TT-419 -- Climate refugees

* * * * * * * * * 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, May 6, 2007 Issue No. 419

+++ INDEX

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

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+++ WHAT'S NEW

Part One: Global Warming in Japan -- Climate Refugees

The UN's Intergovernmental Panel on Climate Change (IPCC)
has been hitting the news a lot recently, with dire
predictions for Africa, Australia/New Zealand, and South
and South East Asia, as well as more extreme weather for
the rest of us. Although the current summaries from the
report don't yet enlarge on the threat, Japan was
identified as one of the 8 most affected countries and
thus this early warning is more than just academic.

The IPCC was established to assess the scientific,
technical and socio- economic impact of global warming and
climate change. It consists of a number of working groups,
which since February have been releasing preliminary
reports from the final "Climate Change 2007" (also known as
AR4) report to be tabled at the 27th Session of the IPCC
in Spain, later this year. The results that have most
captured the media's attention are those of Working Group
II, which focuses on "Impacts, Adaptation and
Vulnerability", http://www.ipcc.ch/SPM13apr07.pdf. This
committee is creating scenerios of what might happen to
each country/region as global warming progresses.

The picture they paint is quite bleak. They state that
recent extremes in weather are likely to get worse, and
that the melting of the polar ice caps and continental ice
sheets will continue apace, raising sea levels and causing
more flooding due to storm surges. Indeed, their general
advice is that anyone living in a coastal area at or below
10m can over the next 30 years expect both damage to
their properties and physical danger during storms --
with some areas becoming submerged.

We thought it would be interesting over the next two weeks
to focus on two possible effects of global warming on Japan
-- the potential for "climate refugees" and the physical
effects of global warming on Japan. Then in the third week
we will look at electric cars and assess that market, along
with the electric car's ability to reduce pollution. As you
may know, all-electric cars are soon to go mainstream, with
the recent fleet testing of an all-lithium powered
next-generation Mitsubishi Colt at TEPCO in March this
year.

The concept of people fleeing their countries en masse due
to climate change is hard to imagine. Although in the last
100 years, there have been droughts and desertification in
Australia and Africa, tornados in Florida and the
Philippines, and floods in Europe and Bangladesh, after
temporary population relocations, people have generally
moved back to resume their lives. We assume this is
because of the human capacity to ignore future threats if
they are perceived to be once-in-100-years events.
Something that isn't going to recur in your life time takes a
lower priority than the lifestyle benefits of a convenient
big-city home, an inland ranch, or a holiday condo in SE
Asia.

[Continued below...]

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-----------------------------------------------------------

[...Article continues]

However, once disasters become regular enough, or the fear
factor increases sufficiently, people start to question the
suffering and they move. Some instances of such mass
relocations from recurring or perceived recurring threats
include: the farming family relocations after the dust
bowls of the midwest USA in the Great Depression, the New
Orleans ghost town suburbs of post-Hurricane Katrina, and
the mass relocation of the 1993 tsunami victims on Okushiri
Island, Japan when the entire town of Aonae and 120 of its
residents were washed away.

Well, OK, so maybe earthquakes and tsunami are not climatic
events (or maybe they are if you believe as some scientists
do that rainfall can trigger them), but given the IPCC
predictions, the severity of future storm surges such as
experienced in New Orleans, will be comparable to tsunami,
making the results and aftermath frighteningly similar.

The IPCC report states that by 2050 between 70m and 250m
people in Asia will be are most at risk to the twin threats
of drought and flooding. The mega-deltas of China, Vietnam,
and Bangladesh are all threatened. The resulting shortages
of food may be accepted in some buddhist nations, but in
islamic and secular/atheist ones, it is likely to cause
social unrest, government repression, and eventually the
movement of populations. China in particular should be of
interest to Japan because it is rapidly gaining a middle
class who could afford to emigrate if things got really
bad.

Imagine if you will that it is 2050 and China has become
sufficiently wealthy that the top 10% of its population
earns a disposable income similar to their counterparts in
the USA -- giving this sector tremendous financial clout.
The only problem is that due to rampant pollution in
the early part of the 21st century, air temperatures have
risen by more than the predicted 3.6 degrees Celcius and the
desertification of the western states has reduced rice
production by more than the forecast 12%.

The resulting famines among the 130m-150m farmers in the
western states are being taken advantage of by political
independence groups, and bombings, kidnappings, and
sabotage are commonplace. As the farmers demonstrate to
have the government take action, the army reacts with
hardcore nationwide crackdowns that not only anger the
peasants but also put fear into the middleclass. Those
with the funds start to look abroad for bolt holes, much
the same as happened in Hong Kong prior to the British
handover in 1997. Only this time around the number of
people looking to move has vastly increased.

Meanwhile, not 1,000km away lies the sleepy island nation
of Japan, once powerful but now drained of most of its
youth. Its 97m population is still dropping and a stable
but financially hamstrung government has increased the
retirement age to 85 -- the same as the top age for a home
mortgage [Ed: actually you can get one of these now]. The
fact that there is a common written heritage and almost
2,000,000 Chinese academics/students, factory workers,
wives, and multinational expatriates are already embedded
into the local society makes Japan look attractive to those
ready to flee Shanghai. While they won't get permanent
residence easily, the recent approval of foreign-owned
medical facilities (for use by foreigners), gated holiday
communities for wealthy non-residents, and increased volume
and duration of visa-free stays, will make it viable for Mom
and the kids to live in Japan and for Dad to commute to
his Shanghai office on weekdays. Indeed, the cost of an
airfare is less than travelling the Shinkansen within
Japan.

If you find this scenario hard to imagine, consider that a
foreign settlement is already being built outside
governemnt guidelines in Japan. We speak of the ski resort
of Nisseko in Hokkaido, where this deserted little ski
village has suddenly become a "little Australia" thanks to
hordes of determined snow seekers from Canberra, Sydney,
and Melbourne. The visitors may not speak the language, and
most do not have residency rights, but they do have the
cash to go look for the best off-season powder snow in
Asia. And now that they've found it, they're also busy
buying and selling condos and land in English. We expect
that in the not too distant future, a local foreign school and
other facilities will follow.

Despite lacking the obvious look of refugees, we posit that
by virtue of a lack of suitable climate (snow) in
Australia, this group can be considered the front runners
of "climate refugees".

Hmmm, OK, well perhaps another more acceptable example
of climate refugees comes from Hong Kong. An article in the
South China Morning Post last week that claimed that expats
with families are recently refusing to take up posts in the
territory because of the severity of air pollution there. More than
30% of days last year were government designated "bad air"
days, and since 10% of HK kids have asthma, they suffer
particularly badly on these days.

A spokeperson for Merrill Lynch warned last year that
companies such as his could move out if something wasn't
done. The problem is that while economics may dictate that
multinationals must be located somewhere near or in China,
given that at least 50% of HK pollution allegedly comes from
the Pearl River delta, moving to China would be worse for
executives' families. Thus the multinationals have to come up
with alternatives, such as moving their operations to more
remote areas in China's North, or offshore somewhere like
Japan. Indeed, Okinawa is hoping that a number of them will
choose Naha or Nago, which are only 820km away from
Shanghai.

If Chinese or coastal Korean immigration to Japan were to
become a reality, Japanese real estate and the drooping
economy (if not in recession by that time) would stage a
rennaisance. Yes, this is 30 years hence, but if you look
at how cheap land has become in rural areas of Japan,
especially in Honshu and Kyushu, then perhaps the idea of
land banking wouldn't be such a crazy idea.

How cheap? Well, a friend recently told us that his parents
in Fukushima (central Honshu) were offered 500 tsubo
(1,650m2) of vacant land for just JPY3m. This represents a
price of around US$62,500 an acre -- remarkably cheap for
Japan and nowadays for much of North Asia as well.
Apparently rural Kyushu is just as cheap.

And if you look at the Nisseko phenomenon, where the price
of land has shot up in the last 10 years from around
JPY10,000/tsubo (effectively US$100,000 an acre) to ten
times that amount today, then any foreign interest in rural
Japanese land would be an excellent investment opportunity.
Indeed, in terms of the Australian climate refugees, rumor
has it that a number of foreign real estate investors are
already nosing around other depressed ski areas for another
Nisseko opportunity. We have not seen any evidence of the
Chinese looking at Kyushu yet, but we expect it to come.

In contrast to rural land, inner city land may take another
ten years to peak, as retiring "dankai" couples look to
move somewhere more convenient. But beyond that point, it
has to come down as the nation's population decreases.
Recently, desirable land in inner Tokyo, in places like
Hiroo, Shibuya, Kojimachi, and Mejiro has been selling
for around JPY3m-JPY6m/tsubo, which is around
US$30m-US$60m/acre. That's a massive price differential
to rural property -- making rural land banking even more
attractive.

Next week, we'll cover part two of this series -- looking
at the likely physical impact of global warming on Japan.

Lastly, if you're free on Wednesday night, try to make the
presentation by Terrie Lloyd at the Entrepreneur
Association of Tokyo seminar. Terrie is talking about how
to sell your "under-JPY1bn in sales" company as a foreigner
(or a Japanese) in Japan. He will talk about valuations,
current market drivers, how to polish your business and get
it over the finish line. He will also discuss selling
businesses that you never thought had any value. This talk
comes on the back of several successful company sales
advised by the Japan Inc. Advisory team, and reflects
practical anecdotes arising from those deals.

If you can't make this presentation, then keep in mind that
the next Entrepreneur's Handbook seminar by Japan Inc., an
intensive "brain dump" by Terrie on the rules and lifecycle
of creating, operating, and selling a company, will be held
in Shinjuku on May 19th, 2007. More details in the EVENTS
section below.

http://www.japaninc.com/entrepreneur_handbook_seminar

...The information janitors/

***------------------------****-------------------------***

---------------------- M&A Advisory -----------------------

The Japan Inc. Advisory team is highly experienced in
helping foreign entrepreneurs both sell and buy companies
in Japan. Our experience includes:

- Fundraising for venture businesses
- Selling companies for owners looking to leave Japan
- Sourcing buy-out targets for foreign firms entering Japan
- Assisting with joint venture and takeover negotiations
- General management advice

We have a dedicated, experienced team that
specializes in smaller deals that other investment
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-----------------------------------------------------------

+++ NEWS

- Korea punishes pre-war collaborators
- Consumer finance firms in a tailspin
- Citigroup syndicates US$12bn for Nikko
- Orix starts taxi business in India
- Fresh produce exports rising

-> Korea punishes pre-war collaborators

Japanese pop songs may be popular in South Korea, but
memories are long when it comes to grudges. The Korean
government has announced that it will confiscate the lands
of 9 Korean families whose great-grandparents collaborated
with the Japanese army during the annexation of the country
by Japan in 1910. Approximately 254,906m2 of land worth
KW3.6bn (US$3.87m) will be seized. (Source: TT commentary
from chosun.com, May 2, 2007)

http://english.chosun.com/w21data/html/news/200705/200705030025.html

-> Consumer finance firms in a tailspin

Takefuji has warned the markets, just before the second
half of the Golden Week holidays, that this coming week it
will announce a huge loss of around JPY481bn (US$4bn). The
company is blaming the recent supreme court decision
allowing recipients of previously high "grey zone" loans to
seek recompensation for excess interest paid. At the same
time, the company is saying that the lower interest rate is
making it hard for the firm to make a profit. ***Ed: We
don't buy all the moaning and groaning coming from the
consumer finance sector about how hard done by they are.
Yes, they have been hit with some ugly claims, but if you
look at the mostly unsavory characters who have been
running these firms until recently, you'll see that they
have plenty of assets that these companies could fall back
on to get over the hump. Decades of profits don't just
disappear and some judicious court action by the new
management could untap some of this.

We would, however, agree that foreign companies who bought
into the market in the last 5-6 years are getting a raw
deal. But, with the impending shakeout of the consumer
finance marketplace, only the fittest and best run
companies will survive -- which will leave the foreigners
in a pretty good position 3 years hence.

One common complaint by industry spokespeople is that the
interest rate restrictions are driving "low-income" people
desperate for money to illegal loan sharks. We'd contend
that the industry featured loan sharks previously as well,
and indeed, it was the cruel harrassment of late-payers by
these lenders that led to some well publicized borrower
suicides and thus the legislative changes. We predict that
as the industry shakes out over the next 2-3 years, there
will be some players who understand the need for consumer
education and they will benefit as a result. Eventually,
though, the industry will normalize.

Furthermore, we'd point out that anyone borrowing money at
more than 22% can only be considered an addict and needs
help. In that light, these reforms are long overdue.**
(Source: TT commentary from timesonline.co.uk, May 2, 2007)

http://tinyurl.com/yokvb5
Or, http://www.liveurl.org/index.php?EKZRbLg3n4

-> Citigroup syndicates US$12bn for Nikko

As befits the world's largest bank, Citigroup has borrowed
JPY1.45trn (US$12bn) in what is to be Japan's largest
syndicated loan, to pay for its acquisition of the majority
of the stock in Nikko Cordial. Citigroup has announced that
it will pay JPY920bn to buy 61% of the securities firm. The
loan is larger than the acquisition price, so as to fund
the additional purchase of 6% of Nikko's shares in the
future, eventually giving Citigroup board control of the
company. ***Ed: We wondered why Citibank, the banking
subsidiary of Citigroup, didn't just take care of the loan
itself. The Bloomberg article explains that Citibank is
prevented by US commercial law from extending loans to its
parent. (Source: TT commentary from bloomberg.com, May 3,
2007)

http://tinyurl.com/2yj6o8
Or, http://www.liveurl.org/index.php?vPIlSBF8gH

-> Orix starts taxi business in India

An increasingly adventurous Orix, the Tokyo-based finance
company, has announced that is is starting a taxi firm in
New Delhi, India. The company is working through a joint
venture and plans to have 500 cabs working by the end of
the year. Orix says that it is targetting middle class
Indians by using a combination of new cabs, proper
airconditioning, passenger emergency buttons, honest fare
meters, and a radio dispatch and GPS control system to keep
driver efficiency up. The basic fare will be 15 rupees
(JPY44) a kilometer, about 50% more than rides in the aging
cabs of today. ***Ed: This will extremely interesting to
watch. After riding some dilapidated cabs in Mumbai and New
Delhi ourselves, we believe this is an idea whose time has
come. Orix should do very well with this investment.**
(Source: TT commentary from nikkei.co.jp, May 3, 2007)

http://www.nni.nikkei.co.jp/AC/TNKS/Nni20070503D03JFA03.htm

-> Fresh produce exports rising

The Japanese penchant for fruit and vegetables in perfect
condition has now spread to other Asian markets, led by
Fuji apples, Yamanashi peaches, Kofu grapes, and now
cabbage and Chinese yams. The value of exports in 2006 was
JPY11.4bn (US$950m), about double Australia's 2005 fresh
produce exports to Asia. The shipments have spiked 52%
above 2002 figures, when the trend for Japanese fresh
produce first became evident. Expectations are that exports
will continue to grow at a rate of 12%-13% annually through
2009. (Source: TT commentary from nikkei.co.jp, May 3, 2007)

http://www.nni.nikkei.co.jp/AC/TNKS/Search/Nni20070502D02JFA05.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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-----------------------------------------------------------

+++ CANDIDATE ROUND UP/VACANCIES

=> LINC Japan Ltd., an affiliate of the LINC Media group,
is actively marketing the following positions and customers
for market entry customers setting up in Japan.

POSITIONS VACANT

* Medical instruments CEO, bilingual -- JPY15-18m
* Medical instruments salesperson, bilingual -- JPY10-12m
* Software company CEO, bilingual -- JPY15-18m
* Experienced software salesperson, bilingual -- JPY10-12m
* Network engineer, bilingual -- JPY5-8m
* IT sales trainee, bilingual -- JPY4-5m
* Help desk analyst, bilingual -- JPY4-5m
* Java software developer, bilingual -- JPY6-7m
* Freelance market entry consultants, bilingual -- Neg.

CANDIDATES AVAILABLE

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native J + good E, wants senior sales role or country
manager, available June-July, target JPY12-14m base plus
commissions

* Senior Marketing
39-yr old female Marketing/Sales manager, mainly media
background, fluent bilingual, wants senior sales role in
PR or advertising industry, available immediately, target
JPY10-12m base plus commissions

* IT Marketing
32-yr old female with operations and project management
experience in ISP/IT company, wants marketing job,
available in June/July, target JPY6-7m base

Interested Japanese or foreign candidates may e-mail
resumes to: terrie@lincjapan.net.

------------ Engineer wanted for India posting ------------

Forum 8, a leading Japanese developer of engineering
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Job Description:
- Finding distributors for our software
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- Native-level English or Hindi
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For more information, please visit
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or contact us at recruit@forum8.co.jp.
-----------------------------------------------------------

+++ UPCOMING EVENTS/ANNOUNCEMENTS

----------- Entrepreneur Association of Tokyo -------------

Speaker: Terrie Lloyd, CEO and Founder of LINC Media
Presentation Title: 'How to Sell a Company'

LINC Media's very own Terrie Lloyd will be joining EA-Tokyo
this coming May to talk about how to sell a company!
Having started 14 companies over the past 24 years in Japan
completed 5 successful earn-outs of his own, and sold 3
companies for clients, Terrie is a leading authority on the
subject. Please sign-up early to reserve your seat. Please
note that the seminar will be held at the Shinsei Bank Head
Office.

Date/Time: Wednesday, May 9, 7:00 pm
Location: Shinsei Bank Head Office - 20th Floor Seminar Room
Language: English
Website: http://www.ea-tokyo.com
Email: info@ea-tokyo.com

-----------------------------------------------------------

============== Start a Company in Japan ===================

Entrepreneur's Handbook Seminar, May 19th, 2007

If you have been considering setting up your own company,
find out what it takes to make it successful. Terrie Lloyd,
founder of over 13 start-up companies in Japan, will be
giving an English-language seminar and Q&A on starting up a
company in Japan. This is an ideal opportunity to find out
what is involved, and to ask specific questions that are
not normally answered in business books. All materials are
in English and are Japan-focused.

For more details:
http://www.japaninc.com/entrepreneur_handbook_seminar
-----------------------------------------------------------
______________________________________________________
IT events announcements are priced at JPY50,000 per week.
For more information, contact sales at japaninc.com

***------------------------****-------------------------***

+++ 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.

-> No corrections this week.

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-----------------------------------------------------------

***********************************************************
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+++ ABOUT US

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Written by: Terrie Lloyd (terrie.lloyd@japaninc.com)

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