Editor's Note: The article below was written in December 2009 for SUCCESS STORIES: JAPAN Executive Newsletter subscribers and hence, not necessarily focused for HR professionals alone. It is being re-published, with permission, in this edition of HRA as we thought the insights and perspectives provided by the author are very much relevant to HR as well. We hope that this Editorial helps put things in perspective and help you come to a realization that 2010 can be a great year for HR in Japan.  


TO OUR FRIENDS, COLLEAGUES, PARTNERS, SUBSCRIBERS AND CLIENTS:

I would first like to take this opportunity to thank all of you for the support, advice, comments and new business you have offered us during 2009.  Our perspective on Japan is rather unique, we are repeatedly told.  And so we are especially grateful to know that even those who usually read these free teaser emails silently are happy to receive them as well as to send us their updated email addresses when they move, and to pass our commentary along to interested Japan-oriented business colleagues, no matter where they are located in the world.

There are now over 14,000 of you receiving these periodic messages, and you should always feel free to forward them on to your colleagues, partners and customers, or to send them off to corporate headquarters as additional support for your own contention that the prospects for your business success in Japan remain as strong as ever.

There are many points that we make over and over again to our subscribers in the pages of SUCCESS STORIES: JAPAN Executive Newsletter that often don't reach you, our non-subscribers.  And so the point of my brief message today is simply to let you know that Japan not only remains a vibrant economy with many pockets of opportunity for business profit, but also that it will become increasingly apparent in the longer term (the next 3-5 years) that many of those offering obituaries for Japan's economy today will be proven to have been wrong.

I don't have the time or space in this email to offer you our entire thesis on why Japan is even more important to your company's success today than it has been in the recent past.  But rest assured that our thesis is a comprehensive and well-researched one, developed from business practitioners we have been regularly speaking with at domestic and foreign companies throughout Japan, over the past 12 years that we have been continuously and profitably publishing SUCCESS STORIES: JAPAN Executive Newsletter.

Today would like to offer you all some talking points to use the next time you get into a friendly debate over drinks or dinner with business colleagues about what's really happening in Japan.  When they tell you Japan is finished, that Japan's economy will never recover, that demographics or a weak political system spell the end for the entire economy, please offer them some of these thoughts.

In the coming years, Japan has a number of advantages too that few point out:

Technology. The country has over 1000 companies with a $1 billion in sales or more. Many of these are hurting and bloated, but many are cutting-edge too. Most people can't name more than a handful of such companies, but many of them have spent years developing technologies that are world-class and will go worldwide as soon as their management
understands how to. Anybody impressed with how Japan led in mobile phone and miniaturization technologies? How it led in automobile manufacturing?  How it leads in many areas of MEMS and robotics? Well, get ready for energy efficiency technologies, food technologies, nanotech advancements, rare metal processing expertise and a host of others coming down the pike in the coming years. The Japanese have traditionally been poor marketers of their own discoveries but that will change because it needs to.

Capital. Much has been written about Japan's $14 trillion in household savings and I will not go into it here. But Japan's debt is internal and that is an important point that distinguishes its debt problem from the debt problems experienced today by the US, UK, Greece, Spain, Ireland, Dubai, Ukraine, Iceland and many other countries.  Over the years, Japan has the flexibility to tax its citizens in a way most countries do not. You can argue that many Japanese now have low
savings, but you cannot argue that households have anywhere near the level of personal indebtedness that rival those found among households in the US and Europe. You can also argue that taxes hurt growth and yes that's true too, but the point is that the ability to tax its citizens is one tool of a 'tool-kit' of solutions to Japan's fiscal problems that other countries do not have the luxury of employing.

State assets. Nobody talks about Japan's state assets but they are significant and worth much more than people think. Privatizing these gradually will yield enormous benefits. Think NTT, Japan Tobacco, JR Railways, Japan Post, state oil exploration companies, Japan Development Bank stakes, JOGMEC stakes, JAPEX stakes, refining assets, telecommunications assets, property assets, stakes in banks,…tokushu hojin. Many of these have their own problems but many also have valuable monopolies, unique assets and prime positions that have real value. And at the prefectural and municipal levels, there are holdings of parks, hospitals, resort and recreation facilities, arenas, theaters, shopping areas around train and bus stations, sanitation, municipal facilities of various kinds, many whose operations are viable today and can be made saleable tomorrow. They are not all in need of financial support today either.

A strong yen. Say what you want about the ill effects of a strong yen on Japan's economy, and many of them are true.  But many act as if nobody can make money in deflation, and that companies can only make money when there's inflation (a little or alot).  That's not true. In the same way that inflation gives incentives to seek scale, to over-invest and take on too much debt, surviving in deflation means cutting out the fat and paring down your company to the things which make the most profit on ever more valuable capital. Japan's companies arguably have the lead on this as they've been operating in a deflationary economy for longer than many companies in other countries.  They've taken the first few cuts at restructuring these past ten years and will now have to do even more. The one's hurt by a strong yen are Japan's largest exporters like Toyota, Canon and Panasonic, true.  But a strong yen actually helps Japanese consumers, and it helps Japanese companies acquire assets abroad, and it helps Japan buy the natural resources it mightily needs like metals and oil too. Many countries with devalued currencies don't have the benefits of a super-strong currency, but Japan does and this is important to remember when arguing with doomsayers on Japan's prospects.

Yes, Japan has big problems, but does anybody really think Japan is in poorer shape than the UK, Greece, Spain? Look what Greece is about to go through, for example.  No, Japan has many problems, but unlike many others, it has more tools in its tool kit than many. It needs to get a good focus on its problems but it is not in any emergency in the near term despite what the CDS or bond market says.

Please let us help you in 2010 to grow your Japan business, just as we do with for our consulting clients as well as the subscribers to SUCCESS STORIES: JAPAN Executive Newsletter.  We have our own proprietary databases of companies in Japan that we can use to help you gain partnerships for distribution, technology alliances, or customers beyond the normal haunts of Tokyo.  We also have the world's largest Japan-only expert network across all industries, so we can find you staff or contacts that can point you to critical resources, companies and contacts you never knew existed, no matter what industry sector or service profession you're focused on.  We have databases of officials in the prefectures and the cities as well, if you are focused on gaining public sector assignments.

And if you are in private equity, remember that we are uniquely able to locate Japan targets for investment, as well as strategic and financial investors that will help your firm exit its Japan operations, or help your portfolio companies by extending their business to Japan.  If you are a Japan-focused partner in your law firm, we know Japan-based corporations that are looking to establish business with law firms abroad for the first time.  If your company is a product seller in Japan or exporter to Japan, we can help you penetrate your market much more deeply than many often do.  Even real estate firms use us to market foreign-based assets to the many companies in Japan interested in acquiring.

Might I add, we can help you make the case with your corporate HQ for additional investment in your Japan operation, if need be.  We can benchmark your progress, and offer a sober assessment about your company's Japan strategy that will win you additional resources from your corporate headquarters, or at least keep it from cutting back on the level of support you get currently.  Alot of our clients use us for various kinds of corporate strategy perspective and you are welcome to call on us if you believe we can assist.  I have always believed our ability to help non-Japanese home execs understand Japan better is one of the most valuable services we offer.

Anyway, remember that Japan will still be around in 2010, and for years after wards, and it will remain one of the largest profit opportunities still left untapped by many companies for years to come.  We are here to assist you, and when we say we know Japan's business sectors like few others, we mean it and will be happy to prove it.  No matter what business you're operating in, if you want to know how to gain more profits and grow your business interests in Japan, please contact us anytime.

Best regards for the holiday season and for success and profit in 2010 and beyond,

Jay Nelson
Senior Editor
SUCCESS STORIES: JAPAN Executive Newsletter

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