An Insider's comments on Japan's high tech business world

* * * * * * * * TERRIE’S TAKE – BY TERRIE LLOYD * * * * * *
A weekly roundup of news & information from Terrie Lloyd, a long-term
technology and media entrepreneur living in Japan.

General Edition Sunday, Apr 13, 2014, Issue No. 752


– What’s New — Bad Loans Propaganda
– News — Department store sales plummet 25%
– Web Content/Tech Job Vacancies — Video blogging/editing
– Upcoming Events
– Corrections/Feedback — Cheap taxes main motivation for Singapore?
– Travel Picks — Super Cheap Shopping in Osaka, Mountains of Tuna in Tokyo
– News Credits

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On Friday the Nikkei carried a feel-good article about the fact that
Japan’s top three banks, MUFG, Sumitomo-Mitsui, and Mizuho, had cut
their Non-performing Loans (NPLs) to small and mid-size companies by
13% over the 9 months from April to December 2013. The newspaper used
words like “upgrading” and “normal” a lot. When we read this kind of
“news”, a little red light goes off — government propaganda has its
own language and smell.

A giveaway of such propaganda is when the reporter has to pad the
article with a minor example of how things are improving. In the
Nikkei’s case, the example is one Tabuchi Electric of Osaka, which
luckily saw new solar business kick-in to help it recover from
previously declining electrical equipment sales, caused, no doubt,
because of drastic price competition from Chinese firms. Tabuchi was
able to record a profit in March 2013, and as a result its erstwhile
primary lender, the Bank of Tokyo-Mitsubishi UFJ (MUFG), upgraded the
company’s credit status to “normal” and gave it a JPY2bn line of

Hmmm, how nice. However, now that the Abe government has basically
spiked the solar sector with reduced Feed-in Tariff benefits and has
just this week announced that nuclear power is back, we would be
interested to see if Tabuchi can actually survive the next couple of
years on its new solar business — we bet not. In any case, the
Tabuchi example is the Nikkei’s way of implying that since the other 2
big banks had similar reductions in debt exposure, things must be
improving financially at Japanese SME companies for such rating
upgrades to be happening.

Or, in other words, isn’t Abenomics wonderful?

[Continued below…]

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[…Article continues]

Fortunately for discerning readers, the Nikkei also likes to include
numbers in its articles, and these help us get a better understanding
of what is really going on despite the hyperbole. First of all, a
reduction of 13% still leaves 87% of bad loans sitting where they were
this time last year. That pretty much tells you there is not yet a
lifting of all ships. SMEs are typically not exporters, and apart from
the 3 months prior to the April Consumption Tax increase, they all had
a pretty difficult year. Further, and what the Nikkei article avoids
enlarging on, is the fact that of the 13% problem loans reduced, only
about 4% were due to lender improvements (JPY150bn according to the

So what happened to the other 9%? Like banks anywhere, Mitsubishi,
Sumitomo-Mitsui, and Mizuho have a series of not-quite-arm’s-length
debt servicer companies, that buy the bad debts for 5%-10% of the
original loan value, then try to extract at least the purchase price
and some interest out of the company owners by more aggressive means
than their more illustrious parent companies use.

Being a delinquent debtor in Japan is tough. We recall the news a few
years ago of how a Takefuji debt collector told a customer that they
should sell an eye or a kidney to pay back their loan. While we don’t
think that the big banks’ servicing firms go quite to this length,
they do indeed go for every physical asset the former business owner
has: bank accounts, salary attachment, house, sellable art works, golf
club memberships, car, etc. This is one of the draw backs of owning a
company in Japan — you’re never really dealing in a limited liability

Another big flaw in the Nikkei article is that while there may have
been an oh-so-slight 4% improvement in the SMEs that are customers of
the big 3 banks, in fact, most SMEs never get to deal with these
brands. Looking at Mitsubishi’s 2013 Fact Book for example, it shows
that the banking giant actually cut its loans to SMEs by about 12.5%
in the last 5 years — even in the face of considerable political
pressure brought to bear by the Kamei debt moratorium and subsequent
“guidance” by the Financial Services Agency (FSA).

Instead, SMEs largely get their loans with regional regular banks and
the so-called Shinkin banks. We notice that the Nikkei article made no
effort to report the status of these financial lenders, even though as
a group they provide at least 30% more loans to Japanese companies
than do the big three. Therefore, if the SME bad loans problem for the
big 3 is being reported as around JPY2.3trn (US$22.3bn), we can deduce
the total SME non-performing loans across the country is probably
about 3-4 times that when you include the regional and shinkin banks
meaning the nation’s bad loans for SMEs may be as much as JPY10trn
(US$100bn) or more.

In reality, we don’t think there is anywhere the improvement in bad
loans that the Nikkei would have you think. Instead, the bad loan
problem is still quite large and serious, and the Nikkei’s numbers do
not include consumer bad loans and non-performing loans at large
companies. If you were to include all sectors, then the banks and
their debt servicing organs could be exposed to about JPY20trn of
potential loan defaults in the future (not including new loans). [Ed:
Are there no foreign economists interested in digging into this
subject further and carving out a name for themselves…?]

Also, let’s not forget that an NPL means the lender can’t even pay
interest on their loan, let alone the loan principal itself. So they
are either just treading water or more likely going backwards. Without
funds from somewhere, anywhere, the current re-tightening of the
domestic economy means that many of these firms, the bedrock of the
economy and main employers of Japanese workers, will eventually go
bust. You can take your pick of which future event will trigger the
failures: the next Consumption Tax increase, the lack of laborers and
other unskilled workers, or the aging CEO simply running out of the
will to keep going.

…The information janitors/


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+++ NEWS

– Department store sales plummet 25%
– Losing steam on inflation
– US Junk bonds most popular
– Nikkei stocks tank, following US
– 1m married Japanese looking for affairs

=> Department store sales plummet 25%

Everyone expected it, and it’s happening. Tokyo department stores are
reporting that sales for the first week of April have fallen about 25%
after the torrid buying of March stimulated by the increasing
consumption tax. Leading store Takashimaya has said that it still
expects a group net profit of JPY20.5bn for FY2013, but that it will
“temper its outlook for the near future”. Takashimaya said it would
use “aggressive” cost cuts to make up for the short-fall, until things
improve. ***Ed: That doesn’t sound good for the store’s employees, nor
for all the people working in other retail stores around the
country.** (Source: TT commentary from, Apr 9, 2014)

=> Losing steam on inflation

When the BOJ set 2% as its annual inflation target the FY2013
wholesale inflation rate did in fact come in at around 1.9%, the
highest rate of increase since 2008. Unfortunately the pace of
increase seems to be slowing, and the increase for March was just 1.7%
compared to the same month a year ago. This is the lowest pace of
increase in the last 9 months, and is probably another point of
impetus for the BOJ to do a new round of stimulus measures in the next
couple of months. (Source: TT commentary from, Apr 11, 2014)

=> US Junk bonds most popular

Despite their reputation for being conservative, Japanese investors
have decided that higher yield is important, and have been jumping
into a Fidelity fund that specializes in U.S. junk bonds. As a result,
the Fidelity US High Yield Fund now has JPY1.2trn under management,
compared with the previous long-running king of the hill, Kokusai
Asset Management, with its JPY1.18trn Global Sovereign Open fund.
Kokusai’s portfolio focuses on safe U.S. and European sovereign bonds,
and yields just 4.5% annually, while Fidelity investments are
currently yielding about 15%. ***Ed: Hmmm, junk bonds in the USA, just
as the stock markets are tanking — may not be a healthy long-term
trend.** (Source: TT commentary from, Apr 11, 2014)

=> Nikkei stocks tank, following US

One reason why the Japanese version of the Wall Street Journal appears
to be doing well is that Japanese investors never lose a chance to
take their cues from evening movements on the U.S. stock market, in
deciding whether to buy or sell the next morning at home. This
behavior was confirmed once again on Friday when, despite generally
good news here in Japan, the plummeting NASDAQ in the USA caused
investors here to dump stocks as well. As a result, the Nikkei 225 had
its worst trading week since the earthquake in 2011, with stocks
falling to the lowest level this year, to 13,960. One expert noted
that it wasn’t just the action on the US markets that had investors
worried, but the lack of reform effort by the Abe government as well.
(Source: TT commentary from, Apr 11, 2014)

=> 1m married Japanese looking for affairs

Who says the Japanese are sexless? Infidelity website Ashley Madison
says that after a slow start from its launch in June 2013, the site
now has over 1m people. Yes, that’s right, almost 1% of the population
and 2% of married people have signed up! The site is intended for
cheating marrieds, both men and women, and has found that 55% of
Japanese women have affairs because of a lack of sex in their married
relationship. Furthermore than only 2% of them feel bad about it —
[Ed: a reasonable indicator that they will repeat the behavior.]
(Source: TT commentary from, Apr 2, 2014)

NOTE: Broken links
Some online news sources remove their articles after just a few days
of posting them, thus breaking our links — we apologize for the



=> Are you in web content, sales, or engineering? If so, this section
is for you.


– Part-time video editors and bloggers

We are inviting applications from amateur video editors and video
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samples that have been commercially published or which have garnered a
high number of views on public video sites. The positions require
strong communication skills, availability at least several times a
month to do shooting during business hours, and strong Japanese. You
should be located close to one of the following cities: Naha, Fukuoka,
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– Bilingual account manager for major tourism portal
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Interested individuals may e-mail resumes to:




—————— ICA Event – April 17th —————–

Speaker: James Santagata, Founder and Managing Director of Career
OverDrive! and SiliconEdge.
Title: “Sick & Tired of Resume-Collecting Recruiters? Fire Your
Recruiter & Take Control”

Details: Complete event details at

Date: Thursday, April 17th, 2014
Time: 6:30 Doors open, Buffet Dinner included and cash bar
Cost: 4,000 yen (members), 6,000 yen (non-members) Open to all. No
sign ups at the door!!!!!!!
RSVP: By 4pm on Friday 11th April 2014. Venue is The Foreign
Correspondents’ Club of Japan.

——– Business Start-up Seminar by Terrie Lloyd ——–

Have you ever thought about setting up your own company in Japan? Or,
are you already running one and wondering how to move up to the next

Local Australian/Kiwi entrepreneur Terrie Lloyd, is running a seminar
for people who want to form their own companies, on May 10th, 2014.
Terrie has established 17 companies in Japan over the last 30 years,
and has a lot of experience to share about how to structure and run
your business when first starting up.




=> In TT-751 we said that the Tokyo Metropolitan Government and
Japanese government in general need to come up with a better package
of incentives than the half-hearted ones they are trying to use now. A
reader disagreed with our opinion that foreign companies consider the
following points when deciding where to put their regional
headquarters: taxes, quality of living conditions for senior
management and their families, availability of trained manpower,
quality of infrastructure, and cost of living.

*** Reader says: Taxation is not top priority in deciding the
Proximity to main markets, qualified HR, economic stability, security
and sophisticated infrastructure are important. You and I know that
nothing in Asia can offer what Tokyo does in almost every respect.

=> We respond: We can’t agree with you on the Tax versus conveniences
argument. If what you said was true, there would be tons of foreign
companies here rather than Singapore. But, no, they are all piled into
Singapore. Since Singapore is not a large market in itself, and nor is
it close to the largest markets of China and Japan, it has only one
advantage over Japan that we can see — tax. Unless you can think of
other reasons for so many companies to be based there…

HK is of course close to China geographically and linguistically, as
well as having a tax-friendly environment. These things make the
pollution worth putting up with.



=> Super Cheap Shopping in Kishiwada, Osaka
Ala Moana meets Osaka Shotengai

What happens when the Ala Moana center at Waikiki Beach and the
Shotengai of Osaka have a love child? Welcome to the world Kispa La
Park. Also known as Senmontengai, or South Gate Shopping Street, La
Park Kispa is the gateway to the south shore of Osaka Bay, between
Osaka city and the International Airport. While it is only 25 minutes
away from KIX, Kispa La Park lives in a parallel universe to the
sanitized feel of the duty free shops at Kansai or Western Japan
International Airport.

Here you meet locals who live in one of the most established districts
of Osaka, families who haven’t moved for generations. They keep coming
back to Kispa, where you can find a bargain without going to a 100 yen
shop (they have one of those here too). From authentic Japanese cotton
business shirts for less than 2500 yen, to gold medal barley shochu
spirits for less than 1500 yen, Kispa stocks everything. Check out the
heirloom kimonos, good for kids before the Shichigosan festival.

=> Tokyo’s Tuna Overkill Lunch Deal
Sashimi haven for the hungry and thrifty

Make sure to skip breakfast for the most amazing and affordable
sashimi set lunch to be found in Tokyo. Firebird is a small sushi
bistro nestled in one of the many modest buildings in the quiet
neighbourhood of Toyocho – but the food is far from ordinary. For a
mere 800 yen (USD $7.80), you can get a giant bowl of maguro (tuna)
that will satisfy any sashimi-lover’s cravings for at least a month.

This lunch-only deal has officially been dubbed maguro nosesugi don
(literally “rice bowl with too much raw tuna” – as if that were
possible!). Orders are not taken, because everyone is obviously there
for the super lunch deal. The key is to come in as small a group as
possible, because each group receives only one platter of tuna sashimi
to be shared. The shocking picture of the mountain of tuna is a bowl
for just one person. In addition to the generous portion of fresh
tuna, somewhere in the bowl is an equally liberal serving of
flavourful seasoned rice, along with 3 sides of tofu, a salad and a
bowl of miso soup. [Ed: You have to see the photo for the mountain of
tuna they serve…!]


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