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, September 13, 2015, Issue No. 819

– What’s New — Laox Rides a Chinese Rollercoaster
– News — Child poverty one of worst in OECD
– Upcoming Events
– Corrections/Feedback
– Travel Picks — Historic house in Kumamoto, Beautiful ryokan in Shimane
– News Credits

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While the world stock markets have been roiling over economic
uncertainty in China, there is a microcosm of the rollercoaster ride to
be found in a company based here in Japan — an fast-growing electronics
retailer called Laox. By “microcosm” we mean that if you take a look at
the Laox stock price over the last 6 weeks, since just before the August
24th “Black Monday” on the Chinese stock markets, you will see that
their shares have moved almost 40% from the top (JPY524 on Aug 14th) to
bottom (JPY324 on Sep 8th), then recovered by 20% in just the last 3
trading days. If we were a day trader, this is one stock that would be
fun to play with.

The main reason Laox has seen such highs and lows lies with the fact
that the company’s own fortunes are deeply entwined with the economics
of China. Laox’s largest shareholder since 2009 has been China’s largest
electronics retail chain, Suning. Laox’s CEO is Luo Yiwen, a savvy
Chinese national with more than 20 years experience in Japan. And most
importantly, about 80% of Laox’s customers are Chinese tourists, who
pull up by the bus load to pile suitcases with electronics goodies to
take back home. In fact, looking at Laox’s own numbers, it appears that
up to an amazing 62% of ALL Chinese tourists coming to Japan may shop at
a Laox store. This shows what an awesome marketing machine Laox has in
China and the quality of the ties it has with Chinese tour agencies.

The China connection has been good to Laox. Even though the company does
less than 1/30th of the revenues of industry leader Yamada Denki, a
Chinese newspaper noted in June that the retailer had become the largest
Duty Free store chain in Japan. Furthermore, while leader Yamada Denki
has seen its profit drop dramatically in the last two years mostly due
to the increase in consumption tax and falling discretionary spending by
Japanese, Laox in contrast has seen its profit soar 570% in the last 12
months, and in so doing has hit its highest profit level since the
company went public in 1999.

So it’s fair to say what happens to China happens to Laox.

———- New Service: Foreign Tourist Surveys ———–

If your company is producing, selling, or supporting fashion, food, or
high-end consumer goods, then probably you are selling a high percentage
of your products to visiting foreign tourists. Wouldn’t you like to know
what these buyers actually think about your brand and those of your
competitors? Japan Travel KK is proud to announce the successful
trialing and now launch of its new Inbound Physical Survey service. Our
experienced survey personnel, in conjunction with leading retail
partners (who provide us with legal polling venues) can interview 100s
of tourists in surveys of up to 20 questions. This is NOT an unqualified
online survey service of “maybe” tourists, but rather a physical, proven
set of interviews with real tourists in real retail environments.

For inquiries, email us at:

[…Article continues]

This point hasn’t been lost on shareholders, and in a July Credit Suisse
report, the company responded to an investor concern about
over-dependency on Chinese tour groups, by saying that it is now
appealing to Chinese FIT travelers as well. We find it refreshing that
the company doesn’t bother to deny its over-dependency on Chinese
tourists in full, but sees that tour groups are just one segment of a
rich market. Given the amazing numbers that they are doing, we suppose
no one is too bothered by this simple fact. Still, if the Senkaku
Islands dispute were to re-emerge, we’d be quick to short the stock for
a while.

Laox has an interesting recent history. After going public in 1999, it
got caught out by competitors in the early 2000’s and was essentially
bought out for cents on the dollar by a private equity fund called MKS
Partners. Some readers may remember the erstwhile Nobuo Matsuki who ran
the fund. Nice guy. Anyway, MKS was unable to pull Laox out of its deep
funk and essentially called it quits several years later. In 2008 after
7 straight years of losses, a fund called Milestone Turnaround
Management took over sponsorship of Laox and just one year later
Milestone was fortunate enough to sell its stake to Suning of China.

At the time this deal was done, the Laox sale was one of only three
private equity backed Japanese firms to be sold to an Asian strategic
acquirer. Perhaps in another period, the image of a Chinese company
acquiring a venerable (80-year old) major Japanese retailer might have
caused a political fuss. But Laox was so heavily on the ropes that it
probably wouldn’t have survived much longer. So, better a Chinese buyer
than going under (someone needs to tell this to Sharp). It also speaks
volumes about the skill of the current management team under CEO Yiwen,
that last fiscal year was the first year of profit for many years. It’s
been a good investment for Suning. They paid around JPY800m for the
first 27.36% in 2008 of the 65% they now own, and with a market cap of
JPY343bn in July, that JPY800m investment is now worth JPY93.8bn — not
too shabby!

Where will the Laox stock go from here? Well there is no doubt that
although the company is dependent on China, and although its China
electronics stores network is not going well, it is not planning to pull
its horns in either. Rather, Laox just last June announced a joint
venture with apparel company Onward Holdings, to start producing
Japanese-designed apparel, presumably for sale in the China market and
to Chinese tourists. This makes sense, because with the ability to
design its own lines of clothing, it gets to build in stronger margins
and produce goods that it knows will sell.

Cross-selling electronics for apparel also makes sense when you consider
that the top buyers among Chinese tourists are women, and after
cosmetics their preference is for apparel (not electronics, which comes
in 3rd or 4th depending on the survey). There is also a shoemaker that
Laox bought recently, in the mix — reinforcing the signals for where
Yiwen is taking the business.

…The information janitors/


——- Bilingual Senior Software Developer Vacancy ——-

MetroWorks KK, the creator of the ACQ structured crowdsourcing software
that powers, has a vacancy for a highly experienced
senior software developer for its Tokyo-based team. The successful
individual will have significant experience developing complex web
systems, including architecting, design, coding, content team
collaboration, and general team management. We use an Agile approach and
our code is mostly written in PHP Zend, some Java, MySQL, and Mongo. We
use many other services (web, iOS/Android mobile, etc.) and platforms as
well, with various members of the team being experts on each.

Ideally the applicant will have a minimum 5 years experience in
developing web systems. Any nationality, as a visa can be supplied to
the qualified individual, however, English and Japanese capability is
desirable. Competitive salary with additional increases as capability
and team leadership skills are established. Great team, friendly
atmosphere, modern office in convenient location in Roppongi. Immediate
start, but we will wait for the right person.

Interested applicants please send your resume to


+++ NEWS

– Growing stem cells in industrial volume
– Post Office IPO biggest since 1998
– Watami has feathers clipped
– Child poverty one of worst in OECD
– Wages fall 2.5% yoy in June

=> Growing stem cells in industrial volume

Interesting announcement from University of Tokyo (Todai) researchers
that they have figured out how to significantly speed up the production
of liver cells morphed from stem cells. The new cells harvesting method,
which uses protein-coated magnetic beads, reduces the time for iPS cells
to become progenitor liver cells from about a month to just two days.
The researchers have confirmed that the new process yields industrial
grade cells that are stable and freezable. ***Ed: If there is one thing
we can be sure of from Japanese researchers, it’s steady improvement of
processes — not long before we see bio factories supplying the world
with new stem cell therapies. No wonder the government is throwing so
much money at this sector.** (Source: TT commentary from, Sep
11, 2015)

=> Post Office IPO biggest since 1998

The government is hoping to reap a windfall of at least JPY1.4trn from
shares sold in the upcoming IPO by Japan Post Holdings in November.
Subscription by Japan’s ordinary citizens is expected to be massive,
because you don’t get many more Japanese “bedrock” as a company than
Japan Post. A huge presence in financial and postal services coupled
with government-endorsed commercial advantages make the investment very
low-risk. 80% of the shares will be sold to domestic investors and 20%
to foreigners. ***Ed: Apparently the listing is part of some master plan
by PM Abe to encourage more families to become shareholders. Not sure
why that is desirable when you have the government manipulating prices
behind the scenes.** (Source: TT commentary from, Sep 10,

=> Watami has feathers clipped

It looks like the general downturn in consumer spending is starting to
take its toll on some of the bigger restaurant players in Japan.
Apparently due to large losses in its core food service operations,
Watami Company is putting its profitable elderly care business up on the
block. As of the end of FY2014 (March this year), Watami had 111 nursing
homes across Japan, bringing in sales of JPY35.4bn. ***Ed: We expect to
see other domestic consumer services companies have similar tribulations
in coming months, if the government doesn’t figure out how to stimulate
consumer spending again.** (Source: TT commentary from, Sep 11, 2015)

=> Child poverty one of worst in OECD

Whatever happened to equality in Japanese society? It appears the gap
(Gini ratio) is widening and now over 16% of Japanese kids live in
poverty. This is the worst since Gini data was tracked in 1985, and with
55% of single-parent kids living in poverty, this is one of the worst
ratios in the OECD. Japan considers families with income of less than
JPY1.22m per person as being in poverty. Unfortunately there are many of
them, and once in poverty, the condition tends to stick, as evidenced by
only 20% of those kids going on to university and thus finding the means
to change their economic status. ***Ed: PM Abe should be ashamed of
these numbers. How is it possible that the country is expending huge
amounts of money on concrete and infrastructure when such a large
proportion of its future population is being so disadvantaged?**
(Source: TT commentary from, Sep 10, 2015)

=> Wages fall 2.5% yoy in June

Nervousness about world markets means that Japanese companies are still
not passing on earnings to employees (in the form of wage increases).
Rather, as of June, the total cash income for the average worker was
actually down by 2.5% over the same period in 2014 — and this does not
mean “real wages” (i.e., after inflation). No wonder, then, that
consuming spending has been in a slump and why analysts are predicting
the Bank of Japan will have to do another round of Quantitative Easing
(QE). ***Ed: Hopefully this next time around, not just the QE but the
governments own fiscal stimulus programs will try to channel cash to
actual families, not their employers or shareholders. Clearly trickle
down is not working. Fear and selfishness are innate traits in a
restricted society.** (Source: TT commentary from, Sep 4, 2015)

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 inconvenience.


————– Have a Tour to Promote? ——————–

Japan Travel is recruiting tour operators who would like to list their
inventory on our new Tours Marketplace ( Listing
is free, and only successful bookings will attract a marketing fee. Take
advantage of our position as Japan’s largest independent inbound travel
website (714,000 unique users in March, 2015) and give your tours the
exposure you need to develop your business. We are particularly
interested in tours that include a unique aspect of Japan and where your
marketing collateral includes strong photography and/or videos,
evocative descriptions, and strong appeal. After June 1st, all new tours
MUST include at least a one-night stay or formal (not public) ground

Operators and agents wishing to apply, contact


—————– ICA Event – October 15th —————-
Speaker: Jonathan Hope – Partner, Fusion Systems Japan
Title: ” Secure Corporate Data and Messaging on the Cloud: What are the
Commercial Risks?”

Details: Complete event details at

Date: Wednesday, October 15th, 2015
Time: 6:30 Doors open, Buffet Dinner included with charges and pay as
you go cash bar.
Cost: 4,000 yen (members), 6,000 yen (non-members) Open to all. No sign
ups at the door!!!!!!!
RSVP: By 1pm on Monday October 12th, 2015. Venue is The Foreign
Correspondents’ Club of Japan


No feedback this week.



=> Mifune Machinaka Gallery, Kumamoto
Create your own Japanese space in a historic house

When I was walking along Honmachi-dori which runs alongside Mifune
River, a pure white walled Japanese building caught my eyes. I wondered
what was inside and found a sign saying “Mifune Machinaka Gallery”. A
caretaker invited me to “please come in” and opened the gate. What I
found is worth a repeat visit.

The gallery is an ancient house renovated in 2014, having originally
been built in the Edo Period (1603-1868) for the Hayashida family. They
made their fortune in various businesses, including rice polishing, sake
brewing, land and sea transport, trading, accommodation and finance. The
property consists of the main house, two storehouses and a detached
building which evokes images of the powerful Hayashida clan in feudal

In the main house, the entrance hall stretches quite some distance and
the huge main tatami mat living room can be divided by fusuma (wood
frame-and-paper sliding doors). I felt like I was exploring a special
hideaway from another age. The storehouses are lit up in an elegant way,
creating a historic but chic atmosphere and it’s interesting to see the
structure of ceiling and the open wood beams from the inside.

=> Fukuma-kan, Shimane
An unparalleled ryokan experience by the Sea of Japan

Japan is known for its busy mega-metropolises existing in stark contrast
to the idyllic beauty of its countryside towns. Where the former are
easily accessible, it is difficult for visitors to decide upon a remote
location that will live up to their massive expectations. While
different regions of Japan offer their own unique vistas, for me the
highlight of my trip was Fukuma-kan in Mihonoseki Harbour, Matsue City,

Located in the Mihonoseki Harbour on the eastern tip of Shimane
Peninsula, Fukuma-kan is a ryokan offering magnificent views of the Sea
of Japan, while retaining a rustic, rural charm. Although a trip to the
nearby cities of Matsue and Yonago, and attractions such as Matsue
Castle and Izumo Taisha, will probably be on the cards, the beautiful
harbour-side town of Mihonoseki and the hospitality afforded by
Fukuma-kan will be more than enough to impress and occupy your mind long
after you leave.



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Written by: Terrie Lloyd (

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