EURObiZ Japan October 2010 by Paradigm

Erica Borile Vera Italia president

A taxing issue

Sweet success

Importing the real Italy

Changing corporate and consumption tax

Japan loves Chupa Chups, Vera Italia Frisk and Mentos

2010

THE MAGAZINE OF THE EUROPEAN BUSINESS COUNCIL IN JAPAN / THE EUROPEAN (EU) CHAMBER OF COMMERCE IN JAPAN

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TAX

FOCUS

10 A taxing issue

14 Contractual difficulties

20 Home green home?

How should Japan avoid fiscal disaster: raise consumption tax, lower corporate tax, or both? Paul Jackson reports.

Why are EU companies shut out of procurement contracts worth trillions of yen, asks Gavin Blair?

Waiting for Japanâ&#x20AC;&#x2122;s huge construction sector to adopt sustainable building technology. By Rob Goss

CHAMBER SPOTLIGHT

28 The Swiss Chamber of Commerce and Industry in Japan builds on Switzerlandâ&#x20AC;&#x2122;s reputation for quality and stability.

October 2010

1648

56 30

Cover photograph Tony McNicol

COLUMNS 7 From the Editor 16 Q&A

32 Who’s Who Directory IT & Telecommunications

Japan’s inward foreign direct investment is tiny compared to other large economies. We ask JETRO president Michitaka Nakatomi what his organisation is doing to encourage investment from the EU.

38 In Committee

27 Executive Notes Territorial squabbles are bad news for both Japan and China, writes Dan Slater of the Economist Corporate Network.

Christopher S Thomas visits a modern house that uses Edo period technology, and finds that pre-modern architects knew plenty about sustainable construction.

30 Investing in Japan

42 Industry Experts

Perfetti Van Melle’s confectionary products, Frisk, Chupa Chups and Mentos, are hugely successful in Japan. That’s thanks to in-depth knowledge of the local market – and some adroit advertising, reports Rob Goss.

The EBC Tax Committee is calling for more accountability, confidentiality and transparency, finds Geoff Botting.

41 Green Biz

Legal Services

47 Event Report Belgian beer comes to Tokyo. Kanpai!

48 Culture Shock

practitioner of reiki, a system of healing developed by Buddhist monk Mikao Usui in the 1920s. She talks to Alena Eckelmann.

50 Talking EURObiZ Magellan president, Alison Pockett, tells Justin McCurry about financial planning, why it is never too early to prepare for the future, and why every crisis is an opportunity in disguise.

52 Lens Flair Rob Gilhooly takes a stroll through Tokyo’s funky Shimokitazawa district.

55 Upcoming Events Europe and Japan business-related events.

56 Work Place Erica Borile is president of Vera Italia, importers of authentic Italian goods.

Bulgaria-born Petya Lowe is an expert

The Mission of the European Business Council To promote an impediment-free environment for European business in Japan.

October 2010

Publisher Vickie Paradise Green

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The European (EU) Chamber of Commerce in Japan

Editor-in-chief Tony McNicol

The EBC is the trade policy arm of the seventeen European national chamber of commerce and business associations in Japan

tonymcnicol@paradigm.co.jp

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Paul Jackson writes about tax reform, page 10

Gavin is a freelance journalist who covers Japan for The Christian Science Monitor, The Hollywood Reporter and Global Post, as well as magazines in Asia, Europe and the United States. “Hearing about the variety of means still employed to restrict European businesses’ access to Japan’s huge public sector market was a real eye-opener.”

Alena Eckelmann was energised by reiki practitioner Petya Lowe, page 48

Alena, born in the former East Germany, came to Japan from the UK to join an executive training program in Tokyo, and she has been here ever since. A researcher

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everything from arts and entertainment to the latest social trends. “Britain has Europe to thank for its equivalent of the consumption tax, which was conveniently foisted upon the country as a condition of joining the EU [then the EEC] back in 1973. Now it looks as if Japan has Europe to thank, or curse, for consumption tax-related discussion. The Greek debt crisis has helped break Tokyo’s taboo on talking about a sales tax hike but, as we saw in the upper house election, the issue still remains one of Japan’s hottest political potatoes.”

Gavin Blair reports on procurement, page 14

at heart, she enjoys hands-on discovery. Her articles on Japan’s rich traditions and regional heritage have appeared in a number of magazines in Japan. “We tend to believe in what we see. However, material things do not necessarily lead to a sense of well-being of the body and mind, nor do our logical actions, as wellcalculated as they might be, always bring the results we desire. Approaching energy work and ancient healing methods with an open mind, I have found that reiki is both valuable and practical for the 21st century.”

F rom the E ditor

The trouble with tax

inbox

Global Competitiveness Report

2010-2011 (2009-2010)

Switzerland

(1)

Sweden

(4)

Singapore

(3)

United States

(2)

Germany

(7)

Japan

(8)

Finland

(6)

Netherlands

(10)

(5)

(9)

Denmark Canada

of eight. Number one was Switzerland, the subject of our Chamber Profile this month (page 30). In our Q&A (page 18), tax reform and other measures to improve ease of doing business in Japan are discussed by JETRO president, Michitaka Nakatomi. His organisation is tasked with increasing foreign direct

Lost for words Thank you for such a brilliant analysis! (Tongue-tied: Why do EU companies struggle to find good English-speaking staff? September 2010) Being the only true gaijin (one western guy out of 160 employees) in my company, I can confirm that, amazingly, most Japanese people can’t speak English. My company specializes in the import-export business and has many daily exchanges with foreign countries. But I would probably say that we’re not doing so bad compared to Japanese domestic market orientated companies where the situation might be even worse than it appears. [Nevertheless] Japan can still produce high-level, reliable, very competitive and sophisticated goods such as cars and electronics – which are much-appreciated world wide. I won’t even mention the unrivalled service-quality we have here. I feel like I have travelled back in time when I go back to France and try to find a taxi driver who is nice enough to drive me home. I love Japan so much, but I’d like it to wake up and open up some day Julian Arnaud

World Economic Forum

This month we focus on something everyone loves to hate: tax. In our main feature (page 10) Paul Jackson looks at ways the government might repair Japan’s finance, namely raise consumption tax (one of the lowest rates in the developed world), or lower corporate tax (one of the highest). The EBC Tax Committee is profiled (page 40), and Geoff Botting hears about tax issues affecting companies in Japan – problems with accountability, confidentiality and transparency on the part of the tax authorities. Tax rates and tax regulations were highlighted in the World Economic Forum’s Global Competitiveness Report 2010-2011 as major impediments to doing business in Japan. Only political instability was reported as more troublesome. Yet, Japan was still ranked six in the report, an improvement from last year’s ranking

investment into Japan, still miniscule compared to other major economic powers. Nowhere are barriers to investment and trade more prevalent than in the procurement market (page 15). EU companies are almost completely shut out of deals worth trillions of yen, although writer Gavin Blair finds signs of progress – and that some EU companies are beating the odds to do business. If you’d like to share an opinion on tax issues, the business environment in Japan, or JETRO’s efforts to increase FDI, please write to us at eurobiz@paradigm.co.jp Tony McNicol Editor-in-Chief

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taxing issue

TAX

TAX A Raise consumption tax? Lower corporate tax? Or both? Text Paul Jackson

t last politicians here seem to be taking the problem of Japan’s shocking finances seriously. During the upper house election campaign both ruling and opposition parties talked about raising the consumption tax from its current level of 5%. Greece’s debt crisis has opened people’s eyes to the fact that debt problems cannot be ignored forever. At about 200% of GDP, Japan’s public debt is the biggest in the industrialised world and it’s getting bigger all the time. For this year’s budget of ¥92.3 trillion, the

October 2010

government is actually borrowing more money than its combined tax revenues. Breaking the political taboo of a sales tax hike has triggered countless headlines, but what at first glance seems contradictory is that those same politicians have also been calling for a reduction in the corporate tax. Surely, it can’t make sense to raise one tax and lower the other? Most observers would agree that to tackle Japan’s debts, the government must cut spending, increase revenue and boost economic growth. Raising the sales tax would fill the coffers while many argue that cutting corporate taxes would stimulate the economy. “The problem with Japan’s finances

is that we have a huge shortfall in revenue,” says Yasuhisa Abe, director of Nippon Keidanren’s Business Infrastructure Bureau. “Putting the DPJ’s manifesto to one side, if we just look at the nation’s social security costs, they’re rising each year by almost ¥2 trillion. How can we cover these costs in a nation that’s shrinking and greying? Raising the sales tax is the only way.” Abe dismisses the argument that Japan is safe from a financial crisis like Greece’s because its bonds are 95% domestically owned. Japan will soon reach the limit of domestic demand for bonds, he argues, and it’s not a question of 10 years or even five. Takero Doi, an economics professor at

F ocus 20% 15% 10% 5%

Ita ly

UK So * ut Un h Ko re ite a d St at es †

Ja pa n

Fr an ce

Ge rm an y

* UK consumption tax (VAT) will rise to 20% from January 2011 † United States sales tax is set state-by-state

Corporate Tax (%) 50% 40% 30% 20% 10%

Ita ly

UK So ut h Ko Un ite rea d St at es

Ge rm an y

Ja pa n

Fr an ce

KPMG - Corporate and Indirect Tax Rate Survey 2009

United States Council for International Business, 2010

Consumption Tax (%)

Keio University, is also calling for a hike in the consumption tax rate as part of comprehensive tax reforms that would see the income tax base widened, deductions replaced with tax credits and corporate tax rates lowered. “We can no longer put off dealing with our debts. So, while trying to minimise the tax increase and potential harm to economic growth, the question is which tax to raise,” Doi says. “That tax is the sales tax. “Research shows that countries with higher rates of income and corporate tax have lower growth, while countries with higher rates of consumption tax have relatively higher rates of growth,” Doi says, referring to a long-term study of Organisation for Economic Co-operation and Development (OECD) data. While a higher consumption tax rate might have a less detrimental effect on

growth than higher income or corporate tax, when it comes to actually boosting growth, cutting tax on profits is the strategy recommended by many, including Doi. The argument goes that reducing corporate taxes frees up more cash for companies to reinvest in future products and expansion, while it also helps attract foreign direct investment and keeps domestic firms investing at home. “At the moment companies are investing based on their own cash flow, so unless that cash flow is somehow increased, investment can’t rise beyond current levels,” says Naoyasu Yoshimura, deputy director of the corporate tax division at the Ministry of Economy, Trade and Industry (METI). But perhaps the most striking point is that while Japan’s corporate tax rates are at a similar level to those of the United States, they are much higher than those in Europe and many parts of Asia. “Combining the national and local rates, corporate tax [in Japan] is 40.69% ,” Yoshimura says. Most European countries, on the other hand, now tax company profits at rates well below 30%. Differences in tax rates, Yoshimura says, are prompting firms in Japan to move their production and financial operations to countries with lower taxes. “This means lost employment and opportunities for future growth in Japan. It’s probably not a good thing for the world to engage in a race to lower corporate taxes, but since most major nations have corporate tax rates between 25% and 30%, this is the level we have to show a clear sign of working towards.” This June, METI called on the government to cut the tax by five percentage points in fiscal 2011. Yoshimura

The argument goes that reducing corporate taxes frees up more cash for companies to reinvest in future products and expansion

acknowledges this would only be a “first step”. But for foreign companies, he says, it would reduce the time needed to recoup investment in Japan, even if it might not be enough to convince them to establish their Asian headquarters in Japan. Keidanren’s Abe says there’s no correct figure for corporate tax in absolute terms. It can only be high relative to rates in other countries. But if Japan’s rate stays where it is, Abe too is concerned about domestic firms moving their operations abroad. “The corporate tax comes down to a question of employment,” he says. “Panasonic, Sony, Toshiba, Hitachi, they are Japanese brands, but look at the back of their products and you’ll see made in Taiwan, Malaysia, China. That’s the current state of electrical goods. “We’ve been saying the same thing will happen with cars, and it’s already happening with Nissan’s March. If the auto industry moves out of Japan, we won’t be able to maintain existing employment levels in this country.” For Abe and Yoshimura the issues surrounding the two taxes are clearly separate. For his part, Doi stresses that, while a 10% cut in the corporate tax could be compensated for with a 4% rise in the consumption tax, it’s not a question of using a tax hike to finance

October 2010

FOCUS

a tax cut or a case of consumers versus corporations, since everyone benefits from economic growth. Abe says there is also a difference in relative importance. Perhaps surprisingly for a business lobby representative, he says the need to raise the sales tax is more pressing than cutting the corporate tax. But Tommy Kullberg, EBC chairman, says there should be no more waiting for a reduction in corporate tax rates. “What we need is stimulus on the growth side,” Kullberg says. “Look at all the stimulus we’ve already had. The government has even been handing out cash to people, but how much growth has it created in the Japanese economy? People are just saving it.” Kullberg adheres to the view that the corporate tax rate is an advert for a country and stresses that a lower rate can encourage companies to invest. He cites the example of his home country of Sweden which, despite its reputation for high taxes, has a rate of 26%. “There’s no doubt it’s triggering foreign direct investment, and that’s what we need in Japan to increase competition and get protected Japanese companies back in business,” he says. Kullberg talks about FDI as if it were a jump lead for sparking Japan’s stalled economic engine back into activity after two lost decades of stagnation. He refers to the impact on Japanese competitors of two companies he has been involved with, IKEA and H&M, in “stimulating business, not killing it”. Exposure to the toughest competition in the world is what drives development, he argues, not clinging to established practices of the past. An anecdote about a recent shopping trip for a TV back in Stockholm well illustrates his argument. “We could hardly find a Sony. When we did, it was in a corner. It looked thick and the technology old. Samsung and LG TVs from South Korea were top-of-the-line in terms of price and quality, and standing out en masse everywhere. This is a dramatic change compared to when we last bought a TV 10 years ago. Japan has not kept up with the competition.”

Boost growth But if the need to lower the corporate tax and boost growth is such a no-brainer, why hasn’t the Japanese government already done it? “Let’s sit in the chair of the Japanese minister of finance,” says Hans-Peter Musahl, a partner with Ernst & Young Shinnihon Tax in Tokyo who handles international and transaction tax services. “First of all, he has far less tax revenue than if he were in a country in Europe.” While Japan generated tax revenue equivalent to 27.9% of its GDP in 2007, most countries in Europe had tax revenues between 30% and 48% of GDP. In the case of France, the figure was as high as 43% of GDP, he says. “The result is that Japan needs to finance its spending by taking on debt, the limits of which have been made clear by the financial crisis,” explains Musahl, who is also head of the EBC Tax Committee. “Japan is paying interest on 200% of its GDP.” “If I were sitting in the Ministry of Finance and somebody requested a significant corporate tax reduction, I would simply say, ‘How can I finance it?’ This is where the dilemma starts,” Musahl says. According to Musahl, the corporate tax rate in Japan, which is at a world high of 42.1% in major cities such as Tokyo, also provides a relatively high proportion of tax revenue at about 20%, compared with less than 10% in Germany, for instance. Raising the consumption tax seems like a more practical proposition, considering the much higher rates in Europe of 15% to 25%, he points out. But Japan has been wary of doing this, he says, partly for fear of sparking a recession, as happened when then-prime minister Ryutaro Hashimoto raised the tax from 3% to 5% in 1997, a move Musahl describes as “the right thing to do at the wrong time.” Nevertheless, Musahl believes a compromise can be reached. The corporate tax rate could be lowered, with countermeasures – such as restricting the change to companies of a certain size, or by discontinuing certain tax benefits – introduced to help compensate for the loss in revenue.

If the need to lower the corporate tax and boost growth is such a no-brainer, why hasn’t the Japanese government already done it? In the case of the consumption tax, maintaining or reducing the rate on essentials such as food might make it easier to raise the tax on other items. Increments of two percentage points in alternate years could limit the shock to the economy. Regarding the effect on European firms, Musahl says a consumption tax increase would have a similar effect on everyone, although the double burden of consumption tax and acquisition taxes in the case of vehicles is a cause for concern. On the other hand, a reduction in the corporate tax rate would be very positive for successful European firms already based in Japan. That being said, companies looking to enter, or in the process of entering, the Japanese market – a process Musahl describes as a five to ten year undertaking – might prefer to see the period for carrying over losses extended from the existing limit of seven years. For Kullberg, lower corporate tax rates would encourage existing European firms to “take a fresh look at their operations” and move away from a low market share/high margin model, and to operate more like they do in the rest of the world. Following his line of argument, that would not only be good for them, but also be good for the Japanese economy – and, by extension, those empty government coffers.

Do you have an opinion on this topic you’d like to share? Please post comments at www.eurobiz.jp or send them to eurobiz@paradigm.co.jp

October 2010

Contractual difficulties Why are EU companies shut out of procurement deals worth trillions of yen? Text Gavin Blair

October 2010

Japan procurement market (2007) Open €22 bn Potentially open €74 bn

Total size €565 bn Closed €469 bn

spurring Japan to consider a similar arrangement. There are concerns on the European side, however, that without meaningful domestic reform, many of the current problems with non-tariff measures (NTMs) could continue even after an agreement is implemented.

Copenhagen Economics

very year, the central and local governments of Japan, along with other public entities, buy an estimated €565bn worth of goods and services. According to a report for the EU by consultants Copenhagen Economics, less than 4% of that market – amounting to €22bn – is in theory accessible to European firms. On the other hand, at least 13% of the EU public procurement market, €312bn, is open to Japanese firms. Despite international agreements, political pressure and the best efforts of foreign chambers of commerce this huge imbalance persists. Now a new trade deal – the biggest since NAFTA – with one of Japan’s main industrial rivals, is causing the country’s business leaders to rethink the issue of openness. The EU-Korea Free Trade Agreement, originally signed in October last year and edging towards full ratification, has been

And while the new Democratic Party of Japan (DPJ) administration has pledged to reduce unnecessary public spending to help rescue the nation’s finances, there has been little or no mention of how truly opening up public procurement could contribute. Japan is a signatory to the World Trade Organization’s Agreement on Government Procurement (GPA), but that doesn’t ensure all sectors are open to foreign companies – or a truly level playing field when they are. “Under the GPA, countries can elect to open up certain sectors to each other and negotiate the details over those,” explains Nikolaos Zaimis, head of the trade section at the Delegation of the European Union to Japan. “A big issue for us is how much of this €22bn ‘open in theory’ part of public procurement is actually open,” says Zaimis. “There are rules, regulations, standards and specifications that prevent access.”

FOCUS Zaimis cites the example of railways, where foreign companies are almost completely excluded from bidding due to “operational safety” clauses – widely viewed as a pretext for protectionism. “These have been invoked in something like 98% of contracts. So in practice only about 2% of the railways market, around €2bn, is open to us.” Japan’s public works construction market, despite having shrunk from its bloated heyday, remains both huge and largely inaccessible to foreign competition. Japan is ostensibly committed to opening all public construction projects above a certain amount to bidding by foreign companies. That figure is 15m Special Drawing Rights (SDRs, an IMF device based on average values of the US dollar, euro, yen and pound that compensates for the effect of currency fluctuations). In the EU, the level is only 5m SDRs. “It’s legal, that’s how it was negotiated,” says Zaimis, “but there is an imbalance.” A number of NTMs are regularly used to disadvantage European bidders, including artificially breaking down larger contracts into smaller segments that fall below Japan’s GPA threshold. This can also be done according to the “single fiscal year budgeting policy”. “This is the breaking up of big projects into one-year phases, which makes little sense,” explains Andrew Gauci, CEO of Bovis Lend Lease Japan. “It’s very inefficient and can lead to situations like there being two cranes on a site for three years when they only need to be there for one if the job had been bid as one clear package.” The result of the difficulties faced is that many foreign firms in the sector have simply given up, according to Gauci. “Almost every big international contractor has come to Japan and then packed up and gone home.” There have, however, been moves in the right direction, says Gauci. “It

has got better, the ‘comprehensive evaluation bidding system’ [a format for assessing bids that emphasises factors such as technical specifications and time performance] means that the technically best bid has a chance of winning, and this has helped stop bid rigging to some extent, though cases do still come up.” Meanwhile, in other areas progress remains to be made. “There are materials/technology from Europe that are better than some of what is being used here, but it can take so long to get them approved,” says Gauci. Understanding the system Still, not every company in the sector experiences such difficulties, reports Yoko Tajika, the technical manager in Japan for Halfen, a German supplier to the construction industry. “We haven’t encountered any problems obtaining approval for materials in Japan,” she says. “If you understand how the system works and how to prepare the application documents properly – and it helps that I’m Japanese – then it’s not such an issue.” Another European company that has leveraged local connections is Tomra Japan, a subsidiary of a Norwegian company that manufactures and maintains automated recycling machines for cans and bottles. “As with many foreign firms, we’ve had to overcome the concern of whether we’re here for the long term. One way we addressed this was by entering with Sumitomo into a fiftyfifty joint venture, which became operational two years ago,” says the president, Trond Varlid. “It’s definitely improved the situation when we have discussions with municipalities.” Such local governments are Tomra’s main customers, although things are still not always plain sailing. “The complicated laws on PET bottle recycling

Japan’s public works construction market, despite having shrunk from its bloated heyday, remains both huge and largely inaccessible to foreign competition are sometimes brought up as a kind of excuse in negotiations with municipalities that can say what we do is not actually officially approved,” explains Varlid, “though on a day to day basis, we don’t really face discrimination as a foreign firm.” A recent positive development is an agreement by 41 WTO members, including Japan, to shift to an e-bidding system for public procurement. Although this only applies to central government contracts, many of which are already online in Japan, it should improve transparency. Access to local government procurement remains a key issue for the European side. “There are still problems to be worked out about the lack of information available,” says a government official who isn’t authorised to speak publicly on the issue. “It would be good to have all the information on public procurement tenders on one website, as in Europe. In fact, I think it would be convenient for Japanese businesses too.” Were the Japanese public procurement market to be opened up to foreign companies to the same extent as the EU market, an additional potential annual market of around €375bn for European firms to bid for would be created. With stakes that high on both sides, there will be tough negotiations ahead. October 2010

Attracting investment

EURObiZ Japan talks to Japan External Trade Organization (JETRO) president, Michitaka Nakatomi Photos Rob Gilhooly

October 2010

Q&A

Japan’s inward foreign direct investment is tiny compared to that of other large economies. JETRO president, Michitaka Nakatomi, explains his organisation’s efforts to encourage investment from the EU. How much foreign direct investment (FDI) does Japan attract, and how much comes from Europe? Japan’s inward FDI at the end of 2009 was ¥18.4 trillion, which accounts for 3.9% of our GDP. If we look at the areas where that FDI comes from, then Western Europe is very important. Europe accounts for 41.9%. Europe’s share of Japan’s total trade has been dropping recently, but that’s not the case for FDI, which is very good. The government’s target for FDI is 5% of GDP, to be reached by the end of 2010. Will that be achieved? FDI was 3.9% in 2009, and this percentage is increasing (for example, compared with 2.4% in 2005). But we don’t yet know the figure for this year. Even the target of 5% is much lower than for many large economies, say the United Kingdom’s 51.7%, France’s 42.8%, Germany’s 21%, or South Korea’s 13.3%. Why is that so? There may be various reasons. One is that Japanese industry is quite self-contained and not necessarily dependent on input from other countries, including Europe. But that should change, and it’s changing. Japanese companies aren’t necessarily hesitating to receive investment from abroad; one prominent example is Nissan Renault. In 2008, Japan introduced the system of trilateral mergers. The first case was Citi and Nikko Cordial Group.

First, they talk about tax – for example, Japanese corporate tax is not very low. Now the government has announced they will try to lower the corporate tax rate. Sometimes foreign companies talk about a lack of skilled labour capable of working in an international environment. The human resources issue is often a very important one. Also, we sometimes hear complaints about administrative procedure issues: that paperwork is slow or complicated. Regarding paperwork, the Japanese government has set up INVEST JAPAN offices in relevant ministries and agencies to serve as single contact points for foreign business people seeking information or help in setting up businesses in Japan. Are you worried that companies are overlooking Japan in favour of China or other parts of Asia? I know that many European companies have various business expansion plans in other Asian countries. But Japan is still a center of innovation in Asia and a huge market for many companies. We have some statistics from United States companies showing that their profits here are better than elsewhere. At the same time, FDI is still low. We need to let foreign companies know the merits of Japanese innovation and market opportunities here. FDI stocks as percentage of GDP (end of 2009) 3.9% 21.9%

Does JETRO talk to the government about creating an FDI-friendly environment? Together with the government, we promote the INVEST JAPAN program. As detailed in the 2010 New Growth Strategy, the government is committed to the creation of an FDI-friendly environment. Of course you are right that there are some problems, so we are always in discussion with other agencies about how we can change the situation.

Japan

51.7%

21.0% Germany

13.3%

ANCTAD

42.8%

What are the main obstacles to investment? What do potential investors from the EU tell you?

United Kingdom

United States

France

South Korea

What are the merits of the Japanese market? One very important reason to choose Japan for investment is excellence in research and development. R&D expenditure in Japan as a percentage of GDP is 3.8%. That’s the highest in the world. If we look at the number of patents, the United States is number one, but Japan is number two. If we look at technology and patents in environment and energyrelated areas, Japan is – by far perhaps – number one. At the same time, as well as large companies, we have very strong small and medium-sized enterprises in niche markets – many in the regions of Japan. What are the advantages of investing outside Tokyo? Office and labour costs are slightly lower, and there are also R&D facilities and good human resources in the regions. Nevertheless, about 60% of FDI comes to Tokyo. We have 37 offices across Japan, so we can connect foreign companies with local partner companies and governmental organisations. Kobe’s biomedical innovation cluster is a good example, I think. The city has invited both Japanese and foreign companies, as well as universities and R&D labs. From Europe, Boehringer Ingelheim as well as Siemens have already invested. Umicore from Belgium also came to Kobe to make materials for lithium batteries, and has received a subsidy from the Ministry of Economy, Trade and Industry. Are there particular sectors that you promote for investment? What are the opportunities for EU investors? We don’t specify sectors where investment should take place. But roughly speaking, there are two types of investment. One is cooperation with Japanese companies that excel in R&D. The other is investment looking to sell to the Japanese market. The Japanese population is ageing. So there will be enormous demand in the healthcare and medicine sectors. We also welcome investment in the retail and wholesale sectors. Recent October 2010

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Q&A

Now it’s time for Europe and Japan to work together to begin negotiations on an EIA

examples are H&M and IKEA. The Japanese market is large and sophisticated. If such companies can succeed in this market, I think they can succeed in other markets as well.

Other, 6,270 – 3.4% Asia, 15,971 – 8.7% Cayman Islands 15,630 8.5%

Bank of Japan

It is often said that the Japanese economy is heavily focused on exports, to the detriment of domestic consumption. Can FDI help redress that imbalance? Our dependence on exports is not necessarily very high, especially compared to China or South Korea – and we import quite a lot. But now international competition is very hard, and we very much would like to attract capital and technology. If we don’t, I think it will be very difficult for us to maintain our current status. FDI brings new management skills, new markets and new technologies. I think that can definitely boost domestic consumption. I don’t think the government has any hesitation about inviting investment from abroad. But perhaps the national and local governments need to work harder to introduce new tax and subsidy regimes.

Inward FDI stock in Japan by origin (end of 2009)

Total 184,252

United States 69,100 37.5%

Western Europe 77,281 41.9%

Unit: ¥100m

tax and introduction of a subsidy scheme. We very much hope those measures will be implemented as quickly as possible.

Does JETRO support free trade agreements between Japan and other nations? Our primary aim is to promote trade and investment with other countries. At this time, trade with Asia represents a large proportion of our total trade. A regional FTA would be of great benefit both to Japan and other countries in Asia. Likewise, we very much hope there will be an FTA, or a so-called economic inteHow could the subsidy regime change? gration agreement (EIA), between Japan I’ve already mentioned how Umicore and Europe. Trade revitalisation efforts received a subsidy; one-third of the cost of building their factory. That subsidy was and rules-making in the WTO are not progressing well. That’s why many counbased on a supplementary budget, but we hope a fixed national subsidy system tries are rushing to create FTAs. Japan has concluded 11 FTAs. We are now negotiatwill be introduced – and we hope that ing with India and an outline agreement will happen in the regions too. The government’s new growth strategy has been established. We are also talking to Australia and Peru, and we hope that has already mentioned lower corporate

these negotiations will be completed as soon as possible. Japan already finished negotiations with Switzerland – the agreement’s in effect. Now it’s time for Europe and Japan to work together to begin negotiations on an EIA. Clearly, the economic situation right now is not very good. What is the outlook for FDI? Because of the economic crisis, which affected all countries, FDI into Japan dropped drastically, almost 50% last year. Now the world economy is picking up, so we are hopeful that FDI will increase. Certainly, companies have been hesitant to invest up to now. But the IMF forecast for our economy in 2010 is 2.4% growth. That’s higher than for Europe. Japanese business has had a reputation for protectionism. Is that changing? Japanese business actively invests abroad, and it actively works with foreign entities. There’s no reason why it should hesitate to receive investment from abroad. I think companies are receptive to open trade and investment; that’s my answer. Of course if there are problems, we need to communicate with the government to change the situation.

Do you have an opinion on this topic you’d like to share? Please post comments at www.eurobiz.jp or send them to eurobiz@paradigm.co.jp

October 2010

Home Green Home? 20

October 2010

When will Japanâ&#x20AC;&#x2122;s huge construction sector adopt sustainable building technology? Text Rob Goss

FOCUS

hen it comes to renewable energies such as solar, wind and biomass, Europe has often led the way. In 2009 Japan reintroduced subsidies for solar cell installation and followed the European example with a feed-in tariff allowing homeowners to sell surplus electricity back to power companies. But Japan, the world’s third-largest construction sector, still lags far behind Europe and its Asian rivals when it comes to creating energy-efficient buildings. Take your windows. While strict regulations in Europe mean high-efficiency “low-e” double glazing has long been the norm, single glazing still satisfies building standards in most of Japan. Low-e (glass coated to retain heat) double glazing is around six times more efficient than single panes. Yet despite being greener and more cost-effective in the long term, builders are often put off by its higher initial cost. If you live in Japan, the chances are that you have only singleglazed windows. Then there is your insulation. With approximately 35% of heat loss in a typical house going through its walls, insulating your home well is one of the cheapest and most effective ways of saving energy and reducing CO2 emissions. As with glazing, however, Japan’s insulation standards fall far short of those in Europe. They are also less stringent than in China and South Korea. To put that gap in perspective, Guy Prendergast, former vice-chair of the EBC Construction Committee, believes 80% of Japanese buildings would likely fail to get a building permit somewhere like Germany or France. “Japanese buildings are well-engineered to cope with earthquakes, but they could also be better engineered to cope better with heat and cold. That we are still building un-insulated buildings is a criminal waste of resources,” Prendergast adds. So why are Japanese standards lagging? You need to consider the historical and climatic context, says Gordon Hatton, chair of the EBC Construction Committee and viceAverage life of housing 80 70

77 years

60 50

the cabinet office

55 years

30 20 10 0

30 years Japan

United States

United Kingdom

The perception of the merits of proper building insulation remains low Gordon Hatton, EBC Construction Committee chair

president of Pembroke Real Estate Japan. With the most populated areas of Japan enjoying a relatively temperate climate, heating and air conditioning are unnecessary during much of the year. “A degree of patience and a kotatsu would traditionally have got people through the relatively short cold periods of winter, while natural ventilation provided relief from the mid-summer heat,” Hatton says. “The perception of the merits of proper building insulation remains low.” Consider too that the construction industry has typically focused its engineering research, code refinement and project budgeting on the mitigation of seismic and fire risks. It has been hard to promote regulatory improvements or convince industry and consumers to change, says Hatton. But it isn’t just green materials that are under used. Energy-management technology is too. Many office buildings, for instance, lack flexible control systems. If you work in an office where a single switch controls the air conditioning for an entire floor, consider how much more efficient it would be with an improved control system. Something as simple as being able to adjust the air-conditioning room by room or workspace by workspace would substantially cut running costs and emissions, and for very little investment. Yet things could soon improve. Hatton says an increasing awareness of energy issues may bring about more opportunities to address insulation and other passive means of making buildings comfortable and environmentally friendly. Paul Goudeau, president and representative director of Saint-Gobain HanGlas Japan, says change has already begun. “With the Windows 25 working group, for example, Japan’s window industry is now trying to create new industry standards, while looking for solutions to energyefficiency issues together,” he says. “On the government level there is also a great political desire to become a more energy-efficient country, and an awareness that construction is an area where great progress can be made.” Then-prime minister Yukio Hatoyama pledged to lower Japan’s CO2 emissions by 25% from 1990 levels by 2020. With 30% of Japan’s CO2 emissions coming through buildings, this is one area where the government is expected to look for more reductions. October 2010

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FOCUS

Eco points One government-run initiative that is already having an impact is the Eco Point system. Launched in January this year, it rewards consumers with points when they purchase certain energy-efficient products. The points can then be exchanged for such things as store coupons and discounts on other ecofriendly goods. Although the overall double-glazing market in Japan has been flat since 2009, Goudeau credits Eco Points for a significant increase this year in low-e double glazing. However, more needs to be done to reach the 2020 target, he says. One way forward? Tighten regulations. “Japan doesn’t have a shortage of green materials; it just lacks the regulations to make sure they are used,” Goudeau says. Gösta Tyrefors, CEO of Swedish firm Gadelius, whose businesses include energy-saving products for residential use, says another solution would be to give consumers and builders more incentives to go green. That means not only extending the reach of the Eco Point system, but giving tax breaks to builders and consumers using energy-efficient products. “A combination of enhanced regulations and incentives would be ideal,” Tyrefors says. “You can explain to a consumer how much they will save in the long term using energy-efficient materials, but the higher upfront cost can still often put them off. Some form of more immediate incentive, like Eco Points, can make a big difference in getting them to choose more efficient options.” What about other ongoing initiatives? Well, since 2007, the government has also been working on a “200-yearhome” project aimed at increasing the lifespan of Japanese homes. Currently, residential buildings last just 30 years on average in Japan. In the UK that number is 77 years. Among other things, the project promises to promote better quality construction methods and introduce financial subsidies for housing builders to produce longer-life homes. Longer-life homes not only reduce material usage, they also increase the long-term return from installing energy-efficient materials, such as insulation and high-efficiency glazing. “Promoting a 200-year life-cycle for housing, as well as the building standards that would need to be established to achieve this, is commendable, and some of the major housing providers are marketing high-grade housing with this in mind,” says Hatton. “Hopefully this influence is also finding its way into government-driven housing projects. But whether it can filter down to small-scale local builders, who are responsible for a major portion of residential construction, is yet to be seen.”

Japan doesn’t have a shortage of green materials; it just lacks the regulations to make sure they are used Paul Goudeau, Saint-Gobain HanGlas Japan Rigid local standards Shared wisdom among European firms operating in Japan is that enhanced and enforceable building standards, combined with green incentives, will lead to more business opportunities. Yet even if high-efficiency European products see an uptick in demand, companies will still face substantial challenges breaking into the Japan market. As in other industries, operating costs can be prohibitively high and it can take time to establish relationships. Andreas Stange, president and CEO of TÜV SÜD Japan, a German testing and certification company, adds that it is very often expensive and time-consuming to meet the rigid local standards needed to get approval for materials and equipment in Japan. In many cases products need separate Japanese approval even after gaining approval in Europe. It also takes time to change old industry and consumer habits and ways of thinking, says Johanna Schilling of ECOS Japan Consult, a firm that promotes economic cooperation and relations between Japan and Germany. “One shouldn’t give up too early; it may take years until the market moves, though when it does, new trends can develop very quickly,” Schilling says. “You also absolutely need to have a strong partner in the market who is able and ready to invest time and money into market development.” One company that has overcome these challenges is Tremco illbruck, a German manufacturer of pre-compressed sealing tapes. In 2005 the company teamed up with Japanese construction company ABC Trading to successfully introduce its eco-friendly alternative to silicone sealing. Schilling is hopeful similar European successes will follow. “Consumers and politicians are more and more interested in better energy efficiency and healthier indoor climates. With that there is an ever-growing demand for related building materials,” she says.

October 2010

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EXECUTIVE NOTES

Troubled waters A territorial dispute in the East China Sea is bad news for China and Japan. Japan’s foreign relations with China have not always been good – two wars and the occupation of large chunks of territory naturally leads to a bit of “spice” between the two sides. However, that has not stopped the countries from viewing each other as natural economic partners. Thus, when Japan was forced by the US to officially recognise the tiny island of Taiwan to the detriment of its relationship with China, businessmen were dismayed. China is a natural market for Japan, and vice versa. That makes the latest trouble over the Senkaku/ Diaoyutai Islands all the more vexing. Unfortunately, China’s government is caught in a bind when it comes to patriotic issues. One of the few areas in which Chinese nationals can cause their government to squirm with embarrassment is patriotism. The government can get away with being corrupt, repressive and incompetent. But failing to stand up for China’s vital national interest is legitimate cause for complaint, even in the government’s eyes. After all, the government has incessantly positioned itself as the only entity able to protect China, ever since the Sino-Japanese war of the 1937 to 1945. As a result, the government tends to “frontrun” patriotic outbursts, meaning it has to appear more shrill than any of its potential critics on the matter. The story from the Japanese side is that the Japanese coastguard vessels were not doing anything unusual when they intercepted the Chinese trawler. The costguard often chases away Chinese fishermen. What was different this time, is that the Chinese trawler refused to move away. Not only did it not move away, but it alledgedly rammed one or both JCG vessels. The Japanese administer the island, not the Chinese. But it’s highly doubtful that the islands are any more Japanese than they are Chinese. The details are complex, but clearly Japanese empire-building in Okinawa (an independent kingdom until the Meiji restoration) and Chinese fragmentation after 1949 make for extremely

The Chinese government has a much better record than Japan in settling territorial disputes

subtle ownership claims. (China doesn’t claim the islands for herself, but as part of Taiwan.) Given this ambiguity, don’t be too hard on China. The stakes are high, irrespective of the Chinese government’s need to burnish its patriotic credentials. After all, the islands sit atop enormous reserves of oil and gas. Furthermore, the Chinese government has a much better record than Japan in settling territorial disputes. Japan is embroiled in at least four island disputes: the Kurile Islands with Russia; the Senkaku islands with China, Taiwan and South Korea; Takeshima Island with South Korea; and Okinotorishima, a sinking hunk of rock south-west of Iwo Jima, also with China. In contrast, China has worked hard to resolve most of its border disputes, even when in the case of Russia it meant giving up large tracts of land. In one way or another, both countries will resolve this latest spat. After all, an impressively broad-minded agreement has already been drawn up regarding the East China Sea. But they will have to be vigilant. Sometimes, it takes only a belligerent trawler captain to let the genie of nationalism out of the bottle.

Dan Slater Dan Slater is director of the Economist Corporate Network (www.corporatenetwork.com) in Tokyo, and you can reach him at danslater@economist.com.

October 2010

Swiss Chamber of Commerce and Industry in Japan Waiko Bldg 3F, 5-2-6, Toranomon, Minato-ku, Tokyo 105-0001 Tel: 03-5408-7569 • Fax: 03-3433-6066 ICELAND Email: sccij@gol.com Reykjavik

www.sccij.jp

Honorary President:

H.E. Ambassador Urs Bucher

EXECUTIVE COMMITTEE President:

Martin Stricker, Gaipro

Vice-President Kanto: Masayuki Matsushima, Credit Suisse Securities Vice-President Kansai: Thomas Hauser, Nestlé Japan Treasurer:

Christoph Saxer, Novartis Pharma

Marco Ammann, Hilti (Japan)

Hajime Endo, Lonza Japan

Martin Fluck, Oakwood Premier Tokyo MidtownNORWAY

Noboru Okabe, Swiss International Air Lines

Michael Viana, UBS Wealth Management

SWEDEN

Strength in stability The Swiss Chamber of Commerce and Industry in Japan (SCCIJ) membership numbers 40 individuals and 100 companies, including well-known Swiss multinationals ABB, Credit Suisse, DKSH, Nestlé, Roche, UBS, and Novartis. The last is the largest Swiss employer in Japan with over 4,000 people. Industries represented include pharmaceuticals and chemicals, financial, machinery, watches and luxury goods, medical instruments and nutrition. There are also many small and medium-sized companies that the SCCIJ president, Martin Stricker calls “hidden champions” of the membership. “They have very good technology and extremely high market share in their niches,” he says. Stricker works in close cooperation with the chamber’s sole paid member of staff, Teruyo Kinoshita. “Our executive committee members do not get paid by the chamber, but it’s impressive how active they are,” says Stricker. The executive committee is split up into different sub-committees with specific responsibilities. This is a good way to share the chamber’s workload and tap the considerable experience and expert knowledge of members. The chamber is also helped by its close relationship with the Swiss Embassy; Ambassador Urs Bucher is honorary president. As with other chambers, networking is very important for members, says Stricker, but the SCCIJ aims to offer something

PORTUGAL 28

October 2010

SPAIN

DENMARK Copenhagen

more. “There are so many networking events in Tokyo that you could go to a different one each day,” he observes. Scheduled for October as part of their monthly luncheons with highprofile speakers are Dr. Betrand Piccard and André Borschberg of the highly acclaimed Solar Impulse project. They plan to fly around theNETHERLANDS world in a solar-powered aeroplane to

POLA

BELGIUM

CZECH REP.

LUXEMBOURG

GERMANY FRANCE

Zurich Bern

HUNG

AUSTRIA

Geneva

SLOVENIA

ITALY

BOSNI HERZEG

C hamber S potlight

Swiss-ness is a brand in itself

An SCCIJ-hosted luncheon with H.E. Mr Urs Bucher, ambassador of Switzerland to Japan

Martin Stricker, SCCIJ president

will eliminate duty on 99% of trade between Switzerland and Japan within 10 years, and is Japan’s first free trade agreement with a European country. Thanks to the treaty, the Swiss chamber has already had enquiries from several Japanese companies wanting to join. “The trade relationship between Switzerland and Japan is already good,” says Stricker, pointing out that it took just two years to negotiate the free trade agreement. “Japan may be the third-largest economy now, but it is Switzerland’s number-one trading partner in Asia.”

demonstrate what can be achieved by renewable and efficient energy. The SCCIJ also has a series of “open house” events at major companies. The main social event of each year is a Christmas party with the Swiss Club. Lately, the chamber has been working hard to boost their activities in Kansai, a region important for Swiss business both on account of the many pharmaceutical companies based there, and Nestlé Japan which has had its headquarters in Kobe since 1933. The chamber is also very keen to reach out to and cooperate with other chambers of commerce, says Stricker. “The image of Switzerland in Japan is very good,” Stricker says. “Swissness is a brand in itself. You have to

handle it responsibly, but it’s definitely a benefit.” When Japanese people hear the word Switzerland they think of chocolate, cheese, mountains and watches – after that neutrality and stability, he notes. Switzerland is also a popular tourist destination for Japanese travellers. The economic relationship between the two nations is no less strong; Japan is Switzerland’s largest trading partner in Asia. In February 2009, a free trade and economic partnership agreement was signed and came into force in September last year. It

Nestlé Japan employees creating winning products.

Novartis, the largest Swiss employer in Japan with over 4,000 people

October 2010

Sweet success

Perfetti Van Melle

ou might not have heard of European confectioner Perfetti Van Melle. But sweet tooth or not, you will likely recognise some of its products. Founded in the Italian town of Lainate in 1946 by brothers Ambrogio and Edigio Perfetti, today the Perfetti Van Melle group exports gum and sweets to over 130 countries. With annual global sales in excess of €2bn, and well-known brands that include Frisk, Chupa Chups and Mentos, it is the sixth-biggest confectioner in the world. It is also one of the most successful overseas food companies operating in Japan, with 7.5% of the confectionary market share. “That’s a significant amount because the market is fragmented among lots of companies,” says François Stroobant, PVM’s country manager for Japan. “We are consistently in the top four or five sugar confectionery companies here.” While PVM has had success in Japan with many of its brands, it’s with Frisk, the Belgian mint tablet brand it acquired in 1995, that the company has had its greatest hit. A year after PVM took over, and just three years after it first went on test sale in Japan, Frisk became the first import to be elected “best selling food product of the year” by food trade newspaper the Japan Food Journal. 30

October 2010

Text Rob Goss Photo Tony McNicol

Today, you’ll find Frisk on sale in 46,000 convenience stores across the country and numerous other retail outlets. Business in Japan has grown to account for more than half of Frisk’s global sales – the mint alone giving PVM a 5% share of a domestic candy market worth nearly ¥250bn annually. Stroobant puts part of Frisk’s success, not to mention triumphs with other brands, down to PVM’s innovative approach to advertising. Take the “Frisk sharpens you up” slogan and quirky TV commercials, which break from convention by ignoring taste and minty-fresh breath, instead stressing Frisk’s ability to perk you up. “We are very much focusing on tired, overworked Japanese businessmen with that,” Stroobant says. Produced exclusively for the Japan market by a local advertising agency, but always featuring nonJapanese actors to reinforce Frisk’s European-ness, the campaigns have won numerous awards. Also notable is how extensively PVM advertises Frisk, combining outdoor hoarding ads, in-train ad campaigns, and prominently placed and colourful in-store displays. The company has even taken a leaf out of Budweiser’s book, using female models to promote the brand and hand out samples in public. The company is similarly proactive with its marketing of Chupa

Chups, the Spanish lollipop with a distinctive logo, famously designed by Salvador Dali. PVM employs social media such as Mixi and Twitter to communicate and build loyalty with customers. It also works hard to enhance the Chupa Chups brand through a range of licensed products, which run the gamut from lolly-scented pens and bath salts to cuddly toys. As we chat Stroobant can’t help but smile as he rifles through a collection of Chupa Chups goods and whips out a pair of Chupa Chups underpants encased in an over-sized plastic lolly. “With all our products we are always trying different ways to elevate our brand above our competitors,” Stroobant says, still grinning. Another reason for PVM’s stellar results has been its long-term relationships with local distributors. Kracie Foods (formerly Kanebo), for example, has been importing and selling Frisk for the company since 1993. Cadbury Japan has been doing likewise for Mentos since 1982. (PVM acquired the brand when it merged with Dutch firm Van Melle in 2001.) For Chupa Chups, the company has long-lasting tie ups with local firms as diverse as Morinaga, Sanrio Far East and vending machine operator Finetec. “As a representative office and brand owner we assist with product development and marketing, but it’s our loyal

I nvesting I n J apan

local partners that are in control of importing and selling our products. We are very aware of how much we need their local expertise,” Stroobant says. These local connections enable PVM to operate its entire business in Japan through just a small representative office that reports back to a larger regional office in Hong Kong. Local knowledge is also a big help when it comes to overcoming certain challenges, Stroobant says, and nothing is as challenging for PVM as dealing with local food regulations. Not only do products have to comply with Japan’s strict food sanitation law, they also have to comply with additional standards set by each retailer and each distributor for such things as additives, maximum ingredient percentages and shelf-life limits. “This is very challenging for us; it takes a lot of time [on average a year] to develop a new product and tick all the right boxes to get approval from everyone,” Stroobant says. Then there is the added challenge of catering to Japanese taste buds. In some cases PVM does this by creating Japanonly products, such as Chupa Chups lollies flavoured with the distinctive green tea latte or ramune (Japanese lemonade) . In other cases it means tweaking existing recipes. “Japanese consumers can be very picky about flavours, so we have to localise many of our recipes. Because of this, and to be compliant with all the regulations, all Frisk recipes for Japan are unique to Japan. If you buy a pack of Frisk orange mints in Belgium, for example, they will have a slightly different taste to those for the Japan market,” Stroobant says. Yet despite customising its products for Japan, and in spite of high import duties, PVM opts not to manufacture here. Everything is made in Europe. “Quality of production is an important factor in Japan. And by producing everything in

Europe, we can play on the premium ‘made in Europe’ image Japanese have,” Stroobant says. “It also allows us to keep more control over the quality.” At the company’s state-of-the-art factory in the Netherlands, Frisk tablets are produced in a pharmaceutical environment, following extremely strict quality standards. PVM certainly know how to make a mint.

Business in Japan has grown to account for more than half of Frisk’s global sales

October 2010

Whoâ&#x20AC;&#x2122;s Who

IT & Telecommunications in Japan

October 2010

Manage the Cloud

oftware as a service (SaaS) and cloud computing in general are hot topics these days. Services such as Salesforce.com, NetSuite.com and Google Apps Premier Edition are successful examples, and the number of such services – and corporate reliance on them – is increasing. The numerous advantages of the cloud for firms include pay-as-you-go pricing, rapid development and real-time changes, keeping the existing infrastructure, and global availability. But what do potential users need to watch out for? Here are a few things, to start. • Is the SaaS firm stable? What is your exit strategy if the firm is acquired or goes bankrupt? • Is your data locked in? Can you get your data out, when you want it?

And in what format? • What about backup and recovery? Who does the backups, and what is the recovery procedure? • How secure is it? What risks can you eliminate or alleviate? • Is the application flexible? Think about your data operators and how fast they enter data. Will the solution impede them? Can it be customised so it doesn’t? • Can it be integrated? Does it have an application programming interface, or API, to allow the developers to integrate it with other systems? Cloud-based systems when they first began to appear, which was when our company used them, led earlier on to some painful experiences, such as having providers suddenly pull the plug, having pricing and terms of service

Who’s Who // IT & Telecommunications

Before it manages you

Rick Cogley CEO eSolia Inc unilaterally changed partway through the contract period, and having limits placed on how and in what form data could be accessed. Hosted database solutions like ours take advantage of such collective experience, and can be integrated successfully at many firms. Leveraging anyone’s real-world experience will be to your advantage.

Top 3 ways foreign companies waste money on IT in 2010 Japan had the lowest growth rate of all OECD countries the last two years, but companies are again opening Tokyo offices. Despite this rosy perspective, concerns about a US double-dip recession and its ripple effect on Asia – combined with the aftermath of the 2009 global downturn – are prompting conservative outlooks and tight budgets. A number of businesses have not adjusted their Japan technology strategy to compensate for this new climate, despite available new alternatives. Here are insights on how to avoid these money sinks. Hiring too soon We often see companies hiring full-time desktop support IT staff for offices of 20 people or less. This can generate discontent since the IT staff are not utilised for 70% of their time, and opportunity to learn is often limited. For the hiring company, the wages, recruitment fees, holidays, transportation, overtime, social insurance, pension schemes, and

training represents a huge investment for a dissatisfied staff who may soon leave for a busier environment. For 25% or less of a full-time staff price, a company can vastly increase flexibility by engaging a local IT company for an SLA support contract, with a fast response time, an immediate start, and the capability to change contracted hours. Purchasing expensive, unnecessary infrastructure For a small office, it’s often possible to minimise expensive equipment outlays in favour of outsourced services. Instead of purchasing a single email server at around ¥900,000 for hardware, software licensing, 24-hour support, power and storage space, an outsourced solution provides similar benefits for ¥1,627 per person, per month – possibly saving you from losing ¥802,380. Sending internal IT staff to Japan Tokyo is an unforgiving environment for the non-Japan experienced IT staff

Jason Winder CEO Webnet IT member. A trivial task in other countries often involves complex Japanese application forms and unfamiliar procedures, leading to uncertainty as to whether the project can be completed on time. The alternative is partnering with an experienced, local bilingual IT company that can listen to your IT department’s requirements, prepare a fixed price proposal, and set up your office on-time and on-budget. October 2010

Who’s Who // IT & Telecommunications

The effects of cloud computing on networks

loud computing is currently without doubt one of the hottest topics in IT. With the public cloud, customers access the provider’s applications on the Web; in this case, resources are shared among multiple customers of the provider. Via a “shared” private cloud, on the other hand, a limited number of companies share resources held by a single company or by a service provider. In private clouds operated by larger companies, however, cloud resources are dedicated to one company and stored in its data centre or that of a service provider. The cloud is then accessed via the internet – or preferably a VPN to maximise security and performance. Nowadays, clouds handle many varied applications, such as online trading, customer support, data analysis and monitoring, transaction processing, and so on. Issues such as quality of service with end-to-end service level agreements, 24 x 7 managed service, usage-based

billing, end-user service management and compliance must be key considerations by customers. Service-level agreements Just how cloud computing impacts networks depends primarily on three key factors: where the source data is kept, how the source data is updated and secured by back-ups, and how geographically distributed are the users who are accessing the cloud and its data. Ultimately, people require a very fast network that has high availability with excellent quality of service (QoS). If end-to-end SLAs are desired, a dedicated infrastructure is established via a service provider or a private cloud. Network bottlenecks While servers and terminals are becoming more powerful, more dynamic, more mobile and more automated, innovation in the network sector so far has primarily been focused on speed and transfer rates. The automation of servers

eSolia Inc.

Christophe Ozer, Country Manager, Orange Business Services Japan

and desktop now needs to be followed by the automation of networks. Open stage for providers Networks are the providers’ responsibility. Telecom operators are ideally positioned to provide secure resilient cloud services that deliver pervasive connectivity to virtualised assets, backed with robust performance guarantees and transparent monitoring tools.

Orange Business Services

Address

Otowa Bldg. 3F, 3-11-2 Otsuka , Bunkyo-ku, Tokyo 112-0012

Address

Shiroyama Trust Tower 34F, 4-3-1 Toranomon, Minato-ku, Tokyo 105-6034

Tel

03-5940-6880

Tel

03-5733-9000

Fax

03-5940-6881

Fax

03-5733-9001

info@esolia.co.jp

info.japan@orange-ftgroup.com

Web site

www.esolia.com

Web site

www.orange-business.com/en

Established

1999

Established

1985

Staff

Contact:

Rick Cogley, CEO (rick.cogley@esolia.co.jp)

Contact:

Christophe Ozer, Country Manager

eSolia is a globally minded information technology management firm providing superior business-centric consulting, project and outsourcing services to a variety of blue-chip foreign and Japanese organisations in Japan and abroad. Our focus is on multi-cultural, multi-language organisational environments, with a vision to consistently provide our clients with just the right mix of helpful goods and services. Founders Rick Cogley and Takumi Fukuoka have been delivering services together from Japan for 16 years, with a successful track record in handling complex, high-pressure projects, and providing creative problem-solving for our clients’ challenges. Our services are always standards-based, unbiased by maker affiliation, built and grown with an awareness of your business and culture, and are delivered by a team of experienced experts who act with the highest standards of ethics, professionalism and integrity. eSolia sows the seeds that help you build a strong foundation for your Japan business success and meet your commitments.

October 2010

Orange Business Services, the commercial brand of business-tobusiness activities in the France Telecom Group, has the broadest experience in IP transformation of any service provider, serving the world’s largest companies for nearly 60 years, and 25 years in Japan. Innovation, coupled with our historical strengths, makes us leaders at managing complex communications’ needs, while our intensified focus on real-time business and M2M provides customers unprecedented ways to innovate, save money, and protect the environment. Orange Business Services Japan is Cisco Gold Certified with over 25 Cisco-, PMO- and security-certified professionals. Key expertise and specialisation in LAN-WAN network deployment, security and management, IP telephony, messaging, wireless and application performance optimisation, cloud computing, and M2M. Orange Business Services Japan has offices in Tokyo, Nagoya, Osaka and Narita. www.orange-business.com

Webnet IT

Address

Shibuya-YT Bldg. 02, 6F, 21-3 Shinsen-cho, Shibuya-ku, Tokyo 150-0045

Address

Shu Bldg., 2-28-10 Ebisu, Shibuya-ku, Tokyo 1500013

Tel

03-5790-7621

Tel

03-4550-1530

Fax

03-5790-7622

Fax

03-5501-9006

info@telegaertner.co.jp

contact@webnet-it.co.jp

Web site

www.telegaertner.co.jp

Web site

www.webnet-it.co.jp

Established

1995

Established

2003

Staff

15 in Japan

Contact:

Jason Winder

Contact:

Shinichi Iwamoto, President

Webnet IT has been providing highly skilled IT staff and IT services to companies in Tokyo since 2003. We specialise in working with foreign companies with either existing offices in Japan, or plans to open offices in Japan.

Telegärtner Ltd. has been growing with the development of Japan’s internet environment. To respond to the increasing demand for broadband networks and faster LAN connections, and the sophisticated infrastructure that came with the expansion of FTTH, we have established a sales system dealing mainly with data and voice products and fibre optic connection parts. We are also providing various types of coaxial connectors for mobile communication base stations and wireless LAN systems. We have promoted an attitude of “quick response”: continuously improving our services by providing instant estimates and instant delivery by securing inventory stock areas in metropolitan areas and consolidating cooperative relationships with agencies. We offer many other customised products and services, and are ready to deal with challenging requests including specifications for special environments, next-generation industries, and OEM/ODM. Our system promptly provides products and services for overseas projects through partnership with our German headquarters and group companies.

We act as a bilingual IT department for our clients, offering services such as IT project management, new office setups, office moves, support contracts, procurement, managed services (hosted email and web), managed outsourced helpdesks and ad hoc consulting. For a free consultation of your IT requirements in Japan, please contact us now on contact@webnet-it.co.jp, or call us on 03-4550-1530.

KDDI Corporation

Address

Garden Air Tower, 3-10-10, Iidabashi, Chiyoda-ku, Tokyo 102-8460

Address

Garden Air Tower, 3-10-10 Iidabashi, Chiyoda-ku, Tokyo 102-8460

Tel

03-6678-0867

Tel

03-6678-0867

global-marketing@kddi.com

Web site

www.kddi.com/english/index.html

Web site

www.telehouse.net/

KDDI, a Fortune Global 500 company, has a 50-year record of achievement in telecommunications. We invested in the world’s first undersea cables, built the first fibre-optic cable in the Pacific, and were the first to provide switched Ethernet between Asia and the US. KDDI now enables you to be connected to the world, as we are a comprehensive communications company offering both fixed-line and mobile communications services. We continue striving to be a leading company during changing times. For personal users, we offer “au” mobile phones, the second largest in Japan, and broadband internet services and telephone services. For our business clients, we provide all services in the information and communication technology (ICT) realm – from global networks to data centres, applications and security strategies – to help your business expand both globally and locally with KDDI’s global business centres in 24 countries. We are here to support you.

Who’s Who // IT & Telecommunications

Japan Telegärtner Ltd.

TELEHOUSE, a stable and trusted pioneer of the carrier-neutral data centre, is a global brand of KDDI Corporation. TELEHOUSE was established in 1989 as a pioneer in the data centre industry in London and New York, expanding to 39 sites in 10 countries. • Carrier neutrality: TELEHOUSE provides customers with a single expansive location where multiple global carriers, local carriers, internet exchanges, and internet service providers can converge. • Connectivity among TELEHOUSEs: You can connect via low-latency Ethernet among all of the TELEHOUSEs in the US, the UK and France at speeds up to 1Gbps. • High quality: All facilities and equipment within TELEHOUSE sites follow strict global guidelines, and have set the industry benchmarks for equipment specifications, operations and security levels. Join Us! We are located at 21 sites in 9 cities in Japan: Sapporo, Sendai, Oyama, Tokyo, Nagoya, Osaka, Hiroshima, Fukuoka, and Naha.

October 2010

Who’s Who // IT & Telecommunications

MDS Global IT Services & Consulting

IFS Japan K.K.

MDS Global K.K.

Address

Sumitomo Shiba Bldg.4, 2-13-4 Shiba, Minato-ku, Tokyo 105-0014

Address

1-5-15-202 Yoyogi, Shibuya-ku, Tokyo 151-0053

Tel

03-3373-7749

Tel

03-5419-7900

Fax

03-3373-7756

Fax

03-5419-7909

info@mdsglobal.com

info@ifsjapan.co.jp

Web site

www.mdsglobal.com

Web site

www.ifsworld.com

Established

2001

Established

1997

Staff

2,700 worldwide

Contact:

Mike Stensrud

Contact:

Saeko Fujita, Marketing Manager

Foreign firms in Japan have needs that make finding the right staff a real challenge. In addition to operating in a market that is highly unique, they must deal with an additional obstacle: finding quality staff with additional language skills and experience in foreign firms. MDS Global K.K. can help you overcome that obstacle. We are a licensed provider of temporary staff, recruiting and IT contracting services. We have nine years of experience providing firms with both Japanese and non-Japanese IT & administrative staff, many of whom have varying levels of both Japanese and English language skills, as well as prior experience in foreign firms. Our clients include financial firms, law firms, insurance companies, retailers and more. Whether you have short-term staffing requirements or require longer-term, project or permanent staffing solutions, MDS Global K.K. is ready to help. Contact us to learn more.

IFS was established in 1983 and develops, supplies and implements IFS Applications™, a component-based extended ERP suite built on SOA technology. IFS focuses on agile businesses where any of four core processes are strategic: Service & asset management, manufacturing, supply chain, and project. Our HQ is in Sweden, with 2,000 customers in more than 50 countries. IFS Applications is a global product—with a global organisation to implement it. IFS Japan focuses on the manufacturing and service sectors, and mainly supports Japanese-owned companies (JOC) in Japan and overseas. We take Japanese unique requirements into the core application, so JOCs can deploy the same product with same functions worldwide. User productivity is IFS’s other main focus. IFS Applications provides an attractive, intuitive and efficient user-experience with a technology as easy to use as surfing the web or using an iPhone. So you can spend less time managing your software and more time managing your business.

Sponsorship The European Business Council (EBC) once again is producing the EBC White Paper, its hallmark annual report on the business and investment environment, in English and Japanese, for release in mid-November. This will be the 11th in the series. The EBC cannot produce the white paper without kind financial contributions from its members and supporters to help cover production, translation and distribution costs. Also, placing advance orders assists with cost recovery.

Blue-Star Sponsorship: ¥150,000 (or more if you wish) (company name on a 2-name page) Special Sponsorship: ¥100,000 (company name on a 10-name page) Sponsorship: ¥50,000 (company name on a 20-name page) Purchase price: ¥5,000 per set: 1 English copy and 1 Japanese copy If you would like to support the white paper as either a sponsor and/or would like to pre-order copies, please visit www.ebc-jp.com

European Business Council (EBC) Tel: 03-3263-6222. E-mail: ebc@gol.com

www.ebc-jp.com 36

October 2010

Tax//

A call for accountability, confidentiality and transparency Text Geoff Botting

he Japanese government’s proposal to cut the corporate tax rate has grabbed a few headlines over the last couple of months. Reducing the levy, at 41% one of the world’s highest effective corporate tax rates, and most likely hiking the consumption tax to capture lost revenue, would be hugely controversial. Yet the issue, despite its significance – and even drama – is absent from the list of advocacy issues of the EBC Tax Committee. “If I went down to the Finance Ministry and started protesting, do you think anyone would listen anyway?” shrugs committee chairman Hans-Peter Musahl. “We would be more than pleased to have a lower corporate tax rate … but the Japanese government isn’t going to cut the corporate tax just because we foreigners are demanding it. This is a matter for Japanese industry, and it’s being well taken care of by the powerful Japan Business Federation [Nippon Keidanren] and other domestic interest groups.” That’s not to say the committee doesn’t care about the issue – or about

October 2010

All companies naturally want to pay as little tax as possible. But they also want to know exactly how much they will have to pay Tax Committee chairman Hans-Peter Musahl

the perilous state of Japan’s fiscal situation. Rather, the committee’s strategy is to focus on three specific areas, two involving transparency. Reforms in these areas, believes the committee, can create the conditions for both Japanese and foreign businesses to grow, thereby improving the tax base and, eventually, helping put the country’s fiscal house back in order. In short, the committee wants improved accountability and confidentiality, and an unlimited period for carrying forward tax losses. The second issue is seeing some progress, as it’s listed as one the

government’s 2010 tax reform proposals. The committee has the Keidanren and other foreign business people on its side. Last July, the Keidanren, the EBC and the American Chamber of Commerce in Japan issued a joint statement urging an extension of the current seven-year time limit on carrying forward tax losses. At the root of the accountability and confidentiality issue is the traditional attitude of the Japanese tax authorities towards corporate taxpayers. Musahl describes this as a “vertical arrangement”, where the tax office lords over taxpayers as if atop a lofty perch, yet is not accountable for rulings it might make. “In Japan, you might get some informal advice (from the tax office), but you can’t rely on it – it is not enforceable,” says Musahl, a partner at Ernst & Young Shin Nihon Tax. The solution would be a more “horizontal” arrangement, such as in the Netherlands or United Kingdom, for example. Ideally, the two sides establish a formal relationship and work in an atmosphere of mutual trust and transparency. The main aim is for taxpayers to acquire clear answers up front on any

I n C ommittee

tax query they may have, allowing them to settle their tax returns more speedily. The EBC was invited to present its view on horizontal monitoring to the Japanese government and was allowed to attend government hearings on tax reform planned for fiscal 2011. “If you establish a formal process, then it’s of mutual benefit … the taxpayer knows his tax position, and he can properly disclose it to the public,” says Musahl. A clear picture The ability to know one’s tax position is fundamental to the accountability and confidentiality issue. Foreign companies investing in Japan need a clear picture of their tax situation, not just for the present, but for several years down the road as well. “All companies naturally want to pay as little tax as possible. But they also want to know exactly how much they will have to pay,” says Musahl. “The public and shareholders want companies to properly account for and disclose their liabilities. “If you make an investment in the Japanese economy, you need to calculate your return. So you need to know the tax you’re going to pay.

Key advocacy issues 1) Making accountability by tax authorities more systematic, and putting an end to arbitrary and inconsistent treatment of taxpayers 2) Ending the practice of leaking confidential tax data to the media as a method of punishing taxpayers 3) Abolishing the use of secret comparables 4) Allowing tax losses to be carried forward for an unlimited period But sometimes in Japan, that can be difficult.” Part and parcel of this problematic issue is the habit of Japanese tax authorities of leaking confidential tax information about companies to the media. In a typical case, the major newspapers will be informed about a taxpayer’s supposed additional tax liabilities even before the case is resolved. Once news gets out, it can inflict severe damage on a business’s reputation, especially in Japan where a company’s image counts for so much. Why do they do it? “It’s a weapon,” Musahl says, adding that the leaks serve to punish purported

wrongdoers. “Under Japanese law, the authorities are obliged to keep your information confidential, at least while your case is being disputed.” This heavy-handed (and technically illegal) approach may have been justified in the past, when dealings by companies in Japan tended to be less clear, but its time is now long over, the committee believes. “The change of the economic landscape forces companies to become transparent anyway,” the committee chief says. “Companies must disclose their tax liabilities, because investors need to know what’s going on.” As for the committee, its 14 member companies are a mixed bag of accounting firms and several companies not directly in the business of taxes or accounting. These include manufacturers, such as Mercedes-Benz Japan, and pharmaceutical companies, including Bayer. “When these companies make investments in Japan for periods of over 10 years or so, they really need to know how to price their products. And how much tax they’re going to pay is key [to that],” Musahl says. But that, of course, requires transparency from the tax authorities.

October 2010

Kenichi Ohmae Graduate School of Business MBAグローバリゼーション専攻

大前研一学長を始め、世界の経営者の指導のもと、一流の経営戦略と思考プロセスを学び、国際的なビジネスリーダーに成長できます。本校は日本で唯一、文部科学省が認可した、サイバー（インターネットや衛星放送）ネットワークを利用した遠隔教育方式の経営大学院です。時間や場所の制約を受けないので、企業に在籍したまま、いつでもどこからでも講義を受けることが可能です。異なるビジネス環境（英語環境）においても「仕事をやりぬく」、「結果を出すことができる」人材の育成を目指した、まさに実践的なプログラムです。ビジネスブレークスルー大学院大学

TEL: 03-5860-5531 Email: bbtuniv@ohmae.ac.jp

http://www.ohmae.ac.jp/gmba_ j/

働きながら、MBAを取得できます！

G reen B iz

Green lessons from the past A modern house uses eco-friendly Edo-period technology Text and photo Christopher S Thomas

ack in the Edo period (1603-1868), they knew a thing or two about sustainable living. Today’s designers are still finding applications for centuries-old technologies, with a few modern updates. Architect Hikari Kurihara’s awardwinning EDO Style House (EDO standing for ecological, design, organic) incorporates ideas gleaned from traditional Edo period homes. The project is funded by house builders Otsuki Home. “By collaborating with nature and using traditional techniques, we found we could effectively reduce the house’s carbon footprint, use less energy and, by using natural materials, eliminate the so-called ‘sick house syndrome’ [illnesses caused by volatile chemicals in building materials], so it’s good for the health as well,” Kurihara says. The result is a living, breathing house, built of healthy, natural materials and filled with cool breezes and light. The house is a compact 91m2, which helps reduce its carbon, energy and land-use footprints. Yet, thanks to ingenious and multi-purpose use of interior space, the residents can live comfortably without feeling cramped or deprived. Sliding doors reduce the space devoted to doorways, and allow the interior to be adjusted for “winter mode” (doors closed to trap heat in individual rooms) and “summer mode” (doors open to allow breezes to meander throughout the house).

A living, breathing house, built of healthy, natural materials and filled with cool breezes and light

A two-storey ceiling in the entranceway provides naturally cooling air circulation. Vents in the floor allow lower temperature air from underneath the house to be drawn up to cool the interior, and the windows, including skylights, are kept small to let in plenty of light with minimal energy loss. The roof is designed to catch rainwater, which is used in the toilets. The water is also used to cool the roof, in a system that both reduces energy use and generates a beautiful sound like a furin (traditional wind chime). The system provides, via a gravity feed, water for a “green curtain” of goya bitter melon vines. They shelter the house on the sunny side, help filter the

air, and provide a nice crop of vegetables for summer dining. Insulating the house is a material called “wool breath” made from sheep’s wool and sealed in plastic and polystyrene. The material works as well as conventional fibreglass insulation, but blocks humidity more effectively. Keisodo (a kind of diatomaceous earth, that is naturally occurring and highly absorbent) mixed with straw is used to plaster the interior walls. The mixture draws in moisture when humidity is high, then releases it as the air dries out. Managing humidity in this way also helps reduce odours, control insects, and keep residents comfortable.

October 2010

Industry experts | Legal services Regulatory risks

A global network built with local talent

he regulatory environment in Japan can be unfamiliar ground, especially for foreign companies operating in or entering Japan. Companies face a number of challenges relating to financial and antitrust regulation, as well as managing their workforce. Understanding what the regulators focus on, knowing how to guide an under resourced regulator to the most helpful factual materials and being able to accurately predict the regulatorâ&#x20AC;&#x2122;s views is key. Equally important for foreign companies is understanding what is acceptable local practice for dealing with employees and executives. We know all of these areas well. Our antitrust clients benefit from the views of Akinori Uesugi, who was secretary general with the Japanese Fair Trade Commission before joining the firm as a senior consultant. Our employment team appreciates the aspects of employment law that are unique to Japan, and provide practical and strategic advice on how to deal with these issues, rather than just pointing out the risks. We regularly advise clients on how to structure overtime compensation and negotiate with both the labour authorities and trade unions. Our experience with regulators means that we understand their attitude and concerns, as well as the legislation

October 2010

and rules. We are able to use this knowledge to help you formulate your strategy and to achieve the most favourable outcome. For information about our practices, please contact Takeshi Nakao at takeshi.nakao@freshfields.com

Freshfields Bruckhaus Deringer LLP is an integrated international law firm and operates from 27 offices in 15 countries. Our 2,500 plus lawyers provide unrivalled technical and commercial advice to the worldâ&#x20AC;&#x2122;s leading national and multinational corporations, financial institutions and governments, helping them deal with their most challenging and complex business issues and transactions. We have been operating in Japan since 1988 and brought our first Japanese lawyers on board in 1998. We advise domestic and international companies on Japanese, English and US law across a range of practice areas.

Industry experts | Legal services Small to Medium-sized matters

“We handle small to medium-sized legal matters – both in and out of Japan – that require handling speedily and effectively”

Kengo Miyamoto Partner Miyamoto & Yoshida

ith regard to our office’s practice, while we cover a broad range of areas, our main focus is on general corporate, employment, and dispute resolution. Miyamoto & Yoshida do not target, however, what you would consider “big matters”, such as mergers and acquisitions – albeit M&As continue to make business headlines here. We handle small to medium-sized legal matters – both in and out of Japan – that require handling speedily and effectively. This could encompass establishing joint ventures, arranging distributorship or setting up a business; hiring or firing; and breach or termination of contract, product liability claims, and leakage of trade secrets. It is our contention that, while big matters are best handled by the larger firms, the small to medium-sized client would be wise to rely on law firms of our size. We think of ourselves not as a luxurious, fully equipped Rolls-Royce, but rather as a handy Lexus for daily use. In this age of increased globalisation, we provide legal advice to Japanese companies dealing with foreign companies, as well as foreign companies working with Japanese companies, in a manner that is consistent with

their international business. We also can assist in drafting contracts in English – such as agreements related to sales and purchase, distribution, agency, and joint ventures – or by participating in negotiations conducted in English. For information about our practices, please contact Kengo Miyamoto at kengo.miyamoto@m-y-law.jp or visit our website www.m-y-law.jp/eng Miyamoto & Yoshida provides advice on a wide range of legal issues that a company encounters in its daily operations. We also bring advanced skills regarding finance, which, due to recent changes in regulations, has become more complex. We provide advice in cases not only where intellectual property rights are the core issue, but also where they are ancillary to a larger transaction. We provide assistance in preparing employment contracts and working rules, and also offer advice on termination, sexual harassment and protection of trade secrets. We handle insolvency and restructuring, as well as litigation and dispute resolution.

October 2010

Industry experts | Legal services Intellectual Property

The quality of translation crucially depends on the choice of words, especially in the field of intellectual property

rom laughable misunderstandings to crucial mistakes, we all deal on a daily basis with language issues. When it comes to the protection of your intellectual property (IP) rights, anecdotes on translations are numerous, but many, unfortunately, end in serious mistakes. Despite efforts to harmonize the IP among the three main zones (US, Europe and Japan), there is no global patent or trademark, as the national law and national language prevail. During prosecution or registration of your rights, an exact translation is required. However, the business of translation is extremely subjective, and here is the issue: There is never a single way to translate a word or a sentence; there is always a range of possible translations. Katakana, for example, is an ingenious invention in that it mimics the original pronunciation of a word. However, who has never hesitated when coming up with a katakana translation for one’s

October 2010

family name? Likewise, in trademarks, applicants often face difficulties with regard to the lack of sound variety for which two words that are totally different in sound in the original language are considered to be similar or even the same in Japanese: e.g. “track” and “truck”. When it comes to patents, computers have not reached the level of human translation. The quality of translation crucially depends on the choice of words, especially in the field of intellectual property. Claims must be translated as precisely as possible because the scope of protection may depend on the interpretation of a single word. Yet, preciseness often comes SONODA and KOBAYASHI at the expense of comprehensibility, and the choice lies Mitsui in theBuilding hand ofSuite the 3401 Shinjuku 2-1-1 Nishi-Shinjuku translator.

Shinjuku-ku, Tokyo Japan 163-0434

For information about our practices, Tel:+81(0)3-5339-1093 please contact DianeRax:+81(0)3-5339-1094 Beylier, International Client Relations Manager www.patents.jp dbeylier@patents.jp

info@patents.jp

Sonoda & Kobayashi was established in 1998 with the specific goal of creating an IP law firm with a global outlook. Sonoda & Kobayashi offers expertise and services across a wide range of technical fields including biotechnology, pharmaceuticals and electronics. Our primary concern is to reduce the difficulties all too often encountered by international companies. By combining legal knowledge, technological linguistic ability and a keen awareness of intercultural differences, we ensure that a smooth communication is achieved. www.patents.jp

t The American School in Japan (ASIJ), we love to learn, and that is clearly apparent when you walk into any of our classrooms, especially those at our Early Learning Center (ELC) and Elementary School. By creating a rich environment, where students follow a developmentally appropriate curriculum and engage in stimulating project-based learning, we aim to nurture each child’s full potential. At the ELC, director Judy Beneventi, who was named National Distinguished Principal in 2007, and her team of highly trained and well-educated faculty have created a diverse, developmentally appropriate program that is research driven. Following best practices in education, they focus on what is age appropriate, individually appropriate, and socially and culturally appropriate. The curriculum in early childhood education must encompass many areas and must give young children a better understanding of their immediate world. It is important for children to develop physically, to develop an understanding of science and society, to participate in and enjoy art, music and drama, and to be presented with activities that will enhance cognitive development. ASIJ’s curriculum provides for all areas of a child’s development: social, cognitive, motor, language, emotional and creative. Teachers prepare the environment for children to learn through active exploration and interaction with adults, other children and materials. At the ELC, we use the Project Approach because it allows for the varying learning needs, skills and interests of the children. We want learning to ADVERTORIAL

be memorable and meaningful. This approach provides a way to introduce a wide range of learning opportunities that are responsive to the different ways children learn, their different backgrounds and experiences, and their different stages of development. At the Elementary School, principal Dan Bender, National Distinguished Principal of the Year 2000, and his team of teachers and specialists take a similar approach through units of study that guide students through an area of enquiry and encourage them to generate questions and research topics. In offering a developmentally appropriate program, we also strive to make sure that each student continues to learn skills at the correct level. Studies affirm that children leaving third grade as solid readers have an enormous advantage in continuing their academic success. The opposite is also true. A school like ASIJ that operates with high expectations for achievement is committed to the goal of early reading success for all primary grade students. Our team of learning support and speech and language professionals has created a system to assess students’ progress at key points of development, e.g. in the fall of the kindergarten and first grade years, to identify students who need some reading “vitamins” to boost them to success. This takes the form of best practice instruction in the classroom and extra small group lessons from a qualified learning specialist. Such a proactive safety net approach — known as early intervention — prevents the development of major achievement gaps that lead to discouragement and lower achievement.

At the ELC, classroom teachers also provide a strong English model at a time when language acquisition is a critical developmental task. Students simply aren’t given the opportunity to fall behind in this kind of school program. Foremost among parents’ priorities is the provision of a nurturing, emotionally safe learning environment for their young child. Students who feel safe and cared for by the adults in their school grow in self-esteem and the ability to take the risks that learning requires. This is the cornerstone of the learning foundation children build on for their future. In a caring school, respect is a core value, and time and focus are given to helping young children learn what it means to be responsible community members. The professionalism of the teaching staff is a major source of trust that parents weigh in choosing a school for their young learners. The love of learning that we instill in students is modeled by our faculty, who continue their own education and seek out professional development activities. At the ELC, six of the lead teachers have master’s degrees, with one now working on a PhD, and many assistant teachers are certified teachers themselves. In our elementary school, 28 teachers— more than half—hold advanced degrees. Our focus school-wide, whether you are a student, parent or teacher, is on loving to learn.

info@asij.ac.jp

http://community.asij.ac.jp

EVENT REPORT

Kanpai! Belgian Beer Weekend

10-12 September 2010, Roppongi Hills Arena Text and photos Tony McNicol

he inaugural Belgian Beer Weekend was held under the auspices of the Belgian Beer Information Center in Tokyo and the Union of Belgian Brewers (a Brussels organisation to which all Belgian breweries belong). Belgian Ambassador Johan Maricou was the honorary chairman of the organising committee, which included beer importers Asahi Breweries, Brussels, Konishi Brewing and Mitsui Foods. For three days in September, Roppongi Hills Arena was awash with Belgian beer, food and music. A version of the renowned Belgian Beer Weekend (held the first weekend of each September in Brussels), the Tokyo event served 15,000 visitors with 45 beers – from Pilsners, to white beers and red beers, to abbey beers and trappist beers, to fruit beers and lambics. Typical Belgian fare on offer included frites, rotisserie chicken and – of course – waffles. “I think a lot of Japanese people who have already tried Belgian beer will find something new to taste here,”

Belgium has 140 breweries and 800 types of beer in an area just 1.5 times the island of Shikoku said Hans Rubens, import beer sales and planning department manager of Konishi Brewing. Konishi started importing Belgian beer 22 years ago and stocks about 40 to 50 beers (29 of the 45 beers at the festival were from the company). “We have very special beers, such as lambic beers, which have a very sour taste. We have very fruity beers, such as beers with cherries. And we have very strong beers … almost the same alcohol percentage as wine,” said Rubens. Imports to Japan are going well, he noted, bucking flat sales in the overall Japanese beer market. “Belgian breweries have stepped up their efforts in Japan, and so today

you can enjoy probably a few hundred [varieties of beer].” Belgium has 140 breweries and 800 types of beer in an area just 1.5 times the island of Shikoku. Rob Van Nylen, CEO of Akoni, was drinking Leffe Brown, a 6.5% popular abbey beer from South Belgium. “It’s very aromatic ... a typical Belgian beer,” he said. As a Belgian, what advice does he have for novice beer drinkers? “My advice would be very simple,” said Van Nylen. “You can drink Belgian beer in a bottle any day in Tokyo, but getting it on draft is a special experience. There are more than 10 Belgian beers on draft here – that’s a unique chance.” October 2010

Reiki is a very powerful tool for self-discovery, inspiration, creativity and transformation which can be applied to enhance our personal and professional lives Petya Lowe

October 2010

C ulture S hock

The power of

Text Alena Eckelmann Photo Tony McNicol

Roughly translatable as “spiritual life-force”, reiki is a system of healing developed by Buddhist monk Mikao Usui in the 1920s. Holistic therapist Petya Lowe has lived in Japan for 20 years. The Bulgarian national is a reiki practitioner and one of few foreign teachers of the original Usui-method. Lowe discovered the healing system by chance in 1994 while browsing through a magazine where she saw an advert for a reiki class. She felt inexplicably drawn, signed up, and it has been part of her life ever since. After founder Usui’s death, reiki spread to foreign shores; first to Hawaii, then to the mainland United States, and later Europe. While over the years reiki has become modified abroad, in Japan the original system has been largely preserved. “What attracts me to reiki is its incredible simplicity, versatility, and infinite practical applications. We can use reiki to enhance all aspects – physical, mental, emotional and spiritual – of our lives, and of

the lives of our friends, families and clients,” says Lowe. Reiki is a hands-on healing technique that taps the universal life energy flowing through all living beings. In Japan the energy is called ki, in China qi, and in India prana. It is drawn in by the reiki practitioner and transferred through the palms of their hands to various energy centres in the patient’s body. I had a chance to receive a reiki treatment when interviewing Lowe. As I lay on a massage table, Lowe silently placed her hands above different parts of my body, starting

from my feet and working up to my head. I experienced a warm tingling sensation in the areas Lowe worked on, then a feeling of calmness and of deep relaxation. “Reiki helps us to be more centred and in touch with ourselves and with others. It addresses itself to the part of you that understands everything and it has the ability to heal every level of your being, thereby restoring the body’s balance and well-being,” Lowe explains. “It is also a very powerful tool for self-discovery, inspiration, creativity and

transformation which can be applied to enhance our personal and professional lives.” The ability to practice reiki is acquired through an “attunement” performed by a reiki teacher. The initiate is connected to the source of reiki energy then, once attuned, the new practitioner will be able to use the energy at any time and in any place for the rest of their lives. Lowe was attuned as a reiki expert and teacher some 14 years ago. She also conducts private therapy sessions at Lifeforces, the holistic practice in Tokyo which she co-founded in 1994. Even though teaching and “giving” reiki can be considered a simple job, Lowe thinks of it more as an aspect of her life that permeates both daily and professional activities. “The practice of reiki, in the same way as meditation, for example, transforms us and opens us up to new dimensions. Then we just live our lives, and do our jobs, with this additional, expanded perspective.” October 2010

Alison Pockett President, Magellan Financial Planning Text Justin McCurry Photo Tony mcnicol

October 2010

T alking E U R O bi Z

n 1995 I founded the financial advisory company Magellan, which caters to Japan’s foreign community. I’ve been deeply involved in that community as a former president of both Foreign Executive Women (FEW) and the British Chamber of Commerce in Japan (BCCJ). But since I came to Japan 15 years ago, I have seen major changes in the financial status of fellow foreign business people. I have seen a shift from lucrative expatriate-style packages to local packages; foreigners who once would have been on a traditional package – with all the spicy extras – now have to think more for themselves. The market has also changed in terms of the number of financial advisory firms. Many left or closed down during or after the credit crisis, and some have simply fizzled out. Having sat on the board of governors of the EBC, I’m aware that there are a number of barriers to certain sectors here. Sometimes you get the feeling that Japan is on the “too difficult” pile, so companies decide to go to places like India or China, where lower operating costs and less regulation make for more profitable options. But as long as there is a market for expats and their businesses in Japan, the individual’s need to plan for their future won’t change. People will need guidance on what to do with their money. I smile when people tell me their company is looking after them and that they don’t need any advice. The problem is that when they leave that company – and foreigners traditionally change their job every four to five years – they stand to lose a lot financially. If you don’t have a back up plan in place, you’ll need financial advice. That’s particularly true if you’ve been with a company for a few years and you’re losing your pension or some other benefit when you leave. Magellan’s philosophy is that it doesn’t matter how much money a client has. It annoys me that certain financial institutions like to grade people. I don’t think that’s the right philosophy. We would never be able to attract clients that way, because people would feel we were discriminating against them according to how much money they have.

Obstacles are what you see if you take your eyes off the goal Getting involved in personal finance was a natural progression for me after I had the opportunity to join American Express in 1989. Their training programme was second to none, so I was extremely lucky. I had completed an MBA in Britain which opened my eyes to other possibilities. Having worked abroad before, I had always intended to go back overseas. That opportunity came when I was asked to set up a financial advisory firm in Japan for a company based in Hong Kong. I realised that there were other opportunities for me here. For me, obstacles are what you see if you take your eyes off the goal. My goal was to establish a highly reputable financial planning operation that was well respected in the marketplace. I made it my business to join the British Chamber of Commerce and Foreign Executive Women because it is important, as a businesswoman, to become involved in the business community around you and to enjoy the networking opportunities these associations provide for both business and personal connections. Encountering problems usually comes from not knowing the right people to help or guide you. I was fortunate enough to have developed a good network of people who had been in Japan for a while and could point me in the right direction. There was definitely a gap in the market in the mid-1990s. Tokyo at that time was a very different place from today. There was still an overflow of people who had been here since before the bubble burst, on traditional expat packages. After the bubble burst, I expected Tokyo to empty out, but it didn’t. Most foreigners living in Japan are only going to be here for a short time, so they don’t need advice from a Japanese financial planner. Foreigners tend to

move between jobs more often than their Japanese counterparts, which also involves being relocated to another country. This means that careful financial planning is needed to build in flexibility for their investments and other financial matters. One of the questions I get asked most concerns retirement. Clients seem embarrassed to admit how little planning they’ve done. I can tell you that if you’re approaching 30, you’d better do something pretty quick. If you’re approaching 40, it’s going to cost you a lot of money, and if you’re 50 you might as well give up now. The earlier you start, the less painful it will be later. My job is to get people on the right track and sometimes tell them, diplomatically, that they might not be able to get immediate results with the financial resources available. I tell them not to panic – that they will get there in the end. And most people do, as long as they stick to the plan. The credit crisis was truly shocking. A lot of foreigners lost their jobs here or were relocated, but I’m of the opinion that in every crisis there lies an opportunity. The crisis gave people the opportunity to sit down and talk through their finances – our job is also very much about financial psychology. We help them to reassess their financial situation and offer reassurance. We haven’t lost any clients because of the credit crisis. In fact, it was an opportunity for us to meet more people face-to-face. Now the situation is slowly improving. So there is clearly still a need among the foreign community for personal financial planning advice. The nature of the advice hasn’t changed – clients still need to plan and to be educated about personal financial planning. Away from work, I enjoy photography, but my real passions are scuba diving, and marine and wildlife. My favourite destination is the Galapagos Islands, a mesmerising place. I’d also like to take the time to see more of Japan. There is always something new to discover and learn about. Many people regard Japan as a difficult place to live, but I think it depends on how involved you become in your community. It’s not a difficult country to live in at all. October 2010

Shimokita nights Photos and text Rob Gilhooly

October 2010

L ens F lair

Years ago I found a small sign pasted to a wall in Shimokitazawa that read: “Beware Young People.” It could have been an edgy, almost political request or warning, or both. Shimokita, as people who frequent Tokyo’s hipster Mecca tend to call it, is that kind of place. That was about 15 years ago, and my first taste of Tokyo. An actor friend was performing in alternative theatre, and a musician acquaintance at a live venue. Post performance was spent in a higgledypiggledy izakaya where two sake-fuelled members of the entourage tangoed on the table among remnants of yakitori and sake, while another read poetry she had recently penned. At every corner, Shimokita oozed youthful energy and creativity, its maze of narrow winding lanes symbolising the endless possibilities that draw young creative types, just as Shibuya entices teenage shoppers.

That vitality remains. Wannabe artists, musicians, actors and writers still frequent the trendy bars and cafes, some of which – like Bar Idiot Savant and Taimado hemp restaurant – have a distinctly antiestablishment feel. Look hard in Shimokita’s bars and you might even find a bottle or two of absinthe. Perhaps the most striking feature of Shimokita, though, is its homely feel: people actually seem to know one another. I lived in Shimokita for over eight years and my main drinking companions were people from the neighbourhood. How long that community atmosphere will last, however, remains to be seen. Upon a recent visit I found another sign pasted to a wall; “Shimokita is dead?” it asked in reference to a local authority plan to develop the area. Fortunately, those who live and work in Shimokita do not lie down easily, and the fight goes on to preserve one of Tokyo’s most idiosyncratic neighbourhoods. See all the photographs at www.eurobiz.jp

October 2010

PROMOTION

Q&A O

pening its doors in 2007, Robert Walters Osaka office has leveraged its Japan and global networks to quickly establish itself as one of the top professional recruitment consultancies servicing the Kansai and Chubu regions. Osaka Manager Nathaniel Pemberton shared his views on the trends and recruitment market in this region. How has Robert Walters Osaka been able to establish itself so quickly in Western Japan? Nathaniel: When we first began operations in Osaka, we were very fortunate to be able to build upon the experiences from our Tokyo office, now celebrating their 10th anniversary, as well as our established global network that presently includes 40 offices in 19 countries. With strong industry contacts and access to one of the largest candidate databases in Japan, our Osaka office was able to quickly build relationships with local business leaders and establish ourselves in the Kansai and Chubu regions. Our strong relationshipfocused style and high quality of service for both clients and candidates have meant that a large portion of our business now comes from referrals. In the manufacturing-heavy Kansai and Chubu areas many companies have begun shifting their production to cheaper locations overseas. Has your

Robert Walters Osaka

business changed as a result of this shift? Nathaniel: Whilst there has been a shift towards outsourcing certain roles, our clients still require specialised professionals to run their operations locally. We perceive this internationalisation as more of an opportunity, since such relocation results in increased demand for bilingual management, which we specialise in placing. The need for cost accountants, for example, has been increasing specifically in Kansai to cater to Osakaâ&#x20AC;&#x2122;s large manufacturing base. Who are these specialised professionals you mention? Nathaniel: Generally, we help clients source mid- to senior-level management professionals specialised in their area of expertise, whether it be in investment banking, IT, retail, manufacturing, healthcare and pharmaceutical, logistics, or professional services, amongst many others. In Osaka specifically, we are finding a particularly strong focus on the sales & marketing roles, and growing demand for finance professionals. Specialists with pharmaceutical experience have been especially sought after, since the recent passage of legislation promoting generic medicines. Where do you see Robert Walters Osaka operations expanding in the future?

Nathaniel Pemberton

Nathaniel: Locally, we are very excited about the strong growth we continue to see each year in the Kansai and Chubu regions. I feel there is still a lot of growth potential in Western Japan, and we hope to broaden our existing areas of coverage. In Asia, Robert Walters is looking to expand into new markets in the near future, with our newest branch opening this month in Seoul, and a new office planned for Beijing. As more Japanese companies continue to internationalise, we hope that our strong position as leaders in bilingual recruitment will help their businesses achieve higher levels of agility and total performance. â&#x2014;?

About Robert Walters Robert Walters is one of the worldâ&#x20AC;&#x2122;s leading specialist professional recruitment consultancies with 40 offices spanning 19 countries. In Japan, Robert Walters recruits out of its offices based in Tokyo and Osaka, where our consultants share a wealth of recruitment experience. We offer a highly professional and specialised service, and are proud of the long-established track record we hold in working with leading international and Japanese corporations. www.robertwalters.com

October 2010

Robert Walters Osaka Pias Tower 15F 3-19-3 Toyosaki, Kita-ku, Osaka-shi Osaka 531-0072, Japan t: +81 (0)6 4560 3100 f: +81 (0)6 4560 3101 e: osaka@robertwalters.co.jp

events

Upcoming events Austrian Business Council www.abc-jpn.org

Austria wine tasting

How to approach the Japanese market: Breakthrough with the new observation framework and behavioural feature of the Japanese

30 November, Tuesday, from 19:00 Venue: Conrad Tokyo, 2F, Kazanami Hall Fee: ¥2,000 Contact: www.abc-jpn.org

8 October, Friday, 12:00-14:00 Speaker: Takashi Nishihara, JDS Company Ltd. Venue: Hotel Okura Tokyo, Oak Room Fee: ¥6,000 (members) Contact: events@dihkj.or.jp

Belgian-Luxembourg Chamber of Commerce in Japan

The business trends that shape the new decade:

www.blccj.or.jp

Luxembourg wine tasting* 26 October, Tuesday, 19:00-20:30 Speaker: Yumi Tanabe, senior wine advisor Venue: Marunouchi Café Fee: ¥3,000 Contact: event@marunouchicafe.com * BLCCJ, in cooperation with the Luxembourg Trade and Investment Office

British Chamber of Commerce in Japan www.bccjapan.com

what they mean, what has to be done

12 October, Tuesday, 18:30-21:00 Speaker: Prof. Dr Hermann Simon, SimonKucher & Partners Venue: The German Chamber of Commerce and Industry in Japan Fee: ¥5,250 (members), ¥8,400 (non-members) Contact: events@dihkj.or.jp

www.iccj.or.jp

Viva Italia, vivi Italia!: an Italian market in the heart of Tokyo

19 November, Friday, 19:00-23:00 Venue: Conrad Tokyo, Shiodome Fee: ¥25,000 Contact: info@bccjapan.com

29-30 October, Friday-Saturday, 11:00-17:00 Venue: Kotsukaikan Bldg., in front of Yurakucho Station Contact: iccj@iccj.or.jp

Finnish Chamber of Commerce in Japan

Netherlands Chamber of Commerce in Japan

17th Stora Enso Cup* 19 November, Friday Venue: Taiheyo Club Narita Course, Chiba Pref. Fee: ¥18,000 Contact: fccj@gol.com * Jointly organised with SCCJ

French Chamber of Commerce and Industry in Japan www.ccifj.or.jp

Soirée de gala* 15 November, Monday, 18:30-22:30 Venue: ANA InterContinental Tokyo Fee: ¥35,000 (members), ¥45,000 (guests) Contact: Toru Moriyama, 03-3288-9633, pub@ccifj.or.jp

German Chamber of Commerce and Industry in Japan www.japan.ahk.de/en

http://nccj.jp

Luncheon meeting:

Lotgenoten, partners in circumstance 8 October, Friday, 12:00-14:00 Venue: DSM, Front Tower Shiba Koen, 11F Fee: ¥2,000 (members) Contact: nccj@nccj.jp

2010 Deshima business awards 19 November, Friday, 16:00-19:30 Presenter: Bernhard Wientjes, chairman, Confederation of Netherlands Industry for Employers Venue: to be confirmed (in Tokyo) Fee: no charge Contact: nccj@nccj.jp

Norwegian Chamber of Commerce in Japan

NOVEMBER S

Italian Chamber of Commerce in Japan

British business awards 2010

www.fcc.or.jp/

OCTOBER

Joint Nordic chambers event 30 November, Tuesday, 19:00-21:00 Speakers: Coca-Cola Japan and Tomra Japan Venue: Norwegian Embassy Fee: to be confirmed Contact: stein.saugnes@nccj.or.jp

Swiss Chamber of Commerce and Industry in Japan www.sccij.jp

The 2nd SCCIJ networking event 25 October, Monday, 18:30-20:30 Venue: Uchida Yoko, 2F, Event Hall Fee: ¥1,000 (members) Contact: sccij@gol.com

Swiss Christmas party 2010 26 November, Friday, 18:00 doors open Venue: Hilton Tokyo, Nishi-Shinjuku Fee: ¥10,000 Contact: sccij@gol.com

www.nccj.or.jp

October 2010

W ork P lace

Erica Borile President of Vera Italia

“Our website sells food, wines and a wide selection of other Italian imports. “We look for companies offering the best authentic Italian produce. That’s why we call ourselves Vera Italia – the real Italy. Photo Tony McNicol

October 2010

because there’s no place like home, especially when you’re sick.

Hospitals are excellent establishments. It’s just that no-one likes going into them unless they have to. So why not have the hospital come to the patient instead? Getting healthcare at home is a simple solution that makes patients less anxious and hospitals less crowded. Find out more at www.philips.com/because