By Ken Charles
Founder of the Tech Industry team at Apex,

Despite having the world’s third largest economy, Japan’s social media ecosystem is perhaps the most unique in the developed world — and among the most difficult for Silicon Valley to understand, let alone capitalize on.
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It’s a semi-enclosed greenhouse where Facebook flounders behind Twitter, and where LINE, a social network dominated by cartoonish stamps, rules. So with help from my local colleagues here in Tokyo, here’s the latest user data on Japan’s leading social networks, expressed in five key takeaways everyone in the Valley should know:

By James Santagata
Principal Consultant, SiliconEdge
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Can we be honest here?

The fact is, Japan's Abenomics is really just another name for Kruganomics.
And it's an abject failure, carried on the backs of the citizenry.

We've talked about this in excruciating detail before -- that of Abe's so-called "Three Arrows"​, the only arrow that was needed was the structural reform arrow -- The other arrows such as the devaluation of the yen would have come naturally as Japan's current account was depleted due to the abject failure of TEPCO to the run their nuclear power plants safely and prudently, results in the massive importation of oil and natural gas.

With the loss of these nuclear power plants, it should have been obvious that surging oil imports would sap Japan's trade balance, taking the Yen lower yet again... and all of this would have happened naturally.

As this slow motion train wreck was unfolding, the Bank of Japan stepped in to further goose the process and in a very short while, we went from approximately 79 Yen to 1 USD all the way down to 123 Yen to 1 USD  - an effective Yen devaluation of 55.7%!

At the same time, Abe ushered in (or to be far, simply allowed that which had already been scheduled) a massive consumption tax increase from 5% to 8%.

Now, the average man in the street and other mathematically challenged individuals actually believed and still believe that this was only a "3%" consumption tax increase rather than the full 60 percent increase that it was (8% current tax- 5% former tax = 3% delta; then 3%/5% = 60% increase).

Oh, and it should be fun watch the next installment of the consumption tax increase because to the man in the street, it's just a minor 2% increase -- from the now current 8% consumption tax to the scheduled 10% -- although, those with basic math skills can tell you it's actually a 25% consumption tax increase on top of the 60% increase before that, oh, and that's also on top of the 55.7% devaluation of the Yen.

In effect, all that Kruganomics, err, Abenomics has done is to shift the failure of an ossified, rent-seeking, export-culture onto the backs of domestic consumers and small business owners.

The smart move for Japan, then and now, would be to drive the yen lower against the dollar (that is, to strengthen the yen) and force the ossified firms to compete (such as enticing them to acquire overseas assets and IP with the strong yen) and evolve....or do nothing or do something but fail to execute effectively and die.

Yes, that's right die -- to have these ossified corporations die an inglorious death but be composted for the good of the markets and Japan all while reforming the labor markets (labor mobility, employment at will, etc.) the capitals markets and tax rates so that small business and solo entrepreneurs could easily accumulate sufficient capital and simply form their ventures without the need for large amounts of capital or expensive tax advisers.

And that is the arrow Abe never fired.
In fact, that's the arrow which he never will.

Unsurprisingly Japan has slipped back into recession although the severity of and solution to remedy the recession greatly by publication.

From the Taipei Times, a rather realistic view:
​Troubled Japan returns to recession.
​FALTERING POLICY:Japan’s ‘Abenomics’ program has lifted the stock market and lowered the value of the yen, but failed to raise incomes or spur sustained growth

So far, his “Abenomics” program, centered on aggressive stimulus by the central bank, has lifted the stock market, lowered the yen’s exchange rate — a boon for multinational companies like Toyota that earn a lot of revenue outside Japan — and helped curb persistent consumer-price deflation.
However, it has struggled to approach its ambitious goals for lifting incomes, spending and investment.
Sadayuki Sakakibara, chairman of the Japan Business Federation, or Keidanren, the nation’s most influential corporate lobby group, called for further official measures to support the economy. Abe’s government is working on a possible new spending package, according to Japanese media reports, which is expected to be worth about ￥3.5 trillion (US$29 billion).

More about Japan's Recession from the Taipei Times

From Fortune magazine:
Japan Is Back In Recession Again
Japan joins the Eurozone in feeling the chill from China.

 The yen had initially fallen 20%, boosting exports and business sentiment. BoJ Governor Haruhiko Kuroda doubled down on that bet last year as the economy weakened in the wake of a big rise in taxes, but the yen barely reacted the second time around, and Kuroda pointedly refused to add to the current asset purchases of 80 trillion yen ($65 billion) a month last month as evidence of the slowdown increased.

​More about Japan's Recession from Fortune magazine

By James Santagata
Principal Consultant, SiliconEdge


What Is The Impact of China's Market Implosion & Yuan Devaluation on Japan?

With China's stock market still imploding it will be interesting to see the subsequent impact on Japan's economy --- in both the short-term and long-term.

Will China's economic implosion kill off the huge influx of Chinese tourists and cash which they freely spend in Japan, especially in the ritzy areas of Tokyo and Ginza?

Will the Chinese stock market rout lead to even more Chinese parking their money into Tokyo & Japan real estate as a safe haven (from both future yuan devaluations and capital controls or confiscation)?

Or will margin calls and other liquidity needs see them yanking their capital out of the Japanese real estate market (and the world real estate market for that matter)?

The successive Chinese devaluations of the yuan coupled with their stock market melt down is contributing to the recent strengthening of the yen as a reaction to the market uncertainty as well as a perceived flight to safety. 

But it will probably be short lived.

Why?

Because Japan is in the midst of a massive but quiet transformation. Japan's corporate cultures and HR departments are now being transformed. High-quality Gaijin are coming on board, often bringing foreign market knowledge and a window into those markets. 

These Japanese corporate transformations also include finally looking outward from the Japanese domestic market -- to foreign markets. And these transformations include everything from overseas sales processes, to M&A to rebooting or restructuring existing foreign-based business entities. 

But it's all under the surface and not readily evident from afar or from the outside.

This current downward pressure on the Chinese yuan and Japan yen will also surely preclude the United States Federal Reserve Board (FRB) from raising rates -- though the likelihood of the FRB every raising those rates in the short term was always very doubtful from the start, but now the FRB has the perfect, ready-made excuse not to do so -- It's all China's fault, don't ya know.

Instead, Chinese yuan & Japanese yen devaluations will be used as an excuse for the US Federal Reserve Board to continue with QEx. 

But how long can this go on before inflation skyrockets in America?

A smart move for Japan during this coming Great Recession is to focus on Factory, Restaurant and Office Automation -- FRO Automation -- for the win!

Once again, Waseda University in Japan has announced their annual Startup Nation Tour of Israel.

By James Santagata
Principal Consultant, SiliconEdge

One of the most frequent questions I get about Japan, from friends, family and even business associates and clients, is related to what living in modern Japan is really like. 

And by this I mean, not what's experienced during the initial honeymoon period of a few months or even a few years but what's experienced as a long-term, integrated resident.

There are just so many myths, memes, misunderstandings and misconceptions that it's hard to cut through or address all of them.

Well, if you must know, living in modern Japan today is like living in 1950's America with all the good parts but without the apartheid.

It's like living in 1920's Paris but without the poodle poop everywhere and high-nosed attitudes.

By James Santagata
Principal Consultant, SiliconEdge


Japan is like a supertanker laden with oil.

It's very valuable but its contribution is often underappreciated or even unappreciated.

It's slow to turn, hard to maneuver but it's buoyant and true.

And once it gets moving and its course is set you better get out of its way. :)

By James Santagata
Principal Consultant, SiliconEdge


That Japan like any country, be it developing or developed, has her share of problems is not in the least bit surprising or at least it shouldn't be.

However, what has surprised me over the years is how many foreign "Japan watchers" and "Japan pundits" always seem to miss the crux of what's really going on on the ground in Japan and more importantly what's going on in the mind of the Japanese.

...
...
With that said,  there is another popular myth and meme that comes up regarding the lack of Japanese startups and that is the idea that the Japanese have an almost in-born fear of failure.

I'm not here to argue that Japanese don't have a fear of failure because they do. We all do. Just as most other peoples around the world do, including those in the US and even including those working in Silicon Valley.

People fear failure. 

But to hear the pundits tell it, "Japanese need to get over failure and embrace it". These pundits act like the fear of failure in Japan is simple a psychological construct* like it is in parts of the West like in the US.