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Below Story Written for J@pan Inc.
End Story on Venture Capital <RETURN TO STORIES MENU> Below Story Written for J@pan Inc., Oct. 2000  Ecom Small-Fry Gets Hammeredby Mark Schumacher Date: October 2000 issue Opening an online shop in the US is a breeze, but in Japan, the prevailing winds favor the big players. Japan's booming ecommerce scene is clearly stacked in favor of the big players. For small, Japan-based merchants hoping to jump on the ecommerce bandwagon, the options are limited, expensive, and generally unprofitable. In the US, small merchants can open an online store for as little as $25 monthly. In Japan, that number skyrockets to around $500 monthly at popular shopping malls like Rakuten, and then jumps into the stratosphere ($50,000 or more yearly) to run a customized storefront. To make matters worse, small Japanese merchants typically operate on bare-bone margins -- which are instantly gobbled up by Web site development/hosting fees, and by the hefty per-transaction fees and commissions charged by Japanese ecommerce providers and credit card companies. Thankfully, in the past year, some relatively inexpensive ecommerce solutions aimed at smaller merchants have appeared (see table). Ranging in price from around ¥7,500 (not including hosting fee) to ¥50,000 monthly, these solutions target small Japan-based merchants who don't want to deal with the hassles of running their own dedicated server -- who simply want to buy inexpensive ready-to-run ecommerce solutions instead of building everything themselves. In the US, this type of business model was pioneered by www.icat.com, and is now practiced by many e-store providers (e.g., http://www.customcart.com/, http://www.anacom.com/). Such services cost around $100 monthly (sometimes much less, including hosting fees). Not surprisingly, this model has attracted hundreds of thousands of small merchants in the US and abroad, for it makes it relatively easy to implement online English-language payment systems. For small Japan-based merchants hoping to build English-language stores in Japan or anywhere worldwide, these US-based services are definitely worth investigating. As with all good things, however, there are limitations. For one, shipping and tax programming is customized for US audiences, not for Japanese shoppers. No customization is allowed in Checkout/Registration screen flow or content. Indeed, nothing is customized for the Japanese market, where the bulk of payments are made via bank transfers, convenience stores, post offices, or COD, not via credit card. The only true advantages are (1) low cost and (2) offline processing, or manual processing, of credit cards. The latter item is crucial to small merchants, for it means there are no transaction costs, no commissions, to be paid to the ecommerce solution provider. Only one flat monthly hosting rate, plus the 5 to 9 percent per-sale commission charged by the Japanese credit card company. The comparable US commission rate is only 2 to 3 percent. THE SCENE IN JAPAN The mall solution (Yahoo, Rakuten, etc.) is perhaps the most "headache free" entry point for small Japanese merchants with small budgets and little technological savvy. But be prepared to budget at least ¥1 million yearly or more for Web development costs, onetime setup fees, monthly charges, and other expenses. And forget about building brand image, for mall membership means you and your competitors all share the same checkout/registration format, and it pits you against all your competitors on the same mall entry page. Payment is typically handled by the mall itself, which means the invoice/billing statement reinforces the image of the mall, not of the individual merchant. For merchants who want more robust storefronts, who have three to five million yen to spend on store-creation software, and who are not afraid to run their own dedicated server (or to outsource this function), the Japanese market is looking better. The leader seems to be Vanguard, which has developed a fully featured ecommerce software package (Java-based) for ¥2.7 million yen (not including dedicated server). It is customized for the Japanese market and is being utilized by GOL/Exodus for its online merchants. IPTelcom, another software house, has a similar package (Perl-based) available for ¥1 million. It also requires a dedicated server. IPTelCom offers dedicated hosting for ¥50,000 per month. As in so many areas of life in Japan, the odds are with the powerful, not the weak. Innovative and inexpensive ecommerce solutions are on the way for small businesses, but the many great etailing ideas of small Japanese merchants might die on the vine before that time arrives -- or get snatched up in the interim by big players with big wallets. Kamakura-based Mark Schumacher is behind several Japan-based eshops, including http://www.esake.com/. Below Story Written for International Herald Tribune, Aug 96 Japan Ousts Anti-Import Demon Japan's economic machine is being stripped of its local content. Imports of manufactured goods are skyrocketing, and now account for a record 59.1% of all imports. A decade ago Japan was scathingly criticized by trading partners for blocking imports of manufactured goods. Foreign nations buttressed their criticism with revealing statistics. In 1985 Japan's imports of manufactured goods accounted for a measly 31% of all imports, far below the 70% to 80% ratio found in France, Germany, the UK and America. Foreign traders argued that Japan's low ratio was a clear-cut example of Japan's anti-import bias. Animosity has simmered down to a whisper since then. According to Japan's premier import promotion agency -- JETRO -- the nation's imports of manufactured goods jumped 30.9% in 1995 to $198.6 billion, accounting for nearly 60% of all imports. That's a whopping reversal compared to 1985, and up drastically from 50% early this decade. Japan's exploding import demand is largely a common-sense reaction to the mighty yen rather than a genuine change in heart among the island's economic mandarins. To stay price competitive, Japan's top firms have been forced to move production to low-cost offshore locales, and to procure more parts and finished goods from low-cost foreign suppliers and Japanese transplants. The automobile and consumer electronics industries -- the two pillars of Japan's postwar economic miracle -- are indicative of overall trends. Imported vehicles hit a record high in 1995, jumping 20.9% year on year to 402,608 units (10.2% of Japan's total passenger car market). Reverse imports from overseas Japanese car plants accounted for 27% of that total. More amazingly, Japan's automakers now produce more cars offshore than they export. In another unprecedented turnabout, offshore sales of manufactured goods by all Japanese producers (not just carmakers) surpassed the combined value of Japan's manufactured exports for the first time ever in 1995. In consumer electronics, the nation imported more color TVs in 1995 than it produced at home, another first. Most came from Japan-owned offshore factories. In a similar fashion, imports of foreign-made Japanese VCRs, stereos, cameras and air conditioners are approaching 50% of domestic production. Electronics giant Sanyo Electric, for example, forecasts that around 75% of the video recorders it will sell in Japan in 1996 will be produced by its overseas subsidiaries. Aiwa Co., a leading audio-visual firm, now makes about 86% of its products overseas and procures about 90% of its parts from abroad, as does computer powerhouse NEC. According to industry watchdog Standard & Poor's, overseas sales will soon account for more than half of all sales by Japan's consumer electronics firms. <RETURN TO STORIES MENU> The Issue in Perspective The private sector, not the government, is the main driver behind the prolonged upswing in most manufactured imports, explains Jay Sibel, a Japan-based representative of U.S. management consulting firm A.T. Kearney. "The issue was highly political to begin with, but it is now less relevant because of the yen's appreciation and the efforts of Japan's private sector to remain cost competitive. In essence, the strong yen is creating price differences which are irresistible even to those companies who are fiercely loyal to their suppliers." Many would agree. The issue first gained notoriety in the latter half of the 1980s, a time when Japan's economic machine appeared indestructible and unbeatable. Foreign criticism was harsh and emotionally charged, especially from the U.S., where anti-Japan feelings had reached a fever pitch. Japan, in contrast, staunchly maintained its innocence, claiming that the gap in manufacturing-import ratios stemmed purely from natural causes. Japan lacks the bountiful natural resources of Europe and America, say the Japanese, and must therefore rely more heavily on imports of raw materials, fuel and agricultural products. It is thus only natural that Japan's manufactured-import ratio should be statistically lower than that of Western counterparts. Many would likewise agree that Japan's manufactured imports will continue to climb in coming years. With the country's top firms racing to expand their offshore presence to regain their cost-competitiveness, it seems only natural for Japan to procure more low-cost parts and finished products from foreign suppliers and from its own offshore plants. But even as the death knell sounds for Japan's anti-import demon, another specter is rekindling fears of "kudoka" -- hollowing out -- the notion that Japan will lose its manufacturing base if too many companies move overseas. Such fears seem exaggerated, however. Overseas plants still account for only 7% to 8% of Japan's total output -- far less than the U.S. rate of 26% or Germany's 15%. The Ministry of International Trade and Industry says it expects Japan's rate to approach 9% in the near future. End of Manufactured Imports Story <RETURN TO STORIES MENU> Below Story Written for Die Welt (August 1996) Shifting Gears Say good-bye to Japan's lauded export strategies. The nation's automakers now make more cars offshore than they export. Stung by the mighty yen, a steep dive in domestic car sales and intensified competition from foreign rivals, Japan's automakers are migrating en masse to offshore locales. Overseas production is surging, mirrored by slumping domestic car production and tumbling auto exports. The shift from export-oriented strategies to offshore production has been swift and striking. In the past 10 years, carmakers have ramped up their overseas production from 1.4 million units in 1985 to over 5 million in 1995. Phrased differently, overseas production accounted for a meager 12% of total production by Japanese automakers in 1986, but today that figure exceeds 30%. The turnaround is mirrored by nose-diving domestic production. In the past five years, domestic production of passenger vehicles has tumbled 24% from its peak in 1990 to only 10.2 million in 1995. Exports, meanwhile, have plunged to levels last seen in the 1970s. Last year Japan shipped a meager 3.62 million vehicles to all overseas markets, down 16.7% from 1994 and the fourth consecutive yearly drop. More declines are expected. Honda, for example, expects to make more four-wheel vehicles overseas than in Japan in 1996. Suzuki and Isuzu achieved that distinction last year. High Yen Drives Exodus It's not difficult to understand why Japan is moving offshore. The yen's breathtaking appreciation during the past decade, especially after the bursting of Japan's bubble economy, has robbed Japanese cars of their price competitiveness, gouged profits and eroded market share. Many Japanese automakers have been forced to raise their overseas prices, permitting European and U.S. rivals to seize back share with less expensive vehicles of comparable quality. The loss of price competitiveness has also opened the door to South Korean automakers, who are eating away at Japan's hold of the low-end compact-car market. In Europe, for instance, shipments of South Korean cars grew about 60% year on year in 1995. In contrast, the number of registered Japanese vehicles slumped 1.1%. The European operations of Nissan Europe N.V., to cite another example, reported combined losses of 65 billion yen in 1995, necessitating parent Nissan Motor Co. to pump an additional 70 billion yen into the Amsterdam-based subsidiary this May. Japan's auto executives are concerned, but they remain optimistic that offshore production will continue to drive down costs. To further that goal, they are revising design and development concepts as well as production technologies, pursuing methods for reducing the number of parts handled on the final assembly line and designing common-part strategies for different models. Still, nearly all agree that the most expedient means for cutting costs is to move offshore. Says Ryuichiro Inoue, a senior researcher at the Mitsubishi Research Institute: "Japanese automakers have no choice but to boost overseas operations to keep their competitive edge. In that sense, they are already headed down a well-charted path, and will have to remain on it in the future." <RETURN TO STORIES MENU> Fast Lane to Offshore Locales Japan's offshore exodus jumped into high gear last year with the conclusion of the U.S.-Japan Auto Trade Accord. As part of that agreement, Japan's five leading carmakers -- Toyota, Nissan, Mitsubishi, Honda and Mazda -- agreed to boost production at their factories in North America by 25% to 2.65 million units by 1998. That compares to around 537,000 units produced at their European bases in 1994. They are well on the way to achieving those commitments. The Japan Automobile Manufacturers Association reported this May that Japanese carmakers produced 2.3 million vehicles at their U.S. plants in 1995, up from 2.15 million in 1994 and the 10th straight year of increases. In contrast, exports from Japan to the U.S. dropped to 1.23 million vehicles in 1995, only half the 3.43 million exported there in 1986. Amazingly, Japan's U.S.-based factories now export more passenger vehicles from the U.S. than do the Big Three U.S. carmakers, with Honda and Toyota ranked as the top two U.S. exporters. Honda, the leader, exports its cars to 36 countries in Europe, Asia and South America. Although America will remain Japan's largest offshore production base for years to come, Asia is fast becoming the destination of choice. In the past three years, nearly every major Japanese carmaker has unveiled plans to drastically increase vehicle production in fast-growing Asia, where Japan already rules the roost. Yet, even with their bullish Asian production plans, Japanese carmakers have been losing market share in the region to competitors from the U.S., Europe and South Korea. In Thailand, for instance, Japan's automakers have seen their combined market share fall from a peak of 84% in 1991 to around 70% in 1995. The European market, meanwhile, has become a tough battlefield for Japanese carmakers. Market demand tumbled owing to Europe's economic slump early this decade, with auto sales falling at double-digit rates. The gradual recovery that began in 1994 has bolstered demand, but the yen's appreciation against major European currencies has severely hurt Japan's carmakers. In Sweden, for example, price differentials caused Japan's share to fall from around 30% to some 10%. Nevertheless, Mitsubishi, Nissan, Toyota, Suzuki and Honda continue to expand their European production. Mitsubishi Motors, for example, recently announced plans to manufacture a new compact sports utility vehicle at its joint venture plant in The Netherlands with AB Volvo of Sweden. Scheduled for launch in 1998, the operation will be the first-ever venture by a Japanese company to manufacture and sell sports utility vehicles in Europe. Honda, meanwhile, has resumed plans to manufacture passenger cars in Turkey, with production scheduled to start in 1997. Not to be outdone, Suzuki Motors bought a controlling stake in its Hungarian subsidiary in May this year. It plans to boost the subsidiary's production of passenger vehicles from 43,000 last year to 50,000 as a means to expand sales in Europe. Elsewhere, Toyota has unveiled plans to fully remodel its Carina E vehicle for exclusive marketing in Europe beginning next autumn. Last year, it manufactured 88,000 Carina E's at its plant in Britain. <RETURN TO STORIES MENU> Roadblocks Ahead Auto executives still have their share of headaches. Domestic auto sales are rebounding, but they have yet to regain the peak reached in 1990. And with the domestic market nearing maturity, there is little hope for further growth. International pressure has also forced Japan's auto firms to face greater competition on their home turf. Imported vehicles hit a record high in Japan in 1995, jumping 20.9% to 402,608 units. Although reverse auto imports -- cars that Japan makes overseas and then sells in Japan -- accounted for 27% of that total, foreign rivals are nonetheless making rapid headway thanks to quality improvements, competitive prices and aggressive Japan strategies. German carmakers -- Volkswagen, Mercedes-Benz and BMW -- posted the biggest gains. They hold the top three import spots and account for more than 43% of all incoming vehicles. Japan's automakers are also at a global disadvantage when it comes to land and labor costs. Nissan, for instance, had the most productive assembly plant in North America for the third straight year, according to the Harbour Report released this May by Detroit-based research firm Harbour and Associates Inc. But worldwide, Nissan lost $760 on each vehicle it made, says the report. Chrysler Corp., which ranked seventh out of eight in plant productivity, enjoyed the highest profit per vehicle at $628. To rein in costs, nearly all Japanese automakers are importing more materials and trimming personnel. And to reduce the expense and time involved in designing new cars, Japan's five major automakers unveiled an experimental "virtual car" design in May that promises to standardize and consolidate their separate design activities. The goal is to slash costs by developing a single chassis that can be outfitted with a variety of car bodies. Other strategies include Toyoto's efforts to create an inexpensive compact "world car" intended to remain competitive at an exchange rate of 90 yen to the dollar. Honda is working on its Asia car, "City," to better meet the needs of consumers in host countries. And in Europe, Mitsubishi is pumping up its development of new compact cars and five-door hatchbacks to better reflect European tastes. Despite recent setbacks, the future of Japan's auto industry isn't terribly dim. With more and more production moving offshore, the Japanese are quickly regaining their price competitiveness. New hot-selling niche products, like 4-wheel-drive recreational vehicles, are bolstering sales. And as more fat is chewed away from the production process, Japan's pace-setting carmakers will emerge all the more leaner and meaner. End Story on Autos........................................ <RETURN TO STORIES MENU> Below written For JETRO's FOCUS JAPAN Magazine (Feb. 96) Looking Back at 1995 Everyone admits that 1995 was a horrible year for Japan. Jolted by natural disaster, terrorized by home-grown religious fanatics and rocked by bank failures and prolonged economic downturn, Japan found its back mostly against the wall last year. But future historians may well define 1995 as a watershed period for Japan. The Kobe earthquake and the Tokyo subway sarin nerve-gas attacks changed the national mood. Japan's image of itself as a "safe society" -- one with unending economic prosperity -- was challenged by the outbreak of disorder. Both events, and the ensuing revelations of government ineptitude and police bungling, shocked Japan's sense of security and prompted reassessments of its education system, police and religious groups. In essence, the local media portray 1995 as the end of an era, a turning point in history, a period in which Japan's confidence in itself was jarred. Throughout the year, the nation seriously questioned the economic and political systems credited for its unparalleled success in the postwar period. Major media groups, moreover, now suggest that Japan's lauded postwar system of government, economy, management and consensus is gradually breaking down. Despite disaster and unrest, 1995 was nonetheless a momentous and memorable year for the Japanese people, a year of transition and healthy transformation. The nation's trade surplus with the U.S. and elsewhere declined significantly. Imports gained a strong position in the Japanese market, domestic prices continued falling to earth thanks to further market deregulation, corporate restructuring and downsizing occurred without wholesale workforce layoffs, and the blueprint for regional free trade for the entire Asia-Pacific region was unveiled at the Asia Pacific Economic Cooperation (APEC) forum held in Osaka in November. Adding to misfortune were a string of bank and credit union failures and a ballooning bad-debt financial crisis, severely undercutting trust in Japan's banking system. Media exposure of fiscal mismanagement and shady dealings sparked a public fury over government plans to use taxpayer money to bail out housing-loan corporations (jusen), whose billions in bad debts continue to harm the nation's financial health. Things got worse in November, when U.S. authorities shut down the U.S. operations of Daiwa Bank -- Japan's tenth largest city bank -- as punishment for covering up illegal trading activities at Daiwa's New York branch. That action fueled more distrust of Japan's financial system, both at home and abroad. On the economic front, the yen's breathtaking advance to ¥79.75 against the dollar in April hurt the nation's slow economic recovery and further eroded the global price competitiveness of Japan's ailing private sector. The yen has since jumped back to the ¥105 range, but its roller-coaster volatility is a matter of grave concern for Japanese business. Meanwhile, the national economy barely grew. New graduates found it increasingly difficult to get jobs as companies cut back on recruitment. Although wholesale layoffs have been avoided, Japan's unemployment rate is now at its highest -- 3.4% -- since 1953. Elsewhere, Japan's security relationship with the U.S. came under intense scrutiny when a young Japanese girl in Okinawa was raped in September, allegedly by three U.S. servicemen. The incident triggered public outcry in Japan and sparked a heated -- and ongoing -- debate on Japan's security needs in the post coldwar era. Foreign relations also brought Japan its share of trouble in 1995. To commemorate the 50th anniversary of the war's end, the Japanese Diet issued a statement of remorse in June about Japan's actions during World War II. The statement drew fire from Japan's Asian neighbors because it stopped short of a candid apology and minimized Japan's guilt. Ironically, the resolution -- which aimed to usher in an era of trust among Asian nations -- succeeded in raising tensions and distrust among Japan's regional neighbors. Japan's politically sensitive current account surplus fell 14.5% in 1995 to $110.4 billion, its second consecutive yearly decline. Further, nearly all economists at home and abroad predict that Japan's surplus will continue to shrink given the high yen -- which has lowered import prices, prompted Japan's manufacturers to shift more production overseas and sparked a huge increase in the number of Japanese traveling abroad. Automobile trade, once a hotly contested point in trade relations between Japan and the U.S., has simmered down considerably since the successful conclusion of the U.S.-Japan auto-trade accord in June. Expanded overseas production by Japan's top carmakers, together with a huge increase in auto imports to Japan, is now a big factor helping to close the trade gap between the U.S. and Japan. In early February 1996, President Bill Clinton acknowledged that trade relations with Japan were improving. In his annual economic report to Congress, Clinton said that bilateral trade agreements with Japan were finally producing much-awaited results. Since the introduction of Japan's first commercial Internet connection in September 1993, the number of commercial providers has mushroomed to over 40. Private firms and government agencies are racing to introduce their own products and services over the Internet. The overall impact on Japanese business and lifestyles is yet unclear, but most analysts say that Internet mania is spurring the acceptance of multimedia and helping Japan catch up with the industrialized West in terms of computer penetration and networking capability. Meanwhile, Japan's trade and investment ties with Asia continued to expand at a fast pace, spurring growth both at home and in Asia. In related matters, Japan played a seminal role in hosting the third annual APEC summit in Osaka in November and in helping APEC's 18 member nations form a consensus during the summit on how to achieve free trade in all sectors by the year 2020. In summation, 1995 wasn't as bad as most people suggest. Even the string of disasters that rocked the nation yielded some positive results -- it prompted Japan into a serious bout of soul searching. Indeed, the country's future direction has not been discussed so openly, widely and enthusiastically in many years. And in the five years before the beginning of the 21st century, Japan now has a better handle on the maladies that plague itself. The result of that move is now household knowledge in Japan. Nomo became the first native Japanese player to appear in a U.S. major league game in nearly 30 years. In his first season, he was selected as the National League starter in the All-Star Game and played a big role in helping the Dodgers win the National League Western Division title. Like Nomo, it's a sure bet that more and more of Japan's youth will choose to strike out on their own in the years ahead, discarding the traditional path of obligation, loyalty and submission to group sensibilities. But it's also a sure bet that Japan will enjoy many more years of sunshine thanks to the erstwhile efforts of its dedicated and hard-working citizens. Younger folk may become less pliable, but it won't happen over night. As one Western writer recently reported: "The Japan economy is like a cyclist pedaling uphill, and the strains are healthy ones." <End 1995 Story> Published Jan. 1996 in Focus Japan, a JETRO publication) Internet mania is fast changing the way Japan works and plays, but Japan still lags far behind the U.S. and Europe when it comes to Internet penetration. The number of people now using the Internet in Japan accounts for only 2% of the total worldwide number of Internet users. Further, Japan has only some 160,000 host computers connected to the Internet, placing it in sixth place worldwide behind the U.S., Germany, the U.K., Canada and Australia. But the situation is changing rapidly. Since the introductionof Japan's first commercial Internet connection in September 1993, the number of commercial Internet providers has mushroomed from just two to over 40. Top firms like Sony Corp., Toyota Motor Co. and NEC Corp. are racing to introduce their products and services over the Internet. Others are using their WWW home pages to recruit new staff. And leading trading houses and phone companies like Sumitomo Corp., NTT and KDD have announced separate plans to create Asia-wide networks of dedicated Internet communication lines -- at present, Internet users in Asia can only access the global information web by routing calls through U.S. telephone circuits. With providers and services proliferating, prices are falling. Internet Initiative Japan Inc., one of Japan's pioneer Internet providers, slashed its entry fee by half in October 1995. Today, users pay an entry fee of ¥5,000 ($50), plus basic monthly fees of ¥2,000 ($20) and connecting fees of ¥15 to ¥28 (15 ¢ to 28 ¢) per minute. Even with prices falling, Japan's overall communication costs remain about five to six times those in the U.S. <RETURN TO STORIES MENU> If you're looking for more than government data, NTT and Stanford University co-sponsor an extensive index of Japanese web resources at their Japan Window site (http://jw.stanford.edu). The Science University of Tokyo (http://sunsite.sut.ac.jp/asia/japan) is another good location with numerous links to Japan-related WWW servers, as is Cyberspace Japan (http://www.csj.co.jp/index-e.html). NTT's own home page is worth exploring (http://www.ntt.jp/), especially its What's New page (http://www.ntt.jp/WHATSNEW/), which presents an interesting potpourri of sites. The September What's New file, for example, included Asia Business Watch (http://shrine.cyber.ad.jp/~dwhit/), a service providing market updates on the Japanese economy. The November file included a new telephone directory search service for the Tokyo area. Make sure to read the "Announcements" section, for it harbors a large selection of engaging -- although sometimes esoteric -- Japanese resources. If you need more, try the diverse links offered by Japan Open Yellowpage (http://plato.digiweb.com/saito/ENJOY/); the Asia Now home page (http://neog.com/asianow/); or the vast collection of Japan-related web sites on Silkroute Inc.'s Asia Cyberspace page (http://silkroute.com/silkroute/asia/rsrc/country/japan.html). This location features links to an unbelievable number of Japanese universities and public organizations, as well as pathways to forums on society, politics, economics and business, plus gopher and archie locations around Japan. It's relatively easy to find the home page of major Japanese firms by using a standard Internet search engine -- like Webcrawler (http://webcrawler.com/), Infoseek (http://www2.infoseek.com/) or Lycos (http://www.lycos.com/). If you prefer a site that links you to numerous firms, try the U.S.-Japan Center (http://www.nmjc.org/cc.html), which offers access to scores of companies and other Japan-related sites. Silkroute Inc.'s Asia Cyberspace page (see above) is another notable portal into corporate Japan, with links to such firms as Fujitsu, Honda, Daiwa Institute of Research and NEC. Another friendly site is Keidanren (http://www.keidanren.or.jp/A2J/index-s.html), which maintains links to over 400 Japanese companies. When it comes to accessing commercial, regional and scientific databases, try out G-Search Intershop (http://www.gsh.co.jp). This service provides links to 140 domestic and 850 overseas databases, including fee-based links to English databases maintained by Japan's major newspapers. Also explore the extensive links at http://www.etl.go.jp/People/yamana/inet_info_e.html, a site that includes a comprehensive listing of Internet providers in Japan and their fees. If Japan's most popular commercial computer networks interest you, explore the NIFTY-Serve home page (http://www.nifty.co.jp/index.html) or jump to the U.S.-Japan Center's home page (see above) for more on commercial networks. Be aware, however, that many of Japan's domestic services require a computer that can run Japanese-language software. In addition, special browsers allow you to view Japanese-language sites from English machines. To get more on this topic, go to NTT's WWW server (http://www.ntt.jp/japan/note-on-JP/browsers.html). UPU Inc., a recruitment magazine firm, started an experimental Internet recruiting service (in Japanese only) in late March this year. Since then, some 30 companies, including Toyota Motor Corp., have offered jobs listings on the service (http:/www.iijnet.or.jp/UPU/). For an English listing of jobs in Japan and Asia, check out the job forums at http://www.asia-net.com/japan-net.html or at http://www.wpi.edu/Academics/IMS/Library/jobguide/internat.html#jap. The Internet has also prompted some local firms to set up shop overseas to combat Japan's high labor costs and connect fees. Magic Box Productions, a computer graphics creator, moved to California early this year. Says Hirobumi Ito, vice chairman of the firm: "We don't need to stay in high-cost Japan, because we can make use of graphics resources scattered all over the world on the Internet." End Story on Japan's Internet Connection.......................... It's not hard to understand why Japan's government is going online. The World Wide Web is fast becoming the premier public-relations vehicle around the globe. With somewhere between 20 million to 30 million worldwide users, the Web offers the government a simple, economical and speedy means to reach a global audience with a broad range of graphic, textual and audio information about Japan and government activities and goals. And with English the de facto "standard" language of the Web, many of the Japanese government sites reviewed below offer as much information in English as they do in Japanese. http://www.kantei.go.jp http://www.jetro.go.jp http://www.miti.go.jp/ http://www.nttls.co.jp/infomofa/ http://www.mpt.go.jp/ http://www.epa.go.jp/ http://www.sta.go.jp/welcome-en.html http://www.ntt.jp/japan/JNTO End Story on Japanese Government WWW Sites................................ Story published Nov. 1995 in International Herald Tribune) It's happening again. For the second time in the last ten years, Corporate Japan is moving offshore with the force of a tidal wave. Last year it pumped a record-high $9.7 billion of investments into Asia, a whopping 47% increase compared to 1993. Asia is now the second most popular destination for Japanese money after North America, where Japan's investments jumped 16.3% to $17.8 billion in 1994. But the pendulum is swinging unmistakably toward Asia. What was once just a trickle of regional trade, investment and production by Japan has swelled to a flood. Since 1993 the value of Japan's two-way trade flows and overall surplus with Asia have surpassed those with America. Virtually every day another Japanese firm announces plans to shift production to Asian locales, with the roster of Japanese companies in Asia now reading like a Who's Who of Corporate Japan. It doesn't take a degree in economics to understand why Japan is moving offshore, especially to Asia. First, the yen's breathtaking appreciation between 1993-95 makes it too expensive to manufacture most goods in Japan, as each round of appreciation erodes Japan's global cost competitiveness and makes neighboring low-cost Asia that much more attractive. Second, the electrifying economic growth of China and Southeast Asia has prompted nearly all industrialized nations to boost investments in the region. In surveys, business leaders worldwide say they must advance into Asia to capitalize on its booming markets and to stay ahead of corporate rivals. Sony's experience mirrors that of Japan's electronic appliance makers. Today about 80% of all color TVs, 60% of all microwave ovens and nearly half of all VCRs manufactured by Japanese makers are made outside Japan, mostly in ASEAN. Japan's own exports of electronic appliances have tumbled from ¥4.4 trillion in 1985 to ¥1.9 trillion in 1994. That's an amazing reversal. Japan's reputation as an export powerhouse was initially built around consumer electronics. Japan's automotive industry is another worthy example given its flagship role in fueling Japan's export success. In the past ten years, carmakers have ramped up their overseas production from 1.4 million units in 1985 to nearly 5 million vehicles in 1994. But unlike electronic appliance makers, most of their offshore plants are in the U.S. and Europe. That's fast changing, though. In the past two years, nearly every major Japanese carmaker has unveiled plans to drastically increase vehicle production in Asia. That will attract scores of Japanese parts suppliers to the region and boost the activities of existing Japanese subsidiaries. Toyota, for example, already makes brake pedals in Indonesia, transmissions in the Philippines, steering gear and shock absorbers in Malaysia and engines in Thailand. Altogether, it buys auto parts worth ¥16 billion annually from 10 Asian nations. Other examples abound. Camera maker Konica in May said it would increase production of copy machines in China by 50% to cope with the strong yen. Giant trading houses like Sumitomo, Nissho Iwai and Itochu are building industrial parks in Indonesia, the Philippines and Vietnam. And NEC earlier this year said it would begin making computers in China. The Ministry of International Trade and Industry reports that overseas production as a percent of total production reached 7% in 1993, up from 3% in 1986 yet far less than the U.S. rate of 26% and Germany's 15%. MITI says it expects Japan's rate to approach 9% this year. Takama Yamamoto, chairman of computer maker Fujitsu Ltd., recently told the local press that "Japan won't lose its glow for a while as long as it eagerly pursues new technologies." Others contend that Japan remains protective of its high-tech R&D and selective in what it manufactures offshore. What has emerged, they say, is a healthy division of labor that fuels growth in Asia and Japan, with Japan keeping high-tech production at home and farming out production of low-grade and mid-tech goods to Asia. Phrased differently, Japan's investments stimulate Asia's economies, creating more demand for Japan's high-tech goods. This so-called "ripple effect" has not gone unnoticed. In its 1995 White Paper on Foreign Direct Investment, the Japan External Trade Organization reports that each one-unit increase in investment in ASEAN results in a 1.85 unit increase in exports to the region. Asia, in turn, is booming in its own right. And as regional demand grows, so too does two-way trade with Japan. Now add billions of dollars in Japanese investments and ODA funding -- nearly 60% of Japan's $14.2 billion in ODA outlays in 1993 went to Asia -- and it's clear that the Japan-Asia connection is a winning combination for all. When the bubble burst in early 1991, investments fizzled. It wasn't until 1993 that the second wave of investments began, spurred in part by another crest in the yen's value. By now, however, earlier investments had passed the startup stage and entered full-scale operations. The upshot? The two rounds of yen appreciation have wrought major changes in the structure of Japanese industry. In the first round, Japanese firms set up overseas production facilities in Asia and elsewhere mostly to meet overseas demand. But in the current round, companies are boosting procurement from overseas firms and subsidiaries as well as channeling exports from overseas units back into Japan. Employment-wise, the Ministry of International Trade and Industry reports that around half of the 12.6 million people employed by Japan's overseas subsidiaries are in Asia. END "Japan Inc. Leaves Home" Below Story Published March 1996 in Focus Japan, a JETRO magazine) There's nothing surprising about these moves. After all, Japanese firms have successfully applied such strategies more or less continuously since the early 1970s to cope with the yen's prolonged ascent. But the current round of restructuring differs significantly from all prior efforts. Long-standing corporate pillars -- like seniority-based compensation and promotion -- are slowly being dismantled in favor of performance-based systems. Lifetime employment, once a hallmark of the Japanese economy, is losing ground as well. In the drive to cut costs, more and more companies are offering workers early retirement packages, transferring employees to lower-paying jobs at affiliate companies, or even trimming top-heavy management ranks. Fewer college graduates are being recruited, while bonus and overtime payments are being reduced to curb costs. Although wholesale layoffs have been avoided, Japan's unemployment rate is now at its highest -- 3.2% -- since 1953. Elsewhere, retailers are bypassing Japan's multi-layered distribution networks and dealing directly with manufacturers and importers. As a result, prices are falling to earth as Japan's long-standing retail price maintenance system begins to unravel. These and other changes add up to a fundamental restructuring of Japanese business. Change has been gradual and painful, but nearly all agree that Japan will emerge a stronger competitor in the years ahead. Fujitsu Ltd., one of Japan's top computer makers, was among the first to introduce such strategies. In 1993 it launched a merit-pay bonus system for 6,500 of its managers. In 1994, it followed up with a results-oriented annual salary system called "Spirit." More than 70% of the 11,000 managers and team leaders eligible to join did so. After the first year, some 70% of Spirit participants were rewarded with salary increases, while around 20% saw their pay decline. Company officials say they are willing to spend more on salaries whenever increases reflect improved performance. Fujitsu's goal, like that of many firms, is to boost productivity and to spur motivation and loyalty by rewarding successful employees with higher salaries. Toyota Motor Corp., meanwhile, stopped promoting managers based on seniority in January 1996. In April, the nation's largest automaker will also increase the proportion of management pay linked to performance, already at 65%. Long-standing restrictions on promotions will also be eliminated, including regulations that say employees hoping to be promoted from section chief -- the lowest managerial rank -- to the next rank of deputy manager must be university graduates with at least 20 years of service at Toyota. Nippon Telegraph and Telephone Corp. (NTT), for example, recently announced plans to eliminate 45,000 of its 195,000 jobs by the year 2000. That may sound like a small revolution in the land of lifetime employment, but in reality, only a small number of NTT employees will find themselves jobless. Workforce reductions will be achieved through attrition, early retirement programs, reduced hiring and the transfer of employees to NTT subsidiaries. Most big Japanese firms are using similar tactics. IBM Japan Ltd. and Nissan Motor Co., for instance, recently announced plans to cut payrolls by transferring employees to affiliates. Such moves are causing concern among economists, who say that affiliates and small subcontractors are already plagued with 'surplus' workers. These smaller companies, moreover, are less capable than larger ones at coping with the strong yen and weak domestic demand, especially now that Japan's firms are moving more production overseas. Itochu Corp., a top trading house, began eliminating housing and family allowances on a limited basis back in 1986 and has since moved to salaries based largely on individual ability. Takeda Chemical Industries Ltd., a leading pharmaceutical maker, began eliminating allowances for housing, dependents and managerial posts in 1993.(13) The Japanese Trade Union Confederation (Rengo) recently predicted that nationwide salaries in coming years will likely be stripped of all allowances unrelated to performance. Some firms are turning to flex-time systems. Tokyo Gas Co., for example, began a limited experiment with flex time in 1990. The program was so successful in cutting overtime hours and improving worker productivity that it is now available to more than 5,000 workers at company headquarters and branch offices. Other companies have followed suit. The nation's corporate flight has rekindled fears of "hollowing out," the notion that Japan will lose its manufacturing base and its ability to create jobs. In 1995, for instance, color TV imports surpassed domestic production for the first time. Likewise, about 60% of all microwave ovens and nearly half of all VCRs manufactured by Japanese companies are now made outside Japan. However, government and private sources say the threat of hollowing out is exaggerated, for Japan produces only 7% of all its goods overseas versus nearly 26% for the U.S. and 15% for Germany. Rather, analysts contend that a healthy division of labor is emerging -- one that fuels growth both at home and abroad, especially within Asia -- with Japan keeping high-tech production at home and farming out production of low-cost and mid-tech goods. Despite varying viewpoints, one thing remains clear. Japan is still a manufacturing superpower with formidable competitive strengths. The nation has weathered prior economic downturns and yen shocks and emerged a stronger, leaner competitor. It therefore seems likely that the current round of restructuring will yield similar results -- but not without painful choices that could unravel some of Japan's most lauded labor practices. Below Story Written for Int'l Herald Tribune, April 1996 Talk of Japan's economic decline has dominated press coverage of Japan in recent times. The yen's sharp rise, a debt-entangled financial sector, a grinding recession and five years of slumping profits have stymied growth, pushed unemployment to postwar highs and fueled social unrest. Japan is now often portrayed as an aging powerhouse, one beset with the ailments of all mature industrial societies. This diagnosis holds a kernel of truth. But in large part Japan's economic woes seem exaggerated, for recent statistics paint a picture of mushrooming economic influence -- rather than flounder, Japan appears to be growing leaner and meaner. Consider: nearly all of Japan's top firms are moving production to low-cost offshore locales and importing the goods they make there back to Japan. This is especially true in Asia, where Japanese firms are investing at record rates and where Japan's two-way trade continues to surpass its trade with both North America and Europe. Domestic production of cars and consumer electronics is slumping, but the downturn is mirrored by surging Japanese production of precisely the same goods overseas. In 1994, for example, the combined overseas production of Japan's top five carmakers surpassed their exports from Japan. Electronics giant Sony Corp. plans to make more than 50% of its products outside Japan by 1998, up from around 42% last year. And world-leading camera maker Nikon Corp. recently announced plans to boost offshore production to 75% of total production by 1999, up from the current 30%. Overseas plants still account for only 7% of Japan's total output -- far less than the U.S. rate of 26% or Germany's 15% -- so there is room for considerable expansion. But by 1993 Japan's surplus had reversed course and jumped to an all-time high of $131.3 billion despite recession at home. Even so, doomsayers insist that the current account surplus will continue to fall because of Corporate Japan's continuing offshore exodus and the inroads being made by cut-price imports thanks to deregulation and the high yen. With further declines in Japan's surplus expected, many point to a general deterioration in Japan's global economic standing. A closer look, however, suggests the opposite. Two keys to gauging the true situation are "reverse imports" -- or products that Japanese firms make overseas then sell in Japan -- and booming production by offshore Japanese plants. Cars are indicative of overall trends. Imported vehicles hit a record high in Japan in 1995, jumping to 402,608 units, up 20.9% from 1994. Reverse imports from overseas Japanese car plants accounted for 27% of that total. Suzuki and Isuzu, meanwhile, both made more four-wheel vehicles overseas than in Japan in 1995. Honda Motor Co., which meets about one-third of the world's demand for motorcycles, produces only some 20% of its cycles domestically. The situation is equally pronounced in the consumer electronics sector, where imports of foreign-made Japanese VCRs, stereos, cameras and air conditioners are approaching 50% of domestic production. Electronics giant Sanyo Electric forecasts that around 75% of the video recorders it will sell in Japan in 1996 will be produced by its overseas subsidiaries. Aiwa Co., a leading audio-visual equipment maker, now produces about 86% of its products overseas. It also procures about 90% of its parts abroad, as does computer powerhouse NEC. Offshore sales are also climbing rapidly. Sony Corp., for instance, now generates about 36% of its revenues from overseas sales. Japan's offshore exodus has been swift and striking. In early April the Ministry of International Trade and Industry announced that the value of Japan's overseas production of manufactured goods surpassed that of Japan's exports. The Ministry said that the combined sales of Japanese offshore manufacturing plants reached 41.2 trillion yen versus only 39.6 trillion yen in manufactured exports. These factories, moreover, are heavily reinvesting their profits locally, in contrast to Western competitors who repatriate much of their earnings. In contrast, corporate spending on domestic facilities remains stagnant, with major companies planning an increase of only 0.6% in 1996. As a percent of total corporate spending, offshore investments account for 46% of all outlays in home appliances, 30% in automobiles and 13% for industry overall. Further, the operating profit margin of Japanese manufacturers in Asia is five times the global average, according to a MITI survey conducted in March 1995. Other statistics provide evidence of Japan's expanding external economic clout in Asia. Of the $14.2 billion in Japan's 1993 ODA outlays, for example, nearly 60% went to Asia, where Japan outspends the U.S. by 20 to 1 in some crucial emerging markets, according to Robert M. Orr, a former U.S. aid official. Japan is not falling behind in the race for economic leadership. Rather, its companies are unequivocally expanding their footholds in fast-growing Asia and beyond. As author Eamonn Fingleton recently wrote: "The Japan economy is like a cyclist pedaling uphill, and the strains are healthy ones." End Story on Japan Takes a Licking Written for International Herald Tribune (April 28, 1996) Less than a decade ago Japan was famous for its fiscal conservatism. Today it is burdened with the largest fiscal deficit among the industrialized world. The April passage of Japan's 1996 budget will soon push the nation's outstanding long-term debt to 320.52 trillion yen ($3 trillion) -- a figure surpassing U.S. national debt and equal to a whopping 64.6% of Japan's annual gross domestic product. The reversal in Japan's fiscal health has occurred with little fanfare or opposition. Clobbered by nearly five years of recession and four consecutive years of declining tax revenues, Japan's fiscal mandarins have relied on expansionary fiscal policies to spur domestic demand and curb unemployment. Since 1992 alone, the government has flooded the economy with more than 45 trillion yen ($420.5 billion) in emergency stimulus spending packages. The economy continues to sputter, however, prompting outcries at home and abroad for more of the same Keynesian medicine. Japan's slide into the red has also gone mostly unnoticed, overshadowed by a banking crisis and graft scandals that have sparked political acrimony and public uproar. Financial and political authorities are well aware of Japan's mounting government debt, to be sure, but with unemployment at postwar highs and the economy still struggling, the issue has yet to prompt any significant national debate. More to the point, the cost of paying interest on Japan's outstanding government bonds will account for 21.8% of 1996 expenditures and 32% of estimated 1996 tax revenues. In 1995, Japan's debt payments represented around 21% of tax revenues. The comparable figure in the U.S. and Europe ranges from 10% to 18% of tax receipts. Japan will no doubt need to address its mounting long-term debt in coming years, but looming short-term problems could sidetrack the government and push the day of reckoning well into the 21st century. Take, for example, the mushrooming debt of the former government-owned Japanese National Railways. In April this year, JNR's outstanding debt hit a record 27.58 trillion yen ($257.8 billion), with the government still undecided on how to mop up nearly $200 billion of that total. The JNR debacle began in 1987, when the money-losing JNR rail system was divided into seven separate companies targeted for eventual privatization. The former monopoly's debt was handed over to the newly created state-owned Japan National Railways Settlement Corporation. JNRSC was charged with selling the land and stocks it acquired as part of the JNR split-up. But its charter expires in two years, and few expect it to raise the $200 billion needed because of the drastic plunge in land and stock prices since the bursting of Japan's bubble economy early this decade. To deal with the mess, the government may need to raise taxes or issue more deficit bonds. Two other issues are sure to gain widespread press coverage in coming months. First, liabilities from 15,000-plus corporate bankruptcies in 1995 hit a record 8.42 trillion yen ($78.7 billion) last year, says private credit research agency Teikoku Databank. Second, a looming 30 trillion yen ($280.4 billion) bad-loan crisis among nonbanks -- credit card companies, consumer loan firms and other entities who extend loans but do not accept deposits -- threatens to greatly eclipse the current 685 billion yen ($6.4 billion) taxpayer bail-out of seven defunct "jusen" housing loan companies. The Japanese government, moreover, is nowhere near being unable to pay its bills and can easily borrow enough to cover the deficit. And as the economy regains its footing, so too will tax revenues. Don't expect miracles, but consensus-driven Japan may yet find a way to deal with its fiscal problems that avoids the raucous mud-slinging political posturing of its U.S. counterparts. End Debt Story................. First Stop -- Meta Indexes |
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This brings us to the greatest flaw in current ecommerce solutions for small Japanese merchants. Almost all of the available solutions require online real-time credit card clearing. This means the ecommerce provider can charge a transaction fee and take a small percentage on each sale. This is a double whammy for small merchants, who must now pay 5 to 9 percent per sale to the credit card company plus the additional fees charged by the ecommerce provider. The percent-per-sale commission charged by ecommerce providers in Japan ranges from 0.4 percent (Cybercash) to 5.5 percent (Estore).