TT-449 -- Unhappy and Unemployed, ebiz news from Japan

* * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
(http://www.terrie.com)

General Edition Sunday, December 9, 2007 Issue No. 449

+++ INDEX

- What's new
- News
- Candidate roundup/Vacancies
- Upcoming events
- Corrections/Feedback
- News credits

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+++ WHAT'S NEW

The rate of unemployment in Japan hit a record low of 3.6%
in July and has since started creeping back up, with 4% of
the workforce looking for a job in October. This represents
2.71m people out of work, with the largest number of those
being women aged 35-44 years old. Perhaps more importantly,
new job offers, i.e., those new openings being registered
by companies in October, decreased a full 3.9% from 2006.

Still the numbers are better than they were last year.
There are 100,000 less unemployed people than in 2006, and
according to the Ministry of Labor, in October there were
1.02 jobs open for every 100 job seekers. Indeed, in the
increasingly exasperated technology sector the ratio in
August was an astounding 4.29 job offers per engineer. So
where is the labor market headed? Have we passed the peak
of the tightening, or because of demographics and social
factors, is finding an employee going to be just as
difficult in the future?

A clue to this question can be found in the most recent
Hello Work statistics, which show that the highest rate of
unemployment for both men and women is in the 25-34 years
age group, with a combined jobless rate of about 150% over
other age groups. Given that these people should be at the
peak of their employability, we can assume that they are
probably unemployed through choice -- a status now called
a NEET (Not Employed, in Education, or Training).

The authorities say that there are around 620,000 NEETs
in Japan and that this number is growing even in the current
tight labor market. Actually, given the problem of Hikikomori
(stay-at-home) youths, we wonder how they come up with
this statistic, and wouldn't be surprised if the actual number
of NEETs was actually a lot higher.

Another statistic shows that over 1/3 of unemployed women
left their jobs voluntarily. So are they leaving to have
babies, a hopeful possibility, or because they are
disenchanted with low-paying jobs? Most likely the latter,
we imagine. The current starting salary for a female
university graduate is now around 190,000 yen per month,
and the average working wage for a salaried person
(representing all sexes and ages), excluding bonuses and
overtime, is just 250,668 yen per month, only 20% more
than when the college hopefuls started! That doesn't leave
much in the way of promotions and incentives for new
employees through their 35-year career. No wonder they are
not happy.

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[...Article continues]

The Nikkei just ran a good analysis of the problem with
disincentivised employees last Friday. According to the
newspaper, factories all over the nation are having
problems finding employees who are willing to be promoted
into positions of responsibility. They quote a manager at a
car manufacturing plant as saying, "I'm happy with my
current job, and if I become a group leader, my pay won't
rise much, but my responsibilities will increase because I
will have people under my supervision." Doesn't sound like
a guy looking for a promotion any time soon...

The Nikkei says that a new word has entered the Japanese
vocabulary: "Otaryman", which is a contraction of "otaku"
and "salaryman". The word arises from a popular manga which
portrays a salaryman who has given up on trying to climb
the corporate ladder and instead focuses on spending his
spare time with his friends. The manga series has already
sold over 500,000 copies since its release in March.

Further confirming the trend of unambitious employees,
Towers Perrin, the HR consulting firm, did a survey of
88,000 people in 19 countries and found that 72% of
Japanese were not enthusiastic about their work and just 3%
were "fully engaged" at an emotional level in their jobs. At
3%, the Japanese had the lowest work satisfaction level of
all 19 countries. Even China with its pollution and low
salaries scored 6%.

We believe that what this means is that Japan is
experiencing a major shift of values in the workforce, and
that companies wanting to recruit motivated, enthusiastic
employees from a shrinking pool of desirable candidates are
going to have to work harder to provide attractive
conditions and job opportunities. In particular, the Towers
Perrin study points to the need for more holidays and more
emphasis on mental health and leadership training.

Now, more holidays means not just more holiday allocation,
but an actual change in traditional management attitudes
so that employees can actually take those holidays. The
recent spate of Karoshi (death from over-work) cases in the
courts have highlighted the fact that many of those dying
had been unable to take sufficient leave. Indeed, it is not
unusual for foreign recruiters handling salarymen in their
30's and 40's to discover candidates who haven't had more
than 2-3 days off in a row for some years.

While the current shift in values appears to give foreign
companies, banks, and consulting companies an
advantage in appealing to fresh candidates, manufacturers,
retail chain operators, and other traditional businesses are
caught in a bind. Rather than go empty-handed for new
employees, they are turning to recruitment firms in greater
numbers, and the recruiters themselves are having to
innovate to keep up with demand. In this respect,
recruiting in Japan still has to focus on the Japanese and
Japanese-speakers, but it is going global.

On December 7, a relevant news item caught our attention.
Malaysia-based JobStreet, a pan-Asia job board operator
that until now has mainly focused on English and
Chinese-speaking candidates has decided to set up in Japan.
The company says that it will try to recruit and prepare
young professionals around Asia, who certainly don't
suffer from a lack of confidence and enthusiasm, for jobs
in Japan. The company said that it plans to put its
candidates through its Philippine training center, giving
candidates a 3-month program in Japanese language and
culture before making them available for appointments here.
We think the reality is that they will have to increase
the training to at least 6-9 months of full language
immersion, but if they do this, their prospects are not so
bad.

Training someone in Japanese language for 6 months may
sound expensive, but in fact, some other countries are
already doing the same thing. Think Dalian in China, where
reportedly tens of thousands of aspirants are learning
Japanese, and Pune, India, where over 1,000 software
engineers a year are graduating from one major language
school alone. Yes, the incoming foreigner still don't have
the ability to speak fluently, but coming here armed with
advanced 3-kyuu Japanese lets the determined self-studier
pick up advanced conversation in a matter of months. We
predict that such programs will create some thousands of
new semi-fluent employees a year for Japan, and,
importantly, these people will still be hungry for
promotion and personal recognition -- essential aspects of
an immigrant culture and the source of new blood that
Japan so badly needs.

Apart from SE Asia, another source for willing, skilled
workers is South Korea. The jobless rate there for people
aged 15-29 years old is around 8%, and now some
recruiters are starting language training for engineering
students, with the aim of sending them to Japan. One
company looking after placements at this end is Jtec, a
Korean technology broker based in Tokyo. Next year, Jtec
is planning to employ at least 100 South Korean engineers
who have been through a preparatory course and put them
into placement positions here. We [the editors] also know
of at least one major South Korean newspaper subsidiary
which is also training about 100 engineers every 6 months
for eventual placement in Japan. In their case, the training
costs are picked up by the South Korean government as part
of a subsidy program designed to reduce the unemployment
rate there.

So will these thousands of foreign workers have jobs when
they get here? It may surprise you to know that 9.6% of
Japanese firms with more than 100 employee (and there's
a lot of them) have already hired foreign students or young
workers as full-time or contract employees in the past
three years. Although the overall view of young foreign
employees is not so positive -- with the Nikkei pointing
out that they (the foreign workers) have a "pushy attitude
in requesting better working conditions," nonetheless, of
the companies that have hired foreigners, a full 79.5%
said that they will do so again.

********************

Changing the subject, check out the interesting reader
comments in the Feedback section below, about the
likely causes of the low birth rate in Japan.

...The information janitors/

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+++ NEWS

- Economy headed for downturn?
- Wal-Mart up to 95% of Seiyu stock
- What direction for capital gains and dividends tax?
- New generation of wall-hanging TVs
- Reform becomes road kill

-> Economy headed for downturn?

An FT article points out that the indicators show Japan's
economy may be headed for a slowdown. Q3 growth figures
were revised down by the government from 2.6% to 1.5%,
annualized. Unemployment is still at 4%, although analysts
are expecting it to increase to 4.1%. And the BoJ's Tankan
due out this coming week is expected to be worse, as
Japanese companies fret about the volatility in the USA
and smaller listed firms report decreased profits. ***Ed:
We believe Japan's economy is still inexorably coupled to
the fortunes of the USA, despite cheerful media and analyst
predictions that Asia sales are big enough to take up the
slack. It's important to remember that a slowing US economy
produces a lower dollar, the basic currency for more than
half the world's trade, which then affects higher-priced
exports from Europe, Asia, and other non-dollar producers
-- e.g., pretty much all the alternative customers for
Japan's own exports.** (Source: TT commentary from ft.com,
Dec 8, 2007)

http://www.ft.com/cms/s/0/27e7b8f6-a531-11dc-a93b-0000779fd2ac.html

-> Wal-Mart up to 95% of Seiyu stock

Wal-Mart may not have got the hang of running a major
operation in Japan yet, but you can't say that they are not
trying. the US giant has said that it is paying JPY93.3bn
to increase its stake in Seiyu to 95.1% of the supermarket
chain. It has now been 6 years, with no profits in sight,
since Wal-Mart took over Seiyu. Wal-Mart's shares fell 3%
on news of the almost-completed buy-out. Seiyu expected to
post a JPY10.4bn net loss for 2007, reflecting the costs
of an early retirement program. ***Ed: We think Wal-Mart
needs to stop trying the hybrid approach on Seiyu and go
all-out to do something new in Japan. Low prices and high
quality are the foundation of Uniqlo in their challenge
10 years ago of the status quo. Wal-Mart needs to try the
same thing.** (Source: TT commentary from marketwatch.com,
Dec 5, 2007)

http://tinyurl.com/228xsd

-> What direction for capital gains and dividends tax?

The Nikkei reports that tax reform panels at the Financial
Services Agency (FSA) and the Finance Ministry are sparring
over how far to remove the tax breaks on capital gains and
dividends. Currently the rate is 10% on both, just half of
what it was before the reduction in 2003. The Finance
Ministry wants to remove the capital gains tax breaks
entirely by January 2009 except for those stocks held
before December 31, 2008. In contrast, the FSA wants to let
people with JPY30m or less in capital gains to get the 10%
rate, and any amounts higher than this would be taxed at
20%. On dividends, the Finance Ministry is suggesting an
allowance of just JPY100,000 at 10% and taxing the
remainder at 20%, while the FSA is recommending the 10%
rate on all dividend income. ***Ed: No need to say who
we're hoping will win this little tiff...** (Source: TT
commentary from nikkei.co.jp, Dec 7, 2007)

http://www.nni.nikkei.co.jp/AC/TNKS/Nni20071207D07JFA03.htm

-> New generation of wall-hanging TVs

Hitachi has said that in mid-December it will release
Japan's first true wall-hanging ultra-thin LCD TV. The
company says that its unit is about 30% lighter than
conventional LCD TVs and receives high-definition signals
from a control unit elsewhere in the room, via an
Ultra-wide Band (UWB) transmission unit. The UWB unit
transmits data at an impressive rate of 160Mbits/second.
(Source: TT commentary from nikkei.co.jp, Dec 7, 2007)

http://www.nni.nikkei.co.jp/AC/TNKS/Nni20071207D07HH771.htm

-> Reform becomes road kill

The government has apparently backed down on the fight
former-PM Koizumi started with the roading politicians and
has agreed that instead of making a substantial amount of
roading tax revenues available for alternative spending
besides making and maintaining roads, now only 3% of the
roading budget can be reallocated. The loser was the
Ministry of Finance, which wanted the roading and gasoline
taxes to help pay for pensions, etc., and the winner was
the Ministry of Land, Infrastructure and Transport which
can now continue funding unnecessary roads and bridges, as
well as sustaining the special interest groups feeding off
the funds. ***Ed: Junichiro Koizumi, where are you when we
need you?** (Source: TT commentary from nikkei.co.jp, Dec
8, 2007)

http://www.nni.nikkei.co.jp/AC/TNKS/Nni20071207D07JFA07.htm

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

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+++ CORRECTIONS/FEEDBACK

In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to editors@terrie.com.

-> In TT444 we wrote about what we think are the major
contributing factors to the decline of the Japanese birth
rate, and how it might be combated (i.e., birthrate
increased).

*** Our reader comments: For what it's worth (maybe not
much), I have also given much thought to why Japan's
birthrate is dropping so much. Here are my ideas:

As complex a phenomenon as this is, it also uncannily
resembles an airplane crash, in that there is not one
single cause, but many. These many causes can lead to a
catastrophic accident when, by wild bad luck more than
anything else, they line up, converge and, in some cases,
reinforce each other.

Some of the causes are proximate (the "stick that breaks
the camel's back") and others ultimate (too much weight on
the camel). I propose at least four ultimate causes and two
proximate ones:

Ultimate (not all specific to Japan, certainly, but perhaps
more profound here)

#4) Relatively small, cramped living space, which the
Japanese didn't mind 40 years ago but do now as a result of
globalization (i.e., they can see the way "the rest of the
world lives") and their situation is depressing.

#3) Too much pollution of various kinds, including
overly-processed food, which almost certainly interferes
with the reproductive systems of both men and women. Indeed
this is a suspected leading cause of infertility or low
fertility in a number of the world's most developed
countries.

#2) Too much stress overall in daily life. One female
acquaintance in her late 30's lost her monthly period,
apparently permanently, several years ago. Her doctor found
her perfectly healthy in all other areas and attributed the
symptom solely to the stress of working 50-60 hours a week
for a really awful boss.

#1) The "push" of a luxurious lifestyle, fueled in great
part by the mass media and the trillion-dollar consumerism
machine. To live this lifestyle requires eating out every
day, traveling every weekend, and constantly making new
purchases. This addiction to luxury has the double effect
of leaving the people rich in lifestyle but poor in assets
(i.e., being less likely to save for large-ticket things
like a house, marriage, or children) and also unwilling to
consider "giving up" that lifestyle to make the sacrifices
necessary to raise children.

Proximate: (highly specific to Japan)

#2) The "pull" of aging Baby Boomers, who have different
values themselves from previous generations (without
putting too fine a point on it, they are often incredibly
selfish). In many cases, the mothers consider their
daughters as friends, and often don't want them to leave
the family home at all. I know dozens of cases like this.
The parents give their daughters in particular every
incentive NOT to get married, but rather to stay at home
and take care of the parents in their old age. The carrot
dangled will often be inheriting the house and other
assets, thus assuring the daughter(s) an entire lifetime of
a fairly high living standard without ever having to work
full-time, or maybe not even at all.

#1) I think this is the big one. The insane cost, stress,
and sociological and psychological pain of the Japanese
education system, which is can be summed up in three
words: cram, test, and money. This self-perpetuating system
guarantees a 99.99% probability that even if you do invest
(or waste) an entire childhood, a million dollars or more,
and the mother's entire social and economic life for 20
years, your child will still not graduate from an "elite"
university and land an "elite" job -- thus branding them a
"failure" for the rest of their life. This is also a likely
major contributor to the feelings of frustration and
disappointment that many Japanese adults seem to be
subject to.

Obviously I'm overstating the case somewhat for effect.
But at the same time, I'm sure that other readers can find
yet more reasons. And we are even half right, what seems
incredible is that Japanese women are bothering to even
have any kids at all!

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