Author: g_fasol

  • Fukushima nuclear disaster: 5 years since the Tohoku earthquake and tsunami on 2011/3/11 at 14:46:24

    Fukushima nuclear disaster: 5 years since the Tohoku earthquake and tsunami on 2011/3/11 at 14:46:24

    5 years and many lessons learnt since the Tohoku and Fukushima disasters

    Tohoku disaster and Fukushima nuclear disaster lead to Japan’s energy market liberalization

    Tohoku disaster: On Friday March 11, 2011 at 14:46:24, the magnitude 9.0 “Great East Japan earthquake” caused a tsunami, reaching up to 40.4 meters high inland in Tohoku.

    Japan’s National Police Agency registers 15,894 deaths and 2,562 missing people.

    TEPCO’s Fukushima Dai-1 nuclear power plant vs Tohoku Electric Power Corporation’s Onagawa Nuclear Power Plant

    One of the world’s worst nuclear disasters started at Tokyo Electric Power (TEPCO) Fukushima Dai-1 Nuclear Power Plant.

    The Onagawa Nuclear Power Plant, owned and operated by Tohoku Electric Power Company, and built under Yanosuke Hirai, was closest to the 2011/3/11 earthquake’s epicenter, and survived the quake without major damage and was successfully shut down, and served as a refuge for 300 people from the neighborhood who had lost their homes. There were radiation alarm signals at Onagawa Power Station, but these alarms were caused by radioactive fallout blown from Fukushima-Dai-Ichi by winds, and did not originate from Onagawa.

    The Onagawa Nuclear Power Plant was the only nuclear power plant in the region of the Tohoku Earthquake that survived the earthquake without any major damage.

    On Yanosuke Hirai’s insistence, Tohoku Electric Power Company built Onagawa Nuclear Power Plant at 13.8 meters above sea level, while during the construction of TEPCO’s Fukushima Dai-1 plant the natural ground elevation was reduced from 35 meters to 10 meters. The Tsunami reached 13 meters height in both locations.

    In 1990 Tohoku Electric Power Company (Onagawa Nuclear Power Station Construction Office) published a detailed analysis of the Great Jogan Tsunami of AD 869

    Yanosuke Hirai had researched the Great Jogan Tsunami of July 13, 869, which was caused by the 869 Sanriku Earthquake (貞観地震). The results were taken into account in planning the Onagawa Nuclear Power Station, and published in 1990:

    Hisashi Abe, Toshisada Sugeno, Akira Chigama, (Onagawa Nuclear Power Station Construction Office)
    “Estimation of the Height of the Sanriku Jogan 11 Earthquake-Tsunami (AD 869) in the Sendai Plain”
    Zisin (Journal of the Seismological Society of Japan, 2nd Series), Vol. 43 (1990) No. 4 P 513-525

    See also the “869 Sanriku earthquake” entry in Wikipedia.

    Fukushima nuclear disaster mitigation. US sends 150 nuclear experts headed by Chuck Casto to work with the Japanese Prime Minister and top leaders for 11 months to help deal with the Fukushima disaster

    The USA sent a team of about 150 nuclear experts for 11 months to Japan to assist TEPCO and the Japanese Government in mastering the nuclear crisis. This team was headed by Chuck Casto – read some of his conclusions here:

    Japan’s first ever Parliamentary Commission

    Japan’s Parliament for the first time ever created an Independent Parliamentary Commission to analyze the nuclear disaster, headed by Kiyoshi Kurokawa, read the summary of his talk “Groupthink can kill” here (including videos describing the Commissions results in simple easy to understand terms).

    Three former TEPCO executives have now been indicted by a citizen’s prosecution committee.

    Nuclear disaster leads to energy market liberalization in Japan

    Japan’s faith in nuclear power was shaken, leading to development of renewable energy, liberalization and long overdue reforms of Japan’s energy sector.

    Quakes and after-quakes

    The figures show that more than 300 earthquakes of magnitude 5 or larger occurred since the major quake on March 11, 2011 at 14:46. The epicenters of quakes lie mostly where the Pacific Plate moves under the North American Plate on which Tohoku lies.

    According to our knowledge earth quakes are mathematically speaking a “chaotic” phenomenon, and scientific arguments are, that it is difficult if not impossible to predict earth quakes with precision. (Figure: Wolfram Alpha LLC)

    Earth quakes of magnitude 5 and greater in Japan (March-April 2011) (Figure: Wolfram Alpha LLC)
    Earth quakes of magnitude 5 and greater in Japan (March-April 2011) (Figure: Wolfram Alpha LLC)
    Earth quakes of magnitude 5 and greater in Japan (March-April 2011) on logarithmic magnitude scale (Figure: Wolfram Alpha LLC)
    Earth quakes of magnitude 5 and greater in Japan (March-April 2011) on logarithmic magnitude scale (Figure: Wolfram Alpha LLC)

    Nuclear fallout on Tokyo: radiation levels in Tokyo/Shinjuku

    Starting with Tuesday 15 March 2011, radioactive fallout came down on Tokyo as shown in the figures below.

    Radiation in Tokyo/Shinjuku (until April 13, 2011) compared to Austria
    Radiation in Tokyo/Shinjuku (until April 13, 2011) compared to Austria

    Radiation levels in Tokyo (Shinjuku and Shibuya) and Tsukuba:

    Radiation in Tsukuba (until April 13, 2011) compared to Austria
    Radiation in Tsukuba (until April 13, 2011) compared to Austria

    The blue curve above shows the radiation levels in Tokyo/Shinjuku as measured and published by the Tokyo Metropolitan Institute for Public Health here:

    • each hour for the last 24 hours
    • daily starting March 1

    The red curves show maximum and minimum data as measured by TEPCO in Tokyo-Shibuya, and published here: TEPCO radiation data

    The green curves show radiation data measured by Japan’s highly respected AIST Laboratory in Tsukuba (Ibaraki-ken, about 60 km north of Tokyo in direction of Fukushima) and published here: AIST radiation data.

    Radiation levels in Tsukuba

    The green curves show radiation data measured by AIST Laboratory in Tsukuba (Ibaraki-ken, about 60 km north of Tokyo in direction of Fukushima) and published here: AIST radiation data.

    The radiation measurement results in Tsukuba are considerably higher than found in Tokyo, but have decreased close to the top levels found naturally in Austria and in many other countries.

    The differences in the data between Tokyo and Tsukuba could be because Tsukuba is 60km closer to Fukushima, could be caused by weather conditions, but they could also be caused by differences in the measurement equipment or a combination of these factors.

    Eurotechnology-Japan newsletters in March/April 2011

    In a series of newsletters, our company informed our customers, and friends about the nuclear disaster impact on Tokyo. Our newsletters were reposted by our readers to 100s of friends, and in some cases influenced the decisions by foreign subsidiaries here in Tokyo. In the days following the nuclear disaster, it was difficult for non-phycists to understand the true situation, and what the radioactive fallout really meant.

    Copyright (c) 2016 Eurotechnology Japan KK All Rights Reserved

  • Mobile internet’s 17th birthday

    Mobile internet’s 17th birthday

    The global mobile internet revolution started with Docomo’s i-Mode on February 22, 1999

    i-Mode, Happy Birthday!

    i-mode menu NTT docomo
    i-mode menu NTT docomo

    Today, exactly 17 years ago, on February 22, 1999, NTT-Docomo launched the world’s first mobile internet service, i-Mode, at a press conference attended only by a handful of people.

    NTT-Docomo created the foundation of the global mobile internet revolution, and i-Mode is still a cash-cow for Docomo in Japan, but Docomo did not succeed to capture global value.

    i-Mode pioneered many business models, which are today monetized by Apple and Google (mainly via Android).

    i-Mode also contributed to make Japan the world’s biggest App market in terms of cash revenues, and helped Japanese app companies to be among the world’s largest and top grossing.

    Read in detail in our blog:
    i-Mode was launched Feb. 22, 1999 in Tokyo – birth of mobile internet

    Japan telecommunications industry report

    Copyright 2016-2019 Eurotechnology Japan KK All Rights Reserved

  • SHARP and the future of Japan’s electronics

    SHARP and the future of Japan’s electronics

    SHARP is in the news, but its about Japan’s US$ 600 billion electronics sector

    The need for focus and active portfolio management

    SHARP, supplier of displays to Apple, faces repayment of about YEN 510 billion (US$ 4.2 billion) in March.

    Innovation Network Corporation of Japan INCJ (産業革新機構) and Taiwan’s Honhai Precision Engineering (鴻海精密工業) “Foxconn” compete for control of SHARP.

    While SHARP makes headlines, the big-picture issues are:

    1. corporate governance reforms in Japan
    2. the future of Japan’s US$ 600 billion electronics sector, which dominated world electronics in the 1980s but failed to keep up with the evolution and growth of global electronics.

    To survive Japan’s old established electronics conglomerates have two choices:

    1. focus on a small number of key products (remember Apple CEO Tim Cook showing that all of Apple’s products fit on one small table)
    2. actively managed portfolio model

    however, for Japan’s economy to prosper, Japan needs many more young fresh new companies in addition to the old established conglomerates.

    Interviews for BBC-TV and French Les Echos

    Last week I was interviewed both live on BBC-TV and also by the French paper Les Echos about SHARP’s future:

    In summary, I said that its not just about SHARP’s current predicament, but its about corporate governance reform in Japan, about reinventing Japan’s electronics sector, and that its more likely at this stage that Japan’s Innovation Network Corporation (INCJ) will take control SHARP, since INCJ is not just concerned with SHARP but with the bigger picture of restructuring Japan’s electronics sector.

    INCJ has concepts for combining SHARP’s display division with Japan Display, and has plans for SHARP’s electronics components divisions, and for the white goods division, and other divisions.

    SHARP governance: How and why did SHARP get into this very difficult situation?

    SHARP is a poster child for the urgent need for corporate governance reform in Japan.

    Essentially SHARP assumed that the world market for TVs and PC displays will continue to demand larger and larger and more expensive display sizes, and thus took bank loans to build a very large liquid crystal display factory in Sakai-shi, south of Osaka.

    In addition, SHARP, has a huge portfolio of many different products ranging from office copying machines and printers and scanners, mobile phones, high-tech toilets, liquid crystal displays, solar panels, and hundreds of other products. SHARP keeps adding new product ranges constantly expanding its portfolio of businesses, and rarely sells loss making divisions.

    Effective and strong independent, outside Directors on the Board might have asked questions during the decision making leading to the building of the Sakai factory. They might have asked for a Plan B, in case the global display market takes a turn away from larger and larger and more expensive displays, or if the competition heats up and prices start decreasing, they might have asked about SHARP’s competitive strengths, they might have also questioned the wisdom to finance an expensive factory via short-term bank loans as opposed to issuing shares to spread the risks to investors.

    Its not just outside Directors, shareholders could have also asked such questions.

    SHARP has about YEN 678 billion (US$ 5.6 billion) debt, most is short-term debt, and in a few weeks, in March 2016, SHARP needs to repay about YEN 510 billion (US$ 4.2 billion), and needs to find this amount outside.

    SHARP is a Japanese electronics company, founded in 1912 by Tokuji Hayakawa in Tokyo as a metal workshop making belt buckles “Tokubijo”, and today one of the major suppliers of liquid crystal displays for Apple’s iPhones, iPads and Macs.

    SHARP today has about 44,000 employees, many factories across the globe, sales peaked around YEN 3000 billion (US$ 30 billion) in 2008, and show a steady downward trend since 2008.

    Revenues (profits) peaked in 2008, and have fallen into the red since.

    SHARP's revenues (sales) peaked in 2008, and since then stagnated around YEN 3000 billion (US$ 30 billion), and show a downward trend ever since
    SHARP’s revenues (sales) peaked in 2008 around YEN 3000 billion (US$ 30 billion), and show a downward trend ever since
    Averaged over the last 14 years, SHARP shows average annual net losses of around YEN 38 billion per year (US$ 380 million per year)
    Averaged over the last 14 years, SHARP shows average annual net losses of around YEN 38 billion per year (US$ 380 million per year)

    What future for SHARP? Focus vs portfolio company

    SHARP (or rather, its creditors, the two “main banks” Mizuho and Mitsubishi-Tokyo-Bank, and others controlling the fate of today’s SHARP) needs to decide whether it focuses on a group of core products, in which case it needs to be No. 1 or No. 2 globally for these products. Successful examples are Japan’s electronic component companies.

    Or on the other hand, SHARP could be a portfolio company, in which case this portfolio must be actively managed.

    What future for Japan’s US$ 600 billion electronics sector?

    Japan’s 8 large electronics conglomerates:

    • Hitachi
    • Toshiba
    • Fujitsu
    • NEC
    • Mitsubishi Electric
    • Panasonic
    • SONY
    • SHARP

    combined have sales of about US$ 600 Billion, similar to the economic size of The Netherlands, but combined for about 15 years have shown no growth and no profits. They are poster children for the urgent need for corporate governance reform in Japan.

    These 8 electronics conglomerates are portfolio companies, and they need to manage these portfolios actively, such as General Electric (GE) or the German chemical industry are doing. Germany’s large chemical and pharmaceutical industries started active and drastic product portfolio management in the 1990s, and are continuing constant and active portfolio optimization via acquisitions, spin-outs, and other M&A actions, and so is GE.

    A stark contrast are Japan’s very successful, profitable and growing electronics component companies.

    Innovation Network Corporation of Japan INCJ (産業革新機構)’s dilemma

    INCJ aims “to promote the creation of next generation businesses through open innovation” according to its website.

    Japan’s NIKKEI financial daily mentions INCJ’s dilemma, whether attempting the rescue of an old conglomerate is compatible with its mission to create next generation business through open innovation.

    Why “let zombie companies die” is beside the point

    Concerning SHARP some media wrote headlines along the lines of “let zombie companies die”. Thats easy to write, however, SHARP is a group with 44,000 employees, many factories, about US$ 30 billion in sales annually.

    “Let this zombie die” is not an option, SHARP has 100s of products, and divisions, and the best solution for each of these divisions is different. And that is exactly what the Innovation Network Corporation of Japan seems to be considering in its plans for SHARP.

    I think the way forward is not “to let zombies die”, but to develop private equity in Japan

    I think the move of Atsushi Saito, one of the key drivers of Japan’s corporate governance reforms, from CEO of Tokyo Stock Exchange/ Japan Exchange Group, to Chairman of the private equity group KKR is a tremendously important one in this context.

    Will there be native Japanese private equity groups with sufficient know-how and ability to take responsibility of restructuring Japan’s electronics sector? Thats maybe the key question.

    Why its not really about nationalism

    Some media bring a nationalist angle into SHARP’s issues. However, Nissan was rescued by French Renault, UK’s Vodafone acquired Japan Telecom, and there are many other examples, where foreign companies acquire Japanese technology companies.

    I don’t think nationalism is an issue here. The key issues is to create and implement valid business models for Japan’s huge existing electronics sector, and more importantly, create a basis for the growth valid new companies – not just reviving old ones.

    Japan electronics industries – mono zukuri

    Copyright (c) 2016-2019 Eurotechnology Japan KK All Rights Reserved

  • Economic growth for Japan? A New Year 2016 preview

    Economic growth for Japan? A New Year 2016 preview

    Economic growth for Japan in 2016?

    Economic growth: Almost everyone agrees that economic growth is preferred over stagnation and decline. Fiscal policy and printing money unfortunately can’t deliver growth.

    1. Building fresh new successful companies,
    2. returning stagnating or failed established companies back to growth (see: “Speed is like fresh food” by JVC-Kenwood Chairman Kawahara), and
    3. adjusting the structure and business models of existing companies to the rapidly changing and globalizing world (see: “Japanese management – why is it not global?” by Masamoto Yashiro)

    deliver growth.

    Governments best help economic growth by reducing friction, and by getting out of the way of entrepreneurs building, turning-round, and refocusing companies.

    Some required action is counter to intuition: for example, in many cases reducing tax rates increases Government’s tax income, a fact known for many years. Effective education and research are key to create, understand and apply such non-obvious knowledge.

    Companies need efficient leadership, leadership needs feedback, wise and diverse oversight by Boards of Directors, who ring alarm bells long before a company hits the rocks, or fades into irrelevance. Corporate governance reform may be the most important component of “Abenomics”. Read a Board Director’s view on Japan’s corporate governance reforms:

    Japan’s electrical conglomerates are some of the poster children motivating Japan’s corporate governance reforms. In an interview about Toshiba’s future on BBC-TV a few days ago, I explained that Japan’s electrical conglomerates showed no growth and no profits for about 20 years, and the refocusing Toshiba has announced now should have been done much much earlier, 10-20 years ago (“Speed is like fresh food“). Refocusing Japan’s established corporate giants will release resources for start-ups, spin-outs and growth companies.

    Japan can be very good at restructuring and turn-rounds, e.g. see

    Happy New Year!

    Gerhard Fasol

    Copyright 2016 Eurotechnology Japan KK All Rights Reserved

  • Corporate governance reforms in Japan – practical views of a Board Director

    Corporate governance reforms in Japan – practical views of a Board Director

    A Board Director’s view

    Corporate governance reforms in Japan progress faster than even one of their key promoters expected, and cost almost no tax payers money

    Author: Gerhard Fasol

    Corporate governance reforms in Japan are one component of “Abenomics” to bring back economic growth to Japan.

    Corporate governance reforms in Japan are driven at least in part by the spectacular stagnation of Japan’s top 8 electronics conglomerates, which 25 years ago dominated world electronics, but largely failed to adapt to the changes driven by much more agile Silicon Valley or South Korea based competitors. The right type of Board Directors, could potentially have rung the alarm bells much earlier, and woken up executive management under their supervision.

    A welcome factor is that corporate governance reform costs Japan’s heavily indebted Government almost no money – unlike public works programs, and similar traditional ways of stimulating the economy.

    The speed with which Corporate Governance Reforms in Japan are being implemented surprised even one of their main promoters, emeritus Group CEO of the Japan Exchange Group, Atsushi Saito, as expressed in his recent talk.

    In March 2014 the shareholders appointed me as independent Board Director of the Japanese cybersecurity company GMO Cloud KK, which is listed on the First Section of the Tokyo Stock Exchange. Our main business are internet security solutions, cybersecurity, digital identity management solutions, and cloud hosting and related services and solutions.

    Read an article on Corporate Governance Reforms here in the Journal of the American Chamber of Commerce in Japan (ACCJ), and more below in this post – from my experience practicing corporate governance in Japan as a Board Director.

    The main components of corporate governance reform in Japan

    The main components of Japan’s corporate governance reform are:

    1. The revision of the Company Law (会社法(平成十七年七月二十六日法律第八十六号)), Law No. 816 of July 26, 2005. The latest revision is No. 63 of September 4, 2015 (平成二七年九月四日法律第六三号).
    2. The Corporate Governance Code of the Tokyo Stock Exchange (TSE), issued on June 1, 2015, “Seeking Sustainable Corporate Growth and Increased Corporate Value over the Mid- to Long-Term”
    3. Japan’s Stewardship Code, issued by Japan’s Financial Services Agency (FSA) on February 26, 2014, “Principles for Responsible Institutional Investors ≪Japan’s Stewardship Code≫- To promote sustainable growth of companies through investment and dialogue”

    What is corporate governance and why?

    Japan’s Corporate Governance Code, which was issued by the Tokyo Stock Exchange on June 1, 2015, defines Corporate Governance as “a structure for transparent, fair, timely and decisive decision-making by companies, with due attention to the needs and perspectives of shareholders and also customers, employees and local communities”.

    The subtitle of Japan’s Corporate Governance Code is its mission statement: “Seeking sustainable corporate growth and increased corporate value over the mid- to long-term”.

    Corporate governance has been analyzed in great detail in Professor John Kay’s analysis of UK’s capital markets: “The Kay Review of UK Equity Markets and long term decision making“, which was triggered by certain M&A transactions among other factors, and published on 23 July 2012.

    “The Kay Review of UK Equity Markets and Long-Term Decision Making” has been archived in UK’s National Archives here.

    The Kay Review analyzes UK’s capital markets in depth, and argues that its companies’ duty to be successful in the long-term, and its only the success of companies that brings wealth to all stake holders and people who invest in companies, in many cases pensioners. Over the years a fine grained system of specialized service providers has developed between companies on one side, and individual investors on the other side. Professor Kay argues that this system of intermediaries (fund managers, analysts etc) can be seen as “overhead” and needs to be as efficient as possible.

    Overall the capital market system needs to be built on long term trust and stewardship, not on anonymous one-time monetary transactions.

    The Kay report had important impact, for example it led to the end of the requirement of quarterly financial reports by UK companies, as we discussed here.

    Martin Lipton, of the NY law firm Wachtell, Lipton, Rosen & Katz, in an article published on the Harvard Law School Forum on Corporate Governance and Financial Regulation blog encourages the US Securities and Exchange Commission (SEC) to keep the UK developments in mind, when reforming the reporting requirements for US corporations, and also calls for an end to the requirement of quarterly reporting.

    Why end the requirement of quarterly financial reports? Because short term focus on quarterly financial performance may cloud the view on long-term success and investment. Intense discussions between fund managers and management are strongly encouraged.

    Will the end of quarterly financial reporting reach Japan?

    Why Japan’s focus on corporate governance?

    GNP as a measure of economic size has many flaws – however many signals, not just GNP, indicate that Japan is the only major economy that does not grow.

    While there are many excellent Japanese corporations, overall it is no secret that Japan’s economy has the potential to do much much better.

    Japan’s decline was even deplored by Keidanren and Toray Chairman Sadayuki Sakakibara at the 2015 Kyoto Bank New Year Gala event. Stanford Economics Professor Takeo Hoshi has analyzed the factors which caused Japan’s economy to stop growing after catching up with the developed economies, see Professor Hoshi’s recent talk about Abenomics for the Stockholm School of Economics.

    A case in point are Japan’s 8 large electronics conglomerates which combined are approximately the same size as the economy of The Netherlands. Unlike The Kingdom of the Netherlands, Japan’s top 8 large electronics conglomerates have not grown for the last 20 years, while on average reporting losses over these 20 years. While Japan’s top 8 electronics conglomerates dominated the global electronics sector, they have been faded, and today Apple alone is about 10 times bigger in market cap/value than all top 8 Japanese electronics conglomerates combined, see: “Japan’s electronics giants – FY2012 results announced. 17 years of no growth and no profits.

    There is much hope that outside directors supervising executive management will bring outside expertise, and improve the performance of company-insider executive management, and if necessary also insist on replacements.

    Much faster than expected

    One of the most outspoken promoters of corporate governance reform is emeritus Tokyo Stock Exchange Chief Executive Atsushi Saito. In a recent talk, Atsushi Saito expressed his great surprise that corporate governance reform was implemented in Japan must faster than he had expected.

    The cheapest part of “Abenomics” – corporate governance reform comes at essentially zero cost to tax payers

    Many measures of Premier Minister Abe’s “Abenomics” stimulation programs pump borrowed Government Bonds (JGB) money into the economy, thus cost money and ultimately increase Japanese very large Government debt.

    By comparison, corporate governance reforms cost essentially zero cash and don’t further increase government debt.

    Theory and practice

    Non-diversity: about 0.6% of Japanese Board Directors of listed companies are non-Japanese

    As of 17 December 2015 Japan has 3504 listed companies on the exchanges operated by the Japan Exchange Group:

    • TSE 1st section: 1933 (incl. 6 foreign companies)
    • TSE 2nd section: 544 (incl. 1 foreign company)
    • Mothers: 219 (including 1 foreign company)
    • JASDAQ Standard: 750 (including 1 foreign company)
    • JASDAQ Growth: 44 (including 0 foreign company)
    • TOKYO PRO Market: 14 (including 0 foreign company)
    • Total: 3504 (including 9 foreign companies)

    In addition there are three regional exchanges:

    • Fukuoka Stock Exchange
    • Nagoya Stock Exchange
    • Sapporo Stock Exchange

    Assuming there are about 10 Board Directors per company, there are about 35,000 Board Directors of listed companies in Japan. Of these approximately 200 are foreigners, ie. about 0.6% of Directors of listed Japanese companies are foreign (I am one of these).

    Maybe 10-20 of Japan’s public companies are “Englishized” such as Rakuten or SoftBank, or hire simultaneous interpreters at Board Level (you’ll see Directors with headphones listening to the interpreted/translated version of what is being said – of course slowing and filtering understanding and communication)

    All other approx. 3490 Japanese Stock Exchange listed companies are run 100% in Japanese language at all levels including Board level – and almost exclusively by Japanese men.

    In a rapidly globalizing world, these companies desperately need global input from many nationalities, different backgrounds, and genders at Board level in Japanese language, but the number of people providing this depth of diversity, having the qualifications and being able to function at Board level in Japanese in addition to several other languages is severely limited – this is one of several factors limiting Japan’s growth after having caught up with developed countries in the 1980ies.

    What are the main issues?

    Diversity delivers better decisions and better results

    Japan has many outstanding leaders, such as SoftBank’s founder Masayoshi Son, or Kyocera’s founder Kazuo Inamori, who also founded part of today’s KDDI, and who turned around Japan Airlines from bankruptcy in his 80s.

    Some Japanese Executives are outstanding leaders, however, many are not, but function more like chief administrators – as in any other country.

    Outstanding leaders don’t fear working with excellent people and will attract top leaders. However, chief administrator type executives will fear for their power and will assemble teams who fear to speak out, as can be observed in many recent corporate scandals in Japan, and many other major countries. Corporate scandals and corporate governance failures may happen anywhere, not just in Japan.

    Diversity at top management levels and Board levels has many benefits, as has been proven in many studies. Diversity delivers better decisions and better results. Boards of Directors are one way to bring diversity to decision making.

    Overcoming stagnation

    Many major Japanese corporations show no growth and no income for the last 20 years.

    A showcase example are Japan’s top-8 electronics conglomerates. Combined they are as large as the economy of the Netherlands, but contrary to The Netherlands, they have shown no growth for the last 17-20 years, as well as losing money on average over all these years. Of course, as a consequence the market capitalization = value of these top-8 electronics companies has decreased dramatically. While Japan’s top-8 electronics companies dominated 60% or more percent of the global electronics industry in the 1980, they have fallen steep. Clearly a dramatic example of failed corporate governance, and surely a big push for Prime Minister Abe to put so much priority on improving Japan’s corporate governance, together of course with the need to improve employment, and returns for pension funds to fund Japan’s aging population.

    Three forms of corporate organization: splitting supervision and execution

    Traditionally, executives supervised themselves at Board level

    Traditional Japanese corporation have a Board of Directors composed of corporate executives, i.e. the executives supervise themselves without external supervision or input. Supervision is done by the Kansayaku Board (corporate auditor’s Board) which however has limited powers on corporate decision making.

    Japan’s corporate government reforms now give Japanese companies options to split execution (executives, 執行役員) and supervision (Board Directors, 取締役).

    Japanese corporations now can chose between three forms of organization

    • company with Kansayaku Board
    • company with Supervisory Board
    • company with three committees:
      • Nomination Committee
      • Audit Committee
      • Remuneration Committee

    According to the new Corporate Governance Code, the Board (independent which of the three options is selected) has the following three duties:

    1. setting the directions of corporate strategy
    2. encourage and support appropriate risk taking by senior management
    3. supervise Directors and executive management, including senior executives (執行役員)

    Connecting the dots: the link between accounting issues and the space shuttle Challenger disaster

    Toshiba’s recent accounting issues reflect much deeper fundamental problems – of course.

    I see parallels between Toshiba’s accounting issues and the space shuttle Challenger disaster: Nobel Prize Winner Richard Feynman determined that the cause of the space shuttle Challenger disaster was the failure of top management to communicate with the people doing the work (“genba”, 現場): “Appendix F – Personal observations on the reliability of the Shuttle, by R. P. Feynman“.

    Space shuttle Challenger’s top management was insisting to keep the planned launch date fearing public relations issues, while the workers and engineers on the ground, “genba”, knew that they were not ready. But top management at space shuttle Challenger did not listen to “genba”.

    My advice to Japanese corporations: embrace and learn to love diversity!

    Embrace and learn to love diversity! Diversity delivers better results overall. We all learn from each other.

    My advice to foreign investment funds seeking more influence on Japanese companies

    Shouting at the CEO or Boards of Japanese companies will not help – many foreign activist investors have already proven this fact many times. Insisting on your superior knowledge will not make you many friends – as anywhere else.

    You need to develop trust and relationships. You need to start by learning Japanese, understanding Japan, and earn trust and contribute with achievements, or partner with people who have: KKR hired Japan Exchange Group emeritus CEO Atsushi Saito.

    There are no increasing numbers of examples, where outstanding Japanese corporations careful listen to outside advice from investors, and thus become even more outstanding: SONY and robotics maker FANUC come to mind.

    My advice to foreign companies operating in Japan

    Your subsidiary in Japan is a Japanese corporations and needs corporate governance. There have been a long list of corporate governance failures leading to huge problems and losses at foreign subsidiaries in Japan, in the financial sector, the elevator sector, the pharmaceutical sector and several others.

    Make good use of the Board of Directors of your Japanese subsidiary corporation.

    Need to know more?

      Copyright (c) 2015-2019 Eurotechnology Japan KK All Rights Reserved

    • Was Osamu Suzuki first to understand Volkswagen’s Diesel issues?

      Was Osamu Suzuki first to understand Volkswagen’s Diesel issues?

      Osamu Suzuki: “we looked at Wagen’s technologies, and could not find anything we need” (Nikkei, 1 July 2011)

      by Gerhard Fasol

      Did Volkswagen underestimate Mr Suzuki?

      Over the last 18 years myself and our company have worked on many foreign-Japanese company partnerships, therefore we always have great interest in business partnerships involving Japanese companies, and have followed the Volkswagen-Suzuki relationship closely.

      We published two blog articles after the ICC Arbitration Court issues judgement sealing the Suzuki-Volkswagen divorce, and before we became aware of the Volkswagen Diesel issues:

      When I was asked to brief German President Horst Köhler on April 3, 2005 about Japan’s technology sector, my advice included the following:

      Interaction with Japan enforced total restructuring of leading US companies, including INTEL and MOTOROLA. According to my knowledge, there are almost no European companies yet which were forced to totally restructure their business due to interaction with Japan. I feel that this may happen in the future.

      Volkswagen could be a candidate now, although US agencies and courts are now primary actors, Suzuki’s role may not be negligible.

      Volkswagen had already lost out against Suzuki, and Suzuki’s CEO Mr Osamu Suzuki in the 1980s when India started to build an Indian automotive industry. India had considered to build India’s car industry based on Volkswagen’s Beatle, but decided to go with Mr Osamu Suzuki instead. Maruti Suzuki India Limited (マルチ・スズキ・インディア) achieved 45% market share in India’s passenger car market in 2014. Suzuki Motors owns 54% of Maruti Suzuki, and Mr Osamu Suzuki is greatly respected as Japan’s No. 1 top India expert.

      When Mr Osamu Suzuki entered into the Maruti Suzuki India Joint-Venture, he reportedly insisted to have 100% decision making and management rights in the Joint-Venture.

      Links between the Suzuki-Volkswagen and the Volkswagen Diesel issues time lines.

      We can see interesting links in the time lines of the Suzuki-Volkswagen relationship and the Volkswagen Diesel issues:

      Time line of events relevant to the Suzuki Volkswagen relationship

      • 16 Nov 1970: “Maruti technical services private limited” (MTSPL) to create an Indian automobile industry, first CEO: Sanjay Gandhi. Sanjay Gandhi contacted Volkswagen AG to seek a cooperation to produce an Indian version of the VW Käfer (Beatle). However, a cooperation with Volkswagen did not work out. The company failed in 1977, and was reborn as Maruti Udyog Ltd by Dr V. Krishnamurthy.
      • 1982: Maruti Udyog Ltd and Suzuki entered into a licensing and joint venture agreement, creating Maruti Suzuki India Limited (マルチ・スズキ・インディア), which in 2014 achieved a 45% market share of India’s passenger car market.
      • 20 0ctober 2005: Suzuki and FIAT announce a partnership on FIAT’s Diesel engines (see: Suzuki announcement)
      • 6 March 2006: Suzuki and GM announce the reduction of GM’s stake in Suzuki from 20% to 3%, strongly reducing the GM holding in Suzuki, which had started in August 1981. (see: Suzuki announcement)
      • 9 Dec 2009: VW-CEO Martin Winterkorn and Suzuki-CEO Osamu Suzuki announced the “comprehensive partnership” at a press conference in Tokyo (see: joint Suzuki Volkswagen press announcement)
      • 9 Dec 2009: Suzuki transferred 107,950,000 treasury shares to Volkswagen AG, valued approx at 226,695,000,000 yen (= approx. US$ 2.3 billion)
      • 15 Jan 2010: VW purchased 19.89% of Suzuki shares for about € 1.7 billion
      • March 2011: Volkswagen writes in the annual report that Volkswagen “significantly influence financial and operating policy decisions” at Suzuki
      • 1 July 2011: Osamu Suzuki publicly airs his frustrations with “Wagen-san’s” intentions in his Japanese language blog in Japan’s Nikkei “スズキとワーゲンの今とこれから (鈴木修氏の経営者ブログ)” (“Suzuki and Wagen now and the way forward”) (may need Nikkei subscription)
      • Sept 2011: Suzuki’s Board decides to terminate the partnership
      • 18 Nov 2011: Suzuki gives notice to Volkswagen of termination of partnership, Volkswagen does not reply (says Suzuki)
      • 24 Nov 2011: Suzuki files for arbitration at International Court of Arbitration of the International Chamber of Commerce (ICC) in London
      • 2013-2014: The International Council on Clean Transportation (ICCT) conducts a research project in collaboration with the West Virginia University to determine real world, away from test rigs, emissions from diesel cars in the USA. Project leader is John German. ICCT tests a VW Jetta, a VW Passat, and a BMW X5, and finds that in real world driving conditions, the VW Jetta exceeds the US-EPA Tier2-Bin5 Nix (Nitrogen Oxide) emission standards by 15 to 35 times, the VW Passat by 5 to 20 times, while the BMW X5 generally conformed to the standards except in extreme conditions. The fact that the BMW X5 conforms to the standard for the ICCT was proof that the technology to conform existed. (see: ICCT announcement)
      • 30 Aug 2015: ICC Arbitration Court issues judgement and holds the termination of the partnership valid, orders VW to sell all Suzuki shares back to Suzuki (or a 3rd party selected by Suzuki), and orders Suzuki to pay damages for breaking the agreement
      • 17 Sep 2015 8:45am: Suzuki purchases back 119,787,000 of its own shares previously owned by VW via Tokyo Stock Exchange ToSTNeT-3 system for 460,281,547,500 yen (approx. US$ 3.9 billion), completing the termination of the partnership and capital alliance with VW
      • 18 September 2015: Press announcement by The ICCT “EPA’s notice of violation of the Clean Air Act to Volkswagen
      • 18 September 2015: EPA notice of violation to Volkswagen (See: EPA announcement), EPA website concerning Volkswagen
      • 18 September 2015: California Air Resources Board (CARB) letter to Volkswagen, “Re: Admission of Defeat Device and California Air Resources Board’s Request”
      • 26 Sep 2015: Suzuki announced the transaction to sell all 4,397,000 Volkswagen shares which Suzuki owns to Porsche Automobile Holding SE, completing the termination of the partnership and capital alliance with VW

      The International Council on Clean Transportation (ICCT) study on real-world exhaust emissions from modern diesel cars

      The ICCT noted that there is a wide discrepancy in emissions by cars under test conditions and in real live road driving conditions, and conducted the project on real-world exhaust emissions from modern diesel cars.

      The report can be dowloaded here as a pdf file: “REAL-WORLD EXHAUST EMISSIONS FROM MODERN DIESEL CARS

      “In-Use Emissions Testing of Light-Duty Diesel Vehicles in the United States”

      The ICCT contracted with the Center for Alternative Fuels, Engines and Emissions (CAFEE) at West Virginia University to test the real road emissions of three cars in the USA. This study is explained on the ICCT website “In-use emissions testing of light-duty diesel vehicles in the U.S.”

      The final report can be downloaded here: “Final Report: In-Use Emissions Testing of Light-Duty Diesel Vehicles in the United States. by Dr. Gregory J. Thompson (Principal Investigator)“.

      Copyright (c) 2015 Eurotechnology Japan KK All Rights Reserved

    • Mr. Suzuki didn’t want to be a Volkswagen employee, and that’s understandable (Prof. Dudenhoeffer via Bloomberg)

      Mr. Suzuki didn’t want to be a Volkswagen employee, and that’s understandable (Prof. Dudenhoeffer via Bloomberg)

      Mr Suzuki (Chairman of Suzuki Motors), wrote in his Japanese blog, that “ending the partnership with Volkswagen (Wagen-san as he calls VW) was like the relieve I feel after having a fishbone stuck in my throat removed”

      No partnership works without meeting of minds, with opposite agendas and colliding expectations

      by Gerhard Fasol, All Rights Reserved. 20 September 2015, updated 27 September 2015

      VW Volkswagen Suzuki
      VW Volkswagen Suzuki

      Suzuki Volkswagen – bottom line first:

      • Volkswagen wanted Suzuki more than Suzuki needed Volkswagen
      • Suzuki-CEO Osamu Suzuki: “we looked at Wagen’s technologies, and could not find anything we need” (Osamu Suzuki’s blog in Nikkei, in Japanese language)
      • Volkswagen underestimated Suzuki’s strength and resolve, and didn’t do the required homework
      • Volkswagen overestimated its own leverage on the opposite side of the world from Wolfsburg
      • Partners with opposite agendas and colliding expectations, without communication and no homework can’t partner
      • Its not about “cultural differences”. Not at all.

      On 9 December 2009 a beaming Martin Winterkorn (VW-CEO) was celebrating the new “comprehensive partnership” with Suzuki Motors, and Osamu Suzuki, the 79 year old CEO of Suzuki, was looking the other way, avoiding Mr Winterkorn’s eyes – as you can see in Reuters’ photograph of the occasion.

      Reuters reported, that Mr Osamu Suzuki was asked how he would feel about a German CEO of Suzuki Motors in the future, and his answer was unambiguous: Mr Suzuki emphatically stated that Suzuki will not become a 12th brand for Volkswagen, and that he does not want anybody to tell him what to do.

      Wall Street Journal reported, that Suzuki and Volkswagen would negotiate details in the weeks or months to come. We now know that these negotiations did not lead anywhere, and were never concluded satisfactorily.

      It is obvious that there never was any “meeting of minds”, the expectations were colliding, and the CEOs had not a single language in common in which they could talk directly. At the press conference they looked away from each other.

      Osamu Suzuki airs his frustrations with “Wagen-san” in his Japanese language blog in Nikkei – the world’s largest business daily

      Mr Suzuki (Chairman of Suzuki Motors), wrote in his Japanese blog, that “ending the partnership with Volkswagen (Wagen-san as he calls VW) was like the relieve I feel after having a fishbone stuck in my throat removed”

      On 1 July 2011, Suzuki-CEO Osamu Suzuki informs the world about his frustrations about “Wagen” (ワーゲン), via a blog post “スズキとワーゲンの今とこれから (鈴木修氏の経営者ブログ)” (english translation: “Suzuki and Wagen now and the way forward”). Osamu Suzuki’s blog post can be read here (may need Nikkei subscription).

      Professor Ferdinand Dudenhoeffer, Director of the Center for Automotive Research at the University Duisburg-Essen according to Bloomberg, summarized: “Mr Suzuki didn’t want to be a Volkswagen employee, and that’s understandable”.

      VW’s reply: “The tail is not going to wag the dog” (VW-CEO Winterkorn cited in Der Spiegel on 19 Sept 2011)

      Germany’s leading intellectual and business weekly Der Spiegel on 19 Sept 2011 quotes VW-CEO Martin Winterkorn about the VW-Suzuki relationship: “Da wackelt der Schwanz nicht mit dem Hund” (the tail is not going to wag the dog, which I guess has the meaning that Mr Winterkorn perceived Suzuki Motors as the junior partner who cannot have any independent power in a relationship with Volkswagen).

      Suzuki Volkswagen alliance time line

      • 9 Dec 2009: VW-CEO Martin Winterkorn and Suzuki-CEO Osamu Suzuki announced the “comprehensive partnership” at a press conference in Tokyo
      • 9 Dec 2009: Suzuki transferred 107,950,000 treasury shares to Volkswagen AG, valued approx at 226,695,000,000 yen (= approx. US$ 2.3 billion)
      • 15 Jan 2010: VW purchased 19.89% of Suzuki shares for about € 1.7 billion
      • 1 July 2011: Osamu Suzuki publicly airs his frustrations with “Wagen-san’s” intentions in his Japanese language blog in Japan’s Nikkei “スズキとワーゲンの今とこれから (鈴木修氏の経営者ブログ)” (“Suzuki and Wagen now and the way forward”) (may need Nikkei subscription)
      • Sept 2011: Suzuki’s Board decides to terminate the partnership
      • 18 Nov 2011: Suzuki gives notice to Volkswagen of termination of partnership, Volkswagen does not reply (says Suzuki)
      • 24 Nov 2011: Suzuki files for arbitration at International Court of Arbitration of the International Chamber of Commerce (ICC) in London
      • 30 Aug 2015: ICC Arbitration Court issues judgement and holds the termination of the partnership valid, orders VW to sell all Suzuki shares back to Suzuki (or a 3rd party selected by Suzuki), and orders Suzuki to pay damages for breaking the agreement
      • 17 Sep 2015 8:45am: Suzuki purchases back 119,787,000 of its own shares previously owned by VW via Tokyo Stock Exchange ToSTNeT-3 system for 460,281,547,500 yen (approx. US$ 3.9 billion), completing the termination of the partnership and capital alliance with VW
      • 26 Sep 2015: Suzuki announced the transaction to sell all 4,397,000 Volkswagen shares which Suzuki owns to Porsche Automobile Holding SE, completing the termination of the partnership and capital alliance with VW

      A teachable moment

      • “Comprehensive partnership” without meeting of minds does not work
      • Partnerships are hard when CEOs on both sides don’t have any language in common, thus can’t talk to each other – and have exactly opposite expectations from the start and don’t address them until its too late
      • Processes and methods successful in Europe or USA often don’t work in Japan
      • Its not about “cultural differences”. Not at all.
      • Its about trust, respect, communication and “meeting of minds”, shared (not opposite) expectations and agendas.
      • Speaking at least one language in common helps.
      • more details and analysis here

      Financial aspects

      • VW made approx. US$ 1.3 billion profit on the Suzuki shares it owned from 2009-2015
      • Suzuki broke even approximately on selling own treasury stock to VW and repurchasing the same shares back from VW a few days ago, and on temporarily owning 2.5% of VW, but still may have to pay compensation to VW.
      • Read detailed financial analysis here.

      During the period 2009-2015 both VW and also Suzuki share prices increased substantially. The reason that VW made substantial financial profits from the VW-Suzuki share transactions, while Suzuki did not, is that Suzuki used 1/2 of the proceeds of selling Suzuki treasury stock to VW for R&D, thus had a much smaller holding of VW shares than VW did of Suzuki shares.

      With cash reserves of approx. US$ 8 billion Suzuki will be just fine, and can now focus on expanding Maruti-Suzuki’s 37% market share of India’s passenger car market and other exciting growth projects.

      And Volkswagen can now focus on growth markets, and Toyota – and other very pressing issues.

      Copyright (c) 2015 Eurotechnology Japan KK All Rights Reserved

    • Quarterly financial reports to go away: UK and EU remove requirements for quarterly financial reports

      Quarterly financial reports to go away: UK and EU remove requirements for quarterly financial reports

      Voluntary quarterly reporting?

      Quarterly financial reports: can they be the trees which obscure long term growth of the forrest?

      As a Board Director of a Japanese company traded on the Tokyo Stock Exchange I have to study and approve monthly, quarterly and annual financial reports, and I share responsibility for the future success of the company.

      It is obvious that the longterm success and growth of the company is the most important priority for all stake holders. So how useful are quarterly financial reports? Lets look at some recent developments and at an example below from our Report on Japan’s Telecommunications Industries.

      UK setting the trend!

      Britain’s leading economist, Professor John Kay, created the Review of UK Equity Markets and Long-Term Decision Making which he reported to the UK Secretary of State for Business, Innovation and Skills in July, 2012.

      Motivated by Professor John Kay’s report, the UK regulator removed the requirement for companies to publish quarterly financial reports.

      Mark Zinkula, CEO of Legal & General Investment Management, one of UK’s largest investment management firms, around 8 June 2015 wrote a carefully worded letter to 350 UK company Chairmen, recognizing that each company has different circumstances, and encouraging them to report the most meaningful key metrics and to omit reporting quarterly financial results if these don’t contribute to longterm value creation. You can download Mark Zinkula’s letter as a pdf file here.

      Martin Lipton, of the NY law firm Wachtell, Lipton, Rosen & Katz, in an article published on the Harvard Law School Forum on Corporate Governance and Financial Regulation blog encourages the US Securities and Exchange Commission (SEC) to keep the UK developments in mind, when reforming the reporting requirements for US corporations.

      The European Union (EU) reduced the reporting requirements including the requirement for quarterly financial reporting.

      Will Japan and other important countries such as USA follow this trend as well?

      Quarterly financial reports: pro’s and con’s

      Essentially all well managed companies have fine grained financial management systems which document the financial position of the company at any moment in time.

      As an example, when Kazuo Inamori rebuilt Japan Airlines from bankruptcy, he created a reporting system which calculates the profit/loss of every single flight in real time: i.e. when a Japan Airlines flight from Tokyo arrives in San Francisco, the pilot and everyone else knows before landing in San Francisco whether this particular flight was profitable or not – while before Japan Airlines bankruptcy, profit/loss (mainly losses for the last years leading up to bankruptcy) was determined on a full company basis every 3 months in arrears. Read Kazuo Inamori’s talk here. Clearly Kazuo Inamori thinks that such fine grained profit/loss awareness is a crucial component for Japan Airlines’ revival from bankruptcy.

      Its obvious that for today’s IT systems the creation of quarterly financial reports from such fine-grained measurement systems such as Kazuo Inamori had installed at Japan Airlines does not cause much additional effort or costs once the coding is done.

      Quarterly financial reports: trees vs. the forrest

      Quarterly financial reports can be complicated to understand for highly cyclical industries: lets have a look at the quarterly vs annual reports of Japan’s mobile operators from our Report on Japan’s Telecommunications industries.

      The figures below show exactly the same financial data – the net income (= profit) of Japan’s mobile operators NTT-Docomo, SoftBank and KDDI over the last 10-15 years:

      • Upper Figure: quarterly net income (thick curves) vs annual net income (thin curves)
      • Lower Figure: quarterly net income (thin curves) vs annual net income (thick curves)
      Net income of Japan's mobile operators: quarterly results (thick curves) vs annual results (thin curves)
      Net income of Japan’s mobile operators: quarterly results (thick curves) vs annual results (thin curves)
      Net income of Japan's mobile operators: quarterly results (thin curves) vs annual results (thick curves)
      Net income of Japan’s mobile operators: quarterly results (thin curves) vs annual results (thick curves)

      It is hard to draw conclusions from quarterly income curves above. Most eye-catching is that SoftBank’s quarterly income results became much more fluctuating in the last two years. Its hard to judge the relative performance of Docomo, SoftBank and KDDI from the quarterly income curves.

      Annual net income curves give a much clearer picture. Annual figures clearly show that SoftBank caught up and overtook Docomo and KDDI in net profits.

      As Mark Zinkula points out that every company and every industry is different. In the case of Japan’s mobile operators, annual figures give a clearer picture.

      Will quarterly financial reports become voluntary and go away? They might partly in the UK, and maybe also in other countries. As so often in finance, the UK sets the global trends.

      Quarterly financial reports & the Toshiba accounting issues

      Quarterly financial reports can be the trees and annual reports the forrest… seeing the forrest can be more important than seeing individual trees

      Would focus on annual and long-term performance have prevented Toshiba’s accounting issues?

      Copyright (c) 2015 Eurotechnology Japan KK All Rights Reserved

    • Burberry Japan: breaking up is hard to do

      Burberry's new directly operated flagship store in Tokyo Omotesando

      Burberry’s Japan pivot

      Burberry Japan pivots from successful partnership to direct business

      by Gerhard Fasol, All Rights Reserved.

      many of the underlying issues also apply in all other business areas, such as electronics, and technology.

      Sanyo Shokai pivots from Burberry to Mackintosh and other brands


      Burberry Japan pivots to direct business to solve Burberry’s “Japan Problem”: for the last approx. 50 years Burberry’s business in Japan was not Burberry’s business at all, but run under license by the Japanese company Sanyo Shokai and the giant trading company Mitsui. Sanyo Shokai’s core business was developing its own product lines Blue Label and Black Label and selling them under the Burberry Blue Label and Burberry Black Label brands.

      Almost every day a foreign company approaches us to help them find a “Japanese partner” to build their business in Japan…

      There are many examples of very successful Japan-market-entries via partnerships. Success stories include: Oracle, Salesforce.com, Starbucks, Fuji-Xerox, Yahoo, SuperCell, and many more, and until a few months ago, Burberry.

      Read our analysis here, and background facts here.

      Burberry found an excellent Japanese partner in 1965, Sanyo Shokai, backed by giant trading company Mitsui, and Sanyo Shokai built a terrific business for Burberry in Japan! Not only did Sanyo Shokai import Burberry products to Japan, but Sanyo Shokai also developed two enormously successful sub-brands for Burberry in Japan: Burberry Blue Label and Burberry Black Label. And Sanyo Shokai kept transferring substantial royalties/license fees to Burberry’s headquarters.

      Actually it turned out that almost all the business value for Burberry in Japan was in the Burberry Blue Label and Burberry Black Label sub-brands, which were developed by Sanyo Shokai in Japan, by Japan and for Japan – and with the required Japanese quality and customer service. Sanyo Shokai also contributed the Japanese Burberry flagship store in one of the world’s prime luxury shopping areas, Ginza, and about 300-500 Burberry stores all over Japan – many in prime locations.

      In June 2015, Burberry terminated this very successful licensing relationship.

      Now after their divorce, both Burberry and Sanyo Shokai rebuild their businesses in Japan from scratch:


      why has Burberry not decided on a less disruptive transition?

      For example, acquiring Sanyo Shokai comes to my mind. Acquisitions in Japan are not unheard of, and since Sanyo Shokai is a publicly traded company, well established rules apply.

      why did Sanyo Shokai over the 50 years since starting the relationship with Burberry not build its 100% owned brand?

      Much smaller Yagi Tsusho managed to acquire Mackintosh, why did not Sanyo Shokai within the last 50 years acquire or develop a 100% owned and successful brand? With Blue Label and Black Label, Sanyo Shokai has proven its ability to build and develop brands, why not under their own brand?

      Some puzzles about this split


      Winding veils round their heads, the women walked on deck. They were now moving steadily down the river, passing the dark shapes of ships at anchor, and London was a swarm of lights with a pale yellow canopy drooping above it. There were the lights of the great theatres, the lights of the long streets, lights that indicated huge squares of domestic comfort, lights that hung high in air.

      No darkness would ever settle upon those lamps, as no darkness had settled upon them for hundreds of years. It seemed dreadful that the town should blaze for ever in the same spot; dreadful at least to people going away to adventure upon the sea, and beholding it as a circumscribed mound, eternally burnt, eternally scarred. From the deck of the ship the great city appeared a crouched and cowardly figure, a sedentary miser.

      Has this transition been well thought through?


      It will be interesting to see where both Burberry and Sangyo Shokai will stand 10 years from now – 10 years from this divorce. Both certainly are in challenging situations in Japan now after this divorce. Will both survive in Japan? Or only one of the two?

      Read more details here.

      Foreign companies seeking to build a business in Japan via a partnership, and Japanese companies seeking to build the business of foreign companies in Japan can certainly learn from this case study. Although its fashion and apparel, many of the underlying issues also apply in all other business areas, such as electronics, and technology.

      Burberry's new directly operated flagship store in Tokyo Omotesando
      Burberry’s new directly operated flagship store in Tokyo Omotesando
      Sanyo Shokai's flagship building  in Tokyo-Ginzs, one of the world's prime luxury shopping areas, much frequented by cash-rich Chinese shoppers. Currently being converted from the Burberry brand to Mackintosh and other Sanyo Shokai brands (second building from the left)
      Sanyo Shokai’s flagship building in Tokyo-Ginzs, one of the world’s prime luxury shopping areas, much frequented by cash-rich Chinese shoppers. Currently being converted from the Burberry brand to Mackintosh and other Sanyo Shokai brands (second building from the left)

      Copyright 2009-2024 Eurotechnology Japan KK All Rights Reserved

    • Toshiba income restatement: corresponds to one full year of average operating income

      Toshiba income restatement: corresponds to one full year of average operating income

      Toshiba’s income restatement announced by the independent 3rd party committee

      by Gerhard Fasol

      Independent 3rd party committee chaired by former Chief Prosecutor of Tokyo High Court

      On 12 June, 2015, Toshiba announced corrections to income reports, and at the same time engaged an independent 3rd party investigation committee headed by former Chief Prosecutor at the Tokyo High Court, Mr Ueda, to investigate. This independent 3rd party committee submitted their report yesterday, and held a Press Conference this evening.

      Lets look at the announced Toshiba financial data in detail. The figure below shows:

      • Toshiba’s previously reported operating income/profits (blue curve),
      • corrections announced by an internal committee on June 12, 2015 (green curve),
      • corrections announced by the independent 3rd party committee on July 20, 2015 (red curve).

      The combined amount of downward corrections determined by the independent 3rd party committee is YEN 151.8 billion (US$ 1.22 billion) in total.

      Lets put this amount into context:

      • annual sales: approx. YEN 6000 billion (US$ 60 billion)
      • annual operating income (average over last 17 years): YEN 148 billion (US$ 1.5 billion)
      • annual net income (average over last 17 years): YEN 19 billion (US$ 190 million)

      Therefore the downward correction summed over the years corresponds to:

      • approx. 2.5% of average annual sales
      • approx. 103% of average annual operating profits, ie more than a full year of average operating profits
      • approx. 8 years of net profits

      Toshiba – typical for Japan’s large electronics corporations – operates with razor-thin profit margins: Toshiba’s net profit margin averaged over the last 17 years is 0.25%.

      Therefore, the downward correction corresponds to 8 years of average net income/profits.

      Toshiba's corrections: internal investigation (June 12, 2015, green) vs independent 3rd party committee (July 20, 2015, red)
      Toshiba’s corrections: internal investigation (June 12, 2015, green) vs independent 3rd party committee (July 20, 2015, red). Source: https://www.eurotechnology.com/store/j_electric/
      • Blue curve shows Toshiba’s initially reported operating income.
      • Green curve shows corrections determined by an internal examination, announced on June 12, 2015. Corrections amount to approx. YEN 50 billion (= approx. US$ 0.5 billion).
      • Red curve shows corrections determined by the independent 3rd party commission, chaired by former Tokyo High Court Chief Prosecutor Ueda and announced on July 20, 2015. Corrections amount to YEN 151.8 billion (= approx. US$ 1.22 billion)

      Japan electronics industries – mono zukuri

      Copyright (c) 2009-2019 Eurotechnology Japan KK All Rights Reserved

    • How big is Dentsu? US$ 37 billion, or US$ 19 billion or US$ 6 billion sales/year?

      How big is Dentsu? US$ 37 billion, or US$ 19 billion or US$ 6 billion sales/year?

      Dentsu dominates Japan’s media sector and advertising

      Dentsu switches from JGAAP to IFRS accounting standards with big impact on KPIs

      Dentsu dominates Japan’s advertising and media industries, and attracts some of the most creative Japanese talent, although Dentsu is not the first advertising agency in Japan – that priority belongs to Hakuhodo.

      From April 1, 2015, Dentsu decided to switch to IFRS accounting standards from Japan’s JGAAP standards. For FY2014, Dentsu reports financial results both using IFRS and JGAAP standards, giving us the fascinating opportunity to compare both accounting standards for a major corporation.

      So how big is Dentsu? For FY 2014 (April 1, 2014 – March 31, 2015) Dentsu reports (we have rounded the figures):

      • Turnover (IFRS) = ¥ 4642 billion (=US$ 37 billion)
      • Net Sales (JGAAP) = ¥ 2419 billion (=US$ 19 billion)
      • Revenues (IFRS) = ¥ 729 billion (=US$ 6 billion)

      For operating income, net income and other data IFRS and JGAAP measure quite different KPIs.

      Disruption is on the way: CyberAgent based on blogs, Recruit based on classified advertising and HR, LINE based on sticker communications, and many more…

      How big is Dentsu? US$ 37 billion, or US$ 19 billion or US$ 6 billion sales/year?
      How big is Dentsu? US$ 37 billion, or US$ 19 billion or US$ 6 billion sales/year?

      Managing Japan/West cultural issues via the Dentsu-Aegis-Network

      As for many Japanese corporations, Dentsu’s challenge is to leverage a dominating position in Japan into a global business footprint, while managing the well-known cultural issues. Dentsu’s approach was to acquire the French/UK agency Aegis, and then via Dentsu-Aegis acquire a string of agencies all over Europe:

      Dentsu and Dentsu-Aegis

      Dentsu dominates Japan’s advertising space, and is a very very strong force in Japan’s media industry sector, through control and management of major advertising channels with an overwhelming market share in Japan, and has been working hard to leverage its creative power and strength in Japan into a larger global footprint.

      A big step forward towards a larger global footprint for Dentsu was the acquisition of the London based Aegis Group, announced on July 5, 2012.

      Read our report on Japan’s Media Landscape

      Dentsu HQ
      Dentsu HQ

      Copyright (c) 2009-2015 Eurotechnology Japan KK All Rights Reserved

    • Japan mobile operators grow to US$ 25 billion in operating profits for FY2014 (ended March 31, 2015)

      Japan mobile operators grow to US$ 25 billion in operating profits for FY2014 (ended March 31, 2015)

      Annual revenues exceed US$ 170 billion in FY2014

      Japan’s mobile telecommunications sector continues to grow

      The global mobile internet and smartphone revolution started in Japan in 1999, and Japan’s mobile telecommunications market is the world’s most advanced and most vibrant. Much mobile innovation and inventions, such as camera phones, color screens for mobile phones, mobile apps (i-Appli in Japan), and mobile payments were invented and first to market in Japan.

      Globally the first mobile internet started in Japan in February 1999 when NTT-Docomo brought i-Mode to market. NTT-Docomo did not succeed to develop global business based on i-Mode, however, SoftBank took the lead, and is now building a global business built on Japan’s telecommunications sector’s strengths.

      To understand Japan’s telecommunications market read our report:

      Japan mobile operators grow revenues to over US$ 170 billion in FY2014

      While former monopoly operator NTT-Docomo’s business continues to shrink since its peak in 2002, KDDI is growing its predominantly domestic Japanese business slowly but steadily.

      SoftBank on the other hand drives rapid growth with domestic Japanese acquisitions (Vodafone-Japan, Japan Telecom, eMobile and Willcom) and overseas acquisitions, which include US operator SPRINT, US mobile phone retailer BrightStar, Finnish game company SuperCell and many others – not to mention SoftBank’s investment in Alibaba.

      Japan's top three mobile operators combined revenues grow to over US$ 170 billion
      Japan’s top three mobile operators combined revenues grow to over US$ 170 billion

      Operating profits rise to approx. US$ 25 billion in FY2014

      Operating profits and net profits are steadily increasing for Japan’s three mobile operators combined.

      Former monopoly operator NTT-Docomo’s operating profits peaked in 2002, and have been steadily decreasing since this peak.

      Both challengers KDDI and SoftBank on the other hand are growing operating profits steadily: KDDI mainly domestically in Japan, with relatively small global business, while SoftBank has dramatically increased business outside Japan with a series of acquisitions and investments, including US operator Sprint, US mobile phone distributor BrightStar and Finnish game developer SuperCell.

      Operating income of Japan's three mobile operators combined increases to approx. US$ 25 billion
      Operating income of Japan’s three mobile operators combined increases to approx. US$ 25 billion

      To understand Japan’s telecommunications market read our report:

      Copyright 2015 -2019 Eurotechnology Japan KK All Rights Reserved

    • Masahiro Morimoto, entrepreneur, CEO and Chairman of the Board, UBIC Inc. (today: Fronteo) A discussion with Dr. Gerhard Fasol

      Masahiro Morimoto, entrepreneur, CEO and Chairman of the Board, UBIC Inc. (today: Fronteo) A discussion with Dr. Gerhard Fasol

      UBIC Inc (today: Fronteo): founded to curb huge losses of Japanese corporations due to litigation abroad

      A discussion between UBIC (today: Fronteo) CEO Masahiro Morimoto and Dr. Gerhard Fasol

      From Japanese/Chinese/Korean (CJK) e-discovery, to data forensics, virtual data scientist and predictive coding

      Masahiro Morimoto founded UBIC Inc. on August 8, 2003 to stem the huge losses he saw Japanese corporations incurring due to litigation abroad. English-only software cannot be used for e-discovery of documents in Japanese, Chinese or Korean, and UBIC Inc initially focused on e-Discovery for these double-byte languages. Today, UBIC has grown beyond CJK e-discovery, into applying artificial intelligence tools to predict human behavior from emails and social media, forensics and other fields. Cloud based services are increasing rapidly. Recently, UBIC acquired the US e-discovery company TechLaw Solutions, expanding US business.

      UBIC was founded on August 8, 2003
      Traded on:
      Tokyo Stock Exchange (Code 2158), IPO on November 6, 2007
      NASDAQ (Symbol UBIC), IPO on May 16, 2013

      UBIC Inc. Financial Data for the Financial Year 2014

      (ended March 31, 2015, $1=119.96yen)
      Revenues: YEN 6274 million (US $52.3 million)
      Operating income: YEN 266 million (US$ 2.2 million)
      Net income: YEN 260 million (US$ 2.1 million)

      Market capitalization: YEN 33.25 billion ($276 million) ($1=120.17)

      Note: on July 1, 2016 the company name was changed from UBIC to FRONTEO.

      Discussion between Mr Masahiro Morimoto, CEO and Chairman of the Board, UBIC Inc. (today: Fronteo) and Dr. Gerhard Fasol

      1. Question (Dr. Gerhard Fasol): You announced your most recent financial results on May 13, 2015. Could you kindly give us some of the highlights and some comments?

        Answer (Masahiro Morimoto): For UBIC, the fiscal year ended on March 31, 2015, was memorable for three main reasons:

        1. First, we successfully acquired TechLaw Solutions, a well-established US e-discovery company.
        2. Second, we launched Lit i View EMAIL AUDITOR, a product powered by our proprietary AI program. 
        3. And third, we have promoted several innovative projects with business partners.

        It was not by luck alone that UBIC achieved record high revenue, but as a result of great effort. We achieved both organic and inorganic growth. Our company is entering a new era now.

      2. Question (Dr. Gerhard Fasol): The core of your business is e-discovery with special focus on Asian languages. Can you tell us more about the current state of the e-discovery market, your competitive advantage, and how you can assist your clients?

        Answer (Masahiro Morimoto): Our strength lies in operations that enable us to integrate and manage data within Japan. This is of particular value to the increasing number of Asian companies that do not want their highly confidential data to leave the country. At the same time, we provide an end-to-end, full e-discovery service. Our high level technology has enabled us to develop our own e-discovery reviewing tool, Lit i View.
        Further, our document review services in Asian languages including Japanese that use Predictive Coding, our proprietary AI technology developed by the in-house team, can cut costs while improving the quality of reviews, which can account for up to 70% of discovery costs.
        Lastly, our consultants and project managers can help in bridging any gap there might be between Asian companies and US attorneys, so that complex matters and projects may proceed smoothly for both sides.

      3. Question (Dr. Gerhard Fasol): I understand that most of your work is ultra-confidential, since your work is in the field of data security. However, could you tell us about one or two successes so we can get an idea of how UBIC is able to help clients, and the reason they like working with you.

        Answer (Masahiro Morimoto): One of our customers, which regularly faces cases filed by non-practicing entities (NPEs) in the US, was able to reduce their e-discovery costs by up to 40% by utilizing our services based on our proprietary AI technology. We have heard that achievement garnered a special company award.
        (Note added by Gerhard Fasol: NPE’s are often nicknamed “patent trolls”).

      4. Question (Dr. Gerhard Fasol): I understand that your core product is Lit i View. Can you explain the main characteristics of this electronic data analysis platform, and tell us why it is so important for your customers?

        Answer (Masahiro Morimoto): Currently in Lit i View, we have three types of products.

        1. First, Lit i View E-DISCOVERY, which is an e-discovery support product;
        2. second Lit i View XAMINER, a digital forensics tool; and
        3. third the Lit i View EMAIL AUDITOR, our email auditing tool.

        The feature that these three products have in common and which is unique is that they are equipped with Virtual Data Scientist (VDS), UBIC’s AI software, which enables them to analyze big data.
        Furthermore, Lit i View fully supports data in English, Chinese, Japanese, and Korean, and accurately displays multi-byte characters. In contrast, conventional e-discovery tools developed in English-speaking countries cannot accurately process legal documents written in Asian languages or multi-byte characters, without experiencing problems such as garbling.
        Asian companies, which thus are at a disadvantage in terms of the e-discovery process, have found that Lit i View provides an effective solution to their problems. We are receiving very positive reviews from clients in Asian countries, who tell us that they truly need to use Lit i View for documents in Asian languages.
        For further information, see http://www.ubicliv.com/en

      5. Question (Dr. Gerhard Fasol): Virtual Data Scientist (VDS) is important part of your business model, could you explain us about Virtual Data Scientist?

        Answer (Masahiro Morimoto): At UBIC, we do not consider big data to be merely an accumulation of data, but a collection of people’s thoughts and behavior outcomes. We define behavioral informatics as an analytical interpretation of behavior, and the synthesis of information science (including statistics, mathematics, data mining, and pattern recognition) and behavioral science (including psychology, criminology, and sociology).
        Conventional approaches to big data merely analyze past incidents, from which they extract some facts. But, in behavioral informatics, we are able to predict the future, and we do so by basing our analytics on human cognition and by generating patterns of human and social behavior.
        The highly accurate Virtual Data Scientist software applies a behavioral informatics approach to analyzing big data, thereby making it possible for one to find whatever information is being sought.

      6. Question (Dr. Gerhard Fasol): Predictive Coding is another concept for the basis of your business. Could you explain us Predictive Coding?

        Answer (Masahiro Morimoto): Predictive coding is based on the concept of text mining and AI technology. When e-discovery uses predictive coding, our VDS software analyzes and emulates the e-discovery review sample produced by experienced attorneys, before carrying out the rest of e-discovery review processes. Our AI software not only applies e-discovery to the review of documents at a speed more than 4,000 times faster than that achievable by humans, but also avoids the wide discrepancy in review results that often result from human error. Furthermore, our AI software has proved to be more than 90% accurate in extracting information for e-discovery reviews. Although in litigation, e-discovery is the most expensive process, costs can be cut drastically with our AI. If people use our predictive coding in addition to conventional keyword searches, relevant legal documents will no longer be omitted as often happens when only keyword searches are conducted and keyword settings are misconfigured.

      7. Question (Dr. Gerhard Fasol): Your cloud hosting services appear to be the most rapidly growing area of business, accounting for more than half your revenue. Can you explain what this means for you? Will all your services simply move to the Cloud, or are your Cloud services a new class of products? What benefits do your customers derive from using your Legal Cloud?

        Answer (Masahiro Morimoto): Before answering your question, I would like to explain about our business and work flow of e-discovery. E-discovery has several steps such as identification, preservation, collection, processing, analysis, hosting, document review, and production. We charge for each of the steps. Hosting service is one of the steps of e-discovery, and its purpose is to store the data which has been loaded to the hosting server after collection, processing, analysis, and document review. Unlike the e-discovery process which only takes between one to twelve months to complete, hosting service usually lasts more than five years. One reason that the data which has been processed and reviewed by attorneys must be kept for a long time is that there is high possibility of reusing the data in case of multiple lawsuits and other issues for one particular case, for instance. Furthermore, these data are too valuable and expensive to discard since these data can be leveraged across multiple matters. These are the reasons why hosting revenue has been growing. It is a kind of recurrent revenue for us.
        To answer your question regarding whether we plan to move all our products to the Cloud: we will provide cloud solutions to our customers continuously. But, it depends on the customer and the market requirement. Although we must have cloud solutions to meet the market requirement, we provide all types of solutions such as cloud and on-premise products and services.

      8. Question (Dr. Gerhard Fasol): When I discuss the Cloud with customers and friends, automatically almost the first question concerns security. How do you ensure the security of your Cloud services, and do you see this security as a business opportunity for your company?

        Answer (Masahiro Morimoto): In our Intelligence Cloud Service, clients’ data are securely managed. First, only permitted users have access to restricted virtual desktops; second, we have secure communication networks; third, our communications system has a firewall; fourth, we employ VLAN-based logical separation for network segments; and fifth, we have disaster recovery centers for redundancy operations.
        Currently, our priorities do not include offering Cloud-related security business solutions, since our main business is not only offering Cloud services.

      9. Question (Dr. Gerhard Fasol): I have two questions regarding your TechLaw Solutions acquisition.
        1. First, could you explain the reasons for the acquisition of this electronic discovery and litigation consultancy?
        2. And second, it is a fact that mergers involving US or EU companies on the one hand, and traditional Japanese companies on the other, are often difficult, and sometimes the two companies lead almost independent lives, without really integrating. That being the case, how are you overcoming cultural issues, and could you give some advice to companies undertaking Western-Japanese mergers? What are your key experiences and the conclusions you have drawn that might be applied to ensure successful Western-Japanese company mergers?

        Answer (Masahiro Morimoto): In answer to the first part of your question, we acquired TechLaw Solutions – a US e-discovery consultancy and solutions provider that has been in business for more than 30 years – as part of our strategy to expand our e-discovery market share, with a view to giving ourselves a high-profile presence in the US. Since TechLaw Solutions already has developed a large number of sales channels, its acquisition has given us a unique opportunity to establish the UBIC brand in the US.
        Regarding the second part of the question, all companies have their own culture, so even companies with identical national backgrounds have different cultures. To ensure there are no cultural obstacles when companies merge, it is necessary to recognize and accept that differences exist. UBIC has always respected cultural diversity, and so does not perceive it to be a major challenge.
        Most important of all is the need to share clear, solid, and positive goals, and to clearly visualize the path to those goals. I accompanied members of the UBIC management team on a visit to TechLaw Solutions. We held a number of team meetings, during which I continued to make every effort to convey to them my thoughts, regarding what we expected would be the outcome of the acquisition, the degree to which I believed Techlaw Solutions could help UBIC grow, and the reason I had confidence in our technology.
        At the same time, I held one-on-one meetings with all key employees, and made sure that each of them was enthusiastic about their work and that they held values akin to those upheld by UBIC. Had there been no relationship of trust or the support that comes from sharing common goals, it would have been hard for the companies to merge successfully. But, once we found we had the same goals and could help each other, the cultural differences became non-issues.

      10. Question (Dr. Gerhard Fasol): Your venture company is certainly one of the most successful, having grown rapidly into a global corporation that continues to expand. What are the main factors behind your success? Since improving conditions for the setting up of businesses is one of Prime Minister Shinzo Abe’s growth strategies for Japan, based on your experience, how would you suggest conditions might be improved for entrepreneurs?

        Answer (Masahiro Morimoto): One piece of advice regarding how to improve conditions for entrepreneurs concerns the Japanese education system. Schools should teach children, from a young age, about entrepreneurs and startups.
        Although the climate surrounding fundraising has improved, one critical drawback that Japanese entrepreneurs face is the difficulty in attracting smart, competent people to work for startups in Japan. In Silicon Valley, very competent new university graduates are eager to work for startups or small companies with less than five employees. They do not target Fortune 500 or well-known companies, or even companies such as Facebook or Twitter. In Japan, however, very competent students tend to want to work for big-name companies, rather than startups.
        Part of the problem is that we have not learned about startups and entrepreneurship, which makes it difficult for such businesses to attract young Japanese. For example, I used to be a public servant working for the Japan Maritime Self-Defense Force (JMSDF) prior to working for Applied Materials Japan Inc. But then, having a specific goal that I wished to achieve, I set up my own company. Yet, even at that time, had I had the option of working for a startup, I would not have done so, because the concept of startups was so ill-defined.
        Our children need to be taught that there are any number of work possibilities, ranging from being a florist, an astronaut, an entrepreneur or an employee at a startup. We also should teach our children that working for a large company is not the only option. In Japan, we still believe that large, well-known companies are “safe,” “good,” and, thus, “socially acceptable.” It is interesting to note that, these days, even some of the big companies are setting up-within their organizations-business incubators.
        Japanese media have begun to mention startups and entrepreneurs, while some universities have launched incubator programs to draw students into this area of expertise. This is important, since the younger generations should be made aware that there are any number of ways in which they can utilize their skills.
        There are several reasons for UBIC’s success. One factor is that we are a strong team, committed to a goal. Whereas one person alone can achieve relatively little, a great team with members who empower each other and work together can achieve great things.
        A second reason is that we have a clear corporate mission which is shared by the team. Fortunately, it dovetails well with the current social environment. When we launched our e-discovery business, our mission was to provide secure and cost-effective solutions for Japanese and other Asian companies facing litigation. Based on our expertise in analyzing of huge volumes of litigation-related data in English and several Asian languages, we have been able to develop our behavior informatics analytical tool, which makes it possible to predict how people will think and act based on the human conditions and behavioral norms.
        A third factor behind our success is the strong commitment to working as a team. Our motto – “Enthusiasm, Persistence and Impression” – was chosen to motivate our team to persevere in committing to our shared mission.

      11. Question (Dr. Gerhard Fasol): How did you finance the startup of UBIC? Did you accept venture capital? And what are your thoughts on the use of venture capital in Japan?

        Answer (Masahiro Morimoto): I believe that, in Japan, the overall environment for venture capital has improved, but I did not use venture capital because, in those days, there was little understanding of the benefits of incubating startups over the long term; mostly, their objective was short-term investment for profit.
        As a result, when startups got support from venture capitalists, they had no choice but to make a profit by, for example, opening more stores than they may have thought prudent. The results, at times, were fortunate and I did not wish to have such constraints. I wanted to be able to manage my company with a long-term vision. Nowadays, however, one finds venture capital enterprises even in Japan that want to incubate companies with a long-term vision. The situation has improved immeasurably.

      12. Question (Dr. Gerhard Fasol): You have started a number of new ventures in the medical field as well as the social networks. Can you tell about your vision for the future of UBIC?

        Answer (Masahiro Morimoto): We would like to contribute to the creation of a better future for society through the application of information analysis. At the same time, we hope to introduce a new approach to behavior informatics, on the basis of our extensive experience in litigation support and the application of innovative technologies developed through our research.
        Currently, many businesses are providing solutions for big data analysis of human behavior. But the amount of big data is so huge, that it is difficult for people to conduct in-depth analyses. Generally, little more than average results are produced, without specific topic-related differentiation.
        Our AI technology, however, which has been developed by our legal technology specialists, closely emulates human ability and behavior. In addition, it replicates tacit knowledge: the wisdom, and intuition of experts. In other words, our technology can reproduce what is difficult to verbalize. As a result, we are able to analyze subtleties, sensitivities, and distinctive aspects of individuals, which can for example, form the basis of medical diagnosis and individual consumer behavior and preferences.
        Our vision is to provide AI-based solutions that enable each person to realize his or her individuality and potential in order to develop creativity at work and in other settings.

      13. Question (Dr. Gerhard Fasol): Can you tell us the reason you decided to become an entrepreneur and start UBIC? What is your advice to other entrepreneurs who wish to set up their own business in Japan, or globally?

        Answer (Masahiro Morimoto): Well, at first I had no intention of becoming an entrepreneur. But, I developed a strong sense that I had to do something for those Japanese companies that were incurring huge financial losses as a result of litigation abroad. At the time, there were not many forensic or e-discovery services in Japan that offered strong support. That was why, after having accumulated from scratch the know-how required to set up a company, I established my own enterprise. My mission today is to support companies worldwide with our AI, which can emulate experts’ behavior and apply their wisdom to that we can continue to come up with appropriate business solutions.
        My advice to entrepreneurs and people who want to set up their own company is to have a clear mission, and to commit to this with persistence and the support of a strong team.

      Copyright (c) 2015 Eurotechnology Japan KK All Rights Reserved

    • Toshiba accounting restatements in context

      Toshiba accounting restatements in context

      July 21, 2015: Update – report of the independent 3rd party committee chaired by former Chief Prosecutor of the Tokyo High Court.

      Corrections amount to 2 1/2 years (31.5 months) of average annual net profits

      by Gerhard Fasol

      Sales stagnation combined with almost zero net profit of Japan’s top 8 electronics companies creates increasing pressure to improve performance: top 8 electronics groups stagnate while Japan’s top-7 electronics parts makers thrive

      Toshiba over the last few weeks published a number of announcements, and corrections to these announcements concerning accounting issues. Toshiba also engaged internal and independent external expert commissions to analyze possible accounting discrepancies, these committees have made preliminary announcements.

      At a recent Press Conference, the CEO of the Japan Exchange Group (JXP) which includes the Tokyo Stock Exchange, Mr Atsushi Saito, said that “he feels very much ashamed for Toshiba”, and that “he cannot understand how Toshiba can be so lazy about their accounting”.

      To understand Toshiba in the context of Japan’s electronics industry, read our report on Japan’s electronics industry sector:

      Toshiba in the context of Japan’s electronics industry sector: top-8 electronics groups stagnate while electronics parts makers thrive

      Japan’s top-8 electronics giants – including Toshiba – have essentially stagnated for the last 17 years with negligible growth and negligible profits. Japan’s top 8 electronics groups combined have sales approximately as large as the economy of The Kingdom of the Netherlands. However, the big difference is, that in the 17 years since 1998, the economy of The Netherlands has approximately doubled, while Japan’s top 8 electronics companies have not grown their sales at all over these 17 years. Expressed in Japanese YEN, the combined sales of Japan’s top 8 electronics companies in FY1998 is about the same as in FY2014.

      Japan’s electronics parts makers are a very different story: similar to The Netherlands, Japan’s top-7 electronic parts makers have grown to more than twice the size over the 17 years from FY1998 to FY2014. Some of the Japanese electronics parts makers have growth targets which should allow them to overtake Japan’s current incumbent electronics groups!

      To understand Japan’s electronics sector, read our report.

      The stagnation of sales growth combined with almost zero profits over 17 years of Japan’s top 8 electronics groups, of which Toshiba is one, certainly puts much pressure on Japan’s electronics groups to improve performance. This pressure might be the background of accounting issues.

      Lets look at the actual Toshiba financial data in detail

      The figure below shows Toshiba’s previously reported operating income/profits (blue curve), and the recently announced preliminary corrections (red curve). The combined amount of downward corrections is about YEN 50 billion (US$ 0.5 billion) in total.

      Lets put this amount into context (financial data from our Report on Japan’s electronics industries):

      • annual sales: approx. YEN 6000 billion (US$ 60 billion)
      • annual operating income (average over last 17 years): YEN 148 billion (US$ 1.5 billion)
      • annual net income (average over last 17 years): YEN 19 billion (US$ 190 million)

      Therefore the downward correction corresponds to:

      • approx. 0.8% of average annual sales
      • approx. 33% of average annual operating profits
      • approx. 2 1/2 years (31.5 months) of net profits

      Toshiba – typical for Japan’s large electronics corporations – operates with razor-thin profit margins: Toshiba’s net profit margin averaged over the last 17 years is 0.25%.

      Therefore, the downward correction corresponds to 31.5 months of average net income/profits.

      Toshiba accounting corrections amount to approx. 33% of average annual operating income

      Toshiba operating income: previously announced (blue) vs preliminary corrections (red)
      Toshiba operating income: previously announced (blue) vs preliminary corrections (red). source: https://www.eurotechnology.com/store/j_electric/

      Japan electronics industries – mono zukuri – report

      Copyright (c) 2015-2019 Eurotechnology Japan KK All Rights Reserved-2019

    • Japanese electronics parts makers grow, while Japan’s iconic electronics makers stagnate

      Japanese electronics parts makers grow, while Japan’s iconic electronics makers stagnate

      by Gerhard Fasol

      Japan’s iconic electronics groups combined are of similar size as the economy of The Netherlands

      Parts makers’ sales may overtake iconic electronics groups in the near future – they have already in terms of profits

      In our analysis of Japan’s electronic industries we compare the top 8 iconic electronics groups with top 7 electronics parts makers over the period FY1998 to FY2014, which ended March 31, 2015 for most Japanese companies. Except for Toshiba, all Japanese major electronics companies have now officially reported their FY2014 results.

      Japan’s iconic 8 electronics groups (Hitachi, Toshiba, Panasonic, Fujitsu, Mitsubishi Electric, NEC, SONY and SHARP) combined are as large as the economy of The Netherlands – but while the economy of The Netherlands doubled in size between 1998 and 2015, the sales/revenues of Japan’s iconic 8 electronics groups combined showed almost zero growth (annual compound growth rate = 0.4%) and almost zero income (profits).

      Japan’s top 7 electronics parts makers on the other hand – similar to the Netherlands – more than doubled their combined revenues (sales) over the 17 years from FY1998 to FY2014, and earned healthy and increasing profits.

      While several of Japan’s iconic electronics groups are fighting for survival, Japan’s parts makers have very ambitious growth plans – some of them may well overtake the traditional electronics conglomerates in sales – they have already in terms of profits. And they aggressively acquire around the world.

      Detailed data and analysis in our Report on Japan’s electronics sector

      Japan’s electronics parts makers combined more than doubled sales over the last 17 years

      Japan's top 7 electronics parts makers grow at CAGR of 4.6%
      Japan’s top 7 electronics parts makers grow at CAGR of 4.6%

      Japan’s iconic top 8 electronics groups showed almost no growth over the last 17 years

      Japan's top 8 iconic electronics groups stagnate - some fight for survival
      Japan’s top 8 iconic electronics groups stagnate – some fight for survival

      Japan’s electronics parts makers grow – the traditional electronics groups stagnate

      Japan's electronics parts makers grow - Japan's iconic electronics groups stagnate
      Japan’s electronics parts makers grow – Japan’s iconic electronics groups stagnate

      Japan electronics industries – mono zukuri

      Copyright 2009-2019 Eurotechnology Japan KK All Rights Reserved

    • Japan Exchange Group CEO Atsushi Saito: proud of Corporate Governance achievements, but ashamed of Toshiba

      Japan Exchange Group CEO Atsushi Saito: proud of Corporate Governance achievements, but ashamed of Toshiba

      New Dimensions of Japanese Financial Market

      Only with freedom and democracy, the values of open society and professionalism can the investment chain function effectively

      Japan Exchange Group CEO Atsushi Saito: proud of Corporate Governance achievements, but ashamed of Toshiba
      Japan Exchange Group CEO Atsushi Saito: proud of Corporate Governance achievements, but ashamed of Toshiba

      The iconic leader of the Tokyo Stock Exchange since 2007, now Group CEO of the Japan Exchange Group gave a Press Conference at the Foreign Correspondents Club of Japan on June 12, 2015, a few days before his retirement, to give an overview of his achievements and to review the status of Japan’s financial markets today.

      Atsushi Saito expresses his satisfaction and pride and surprise about the big improvements in corporate governance and the mind change happening in Japan now.

      Atsushi Saito has worked as equity analyst in the USA, experienced the US pension fund debate, and when he was pushing for reform of corporate governance in Japan around 1990 was ignored or even criticized. He is surprised to see that these changes he has been keeping pushing for since 1990 are actually implemented now.

      Atsushi Saito directly expressed his shame about the accounting problems recently revealed at Toshiba, and contracts Hitachi, which has independent outsiders, women and non-Japanese foreigners on the Board of Directors, with Toshiba which has not. Atsushi Saito directly said: “I am very puzzled why Toshiba is so lazy to check their accounting”.

      Atsushi Saito – leading the Tokyo Stock Exchange since 2007

      Leading the Tokyo Stock Exchange since 2007, Atsushi Saito aspired to create an attractive investment destination in Tokyo for investors from all over the world with the following achievements:

      • modernized the trading systems
      • developed a self regulatory body
      • merge with Osaka to create Japan exchange group

      Reform corporate governance to improve capital efficiency and corporate value of Japanese companies

      The most imperative challenge has been left untouched for far too long: reform of corporate governance in Japan to improve capital efficiency and corporate value of Japanese companies.

      Recently we introduced the Corporate Governance Code and we see a shift of mindset in Japanese companies.

      Structural impediments remain remain in Japan’s financial market

      Structural impediments remain remain in Japan’s financial markets, indirect finance from Banks remain a significant force in corporate finance.

      Japanese investment bankers continue to fall way behind European and US rivals.

      The post financial crisis regime under Basel 3 puts breaks on excessive leverage.

      When global economy returns to high growth, we are not able to rely solely on money centered banks – banks will not be able to provide enough capital satisfy demands in a growing world economy.

      Foresee demands for international organizations WorldBank, ADB and new AIIB and private equity funds.

      With FinTec, we expect unbundling across separate financial service lines

      With fintec, combining financial services and technology, we expect increasing unbundling across separate service lines for banking services, between settlement, wire transfers, loans and other services.

      We will see more financial services.

      Over dependence on main banks, risk aversion, lack of sense of duty by corporate managers led to the death of Japanese equity as an asset class

      In Japan, as a consequence of dependence on indirect finance by money centric main banks, deep involvement of the main banks in corporate management, Japanese companies grew increasingly risk averse shied away from dynamic investment, and ultimately damaged corporate value.

      There was a demise of the sense of duty by corporate managers use equity capital efficiently, and as a consequence of these factors, we saw a global divestment from Japanese stocks, eventually leading to the death of Japanese equity as an asset class.

      Pushing since 1990 for reform of corporate governance in Japan, Atsushi Saito was not only ignored but even criticized

      Atsushi Saito working as an equity analyst in the USA, followed the US pension debate, and started to push for reform of corporate governance in Japan around 1990, he was not only ignored but criticized.

      Japan’s recent miraculous turn on corporate governance took Atsushi Saito by complete surprise

      Today Japan addresses corporate governance, there is a miraculous turn of mindsets and regulatory framework. We saw:

      • amendment of companies act
      • corporate gov code
      • stewardship code

      That these changes could happen came as a complete surprise.

      Atsushi Saito hopes that this momentum can be maintained, and fiduciary duties of pension fund managers towards beneficiaries will be strengthened to nurture greater professionalism among Japanese institutional investors, similar to The Employee Retirement Income Security Act of 1974, or ERISA act in the USA.

      Only with freedom and democracy + values of open society + professionalism can the investment chain function effectively

      Only with freedom and democracy, the values of open society and professionalism can investment chain function effectively. This pattern is what defines truly advanced economy

      The recent transformation has brought Japan back into the focus of professional investors globally and a new dawn beckons for Japan.

      All stakeholders must remain focused to follow through these early signs of change to ensure that Japan welcomes a brighter future.

      Questions and answers

      Q: Japan not joining the Asian Infrastructure Investment Bank (AIIB) will deprive Japan of opportunities?

      A: The Japanese Government did not say that it will not join the AIIB, but today there is no clear set of rules for the AIIB, the governance structure is unclear. To use tax payers money our government needs to be prudent before they make a decision on investment. There are about 20 international banks and similar organizations, 19 of them have clear governance rules. All except AIIB have clear governance rules. In case of AIIB China will have about 30% holding. Probably our Government will wait before making a decision, and Atsushi Saito thinks this is reasonable.

      Q: Will Tokyo Stock Exchange enter into international alliance?

      A: Stock Exchange business is a very nationalistic business – only USA has multiple exchanges. All other states have one single Exchange totally under control, regulations, culture by single states. Theoretically Exchanges between different countries can merge, but none succeeded. We saw no case in the world were Exchanges from different countries merged successfully, all such cooperations failed.

      Q: Plans of Toyota to have non-traded convertable shares?

      Its up to their shareholders. Legally they did not violate any rule.

      Japan does not have any priority on special stocks.

      I see a discrepance in the USA: The US aggressively raises the voice for rights of shareholders, and corporate governance elsewhere. At the same time US companies are the largest issuer of special stocks for special owners, e.g. for Google or Facebook, more than 50-60% of voting power is dominated by the founders of these companies. –
      I see a discrepancy, its an ironical discrepancy. I am talking to the leaders of US : US is very nosy about our corporate goverance, protection of shareholders, but how do they protect shareholders of Google or Facebook?

      Q: What is your advice for Japanese economy to regain vitality and energy, for Japan to become No. 1 in the world?

      A: I am very concerned about efficient capital use and corporate governance. When I was securities analyst in USA, I was always asked about financial data of Japanese corporations.

      • Fuji Film had huge cash on the balance sheet – their competitor, the yellow-color photo company was always diligent with share holders, paid dividends, did share buy-backs. Fuji spent much R&D on pharmaceuticals and diversification. The Yellow color photo company disappeared, and Fuji Film is very healthy. Accumulation of sleeping capital is useless. But efficient use of capital is crucial.
      • when GM went bankrupt it was discovered that they had great technology, like electrical car projects which had been stopped. GM had stopped these R&D projects, because shareholders had insisted to stop R&D spending, and pay hire dividends, and ultimately went bankrupt.
      • Toyota had 3 trillion yen cash. This was heavily criticized. Toyota was secretely developing electric cars – now LEXUS electric car is bestseller in USA.

      We are concerned to respect shareholders, but shareholders’ short term wishes are not always best for the company.

      Even BlackRock wants long-term enterprise development rather than short term cash benefits.

      Q: Impact of weak YEN on Stock Exchange

      A: Even with weak yen, our trade balance is negative. Yen rate is not pushing export from Japan. Japan is manufacturing outside of Japan. Trade account is negative, capital account is black, currency account is black. Overseas subsidiaries are sending dividends back to Japan at the yen rate of 120. Its smart return in the capital account. Our industry structure has changed, we are not exporting on the back of weak yen, so we are not criticized.

      Q: plans after retirement

      A: I decided: no job – I will take rest.

      Q: Disclosure. Often financial data are exposed early in Nikkei or Japanese press prior to official disclosure.

      A: I am often asked about this. I don’t know how the press gets their information, its a free market for the press. As long as they don’t do any insider trading or use this information privately, I don’t see anything wrong with early public disclosure. Its a competitive issue between journalists, we cannot critisize competition among journalists. Very sharp journalists pick up information, we are not the police we cannot stop them. Its a competitive world – even for journalists.

      I live far outside from Tokyo, sometimes journalists wait at the door to my home in the suburbs. I think this is an invasion of my privacy, and I don’t tell them information at my home.

      Q: Trust in the stock market, low Japanese retail investor participation.

      A: Advanced states have 60-70% own domestic investors, not outside foreign investors.

      Foreign professional investors have immediately responded to the logic of our corporate governance reforms. Especially US and UK pension managers have immediately responded to the improved efficiency of our markets. Investment professionals in London, New York, Scotland can evaluate the meaning of our regulatory changes.

      Japanese professional or private investors could not understand the improvements we have done, they did not react.

      Mutual funds however are at record hights and we have 8 million ELISA private pension investments in Japan now. People start to build their own pensions now, so retail investors are coming into the market.

      We have a normal quiet market now here in Japan regarding sales of equities.

      Q: Tokyo as a financial center?

      A: If you ask the same question to London, they will say that with IT all transactions are global. There may be arbitrage on the prices. If you compare Shanghai and NY, the trading volume in Shanghai is higher than in NY, but Shanghai not a global financial center, because they are not liberalized in capital in and outflow, they are No. 1 only in volume.

      The definition of Financial Center of the World has changed.

      We want to be one of the better places in financial business globally. We want to offer convenient and friendly conditions for financial people to come to Tokyo, as one of the centers for financial business.

      Tax plays a very important role to define financial centers. London or NY or Tokyo cannot follow a city state like Singapore. We cannot have the same tax system. Tokyo is far bigger than Singapore.

      “Global financial center” is a vague subject for me.

      Q: Do current prices accurately reflect corp performance. Foreign investors: speculative short-term gains? will foreign investors pull out when Bank of Japan money flush ends?

      A: I don’t think the Japanese market is overheating at all. I think the short term speculators have already left Japan.

      Long term investors have long asked for change in Japan, Japan did not listen, but now for the first time Japan is listening and changing, and I am feeling longterm investors are understanding this change. We have long term investors here now in Japan.

      Q: is high-frequency trading a danger for Stock Exchange?

      A: Flash Crash in US was due to the diversity of exchanges. There are 50-60 markets in US. Flash Crash artificially made, not becaue of speed of trading.

      Our rules for pricing system here in Japan, we learnt this since the Edo era, we cannot have flash crash, we limit the price changes, we are cooling the trading. Our system of pricing is different than in the USA.

      We have many high-frequeny traders from abroad, and they appreciate our system. US high frequency traders critized us up to 10 years ago, but today they appreciate our pricing system here in Japan, they want to learn our Stock pricing system. This has really been a big change for us.

      Q: False accounting at Toshiba. Impact on trust in Japan’s stock market.

      A: I feel very ashamed for Toshiba. Toshiba should be the mentor or leader of Japanese industry – not the opposite.

      Hitachi is a huge contrast to Toshiba. Hitachi aggressively introduced outside board members, foreign and women board members. Hitachi is investigated by outside and foreign board members.

      Toshiba is a total contrast to Hitachi.

      I am very puzzled by that – why is Toshiba so lazy to check their accounting.

      We hope that auditors and accounting houses are more professional and more serious. They told us that their subsidiaries have different accounting system. They must have intentionally checked that point.

      My answer: my feeling is one of shame. We should definitely not repeat this type of thing.

      Q: Why do Japanese company accumulate so much cash reserves.

      A: One reason is that Japanese labor laws compel Japanese companies to have reserves to pay for restructuring. We introduced changes in corp governance, and many companies now use the cash for M&A to acquire foreign companies, or e.g. Fanuc has increased dividends.

      I am optimistic for Japanese companies, because they are using cash more efficiently now.

      see also:

      Copyright (c) 2015 Eurotechnology Japan KK All Rights Reserved

    • Japan top grossing smartphone apps

      Japan top grossing smartphone apps

      5 top listed smartphone app companies have combined market cap of US$ 14 billion (excluding LINE)

      LINE is currently a private company and LINE’s company value is generally estimated in the US$ 10-15 billion range, so if we include LINE, the combined market value of Japan’s top 5 smartphone game companies is on the order of US$ 24 – 29 billion.

      Top grossing apps in Japan’s iPhone and Google Play/Android app stores on June 6, 2015

      Japan’s smartphone app market is the world’s largest in terms of cash revenues according to AppAnnie. Lets analyze which apps are at the top-grossing in the world’s largest app market.

      Japan game market report (398 pages, pdf-file)

      iPhone app store top grossing ranking (June 6, 2015)

      1. Monster Strike by MIXI
      2. Puzzle & Dragons by GungHo
      3. Final Fantasy Record Keeper by DeNA
      4. LINE by LINE Corporation
      5. Actual powerful pro baseball by KONAMI
      6. all 25 top-grossing iPhone apps on June 6, 2015

      Google Play Android app store top grossing ranking (June 6, 2015)

      1. Monster Strike by Mixi
      2. Puzzle & Dragons by GungHo
      3. LINE Disney tsumu tsumu by LINE Corporation and Walt Disney Corporation
      4. White Cat Project by Colopl Inc.
      5. Sword and sorcery. Logres of Swords and Sorcery – original popular online RPG by Marvelous Inc.
      6. all 25 top-grossing Google-Play store Android apps on June 6, 2015

      Market capitalization of the companies involved:

      • Mixi: YEN 443 billion (US$ 3.5 billion)
      • GungHo: YEN 580 billion (US$ 4.6 billion)
      • LINE: unlisted
      • Konami: YEN 324 billion (US$ 2.6 billion)
      • Colopl: YEN 312 billion (US$ 2.5 billion)
      • Marvelous: YEN 86.8 billion (US$ 0.7 billion)

      Analyzing the market capitalization of these companies, it is obvious that a large part – or all – of the value is in the smartphone games.

      As an example, Mixi’s core business was the mixi Social Network, which lost weight with the success of Facebook in Japan, until the breakthrough success of its Monster Strike game during FY2014.

      How are foreign companies doing in Japan’s smartphone app market?

      Disney achieved consistently high rankings in cooperation with LINE for the tsumu-tsumu game.

      Next highest ranking foreign game is the Finland based, 73.2% SoftBank owned, Clash of Clans by Supercell on rank 12.

      Japan game market report (398 pages, pdf-file)

      Copyright (c) 2015-2019 Eurotechnology Japan KK All Rights Reserved

    • Japan Google Play top grossing Android apps

      Japan Google Play top grossing Android apps

      25 Japan Google Play top grossing Android Apps of June 6, 2015 (All Categories)

      Japan game market report (398 pages, pdf-file)

      1. No. 1 Monster strike (by Mixi)
      2. No. 2 Puzzle & Dragons by GungHo
      3. No. 3「LINE: ディズニーツムツム」LINE Disney tsumu tsumu (by LINE Corporation & Disney)
      4. No. 4「白猫プロジェクト」”White Cat project” by COLOPL Inc.
      5. No. 5 「剣と魔法のログレスいにしえの女神・人気の本格オンラインRPG」Sword and sorcery. Logres of Swords and Sorcery – original popular online RPG by Marvelous Inc.
      6. No. 6 「クイズRPG 魔法使いと黒猫のウィズ」”Quiz RPG magic using black cat whiz” by COLOPL Inc.
      7. No. 7 「グランブルーファンタジー】」Grandblue Fantasy by Cygames Inc. (Cygames is a joint-venture company between CyberAgent (74.04%) and DeNA (24.03%), originally founded in May 2011 as a subsidiary of CyberAgent Corporation)
      8. No. 8 LINE PokoPoko by LINE Corporation
      9. No. 9 LINE by LINE Corporation
      10. No. 10 FINAL FANTASY Record Keeper by DeNA
      11. No. 11「実況パワフルプロ野球」”Actual powerful pro base ball” by KONAMI
      12. No. 12 Clash of Clans by Supercell. Supercell is now valued at US$ 5.3 billion and 73.2% owned by SoftBank.
      13. No. 13「ファントム オブ キル」”Phantom of the Kill” by gumi Inc.
      14. No. 14 Love life! School Idol Festival by KLab Inc.
      15. No. 15 OnePiece Treasure Cruise (by Bandai Namco Entertainment Inc)
      16. No. 16 LINE POP2 by LINE Corporation
      17. No. 17「スクールガールズストライカーズ」”Schoolgirl strikers” by Square Enix Ltd.
      18. No. 18 Dragon poker by Asobism Co Ltd
      19. No. 19 Dragon Quest Monsters Superlight (by Square Enix)
      20. No. 20 「戦国炎舞 ‐KIZNA‐ 【人気の本格戦国RPG】」Sengoku Enbu – KIZNA – (popular true waring states RPG) by Sumzap Inc (株式会社サムザップ) (Sumzap Inc. is a 100% owned subsidiary of CyberAgent Corporation).
      21. No. 21 LINE Rangers by LINE Corporation
      22. No. 22 Summoners War by Com2uS Corporation (a South Korean game developer company)
      23. No. 23 「ブレイブフロンティア 【無料本格RPG-ブレフロ】」 Brave Frontier by Alim Co Ltd
      24. No. 24 「消滅都市」  Extinction capital – Everything in its right place. By Wright Flyer Studios Inc.
      25. No. 25 「ユニゾンリーグ◆-ユニフレと冒険-人気本格オンラインRPG」Unison League – (popular original RPG) by Ateam Inc.

      Japan game market report

      (398 pages, pdf-file)

      Copyright (c) 2015-2019 Eurotechnology Japan KK All Rights Reserved

    • Japan iOS App store 25 top grossing

      Japan iOS App store 25 top grossing

      25 Top Grossing iPhone Apps of June 6, 2015 (All Categories)

      Eurotechnology report: JAPAN’S GAME MAKERS AND MARKETS – DISRUPTION BY SMARTPHONE GAMES
      Eurotechnology report: JAPAN’S GAME MAKERS AND MARKETS – DISRUPTION BY SMARTPHONE GAMES
      1. No. 1 Monster strike (by Mixi)
      2. No. 2 Puzzle & Dragons by GungHo
      3. No. 3 FINAL FANTASY Record Keeper by DeNA
      4. No. 4 LINE by LINE Corporation
      5. No. 5「実況パワフルプロ野球」”Actual powerful pro base ball” by KONAMI
      6. No. 6「LINE: ディズニーツムツム」LINE Disney tsumu tsumu (by LINE Corporation & Disney)
      7. No. 7「チェインクロニクル・本格シナリオRPG/エヒクロ」”Chain chronicle original scenario RPG / Chaincro” by SEGA Corporation
      8. No. 8「白猫プロジェクト」”White Cat project” by COLOPL Inc.
      9. No. 9 Love life! School Idol Festival by KLab Inc.
      10. No. 10 MOBIUS FINAL FANTASY by Square Enix Inc.
      11. No. 11 「剣と魔法のログレスいにしえの女神・人気の本格オンラインRPG」Sword and sorcery. Logres of Swords and Sorcery – original popular online RPG by Marvelous Inc.
      12. No. 12 Clash of Clans by Supercell. Supercell is now valued at US$ 5.3 billion and 73.2% owned by SoftBank.
      13. No. 13 LINE PokoPoko by LINE Corporation
      14. No. 14 「クイズRPG 魔法使いと黒猫のウィズ」”Quiz RPG magic using black cat whiz” by COLOPL Inc.
      15. No. 15 「戦国炎舞 ‐KIZNA‐ 【人気の本格戦国RPG】」Sengoku Enbu – KIZNA – (popular true waring states RPG) by Sumzap Inc (株式会社サムザップ) (Sumzap Inc. is a 100% owned subsidiary of CyberAgent Corporation).
      16. No. 16 Dragon poker by Asobism Co Ltd
      17. No. 17 「グランブルーファンタジー】」Grandblue Fantasy by Cygames Inc. (Cygames is a joint-venture company between CyberAgent (74.04%) and DeNA (24.03%), originally founded in May 2011 as a subsidiary of CyberAgent Corporation)
      18. No. 18 Dragon Quest Monsters Superlight (by Square Enix)
      19. No. 19 OnePiece Treasure Cruise (by Bandai Namco Entertainment Inc)
      20. No. 20 Game of War – Fire Age by Machine Zone Inc. (a Palo Alto based game venture company)
      21. No. 21 Summoners War by Com2uS Corporation (a South Korean game developer company)
      22. No. 22 Tsuri Suta (Tsuri = Angling) (by GREE)
      23. No. 23 LINE Manga – free popular manga, daily renewed content by LINE Corporation
      24. No. 24 Hunter x Hunter Battle Allstars (by NamcoBandai Games Inc)
      25. No. 25 Puyo puyo!! Quest (by Sega Corporation)

      Japan game market report (398 pages, pdf-file)

      Japan smartphone game business
      Japan smartphone game business

      Copyright 2015 -2019 Eurotechnology Japan KK All Rights Reserved

    • Smartphone games disrupt Japanese video game industry

      Smartphone games disrupt Japanese video game industry

      24 new listed smartphone game companies achieve net income twice as high as all top 8 traditional video game companies combined

      Its not just Nintendo being disrupted, its the whole Japanese video games industry

      In the most recent version of our report on Japan’s game industry, we added 24 publicly listed new smartphone game companies (listed on the Mothers market or the second or first sections of the Tokyo Stock Exchange), and we also added not-yet-publicly-traded LINE, and we will add more in future editions.

      Japan game market report (398 pages, pdf-file):

      There has been much media focus on Nintendo and how it is affected by the rise of smartphone freemium games, and how it will react. But our analysis shows that its not just Nintendo thats affected, but the whole traditional Japanese video game industry.

      Smartphone games disrupt:

      During financial year just ended, 24 publicly listed Japan’s smartphone game companies earned twice as much income as all top 8 traditional video game companies combined.

      Combined net income in FY2014 (which for most companies ended on March 31, 2015) for 24 publicly listed Japanese new smartphone game companies is about YEN 200 billion (about US$ 2 billion), compared to a combined net income of about YEN 100 billion (about US$ 1 billion) for all top 8 traditional Japanese video game companies:

      net income of Japan's top 8 traditional video game companies is about US$ 1 billion in FY2014
      net income of Japan’s top 8 traditional video game companies is about US$ 1 billion in FY2014 (source: official company financial reports)
      net income of 24 listed Japanese new smartphone game companies combined in FY2014 is about US$ 2 billion
      net income of 24 listed Japanese new smartphone game companies combined in FY2014 is about US$ 2 billion (source: official company financial reports)

      Japanese smartphone games have global impact and capture global value

      Japanese smartphone game companies are in leading positions on global scale (Source: AppAnnie):

      • The globally No. 1 ranked top grossing company for iOS and Google-Play app stores combined is a Japanese company: LINE
      • 2 out of the top-10 top-grossing smartphone game companies globally (iOS plus Google-Play app stores combined) are Japanese companies
      • 5 out of the top-10 top-grossing apps globally (iOS plus Google-Play app stores combined) are Japanese apps

      Learn more about Japan’s games industries

      Japan game market report (398 pages, pdf-file)

      Copyright 2015 Eurotechnology Japan KK All Rights Reserved

    • Nintendo smartphone pivot?!

      Nintendo partners with DeNA

      Taking Nintendo intellectual property and characters to smartphones

      Nintendo was founded on September 23, 1889 by Fujasiro Yamauchi in Kyoto for the production of handmade “hanafuda” cards. Nintendo Headquarters are still located in Kyoto (you can see the Nintendo headquarters building from the Kyoto railway station).

      The Chinese characters used to write Nintendo’s original Japanese company name in Japanese mean something like “leave the responsibility to heaven or to god”.

      Nintendo has been through many pivots during its more than 100 years history, and Nintendo can afford to take its time to do things right, and it did when smartphones started disrupting industry sector after industry sector, and did not stop disrupting the games industry.

      Nintendo has a home advantage – the epicenter of the global games industry is in Japan, and not surprisingly, Japan is by far the world’s No. 1 biggest smartphone games market by cash income (other markets are bigger in terms of free downloads, but Japan is No. 1 globally in terms of cash revenues). So Japanese game companies have a big home advantage.

      The No. 1 company ranked by gross revenues of the combined total iPhone + Android app market is also a Japanese company.

      Yesterday, March 18, 2015, Nintendo announced to join forces with DeNA to jointly develop smartphone games including subscription based game services as a platform to leverage Nintendo’s iconic intellectual properties and characters.

      Do you understand the big picture of Japan’s games industries, which drive the global game market? Make sure you do – and read our report:

      Copyright 2015 Eurotechnology Japan KK All Rights Reserved

    • Sir Stephen Gomersall: Globalization and the art of tea

      Sir Stephen Gomersall: Globalization and the art of tea

      by Hitachi Chief Executive for Europe and subsequently Hitachi Board Director (2004-2014)

      Sir Stephen Gomersall: Princess Chichibu Memorial Lecture to the Japan British Society at Ueno Gakuen, Tokyo, 5 March 2015

      Sir Stephen Gomersall: It is a great honour to be giving this lecture this evening.

      HIH Princess Chichibu was a charming and broad-minded Patron of this Society and of the many charities to which she devoted her later life. I remember her as a frequent visitor to the Embassy in the 70s, in her dusky blue or apple green kimonos, and occasionally turning up to watch when a British University Rugby team came to Japan.

      She also personified the affinity between Japan and the United Kingdom which has its origin in our historical ties and in the nature of our peoples. I felt this throughout my years of living in Japan, and my job as Ambassador was made incomparably easier by the goodwill and respect of many segments of Japanese Government and society towards Britain. But we can’t assume that things will always continue in the same way: images can lag behind reality, and relationships have to be nurtured and given concrete meaning.

      Our friendship, differences and challenges

      So I’ve chosen to talk about why two countries which are so geographically remote and different from each other have a strong affinity and interest in developing our cooperation; and some of the joint challenges we face, and the contrast in the way our two countries have adapted to the huge changes of the last decades.

      Three changes

      The biggest change to affect the whole world over this period is what is loosely called globalisation.

      Globalisation can be defined as the results, in economic, social and cultural terms, of the mobility of capital, production and people in a free global economy, and of the consequent international division of labour.

      This has coincided with a second and more destabilising set of changes in the global structure of power, and the weakening, if you like, of any over-arching system, legal or military, of world governance. This began with the dissolution of the Soviet Union, has continued with the shift from the old G7 to the newer G20, the rise of China in particular, and consequent changes in the position of the United States. New threats of terrorism originating in failed states, and in Japan’s case, the threat from North Korea, are part of this troubling mix.

      One can add a third change – the internet, digital and media revolutions – which to the positive have empowered people outside government, helped development in poor countries and created massive consumer convenience; have made political protest easier, as in Egypt and Ukraine; but on the negative have opened new possibilities for cyber warfare and terrorist recruitment, and arguably in the West at least, accentuated the short-termism and sensationalism of contemporary politics.

      So I would like to talk, not from an academic standpoint, but from my experience about how I perceive Japan and the UK have been impacted and coped with these in our foreign policy, politics, economy and industry.

      The Tea Ceremony as metaphor

      But let me first explain how the Art of Tea came into the title.

      A very small act of globalisation took place when my friend and fellow Embassy language-student, Robert Cooper and I decided that the study of Tea might be a good route to immersion in a part of Japanese culture and presented ourselves for induction to the Master of the Tea Ceremony at Tokeiji in Kamakura. This is a very famous temple, and its lightly constructed, almost translucent tea house had a special and very tiny door, hardly the size of a dog kennel, through which new initiates had to prostrate themselves on first entry. This had not been built for gaijin, but Robert, who went first in his jeans, an American shirt and dazzling white tennis socks which he thought sufficiently close to tabi, and I crawled through it into the presence of a shocked but stoical Sensei within.

      This wizened figure, with a loosely wrapped kimono and upright hair, then intoned to us in courteous but almost impenetrable Japanese some of the history of the Temple, the relationship between Tea and Zen, the necessity of subordination of self, and the rewards which might be ours through striving for perfection in the art of making tea and the service of others. Thereafter we attended almost every week for a year, and slowly learned to be less clumsy in the complex handling of cloths and utensils and better to master the numbing effects of sitting for four hours on our ankles.

      After some months, what had been a pain yielded to appreciation of the surroundings, the shadows of leaves on the sunlit walls of the teahouse, and even the beautiful kimono of the younger female class members who usually started the afternoon round. Our teacher was the Sensei’s daughter, a wan lady who kept a steely eye on our sequence of movements, and admonished us and the other students kindly if our foot strayed onto the border of the tatami or our fukusa slipped out of our trouser belts. Thus a whole afternoon could pass in eight rounds of tea, and hardly a word would be said beyond the ritual appreciation of the received cup. By contrast, the mizuba, with its utilitarian sink and stone floor where the cups were washed would be a hive of chatter among the arriving and departing housewives or men students arriving after Saturday work. And when it was all over, we would walk with painful knees down the temple steps to re-join the noise and fumes of the motorcars and the ding dong of the railway crossing by Enkakuji, heading for the bar.

      We were constantly encouraged to improve our Art, and always made welcome. We got used to the silence, and began to appreciate that mastering of the physical act of making tea could be a gateway to a sense of harmony, appreciation of nature and the seasons, and communion with a group of people united in performing this simple act of service as beautifully and selflessly as possible.

      Being drawn into this world was genuinely precious and even cleansing, and in my mind became a metaphor for many aspects of Japanese life and organisation which are built on a preference for the group, harmony, equality, service, perfection and self-discipline.

      But at the end there was always a real world outside.

      Now of course I don’t suggest for a moment that traditional Japanese art and culture seeks only to create or perpetuate a perfect illusion, but there is a sense in which the British tradition has been to venture out and throw oneself wide open for better or for worse, while the Japanese is more comfortable with consensus, even silence, its own familiar peer groups and known relationships. Japan makes internal pacts and compromises, which for the purposes of this lecture go under the guise of the Art of Tea.

      Foreign Policy and standing in the world.

      Britain and Japan have very different philosophical traditions, part of which originates from the 250 years during which Britain went through maritime Empire and industrial revolution, while Japan remained cloistered under the Bakufu. Post-war Britain has remained confident of its place at the international top table, its close relationship with the United States, and its continuing network of international connections. Apart from a moment of hubris in the Suez invasion, it has justified or demonstrated this through its active role in the UN Security council, the retention of its nuclear deterrent and military participation, at a higher level at any rate than our other European allies, in international actions in Iraq and Afghanistan.

      Japan too has been at its strongest when it has been open and looking outward. The isolation of the Bakufu was ultimately self-defeating, while Japan surged forward after the importation of Chinese scholarship in the eighth century, and became a successful modern state after the Meiji revolution. The post-war Constitution enabled Japan to re-establish itself internationally, and enjoy a period of high growth through access to foreign technology, domestic capital and world markets. It is distressing sometimes to hear the Constitution described as “anti-Japanese”.

      Today’s Japan has established itself as a country with a peaceful foreign policy, an economic power house making an important contribution to international economic cooperation; opinion polls show Japan internationally much admired except in China and Korea. Japan has significant soft power based on its culture.

      The baseline for the modern UK-Japan relationship can be set in the eighties and nineties, when Japan was the pre-eminent nation in Asia, and the UK still the leading pro-American voice in the EU. During this time a core UK-Japan agenda was developed, based on the very similar views of what kind of world we wanted to see after the collapse of the Soviet Union.

      The elements of this agenda are built around free trade, the rule of law, peaceful conflict resolution and support for the United Nations. The UK and Japan were co-architects of the Kyoto Protocol on Climate Change in 1997. Britain enjoyed support at the UN from Japan on action on Iraq and Libya; the UK supported Japan’s first deployments of self-defence forces to the Gulf and Afghanistan.

      This political relationship continued during the Blair-Koizumi period, predicated on strong support for our mutual ally, the United States.

      Relations with the United States

      The United States is a huge friend and guarantor for both Japan and Europe, but cannot be expected to defend us if we don’t defend ourselves. Noticeably it was the United States which flew sorties in the East China Sea not long ago after a particular Chinese threat to the Senkakus, just as it was the United States which did the same when the Russians recently made menacing noises towards the Baltic States. But with a Congress no longer so clearly internationalist or prepared to step into every security breach and rightly demanding more burden-sharing from its allies, Japan and Europe need to have the capabilities, and relationship with America, to fulfil our side of the bargain.

      What I have described is, and should be, the base state of a UK-Japan relationship founded on cooperation between two closely aligned countries. As global number three and number six economies we each have an important voice – if we can use it effectively – and this in turn depends upon our economy, defence, and international friendships and alliances.

      But since 2008, a number of clouds have passed across the European and Japanese skies. One is disillusionment with the consequences of the invasion of Iraq and the troubles in the Middle East; another big one the global financial crisis of 2008, which had huge consequences in the EU; and a third the rise, part opportunity, part threat, of China, together with heightened tension in East Asia as a whole. Viewed from Japan, an increased UK/European focus on China came at exactly the point that Japan-China relations began to deteriorate. These are among the factors which have caused both sides to become more preoccupied with issues close to home. Perhaps changes in the Japanese Government didn’t help either, but they are reasons why both sides may have questioned whether the relationship was really as important to the other as we traditionally maintained. The outstanding UK response, public and private, to the Great Tohoku Earthquake was a big affirmative, but even so these questions remain in the air.

      Two nations in retreat?

      Compared with our past, some people will ask whether in fact we are now looking at two nations in retreat.

      The reaction in Britain to UK deployments to Iraq and Afghanistan, at the popular level, has been quite deep. Although both missions were partially achieved and people were very proud of our troops, these nonetheless exposed the difficulty for our relatively lightly armed forces in dealing with unorthodox warfare. Increasing resources had to be committed with diminishing political returns. Since the end of the Cold War, successions of defence reviews have eaten away at the numbers of personnel and front-line units in our forces. And our spending – though better than most Europeans, is perilously close to the minimum 2% of GNP level expected by NATO.

      A second is the dominance of domestic issues in politics, and sudden concern about the future of Britain as a United Kingdom. We are now facing a general election. The battle-ground is likely to be the economy, where the two large parties – Conservative and Labour – in reality have not a lot dividing them on economic philosophy, and not a lot of room in any case for manoeuvre in trying to reduce the national deficit, but still appeal to the electorate daily in terms of what benefits they can deliver to their traditional followers – what Labour refers to as “ordinary people”, and the English middle class and better-off voters for the Conservatives. New promises over the health service, welfare provisions, taxation, university tuition and the like burst daily on the airwaves and then fizzle. This is a rather narrow-band form of politics over how to divide resources within the society to the benefit of one group or another, with very little search for consensus on these difficult issues. Since party membership has fallen dramatically, it is not certain how much core loyalty exists to these parties within the electorate. In the meanwhile an anti-European, anti-immigration party has been taking support from both major parties; and the Scottish National Party, after losing the referendum on independence by 55-45%, has bounced back and will certainly press for further separation should it hold influence in Westminster after 7 May.

      This is not good news for anyone.

      One plausible factor behind this fragmentation of current British politics is that globalisation has created different categories of winners and losers from those familiar in the traditional class divide, and that devolution has actually broken the Westminster system of politics. Regional disparities, particularly between London, the North and Scotland, are now accentuated by rhetorical politics. Another element is that across the country there are groups of people, mainly white, older or unemployed, with lower skills or shrunken pensions who feel threatened by immigration and the cutting back of the welfare state. Concepts of community and identity have become confused. While the Mayor of London can revel in the vigour of London’s “melting pot” society, in other regions the disparity of wealth and opportunity can create an anti-metropolitan, anti-traditional party backlash, resulting in a large increase in disaffected or floating voters.

      The third is the UK’s relationship with Europe, and here again there is a parallel with Japan.

      The founding purpose of the EU was to achieve peace in Europe after the Second World War through economic integration. It achieved this spectacularly well between France and Germany, together with rising living standards for the poorer agricultural regions of Europe. The same logic applied in the eighties and nineties, when enlargement was extended to Greece, Spain and Portugal who made the transition from dictatorship to democracies. Mrs Thatcher recognized this and argued not only that the Single Market should be accelerated, but that Europe should act together in international affairs whenever it could achieve more by speaking with a single voice in the world. She vehemently opposed the idea of one government for Europe, but in reality the major countries have never wanted that, and the threat disappeared when the EU was enlarged to 26 countries in 2004. Game set and match to Britain, you would have thought.

      However, instead of celebrating the victory of Mrs Thatcher’s vision of Europe as a voluntary Union of sovereign member states, parts of the media and Conservative party have continued to brand the European Union as a conspiracy to take British money, to over-regulate our life, and limit the UK’s national sovereignty, and this drip, drip, drip of anti-EU argument from within his own party led Mr Cameron to open the Pandora’s Box of a referendum on our continuing membership in the next parliament, if he is re-elected.

      The current bone of contention with the EU is on the impact of the free movement of people, a basic principle of the Union, which is blamed for excessive immigration, even though the UK economy has desperately needed foreign labour to function. The Government says it needs “reforms” to recommend a yes vote, but is not yet specifying what those reforms need to be.

      We know what Japan thinks about this, because it has openly said that Japanese investment in UK is for the EU.

      And the Americans have equally said they hope the UK will remain a strong voice in Europe.

      Former Prime Minister John Major has argued, most cogently from the Tory side, that if outside the EU, the UK would be “much diminished” internationally, and would still have to conform to EU regulations while having no part in deciding them.

      That is why I am not so pessimistic about the eventual result, but it is an issue we could do without when the Middle East is in tatters and the Russians are in the Ukraine.

      Japan’s position in Asia

      This invites comparisons with Japan’s position in Asia.

      The rise of China gives China a weight very like that of Germany within the EU, in terms of regional balance, but unlike the EU, there is no regional framework to moderate tensions between Japan, China and Korea or build a collective Asian Economic Community.

      A recent Gaimusho briefing I attended on Japan’s security environment gave great detail on the number of China’s incursions around the Senkaku Islands and unilateral moves in the South China Sea; but was designed to show Japan as the sinned-against party, and Japan’s self-restraint, with no discussion of possibilities for improving relations.

      Maintaining balance with China requires patience and steel. Economically Japan cannot re-surpass China, nor can it take the support of South East Asian countries for granted should it come to a stand-off.

      Given the speed of increase in China’s defence spending, a posture of increased preparedness on Japan’s part, and ability to cooperate more with allies, is certainly justified.

      Even without constitutional change, Japan’s defence doctrine is evolving fast with regard to collective self-defence and military exports, though not the percentage of defence spending in the budget. The UK would I’m sure support Japan’s becoming a “normal” military power, but the manner in which it is done will have a considerable effect on the acceptance of regional countries and allies alike. If based upon deterrence and proportionate response to potential threats, it will be well understood. However Japan does suffer in the view of its allies whenever things are said and done politically which look like poking the adversary in the eye.

      The counterpart of deterrence has to be engagement, and building structures for the long term which will moderate trilateral relations for the better. The economic interdependence between Japan and China is already such that both countries fortunately have a strong interest in keeping tensions within bounds, and this can be further built on. A Kohl/Mitterrand moment, when the two leaders held hands in a French war cemetery, looks a long way off in Asia, but Mr Abe is a strong leader and, though I know it is a much dismissed view here, there are useful lessons to be learned from the political achievements of the European Union. Benefits must also come from encouraging young people to travel between Japan, China and Korea.

      Though I’ve discussed China, I haven’t found much so far to say about TEA!

      The concern most frequently voiced among Japanese friends is lack of interest of young people in foreign study or travel, and the very poor level of attainment in languages among Japanese businessmen, politicians and academics, leading to Japan being discounted in international gatherings, and leaving the floor open to competitors, China particularly, to exploit.

      We are here in a university with high standards in international communication, so I won’t stir that particular pot, but revert to the issue later in the context of business.

      To summarize the story so far, I do think voters respond positively to politicians who have a long-term strategy for strengthening their nation and can articulate to their people where they want their country to stand in the world and what needs to be done.

      Mrs Thatcher’s appeal to many beyond her own party was that she was prepared to confront the reasons for the UK’s economic decline and do something about it. And two very important points underlying her policies were pretty immutable truths of international affairs – the first being that a nation’s influence is in direct proportion to the strength of its economy; and the second, that in a world where threats can come from unexpected quarters, nations need to secure their own defences, through adequate armed forces and strong alliances.

      Though we are geographically distant, it is very important that the UK recognize its interest in East Asian Security, and Japan continue to play its part in Europe. There would be no better way of symbolizing that than the early conclusion of the EU-Japan Free Trade Agreement.

      Economy and Industry

      Let us turn now to the economy. Here we see rather greater contrast.

      Benefits of Globalisation for Britain

      Britain has benefited hugely from globalisation. As I see it, Japan has been slower to adapt but has strength in depth.

      As you know, Britain went through a severe economic decline in the 1950s to 70s when our largely nationalised heavy industries, and many of the people who worked in them, were cut back as a result of global competition, from Japan among others. The Thatcher government finally brought labour market reforms, privatisation of public assets, and encouragement of foreign investment into manufacturing. The liberalisation of financial markets established London as a global centre for financial and other services. Manufacturing has declined in volume, but improved in quality, and the UK remains a world centre for research and innovation in universities.

      This structure continues to form the backbone of the UK economy, with the state sector – government, education, health and public services, accounting for 43 percent of GDP. The relative flexibility of our economy, and the ability of the pound to float against other currencies, account for our outperformance of other Eurozone economies in the last two years, though that is not to say that there are not considerable weaknesses as well, as I will come to.

      I remember being chided by Japanese commentators for the “Wimbledonisation” of the UK economy – acting as host to foreign players but having very few national champions. And I remember a huge joy when for a while Japanese Sumo was dominated by Mongolian and Baltic wrestlers. However, whether you call it Wimbledonisation or having an open economy, it accords with British traditions and basically works for the UK.

      It has continued apace, with the government welcoming Chinese investment in UK infrastructure, Tata buying our steel and automotive companies, Japan investing in UK energy, etc. It is open house.

      And of course we have the advantage of English being the international language of business, the south side of Hyde Park being the recreational space for thousands of French families.

      From an economic standpoint, our two major challenges are still the public finances and education/skills.

      Japan and globalisation

      Japan by contrast has been harder hit, arguably because it has protected its domestic market more.

      In the manufacturing sector, Japan has huge assets at home – very high levels of engineering, a disciplined workforce, and is a global leader in quality. But it now has if anything too much hard productive capacity relative to the size of the domestic market. Twenty five years ago, protectionism in the US or Europe was a reason for Japanese companies to transfer production overseas, but now the reason is demographic contraction and the extreme difficulty of making substantial margins at home. In our own company, though everything has been done to avoid loss of domestic jobs, the ratio of workers in Japan to locals overseas within our workforce has fallen from two-thirds to nearer half.

      Twenty years ago, it was already evident that Japanese companies trading abroad, and therefore exposed to global competition, could be extremely flexible even in the face of the yen moving from 100 to 70 to the dollar. On the other hand, domestic sectors – retail, banking, insurance companies – with only other Japanese firms as competition, were very slow to consolidate and restructure, and as a result suffered in some cases slow deaths by overcrowding and indebtedness.

      In high tech one found not Wimbledon but Galapagos – whereby mobile phone companies for example took their domestic market to very high levels of specification, making it difficult for new entrants from outside to come in, but sacrificed the opportunity to determine the global standards being set in the international market, ceding the leadership in the process to the US and Korea.

      Even now, Japan’s percentage of Foreign Direct Investment to GNP is the lowest for any OECD country, and with most markets matured and fully supplied by domestic incumbents, it is hard to see that changing.

      The common thread behind many of these stratagems has been to avoid disruption to the Japanese market through having foreign competition within, and to maintain employment – in other words the policies of the TEA HOUSE. And yet these have not staunched the hollowing out and increasing disparity of wealth in rural Japan compared with the metropolis. What is far more likely to stimulate new domestic growth is more competition from new players, market reform to liberate new forms of industry – for example in high-volume agriculture – and population growth.

      If the aim is to increase domestic demand, “where is the third arrow?” is still the key question. So far, it seems, quantitative easing has produced a short term benefit for large corporations in stock values and profits from overseas earnings, but these have not yet trickled through to wages and domestic consumption – and could be another example of a policy which produces contrary results by shrinking from reform.

      Immigration is a hot topic

      Given the UK’s shortage of skills, and Japan’s shortage of young people, it’s not surprising that Immigration is a hot potato for both countries.

      Britain has always had open doors to immigration for economic reasons. During our post-war recovery, we accepted migrants from our former colonies to do low-grade jobs.

      This was brought home to me when I acted as a part-time census officer in 1971, and discovered that a single road of terraced houses in inner London was neatly segregated between old white widows, with their cats and milk-bottles, the Mediterranean Italian and Greek migrants, never there to accept the census form because they were presumably out partying, Indian and Pakistani families fearful of the authorities and barely prepared to respond from behind a chained door, the old Caribbeans from Jamaica and Trinidad, unable to write the form themselves, but proud and welcoming to their tidy homes, and other black working class households, only scraping it together economically, and often working all hours.

      Since then the Asian communities have spread to many Midlands and Northern cities and become middle class. They have high aspirations for the education of their children, who look like Asians but behave like their British peers. These communities are now becoming represented in local government, teaching, broadcasting, Parliament and even the Cabinet. They are increasingly the backbone of our medical services.

      Because of the turmoil in the Middle East, there is a portion within the Muslim communities, which is prone to radicalisation by fundamentalist Imams or jihadi social media – and a constant worry to our security services.

      Since the 1980s the Government has severely curtailed further immigration from non-EU countries, so that these communities are now to all intents and purposes indigenous and there is no way or intention to repatriate them.

      A second source of immigration has been the European Union. Freedom of movement is a basic principle, under which many Brits have gone to work or retire in Europe, and many Europeans, primarily from Poland and Eastern Europe, have come to work in the UK. They come under a legal right, but in significant numbers. Net migration into the UK was 298,000 last year.

      A third group are refugees from conflicts in Africa and the Middle East – Somalis, Kurds and North Africans, entering illegally from other parts of the EU. This is a humanitarian issue for the EU, with the burden falling much more heavily on France and Italy.

      It is the inability to limit the second category of able-bodied and work-hungry immigrants from EU countries which arouses the most controversy, especially in the run-up to an election. Go into any British hotel or restaurant, and you will find Spanish or East European receptionists, waiters and cleaners. Look for a builder fix your house, and a Pole will probably be more reliable.

      This shows a key weakness of the British economy, which is a shortage of skills, and also gives rise to complaints among the unskilled population that “foreigners are taking their jobs”. The right-wing UKIP party then lay this all at the door of the EU, claim that migrants are defrauding the social security system, and that our country, saved by our Forefathers from German invasion during the Blitz etc., is is now being taken away from us. Fortunately this is a war of words, rather than on the street, but still a powerful message to some older voters.

      In reality EU residents in the UK, of whom there are 1.4 million, pay much more in taxes on their income than they consume in social benefits. And it is inconceivable that the health service could function, or all the public construction projects planned in the next decade be completed, without a heavy involvement of foreign labour. The government is seeking to provide more welfare to work and apprenticeship opportunities to young British people. But the danger is in the effect this could have in the short term if we are faced with an EU referendum.

      Japan’s situation is completely different, but still has to confront the reality that Japan will inevitably decline unless it can find an answer to its ageing and shrinking population. It is hard to envisage permanent immigration from Asia to Japan of the sort Britain accepted two generations ago, even though the British example on assimilation is quite encouraging. It is equally implausible that artificial intelligence – robots that substitute for human workers – will be able to build roads, sewers, or power stations in the future. Emotion will have to give way to pragmatism. And more work permits for qualified foreign workers will have to be introduced to support industries like construction and transport and increased foreign tourism. When this happens on a significant scale, international marriages are bound to occur, and issues of nationality of husbands and children arise.

      I came across such pragmatism ten years ago in Akita when a number of EU Ambassadors were invited by the Governor to give a seminar on attracting foreign investment into the Prefecture. In the evening he offered a splendid reception with three entertainments; first the local lads demonstrating the Kanto-matsuri with lanterns on poles; second a Japanese lady of advanced years performing an elegant geisha dance, and third a cacophonous bunch of Filipina wives of local farmers performing a bamboo dance.

      So this topic is a slight deviation from the Anglo-Japanese theme but is critical to the future of both countries, and one that touches companies like mine who need to become more globalised.

      Globalisation poses tough challenges for Japanese companies, but is the only way forward.

      Now let me turn to the experience of my own company.

      Hitachi, with its characters for the “rising sun” and its resonant creed of “Harmony, Sincerity and Pioneering Spirit” has often been taken as a proxy for Japan itself, and its production did indeed exceed 1% of Japanese GNP thirty years ago.

      Today it is very good example of a company having to make a profound transition in order to grow within the global economy.

      Hitachi started out as late as 1910 as a motor-winding outfit for the mining industry in Tohoku, but quickly advanced into power generation, electrical control and traction equipment. These elite divisions were the breadwinners and training grounds for generations of Presidents. The company creed was monozukuri – perfection in manufacturing – and ochibo hiroi – wasting nothing and learning from experience. Hitachi also prided itself on its research capability, clustered in leafy campuses on the Ibaragi hillsides. So large was the company in the area, that when the Tohoku Earthquake hit in 2011, it suffered structural damage to 2000 buildings.

      When I joined I was impressed by the Hitachi’s serious ethos, and by the dedication to quality of product. I am a proud employee and would always risk my shirt on the company’s ability to deliver a product. I did however notice that the grand men who ran the company back then seemed very out of touch with the international world, that the organisation was very hierarchical, that a company of 380,000 people worldwide behaved as if it were a universe in itself, and for all its technological excellence, it produced rather modest profits.

      This great company was not just a tea pot, it was a TEA PLANTATION! I say this to emphasize how far things have come since then.

      Much has been written about the contrast between Japanese and UK companies, most notably Ronald Dore’s book “British Factory, Japanese Factory” of 1970 contrasting Hitachi and GEC, and a much more recent book by Inagaki and Whitaker in 2005 called “The New Community Firm” . This also charts the rise and decline of Hitachi as a classic Japanese “community company”, with very little diversity, but in which loyalty was repaid by security. By the late ‘90’s the need to globalise to survive was already being internally articulated, but the authors found that the policies touted to achieve that were implemented with lip-service only. Comparing Hitachi with its American equivalent GE, then under Jack Welch, it concluded that a company dedicated to looking after its core community of Japanese permanent employees would really struggle to introduce the degree of performance management and profit-oriented decision-making of a western enterprise.

      This was the company I joined in 2004 as the first foreigner made responsible for proposing and implementing an overseas regional strategy. This job has given me many excitements, and a ringside seat in understanding the roots of the company and the huge changes and sacrifices which it has had to make to get to today’s position.

      For example, at that time we were making televisions. Rather than have other people assemble them locally to our design, using components taken from the market, our management had invested huge sums in a modern factory in Miyazaki, employing thousands. One by one the shining models came out, each supposedly a winner, but never at a price at which we could make a profit in the European market. The simple fact was that there was global over-supply, and though we could make supremely good products, others could do so for half the price or less.

      This story was repeated in semiconductors, displays and hard disk drives, leading in 2008 to losses at a level never seen by any Japanese company, and was the origin not only of a decision to exit these commodity sectors, but also to bring in a new management which reset the company’s strategy to the provision not of products but of solutions, not in the consumer, but in the global social infrastructure market.

      Slowly this is paying off, but again it requires a shift in organisation and management which challenges every tea-drinking tenet of the so-called community firm.

      To explain what I mean,

      1. In value creation, the key is no longer production, but innovation: this requires individualism, and the breaking of internal silos. It needs teamwork and people with a combination of disciplines, rather than those who have perfected a single one. Monozukuri still matters, but is no longer a winning ingredient.
      2. Japanese companies are very technology rich; but to take that technology overseas in the form of infrastructure projects requires a whole new range of skills which do not exist within a traditional manufacture and export organisation. Local political knowledge, commercial, project finance and management capability, and usually a local engineering base for customisation of technology; and the development of local supply chains to match global or local prices.
      3. It requires the whole factory-led power structure to be turned inside out, and authority shifted to the front line, where the customer is. This is a complete break with the tradition whereby power resided with the factory side in Japan, to one where more commercial people outside Japan should become the key decision-takers. Sales units which previously handled foreign markets from Japan become redundant. It also means that the system of promoting domestic engineers over a lifetime into the leadership of the big business units will also evolve, marking a huge shift in career expectations.
      4. In total, a gene pool heavily weighted to engineering needs to become multifaceted, and above all, international. This means changing the system whereby operations overseas are managed by expats on two or three year tours; it means promoting non-Japanese into leadership positions; it means measuring performance objectively, and promoting people with leadership potential much earlier in their careers; and recruiting young people with different backgrounds and skills. Implementing such change takes a long time.
      5. One of my annual duties was to lecture the new intake of 800 young Japanese for 30 minutes on what it is to be “global”. My message was simply to travel, absorb, and think for yourself. “Talk to them in English” the Chairman said – “it will be good for them”. Well I tried, but since language was never among the entry criteria, the result was a predictable blank wall. Reverting to Japanese, I then joined the other executives for a walkabout among the new recruits at the drinks which concluded the induction ceremony. I pitched in to a group of young men, who shied away from me as if I had the ebola virus. I persisted in English for a while, but finally said to them in Japanese, “oh well then, what business group are you due to join?” “Ah, we, we’re the baseball group!” came the reply. The community firm lived on. More encouragingly I found two young girls who seemed more anxious to engage me in conversation. Not realising their nationality to begin with I engaged them in Japanese, whereupon they explained that they were foreign graduates, one Korean and one Chinese, from technical universities in the Kansai. “Goma-san”, they said, still in perfect Japanese, and looking around the room of 800 future colleagues. “What should we do to survive in a company like this?” I thought this question was a sign of great promise, and advised them to win respect as professionals, and voice their own opinions, firmly and politely.
      6. Diversity is a weak point in many organisations, not only in Japan, but often proves in practice to be liberating for all concerned. The most enjoyable team I ever worked in was the UK Mission in New York in the 1990s where over half of our front line negotiators and the entire legal team were women. It is part, but only part of creating a healthy atmosphere of camaraderie and internal competition within a team. Unfortunately the role of many good women in the company is still to make TEA.
      7. Governance is another vital topic, in the light of the Olympus and other similar failures. Part of the greatness of the Chairman who rescued the company from its disaster of 2008 was to bring diversity into the Board of Directors. I was quickly followed by three other non-Japanese Board members, two Americans and one Singaporean, all eminent in their fields. The Japanese Directors too were business men and women of deep experience. Simultaneous interpretation was provided, but it soon happened that conversation would flow spontaneously into English as well. More than that, with the introduction of foreigners who thought it was their duty to speak their opinions in Board meetings, the Japanese members also perked up and became much more interested in debate. It was a huge leap forward. By any international standards, the Board was a model. But my conclusion was that it is not the composition of the Board, but its degree of oversight and influence which is the real issue. The key shift is to move from a situation where the Board simply gives legal authority to decisions already made by the Executive, to one where the Board also debates strategy and can examine the management of the company.
      8. In other words, governance should be not TEA, but SPARKLING WATER.

      Huge contribution of Japanese companies to the UK economy.

      Japanese companies have made a huge contribution to the UK economy and to the Government’s aim, still only half achieved, of rebalancing the economy towards manufacturing. It is estimated that they provide 140,000 jobs, and most notably the surplus in automotive exports that the UK now enjoys is in large measure due to Japanese (and now significantly Indian) investment.

      Hitachi’s two largest overseas projects are coincidentally in the UK, and both very visible and vital from the point of view of renewing the country’s rail and power infrastructure. There isn’t time to go into detail, but in September we will open a factory in North East England to build the next generation of intercity and commuter trains; and the second is to plan and hopefully build a privately owned and operated nuclear power plant based on our latest Japanese operating design.

      As a Brit of course, I’m very proud that the company is prepared to commit such huge investment to the British market. But from a company point of view, what is most encouraging are that these are transformational projects in the company’s journey towards becoming globally competitive.

      In the rail case, the decision has been taken to put the global headquarters of the rail business in the UK. Even Japan now comes under this organisation. And that is the consequence of the exceptional foreign leader brought into the business twelve years ago.

      In the nuclear case, it was a courageous decision to take a business which after the Fukushima earthquake had suffered a sudden domestic collapse, and re-orient it towards the global market. It is anything but simple, but a hugely motivating challenge.

      Conclusions

      On Japan-UK relations

      On the UK-Japan relationship, I believe there is a huge reservoir of good will, common interest and complimentary talent. To sustain it we should focus not on sentiment but on what we can do together to address today’s issues – trade, conflict prevention, international development, anti-terrorism, and including now collaboration in defence preparedness.

      With Japan there is a bond of trust, magnified by the contribution Japan continues to make to the UK economy and its support on international issues. This, and our common values, should be reflected in a special quality of political relationship and cooperation. Frequent dialogue and mutual openness, even in addressing our problems, is hugely valuable.

      We must commit to burden-sharing with the United States through having sufficient readiness to look after ourselves in the first instance.

      As far as Britain in Europe and Japan in Asia are concerned, retreat into isolation is an illusion and a dead end. We need to make these relationships work, and business should lead both countries to sensible policies.

      More generally on world affairs.

      With regard to globalisation and management

      Putting the inner community first is a very natural and admirable human instinct, but as a principle of politics or business organisation it does not work.

      Because we live in a globalised and competitive world, we have to be strong and efficient. More good and strength comes through openness and letting talent rise and lead.

      There are many ways of binding an organisation together. The greatest is shared pride in success. Community, charity and compassion is precious but belongs at level of local and personal life.

      Good politicians and business leaders are those who allow creativity and diversity to flourish, but can also articulate a sense of direction and what is right and wrong.

      Finally

      Because of my background I have spoken with the perspectives and beliefs of someone who wants to see Japan and the UK play a role in shaping the world, and companies like my own be Japanese but international at the same time, realising their full potential value in the global market place. I accept that that is not everyone’s view. It is possible to argue that living standards in Japan are good and creativity abundant in many areas; and that somehow, even without disruptive change, Japan can keep its head down and will find ways of dealing with the issues we have talked about. As you gather, my response would be that it is very difficult for companies in particular to maintain a static state in a competitive world – you are either a competitor or not, though you can change from one to the other; and the same goes, as we saw after the Thatcher reforms, for nations too.

      But it is also a slightly regretful belief, for as I love this country and its attachment to personal loyalty and all the things we enjoyed in that first tea experience, I understand why many, perhaps in this audience, might take that view.

      Stephen Gomersall, Tokyo, March 2015

      (Stephen Gomersall was British Ambassador to Japan from 1999-2004, and Hitachi’s Chief Executive for Europe and subsequently Board Director from 2004-2014. He is now Adviser to the CEO, Hitachi Ltd.)

      Copyright (c) 2015 Sir Stephen Gomersall and Eurotechnology Japan KK All Rights Reserved

      Stephen Gomersall was British Ambassador to Japan from 1999-2004, and Hitachi’s Chief Executive for Europe and subsequently Board Director from 2004-2014. He is now Adviser to the CEO, Hitachi Ltd.
      Stephen Gomersall was British Ambassador to Japan from 1999-2004, and Hitachi’s Chief Executive for Europe and subsequently Board Director from 2004-2014. He is now Adviser to the CEO, Hitachi Ltd.

      Report on “Japan electronics industries”

      https://www.eurotechnology.com/store/j_electric/

    • Crisis leadership post-Fukushima: Dr. Chuck Casto

      Crisis leadership post-Fukushima: Dr. Chuck Casto

      Global leadership in the extreme

      Dr Chuck Casto: Leader of the US Integrated Government and NRC efforts in Japan during the Fukushima nuclear accident in 2011

      I don’t think that there is anyone with deeper insight into the Fukushima-Dai-Ichi nuclear disaster, its management, causes and consequences, than Dr. Chuck Casto.

      Dr Casto arrived in Japan a few days after March 11, 2011, representing the US Government regarding the Fukushima-Dai-Ichi nuclear disaster, and heading a team of 150 US nuclear industry experts, and for 11 months advised the Japanese Prime Minister and Ministers on the Fukushima-Dai-Ichi disaster management.

      Dr. Chuck Custo is licensed nuclear power station operator, and as regional NRC Regulator was responsible for the safety of 23 US nuclear power stations.

      We were lucky and honored to have Dr. Chuck Casto as one of the keynote speakers at the 7th Ludwig Boltzmann Forum in Tokyo.

      Click to read a summary of Dr Chuck Casto’s keynote
      Dr. Chuck Casto: Global leadership in the extreme: crisis leadership in post-Fukushima.

      Related talks (click to read summaries of the talk and watch videos):

      Reading the talks above will give you a good insight into the key causes and implications of the Fukushima-Dai-Ichi nuclear disaster by the world’s best experts directly involved in this nuclear disaster management.

      Copyright (c) 2015 Eurotechnology Japan KK All Rights Reserved

    • Angela Merkel in Japan to discuss renewable energy

      Angela Merkel in Japan to discuss renewable energy

      German Federal Chancellor Angela Merkel in Japan March 9-10, 2015

      Hopes for Japan and Germany share at least part of the path to renewable energy

      Germany’s Federal Chancellor Angela Merkel, Physicist with a PhD (Chancellor Angela Merkel’s PhD thesis is available here) and several scientific publications to her credit, visits Tokyo today Monday 9 March and tomorrow Tuesday 10 March 2015.

      Angela Merkel’s official interview preparing for Japan visit

      In the official interview commenting on her Japan trip (watch on YouTube here), Chancellor Merkel says: “Wir setzen jetzt sehr auf erneuerbare Energien. Und ich glaube, Japan sollte auch diesen Weg gehen – und geht ihn ja auch. Und wir sollten ihn vor allem in Deutschland und Japan auch ein Stueck zusammen gehen. Das heisst, ich werde dort auch ueber den Ausbau erneuerbarer Energien sprechen.”

      Our translation to English: “We put much emphasis on renewable energy now. I think Japan should also go along this path – and indeed goes along this path. We should proceed on this path at least partly together. This means, I will talk about the expansion of renewable energy during my Japan visit.”

      Report: Energy efficiency – opportunities for Japan and Europe

      The Konrad-Adenauer-Stiftung, a German public policy think-tank financed by German Government funds, recently organized conferences on Energy efficiency in Tokyo, Kyoto and Kobe, and engaged our company to produce a report on “Energy efficiency – opportunities for Japan and Europe”.

      Download the report free of charge as a pdf-file here from the Konrad-Adenauer-Stiftung website (pdf-file).

      If you need to know more, read our reports:

      “Renewable energy Japan” research report

      Copyright 2015 Eurotechnology Japan KK All Rights Reserved

    • Japanese acquisitions in Europe total € 6 billion in 2015

      Japanese acquisitions in Europe total € 6 billion in 2015

      Overcoming Japan’s “Galapagos syndrome”

      Globalizing Japan’s high-tech industries

      At the Bank of Kyoto’s New Year celebration meeting, Japan’s stagnation and need for globalization were center of discussion – despite focus on globalization, the present author was more or less the only non-Japanese invited and attending(!).

      The Chairman of Japan’s Industry Federation KEIDANREN, Mr Sakakibara (Chairman of Toray (東レ株式会社)), deplored that Japan’s economy is the only major industrial country not growing, and emphasized the need to overcome Japan’s well known Galapagos syndrome.

      In an effort to overcome lack of growth in Japan, Japanese companies over the last years have been extremely active acquiring European technology companies – actually our company advised several Japanese companies’ M&A teams on European acquisition strategies and opportunities.

      Japanese companies are particularly active acquiring European technology companies – this year alone, the EU-Japan investment registry shows Japanese acquisitions in Europe totaling € 6 billion – far more than European acquisitions in Japan this year.

      Japanese acquisitions 2015 in Europe include:

      Post-merger know-how and execution are key

      It is well-known that EU <-> Japan post-merger management requires substantial management know-how. While such management known-how has been built up between US-Japan over many years, EU-Japan investments had only a shorter time to develop, and in many cases companies are not willing to invest sufficiently in such know-how. As a consequence the majority of EU <-> Japan investments has failed unfortunately – poster-children are the failures of Vodafone’s acquisitions in Japan and the failures of Docomo’s investments in EU, and there are many more examples.

      To overcome these problems, several recent Japanese investments are substantial investments but short of 100% where local European management is kept in place – following the Renault-Nissan success story. Indeed, Carlos Ghosn has emphasized that the Renault-Nissan investment would probably have failed, had it been a 100% take-over.

      Copyright 2015 Eurotechnology Japan KK All Rights Reserved·

    • i-Mode was launched February 22, 1999 in Tokyo – birth of mobile internet

      i-Mode was launched February 22, 1999 in Tokyo – birth of mobile internet

      The mobile internet was born 16 years ago in Japan

      Galapagos-Syndrome: NTT Docomo failed to capture global value

      On February 22, 1999, the mobile internet was born when Mari Matsunaga, Takeshi Natsuno and Keiichi Enoki launched Docomo’s i-Mode to a handful of people who had made the effort to the Press Conference introducing Docomo’s new i-Mode service. KDDI soon followed with EZweb, and J-Phone with Jsky (J-Phone was acquired by Vodafone, which was unable to manage J-Phone, Vodafone then sold the company to SoftBank).

      i-Mode’s popularity soon exceeded any expectation: Docomo for some periods had to limit new subscriptions.

      With Steve Jobs’ love for Japan, and Apple’s intense supplier relationships with Japan, its not farfetched to see connections between i-Mode and iPhone, in particular the i-Mode ecosystem and Java-based i-Appli’s are forerunners of today’s apps and apps-ecosystems.

      At that time there was no Wikipedia, and Docomo had no English-language website at all, so our company Eurotechnology Japan KK’s information was more or less the only English language information openly available about i-Mode. We were bombarded by requests from many major semiconductor firms, telecom operators, investment banks, students and world-famous business schools for our i-Mode report and related business development and strategic work.

      Learn about Japan’s telecom markets: read the 65th edition of our report.

      Today 5 of the global top-10 top-grossing Apps are Japanese

      While Docomo never managed to capture global value from inventing and first introducing the mobile internet, the No. 1 top-grossing company globally, and five of the top-10 globally top-grossing Apps for iOS and Google-Play combined are Japanese (source: App-Annie).

      Japan’s app market is the world’s largest in terms of cash revenues

      Its also no coincidence that in terms of cash value, Japan’s is the world’s largest app-market for iOS and Google-Play combined, bigger than the US market and the Chinese market in terms of cash value. (source: App-Annie).

      App-Annie’s data to our knowledge only cover the iOS and Google-Play app-stores, not the i-Mode and other mobile internet businesses, so Japan’s actual mobile app economy is even larger than App-Annie data show.

      Which are the top-grossing apps in Japan?

      i-Mode is still alive and kicking – and a big business for Docomo

      i-Mode is still today the mobile internet system for Docomo’s traditional flip-phones which are still an important part of the market, and recently made headlines since sales for traditional flip-phones were rising, while smartphone sales were (temporarly?) dropping.

      i-Mode (and EZweb for KDDI, and Yahoo-mobile for SoftBank) will still be important business for some time to come in Japan.

      Copyright (c) 2015 Eurotechnology Japan KK All Rights Reserved

    • Google Play Japan – top grossing Android Apps ranking

      Google Play Japan – top grossing Android Apps ranking

      Android smart phone apps ranking in Japan by gross revenues (Feb. 18, 2015)

      Japan game market report (398 pages, pdf-file)

      AppAnnie showed that in terms of combined iOS AppStore + Google Play revenues, Japan is No. 1 globally, spending more than the USA. Therefore Japan is naturally the No. 1 target globally for many mobile game companies!

      Eurotechnology report: JAPAN’S GAME MAKERS AND MARKETS – DISRUPTION BY SMARTPHONE GAMES
      Eurotechnology report: JAPAN’S GAME MAKERS AND MARKETS – DISRUPTION BY SMARTPHONE GAMES

      Android Google Play – Japan “Top Grossing” apps ranking of February 18, 2015:

      Note that the Android/Google Play ranking shown here is very similar to the iOS top grossing ranking.

      • No. 1 Puzzle & Dragons by GungHo
      • No. 2 Monster strike (by Mixi)
      • No. 3 白猫プロジェクト (= white cat project) (by Colopl Inc.)
      • No. 4 クイズRPG 魔法使いと黒猫のウィズ (= Quiz RPG (role playing game) The World of Mystic Wiz, the which and the black cat wiz) (by Colopl Inc.)
      • No. 5 LINE Disney tsumu tsumu (by LINE Corporation) (ツムツム = Tsum Tsum)
      • No. 6 LINE PokoPoko (by LINE Corporation)
      • No. 7 Dragon Quest Monsters Superlight (by Square Enix)
      • No. 8 LINE (by LINE Corporation)
      • No. 9 Final Fantasy Record Keeper (by DeNA Ltd)
      • No. 10 LINE Rangers (by LINE Corporation)
      • No. 11 Love life! School Idol Festival (by KLab Inc.)
      • No. 12 Logres of Swords and Sorcery – popular online RPG (by Marvelous Inc.)
      • No. 13 Runaway lives motorcycle Tiger (by Donuts Co Ltd)
      • No. 14 Clash of Clans (by Supercell)
      • No. 15 Chain chronicle – real scenario RPG (ChainChro = チェンクロ) (by SEGA Corporation)
      • No. 16 Actual powerful pro-baseball (実況パワフルプロ野球) (by KONAMI)
      • No. 17 Schoolgirl strikers (by Square Enix)
      • No. 18 Puyo puyo!! Quest (by Sega Corporation)
      • No. 19 LINE POP2 (by LINE Corporation)
      • No. 20 Granblue Fantasy (by Cygames Inc)
      • No. 21 Drift Spirits (by Bandai Namco Games Inc)
      • No. 22 Pro baseball Pride 2014 (by Colopl Inc.)
      • No. 23 Sengoku Enbu – KIZNA – (by Sumzap Inc)
      • No. 24 Dragon poker (by Asobism Co Ltd)
      • No. 25 Gandam Conquest (by Bandai Namco Games Inc)

      Japan’s iconic game companies created many game categories – this tradition carries over to mobile gaming now.

      Japan game market report (398 pages, pdf-file)

      Copyright 2015 Eurotechnology Japan KK All Rights Reserved

    • Japan smartphone app rankings by cash revenue (iOS)

      Japan smartphone app rankings by cash revenue (iOS)

      Top grossing app ranking (Feb. 10, 2015)

      AppAnnie showed that in terms of combined iOS AppStore + Google Play revenues, Japan is No. 1 globally, spending more than the USA. Therefore Japan is naturally the No. 1 target globally for many mobile game companies, and quite a few of the top grossing apps in Japan are of foreign origin – can you guess which?!

      Japan game market report (398 pages, pdf-file)

      iOS AppStore-Japan “Top Grossing” ranking of February 10, 2015:

      Note that the iOS ranking shown here is very similar to the Android / Google Play top grossing ranking.

      • No. 1 Monster strike (by Mixi) from rank 2 on July 13, 2014
      • No. 2 Puzzle & Dragons by GungHo (from rank 1 on July 13, 2014)
      • No. 3 白猫プロジェクト (= white cat project) (by Colopl Inc.)
      • No. 4 Dragon Quest Monsters Superlight (by Square Enix) (from Rank 12 on July 13, 2014)
      • No. 5 LINE Disney tsumu tsumu (by LINE Corporation) (ツムツム = Tsum Tsum) (from Rank 3 on July 13, 2014)
      • No. 6 Final Fantasy Record Keeper (by DeNA Ltd)
      • No. 7 LINE (by LINE Corporation)
      • No. 8 Love life! School Idol Festival (by KLab Inc.) (was rank 9 on July 13, 2014)
      • No. 9 LINE PokoPoko (by LINE Corporation)
      • No. 10 Logres of Swords and Sorcery – popular online RPG (by Marvelous Inc.) (was rank 14 on July 13, 2014)
      • No. 11 Clash of Clans (by Supercell) (was rank 5 on July 13, 2014)
      • No. 12 Runaway lives motorcycle Tiger (by Donuts Co Ltd)
      • No. 13 Drift Spirits (by Bandai Namco Games Inc)
      • No. 14 Actual powerful pro-baseball (実況パワフルプロ野球) (by KONAMI)
      • No. 15 Sengoku Enbu – KIZNA – (by Sumzap Inc) (was rank 8 on July 13, 2014)
      • No. 16 Sword Art Online Code Resister (by Bandai Namco Games Inc)
      • No. 17 Chain chronicle – real scenario RPG (ChainChro = チェンクロ) (by SEGA Corporation)
      • No. 18 Schoolgirl strikers (by Square Enix)
      • No. 19 Summons Board (by GungHo Online Entertainment)
      • No. 20 Puyo puyo!! Quest (by Sega Corporation) (was rank 11 on July 13, 2014)
      • No. 21 Granblue Fantasy (by Cygames Inc)
      • No. 22 LINE Manga – daily reload of popular manga free of charge (by LINE Corporation)
      • No. 23 Brave frontier (by Alim Co Ltd) (was rank 4 on July 13, 2014)
      • No. 24 Dragon poker (by Asobism Co Ltd) (was rank 6 on July 13, 2014)
      • No. 25 LINE POP2 (by LINE Corporation)

      Japan game market report (398 pages, pdf-file)

      Copyright 2015-2019 Eurotechnology Japan KK All Rights Reserved

    • Japan in 2015 – analysis

      Japan in 2015 – analysis

      Thoughts and analysis for 2015

      Abenomics?!

      The trick of course is the third arrow, the reforms. Read what Professor Takeo Hoshi has to say about Abenomics, Japanese economist, who has worked his way up US Universities, and has now reached the position of Professor of Economics at Stanford University. By the way, here is my talk at Stanford University – some years ago, but much of it still applies today.

      Japan’s energy

      Japanese people’s views on nuclear power are polarized, and its unclear and unpredictable when nuclear power stations will be switched on again in Japan. Read what the Governor of Niigata Prefecture has to say, who hosts the world’s largest nuclear power plant with 7 reactors and 8 GigaWatt capacity.

      According to the Japanese Energy Fundamental Law, the Government has to publish an official Energy Basic Plan at regular intervals. You can read the 4th Energy Basic Plan published on April 11, 2014, and listen to a commentary on it for The Economist here on YouTube. The 4th Energy Basic Plan starts with the assumption that Japan is poor in natural energy resources, which of course is only true if we restrict “natural energy resources” to fossil resources. Japan is actually potentially very very rich in renewable energy sources, as the scenario plans developed by Japan’s Industry and Economy Ministry (METI) and Japan’s Environmental Ministry show.

      Solid state lighting saves energy

      GaN LEDs were invented and commercialized in Japan, and Shuji Nakamura, Isamu Akasaki and Hiroshi Amano won the 2014 Nobel Prize in Physics for this work. Read the summary of Shuji Nakamura’s keynote at the 5th Ludwig Boltzmann Forum.

      Post-Galapagos and globalization of Japan’s technology groups

      To overcome Japan’s Galapagos issues and to acquire technologies and market access, Japanese companies are acquiring overseas: read a list of Japanese acquisitions in Europe here.

      Foreign companies in Japan, and Japanese companies overseas face a dilemma: expensive expatriates with limited local know-how, or local management? Japanese companies seem to have finally reached the conclusion that Japanese managers eg sent to Germany are in most cases not the best choice to lead a German-based multinational company – here are some great recent examples:

      • Docomo acquires a majority stake in net mobile AG, however net mobile AG remains a publicly listed company. Read details here.
      • NTT DATA acquires SAP solution provider itelligence AG, however itelligence AG remains an independently managed company under the founder’s management, and grows aggressively via acquisitions all over the globe. Read details here.
      • NTT Communications acquires a majority of Integralis, Integralis is renamed NTT Com Security AG, however NTT Com Security AG remains traded on the m:access market of the Munich Stock Exchange. Read details here.

      Carlos Ghosn is very well aware of such multi-cultural management issues and how to solve them, however too many EU companies in Japan are not. If they were, EU investments in Japan could be at least 50% higheras you can read here.

      Best wishes, and much success in 2015!

      Copyright 2015 Eurotechnology Japan KK All Rights Reserved

    • EU Japan FTA

      EU Japan FTA

      Free Trade Agreement (FTA) and Economic Partnership Agreement (EPA)

      Preparations:

      EU Japan FTA trade negotiations initiated: At the 20th EU-Japan Summit of May 2011 the EU and Japan decided to start preparations for both a Free Trade Agreement (FTA) and a political framework agreement (Economic Partnership Agreement, EPA).

      For updates and further details see: http://eu-japan.com/eu-japan-agreements/eu-japan-trade-negotiations/

      May 2012: after one year of discussions, the EU agreed with Japan on an agenda for future negotiations covering market access.

      On 18 July 2012, the EU Commission asked the EU Member States for agreement on opening Free Trade Agreement negotiations with Japan.

      On 29 November 2012, the Council authorized the Commission to start trade negotiations with Japan.

      The EU Japan FTA trade negotiations were officially launched on 25 March 2013 by EU President Jose Manuel Barroso, President Herman Van Rompuy and Japanese Prime Minister Shinzo Abe.

      EU Japan FTA trade negotiations: First round (Brussels, 15-19 April, 2013)

      Press release: First Round of EU-Japan Trade negotions (Brussels, 19 April 2013)

      EU team leader: Mauro Petriccione, Director in the European Commission’s Directorate General for Trade

      Japan team leader: Ambassador Jun Yokota (横田淳), Ministry of Foreign Affairs

      Japanese Ministry for Foreign Affairs, Press Release

      EU Japan FTA trade negotiations: Second round (Tokyo, 24 June – 3 July 2013)

      Japanese Ministry for Foreign Affairs, Press Release: Second Round of Negotiations on the Japan EU Economic Partnership Agreement (EPA) as well as a Japan EU Strategic Partnership Agreement (SPA)

      EU Japan FTA trade negotiations: Third round (Brussels, 21-25 October 2013)

      Japanese Ministry for Foreign Affairs, Press Release: Third Round of Negotiations on the Japan EU Economic Partnership Agreement (EPA)

      EU Japan FTA trade negotiations: Fourth round (Brussels, 27-31 January 2014)

      Japanese Ministry for Foreign Affairs, Press Release: Fourth Round of Negotiations on the Japan EU Economic Partnership Agreement (EPA)

      EU Japan FTA trade negotiations: Fifth round (Tokyo, 31 March – 4 April, 2014)

      Press release by the Foreign Ministry of Japan (4 April 2014)

      EU Japan FTA trade negotiations: Sixth round (Tokyo, 7-11 July 2014)

      Sixth Round of Negotiations on the Japan EU Economic Partnership Agreement (EPA) (Foreign Ministry of Japan, Press release)

      EU Japan FTA trade negotiations: Seventh round (Brussels, 20-24 October 2014)

      Japanese Ministry for Foreign Affairs, Press Release: Seventh Round of Negotiations on the Japan EU Economic Partnership Agreement (EPA)

      EU Japan FTA trade negotiations: Eighth round (Tokyo, 8-12 December 2014)

      Japanese Ministry for Foreign Affairs, Press Release: Eighth Round of Negotiations on the Japan EU Economic Partnership Agreement (EPA)

      Copyright 2014 Eurotechnology Japan KK All Rights Reserved