Japan aims to return to Walkman glory days
STUART BRAUN

In an effort to climb back to its Walkman glory days, Japan is investing heavily in R&D, especially in its technology strongholds. But the culture may not have the same appetite for risk as its competitors and may be outpaced by more aggressive countries, experts say.

When Japan exclusively developed and manufactured Walkmans, Honda hatchbacks and Nintendos, it was set to overtake the United States as the world’s largest economy. Today, Japan continues to be a world-leading high-tech innovator. Yet in commercial terms, the competition has caught up, and is often running ahead. As the Apples and Samsungs of the world outcompete Sony and Panasonic, Japanese companies are trying to revive the country’s economic miracle.


Others argue that Japan’s declining competitiveness is less a lack of innovation than of leadership. “Innovation by itself, though mesmerizing, is worthless without productization. And productization is worthless without monetization,” says James Santagata, managing director of SiliconEdge, a Tokyo-based leadership development consultancy working with startups in Japan and the United States.

Mr. Santagata describes a number of pioneering innovations emerging from Japanese corporate R&D, such as Sony’s Location Free TV. “Yet due to corporate constraints on monetization of these innovations for fear of rocking the boat, or cannibalizing some products, they allow scrappy firms like Sling Media [U.S. producer of the Slingbox Internet TV interface] to come from behind that gobble up the market,” he says.

The Global & Mail (Stuart Braun):
Japan ranked first worldwide in ‘Capacity for innovation’ on the World Economic Forum’s 2012 Global Competitiveness Report, and second in terms of Company Spending on R&D. Is this reflected in real ongoing innovation in Japan?    

According to the "Global Innovation Barometer" survey by General Electric Co. released in March, Japan's self-assessments were the lowest among the surveyed countries. Does this surprise you in light of the WEF competitiveness report? What is causing the dissonance in these views of Japanese competitiveness and innovation?

SiliconEdge (James Santagata):
For decades Japan has been churning out innovation after innovation, some of which are both very visible and "sexy", such as today's automobiles or when Japan dominated the video entertainment and portable audio player market. Many other innovations, such as those by Toray composites, are critical albeit invisible as they are industrially rather than  consumer focused. Nevertheless, this innovation continues today.

Paradoxically, while rest of the world recognizes Japanese prowess in regards to innovation, the Japanese themselves are much less impressed by their innovations. Partly this can be explained by Japanese tendencies towards humility and introspection. Beyond this, however, much more can be attributed to the perceived (from the Japanese perspective) if not actual lack of visible let alone "sexy" innovations, primarily in the consumer space. 

By Yoshito Hori
President and Founder, GLOBIS

I attend lots of conferences. Recently I spoke at the Milken Institute Global Conference in Los Angeles and the World Economic Forum on East Asia in Naypyidaw, Myanmar.

At both events, I sensed how interested the international community is in Japan’s ongoing economic recovery—and how much they want it to succeed. Of course, the man behind the long-awaited upturn in Japan’s fortunes is Shinzo Abe, prime minister since the end of December last year.

From mid-November, when Abe launched his election campaign, he was clear about what he wanted to do: to change the whole “economic landscape” and end two decades of deflation and stagnation.

Even before he won, Abe’s platform was bold enough to get the markets moving. The day the election was called, the stock market embarked on a multi-month rise of over 60%, and the yen a 25% fall. (And those numbers are despite a hefty correction in May!) The real estate market also rose, unemployment fell and GDP growth ticked up.

Business sentiment is bullish too. In May, car company Toyota, a bellwether for Japanese industry, announced a near tripling of net profit to ¥1.3 trillion (US$13 billion). For this year, it’s forecasting profit growth of 36%, due partly to the tailwind of the weak yen.

The media has dubbed Abe’s policy package “Abenomics.” It’s a catchy phrase, but—what does it actually mean? Let me take a stab at explaining.

Abenomics consists of three core elements, nicknamed the “three arrows.”

The first arrow is an aggressive monetary policy. Abe appointed Haruhiko Kuroda, former president of the Asian Development Bank, as governor of the Bank of Japan in March. Kuroda has set a target of achieving 2% inflation and doubling the money supply within two years.

Abe’s second arrow is a proactive fiscal policy, consisting of a ¥10 trillion (US$100 billion) public works package.

Meanwhile, the third arrow is a growth strategy. Structural reforms in Abe’s sights include everything from increasing women’s share of leadership positions to 30% by 2020 to joining the Trans-Pacific Partnership (TPP), a 12-country free-trade agreement that should drive trade liberalization and deregulation inside Japan.

Far from frightening the electorate with this flurry of policies, Abe has maintained a support rate of around 70%, an astonishingly high level. (By contrast Barrack Obama stands at a lowly 45%!) Anyone who’s visited Japan since Abe’s election can sense that “change is in the air.” I genuinely believe that the mindset of the Japanese people is becoming more positive.

As well being the dean of a business school, I chair a venture capital fund. That gives me a ringside seat on the Japanese economy. “Animal spirits” are very much in evidence. We’ve done two IPOs for Internet-related companies this year. In both cases the price tripled or quadrupled on the first day of trading. Japanese investors are also lining up to invest in our fund, where previously 80% of our money came from non-Japanese investors.

Tokyo Professionals will hold a business networking event on Tuesday, July 30th, 7:00 PM at the Conrad Tokyo in Shiodome in the 28 Lounge (28th Floor).

Please RSVP for the next edition at: http://tokyoprofessionals.net

Thank you so much for your continued support and we hope to see you July 30th.

平成２５年（２０１３年）7月30日　東京コンラッドホテルにて次回東京プロフェッショナルズのビジネスネットワーキングを開催いたします。是非ご来場の上、楽しい夜をお過ごし下さい。

本ビジネスネットワーキングは東京における様々な企業および専門事業に関わるビジネス人との交流を深めることのできる素晴らしい機会です。また、この フォーラムは国内外ビジネス人との交流を発展させるばかりでなく、新規の顧客に巡り会う良い機会にもなるでしょう。 東京プロフェッショナルズはこれまで多数のネットワーキング行事を開催し、皆様方のビジネスを成功させる原点となってきました。東京でのビジネス社会進出 及び発展にこのフォーラムがお役に立つと確信しています。

7月30日（火曜日）19:00, 優雅な東京コンラッドホテル(２８階２８ラウンジ於)に是非御参加ください。東京で最も人気のあるビジネスネットワーキングフォーラムで多数のビジネスマンとの会話を楽しみながら東京湾の夜景 も存分にお楽しみいただければと思います。

御予約と御問い合わせはこちらをクリック： http://tokyoprofessionals.net

Sincerely,

Dwayne Wayne
Tokyo Professionals
Business Networking Events Team

SINGAPORE--Hiroshi Suzuki is one of a handful of Japanese executives who have given up on Japan as a base to conduct global business operations and opted for a more cosmopolitan setting.

Suzuki is president of optical lens and eyeglass maker Hoya Corp., which is listed on the Tokyo Stock Exchange’s First Section and headquartered in the capital’s Shinjuku Ward.

Yet, he moved a major part of his business to Singapore, figuring that access to on-the-ground information and other opportunities would enable him to better steer the company.

For the past year and a half, Suzuki has spent more than half of any month in Singapore.

“What a president should do is develop a strategy on how to allocate funds and personnel to businesses with higher growth potential,” he said. “I have better access to information required for such responsibility outside Japan.”

Suzuki, 54, has a long-term contract on a residential floor of an exclusive resort hotel on Sentosa Island and commutes to his office in the business district in central Singapore.

Suzuki returns to Japan mainly for Hoya’s 10 board meetings a year. He consults with representatives of company divisions once a month, either at a meeting outside Japan or through a teleconference.

“From our factories and workers to our customers and rivals, everyone is based outside Japan,” Suzuki said. “I considered relocating our headquarters abroad, but I decided that I would go out first.”

Five of Hoya’s seven board members are from outside the company. The remaining two, Suzuki and Kenji Ema, chief financial officer, are both based overseas.

Ema, 65, set up the company’s financial headquarters in the Netherlands in 2003 and works out of the country.

In late April, Suzuki and Ema met at Hoya’s headquarters in Tokyo and discussed dividends and other issues for an hour. They soon left Japan for their respective bases.

“If we have something to discuss, we can communicate via e-mail and other means,” Suzuki said. “We do not have to get together.”

Sunstar Co., whose main business is health care products, operates its global headquarters in Switzerland.

The company chose Switzerland to change the way its employees view the global business environment.

“How will the world look like if we see it from Switzerland, not from Japan?” a Sunstar official asked.

Sunstar Group Chairman Yoshihiro Kaneda recently moved his base for business to Singapore to expand the company’s Asian operations. He rarely returns to Japan.

The company has no plans to place Japan, whose market is shrinking, at the center of the group’s operations.

A growing number of Japanese companies are relocating some of their headquarters functions or their business divisions abroad.

There are 60 such companies in Singapore alone, including Panasonic Corp., trading house Mitsubishi Corp., shipping company Nippon Yusen KK and chemicals producers Mitsubishi Chemical Holdings Corp. and Mitsui Chemicals Inc.

Mitsui Chemicals moved a division in charge of sophisticated resins two years ago. It has a production base in Jurong Island, which hosts a number of petrochemical complexes.

Atsushi Komoriya, president of Mitsui Elastomers Singapore Pte., a local subsidiary, said: “Everyone is here, from U.S. chemicals giants with which we compete for market shares to automotive manufacturers to which we supply our products. The basic rule is to do business close to where there is business. It will take too long if we stay in Japan.”

At Hoya, Suzuki and Ema have discussed where each business operation, such as production, sales and research and development, can be conducted most efficiently.

The company moved its eyeglass division to Thailand in 2009 and later relocated its hard disk division to Vietnam and its intraocular lens division to Singapore.

“When it came to whether we can choose Japan as the best place to do business, our conclusion was that we have to choose elsewhere for most operations, such as finance and strategy planning,” Ema said.

A key goal for Hoya’s Dutch-based financial headquarters is to minimize tax payments, drawing on different taxation systems around the world.

In the year ended March, Hoya’s group-wide effective corporate tax rate had fallen to 20.3 percent, compared with 35 percent in Japan.

Hoya concentrates earnings at regional headquarters in countries with low corporate tax rates or at manufacturing companies in Asia and elsewhere where tax burdens are relatively low.

Ema said U.S. and European shareholders consider taxes as business costs and do not invest in a company unless it reduces tax payments at least to levels of Western companies.

“Companies have no choice but to adapt themselves to the environment,” he said. “We are in an era when companies can choose a country where they make products, employ workers and pay taxes.”

SINGAPORE FACES PROBLEMS

As part of its strategy to bolster economic growth and increase tax revenue, Singapore has sought to attract foreign companies, top-level engineers and wealthy people from around the world by offering them an environment in which they can operate freely.

Its corporate tax rate of 17 percent is among the lowest in Asia. An even lower rate applies to regional headquarters and financial centers set up by foreign companies.

Entrepreneurs and wealthy individuals who transfer a certain level of assets to Singapore are granted permanent resident status and exempted from inheritance tax.

However, the influx of foreign companies has caused office rents in central Singapore to double compared with a few years ago. Real estate prices have soared beyond the reach of residents.

Prices of automobiles and other products have risen more than wages. Real income has fallen, hitting low-income earners particularly hard and widening the wealth gap.