TT-852 -- API Software Wave About to Hit Japan, ebiz news in 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, June 05, 2016, Issue No. 852

- What's New -- API Software Wave About to Hit Japan
- News -- So, which nation's ship will be the first through the new
Panama Canal?
- Upcoming Events
- Corrections/Feedback
- Travel Picks -- Kamo River in Kyoto, JPY2,300/night hostel in Minami-Senju
- News Credits

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+++ WHAT'S NEW

For the last six months our sister company Japan Inc. Holdings (JIH), a
small consultancy specializing in market research and business
development for foreign high-tech firms, has been working for a U.S.
software company with a significant stake in the collaborative economy.
Specifically they develop API management software. What are Application
Programming Interfaces - "APIs"? Basically they are standardized
software interfaces that provide data communication between different
server-side databases and programs, and web/mobile applications.

For example, a company with inventory to sell will prepare an API and
look for partners wanting to sell that inventory online. The seller will
have an onboarding process, starting with some investigation of the
reseller, contracting, then sharing of API interconnection rules, and
finally live connectivity and the start of business. A sector with high
API usage is travel, where instead of painstakingly developing their own
database hotel by hotel, travel agents these days link through an API to
Booking.com and/or Expedia. In doing so, they get access to hundreds of
thousands of hotels and can pull that data into their own travel
management software so that they can use it to quote and re-sell to
customers.

The idea of a world connected by APIs is most powerful when it is
coupled with changes in how you do business - i.e., the collaborative
economy. Take almost any second tier wholeseller in Japan. In this
deflationary environment, these companies are slowly getting squeezed
out of business and their slow-moving inventory sits unused. In the
collaborative business paradigm they would open their inventory to
real-time orders via APIs, taking orders from anyone willing to connect
to their API. Then as their business recovers, they can expand their SKU
list, but not their inventory, by connecting via APIs to their upstream
suppliers or direct to the manufacturers. After doing this they can now
give real-time pricing and availability on products that are not even in
the country yet.

The keys to success for online sales are speed, detailed stock and
status data, efficiency of volume, and reducing manpower by piggybacking
on other companies for sales and supply.

------------ Japan Travel Group Tour Services -------------

Japan Travel KK is pleased to announce the formal launch of our travel
agency business, beginning with inbound services for overseas tour
groups. We are one of Japan's few foreign-owned inbound DMCs to look
after groups of 10-30, and we have already assisted school, business,
special interest, and extended family groups. We specialize in creating
unique experiences by crafting a blend of memorable destinations,
dining, activities, guide, and transport options.

What does your group want to do? Drive private cars in a convoy around
Hokkaido for a week while visiting remote onsen? Board buses and
experience a series of mountain-side sake breweries and whiskey
distilleries? Cycle for 5 days around the rustic shoreline of Noto
Peninsula in Ishikawa-ken? Take a simple Tokyo-Kyoto tour but with only
vegan or halal dining? We can arrange any of these tours, combining them
with our signature 24x7 multilingual support center, SIM cards, and
multilingual guides.

If you have a group needing assistance, we invite them to contact us at:
tours@japantravel.com.
Or visit our pages at: http://japantravel.co.jp/en/about/travel-agency/
-----------------------------------------------------------

[...Article continues]

The API business sector internationally is centered in North America,
although it is rapidly expanding out to Europe and now South Asia. The
sector got started in California in 2006 and has really exploded in the
last 3 years. We think this is partly because the whole concept of
piggybacking at low cost on someone else's resources really started to
gain traction when Amazon's AWS webhosting service started taking off -
around that time. Nowadays in the U.S., if you're a company trying to
sell something over the web, you are not going to be taken seriously by
resellers unless you have an operational API. This new reality is on its
way to Japan.

How big is the API market? (Actual software market, not the value of
transactions over APIs.) In the USA, the consensus seems to be that
sales in 2015 of API software and management platforms was about
US$500m, with another US$500m for the rest of the world - mostly
centered on the EU. These numbers are up from almost zero in 2013. The
API revolution hasn't hit Japan yet, but a number of the big players are
already here.

What do we see as happening in the API marketplace in Japan and what
will the trends be over the next 5 years?

1. Reluctance to share
Japanese companies were historically run by a single family, and the
idea of a "one-man" company (where the founder runs the place with an
iron first) is still very popular. For these firms, the idea of sharing
internal information with another firm, even an ally, via APIs is an
alien concept. Generally Japanese firms don't like to bring in outsiders
until the get so large that they can impose their system requirements on
to the collaborating firm, which is expected to kowtow to those
requirements in return for being able to receive crumbs from the
superior firm. That said, there are enough start-ups today with
cash-starved founders, that alliancing through APIs may be seen as a
natural growth move. Given that Japan is a group-oriented country, in
the end we think that the API-connected collaborative economy is well
matched to Japanese values.

2. Disconnection of business managers from IT innovators
In JIH's presentations to more than 25 Japanese technology firms,
end-user candidates, and private equity firms, the team was surprised
how few companies, maybe 5 or so, actually understood what an API is and
how it could help them or their customers' businesses. So if this is the
situation among the IT/SI specialists, clearly there is even more
education required among the end users themselves. Probably driving the
market forward by education is going to be too slow, and just as in the
U.S. the Japanese market will respond to success stories as small
challengers sector by sector suddenly appear and start overwhelming
incumbents. This is already starting to happen in the travel sector due
to the high ratio of foreign firms already operating in Japan. We
believe that consumer finance, entertainment, and eCommerce are next.

3. Lack of API software/business development skills
While using APIs is not difficult for a trained engineer, creating
the API in the first place requires not only software knowledge but also
a good understanding of the system it is to access and the business
rules needed to make functions available to a business partner. In
IT-challenged Japan, there will also be many cases where a connecting
system is not yet automated and thus not able to support the real-time
interaction that APIs normally give. Since most Japanese companies are
still only just learning about APIs, probably it will be at least 2-3
years before API development skills become commonplace - a good
opportunity for some enterprising company.

4. Early stage of Japan's collaborative economy
While one would expect that the Japanese API business would arise from
internet players who already sell online and who are used to automated
sales, because these companies are used to working inside the walled
gardens of Rakuten and A8, they are unlikely to move unless the rewards
are easily within reach. Therefore, collaboration on an open basis will
be impeded for a while - much like Japan's domestic PC and mobile
products impeded forward movement in those sectors (the so-called
Galapagos syndrome). Instead, the first API wave will probably come from
Japanese firms dealing with foreign ones abroad, who are demanding API
interaction or nothing at all. Once these firms have figured out what
APIs can do for them, then they will start applying that knowledge
within Japan as well.

So we can see from the above that the API collaborating economy will
probably grow initially through the B2C sectors, where Japanese
consumers are already buying significant volumes of products and
services, and thus if API connectivity leads to better service, the
customers will naturally buy the offerings. From what we can see, this
means travel, apparel, food, consumer finance, online gaming,
crowdsourcing and crowdfunding communities, and a never-ending list of
sports-cultural-activities communities needing to organize and move people.

If you're an importer, your opportunity is to make your inventory
available by API to domestic online resellers, who can give you reach to
tens of thousands more people than you can reach at the moment. If
you're a marketing firm, APIs can give you access to the inventories of
manufacturers overseas, and instead of keeping substantial stock here in
Japan you'll be able to quote for supply directly out of an
international warehouse. This is something Dell and other PC firms have
been doing for years.

The existing players who will be most impacted once the API wave hits
will be larger software companies who are not ready for the wave and who
will be outmaneuvered by first-mover start-ups. Not all software
companies are unprepared, though. For example, we note that Fujitsu is
about to launch its K5 cloud stack and they have APIgee embedded in there.

Online affiliate marketing and conventional marketing/sales companies
will also be hurt. Companies such as ValueCommerce, Amway, A8, and many
others will find that sellers and publishers will start connecting
directly with each other by registering on API directory sites (which
are coming). eCommerce giants such as Rakuten and their
bricks-and-mortar competitors are also likely to be hurt, because the
supplier-seller relationship will change and they will become more
logistics fulfilment agents.

...The information janitors/

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

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

+++ NEWS

- Uber's future in Japan is small towns?
- Injunction to forestall anti-Korean protest
- Tourist "gaiatsu" to reduce taxi fares
- Trucking firms collaborate with "relay" system to overcome driver shortage
- So, which nation's ship will be the first through the new Panama Canal?

=> Uber's future in Japan is small towns?

When you have billions in the bank and a mission to take on the whole
world, you can afford to have the occasional diversion. In Uber's case,
being shut down by the Japanese authorities in the major cities, the
company has decided to make itself socially useful in the back blocks of
Japan. Uber's first permitted service will be in a small 5,500-person
village called Tango, in Kyoto Prefecture, where the 40% of the
population is 65 or over and where the local taxi company stopped
providing service back in 2008. ***Ed: Hard to see how Uber will make
money out of this. The sole local taxi driver was complaining that even
he didn't get enough customers. Uber's first driver is 68 and only wants
to drive when it's raining and he can't go hiking. Oh, and Uber is
having to supply 50 iPads and training to the old folks, so they can
hail the drivers in the first place.** (Source: TT commentary from
fortune.com, Jun 03, 2016)

http://for.tn/1Y8WpOL

=> Injunction to forestall anti-Korean protest

Since the passing of a hate speech law several years ago, anti-Korean
activists have been placed on notice by civic groups wanting to stop
them. Now, for the first time, the Kanagawa district court has issued an
injunction to stop an anti-Korean protest planned against a Korean
residents organization called Seikyusha. The injunction was taken out
against the leader of an anti-Korean activist group also based in
Kanagawa-ken. ***Ed: Proponents of free speech decry hate-speech laws,
just like they decry Google gagging by the EU. But the fact is that
unless we allow victims absolute freedom to deal with their trolls -
like getting rid of them (something we certainly don't endorse) - then
appropriate laws are the only way to set limits on such people. This is
nothing new and it's why we have libel laws.** (Source: TT commentary
from japantimes.co.jp, Jun 03, 2016)

http://bit.ly/1Xt9YKc

=> Tourist "gaiatsu" to reduce taxi fares

Remember we said that inbound tourism would be used as pressure on the
bureaucrats ("gaiatsu") to change laws? A perfect example of this is
taxi companies who are dominated by the Ministry of Transport. Now, the
ministry has agreed to allow taxi companies in metropolitan Tokyo to
drop their minimum pickup tariff so as to increase the number of
tourists hopping short-distance rides. The current minimum fare of 730
yen for the first two kilometers would fall to JPY410 for the first
1.059km and 80 yen for each extra 237m. The new fares could kick in by
the end of this year. ***Ed: It's beyond us why the Ministry even feels
the need to regulate taxi pricing. Surely open competition is fairer to
the consumer, and would allow innovation of the sector - for example
ride sharing (in taxis or Uber).** (Source: TT commentary from
mainichi.jp, Jun 04, 2016)

http://bit.ly/1WAD4X9

=> Trucking firms collaborate with "relay" system to overcome driver
shortage

There is a very interesting experiment going on in the long-distance
trucking industry, where the trucking subsidiaries of two major Japanese
retail brands are collaborating to overcome a chronic driver shortage.
The two companies, supermarket operator Aeon and cosmetics maker Kao,
have decided to start a relay system to move products between distant
distribution centers. Under the system, trucks from Kao will meet up
with trucks from Aeon mid-way between centers, swap 20-ton trailers, and
return to their home base. In doing this, product can be moved further
without having to pay driver's overnight accommodation and overtime.
***Ed: Actually, this problem is even more pronounced in the
long-distance bus business, where to drive passengers further than 500km
or 10 hours you need to have two drivers (2014 law change). So swapping
passengers at a switch point could have a huge pay-off for the bus
companies. This practice is not widespread yet, but once relaying takes
hold in the long-distance trucking industry we believe it will soon
spread to the long-distance bus industry as well.** (Source: TT
commentary from nikkei.com, Jun 04, 2016)

http://s.nikkei.com/1U6dAPb

=> So, which nation's ship will be the first through the new Panama Canal?

At the end of April, France's Agence France-Presse ran an article
stating that the prestigious right of being the first vessel to transit
through the newly expanded Panama Canal, a US$7bn widening effort to
triple the number of vessels using the canal, would go to China Cosco
Shipping Corporation (COSCOCS) after the company won a lottery to select
the pole position. HOWEVER, just this last week, the Nikkei ran an
article stating that now the first ship through would be a Nippon Yusen
LPG tanker, and that Nippon Yusen is one of the canal's biggest users.
***Ed: So more intrigue. What's going on? Did the Japanese government
pay for Nippon Yusen to have the honor of being first through? Or did
the Panamanian government step in and slap China on the face because
China is reportedly secretly backing an alternative canal through
Nicaragua?** (Sources: TT commentary from nikkei, Jun 03, 2016 and
industryweek.com, Apr 29, 2016)

* http://bit.ly/1UkOEQb
* Nikkei comments on the same topic

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

------------------ ICA Event - June 22nd------------------

Speaker: Paul Chapman - CEO, Moneytree K.K.
Title: "Moneytree in Japan: Bringing banks to technology, not technology
to banks"

Details: Complete event details at http://www.icajapan.jp/
Date: Thursday June 22nd, 2016
Time: 6:30pm 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 1pm on Friday 17th June 2016. Venue is The Foreign
Correspondents' Club of Japan.

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

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

+++ TRAVEL DESTINATIONS PICKS

=> A Walk Along Kamo River, Kyoto
Culture on the banks of the Kamogawa

To cap off my Kyoto trip, I opted to walk through the lovely Kamogawa
River district during the afternoon. It was the perfect place for people
and bird watching - an area to get away from the crowd - as I had tried
and failed to wait until sunset.

The Kamogawa, which translates to "Duck River", runs throughout Kyoto
Prefecture. It is a long stretch of water running from the Kyoto Basin
down south to the Yodo River. The walkway caters to locals mostly who
are going out and about their daily lives. Tourists also seek this spot
to enjoy the sound of the river flowing and for a breath of fresh air,
relaxing away from the massive crowd of Kyoto. During the summer,
restaurants open their balconies looking out onto the river. This is
called "Noryo Yuka" where people enjoy outdoor dining to enjoy the cool
breeze of the evening with their food.

The Kamogawa is best to be visited during dusk, or just when the sun is
about to set. Afterwards, you can walk through the winding alleys of
Gion, beautifully lit up by street lights and traditional lamps.

http://bit.ly/22G910j

=> Aizuya Inn, Tokyo
A nice, laid back and friendly budget hostel

The Aizuya Inn is a fifteen minute walk from Minami-senju Station on the
JR and Hibiya lines. One can rent a private room at Aizuya Inn starting
at just ¥3,400 per night, or a shared room from just ¥2,350 per night.
The Manager, Raoul, welcomed me in a very friendly way and instantly
made me feel at home. Aizuya Inn is able to assist its guests in
English, Japanese, French, German, and Italian. This was definitely a
breath of fresh air after staying at many places where only Japanese was
spoken. Raoul was helpful and willing to share his knowledge of Japan.
He gave me a brochure of Tokyo and a railway map to make sure I could
navigate the area easily.

The private, Japanese-style room was quite small and consisted of a
traditional futon. There was a flat screen television and a pinboard
with some of the many services the hostel offers. The room was clean,
the sheets smelled fresh and there was a big sliding window overlooking
the street. Aizuya Inn had a very nice, laid back and friendly vibe.
Other guests are friendly and easily engage in conversations while
hanging out in the living area.

http://bit.ly/1U1WoJx

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

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

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

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