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.

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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.

By James Santagata
Principal Consultant, SiliconEdge


In recent years, much has been written about entrepreneurship and the "Silicon Valley" startup or new venture philosophy and framework.

In turn, many companies and countries have attempted to mimic or emulate this successful Valley model (although previously I've questioned the true success of the Valley model as it's a "Stacked Model" focusing on "Brute Force Human Wave Attacks" reminiscent of the Korean War). 

Regardless of the efficacy of the Valley model, it would still greatly behoove us to ask and investigate if there are perhaps any other viable or proven models, methodologies or frameworks available that we could borrow from and draw upon And if so,exactly what are they and how do they work?

One of the other highly vibrant and extremely dynamic startup centers, both in terms of raw numbers of startups and subsequent success stories, is not only in Israel, it is Israel -- which in turn has lead to Israel being dubbed the "Startup Nation".

What is most fascinating about the "Israeli model" is that it often takes a much different approach and has a very different flavor than the Valley model and yet it has produced dozens upon dozens of very successful startups in the high-tech space.

To tap into this wealth of knowledge and alternative startup methodology, Professor Kenneth Grossberg, Professor & Director of the Waseda Marketing Forum at Waseda University, has developed and lead the very innovative Startup Nation, Israel Study Tour which is now in its third year.

This study tour offers a unique and unparalleled opportunity to learn more about Israel’s extraordinary and arguably world-beating startup-nurturing environment.
 
Inspired by the NY Times bestseller Startup Nation, this trip open doors and pulls back the curtain to places not generally open to the general public as it teaches how a small country in a challenging environment has grown more companies listed on NASDAQ than any other nation in the world except the US. 

Through this unique opportunity to learn about Israel’s remarkable R&D and venture capital infrastructure you'll find ways that can then be applied back in one's own organization.

For more information, click on the button below:

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.

Japan's benchmark Nikkei 225 trimmed its losses after plunging as much as 6 percent on Thursday in a vicious sell-off after the yen rallied over 1 percent against the greenback.

Uncertainty over central banks rolling back stimulus saw the dollar/yen drop below the key 95-handle, hitting a new 10-week low. The Nikkei index is now down 21 percent from last month's five-and-a-half-year high of 15,942, placing the benchmark index firmly back in bear market territory.

Elsewhere in Asia, Chinese markets experienced a bout of heavy selling with theShanghai Composite down over 3 percent after being closed since last week. Seoul shares fell over 1 percent fell to a new seven-week low and Australia's S&P ASX 200 hit a fresh five-and-a-half-month low.


Markets in emerging Asia also extended losses as capital flows continue to exit emerging market equities. Philippine's benchmark index slumped 4 percent and Indonesia's Jakarta Composite fell 2 percent

Central Bank Jitters

Nagging worries about the Federal Reserve tapering its bond-buying program and disappointment from the Bank of Japan's policy inaction at its Tuesday meeting have roiled global equity markets in recent sessions, leading the Dow Jones Industrial Average to drop for a third session in a row on Wednesday.

"We are seeing the first signs of a lack of confidence in the ability of central banks to control the interest rates, to stimulate inflation, and real GDP [gross domestic product] growth rates," said Viktor Shvets, head of strategy research, Asia, at Macquarie.

By HIROKO TABUCHI
Published: May 22, 2013

TOKYO — The Bank of Japan stood pat on monetary policy Wednesday amid market jitters over volatility in bond markets, which has threatened to undermine the country’s battle to end deflation and stimulate growth in the giant economy.

In a unanimous vote, the bank’s board stuck to its strategy of expanding the monetary base at an annual pace of 60 trillion yen to 70 trillion yen, or $585 billion to $682 billion, through purchases of government bonds, commercial debt and other assets. Those moves pump money into the economy.

After the central bank’s meeting last month, it unleashed what analysts have dubbed a “shock-and-awe” monetary policy, a sea change for a bank that had come to be known in recent years for its caution and conservatism.

Under its new governor, Haruhiko Kuroda, the Bank of Japan has gone all-out to fight deflation. Declaring he would do “whatever it takes” to combat falling prices, Mr. Kuroda last month announced that the bank would seek to double Japan’s monetary base, as well as the bank’s holdings of Japanese government bonds, by the end of 2014. The aim of such a policy is to keep interest rates low, prompting consumers to spend and businesses to invest in growth and jobs.

In recent days, however, worries have grown about rising interest rates in the government bond market, which could threaten Japan’s monetary policy. Japan is vulnerable to rising borrowing costs because of its high public debt, which is twice the size of its economy. Bonds are also the main financial asset held by banks, pension funds and insurance companies, making a surge in debt yields perilous. The biggest concern for the central bank is volatility in the bond market, where yields are still above levels marked before its meeting last month, Cameron Umetsu, a strategist at UBS, said in a note published ahead of the decision Wednesday.

“This can be viewed as one of the ‘unintended effects,’ which, if sustained, could dilute the effectiveness of the new quantitative and qualitative easing framework,” he said.

The scale of Japan’s quantitative easing is striking. Assuming that the Japanese economy grows by 2 percent a year, the Bank of Japan would expand its assets to just under 60 percent of the country’s gross domestic product, according to estimates from CLSA Asia-Pacific Markets. The U.S. Federal Reserve’s assets, which now total about 20 percent of the American economy, and the European Central Bank’s assets, which come to about 28 percent of the euro zone’s G.D.P., pale in comparison.

Japan stands out in another important way. Under Prime Minister Shinzo Abe, who took office in December and has been the main champion of the bank’s new audacity, Japan is coupling its monetary push with heavy government spending, contrary to calls for austerity in the United States and Europe.

Author: Edward Hugh

The future never resembles the past – as we well know. But, generally speaking, our imagination and our knowledge are too weak to tell us what particular changes to expect. We do not know what the future holds. Nevertheless, as living and moving beings, we are forced to act. – John Maynard Keynes

Discussions of the population problem have always had the capacity to stir up public sentiment much more than most other problems.
- Gunnar Myrdal

Last Thursday the yen broke through the psychological threshold of 100 to the US dollar. On Friday the slide continued (see chart), even dropping very close to 102 to the USD at one point before strengthening slightly on the run in to the G7 finance ministers meeting.  

The ostensible source of the sudden shift was a news release from the Japanese Ministry of Finance detailing the fact that Japanese investors bought a net total of 514 billion yen ($5.2 billion) in foreign bonds during the two weeks to May 3. Speculation had been rife that Japanese money funds would start to respond to continuing yen weakness and low Japanese yields by investing abroad. It is still far from clear that this is really going to happen in the short term, but nonetheless the news was sufficient to spark bets on more yen weakness.

Naturally the fall has drawn comment, especially during the run up to last weekend’s G7 meeting. US Treasury Secretary Jack Lew told CNBC that while Japan had “growth issues” that needed to be dealt with its attempts to stimulate its economy needed to stay within the bounds of international agreements to avoid competitive devaluations.”I’m just going to refer back to the ground rules and the fact that we’ve made clear that we’ll keep an eye on that,” he said in a comment that was widely seen as drawing a red line in the sand.

But really, what else do external observers expect? On 4 April Bank of Japan governor Haruhiko Kuroda announced he was going to increase the money base by 1% of GDP per month for the next two years. That is to say Japan’s monetary expansion will be incremental and continuous. Kuroda has even stated he will continue to increase the money base beyond the initial 24 months if the targeted inflation doesn’t come. It was always clear that the country was going to have a difficult time trying to generate inflation and that one of the knock-on consequences would be to continually weaken the yen. So you can’t realistically expect him to turn round and say now, “sorry, we didn’t know it would offend you so,  I’m cancelling the policy”. Anyway, that move would throw financial markets straight into turmoil. Didn’t they understand what they were signing up to when they accepted “Abenomics” at the last meeting?

Obviously there is still a considerable amount of confusion around about what exactly Japan’s problem is, and what the policy is trying to achieve. I have tried to examine the more theoretical background to the problem in my  A-b-e of economics post, but looking through the comments to that piece I realised that I was very tightly focused on one, examining only one aspect of what has come to be known as Abenomics, the inflation targeting component and its theoretical justification. Since ideas about what exactly it is the Japanese government is trying to achieve seem to be many and various, I thought it might be worth coming back and taking a second look at the experiment.

Three Arrows Into The Sunset

The aim of Abenomics is obviously to shake Japan out of its deflationary lethargy and return the country’s economy to a more pronounced growth path. In order to achieve this Japan’s Prime Minister has notoriously identified three policy arrows, or transmission mechanisms:

1) Aggressive monetary easing

2) Strong fiscal stimulus

3) An extensive programme of growth enhancing structural reforms

Achieving the inflation target is effectively the key objective of the first arrow, and weakening the yen is basically the transmission mechanism which achieves the objective. In fact while we have heard a good deal concerning the first two arrows, there is still relatively little on the table regarding the third one, as some commentators have started to wryly note.

By COLUM MURPHY
SHANGHAI--Nissan Motor Co. 7201.TO -0.39% is considering a new plant in North America to produce at least 100,000 of its premium Infiniti vehicles a year, likely starting in 2017 as the auto maker fans out production globally from Japan.

"One of the challenges we face is that we really do not have a diversified geographical footprint for manufacturing," Infiniti Motor Co. President Johan de Nysschen said Sunday.

Apart from producing one model in the U.S. for global consumption, the Infiniti brand's current production was "totally concentrated" in Japan, he said.

But that is changing. In May 2012 the company announced plans to produce two Infiniti models for the Chinese domestic market in Xiangyang, Hubei province, with Nissan's local partner, Dongfeng Motor Co. Mr. de Nysschen said more details will be announced around the Shanghai auto show, which officially starts April 21.

In addition, premium compact models for the global market will be produced at Nissan's Sunderland plant in the U.K. starting in 2015.

Nissan has been the most aggressive of Japan's Big Three auto makers to shift production outside of the country during recent years. That stems from an effort to lower Nissan's exposure to the yen, make more cars in the markets where the company sells them, and adjust to the rapidly shrinking Japanese vehicle market.

The yen has weakened against the U.S. dollar recently, but only after a run to a strengthening to a record level in October 2011. A strong yen hurts the price competitiveness of Japanese exports and reduces the value of profits earned abroad when they are returned home.

Today SoftBank Capital, the NY-based venture arm of Japan’s largest wireless provider Softbank Corp., has strengthened its ties to Japan even further, announcing that Yahoo! Japan will be injecting $20 million into SoftBank’s early-stage Technology Fund ’10.

early-stage companies who need funding to more mature companies looking to expand into new markets. Yahoo! Japan’s investment will be an addition to the $100 million early-stage fund, which is a complement to the freshly announced PrinceVille fund.

SoftBank announced the $250 million PrinceVille fund back in January, which was aimed to help U.S. markets expand into Asia using SoftBank’s extensive (and growing) network of mentors and partners.

Yahoo! Japan is the largest web portal in Japan and one of the country’s largest e-commerce platforms, and it’s interested in learning more about innovation happening in the United States, with particular focus on social. According to Joe Medved, partner at SoftBank Capital, Yahoo! Japan’s presence in Japan is overwhelming, especially in the quickly evolving mobile landscape.

“Social networking services in Asia tend to be very home grown, but Facebook and Twitter have taken over as global social platforms,” said Medved. “Yahoo! Japan wanted to understand the U.S. market.”

Alongside the new investment from Yahoo! Japan (which, remember, is a separate entity from Marissa Mayer’s ship here in the U.S.), Yahoo! Japan is sending Toshiaki Chiku, the new head of U.S. operations, over to NY where he will work directly with SoftBank Capital to oversee investments and partnership deals.

According to the official press release (via Nielsen), Yahoo! Japan reaches 80 percent of Japan’s internet users through its various web portals and services. Not only will Yahoo! Japan get a clearer window into the U.S. market, but companies looking to tap into the fast-paced Asian market will have a solid Goliath-style partner in Japan to back them up.

Specifically, SoftBank and Yahoo! Japan will be looking to invest in mobile, social, ecommerce, online advertising, gaming, and cloud computing spaces. Obviously, each one of these markets is chock-full of prime options, but SoftBank seems to have a mind for taking on big winners.

The firm’s previous exits include BlueFin Labs, which was recently acquired by Twitter, BuddyMedia’s acquisition to SalesForce.com, Huffington Post’s acquisition by Aol, and Zynga’s acquisition of OMGPOP.

The number of teachers hired for the Japan Exchange and Teaching Program would be doubled in three years under a proposal drafted by the ruling Liberal Democratic Party to boost Japan’s global competitiveness and nurture international talent.

According to the draft of a midterm report by the LDP’s economic revitalization headquarters obtained Monday, the number of JET teachers would be increased to 10,000 from about 4,360 in 2012. The teachers also would be dispatched to all elementary, junior high and high schools within 10 years.

The JET Program was targeted for wasteful spending by the Democratic Party of Japan’s “shiwake” government revitalization unit before the young party was kicked out of power in the Lower House election in December.

The LDP views the use of native English speakers as vital to improving English-speaking ability at a time when it is moving toward making a passing score on the Test of English as Foreign Language mandatory for entering and graduating from college.

The proposal is in line with the growth strategies Prime Minister Shinzo Abe mapped out last Friday ahead of the July Upper House election. The strategies include globalizing the Japanese workforce and increasing the number of women in it by extending the length of maternity leave to three years from 18 months.

The proposal will be part of Abe’s real basic economic policies, which are being compiled by the Council on Economic and Fiscal Policy for release in June — just a month before the House of Councilors election in July.

The last time Masao Namiki bought machinery for his company, Emperor Hirohito had just died, Japanese investors took the Rockefeller Center as a trophy, and a new central bank chief was about to prick the bubble economy. It was 1989.

The $1 million Namiki borrowed to outfit his workshop with computerized lathes and drills almost bankrupted him as orders from clients Canon Inc., Panasonic Corp. and NEC Corp. evaporated. As interest rates cranked up to 6 percent, crashing stock and land prices wiped out $15 trillion in wealth and triggered an economic malaise that still drags on.

The bubble, and the five recessions since, help explain why business owners like Namiki aren’t buying into investor euphoria over new Prime Minister Shinzo Abe’s campaign to end deflation. Even after the steepest five-month slide in the yen for 18 years made global companies like Toyota Motor Corp (7203). more competitive and Japan the world’s best-performing major stock market, Namiki said he’s still not ready to invest.

“If we had the orders I’d think about adding equipment, but right now the work’s just not there,” the 72-year-old said at his small factory in Tokyo’s Ota district, where he and a handful of employees have made thousands of steel molds for phones, stereos, and keyboards. “The manufacturers are still in wait-and-see mode.”

The reluctance to borrow and spend of companies like Namiki’s that don’t operate abroad and make up the bulk of Japan’s economy is the biggest threat to Abe’s plans, said Nomura Research Institute Chief Economist Richard Koo.

‘Bottleneck’“The greatest bottleneck in the private-sector economy today is the lack of private-sector borrowers,” said Koo. “That comes from the fact that they went through this balance- sheet correction for the last 20 years. Americans went through the same thing in the 1930s, and many who lived through the Great Depression never borrowed again.”

Japan’s trauma was greater still, Koo said. The wealth lost was three times gross domestic product. The U.S. crash cost a year of 1929 GDP. And just when Japan was showing signs of recovery, the 2009 global financial crisis hit. Then came the 2011 tsunami. After all that, the Nikkei 225 Stock Average is two-thirds off its 1989 peak. Land is cheaper than in 1981.

To jump start investment, Abe and his handpicked Bank of Japan governor, Haruhiko Kuroda, said they will double the money circulating in the economy to drive inflation to 2 percent within two years, remove structural barriers to growth and add fiscal stimulus with tax cuts and other incentives.