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, March 06, 2016, Issue No. 841

– What’s New — Mis-allocation of Funds: Zombies and Parasites vs. Start-ups
– News — 35,000 babies in 2014 have foreign parent. Really?
– Upcoming Events
– Corrections/Feedback — Marcus Yip Hospital Fund update
– Travel Picks — Onsen in Noto Peninsular, Treasure chests in Osaka
– News Credits

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The Nikkei is busy trumpeting a start-up event here in Tokyo later this
month, called Pioneers Asia. The company is working hand-in-hand with
government and a number of prestigious universities to celebrate
entrepreneurship and start-ups. Normally we’d say it’s great to see the
mainstream media try to do something about the sorry state of support
for new companies in Japan, but frankly we can’t help feeling the whole
thing is a farce. Although it’s well proven that most Japanese work for
small and medium-sized companies (SMEs), making SMEs vital for the
economy, and there are indeed more than ten thousand new companies being
set up every year, the reality is that Japan currently is in economic
survival mode and when it comes to small company support, the words
“vested interest” and “parasitic behavior” come to mind rather than
“nurturing” and “creation”.

Why do we say this?

Well, let’s start firstly with the deplorable level of financial support
for SMEs by looking at Fukuoka, a region highlighted by the Nikkei as
part of its run up to the Pioneers Asia event. Readers may recall that
Fukuoka was designated by the Abe government in 2014 as a “national
strategic special zone” for start ups. Unfortunately, in the last two
years, all the government has managed to achieve has been to ease
restrictions on the height of buildings downtown…! How helping local
building developers will magically create a flurry of new companies that
can’t afford the new space anyway, is beyond us. Apparently the
government also relaxed residency requirements for foreign
entrepreneurs, but there are no details published on the web — just
tantalizing hints that will eventually frustrate any foreign
entrepreneur thinking about Japan.

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[…Article continues]

What companies need most when starting out is capital, good people, and,
in the case of most Japanese youthful start-ups, some proper business
experience. Granted, a new VC fund in Fukuoka named QB Capital has been
formed with JPY3.1bn yen to invest, but two years in, it hasn’t actually
started yet, and worse still, it’s tied to the Technology Licensing
Organization (TLO) belonging to Kyushu University. Meaning, that if
you’re not a student at that university, you’re out of luck. Actually,
the TLO-tied VC business model hasn’t been successful anywhere else in
Japan either. Tokyo University has such a fund, and when we visited them
last year, we found them to be struggling to find sufficient students
who are silly enough to start up a business, especially when as Todai
graduates they can get a job with almost any major company they like.

You can contrast the struggling SME end of the market, where most jobs
are created, with the top end of the market where the government is
happily creating a frothy environment for its buddies. Japan recently
passed a very dubious milestone at the end of February. Large listed
companies around the country have apparently passed JPY1trn (about
(US$9.3bn) in capital gains profits over the 9-month period
April-December, 2015.

The problem is that most of these capital gains coming from large
corporates selling off troubled subsidiaries — letting them “re-focus
on core business” and all that. The Nikkei didn’t go into a lot of
detail as to who is buying these loss-making subsidiaries, but we
suspect that most are either carve outs whose values are artificially
pumped up by rising stock market (indirect government stimulus), or the
result of direct funding or acquisition by government entities such as
the INCJ, DBJ, and other downstream government proxies (direct
stimulus). To us, these profits are not the sign of a natural, healthy
marketplace, because selling assets is normally so alien to Japanese
companies (i.e., they’d NEVER normally sell a healthy entity).

Instead, all this artificial stock market activity is inevitably drawing
funds away from smaller firms, and has completely distracted the Abe
government from putting cash where it would really help.

Then don’t get us started on zombie companies like Sharp, which has
already had billions in public money and nonetheless has eventually
fallen prey to Taiwan’s Honhai as it has proven it can’t fix itself from
within. What is strange is that the government is still obsessed with
using public funds (albeit via INCJ, which made a failed JPY400bn offer)
to rescue a “core” company like Sharp, when history has already proven
that allowing foreign capital in and introducing internal personnel/debt
discipline can bring much better results for the Japanese firm. Japan
Airlines is a prime case in point.

And the parasites? Well, just this week, and very indicative of the food
chain in Japan, a small but emblematic news item came up. Pasona and
Panasonic announced they are going to set up a patent “consulting”
service to help small- and mid-sized companies with local and
international patents. On reading this we asked ourselves why are these
two companies even bothering? Japan is actually reasonably well supplied
with patent specialists already, and there doesn’t seem to be a shortage
of know how that we can see. Pasona has a contract with the Japan Patent
Office (JPO) to do prior art searches and so at least it has relevant
experience, but why Panasonic is doing this j/v is not obvious… other
than to say they are nice guys…?

Rather, we suspect that Panasonic and Pasona are going to try to sell
the services to unsuspecting SME companies by offering the services in
return for certain rights in the patents themselves. This is just a
guess by us, but given that applying for and keeping patents is
expensive, and most Japanese SMEs just don’t have that kind of money,
it’s hard to see how the new venture could work otherwise. This isn’t
evil, but it does indicate once again that corporate Japan seems bereft
of the ability to find supportive ways to work with SMEs, instead
preferring to either borrow or bind innovators to extract juice from
them. Unfortunately, this gap between supportive investment and
parasitic behavior seems to be getting wider by the day.

…The information janitors/


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+++ NEWS

– Japan diesel vehicles significantly exceed safety margins
– 35,000 babies in 2014 have foreign parent. Really?
– Do new rules to govern Bitcoins have teeth?
– Honda’s new sheet metal laser breakthrough
– Japan’s first “unicorn” venture company is Mercari

=> Japan diesel vehicles significantly exceed safety margins

In the wake of the Volkswagen scandal over excessive diesel emissions in
road tests versus lab ones, it has been discovered that Japan has the
same problem. Apparently tests just conducted here have found that
Toyota’s diesel Hiace van, for example, has a real-world NOx emission
level of 10x published lab tests. Apparently Japanese makers have been
programming their cars to not use their NOx cleaning (EGR) systems at
temperatures of less than 10 degrees Celsius, since doing so can damage
the vehicle’s catalytic converter. The Hiace was not the only culprit.
Other vehicles to fail the tests include the Prado Land Cruiser,
Nissan’s X-Trail, and Mitsubishi’s one-box Delica vans. Only Mazda
diesels met spec. ***Ed: Gaiatsu is a handy thing to have. Although
Volkswagen has taken all the public rejection, it’s not the only guilty
party, and this foreign publicity has nicely forced Japanese car makers
to fix the problem while still (it seems) letting them off the hook in
terms of penalties.** (Source: TT commentary from, Mar 05, 2016)…

=> 35,000 babies in 2014 have foreign parent. Really?

According to a Kyodo News report, government data shows that about
35,000 babies, about 3.4% of total nationwide births, had at least one
parent who is non-Japanese. The rate of foreign parents was highest in
Tokyo, at around 5.9%, followed by Aichi-ken at 4.9%. Chinese spouses
were most common, followed by Koreans, then Americans. ***Ed: Actually,
this data surprises us, because research done back in the 90’s found
that international marriages tended to produce far more children than
all-Japanese couples, around 2.9 kids per couple. And yet, with this
latest announcement, if there are 35,000 international marriages each
year, and only 35,000 births, that would imply that statistically there
is only one birth per marriage? No. There is something wrong with these
numbers from Kyodo.** Source: TT commentary from, Mar
05, 2016)…

=> Do new rules to govern Bitcoin have teeth?

New bills have been submitted by the Cabinet office to the Diet which
will bring Bitcoin and other virtual currencies under the control of the
Financial Services Agency (FSA) shortly. If passed it will mean that all
operators in Japan will have to separate their assets from those of
clients, have their finances audited, and comply with anti-money
laundering and know-your-customer rules. ***Ed: The problem is that
Bitcoin is by virtue of being virtual, is a currency that can easily
operate within Japan while the operator stays outside the country. This
means that players can still do whatever they like, by doing the same
thing that hedge funds and other investors already do: incorporating
themselves in HK and Singapore (or better yet, the British Virgin
Islands) and letting them trade freely and without concern of
regulations here in Japan.** (Source: TT commentary from, Mar 06, 2016)

=> Honda’s new sheet metal laser breakthrough

In a development that promises to allow Honda to both cut costs and
significantly improve the turnaround times on new vehicle designs, the
company has announced it has created a laser-based sheet metal cutting
line, now operating at its Yorii (Saitama) factory. The new system cuts
car sheet metal panels to order and is the first mass production system
to do so. Honda’s breakthrough has been to not only create a high-power
laser suitable for fast industrial-grade auto parts production, but also
a handling system to feed the tens of thousands of metal sheets passing
through the system each day. Honda says the new laser system is 10 times
faster than using conventional lasers, and being laser-based means they
need far fewer dies to be tooled for each model change/enhancement.
(Source: TT commentary from, Mar 05, 2016)…

=> Japan’s first “unicorn” venture company is Mercari

A new funding round, probably its last before going public, of JPY8.4bn,
has given peer-to-peer marketplace app developer Mercari the status of
being the first Japanese company to become a so-called “unicorn” (i.e.,
have valuation exceeding JPY115bn (US$1bn)). The company has now
received total funding of JPY12.6bn in the last 3 years, with the last
tranche including Mitsui, DBJ bank, Sumitomo Mitsui, Globis, WIL, and
Global Brain. The company is expected to go public shortly. ***Ed:
Mercari focuses on mobile commerce and has had an amazing 32m downloads,
with 7m being from outside Japan.** (Source: TT commentary from, Mar 01, 2016)

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.



—————— ICA Event – March 17th——————
Speaker: Pieter B. Franken- Monex, Inc., CTO and Executive Managing
Director SAFECAST Japan, Director and co-founder
Title: “Safecast 5 Years after Fukushima disaster: What lessons have
derived by measuring radiation levels and where is all this going?”

Details: Complete event details at
Date: Thursday March 17th, 2016
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 1pm on Monday 14th March 2016, venue is The Foreign
Correspondents’ Club of Japan

+++ CORRECTIONS/FEEDBACK — Marcus Yip Hospital Fund update

=> Thanks for readers and Marcus’ own friends, the fund established some
weeks ago to help Marcus and his family deal with his terminal brain
cancer has now reached a total of US$45,000. This will be our last call
for any readers who know Marcus or who enjoyed (as we did on many
occasions) the wonderful hospitality and cooking at his 146 Hiroo
restaurant, to donate something towards the fund. See more at the URL below.



=> Noto Peninsula Discovery, Ishikawa-ken
Nature, culture, onsen at the doorstep of Kanazawa City

One of Honshu Island’s eleven peninsulas, the Noto Peninsula, has
largely been off the radar of foreign visitors to Japan. While Noto
attracts many Japanese visitors, foreign travelers have yet to discover
the bounty of natural and cultural gems that this part of Japan has to
offer. There are great hot springs here, too!

The Noto Peninsula is located in the northern part of Ishikawa
Prefecture while the southern part of the prefecture is home to Kanazawa
City, the prefecture’s capital and already a well-known destination for
domestic and foreign travelers alike.

Noto divides into three areas: Kuchi-Noto (Entrance of Noto), Naka-Noto
(Middle of Noto) and Oku-Noto (Deep Noto).

The Wakura Onsen Resort area is in Naka-Noto at the edge of Nanao Bay,
while the Wajima Onsen area is in Oku-Noto and at the entrance to the
Sosogi Coast. Between them they comprise two of Noto Peninsula’s main
hot spring resorts and nature and culture travel spots.

=> Kishiwada’s Treasure Chests, Osaka
Traditional chests of drawers, all hand-made

The No 1 reason to venture out of central Osaka and come to Kishiwada is
the Kishiwada Danjiri Matsuri at Kispa La Park in September and October.
If you come during other times of the year, a visit to the Kishiwada
Danjiri Hall will give you a flavor of what this festival is all about.

Some might also know that Kishiwada is a joka machi, an old castle town,
where you can enjoy a visit to Kishiwada Castle and its beautiful rock
garden, Hachijin-no-Niwa.

Or how about a stroll through Honmachi-no-machinami, the Old Town where
you can find old well-preserved merchant houses that stand along the
ancient Kishu Kaido (Kishu Highway), a trade-route used during Japan’s
feudal period and which connected the Kishu Province (now Wakayama) with
Osaka and Edo, present-day Tokyo. In Honmachi you will also find
Kishiwada’s Confectionery Lane. Kishiwada’s wagashi (Japanese
confectionery) are tasty and plentiful. You can sample your way through
several shops in this lane.

Less known is the fact that Kishiwada and Haruki are also the center for
traditional manufacturers of kiritansu furniture. Kiritansu is the
Japanese word for chest of drawers. Traditionally they were used for
storing kimono and valuable objects and are considered essential in a
traditional Japanese household.



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