News from and on Japan, November 5 – 18, 2017

Toilets as export products, what plan Japanese companies to do with their ample cash? What is a university degree worth in Japan, Nikon’s financial performance and a great business model for lonely people

The Nikkei carried this week a big article on the future of Toyota. With the automotive industry facing a radical different business environment in the next 5 – 10 years, the company is at crossroads to change – while keeping its DNA. Same for Nikon, that has difficulty to compete with smart-phones. All over the world well-established companies see their business environment change rapidly – and for large, often bureaucratic Japanese companies this is quite a challenge. But there is more to read in this News from and on Japan, incl. the titles of two books worth reading.
  • Politics:
    • Japan is in a rush to sign a number of multinational trade-agreements. Last time I reported about the TPP, the Trans-Pacific Trade Agreement that was to be concluded between 12 countries around the Pacific. When the USA backed-out, 11 countries with Japan in the lead and a combined GDP of USD 12 tln, decided to go-on. TPP-11 incl. Chili, Canada, Vietnam, Australia and Japan, is now close to closing. 
      Another trade agreement is in the making: that between Japan and the EU, representing about one-third of the global GDP. Agriculture (easier access by EU farmers to the Japanese market), automotive parts and dispute settling are remaining issues. “As for the bilateral trade pact, Tokyo has been calling for an investor-state dispute settlement system, which gives a company the right to sue a state for compensation if it believes its investment has been harmed by a government decision. The European Union has opposed the approach, calling it a US-led system and proposing setting up a permanent international investment court. Japan, however, is against the idea because of the costs involved”, writes the Japan Times.
    • Part of ruling party LDP’s electorate is to be found in the countryside: farmers are by tradition LDP voters and the TPP-11 as well as the free-trade agreement with EU-28 will hurt the notoriously inefficient Japanese agriculture industry. So, ample funds are freed to support the Japanese farmers: no less than JPY 300 bln, or EUR 2.2 bln is earmarked, “on top of JPY 657.5 bln in funding that starting to be phased in from 2015, even though the TTP has yet to be implemented” (Nikkei.) That is serious money.
    • A long read about PM Shinzo Abe’s intentions: the Asia Pacific Journal, a Tokyo-based online magazine, November edition includes a long analysis of Nippon Kaigi, a grass-root movement promoting traditional Japanese values and a rewrite of Japan’s constitution. In the third Abe Cabinet, 16 out of the 20 of the ministers are members of the Nippon Kaigi Diet Members League. The  article is written by Tawara Yoshifumi, Executive Secretary of Children and Textbooks Network Japan 21 and Tomomi Yamaguchi, an associate professor of Anthropology at Montana State University. It may be a biased article as the debate about the school text book contents is still fiercely fought, but nevertheless, an interesting read. 

  • Economy:
    • December 29, 1989, during the peak of the Japanese asset price bubble, the Nikkei reached an all-time high of 38,957.44. In February 2009 it was as low as 7.268, closing last Friday November 17 was at 22.396.  “Is Japan’s stock market rally for real?”, asks the Nikkei News in an analysis of the Japanese economy. Remarkable graph in this article “Who owns Japanese stock?”: the number of Japanese retail investors down, financial institutions down, foreign investors are up – and substantially  they own 30% of all listed Japanese stock. Equally remarkable is the amount spent by the Bank of Japan to buy ETF’s or Exchange Traded Funds: no less than JPY 16 trillion (EUR 121 bln) on a total GDP of JPY 545 trillion.
    • Reuters carried out a survey among Japanese large and mid-size companies what they plan to do with their huge cash reserves. Japan’s economy may be quietly plodding ahead, on track for its longest post-war economic expansion after an initial burst from the launch of “Abenomics” nearly five years ago, but, reports Reuters, “wage growth has lagged and inflation remains subdued. Asked how they intended to use their internal reserves in the future, 23 percent of companies in the survey said for mergers and acquisitions, versus only 4 percent that said wage increases. Only 5 percent said they were already deploying their cash for M&A, and just 3 percent said they were already tapping their reserves for wage hikes.” That is bad news for PM Abe who is looking for a 3% wage rise to boost inflation.
    • The Japanese government pressed Japanese companies to have a greater focus on returns on equity, but “there has been no radical change in business behaviour”, writes the Financial Times. “As deputy prime minister Taro Aso acknowledged recently, there is an issue here of form versus substance. Akira Matsumoto, chairman of food group Calbee, declared at an OECD conference last month that his governance priorities were customers first, followed by employees, then the community, with shareholders trailing in fourth place. That view is widely shared by other business leaders. And Japan continues to have the lowest dividend payout ratio among the Group of Seven major developed countries.

  • Corporate:
    • Toyota, perhaps Japan’s most iconic brand, is focus in this Nikkei article, that elaborates on Toyota’s financial performance. “Toyota’s financial condition is robust. The automaker’s JPY 7 tln yen (USD 61.6 bln) in net cash is comparable to the total public-works spending by Japan for its fiscal year ending March 2017. Its solid financial foundation has been rewarded by the major credit agencies, with S&P and Moody’s giving Toyota AA- and Aa3 ratings, respectively, both one notch above the Japanese government.” 
      Interestingly enough, when Toyota was founded 80 years ago, its main business was textile machinery and in 1953, the year after founder Kiichiro Toyoda’s death, the automobile division accounted for only 10% of total group sales. But by 1960, that percentage had jumped to 50% and cars became Toyota’s main business. With the rise of electric mobility and new business models like Uber, its 3rd generation CEO Akio Toyoda recognizes that his company is now on the brink of learning whether it can undergo a third business renewal. By the way, the oldest Toyota car can be seen at the Louwman Museum in The Hague, the Toyoda AA, made in 1936 by Kiichiro Toyoda, as a spin-off from his father’s company.
    • When you think about Japanese export products, cars are followed by camera’s. But Nikon, another Japanese icon, is struggling with Its core digital camera business. And its key semiconductor lithography equipment division is also ailing – and this is mainly due to Dutch ASML’s market dominance. Nikon released on November 7 its consolidated financial results for the April- September period. Based on international accounting standards, Nikon’s net profit tumbled 37% in the first half of fiscal 2017 from a year earlier to JPY 13.9 bln yen (USD 122 mln) as sales of profitable lithography equipment for flat panel displays went south. But the company posted JPY 6 bln more in operating profit than it forecast in August, so its shares are up (Nikkei).
    • What does not come to your mind when you are asked what Japanese products are exported, are … toilets, or washlets. That is gonna change according to the two main toilet makers in Japan, Toto and Lixil (that acquired German company Grohe in 2013.) Europe and the USA are target markets, see this video to promote Toto in the USA, followed by a visit to a Toto showroom with a “toilet paradise” ( A new development in Japanese toilets is to analyse your left behinds and send the results by the internet to your home doctor (“not enough fibers today, Molijn-san”). 

  • Society:
    • What is a university degree worth in Japan?, asks Bloomberg. The answer is clear: USD 25.500 per year for just-graduates, although the amount increases somewhat by bonuses and perks like transport costs. On academic life in Japan, the Times Higher Education / THE published an interesting overview earlier this year with compelling statistics.
    • Feeling lonely, no partner, child, co-worker, grandfather or afraid to have no one mourning at your funeral? Look to this great business-model: rent-an-actor by the company Family Romance. You can select from a universe of 800 actors to complete your life. The Atlantic carried an interview with an actor playing a would-be husband for a single mother plus child. 
    • Min Jin Lee’s novel “Pachinko” – her second, after “Free Food for Millionaires” (2007) – is a finalist for the 2017 US National Book Award. It  announces its ambitions right from the opening sentence: “History has failed us, but no matter.” “Pachinko” chronicles four generations of an ethnic Korean family, first in Japanese-occupied Korea in the early 20th century, then in Japan itself from the years before World War II to the late 1980s. The New York Times interviewed Ms. Lee – and it describes the life of Koreans in Japan. “I do have love for Japan. At the same time, I have a complex relationship with Japan because I’m Korean,” she says in this interview. “But I think it shows the strength of a country when you can talk about the past transparently.” Attached as well the review by the Guardian.
Then: Egbert Jacobs, a former Dutch Ambassador to Japan, recently told me about the book “The Company and the Shogun: The Dutch Encounter with Tokugawa Japan” by Adam Clulow (Columbia Studies in International and Global History). “The first book to treat the Dutch East India Company in Japan as something more than just a commercial organization, The Company and the Shogun presents new perspective on one of the most important, long-lasting relationships to develop between an Asian state and a European overseas enterprise.”
Have a great working week.
Radboud Molijn

Global Bridges BV / グローバル・ブリッジズ B.V. for DUJAT / Dutch & Japanese Trade Federation