Terrie's Take 928 - Five Predictions for 2018, e-Biz News From Japan

Terrie's Take terrie at mailman.japaninc.com
Mon Jan 22 10:18:35 JST 2018

* * * * * * * * TERRIE'S TAKE - BY TERRIE LLOYD * * * * * *
A weekly roundup of news & information from Terrie Lloyd, a long-term 
technology and media entrepreneur living in Japan.

General Edition Sunday, Jan 21, 2018, Issue No. 928

- What's New -- Five Predictions for 2018
- News -- Interesting history of Japanese slave made good
- Upcoming Events
- Corrections/Feedback
- Travel Picks -- Acres of Daffodils in Awajishima, Art Deco in Shirokanedai
- News Credits

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Five Predictions for 2018

Continuing our foolish tradition of making predictions that will affect 
the business sector in Japan, here are our top 5 picks for this year. 
How did we do with our 2017 picks? We got one right (Trump and a 
business pickup in his first year), two wrong (Inbound tourism is still 
pumping, and Toyota is not doing anything notable in Electric Vehicles 
yet), and two others that are still developing. So, hey, while this 
isn't the year of the monkey and we don't have a dartboard, we do have a 
dog that can bark out the answers.

1. Tokyo earthquake

Yep, we've made this prediction before, and probably will again. The 
fact is that Tokyo has been blessed with an absence of major earthquakes 
over the last 90 years, but if viewed through the lens of history, this 
period of stability isn't normal. The fact is that just south of the 
capital is the confluence of three very active tectonic plates: the 
Eurasian, Philippine, and North American plates, with a fourth one, the 
Pacific plate hemming in on the North American one about 100km to the 
east of Chiba. As we have reported in the past, major earthquakes strike 
Tokyo on a reasonably regular basis - about once every 150 years, give 
or take. For the nerds among us, there are slip deficit areas running 
the length of the Nankai trough (ending up in Shizuoka and Saitama) that 
act as triggers for the larger earthquakes, and it is these that the 
Japanese government monitors most closely because they indicate the 
amount of tension building up.

About 20 years ago, a number of prominent scientists predicated that 
Tokyo faces a 70% chance of strong earthquake within 30 years - and that 
was 20 years ago... So...

The worst-case scenario is that the quake hits Tokyo in the evening in 
the winter (when people are using gas heating), which experts have 
estimated will kill 23,000 people or more, and destroy 610,000 
buildings. Why 610,000 and not 600,000 we don't know - Japanese penchant 
for accurate-sounding numbers maybe. Anyway, the economic damage would 
be in the region of JPY95trn. Chances are, though, that rather than a 
quake hitting Tokyo directly, depending on which plate is most active 
the most severe damage will either be in Saitama, where the Philippine 
plate rises closest to the surface, or Izu/Shizuoka, where the plates 
most actually collide.

How does one factor an earthquake into your business planning? Firstly, 
of course, there is the safety of your loved ones, meaning that you 
should try living in a structure built after 1985 (when the building 
rules became more stringent), between 1-5 stories high, and located on 
relatively high ground west of Shinjuku. Or if you live on the 
waterfront, then be sure to be in a new building with deep piles and 
more than 3 stories up (in case of tsunami).

Secondly, make sure your business information is in the cloud, with a 
firm that has servers abroad.

Thirdly, try to be in a business that you can run out of a secondary 
city while Tokyo is recovering. For example, for those of us in Travel, 
we are doing our best to expand the business right across the country, 
thus allowing us to operate even when the main office is down. Japan has 
tremendous fiscal reserves and so we don't doubt that the rebuilding 
effort will be full-fledged, in fact leading to a major building boom, 
but the recovery period will be at least a couple of years, not to 
mention the foreign business customers/partners who will be scared away 
by the disaster. So prepare for this.

There is a very good graph of the four tectonic plates and where they 
intersect on page 3 of this PDF. http://bit.ly/2rryN05

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[...Article continues]

2. Stock market hit

With the stock markets moving to new highs, the Topix index hit its 
highest point in the last 26 years (i.e., just coming off the peak of 
1991) last week, there is a lot of local unease about whether the bull 
run can continue. Economists from foreign banks here in Japan are 
publicly saying that they expect gains in 2018 to be modest or even 
reverse compared to last year. One reason for this is that shares are 
comparatively expensive here compared with other markets, and so while 
many companies are reporting record profits nonetheless their earnings 
as a ratio of revenues is still generally much lower than their foreign 

Then on top of overpricing is the uncomfortable awareness that much of 
Japan's stock surge is "manufactured", puppeteered if you like, from 
behind the scenes, as government entities such as the Government Pension 
Investment Fund, and supposedly independent entities like the Bank of 
Japan, buy shares directly or through ETF funds. Japan has a lot of 
critical thinkers among the public, thanks to a decent-enough education 
system, and they can see that the government is effectively 
nationalizing the stock market through its Quantitative Easing and share 
buying operations. This is clearly not a natural economic mechanism and 
contributes to the debt burden and weakened buying power of ordinary 
Japanese citizens. In other words, we are all likely to be poorer 
because of this.

In addition, there is the fact is that public share ownership in Japan 
is extremely low because: a) people have long memories of how they got 
suckered into overpriced stock during the 1990s, b) the lack of savings 
and disposable income restricts many young peoples' ability to buy 
stocks anyway, and c) there is a general distrust of Japanese firms' 
willingness to look after shareholder interests. So with most of the 
public not involved, there are few "animal spirits" to be awoken by the 
current rally. This means low liquidity despite the high prices and 
vulnerability to external shocks, especially now that a lot of trading 
is either programmed or leveraged by trading on margin.

Stock pundits in the USA (Seeking Alpha, etc.) are saying that they 
expect a market correction, even as the bull market of 2009 continues. 
While this may be a temporary setback for the US, where there is a lot 
of trading volume and a diverse set of share traders, the correction 
will probably have a much deeper impact here in Japan.

3. Japan-China run-in hurts tourism

In our predictions for 2017, we said that we expected the Japan-China 
relationship would deteriorate, most likely over the Senkaku islands 
dispute, and that inbound tourism would be impacted as a result. It 
looks like this prediction was a year too early, and instead, we're 
doubling down for 2018. Why? Simply because of the muscle flexing that 
the Chinese began several years ago right across the Western Pacific and 
South China Sea, and which already this year has intensified.

For example, in the last 2 weeks alone China has sent a submarine, a 
frigate, four coast guard ships, and trawlers, near to or inside 
Japanese territorial waters around the Senkaku islands. Japan has 
protested the vessels' intrusions but knows full well that this is a 
waste of energy. We think it's only a matter of time before Tokyo 
decides to build a naval base on the Senkakus to strengthen national 
defense, and the announcement of this move will infuriate the Chinese. 
The last time something like this happened, when the Japanese government 
announced it was buying the privately held Senkaku's so as to keep them 
out of the clutches of Tokyo governor and right winger Ishihara in 2012, 
violent demonstrations were organized by persons unknown (but most 
likely the Chinese government, since demonstrators were bussed in) 
around China. Rocks were thrown, fires lit, Japanese cars trashed, and 
Japanese stores and factories were shunned or attacked across the 
nation. Needless to say, tourism suffered at the same time.

4. Japanese back off Bitcoin

2017 was the year that the Japanese government surprised the world and 
legitimized BitCoin and other cryptocurrencies. While Russia and Estonia
are also hot beds for cryptocurrencies, Japan is by far the most 
influential market in the world to not only allow Bitcoins but to 
regulate them and thus allow them to exist legally and without grey 
zones. They did this by allowing 11 cryptocurrency exchanges to register 
with the Financial Services Agency. Thus, not only is Bitcoin legal 
tender, but trading of it is now permitted and encouraged. This is 
clearly very different to the attitudes of two active regional 
neighbors, China and South Korea, where the respective governments allow 
Bitcoin but persecute financial entities trading or assisting the 
trading of Bitcoin and other cryptocurrencies.

In 2018 we expect Japan to continue its upwards momentum as the world's 
leading Bitcoin market. We suspect that Japan decided to accept Bitcoin 
because it was seen as an expedient way of returning Tokyo's status as a 
financial hub, something it lost after the Lehman Shock and the 3/11 
earthquake. Tokyo well knows that it is unable to attract foreign 
financial firms on a normal basis, due to high taxes and cost of 
operations compared to other regional centers such as Hong Kong and 
Singapore. So we believe that some bright boffin in the Ministry of 
Finance recognized the opportunity in Bitcoin, especially as Chinese 
money flooded in to Japanese exchanges. Today about 75% of global trade 
in Bitcoin is done in yen, mostly by the two biggest Japanese exchanges.

BUT, Japan's trading partners are not about to let Japan usurp the 
national fiat currencies that are the core of the international trading 
mechanism - particularly the dollar. So if Bitcoin activity gets too 
successful, we expect the US monetary authorities and certainly the EU 
ones (who see crypto currencies as a threat to the Euro) to tell Japan 
to cool it. A lot depends on whether Chinese and S. Korean consumers 
find their way to Japanese exchanges or not, and in what numbers. 
Certainly Bitcoin is a great way to move money now that China has 
tightened its financial controls, and so we see nothing but pure upside 
in this business once Japan figures out how to deal with the fraud 
aspect. The great thing for Japan is that people are much more likely to 
trust a Japanese exchange than a Russian or Estonian one.

What do we predict about the Bitcoin market itself? Well, it's a 
crap-shoot, and the currency will go through more gyrations before it 
starts to settle down. We imagine that if enough Japanese retail 
investors are hurt in one of the many Bitcoin value collapses to come, 
the government will eventually step in and introduce some form of 
stabilizing mechanism. For example, they might offer an endorsed version 
of Bitcoin that is backed by a national fund of Bitcoins (sort of like 
hedging) to counter these market extremes.

5. Softbank skating on thin ice

Masayoshi Son is an amazing businessperson and has really shown the rest 
of Japan what it means to be an entrepreneur. We think his top 
achievements to date have been to have single-handedly forced the 
Japanese incumbent telco's to follow Softbank into the Internet 
broadband era (remember the Yahoo Japan parasol sales of broadband 
routers?, back in the late 1990's, and translating a US$20m investment 
into Alibaba of China into a US$70bn investment today. Since 2015, Son's 
company has done around US$44bn in investments or acquisitions, 
including the US$30bn acquisition of British chip firm ARM Holdings.

But at the same time, Mr. Son is not infallible, and the troubled 
US$22bn acquisition of Sprint, the fourth largest telco in the USA, has 
been dragging overall group financial results down, especially since a 
failed tie-up deal with T-Mobile in the USA means that Softbank has to 
plow another US$6bn annually into upgrading/improving Sprint's 
infrastructure so that it can stay competitive. This on top of the fact 
that Sprint is probably only worth half of what Son paid for it - so the 
balance sheet is highly impaired (although not properly recognized, 
yet). As a result, this difficult deal plus other financing costs have 
loaded down Softbank with an incredible US$130bn of debt - some say, 
about 25% of ALL debt of ALL Japanese companies.

We think that if interest rates rise significantly over the next 12 
months, something that is quite possible, along with at least one market 
correction, it could be that Mr. Son will be overwhelmed at a point when 
his position is not that strong, and Japanese and foreign banks will 
start calling in their loans. Mr. Son is basically betting that the 
current bull stock market will run at least another couple of years, and 
in this way, give him time to consolidate his investments in his core 
company, while allowing any new investment risk to fall on to the 
US$93bn fund he set up with the Saudis. He does also, of course, have 
huge stakes in desirable companies such as Alibaba, but frankly, if 
there is a repeat of the Lehman Shock in late 2018, the China market 
will be heavily affected, and that attractiveness will quickly degenerate.

...The information janitors/


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+++ NEWS

- Search engine held responsible in landmark defamation case
- Interesting history of Japanese slave made good
- Japan - country of the lonely
- Bike sharing challenges for Mobike in Japan
- 20% of Japan is unclaimed land, and unusable

=> Search engine held responsible in landmark defamation case

In a first for Japan, the Tokyo High Court has found that Yahoo Japan 
was responsible for the 11 search results that defamed the claimant, and 
the company has been ordered to remove them. The search results 
associated the man with gangsters and other allegations. What's 
significant about this case is that although search engines (Google in 
particular) have removed search results after similar defamation cases, 
the removals are usually of their own volition. In this particular 
instance Yahoo Japan wanted to use the case to set a precedent that they 
(as a search engine) are not responsible for the results returned. 
Otherwise, they probably fear that their administration costs will go up 
significantly as they deal with increasing defamation cases. ***Ed: 
Well, hey, we can't really feel sorry for an industry that lives by 
stealing other people's content, makes huge profits, and dodges all the 
usual fact-checking responsibilities of a publishing firm (which they 
are, in our opinion). The EU has set the course, and now Japan looks set 
to follow.**  (Source: TT commentary from japantimes.co.jp, Jan 20, 2018)


=> Interesting history of Japanese slave made good

Nice article in the Yomiuri about a Japanese man in the 16th century who 
was sold to the Spanish as a slave, traveled to India, the Middle East, 
and Europe with his master, outlived the master, received a huge 
inheritance, then traveled back to Macau and set up a foundation to help 
Japanese Christians there who had fled persecution by the Shogunate. The 
slave's romanized name was Damian de Lima, the same surname as his 
master, and his existence was discovered through a will dated October 
25th, 1642 which was discovered in museum archives in Madrid. ***Ed: Not 
news, but fascinating to discover that a colony of Japanese Christians 
was sheltering in Macau in the early 1600's.** (Source: TT commentary 
from the-japan-news.com, Jan 20, 2018)


=> Japan - country of the lonely

Probably the most depressing news of the New Year is that Japan is well 
on the way to becoming the country of the lonely. An excellent New York 
Times article last month (http://nyti.ms/2mUFdzq) highlighted this fact 
only too well, documenting a danchi to the west of Tokyo where the 
single inhabitants die (alone) with sad regularity. The National 
Institute of Population and Social Security Research has just issued 
figures showing that the number of one-person households in Japan will 
rise from the current 34.5% to 39.3% in 2040, and at the same time, 
household heads aged 65 or older will rise from 36% currently to 44.2%. 
That's almost half. ***Ed: These numbers start to make retirement homes 
look like a good option.** (Source: TT commentary from asia.nikkei.com, 
Jan 12, 2018)


=> Bike sharing challenges for Mobike in Japan

Bloomberg ran an article last week pointing out that the big Chinese 
bike sharing companies Mobike and OFO are running up against the 
Japanese penchant for being neat and tidy. While we see media images of 
bikes on every city corner in major Chinese cities, shared bikes in 
Japan are still somewhat of a rarity and despite their promise, fall far 
short of what can be considered mass transit. Mobike has now partnered 
with Line and its 71m subscribers to promote share cycles in Japan, but 
is still stuck at first base with a couple of hundred test units in 
Sapporo. OFO, likewise, has tied up with Softbank, but is still trying 
to figure out where to get started. Both companies have the same 
problem, which is that they can't use public land for parking, and so 
are having to negotiate with chain store owners to use their parking. 
***Ed: This point has been the same thing that has held DoCoMo's 
Bikeshare business back for so long - having to negotiate with every 
municipality one-by-one, and having to follow each area's detailed 
regulations on the use of their public space. Hard to see the Chinese 
wanting to go through this painstaking multi-year process. It would be 
way quicker for them if they went the route of Airbnb and gave 
individual "partners" some bikes each free of charge, let the partners 
leave their bikes around the city, and do a revenue share on each bike's 
income. This would devolve the responsibility to individuals and not the 
operator. Worked for Airbnb...** (Source: TT commentary from 
bloomberg.com, Jan 17, 2018)


=> 20% of Japan is unclaimed land, and unusable

The diet plans to pass legislation allowing public authorities take 
control of unclaimed land, after appropriate attempts to notify the 
owners, by unilaterally creating 5-year leases and paying nominal rent 
into a trust fund just in case the rightful owners eventually come 
forward. The new law is intended to ease the problem of uncontactable 
multigenerational heirs of land in remote areas, who find it easier to 
go missing than to pay the land taxes - thus creating a vacuum of 
ownership information for many unclaimed land plots. Apparently the 
amount of unclaimed land is around 43,000 sq. km (size of Denmark), and 
by 2040 is expected to rise to around 70,000 sq. km. ***Ed: Despite the 
reasoning here, that land owners are hard to identify, we find it 
troubling that public authorities can quietly sneak themselves into the 
picture as beneficiaries. Why doesn't the Tax Office simply seize and 
resell the lands in question, just like they do with city dwellings? If 
the problem is unpaid taxes, then the Tax Office should fix it. The 
answer is not to give unclaimed lands to public bodies, because such 
lands will never be returned to the private sector.** (Source: TT 
commentary from ft.com, Jan 18, 2018)

* (If you're not a subscriber, you'll need to go to Google and search 
the article under "Japan's lost lands:"

NOTE: Broken links
Some online news sources remove their articles after just a few days of 
posting them, thus breaking our links -- we apologize for the inconvenience.



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Japan is in the midst of the world's largest inbound travel boom in the 
last 20 years. From 2011 until 2017, the number of inbound travelers has 
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What is exciting about this US$40bn+ travel boom is that more than 50% 
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define a maturing market. His presentation will share the latest news on 
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Speaking Locations
Seminars 1 & 2: Sydney, Australia, February 9/10 - location to be confirmed
Seminar 3: Auckland, New Zealand, February 14 - Crowne Plaza Hotel, Auckland

The seminars are free of charge. Other details will be confirmed as they 
come to hand. Interested attendees can reserve a space, by emailing us 
at jerome.lee at japantravel.com.


No events or corrections this week.



=> Nada-Kuroiwa Narcissus Field, Awajishima
One of Japan's top three wildflower fields

Located in the southern part of Awaji Island, the Nadakuroiwa narcissus 
(daffodil) field is a meadow of wild daffodils growing on a steep 
hillside overlooking the surrounding coast. With around five million 
daffodil flowers, it is known as one of Japan's top three wild flower 

The origin of this place can apparently be traced back to about 180 
years ago, when local fisherman planted daffodil bulbs that had washed 
ashore. Since then, the flowers have been naturally growing and 
multiplying, and now they cover an area of about 7 hectares.

The entrance fee to the park is ¥500 for adults and ¥300 for children, 
with free parking included. Be aware that the whole daffodil field is 
located on a steep slope, so you have to climb up quite a bit to get 
anywhere. It is definitely not accessible with wheelchairs or baby 

After a few minutes of walking up and enjoying the surrounding flowers, 
including their pleasant smell, you will reach the top of the mountain 
ridge, which overlooks all sides of the field, as well as the nearby 
Nushima Island. The whole area is just great for taking photos, so if 
you are a fan of nature photography you really should visit this spot! I 
would definitely recommend going on a sunny day though, because it can 
get really windy at the top.


=> Reopening of Teien Art Museum, Shirokanedai

One of the most beautiful museums in Tokyo reopened November 2017, after 
seven months of renovations to install an elevator that makes the second 
floor accessible for the first time. Featuring an Art Deco mansion built 
in 1933 for a member of the Imperial family, and a spacious Japanese 
garden and teahouse, the Tokyo Metropolitan Teien Art Museum has long 
been a favorite with international visitors to Tokyo.

The main building of the museum is the Prince Asaka Residence, which was 
built in Art Deco style because the prince and his wife, who was the 
eighth daughter of the Meiji Emperor, lived for a time in Paris. 
Together they visited the world fair that was held there in 1925, and 
which showcased a new wave in visual arts - what we now know as Art 
Deco. The couple were enchanted by what they saw, and upon their return 
to Japan had a new residence built in this very modern and international 
style. In contrast to the Art Nouveau style that preceded it, Art Deco 
motifs favored symmetry, straight lines, and repeated geometric shapes.

Several French designers were engaged to work on the new residence, 
including famed glass artist René Lalique (1860-1945). Lalique provided 
chandeliers for the salon and great dining hall, as well as 
custom-designed glass-relief doors for the front entrance hall that are 
one of Lalique's largest works and a must-see for Lalique fans visiting 




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Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)

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