TT-491 -- When Yen Loans for Foreign Property Go Wrong, 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, October 26, 2008 Issue No. 491

+++ INDEX

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

SUBSCRIBE to, UNSUBSCRIBE from Terrie's Take at:
http://mailman.japaninc.com/mailman/listinfo/terrie

BACK ISSUES
http://www.japaninc.com/terries_take, or,
http://mailman.japaninc.com/pipermail/terrie/

----------------- PBXL - CUT COSTS NOW! -------------------

Looking for ways to cut expenses in your existing operations
in Japan and around Asia?
If so, PBXL's CommDown program is perfect for you.

Focusing on telecom expense management, our shared savings
approach ensures that you DON'T PAY unless you save.

Contact us today for more information!
03-4550-2557
info@pbxl.jp

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

+++ WHAT'S NEW

The US dollar - Japanese yen rate took a major turn over
this last week, and at one point the Interbank rate for the
yen hit 90.87 to the dollar, the strongest it's been since
1995. Actually we have a bit of a fresh trend here, because
apart from the yen, all other major currencies around the
world fell against the US dollar, meaning that differential
between the yen and other currencies is becoming even
more exaggerated.

As an example, the Australian dollar (AUD) has fallen from
104 yen on July 24th to just 59 yen last Friday. That's a
spectacular collapse of more than 40% in just 3 months.
Another favorite currency for Japanese housewives to
speculate in, the New Zealand dollar, has also fallen a
massive 35% over the same period.

There has been a lot of analysis about why the yen is
strengthening despite the obvious fact that the economy is
being hugely impacted by the global downturn and that the
stock market is being pummeled as a result. Most analysts
agree that one major reason is that hedge funds involved
in the FX "carry trade" are now extensively unwinding their
overseas lendings to high-interest countries, since such
business is becoming increasingly risky in the light of the
loans repayment defaults in places such as Iceland, and are
now repaying their yen borrowings.

Another reason comes from a well-known economist we spoke
to. He reckons that Japanese companies such as life
insurers and other institutional investors are liquidating
their holdings off-shore and repatriating funds back to
Japan so as to weather the storm -- i.e., Japan is becoming
a safe haven. Then of course, there are FX-trading Japanese
housewives who watch CNN and Nikkei World Business
Satellite, and who are curtailing their investments for a
while.

Normally, for those of us earning incomes in Japan, a
rising yen is temporarily very welcome, especially since it
comes so close to Christmas. Overseas trips are cheaper,
buying Christmas gifts on Amazon is a real bargain, and
some of those student loans can even get paid down.

Well, OK, there is a downside. For some people, if the high
yen persists, it will dent their year-end bonuses. However,
on the whole, we're not expecting to see anything more
dramatic just yet. Job cuts and corporate tightening
probably won't happen in earnest until the middle of
January or February next year.

However, there is one group of Japan-based investors who
are lamenting or even panicking over the yen's surge.

[Continued below...]

------------- Looking for English Magazines? --------------

Subscribe to your favorite English magazines today -- TIME,
Newsweek, National Geographic, Scientific American, People
and many more.

eigoTown.com is now offering subscriptions to English
magazines at great prices.

Visit: http://magazines.eigotown.com
Credit cards and PayPal accepted.
-----------------------------------------------------------

[...Article continues]

And that group is those foreigners and Japanese who bought
real estate overseas in the last 5 years, using yen
mortgages from mainly Australian and British banks.

The reason they are unhappy is two-fold. Firstly, their
cheap yen loans have suddenly become much less of a bargain
in real terms versus loans they could have taken at the
higher interest rate in the country of purchase. That's
because their yen loan conversions would have been done
when the target country currency was much higher -- thus
they're sitting on a large loan for a cheapened asset.

Secondly, all banks specializing in foreign loans are now
looking at the value of the properties used as loan
security, and are demanding a "claw-back" of the loan
amount if the land-to-loan ratio falls below a certain
ratio. In demanding the claw-back, they either ask lenders
to increase the value of the collateral provided, in order
to match the yen loan amount, or reduce the amount of the
loan. Either way, this can be a painful exercise, even for
well-off but not highly liquid families, requiring the
paying down of thousands of dollars that wasn't necessarily
budgeted for, or the encumbment of additional value from
the land title.

We don't know how many people have taken such international
land loans, but from the volume of advertising we imagine it has
to be at least in the hundreds if not thousands of people. And
for them, a manageable retirement investment has now turned
into a money-eating nightmare.

"Serves them right for taking such risks," you might think.
But the fact is that buying a property in a pristine
coastal retirement township in somewhere like Australia,
for example, at a Japanese interest rate of 2%-2.5% and
paying a manageable amount from one's salary has been a
very attractive proposition. Further, given that
international home loans are impossible to get in Japan,
and getting an Australian loan when you live outside the
country is not so easy, especially if you're not an Australian
citizen, then it's no wonder that foreign banks which have
been servicing this loan niche have been doing such a
roaring trade. Typically they have been lending against land
in Australia, New Zealand, Britain, and in some cases
Hawaii and some other parts of the USA and Asia.

The biggest risk in taking one of these international loans
is the fact that you are dealing with two different
economies, and once the economy of one location goes bad
compared to the other, then you are exposed to some kind of
risk. For example, if you borrow AUD100,000 to buy a
property, and it's converted into a yen loan at JPY100 to
the AUD, and then the AUD drops to less than a certain
threshold given in the loan contract (typically 70% or
65%), then the bank will require that the value of the
collateral be "topped up" with cash, or the loan paid down
by the amount needed to get under the threshold again.

Now, to their credit, these banks go out of their way to
explain the foreign exchange risks and they make sure that
people are conscious of what they are getting in to. But
the mechanics are somewhat complicated, and the fact is
that no one really expects the foreign exchange rate to
change by a massive amount so quickly that they can't
respond to the situation and either renegotiate the loan
or liquidate some other assets to pay it down. But
unfortunately for some, we've just had a "once in 100
years" foreign exchange shift, and many Japan-based
owners of Australian and other international mortgages
are really feeling the pinch.

As a result, there will be some normally well-to-do
asset-rich but cash-poor families, both Japanese and
foreign, who still own a first-class property asset
overseas, but who can't afford to go there for
Christmas because they've got a claw-back call and are
now trying to make ends meet. No doubt they'll be wondering
just what went wrong. All we can say is that economies go
in cycles, and we think it's better to try to tough out the
current fluctuations than to capitulate and sell your
retirement dream.

...The information janitors/

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

-------- Essential Business References in English ---------

Japan is one of the world's most challenging jurisdictions.
And you, as the director of the corporation, need to have a
very good understanding and comprehension for Accounting,
Tax, Business, and HR management practices on a daily basis.

We have the explanation books written in English!
- Japan GAAP Guide for accounting,
- Japan Corporation Law Guide
- Japan Master Tax Guide
- Japan Staff Employment Law Guide and more!

As a limited offer, we will be providing a 10% discount on
these titles to readers of this E-mail newsletter.

For more details, Please Contact us at:
support@cch.co.jp, or 03-3265-1161
www.cch-japan.jp
-----------------------------------------------------------

+++ NEWS

- MoF yen buying to start?
- 4% consumption tax levy just for medical services
- Fast eaters get fatter than slow eaters
- Large Japanese loan for India
- Luxury brands see downturn

-> MoF yen buying to start?

Looks like the Japanese government is considering
intervening in the FX market by selling yen and presumably
buying dollars -- as it did back in 2003 and 2004. The
Ministry of Finance (MoF) has said that it is "closely
monitoring" the FX rate, and that it is worried about yen
strengthening "harming the economy". This is being
interpreted by market players as a likely signal that the
MoF will start intervening shortly. ***Ed: The thing is,
unlike 2003, the fluctuations in the yen are due to a
global trend where the flows of money are huge -- much
bigger than the "big stick" threat of yen buying by the
government. Even if they put up as much as JPY20trn, which
they collectively spent in the past, it would barely
contain a couple of days' worth of trading.** (Source: TT
commentary from nikkei.co.jp, Oct 24, 2008)

http://www.nni.nikkei.co.jp/AC/TNKS/Nni20081025D24JFA05.htm

-> 4% consumption tax levy just for medical services

Bad news always comes in three's. Not only will the aging
workforce in Japan contribute to lower industrial output in
years to come, and a lower tax base will force up pension
premiums for those poor saps remaining in the workforce,
but now a government expert panel has said that the
nation's expenditure on hospitals and other medical
facilities will need an additional JPY14trn ((US$147bn) to
maintain the current level of services -- because of all
those extra old people. Put another way, the nation will
apparently need a hike of 4% in the consumption tax to
maintain its current standard of medical care. ***Ed: Now,
this is in ADDITION to the 10% hike recommended to enable
the government to pay pensions for those in their last few
years of working life. So we're talking about a possible
400% increase in the consumption tax to look after the
nation's elderly by 2024. Not a bright outlook for workers
aged 50 or younger...!** (Source: TT commentary from
nikkei.co.jp, Oct 24, 2008)

http://www.nni.nikkei.co.jp/AC/TNKS/Nni20081024D23JFA22.htm

-> Fast eaters get fatter than slow eaters

In some native societies it is well known that you can
feast on more by cramming the food down quickly -- before
the body's internal chemistry starts signaling that it's
had enough. Now science has proved the effect formally.
According to an Osaka University study which looked at the
eating habits and weight gains of 3,000 men and women,
researchers found that those participants who chowed down
quickly and ate until they were full, wound up over the
3-year study period to have the greatest Body Mass Index
(BMI) gains. ***Ed: You wonder who pays for this kind of
research. Studying the mating habits of round-snout
pygmy frogs would be more productive than this.**
(Source: TT commentary from stuff.co.nz, Oct 25, 2008)

http://www.stuff.co.nz/4738852a11.html

-> Large Japanese loan for India

Japan has offered India a large US$4.5bn low-interest loan
to help it build a major freight railroad between India's
two largest cities: New Delhi and Mumbai. The link will be
1,468 kilometers long and will significantly upgrade
domestic trade flows and thus economic growth. ***Ed: We
presume that the railroad will be built by a Japanese
company... ;-)(Source: TT commentary from afp.google.com,
Oct 22, 2008)

http://afp.google.com/article/ALeqM5giqHnL_f6-aawPmSTcHokJyngxbg

-> Luxury brands see downturn

It used to be a given that even though regular consumers
might pull back from buying things in a recession, the
luxury stores would still do big business in Japan, fueled
by single women still living at home and a growing number
of super-rich. However, as the IHT reports, it seems that
even the designer houses are suffering these days. The
newspaper says that with inflation running at 2.4% in
August, salaries down 0.3%, and household spending down 4%,
high-end consumers are also being impacted. The report
says that Louis Vuitton (LVMH) traditionally gets 10% of
its sales from Japan, but has seen yen-based sales drop 7%
in the 9 months through September, even while they rose 22%
elsewhere in Asia and 9% in Europe. Hermes and Bulgari
apparently had small 1.5% and 3.8% increases in Japan sales
respectively, but these results were disappointing when
contrasted with a 27.8% increase in Europe for Hermes and
7.5% for Bulgari. (Source: TT commentary from iht.com, Oct
21, 2008)

http://www.iht.com/articles/2008/10/20/business/yen.php

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.

----------------- Web Hosting in Japan --------------------

With prices comparable to those available in the US, and a
full range of hosting services, there is no need to put up
with slow downloading websites hosted overseas anymore.

With nearly 10 years experience in the Japanese market,
Tsukaeru.net provides great value for money to both the
Japanese and English speaking clients.
We provide low cost shared hosting accounts from just 210
yen per month,to fully managed complex hosting.

Customers moving from our competitors receive
up to JPY10,000 cashback on completion of migration.

http://tsukaeru.net/en
Isao 050-3533-8241
-----------------------------------------------------------

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

+++ CANDIDATE ROUND UP/VACANCIES

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

** HIGHLIGHTED POSITION(S)

BiOS is now accepting applications from candidates for the
role of IT Director with a bank-owned hotel company, to
take responsibility for the information technology needs of
both the corporate office and on-site hotel properties. The
Director of Information Technology will work closely with
the client's Japan IT Team as well on-site staff at the
Hotels and provide visionary leadership to the rapidly
expanding IT requirements of this company.

First and foremost, the ideal candidate for this role will
have 10 years experience in higher IT management at
enterprise, regional and global level, and will also have
the technical knowledge and experience to back up the
decisions they make. As well as ensuring the secure and
efficient running of the IT operation, you will also work
closely with a number of teams across the world, plan and
present budgets and projects, and be required to direct
the work and activities of those around you, so highly
polished communication skills and a flexible and thoughtful
attitude are essential to succeed. In addition, the ideal
candidate will be very bilingual, with high fluency in both
English and Japanese.

Remuneration is JPY14m – JPY18m, based on your experience.

** POSITIONS VACANT

- Financial Controller, new foreign firm, JPY8m – JPY10m
- Voice Engineer, global financial co., JPY8m – JPY10m
- Account Manager, foreign Media firm, JPY3m – JPY4m +comm.
- Windows Sys Admin, investment bank, JPY4.5m – JPY6m
- Data Centre Operator, Kanto – JPY4m – JPY5.5m

Interested individuals may e-mail resumes to:
stuart.gibson@biosjp.com

** BiOS Job Mail

Every 2 weeks BiOS sends out a regular communication to its
job seeking candidates, called BiOS Job Mail. Every edition
carries a list of BiOS's current and most up-to-date
vacancies, with each entry featuring a short job
description and a direct link to the main entry on the BiOS
home page. Regardless of whether you are unemployed and
searching, thinking about a career change, or just curious
to know if there is something out there that might suit you
better, the BiOS Job Mail newsletter is an easy and
convenient way for you to stay informed. If you would like
to register for the BiOS Job Mail, or to find out more,
please email stuart.gibson@biosjp.com.

Interested individuals may e-mail resumes to:
stuart.gibson@biosjp.com

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

+++ UPCOMING EVENTS/ANNOUNCEMENTS

----------- 9th METROPOLIS HALLOWEEN GLITTERBALL ----------

In the seven years since its unholy birth, Metropolis'
'Glitterball' has mutated into the monster it is today:
Japan's largest and most rockin' Halloween party!

The no-holds-barred celebration boasts a frighteningly fun
atmosphere thanks to 2,000 revelers decked out in all
manner of scary, sexy, and crazy costumes.

With its signature open bar, food buffet and free-for-all
dance floor, the Metropolis Halloween Glitterball is a
must attend event for any self-respecting beauty or beast
in Tokyo. Get your Freak ON!

Wear a costume to win great prizes!

WHAT: Metropolis Halloween Glitterball
- All-you-can drink, eat, meet and dance!

WHERE: Club Womb, Shibuya
WHEN: Thursday, October 31st
TIME: 19:00 - 24:00
FEE: 2,500yen (Tickets available online, at Lawson ticket
and at participating outlets)

http://metropolis.co.jp/glitterball/glitterball2008.htm
-----------------------------------------------------------

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

Seminar-Tuesday, November 4th

Speaker: Mr. Ricco DeBlank, General Manager of The
Ritz-Carlton Tokyo and The Park Residences

Seminar Title: 'Passion to Serve'

Are you interested in improving your customer service?
If so, then don't miss EA-Tokyo's November seminar with
Ritz-Carlton's service expert, Ricco DeBlank.

Hailing from the Netherlands, DeBlank joined The
Ritz-Carlton Hotel Company in 1995 and since then, has
worked in Bali, Indonesia, Shanghai, China and Seoul, Korea
as a director of human resources.

He served as the General Manager of The Ritz-Carlton,
Sharm el-Sheikh after a stint as Executive Assistant
Manager, Rooms in Hong Kong. In 2003, he arrived in Japan
as General Manager of The Ritz-Carlton, Osaka and
established the hotel as the city' finest both in Japan and
around the world.

Mr. DeBlank was appointed General Manager of The
Ritz-Carlton, Tokyo for its opening in 2007.

Please sign up early while seats are available.

Date/Time: Tuesday, November 4th 7:00 pm
Location: Foreign Correspondents' Club of Japan
Language: English
Website: http://www.ea-tokyo.com
-----------------------------------------------------------

--------------- MIDEM/MIDEMNET MUSIC EVENT ----------------

PRICE FREEZE:REGISTER TO MIDEM/MIDEMNET BEFORE NOVEMBER 15

People drive music forward. And MIDEM is about people

* A worldwide community of professionals from every sector
who create and use music in all its forms.

* MIDEM: the world's music market
(18 - 21 January 2009), 9,000 key professionals from 90
countries

* MidemNet Forum: music business in the digital age
(17 - 18 January 2009), 2 days of intense conference
sessions and serious networking with 1,400 international
music executives

Register now at www.midem.com
-----------------------------------------------------------
______________________________________________________
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 or comments this week.

***********************************************************
END

SUBSCRIBERS: 11,118 as of October 26, 2008
(We purge our list regularly.

+++ ABOUT US

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

HELP: E-mail Terrie-request@mailman.japaninc.com
with the word 'help' in the subject or body (don't include
the quotes), and you will get back a message with
instructions.

FEEDBACK
Send letters (Feedback, Inquiries & Information) to the
editor to terrie.lloyd@japaninc.com.

ADVERTISING INFORMATION
For more information on advertising in this newsletter,
Contact ads@japaninc.com.

SUBSCRIBE
Get Terrie's Take by giving your name and email address at
http://www.japaninc.com/newsletters/free_sign_up, or go
straight to Mailman at:
http://mailman.japaninc.com/mailman/listinfo/terrie

BACK ISSUES
http://www.japaninc.com/terries_take
or, http://mailman.japaninc.com/pipermail/terrie/

Copyright 2008 Japan Inc. Communications Inc.

------------ Japan Inc is worth every penny! --------------

J@pan Inc is Japan's only publicly sold English-language
business magazine. Authoritatively chronicling business
trends in Japan, each beautifully designed full-color issue
brings you in-depth analysis of business, people and
technology in the world's second largest economy. Don't
miss another issue! JPY8,000 for 1 year (12 issues)
JPY15,000 for 2 years (24 issues).

Visit www.japaninc.com/mgz_subscriptions to subscribe.
-----------------------------------------------------------

_______________________________________________
Terrie mailing list
Terrie@mailman.japaninc.com
http://mailman.japaninc.com/mailman/listinfo/terrie