TT-795 -- Rehashing a Failed FDI Program for Tokyo. E-biz 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, March 15, 2015, Issue No. 795

- What's New -- Rehashing a Failed FDI Program for Tokyo
- News -- Hotels acquisition stampede begins
- Upcoming Events
- Corrections/Feedback
- Travel Picks -- Sendai Top 10, Villa at Hamanakako
- News Credits

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+++ WHAT'S NEW

On March 6th, the Japan Times wrote an article trumpeting a new
government initiative to help make it easier for foreigners to start a
company in Japan. Apparently, the new program will be operated from the
Japan External Trade Organization (JETRO) headquarters in Akasaka, and
will work in close cooperation with the Tokyo Metropolitan Government
(TMG). The article talks about how terrible it is that it currently
takes 11 days to set up a company in Tokyo versus just 3 in Hong Kong or
Singapore. Because of this, JETRO and TMG will send personnel from their
different agencies to staff the new office, and will provide a one-stop
shop to speed dazzled entrepreneurs into corporate establishment here.

If this initiative sounds familiar, it's probably because it is.
Essentially, what JETRO and TMG are cooking up is a rehash of the very
same programs both organizations have been running for some years now,
and clearly they feel that two losers make a right.

In fact, we wish that the TMG and the state government would stop trying
to increase the number of foreign companies coming to Japan, because so
far it's been a waste of tax payer money and an exercise in
self-delusion. We have never seen any of JETRO's or TMG's programs make
a noticeable impact on the number of inbound foreign corporate set-ups,
despite, in JETRO's case, working on the very same problem for more than
20 years now. The yen, market segment profitability, and several other
factors are what influence the ebb and flow of businesses here, not the
challenge of some paperwork which in any case will only be executed once
in a company's life.

Now to be sure, it IS a pain to get a company set up in Japan. Why Japan
can't put its processes online and integrate the various agencies (such
as registration, tax, company filings, etc.) is beyond us. Perhaps all
the individual checkpoints in the company establishment process are just
too lucrative (in terms of fees), to let go of? Then, worse yet are
those local banks who think that inbound newcomer companies are unworthy
of receiving one of their sacred bank accounts.

But despite all this, it's the promise of profits that keeps a foreign
company interested in the Japanese market.

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[...Article continues]

We mentioned about a year ago (TT-751) that close to the top of every
foreign company's decision on where to locate its Asia operations is
taxes, proximity to market, size/vitality of that market,
infrastructure, and availability of resources. Unfortunately for Japan,
it falls down in 3 of these 5 metrics, and it is hard to see this
situation changing any time soon. What we can say with some certainty is
that being able to set up a company 8 days earlier is NOT going to
influence most people to choose Tokyo over Singapore or Hong Kong.

In actual fact, as a reference point, we had a recent experience in
setting up a company in Hong Kong, and can say that the paperwork is
just as onerous and time-consuming there as it is in Japan. If it really
does take an average 3 days to set up in Hong Kong, we'd like to see
what constitutes "average" because it seems to us that the Chinese
authorities have learned from Japan's bureaucratic playbook and have
tweaked it a bit (made it worse).

Rather, the Hong Kong statistic is more likely derived from the fact
that you can buy shelf companies there. They're easy and cheap, and in
fact getting one takes far less than 3 days -- more like 4-8 hours. We
set up our subsidiary for a group firm in Hong Kong because it is the
gateway to China and offers unique China-related legal rights not
available anywhere else. It also has very low taxes, although that
doesn't help the foreign subsidiary of a Japanese company that much.

Setting up in Singapore is also very easy, even when doing the
incorporation from scratch. We have just traveled to Singapore on
business, and learned that you can in fact set up a new entity there in
just one day. Further, in TT-783, we noted that you can now set up a
bank account in Singapore via your cell phone. The authorities there
reason that you already have substance by virtue of your ID card, so why
not accept that for the approval process? Singapore has such an
enlightened attitude towards business, it makes Japan look like it's
still in the Stone Age (bureaucratically speaking). No wonder you can
see so many foreign companies and foreign employees there.

Coming back to the JETRO-METI alliance, what is needed is NOT more
bureaucrats to be shifting paper. Rather, these two entities need to get
some real-world advice from foreign business people about what is needed
to bring more foreign firms here. Probably there have been some round
tables with local Chambers of commerce by the new team, but we haven't
heard about it. Furthermore, when you look at their boards of advisors,
there is not a single foreigner on them.

Then there is the need for professional PR, ah, yes, the bane of a
bureaucrat's life. They can never understand why you would want to pay a
private PR or marketing firm (let alone a foreign one that actually
understands foreigners) when you can simply strong-arm the local
newspaper to give you some press for free. Unfortunately, tired
messages, inadequate incentives, and unproductive programs, means that
any new actions are doomed to die an early death -- on the pages of the
Japan Times.

On the off-chance that just maybe someone in either the TMG or JETRO is
reading this, we will repeat the following prescription: "Interest by
foreigners in setting up businesses in Japan will only increase when:"

* The new Special Zones include a substantial 5-year (minimum) profits
tax break for newly arriving companies. Remember, for a company coming
from the USA and thinking "Asia" for the first time, Hong Kong,
Singapore, and Japan all look very similar, except that two of those
locations can also speak English. Therefore, for Japan to compete, it
needs to vastly increase its base of English-speakers -- or at very
least match up on taxes, with a special zone tax rate of 15%...

* Understanding that it is opportunity that creates a company's
commitment to expansion. Therefore, the JETRO/TMG authorities should be
making it much easier for newly arrived companies to meet Japanese
locals, network, and come up with ideas that pull the interest of the
local players. In fact, JETRO has been doing matchmaking programs
forever, but with not much success because they and their consultants
don't really understand the needs of foreign companies starting up here.
To fix this situation, we suggest to JETRO that they drop their allergy
to foreign consultants, and start putting a lot more of them on the pay
roll.

* Foreign companies need much more substantial assistance in hiring new
staff than JETRO and co. realize. It is good to see a subsidy for new
hires, but frankly the amounts being offered are pitiful and need to be
ramped up significantly. How about simply offering to pay the first full
year of any new bilingual staff member? It may sound radical, but the
government could limit the offer to 100 positions across 100 companies a
month to start, and see where that leads them.

* Connecting companies with investment funds, by creating a really
viable entrepreneur investment team and incubator -- something like both
Singapore and Hong Kong have and which have helped attract some very
successful companies over the last few years. If the Japanese government
can channel JPY60bn into something as opaque as the Cool Japan fund,
then surely it can put something like 10% of that amount into a VC fund
targeting foreign entrepreneurs wanting to set up in Japan. If
necessary, they can have the new fund dollar-match a selected group of
commercial funds (something like the VIF program in New Zealand operates).

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

Lastly, thanks to those readers who noticed the missing Terrie's Take
from last week (this edition, actually). For the first time in 17 years
of doing the Take I (Terrie) got sick enough to not be able to get the
newsletter out the door. Food poisoning, or maybe just jet lag, I'm not
sure. Luckily, it was a 24-hour thing, and I'm fighting fit again.

...The information janitors/

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

---------- Tracking Radiation with Citizen Science --------

The 4th Anniversary of Safecast and the 1st Safecast Conference - March
22-25th, Tokyo & Koriyama. Join us to explore the latest developments in
citizen science, radiation mapping and the future of open data.

SAFECAST SYMPOSIUM - http://safecon.io, March 22 in Tokyo
Discussion and lively presentations exploring recent developments in the
area of Citizen Science.

SAFECAST HACKATHON - http://safecon.io, March 23 - March 24 in Tokyo
48 hours to design, hack and make with the Safecast Team.

SUPER PRESENTATION IN KORIYAMA - http://fuku100.org/event/
March 25 in Koriyama
***********************************************************

+++ NEWS

- City banks read writing on wall re tourists
- Who needs nuclear? Not Japan it seems.
- Hotels acquisition stampede begins
- Fitness club memberships at 3 year high
- Teaching kids ways from the bad old days

=> City banks read writing on wall re tourists

Arrogance revealed? The WSJ ran a breathless article this last week
about the Big 3 City banks, Mitsubishi-UFJ, Sumitomo, and Mizuho,
finally agreeing to put in some ATMs that will connect to global banking
networks. The lack of ability to use Japanese ATMs has long been a thorn
in the side of foreign travelers, particularly business people, who tend
to travel cashless and withdraw a few local notes as and when they need
them. Now, after prodding from the government, Sumitomo, Mitsubishi-UFJ,
and Mizuho will upgrade 17%, 12%, and 1.8% of their ATMs respectively.
***Ed: One gets the impression that Mizuho still wants nothing to do
with foreigners. Only 1.8% of their machines will be connected -- hardly
seems worth their even trying.** (Source: TT commentary from wsj.com,
Mar 12, 2015)

http://on.wsj.com/19o1JIG

=> Who needs nuclear? Not Japan it seems.

Although the Abe government, pressured by the Keidanren, has committed
to bring all of the nation's nuclear power plants back online, the
resumption of nuclear seems interminably stalled due to public fears
stoked by ongoing problems at the Fukushima Daiichi plant. What's
interesting about this CNBC article is that it gives an actual number
for the cost-based impact on Japanese manufacturers caused by the lack
of nuclear power. That number is 30% of 5%, or in other words, a bit
less than 2% of all manufacturing cost inputs. ***Ed: At the same time,
the weakened yen has had a far more dramatic impact on industry, and Abe
doesn't seem to be too worried about that.** (Source: TT commentary from
cnbc.com, Mar 10, 2015)

http://cnb.cx/18suy5G

=> Hotels acquisition stampede begins

The realization that there may not be enough hotels over the coming five
years, let alone for the Olympics, has started dawning on local real
estate investors. This means that competition for hotels will be
increasing, particularly where the hotels come in a portfolio and thus
can be balanced for yield/culling. So it is that Fuji Media Holdings'
Sankei Building paid JPY5bn to outbid Morgan Stanley and Orix for a
10-property lot that came up on the market from government turn-around
fund REVIC. ***Ed: Expect to see a lot more action in the hotel
portfolio sector, as existing holders of property portfolios seek to
cash in.** (Source: TT commentary from reuters.com, Mar 13, 2015)

http://reut.rs/1HU73yN

=> Fitness club memberships at 3 year high

Economist Yasunari Ueno, at Mizuho Securities, has issued a note to
investors that membership income at sports gyms is at a 3-year high, in
a sign that he says is an example of consumers feeling more confident
about the economy. While he could be right, since Japan is now getting
used to the sudden jump in prices and wallets are slowly opening again,
we'd posit that given that January is the time most people think about
the coming year, it's possible that we're simply seeing the "spring is
coming" effect as well. Take a look at Ueno's graph and you'll see what
we mean. In fact, every late-winter period saw a jump in revenues --
although this year's is the best recently. (Source: TT commentary from
straitstimes.com, Mar 13, 2015)

http://bit.ly/1NXq6wC

=> Teaching kids ways from the bad old days

Very entertaining article from everyone's favorite
bamboo-curtain-lifting journalist Jake Adelstein. This time his sights
are set on the Minister of Educaction, Hakubun Shimomura, as Jake gives
an account of how Shimomura has been compromised by revelations in the
weekly news magazine Shukan Bunshun. The magazine did an investigation
and found that the man who is supposedly responsible for the moral
education of the nation's kids has more than a few morality problems
himself, including receiving funds from the Yakuza, accepting dubious
campaign contributions, lying in parliament about those funds, and
covering up his role in the whole sorry mess. ***Ed: One thing you can
be sure of with the LDP back in power: there will be a big increase in
scandals like this.** (Source: TT commentary from thedailybeast.com, Mar
10, 2015)

http://thebea.st/1DnUbT0

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.

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

+++ UPCOMING EVENTS/ANNOUNCEMENTS

No events to announce this week.

+++ CORRECTIONS/FEEDBACK

=> No corrections or feedback this week.

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

+++ TRAVEL DESTINATIONS PICKS

=> Sendai Top 10 Things To Do
The very best of Tohoku's capital

If you are traveling through the northeast region of Japan known as
Tohoku, you are likely stopping by or planning a trip to its capital
Sendai. With the city's bullet train, highway/night buses, and airport,
this transportation hub quickly manifested into a modern financial and
cultural center of the entire region. Nature, cuisine, samurai history,
this city has a little bit of everything without the over saturation of
Tokyo or the throngs of tourists in Kyoto. Here is the Top 10 things to
do in Sendai.

10. Ride the Loople Sendai The Loople Sendai is a convenient sightseeing
bus departing from JR Sendai Station. An all-day pass option allows you
to hop on and off at bus stops located near major tourist attractions
around the city center. The bus eventually returns to Sendai Station
after completing a 75 minute loop. It is also an excellent way to see
the city streets, Hirose River, and daily life of citizens.

9. Learn about Date Masamune Feudal samurai lord Date Masamune, better
known and feared by his enemies as the "One-eyed Dragon", founded Sendai
over 400 years ago. Many tourist attractions relate to him or his clan
predecessors. His story is one of struggle, violence, passion of the
arts, and everlasting achievements. Visit Sendai City Museum, Zuihoden
(Masamune's elaborate grave), and the Sendai Castle Site via the Loople
Sendai, public transportation, or a 30-minute walk from JR Sendai Station.

http://bit.ly/1BlLbXx

=> A view from the road on the walk from the station, Shizuoka
Villa Hamanako - rest and relax at this lakeside getaway

In western Shizuoka prefecture, Lake Hamana is Japan's 10th largest, a
popular place for locals and visitors alike to enjoy watersports, go
fruit-picking or just admire the scenery. One of the many places to stay
there is Villa Hamanako, a resort hotel on the lake's western shore,
within easy distance of Hamamatsu, Toyohashi and Nagoya.

It was clearly built as a destination in its own right, I imagine during
the bubble era, as there's more or less nothing to see or do nearby
other than the lake. It's about a 15-20 minute walk from the nearest
station, Chibata on the Tenryu-Hamanako rail line, which is also where
the nearest restaurants and convenience store are.

It's a place to relax: near reception there's a comfortable lounge with
lots of natural light, a compact bar, and a pool table, which may or may
not actually ever be used. Outside there's a refreshing-looking pool
with a wooden deck around it and a lot of comfy couches and chairs
nearby under colourful sunshades.

My room was in the 'Villa' part, a crescent on one side of a pleasant
lawn overlooking the lake. I had a decent amount of space, a comfortable
little couch and a massage chair, a nice big flat-screen TV, and an
imposing canopied bed like something from an Arabic queen's boudoir. The
decor was attractive, with simple, light colours, stylish lighting and
tasteful prints around the walls.

http://bit.ly/1EQ8Oij

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

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+++ ABOUT US

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

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