TT-755 -- Silent 3rd Arrow to Target SMEs? Ebiz news from Japan.

* * * * * * * * 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.
(http://www.terrielloyd.com)

General Edition Sunday, May 11, 2014, Issue No. 755

+++ INDEX

- What's New -- Silent 3rd Arrow to Target SMEs?
- News -- Confusing economics of tuna
- Web Content/Tech Job Vacancies -- Video blogging/editing
- Upcoming Events
- Corrections/Feedback
- Travel Picks -- Kiyomizu-dera Temple in Kyoto and steam train in Akita
- News Credits

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+++ WHAT'S NEW

Here we are in mid-May and the yen is still sitting at the
101/102=US$1 mark and there is little to no news on those Abenomics
third arrow reforms. It's no wonder, therefore, that the press is
listening to every whisper that comes out of Kasumigaseki, trying to
guess what the next move will be. The latest is that the proposed
corporate tax cut may be accelerated and implemented as early as next
year, providing Abe with a major PR opportunity.

While lower corporate taxes seems like a step in the right direction,
one also needs to remember the reasons for doing so, being: 1) to
encourage Japanese corporations to spend some of their near-record
JPY222trn in cash reserves here in Japan, rather than overseas, and 2)
to encourage foreign firms looking at Asia to set up in Japan rather
than Hong Kong, Singapore, or Beijing.

On the first reason, we think it is obvious by now that the bulk of
large Japanese exporters have long since moved their manufacturing
operations overseas, and there is little reason for them to return
capital to a failing market back home where an aging population is
holding on to its assets and actively decreasing spending as its
collective insecurities grow. This massive move abroad by corporations
is probably the main reason that the 2013 devaluation of the yen had
so little beneficial impact on the economy, because those who would
have benefited from cheaper exports no longer need such help.

On the second point, even a tax rate of 30% is still unattractive when
you have all kinds of other hidden costs in doing business in Japan --
ranging from annually increasing social insurance contribution costs
(which, once they are handled by the Tax Office will amount to a "tax"
anyway), through to the high cost of transport, storage, and real
estate. In fact, compared to Hong Kong and Singapore, even a 30% tax
rate will still be almost double. A TT reader suggested to us a few
weeks ago that corporations don't make location decisions based on tax
and that rather they look at proximity to markets. While we debate
this wisdom, even if it were true, what is more desirable? Proximity
to a massive but mature and declining market like Japan or a vibrant
and rapidly growing one like those of Vietnam, Malaysia, or Indonesia?
Singapore as a corporate hub looks even more attractive by that
measure.

[Continued below...]

-------- Japan Travel Paid Blogging -- in Japanese --------

www.japantravel.com has become the largest content creator for inbound
travel content in Japan, and this is now driving demand by local
operators for domestic content. We have a number of openings for
freelance bloggers to write stories and take photos at various
locations around Japan. These positions require native-level written
Japanese for the text projects, and advanced spoken Japanese for the
video and photographic projects. If you are a part-time photo blogger
or video journalist, then contact us for more information.

Go to: http://en.japantravel.com/contact and select the "I want to
write for you" option.
---------------------------------------------------------------

[...Article continues]

While pondering tax cuts, though, it struck us that EVEN IF the Abe
government did reduce corporate taxes, it won't provide much benefit
to the economy. Why? Because 73% of ALL Japanese companies last year
lost money (didn't pay profits tax), and so tax breaks will be
irrelevant to them. It is no coincidence that almost all of these 73%
are SMEs, who employ more than 70% of the population. So if the tax
breaks are not going to have the "trickle up" effect that the
government is looking for in reinvigorating the economy perhaps this
explains why the Abe government has dragged its feet in implementing
them -- because they won't help anyone but the biggest players.

Actually, because so many companies are not paying tax there is
another recommendation is doing the rounds -- one that will require
ALL companies, not just profitable ones, to pay taxes for the right to
operate. The thinking is that these new levies will offset losses from
the proposed reduction in the profits tax, and will work like a
consumption tax on companies, being based on capitalization and
salaries. We don't know if this is such a good idea, because while
initially it would indeed pump up the tax base by 300%, it would also
cause SMEs to actively lay off workers to stay in business. Some
economists say that more people released into the work force by such
actions will be a good thing, but we doubt it if most of them are
older, hard to re-train, and unsuited to a post-manufacturing economy.

So how to help the SMEs get the economy kickstarted again if tax cuts
aren't the answer? We think there are hints of a solution to be seen,
but they are messy and "morally hazardous" (i.e., unpalatable as PR),
so we think they will happen quietly while media attention is focused
on the banner announcements.

Last year, the government ended the debt moratorium for SMEs, a
temporary law which allowed about 300,000-400,000 companies, almost
all SMEs and about 20%-25% of all Japan's actively operating
businesses, to survive by paying interest and no principal on their
bank loans. Indeed, many companies have been paying little or no
interest either. We, like a number of others, predicted that there
would be a rash of SME bankruptcies as a result and that this would
spike unemployment. But it didn't happen. Instead, bankruptcies
actually decreased...

From what we can see, even though the legal requirement for banks to
help SMEs survive was removed, the FSA has continued to "nudge" banks
to stay soft on SME loans, and so nothing changed, yet. What this
tells us is that the politicians, or at least the bureaucrats advising
the politicians, are not stupid and realize they need to do something
about SMEs if they really want bottom-up changes in the economy.

We now believe that if you want to see how Abenomics might move
forward, instead of looking at the top line announcements, keep an eye
on the rule changes and new programs coming out for SMEs. In following
this strategy, you will notice that there have been some interesting
developments recently. 1) There is talk within government circles of
changing the rules on the treatment of directors of companies that go
out of business, which to us sounds like a trial balloon prior to a
major policy change. If the directors of zombie companies were
suddenly released from personal responsibility for the massive loans
their companies have received over the years, they are more likely to
consider shutting those companies down and starting over. Right now
they look at bankruptcy court and see themselves committing social
suicide, so they hang on as long as they can. 2) In just the last few
weeks, a number of colleagues have reported to us that it has suddenly
become much easier for small companies to get loans of
JPY10MM-JPY20MM, even if they are not profitable -- just so long as
they are paying their taxes.

Putting a substantial amount of easy new money in the hands of SMEs
makes sense although it is distasteful. These companies have
historically proven they know how to spend. Yes, such moves will
present a moral hazard and it will likely draw droves of Yakuza and
other fringe-dwellers as well. But nonetheless, it will at least
ensure that those who employ the bulk of Japan's workers will be
sharing their newfound luck and for some of them they will actually
reinvest and change their business for the better. What is the
alternative? Throwing money through tax cuts at large companies who
are already sitting on a JPY222trn pile of frozen cash? We don't think
so. Piles of money don't vote, people working for SMEs do.

...The information janitors/

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

----------------- Tour Operator in Japan? -----------------

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content volume and second largest for traffic, and continues to grow
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www.japantravel.com
-----------------------------------------------------------
***------------------------****-------------------------***

+++ NEWS

- 3D printed guns lead to arrest
- Confusing economics of tuna
- Yoshihiko Miyauchi to step down as Orix CEO
- Ecchi, not war
- Most LGBT kids get bullied

=> 3D printed guns lead to arrest

If you have a 3D printer, the last thing you want to do is go around
boasting on Twitter that you are using it to make plastic guns. Yet
this is what a 27-year old Kanagawa-ken university employee did
recently and as a result his apartment was raided by the police and he
was arrested. The police said that of the five plastic guns seized,
two were apparently functional and dangerous. This is the first
instance in Japan of someone being arrested for creating weapons from
web-based plans and a 3D printer. (Source: TT commentary from
theguardian.com, May 8, 2014)

http://bit.ly/1sBmgh9

=> Confusing economics of tuna

What happens when a commodity becomes expensive because of the falling
yen? It drops 50% in price...?! This is what has happened to the price
of frozen bonito tuna, which after selling for more than US$2,300/ton
in 2013 now sells for just US$1,200/ton in 2014, mainly because of
slumping demand in Japan due to the high prices. Apparently the high
prices last year were caused by a lower supply of tuna due to a poor
fishing season, versus a much better season this year. Still, these
extreme price fluctuations demonstrate that not only is the Japanese
market an important one in the trade, but that Japanese consumers are
very willing to abstain from a product that they feel is too expensive
-- yen devaluation or not. ***Ed: Exporters of Bonito from Thailand
are hoping that this is the bottom of the price-demand cycle, and that
prices (and demand) will improve again next year. We presume it
depends on what the Yen is worth at that time.** (Source: TT
commentary from asia.nikkei.com, May 7, 2014)

http://s.nikkei.com/Qwk4cg

=> Yoshihiko Miyauchi to step down as Orix CEO

An iconic business figure is about to leave the stage. Yoshihiko
Miyauchi, the CEO of finance company Orix, will step down after more
than 30 years in the job. Miyauchi co-established Orix back in 1964
and has since built the business into JPY1trn of revenues and an
expected profit of JPY210bn this fiscal year. He is leaving after
having groomed his 61-year old successor, Makoto Inoue, and putting
into place a number of foreign mega deals to keep his team busy for the
next few years. (Source: TT commentary from bloomberg.com, May 8,
2014)

http://bloom.bg/1nBZmEa

=> Ecchi, not war

Ever heard of the "Senso Rabu na Otoko towa Ecchi Shinai Onna no Kai"?
You probably will over the next few days, as this new women's group
presses forward with its campaign to have its female members deny
sexual relations with male partners who support Japan's right-turn on
weapons exports. Their target apparently includes husbands and
boyfriends who work for companies involved with weapons exports as
well as those who simply support the policy. ***Ed: OK, so apparently
this women's group had only one member when the Japan Times
interviewed them, but the idea is catchy enough that we imagine it is
drawing in new recruits. Certainly the foreign media will lap it up --
good click bait.** (Source: TT commentary from japantimes.co.jp, May
9, 2014)

http://sexstrike.seesaa.net/article/396057411.html (Japanese)
http://bit.ly/1nBZjYJ (English -- Japan Times)

=> Most LGBT kids get bullied

Perhaps it's not surprising, but a new LGBT study has found that 70%
of kids who are gay or otherwise are bullied by their schoolmates, and
that 32% of them have considered committing suicide. The bullying
included 53% being verbally abused, 20% being physically bullied, and
11% being sexually abused. The problem appears to be systemic, as the
study also found that 12% of the surveyed kids reported that the
bullying came from the teachers themselves. ***Ed: Depressing...**
(Source: TT commentary from pinknews.co.uk, May 8, 2014)

http://bit.ly/1qsXmCt

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.

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

+++ WEB CONTENT/TECH VACANCIES

=> Are you in web content, sales, or engineering? If so, this section
is for you.

** HIGHLIGHTED POSITION

- Part-time video editors and bloggers

We are inviting applications from amateur video editors and video
bloggers who own their own equipment, to provide stories for our
travel website business clients. You must have strong experience with
either Final Cut Pro or Adobe Premiere, and be able to show work
samples that have been commercially published or which have garnered a
high number of views on public video sites. The positions require
strong communication skills, availability at least several times a
month to do shooting during business hours, and strong Japanese. You
should be located close to one of the following cities: Naha, Fukuoka,
Osaka, Nagoya, Tokyo, Sendai, or Sapporo. Payment rates vary according
to client, but are NOT at full commercial level, meaning that these
positions are best suited to talented non-professionals. Please send
your resume to info@japaninc.com.

** OTHER MEDIA POSITIONS VACANT

- Bilingual account manager for major tourism portal
(www.japantourist.jp), JPY3M - JPY5M
- Bilingual sales trainee for web media properties, JPY2.5M-JPY3M +
10% commission

Interested individuals may e-mail resumes to: jobs@metroworks.co.jp.

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

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

+++ UPCOMING EVENTS/ANNOUNCEMENTS

------------------ ICA Event - May 15th--------------------

Speaker: Robert E. Peterson ("Bob-san") - President, Wickaboag
Consulting Group, Inc. Marketing & Communications Problem Solver
Title: "Japanese Companies Do Not Understand Marketing! Why and
Implications for Japan Inc"

Details: Complete event details at http://www.icajapan.jp/

Date: Thursday, May 15th, 2014
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 4pm on Friday 9th May 2014, venue is The Foreign
Correspondents' Club of Japan

http://www.fccj.or.jp/about/access.html
-----------------------------------------------------------

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

+++ CORRECTIONS/FEEDBACK

=> No comments this week.

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

+++ TRAVEL DESTINATIONS PICKS

=> Platform of Kiyomizu-dera Temple, Kyoto

Kyoto's Kiyomizu-dera is one of Japan's best-known temples. Perched on
the side of a cliff, its much-photographed platform is truly
impressive. The platform is supported by 139 Zelkova pillars that each
stand 13 meters tall. This unique construction style is known as the
"Kakezukuri Method". In it, carpenters create holes and grooves in the
pillars and cross beams, then combine them to form a latticed square
frame. They are put together without nails! Then everything is
adjusted to ensure that the floor is horizontal and correctly
balanced. In the case of Kiyomizu-dera, the platform floor consists of
more than 410 cedar plates and has a slight slant toward the edge of
the platform in order to protect the wood from being damaged by
rainwater.

http://bit.ly/1gb0v5L

=> Akita's Steam Train Service
JR Akita's return to the Age of Steam

Akita is often seen as the end of the famous 'Narrow Road to the Deep
North', popularized in the writing of the poet Matsuo Basho. This
allusion certainly speaks to the isolation and remote beauty which the
prefecture possesses even to this day. However, though Basho's
original narrow road has long since faded into memory of most folk in
the Tohoku, in 2011, Japan Rail East determined that, as far as they
could, the company would create their own, by refurbishing one of
their classic locos and re-establishing regular steam services up the
beautiful Japan Sea rail link through the prefecture.

First going into service in 1949, this fully restored engine is a
truly lady of the North, serving most of her career drawing passenger
traffic between Akita and Aomori. Since Summer of 2011 she has
regularly steamed up and down the coast of Akita. She carries tourists
back into the past on her own narrow road, opening the beauty of the
Japan Sea coast both to rail fans and to travelers who wish to take a
more leisurely, and stately route up-country on the Gono Line in the
Summer months.

http://bit.ly/1jglHBIn

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

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+++ ABOUT US

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

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