Japan - US Business News

How Toyota should 'Move Forward'

I have wanted to write about the whole Toyota scandal but was gathering information and my thoughts.  A lot has been written about what is wrong and what hasn’t been done up to now and what is to be done from now on to fix the recall problems.

I am interested in what Toyota is going to learn from this “going forward” after they have fixed the issues with the recalled vehicles and settled whatever they need to settle with injured parties and the families of people who lost their lives.

Digg.com did a Digg Dialogg yesterday with Jim Lentz, President and COO of Toyota Motor Sales, USA.

In the interview/dialog, Mr. Lentz was asked questions from the Digg community who wrote in a head time. I was one of those who sent in but it was not asked during the interview. Here is what I had posted:

" As a Japan-US business consultant who has lived in Japan, I have seen Japanese companies do wrong and do the apology ritual many times. I am hoping that a great company like Toyota [ that] has certainly missed step with these issues, will be able to genuinely handle this crisis. My question is this--What will Toyota do now to handle this crisis that is different and sincere as compared to how Japanese companies usually [handle] scandals? And let me say that I applaud this method--it shows a willingness to really put yourself out there and not hide from the really tough questions. Perhaps this is my answer."

The answer to my question is the fact that the head of this major corporation's American arm was putting himself directly in front of the people and addressing the massive recalls that Toyota has instituted.

Are Japan-U.S. economic centers no longer relevant?

Not too long ago, I spoke with the directors of two Japan-U.S. business and economic centers. The first is a brilliantly interesting man who is both academically minded and worldly. He understands that there is a need for change in the way that Japan is represented and thought of in business today. Many of these centers were created decades ago when Japan was less "known" to Americans and were in fact created to promote Japan and its image in America. To put a face on this juggernaut that seemed to be taking over the business world.

The other director is equally interesting but mostly academically minded with a focus on fund-raising for his center and publishing academic papers on Japanese economy and business. He did admit that it is getting harder to gain funding for centers. Well times are hard that is for sure. Corporate donors are not doling out as much money as they once did. However, I feel that is not the only reason.

Japan-US Business and Economic centers, as they exist, are simply no longer relevant.

Stop Shrinking Thinking. 5 ways to a new mindset

I read the article " Is Japan a Dying Nation" by Robin Lustig a couple days ago...and it saddened me.

Japan is like a genius child in many ways. In some areas (manufacturing, the rebuild after WW2, electronics) brilliant and to be admired and in other ways under-developed. 

I always preface when I write this way about Japan that I love the country and its people and I always will but this must be said and I know that it is just not me thinking this way or other foreigners thinking this way. Many of my Japanese friends and associates think this way too.

I am not sure though that Japan can save itself. Why do I feel this way? It is mainly frustration I guess. I think Japan is stuck and for all the talk of change and globalization, it is just not being done on a large enough scale and at the appropriate levels to really make a difference. 

Japan is a country that does not handles change very well and leaves things until they reach crisis level. Unfortunately it does not handles crisis very well either. So where does that leave them?

Japan - US South East Association

While in Florida last month, I did some research into Japan related businesses and associations in the south east. I came across a few and having mentioned one is my post of Sept. 9, I wanted to acknowledge the other.

The Japan-U.S. Southeast Association (SE-US Japan) was established in December 1975 to promote trade, investment, understanding and friendship between Japan and member states of the southeast U.S.: Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee and Virginia. In 2007, the State of Mississippi joined the Association.

They have a conference each year alternating between Japan and the U.S. The 33rd annual joint meeting will be held in Tokyo from October 18-20 this year.

I spoke with representatives of a couple of the member states and really applaud the organization's's efforts. It is so very needed in these times. From what I learned, the members states and their Japanese counterpart focused in the past on attracting industrial plants into the South East but with the changing economic tide, they are focusing on news ways to attract and promote different kinds of Japanese businesses into the area.

If you are in the South East and don't already know of this organization, please visit their website, SEUS-Japan as well as the individual member states' sites. This might help you open up a whole new world of opportunity for your business.

The Land of the Setting Sun?.. 3 Tips to help Japan rise again

Contributor Michael Green, sees the sun setting on Japan and offers three possible sources of light. ____________________________________________________________________ 

I recently read an article entitled “The Land of the Setting Sun” by John Mauldin which had some great statistical data on the future of Japan but which unfortunately painted a bleak picture of things to come.

The original article uses this data to talk about how bleak the future of Japan looks these days and how the government is running into serious debt problems.

I wanted to follow on the original article and take a look at some of the options available to potentially resolve this problem and hopefully return Japan to prosperity.

John has kindly allowed me to reference the statistics from his article. Let me first take a look at the data and some of the points made in the original article:

• Since 1999 the level of debt-to-GDP has risen from 99% to over 170%.  Total government debt is close to 900 trillion yen and growing at about 7-8% a year.

• The Interest-rate expense on this debt takes up about 18% of the annual tax revenue that the Japanese takes in. Interest rates are going to have to rise as Japan will have to compete for capital with other nations. If interest rates double to around 2% or so the interest-rate expense would be approximately 40% of total tax revenues.

•  In 2000 the personal savings rate was 18% now it is 1.8%. Much of those savings were used to buy government debt. With low interest rates the government was able to borrow a lot as the interest costs were not a factor.  The lower domestic savings rate does mean that the Japanese government will have to seek financing from outside Japan at higher rates.

•  If we look at the demographics we see a problem in that there are currently 1.2 nonproductive citizens (under 15 years old and over 64) for every productive Japanese citizen. This ratio is expected to reach 2.0 by 2020 and will only continue to grow thereafter.

This does not paint a pretty picture of the future. What does this debt problem hold for Japan’s future and what policy options are available to get them out of this mess?

Like an individual who is in debt, nations have the same basic options available, either cut expenses or raise level of income.

Solution #1: Raise Taxes
Just hike up the taxes and let the revenue flow in. Given that government borrowing is still increasing at 7-8% a year they would need to raise taxes to very high levels to first balance the budget then begin to pay down debt. This could lead to a prolonged period of very little economic growth that will make the so called “lost decades” of the past 20 years look like boom times in comparison.

Raising corporate taxes will reduce job creation which is essential to future economic growth. Raising personal income taxes will reduce disposable income and reduce demand levels which of course reduce economic activity.

Another G8 country with a similar problem successfully reduced their high levels of debt throughout the 1990s in part by raising taxes but that came at great cost. That country was Canada. Should Japan do this the end result will be lowered standards of living for Japanese citizens just as Canadians found out during the 1990s.

Solution #2: Cut Spending
If they cannot raise revenue then they have to cut expenses. But how much and where to cut? Do they cut health care? Sounds like a good idea until we realize that Japan has an ever aging society which needs health care funding.

How about cutting education? Not a wise thing to do as this will directly reduce national competitiveness. Again looking at the Canadian example, they made deep cuts to services during the 1990s, in particular health care. As painful as it was, they did reduce their national debt a great deal in 10 years. Again, as with increased taxes the end result is lower standards of living.

In the end, Japan is going to have to do a combination of both of these no matter what as at some point this debt is going have to be repaid or at the very least the debt is going to have to be rolled over assuming of course that creditors are willing to do so and this gets more costly the more the debt grows.

However, both of the above solutions do not address the long term issue which really struck me and is my motivation for writing this article.

The point about the ratio of non productive compared to productive citizens is my real concern here. The fact the society is getting less productive and is going to have to carry more unproductive citizens is most certainly going to negatively affect the level of GDP growth in the future and the standard of living for all Japanese even if the debt were not a bad as it is now.

Classifying people as “non productive” is why economics is called the “dismal science” but it is the hard reality. So what do we need to do then?   
 
Solution #3: Societal Changes
The best long term solution is to restructure the population pyramid that makes up Japanese society which is the root cause of problem.

Non productive citizens pay less tax and as they age they tend to need more services and hence have a higher carrying cost to society. These are both driving the need to borrow more to maintain the same level of services. This trend is not getting any better and will have continued negative impacts on long term growth.

So what can be done to restructure society? One idea that is already being discussed is to try to encourage childbirth. This is a good start and a good long term solution but it will take time for these new children to grow up and start being productive members of society.

They will not start to make an impact until about 20 years from now when they first start to enter the workforce. In 20 years it will be 2029 and already too late to change things as the ratio of non productive citizens to productive ones is already expected to be over 2.0,  nearly double what it is now.

A much faster solution is needed and it has to start within the next 2-3 years. Japan needs an influx of young productive workers which will consume goods driving economic growth while providing the revenue needed to support the current and future government spending. This is the key and it is the only solution that will work long term.

Tax and spending changes are relatively quick to implement compared to the long term problem with the structure of society which is much harder to deal with. What will happen is unknown but the fact is that something needs to happen and it needs to happen fast.

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Michael Green has been living in Japan for 9 years and resides in Tokyo. He has worked in the Financial industry for most of his career. He is a specialist in Business Process Re-engineering and Project Management.

More articles by Michael Green:

The Green Bubble Cometh - Part 1 & The Green Bubble Cometh - Part 2

MUFG and Morgan Stanley's "Strategic" Tie up in Japan

Lehman Lives on in Japan - Part 1 & Part 2

Good Economic News in Japan? Depends on the publication

In a new feature we call "Japan News Views", guest contributor Jon Hills of Hills Learning in New York , looks at a topic and how different Japanese publications report on it.

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Background: With America still recovering from the worst job numbers in recent memory, Economists are still pondering the question is the economic recession bottoming out, or continuing to get worse? Although there are some signs from America the economy’s taking off like housing sales up and mortgage rates now climbing, overall the picture is still unclear.

Japan’s economic news today offered hopes that perhaps the world’s second largest economy is showing signs of economic recovery. Despite the comparatively strong yen (it’s been hovering close to 90 yen to the dollar) which hurts Japanese exports, the Monthly Economic Report published by the Japanese authorities today had positive comments on the economy. Each newspaper told a different story on the economic climate.

Yomiuri: "The Monthly Economic Outlook Revised Up 3rd Month in a Row" The Monthly Economic Report’s analysis of the economy was revised up compared to last month, according to the Yomiuri. In June the report stated “A part of the economy looks like it might recover,” where as now “At this time the economy looks like it might recover.”

The report stated that along with an increase in corporate production and exports, personal consumption is also showing signs of recovery. The Yomiuri points to the government’s stimulus package that has encouraged spending on personal products such as televisions and cars that has helped revise the economic outlook upward.

Nikkei:  "The Monthly Economic Outlook Revised Upward 3rd Month in a Row, Consumption Takes Off” The Nikkei actually tells the full quote from the Economics Minister, stating “Although we’re in a tough economic climate, at this time the economy looks like it might recover.” The last time the economic outlook had been revised upward three times was 7 years ago, after the IT bubble in 2002.

However the Nikkei also pointed out that the economics minister used words of caution. “Although we have this analysis, there is still risk involved in the economy. The movements of the stock market and the exchange rate have been neurotic.”

Asahi:  "The stock market dips for the 9th time in a row” After searching the Asahi’s site I was surprised to not find anything about the Monthly Economic Report. It was instead filled with political articles about how the vote of no confidence was going to happen earlier, and that Google was now going to publish Japanese political commentary on their site “You Tube.” It seems as if the Asahi is publishing articles showing “political change”, and the possibility of the DPJ beating Prime Minister Aso and the LDP in the next election.

Maybe the reason the Monthly Economic Report wasn’t included was that it was positive, and the Asahi was looking to publish negative economic news to support their theme of “political change.”

Read our interview with Jon Hills of Hills Learning that appeared in yesterday's post.

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Jon Hills is Director of Hills Learning, a language learning services company in New York City, created to meet the current global needs for cross-cultural communication and understanding. They offer Japanese and Chinese programs.

Bringing Japanese Language Learning to New Audiences

Hills Learning, a language learning services company, was created to encourage and facilitate international communication in New York City. Bridging cultures and learning other languages is something that is becoming more and more necessary in an ever globalizing economy.

 Its founder and director, Jon Hills, personally experienced the importance of understanding other cultures by living in Japan for four years and traveling throughout Europe and Asia. 
 
His travels and experiences abroad motivated him to start a company that would help bring these experiences to New Yorkers. He also realized for the power the U.S. wields as the lone superpower, we have one of the lowest rates of passport ownership, a mere 25% of the population. Therefore not only does interest propel him forward but also the desire to develop our society into a more internationally minded culture. 

Japanese PR Firm launches American campaign

Guest Contributor, Meredith Uchida, writes about Japanese PR firm, Arex and their global push to make a name for themselves outside of Japan.

I currently work for Arex Corporation, a Japanese PR consulting firm specializing in media relations and crisis communications.  For about 3 years I lived in Japan, first to get an MBA degree and then to go on to have my first experience working for a Japanese firm. Since I’ve returned to the U.S., I continue to work for Arex although my job responsibilities are slightly different. In Japan, I was responsible for a helping to manage the day to day PR activities. And now that I am in the U.S., I have taken on a more strategic and consultative position on how Arex can expand its customer base. 

A small company of about 20 employees, I was the only foreigner in the Tokyo based office.  Many of Arex’s clients are American or English-speaking companies in Japan. My responsibilities included managing these English speaking clients, whether it was assisting in pitches to potential new clients, or reviewing documents such as press releases or presentations. I also conducted Business English classes for Arex employees to improve their business level speaking and writing skills. Arex recognized the importance of employees being proficient in the language in order to do business in a global setting and to better serve its English speaking clients.

The Green Bubble Cometh - Part 2

Guest Contributor Michael Green, continues his post on the coming green bubble.  

Corporations will create the initial demand but corporate demand alone is not enough.  Just like the Tech Bubble of 2000 and the Housing Bubble of 2008, it is the individual consumer who will provide the final “gas” needed to inflate the bubble.

In 2000, it was retail investors who really pushed things over the top with their endless demand for the Tech stocks. The same thing happened in 2008, it was the individual consumer that played the housing market game and provided the critical mass of demand needed. In both cases, the sky was the limit and people thought that “this time it is different”. So how will the Green Bubble blow?  Where will the demand come from?

Money will move to where it is expected that a strong profit can be made and the American Clean Energy and Security Act of 2009 appears to support this.

As mentioned there is a year on year reduction in the amount of credits issued. This is a unique situation as normally supply and demand forces interact together to determine prices. However in this system, the supply of carbon credits is “fixed” regardless of the demand. This will provide at least an automatic support for prices and should encourage price inflation all things being equal.

The Green Bubble Cometh - Part 1

Guest Contributor Michael Green, speculates on what he thinks will bubble up next. 

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There has been a lot of discussion in the media about the 2008 housing bubble that we have just gone through. Economic bubbles are nothing new and have been around for a very long time.

We can look back the 17th century and the Dutch tulip bulb bubble. Everyone was trading tulip bulbs and people thought the prices would increase forever making everyone rich. Not so. This same process has been repeated throughout history with cycles of boom and bust.

This brings me to what I feel will be the next bubble. Get your wallets out and open them up as it is time to “go green”. “Going Green” is the latest buzzword to hit the street and just like in the late 1990s when the “internet” had buzz, this has all the initial hype needed to start off any bubble. Indeed for any bubble to happen, the first thing needed is support. So do we have the support to start the process off?

In this article, I will take a look at the support needed to create the conditions for the Green Bubble and then discuss how it might develop.

How does one support a Bubble? Support has to come from three main areas:

1. Citizens need to buy into the concept
2. Government needs to support the concept through legislation.
3. High enough level of demand needs to arise to justify supplying the financial products allowing people to participate in the market to allow the bubble to form

Over the past several years, there has been a slow but gradual increase in awareness of environmental issues in society. This has been building for the past 30 years and it has reached the critical mass needed to really effect change. Government policies in turn reflect the moods of the society that support them.