• Dr Gerhard Fasol – CEO and Producer, Eurotechnology Japan
• Dr Charlotte Crowhurst – Patent Attorney, Potter Clarkson
• Dr Peter Tiffin – VP CMC, Taiho Oncology Europe (TOE)

Featuring speakers with pharma, intellectual property and entrepreneurship backgrounds, this webinar is a great opportunity to learn about the potential strategic pitfalls when entering the Japanese market and how Japanese culture can affect how a business performs in Japan.
The free webinar will be held on Tuesday 31^st January 2023 at 09:00 – 11:00 GMT

Do not miss the opportunity to meet the speakers, network, participate in open discussions, and gain first hand knowledge on how to successfully enter the Japanese market. 

You can access the programme here. 

Hermann Hauser in a recent article on Project Syndicate, entitled “The Struggle for Technology Sovereignty in Europe” argues for “the UK and EU to jointly establish a €100 billion ($120 billion) Technology Sovereignty Fund to counter the $100 billion that the US is spending on its technology sovereignty and the even larger amounts China is mobilizing”. I argue here, that we should be thinking that 27+1 countries could create much larger funds in a world where single individuals like Masayoshi Son can create funds of that order.

Hermann Hauser became an entrepreneur right after finishing his PhD in the Cavendish Lab (Cambridge University, UK) around 1978 – on the same lab bench in the Cavendish as myself – and is arguably Europe’s first and most important technology venture investor. Hermann Hauser can be seen as the initiator of Europe’s VC industry. Hermann Hauser is also one of the co-founders of ARM and many other high-tech companies. For a discussion with Hermann see:

The thought of a €100 billion Technology Sovereignty Fund is of course a fantastic plan. As a starting point, thats of course a great idea, however in my opinion, much much more is needed. My thought would be that for European Technology Sovereignty, five or ten, or even more funds of that €100 billion size will be needed. In my opinion, better not only by governments, but by private individuals like European versions of Masayoshi Son.

Three thoughts, which I will illustrate below

• a €100 billion fund for 27+1 countries is a lot smaller than the US$ 391 billion the single man Masayoshi Son is estimated to control (Vision funds plus three companies)
• a €100 billion fund for 27+1 countries is much smaller than the sovereign funds of very much smaller countries:
  • Singapore (5.7 million people), sovereign funds: US$ 715 billion
  • Norway (5.3 million people), sovereign funds: US$ 1327 billion
• My third point is that the assets in question (ARM) in Hermann Hauser’s Project Syndicate article would already use a large part of the proposed €100 billion fund.

To put a €100 billion fund for 27 EU Countries + UK into context:

Just one single man (Masayoshi Son, from a Korean immigrant family to Japan) controls at least two funds + and to some extent several companies, worth in total on the order of US$ 391 billion as follows:

• the current “fair value” of the first + second Vision Funds is reported as US$ 154 Billion.
• In addition, Masayoshi Son also controls (to some extent) the listed companies, which he often uses as acquisition and finance vehicles:
  • SoftBank Group Corp [TSE: 9984]: market cap = US$ 130 billion
  • SoftBank Corp [TSE: 9434]: market cap = US$ 67 billion
  • Z Holdings Corp [TSE:4689]: market cap = US$ 40 billion (includes Yahoo Japan Corp + LINE)

That is just one single man, who created all this from zero, not 27+1 countries.

Or as another comparison, Singapore has built at least two sovereign funds in total estimated to be worth US$ 715 billion. Singapore is one single relatively small country compared to 27+1 European countries (population of Singapore is about 5 million, about the same as Norway, and about the same as the Berlin region)

1. Singapore Sovereign Wealth Fund GIC estimated value US$ 488 billion
2. Temasec Holdings US$ 227 billion

Norway’s sovereign funds (population about 5 million):

1. Sovereign Pension Fund – Foreign US$ 1300 billion assets
2. Sovereign Pension Fund – Norway US$ 27 billion assets

My third point is that a single €100 billion fund is of comparable size of developed assets in question. eg. ARM’s current value would be a substantial part of a potential €100 billion fund. This means that after acquiring two or three companies of the value of ARM this fund would already be exhausted.

As another example, the strategic German mRNA company BioNTech (which among other therapies developed the BioNTech Covid Vaccine in cooperation with Pfizer) has a current market cap of US$ 51 billion. If a situation would arise that such a Sovereign fund would acquire a company such as BioNTech, that would again use up a large fraction – if not almost all of this fund. In my opinion, although of course a €100 billion fund investing in European technology companies in addition to existing substantial VC and investment funds would be great, this is not huge – even relatively small – compared both to the value of many assets in question, and also to the funds some private individuals (eg Masayoshi Son) or 5 million people countries (like Singapore or Norway) manage to build.

So I think many more than a single €100 billion fund would be needed for Technology Sovereignty – I hope circumstances will develop where even more can be invested in European ventures than today. Hermann Hauser’s proposal is certainly a great step in the right direction- many more such steps would be great!

(c) 2021 Gerhard Fasol

by Gerhard Fasol

Japan’s banking system. Number of banks via the Ministry of Finance registration and the Japanese Bankers Association

We are often asked, how many banks there are in Japan, when discussing possibilities for obtaining finance. Here we answer this question via two methods:

• registration with the Ministry of Finance: 198 as of July 1, 2013
• membership of the Japanese Bankers Association: 251 as of Sept 1, 2020

Banks in Japan need a license, therefore all Banks are registered, and details are published, there is a straight answer to this question: 198 + 1 (as of July 1, 2013).

Note that Japan’s banking sector is consolidating, especially regional banks, so there is some change over time.

Via registration with the Ministry of Finance (as of July 1, 2013):

198 (as of July 1, 2013) + The Bank of Japan

How many banks in Japan? – Detailed answer:

• Capital City (Tokyo metropolis) Banks: 4
  • Mizuho Bank (“blue”)
  • Mitsui Sumitomo Bank (“green”)
  • Tokyo Mitsubishi UFJ Bank (“red”)
  • Resona Bank
• Trust Banks: 4
• other: 15
• Foreign banks: 57
• Regional banks: 64
• 2nd grade regional banks: 41
• other

Total number of banks in Japan = 198 (as of July 1, 2013) (not including The Bank of Japan)

Since a banking license is required, the number, names, addresses etc of all banks of Japan are easy to find.

For historic reasons the number of banks in Japan is quite large, and the Bank of Japan and the Government of Japan have mentioned recently, that they consider the number of banks too large, and consolidation of local banks is under consideration.

Bank of Japan

Not included in the listing above is the Bank of Japan.

The Bank of Japan is the central Bank of Japan, and has three main responsibilities:

• issue bank notes (not the yen coins, the coins are minted by the Mint of Japan)
• carry out currency and monetary control
• act as settlement banks between all Japanese banks: “to ensure smooth settlement of funds among banks and other financial institutions, thereby contributing to the maintenance of stability of the financial system.”

Via membership of the Japanese Bankers Association (251)

• Full members (117)
  • City Banks (5)
  • Regional Banks (64)
  • Members of the Second Association of Regional Banks (38)
  • Trust Banks (4)
  • Foreign Banks (2)
  • Other Banks (4)
• Bank Holding Company Members (3)
• Associate Members (72)
  • Trust Banks (9)
  • Foreign Banks (51)
  • Other Banks (10)
  • Bank Holding Company (2)
• Special Members (58) (regionally based bankers associations)
• Sub-associate members (1)
  • Japan Post Bank

Total: 251

Trends and consolidation

As a consequence of the Japanese banking crisis following the “crash of the bubble”, many Japanese banks were in difficulties resulting in a wave of mergers of Japan’s mega-banks – as a consequence, three top banks were created:

• Mizuho Financial Group (blue)
• Mitsubishi UFJ Financial Group (MUFG) (red)
• Mitsui Sumitomo Financial Group (green)

Regional banks are increasingly under pressure as local economies stagnate and contract, winners and losers emerge, and we expect waves of mergers among mid-sized and small-sized local banks.

Emerging new banks

With the development of fintech and online banks we see new giants emerge, examples are Rakuten Bank, 7-Bank, Jibun-Bank and many others.

Contact

Copyright 2013-2020 (c) Eurotechnology Japan KK All Rights Reserved

The Tohoku triple disaster- impact on Tokyo:

For period of several weeks there were frequent and strong after quakes, and great uncertainty over the nuclear fallout situation. Companies were faced with the decision whether to relocate away from Tokyo for business continuity reasons and care for employees, or to remain in Tokyo to continue business and customer service – we here at Eurotechnology stayed in Tokyo for our customers, and signed a contract with a Swiss customer (market entry into Japan for mobile phone base station high precision components) a few days after March 11. Based on deep expert physics knowledge we analyzed the radiation load in Tokyo, and we heard that many companies used our analysis as input for their relocation decision making. Some of our newsletters and analysis is summarized here:

• https://www.eurotechnology.com/2018/03/11/tohoku-disaster-7-years-ago/

Understanding the causes for the Fukushima nuclear disaster:

The Fukushima nuclear disaster was caused by a large number of contributing factors, starting with the preparations for the piece of land where the Fukushima Dai Ichi nuclear plant was built. Some of these factors are listed here:

• https://www.eurotechnology.com/2018/03/11/tohoku-disaster-7-years-ago/

Fukushima Nuclear Accident Investigation Commission of the Japanese Parliament NAIIC

For the first and only time so far the Japanese Parliament created an investigation commission, which investigated the Fukushima Dai Ichi nuclear disaster. The commission was headed by Kiyoshi Kurakawa, read a summary of his talk at the 6th Ludwig Boltzmann Forum conference here:

• Kiyoshi Kurokawa: “Quo vadis Japan? — uncertain times. Groupthink can kill”

US Integrated Government and NRC efforts in Japan during the nuclear Fukushima accident

A few days after March 11, 2011, US President Barak Obama sent a team of over 100 US nuclear experts for 11 months to Japan to work with Japan’s Prime Minister, Ministers and TEPCO leaders and on location at Fukushima Dai Ichi to assist with managing the nuclear disaster. Leader of this US integrated team was Dr Chuck Casto. Read summaries of Dr Chuck Casto’s talks on his conclusions here:

• Chuck Casto: Global leadership in the extreme – crisis leadership in post-Fukushima
• Chuck Casto: Balance of Nuclear Power Policy in Post-Fukushima Japan
• Chuck Casto: Japan nuclear safety and lessons learnt

Restarting or not the world’s largest nuclear power station complex – Kashiwazaki Kariwa in Niigata (Japan)

The world’s largest nuclear power station complex, Kashiwazaki Kariwa in Niigata-ken (Japan) is sitting idle. Niigata-ken’s Governor is elected by the people of Niigata, and without his/her agreement, the nuclear power plants at Kashiwazaki Kariwa cannot restart. Read what former Niigata-ken’s Governor Hirohiko Izumida says about restarting the nuclear power station in his prefecture:

• Nuclear safety – Niigata Governor Hirohiko Izumida

Developing Japan’s energy industries

The Fukushima nuclear disaster started reforms of Japan’s energy industries, read more:

• Japan energy policy and energy architecture

(c) Copyright 2020 Eurotechnology Japan KK All Rights Reserved

joint event with the alumni organizations of HEC, École Polytechnique, Sciences Po, Edhec, Essec and Trinity College/ Cambridge University. Thursday 7 March 2019 19:00 in Tokyo

On Thursday 7 March 2019 we will have a joint event by the alumni organizations of several French Grandes Écoles, HEC, École Polytechnique, Sciences Po, Edhec, Essec, and Trinity in Japan on Japan’s corporate governance reforms.

Topic: Japan’s corporate governance reforms

Everyone of us who wants Japanese companies to take major decisions, e.g. in major sales, M&A, as investor, or executive or employee benefits from understanding how Japanese companies take decisions at top level. Corporate governance is about how companies take decisions, and how this decision making is controlled. Reforms were initiated by PM Abe and Japan’s Parliament since 2015, mainly driven by the very low returns on capital by Japanese companies compared to Europe and US, and by a long series of scandals. 

As the major shareholder of Nissan, Renault shares responsibility for corporate governance at Nissan, and governance of Nissan directly impacts employment in France. Thus interest in Japan’s corporate governance has suddenly shot up in France.The speaker has several years experience as Board Director and Member of the Supervisory & Audit Committee of a stock market listed Japanese SaaS, cloud and cybersecurity group, and will give a practician view of governance at Japanese companies.

Speaker: Dr Gerhard Fasol

Dr. Gerhard Fasol, graduated with a PhD in Physics of Cambridge University.  He first came to Japan in 1984 to help build a research cooperation with NTT.  In 1997 he founded the company Eurotechnology Japan KK and has been working with hundreds of Japanese and foreign companies on cross-border business development and M&A projects. For four years he served as Board Director of a Japanese stock market listed company. He is also Guest-Professor at Kyushu University and was tenured faculty in Physics at Cambridge University,  Fellow and Director of Studies at Trinity College Cambridge, Associate Professor at Tokyo University’s Dept of Electrical Engineering, and also Guest Professor in Physics at the École Normale Supérieure in Paris. In recent years he has been focusing also on questions of Corporate Governance at Japanese companies, a topic about which he is frequently presenting at a wide range of organizations in and outside Japan.

Event details and registration

• Date: Thursday 7 March at 19:00 (Please try to be on time).
• 19:00 – 20:00: Presentation and Q&A
• 20:00 – 21:00 Cocktail
• Venue: Aux Bacchanales Kioicho
• 東京都千代田区紀尾井町4-1新紀尾井町ビル 1Ｆ
• Shin Kioicho Bldg. 1F, 4-1, Kioicho, Chiyoda-ku, Tokyo
• https://goo.gl/maps/yuqAxJafe1s  
• Registration: Please register using contact form below, no later than Friday 1 March 2019.
• Please note that the last HEC event was booked out early, and some late registrations had to be turned away. So to avoid disappointment, make sure you register early!

To register

Copyright (c) 2019 Trinity in Japan Society All Rights Reserved

日本語版

日本語版

International Nanotechnology Symposium in Tokyo

21 University of Cambridge nanotechnology researchers in Tokyo meeting Japanese corporations

Symposium chair and contact: Gerhard Fasol contact here

Monday 16 September 2019 15:00-21:00 in Tokyo

Purpose of the International Nanotechnology Symposium in Tokyo

Exchange of views on results and future development of different nanotechnology fields between 21 Cambridge University nano-technology researchers and PhD students, researchers and nanotechnology companies. Explore common interests, and potential cooperation.

University of Cambridge, founded 1209 AD

• 107 Nobel Prize winners
• around University of Cambridge: 4700 knowledge intensive companies, 560 high-tech manufacturing firms, 3000 IT and communication based companies
• 2019 THE Times Higher Education Global University Ranking: Place 2 globally
• 2019 ARWU Global University Ranking: Place 3 globally
• 2019 QS Global University Ranking: Place 6 globally

Program

15:00 – 19:00

• presentations by Cambridge nanotechnology researchers:
  • Session 1:  Nanotechnology for Energy & Sustainability
    • TU – Plastic waste as a feedstock for solar-driven hydrogen generation 
    • TL – Fibre-based optofluidics for sustainable photocatalysis
    • AG – Ultrafast charging Li-ion batteries
    • JM – Battery material degradation at the nanoscale studied by analytical electron microscopy
    • MJ – Understanding the nature of oxygen redox in Li-excess cation disordered rocksalts as cathode materials for Li-ion batteries
    • JT – Structure and ionic conductivity of metal-organic framework composites
    • TP – Light-induced patterning of structural colour
    • TB – Triboelectric textile for wearable energy harvesting
  •  Session 2: Nanomaterials & Nano-biotechnologies
    • RM – In-operando SEM to Develop Manufacturing of Nanomaterials
    • KS – Hierarchical carbon nanotube structures
    • BS – DNA origami for enzyme biomimicry
    • RRS – Force-sensing artificial cells and tissues with synthetic DNA mechanotransducers
    • RG – The role of viscoelasticity in axon guidance during development
    • TN – Implantable electrophoretic devices for spatially controlled administration of nanoscopic drug carriers for brain cancer therapy
  • Session 3: Nanoelectronics & Photonics
    • BD – Photophysics of thermally activated delayed fluorescent emitters
    • TG – Quantifying disorder in hybrid perovskites for optoelectronics
    • JO – Gold nanorod – MOF core-shell composites as advanced surface-enhanced Raman spectroscopy sensors
    • EW – Transition edge sensors for far-infrared space science
    • SM – 3D structured carbon nanotube infrared detectors
    • LS – 3D magnetic nanostructures for spintronics
    • TL – Manipulating single electron spins in silicon CMOS spin qubits               
• NTT Basic Research Laboratories
  • Hideki Gotoh: Overview of NTT R&D and Basic Research Laboratories
  • Hiroshi Yamaguchi: Semiconductor Electromechanical Devices
  • Akira Fujiwara: Silicon nanodevices for metrology and sensor applications
• Nippon Electric Glass Co. Ltd.
  • Shingo Nakane, Division Manager, Fundamental Technology Division: Glass products for future applications
• panel discussion on developments in nanotechnology fields and possibilities of future cooperation

19:00 – 21:00 discussions and buffet

please contact us via the form for enquiries

Organizer and responsible: Gerhard Fasol

fasol.com

• Eurotechnology Japan KK CEO and Founder
• Kyushu University Guest Professor

previously:

• GMO Cloud KK (TSE:3788) Board Director and Member of the Supervisory & Audit Committee
• University of Tokyo, Dept of Electrical Engineering Associate Professor and Sakigake Research Project
• Hitachi Cambridge Laboratory, Laboratory Manager
• Cambridge University, Cavendish Laboratory, Tenured University Lecturer
• Trinity College Cambridge Teaching Fellow and Director of Studies
• Cambridge University, Cavendish Laboratory PhD in Physics

Related organizations

Ludwig Boltzmann Forum

Energy – Entropy – Leadership

https://boltzmann.com/forum/

Trinity in Japan

Trinity in Japan: Trinity College, University of Cambridge officially recognized group.

Trinity in Japan: founder and chair Gerhard Fasol

Trinity College founded in 1546. Global impact. 33 Nobel Prize winners.

https://trinityjapan.org/

Contact, registration and enquiries

please contact us via the form below to enquire about registration and fees

(c) 2019 Eurotechnology Japan KK. All Rights Reserved

Corporate Governance Reforms: How the Way Japanese Corporations Take Decisions is Changing

SJCC Swiss-Japanese Chamber of Commerce Friday 12 October 2018, 18:30-19:45, JETRO Office Geneva

Prime Minister Abe’s corporate governance reforms are arguably one of the biggest success stories of his reform program to promote Japan’s economic growth. Japan’s Government in coordination with the Tokyo Stock Exchange and the Financial Services Agency changed the legal and regulatory framework for the supervision of management for stock market-traded companies, faster than many thought this could be done.

Japanese corporations are changing their governance structure, bring in independent Board Directors with fresh ideas and independent views and experience. The share of foreigners on Japan’s Board of Directors is still low (0.5%) but increasing as they bring global expertise to the top level of increasingly globalizing Japanese companies.

The presentation is based on Gerhard Fasol’s experience as Board Director and Member of the Supervisory and Audit Committee of a stock market listed Japanese group. It will explain some details of how Japanese stock market listed corporations take decisions, the different models for management supervision available under Japanese law, and how this works in daily practice.

Understanding how Japanese corporations take decisions, is a key success factor for companies seeking to achieve agreements with Japanese corporations that need Board approval, e.g. for investments, M&A, partnerships or large purchases, as well as for investors in listed Japanese company stock, and employees of Japanese companies. Knowledge about Japanese Corporate Governance is also crucial for the success of Foreign subsidiaries in Japan.

About the speaker

Dr. Gerhard Fasol, of Austrian origin living in Tokyo, graduated with a PhD in Physics of Cambridge University. He first came to Japan in 1984 to help build a research cooperation with NTT. In 1997 he founded the company Eurotechnology Japan KK and has been working with hundreds of Japanese and foreign companies on cross-border business development and M&A projects. For four years he served as Board Director of a Japanese stock market listed company.

He is also Guest-Professor at Kyushu University and was tenured faculty at Cambridge University, Fellow and Director of Studies at Trinity College Cambridge, and also Guest Professor in Physics at the École Normale Supérieure in Paris. In recent years he has been focusing on questions of Corporate Governance at Japanese companies, a topic about which he is frequently presenting at a wide range of organizations in and outside Japan. He served on the Advisory Board to the former Chairman of JETRO Mr Noboru Hatakeyama.

Date Friday 12 October 2018
Time From 18:45 to 19:45 (registration opens 18:30)
Venue JETRO Office Geneva, Rue de Lausanne 80, 1202 Geneva, Switzerland
Fee SJCC/JETRO/JCG Members and Guests: CHF 20, Non-Members: CHF 30
Organization SJCC Swiss-Japanese Chamber of Commerce

Registration and further details: https://www.sjcc.ch/events/2018/10/12/sjcc-after-work-corporate-governance-reforms-japan

Copyright (c) 2018 Eurotechnology Japan KK All Rights Reserved

Understanding how Japanese Boards of Directors function helps you close deals Monday, May 28, 2018, 19:00-21:00 at CCIFJ

Stimulating Japanese companies’ growth is a key element of Prime Minister Abe’s economic growth policies. For companies to grow, management needs to be improved, Boards of Directors need to bring in diverse experiences and new ideas, and Boards need to control executive management effectively. Corporate governance is important for investors, and also for those aiming to achieve major decisions from Japanese companies. If you want to make a major sale, an M&A transaction or create a partnership with a Japanese company, you need to understand how Japanese companies take decisions at Board of Directors level.

The speaker is one of a limited number of foreigners with several years experience as Board Director and member of the Supervisory & Audit committee of a Japanese stock market listed company. His presentation will aim to give you a hands-on understanding of Japanese Board of Directors work from an insider with several years Japanese Board experience. He will illustrate this with an example, where he helped a European industrial group achieve agreement to cooperate from a large Japanese industrial group within 12 hours, by applying his Japanese Board Director experience.

He addresses C-level executives aiming to close deals with Japanese corporations, and to fund managers who have new duties to interact more closely with Japanese Boards under the new stewardship code of the FSA. He will also prepare you for coming changes to these rules.

About the speaker

Gerhard Fasol graduated with a PhD in Physics of Cambridge University, Cavendish Laboratory, and Trinity College. He founded the company Eurotechnology Japan KK in 1997 and has been working with hundreds of Japanese and foreign companies on cross-border business development and M&A projects. He first came to Japan in 1984 to help build a research cooperation with NTT. For four years he served as Board Director of the Japanese stock market listed cybersecurity group GMO Cloud KK.

He is also Guest-Professor at Kyushu University. He was tenured faculty at Cambridge University, Fellow and Director of Studies at Trinity College Cambridge, and also Guest Professor in Physics at the Ecole Normale Superieure in Paris.

Date Monday, May 28, 2018
Time From 19:00 to 21:00 (doors open at 18:30)
Venue CCI France Japon, 1F Meeting room
Admission Fee (to be paid in cash at the door or online via PayPal)
JPY 4 000 for members of the French Chamber
JPY 6 000 for non-members
Language English
Deadline for registration/cancellation Thursday, May 24, 2018, 17:00

Registration: please click on the button “S’inscrire” at the bottom of this page.

Copyright (c) 2018 Eurotechnology Japan KK All Rights Reserved

Gerhard Fasol: Professor Baudenbacher, could you explain in simple terms, what the EFTA Court and your work leading the EFTA Court for many years, means for businesses in Europe, and also businesses in Japan.

Carl Baudenbacher: The EFTA Court is the second tribunal in the European Economic Area (EEA) next to the Court of Justice of the European Union (ECJ). The EEA consists of the EU and its 28 (soon 27) Member States which form one pillar and the three EFTA States Iceland, Liechtenstein and Norway which form the other pillar. Businesses from these countries have access to the EFTA Court. That includes Japanese companies which are active in Europe. I should add that a group of leading Japanese professors from the universities of Waseda, Tokyo and Kyoto have for many years been doing research concerning the EFTA Court.

Gerhard Fasol: Can you illustrate the impact of the EFTA Court with an example? What do you consider your most important case?

Carl Baudenbacher: In Fosen-Linjen (E-16/16), we decided that a public authority which awards a public contract to the wrong bidder, may be liable for a simple breach of public procurement rules and not only for a serious breach. This judgment may have an impact on the jurisprudence of the ECJ, but also of the highest courts, say, in the U.K., Sweden, Norway, Denmark. It could also be that it influences a Japanese court.

Our most important case was probably Icesave (E-16/11) where we held that in a systemic financial crisis a State is not liable for the incapability of its banks’ deposit guarantee scheme to compensate depositors in other countries.

Gerhard Fasol: Do I understand correctly, that the EFTA Court is focused on the relationship between Governments and business. Surely the impact is bigger and beyond Government and business only?

Carl Baudenbacher: The EFTA Court decides cases involving the relationship between Governments and business, for example concerning ownership in energy companies or concerning taxation but also between businesses, for example conflicts between banks and insurance companies and consumers.

Gerhard Fasol: Professor Baudenbacher, you devoted your life to lead the development of international business law, which is at the core of the post WW2 rule based global system, which is now faced with stronger nationalism, in particular the Trump presidency.

Can you explain us what you see as your main achievements, and do you feel these achievements are now in danger in view of recent political developments?

Carl Baudenbacher: I have been a university professor in Switzerland, Germany, the US and Iceland, an author, arbitrator, corporate and political consultant, and a European judge. As a professor, I have founded the post graduate program Executive Master of International Business Law of the University of St. Gallen. This autonomous global program entertains cooperations with American and Asian universities. In Japan, Waseda is our partner. My main achievement has probably been the positioning of the EFTA Court as a voice to be heard. The establishment of international courts, such as the ECJ, the EFTA Court or the WTO Appellate Body has been called the “judicialisation” of international law. This has been beneficial for businesses. With the Trump presidency, there is the risk that the rule based global system will be replaced by archaic mechanisms such as retaliation. Free trade has already suffered and will further suffer.

Gerhard Fasol: While we do see this emergence of nationalism, important major trade agreements between the EU and Japan, between the EU and Canada and many others have been agreed. From your experience leading the EFTA Court, do you think we will see a future of several ECJ or EFTA-type courts for different regional trade groups? Or will we go back to national courts, driven by renewed nationalism?

Carl Baudenbacher: What we are seeing is in all likelihood more than a crisis of the post WW2 global trade system. The former German Foreign Minister Joschka Fischer speaks of the end of the Pax Americana. I leave the question open whether the EU has done its homework as regards its trade balance. A natural reaction to the American move would be that Europe and Asia move closer together. If global trade is in peril, regional trade agreements come to the fore. In my experience, regional courts such as the ECJ and the EFTA Court offer a lot of advantages. But the judges must be aware that they cannot interfere excessively with the sovereignty of the Member States. At the same time, going back to national courts is in my view no solution.

Gerhard Fasol: You often refer to judicial dialogue. Why do you think judicial dialogue is so defining for your work at the EFTA Court, what is its importance beyond? How do you see criticism?

Carl Baudenbacher: What I mean with judicial dialogue is the dialogue between high courts. In Europe, we see such interaction between the ECJ, the EFTA Court and the European Court of Human Rights. National Supreme Courts may also be involved. Let me give you an example. In many countries around the globe dockers have been able to impose collective agreements on ship owners that give them a priority right to load and unload ships. In 2016, the EFTA Court ruled in the landmark case Holship (E-14/15) that such a system is incompatible with competition law. The Supreme Court of Norway has followed the EFTA Court. The Norwegian unions have now brought the matter before the European Court of Human Rights. At stake is, inter alia, the right of businesses to employ non-organised dockers. Sooner or later, this question will also arise in the ECJ. Obviously it could also end up before any other high court in the world. Then it would be natural for that court to look into how other courts have resolved the problem.

Gerhard Fasol: How do you see the developments between EU, UK, EFTA and Switzerland? You are actively promoting the EFTA court, and by extension EFTA for a possible future home for the UK. Where do you see the advantages for EFTA and UK – keeping in mind that EFTA was co-founded by UK.

Carl Baudenbacher: The UK intends to leave the EU because it wants to limit integration to economic matters; it doesn’t want to be part of a political Union. EFTA which was founded under British leadership is an intergovernmental club which focuses on trade. The EFTA Court has in its case law upheld EFTA values such as free trade, open markets, efficiency, a modern image of man.

Gerhard Fasol: Finally, here in Japan many business people are concerned with Brexit – especially Japanese manufacturing and financial companies have a strong presence in the UK. How do you see Brexit – from your neutral Swiss viewpoint, and from your EFTA Court viewpoint – both outside the EU. How do you see Europe develop?

Carl Baudenbacher: The Brexit decision of June 2016 was obviously a shock for Japanese businesses which had used the UK as a gateway to the EU. I have already elaborated on this at Keidanren on 1 September 2016 and then again in September 2017 at RIETI. But the British people have spoken. In my view it would be crucial for Britain to retain access to the EU single market. This would also be important for Japanese investors. The countries which are members of the EFTA Court do have this access. If Britain would subject itself to the EFTA Court, Switzerland might do the same. We would then have two structures in Europe and consequently a certain systemic competition.

Carl Baudenbacher – Profile

Professor Dr. iur. Dr. rer. pol. h.c. Carl Baudenbacher has served as a judge on the EFTA Court in Luxembourg from September 1995 to 9 April 2018. From 2003 to 2017 he was the Court’s President. Baudenbacher was the Judge Rapporteur in many of the Court’s landmark cases.

From 1987 to 2013, Carl Baudenbacher was the Chair of Private, Commercial and Economic Law at the University of St. Gallen (Switzerland). Between 1993 and 2004, he was a permanent visiting professor at the University of Texas at Austin. In 1996 he founded the global autonomous program Executive M.B.L.-HSG of St. Gallen University which has a foot in Japan.

On 9 April 2018, Baudenbacher stepped down from the EFTA Court bench. He will open his own firm focusing on arbitration and corporate and government consulting. His special fields are EU and EEA law, Brexit and the relationship Switzerland – EU.

Copyright (c) 2018 Carl Baudenbacher and Eurotechnology Japan KK All Rights Reserved

Monday, March 12, 2018, 12:00 – 13:30 at the Foreign Correspondents Club in Japan FCCJ

While many Japanese corporations are still admired around the world, too many have for years suffered sluggish growth and low profitability. A string of corporate scandals and failures have shocked the pubic and corroded confidence in Japanese business.

The government of Prime Minister Shinzo Abe has spearheaded reforms. A corporate governance code has been introduced to improve supervision of management and increase the number of independent outside directors. Change is happening faster than many expected and the reforms are generally regarded as successful. Yet, much still needs to be done to bring more diversity into Japanese boardrooms.

Announcement on the FCCJ website

Speaker

Gerhard Fasol is one of a tiny number of foreigners in the boardrooms of listed Japanese corporations. A physicist and entrepreneur, he has been in Tokyo for quarter of a century. For four years he has been Board Director, and since last year additionally a member of the Supervisory and Audit Committee of the Japanese cybersecurity group GMO Cloud KK, which is listed on the Tokyo Stock Exchange.

With years of experience of mergers and acquisitions and cross-border business development projects in Tokyo, Fasol is well placed to explain what’s happening inside Japan Inc. He will come to the FCCJ to discuss what we might expect from Japan’s corporate governance reforms.

Copyright (c) 2018 Eurotechnology Japan KK All Rights Reserved

Tohoku disaster and Fukushima nuclear disaster lead to Japan’s energy market liberalization

Tohoku disaster: On Friday March 11, 2011 at 14:46:24, the magnitude 9.0 “Great East Japan earthquake” caused a tsunami, reaching up to 40.4 meters high inland in Tohoku.

Japan’s National Police Agency registers 15,894 deaths and 2,562 missing people.

TEPCO’s Fukushima Dai-1 nuclear power plant vs Tohoku Electric Power Corporation’s Onagawa Nuclear Power Plant

One of the world’s worst nuclear disasters started at Tokyo Electric Power (TEPCO) Fukushima Dai-1 Nuclear Power Plant.

The Onagawa Nuclear Power Plant, owned and operated by Tohoku Electric Power Company, and built under Yanosuke Hirai, was closest to the 2011/3/11 earthquake’s epicenter, and survived the quake without major damage and was successfully shut down, and served as a refuge for 300 people from the neighborhood who had lost their homes. There were radiation alarm signals at Onagawa Power Station, but these alarms were caused by radioactive fallout blown from Fukushima-Dai-Ichi by winds, and did not originate from Onagawa.

The Onagawa Nuclear Power Plant was the only nuclear power plant in the region of the Tohoku Earthquake that survived the earthquake without any major damage.

On Yanosuke Hirai’s insistence, Tohoku Electric Power Company built Onagawa Nuclear Power Plant at 13.8 meters above sea level, while during the construction of TEPCO’s Fukushima Dai-1 plant the natural ground elevation was reduced from 35 meters to 10 meters. The Tsunami reached 13 meters height in both locations.

In 1990 Tohoku Electric Power Company (Onagawa Nuclear Power Station Construction Office) published a detailed analysis of the Great Jogan Tsunami of AD 869

Yanosuke Hirai had researched the Great Jogan Tsunami of July 13, 869, which was caused by the 869 Sanriku Earthquake (貞観地震). The results were taken into account in planning the Onagawa Nuclear Power Station, and published in 1990:

Hisashi Abe, Toshisada Sugeno, Akira Chigama, (Onagawa Nuclear Power Station Construction Office)
“Estimation of the Height of the Sanriku Jogan 11 Earthquake-Tsunami (AD 869) in the Sendai Plain”
Zisin (Journal of the Seismological Society of Japan, 2nd Series), Vol. 43 (1990) No. 4 P 513-525

See also the “869 Sanriku earthquake” entry in Wikipedia.

Fukushima nuclear disaster mitigation. US sends 150 nuclear experts headed by Chuck Casto to work with the Japanese Prime Minister and top leaders for 11 months to help deal with the Fukushima disaster

The USA sent a team of about 150 nuclear experts for 11 months to Japan to assist TEPCO and the Japanese Government in mastering the nuclear crisis. This team was headed by Chuck Casto – read some of his conclusions here:

• Chuck Casto: Balance of Nuclear Power Policy in Post-Fukushima Japan
• Chuck Casto: “Global leadership in the extreme”
• Chuck Casto on Japan’s nuclear safety

Japan’s first ever Parliamentary Commission

Japan’s Parliament for the first time ever created an Independent Parliamentary Commission to analyze the nuclear disaster, headed by Kiyoshi Kurokawa, read the summary of his talk “Groupthink can kill” here (including videos describing the Commissions results in simple easy to understand terms).

Three former TEPCO executives have now been indicted by a citizen’s prosecution committee.

Nuclear disaster leads to energy market liberalization in Japan

Japan’s faith in nuclear power was shaken, leading to development of renewable energy, liberalization and long overdue reforms of Japan’s energy sector.

Quakes and after-quakes

The figures show that more than 300 earthquakes of magnitude 5 or larger occurred since the major quake on March 11, 2011 at 14:46. The epicenters of quakes lie mostly where the Pacific Plate moves under the North American Plate on which Tohoku lies.

According to our knowledge earth quakes are mathematically speaking a “chaotic” phenomenon, and scientific arguments are, that it is difficult if not impossible to predict earth quakes with precision. (Figure: Wolfram Alpha LLC)

Nuclear fallout on Tokyo: radiation levels in Tokyo/Shinjuku

Starting with Tuesday 15 March 2011, radioactive fallout came down on Tokyo as shown in the figures below.

Radiation levels in Tokyo (Shinjuku and Shibuya) and Tsukuba:

The blue curve above shows the radiation levels in Tokyo/Shinjuku as measured and published by the Tokyo Metropolitan Institute for Public Health here:

• each hour for the last 24 hours
• daily starting March 1

The red curves show maximum and minimum data as measured by TEPCO in Tokyo-Shibuya, and published here: TEPCO radiation data

The green curves show radiation data measured by Japan’s highly respected AIST Laboratory in Tsukuba (Ibaraki-ken, about 60 km north of Tokyo in direction of Fukushima) and published here: AIST radiation data.

Radiation levels in Tsukuba

The green curves show radiation data measured by AIST Laboratory in Tsukuba (Ibaraki-ken, about 60 km north of Tokyo in direction of Fukushima) and published here: AIST radiation data.

The radiation measurement results in Tsukuba are considerably higher than found in Tokyo, but have decreased close to the top levels found naturally in Austria and in many other countries.

The differences in the data between Tokyo and Tsukuba could be because Tsukuba is 60km closer to Fukushima, could be caused by weather conditions, but they could also be caused by differences in the measurement equipment or a combination of these factors.

Eurotechnology-Japan newsletters in March/April 2011

In a series of newsletters, our company informed our customers, and friends about the nuclear disaster impact on Tokyo. Our newsletters were reposted by our readers to 100s of friends, and in some cases influenced the decisions by foreign subsidiaries here in Tokyo. In the days following the nuclear disaster, it was difficult for non-phycists to understand the true situation, and what the radioactive fallout really meant.

• Understanding radiation in Tokyo: Japan crisis update No. 1 (18 March 2911)
• Radiation in Tokyo: Fukushima disaster update No. 2 (22 March 2011)
• Fukushima disaster impact on Tokyo – Update No. 3 (24 March 2011)
• Impact of the Fukushima and Tohoku triple disaster on Japan’s economy (AlJazeera TV interview, 25 March 2011)
• Fukushima nuclear disaster impact on Tokyo [4] (28 March 2011)
• Fukushima disaster impact on Tokyo [5]: Radiation risk situation for Tokyo, Business risk impact (12 April 2011)

Copyright (c) 2018 Eurotechnology Japan KK All Rights Reserved

Daiwa Anglo-Japanese Foundation, London, Tuesday 16 January 2018, 6:00pm

Topic: Japanese Corporate Governance – The Inside Story

Speakers: Gerhard Fasol and Sir Stephen Gomersall

Program: Tuesday 16 January 2018, 6:00pm – 7:00pm, Drinks reception from 7:00pm

Location: 13/14 Cornwall Terrace, Outer Circle (entrance facing Regent’s Park), London NW1 4QP, Organised by the Daiwa Anglo-Japanese Foundation

Registration and further details

While many Japanese corporations are greatly admired around the world, certain aspects of Japanese management style are believed to be holding back Japan’s economic growth. The media focus mainly on extreme cases and fraud, but the responsibilities of Directors go far beyond these defensive, compliance-type duties. Preventing fraud alone is not sufficient to ensure growth and long-term success; it is just the baseline!

Based on several years of direct experience as a non-Japanese Director of a Tokyo Stock Exchange-listed Japanese company, Gerhard Fasol will discuss the reforms to Japanese corporate governance made in recent years, and what, in his view, still needs to be done. He will also discuss issues of diversity and its importance for the quality of management in Japanese corporations.

About the contributors

Gerhard Fasol

Gerhard Fasol founded the M&A and cross-border advisory firm Eurotechnology Japan in 1997, and has worked on a large number of M&A and cross-border projects in Tokyo over the last 20 years. Since 2014 he has been a Board Director and Member of the Supervisory & Audit Committee of the Japanese cybersecurity group GMO Cloud KK, listed on the first section of the Tokyo Stock Exchange, and since April 2017 he has been a Visiting Professor at the University of Kyushu. He gained a PhD in Physics at Trinity College, Cambridge, and then became a Lecturer at Cambridge University, based at the Cavendish Laboratory, while also being a Research Fellow, Teaching Fellow and Director of Studies at Trinity College. He has worked as a research scientist at the Max Planck Institute, Stuttgart, on semiconductor and solid state physics research, as Manager of the Hitachi Research Laboratory in Cambridge, and as an Associate Professor in Electrical Engineering at Tokyo University.

Sir Stephen Gomersall

Sir Stephen Gomersall studied at Cambridge and Stanford University, and joined the Foreign and Commonwealth Office in 1970. He served in Japan as Political Officer (1972-1977), Economic Counsellor (1986-1990), and Ambassador (1999-2004), and also in the United States as Political Officer in Washington and as Deputy Permanent Representative to the United Nations in New York. From 2004 he became Chief Executive for Europe in Hitachi, and was the first non-Japanese to serve on the company’s main Board from 2011-2014. He is currently a Director of Hitachi Europe and Hitachi’s main UK subsidiaries investing in railway manufacturing and nuclear power development. He was knighted by the British Government in 2000, and in 2015 received the Grand Cordon of the Order of the Rising Sun from Japan for services to UK-Japan economic relations.

More on the topic of corporate governance reforms in Japan

• http://www.eurotechnology.com/2017/09/11/corporate-governance-reforms-japan-2/
• http://www.eurotechnology.com/2016/09/08/changing-japanese-management/
• https://journal.accj.or.jp/corporate-governance-reforms/

Copyright (c) 2017 by Eurotechnology Japan. All Rights Reserved.

Corporate governance reforms in Japan: talk at the OAG House in Tokyo, Wednesday 20 September 2017, 18:30-20:00

Wednesday 20 September 2017, 18:30-20:00
Talk: Gerhard Fasol: „Corporate Governance Reformen in Japan: Erfahrungen als Aufsichtsratsdirektor einer japanischen Firmengruppe“
Free of charge. No registration necessary. Everyone welcome.
Location: OAG Haus, Minato-ku Akasaka 7-5-56, 107-0052 Tokyo-to

Details: http://oag.jp/events/gerhard-fasol-corporate-governance-reformen-in-japan/

The wealth and welfare of everyone living in Japan is based on the success of Japanese companies, how well companies are managed, and how managers are encouraged, supported and controlled.

Therefore corporate governance reforms are an important part of the “Abenomics” economic reform program. Many think that the corporate governance reforms of recent years have been the most successful part of Abenomics, and the former Chairman of the Tokyo Stock Exchange even said that these reforms happened much faster than he had thought.

Corporate governance mainly refers to the responsibilities of Board Directors who take part in the major decision making of every company, who supervise and support the executive management including the CEO/President of the company, and this make essential contributions to the success of companies.

Another aspect of corporate governance is the “stewardship code”, which refers to the influence of investors on company’s executive management.

Understanding decision making and the control of management, the way Japanese companies reach decisions and how this decision making is supervised, is essential knowledge for everyone who works to persuade Japanese corporations to take desired decisions, e.g. to achieve sales, partnerships, investments, or even Mergers and Acquisitions (M&A), who invests in Japanese corporations. Employees should also understand how the companies they work for are run.

This talk will explain the major components and fundamentals of corporate governance and its reforms in Japan based on several years of practical hands-on experience on the Board of Directors and on the Supervisory & Audit Committee of a stock market listed Japanese corporation.

Speaker: Gerhard Fasol

Gerhard Fasol graduated with a PhD in Physics from Cambridge University and Trinity College. He worked as research scientist at the Max-Planck-Institute Stuttgart on semiconductor and solid state physics research. He was tenured Faculty in Physics at the Cavendish Laboratory of the University of Cambridge, and he was Research Fellow, then Teaching Fellow and Director of Studies in Natural Sciences at Trinity College Cambridge. He was Manager of the Hitachi Research Laboratory in Cambridge, Associate Professor in Electrical Engineering at Tokyo University, and is founder of the advisory firm Eurotechnology Japan. He is Board Director of GMO Cloud KK, and since April 2017 he is Visiting Professor at the University of Kyushu.

Copyright (c) 2017 by Eurotechnology Japan. All Rights Reserved.

EU-Japan Free Trade Agreement and Economic Partnership Agreement nearing conclusion, maybe this summer.

EU and Japan started to prepare for Free Trade Agreement (FTA) and the political framework Economic Partnership Agreement (EPA) at the 20th EU-Japan Summit in May 2011, three years after Japan and USA had jointed the Trans-Pacific Partnership (TPP) negotiations.

For several years, TPP was catching headlines, Prime Minister Shinzo Abe saw TPP as a core component of his Abenomics program to restarted Japan’s economy from 20 years of stagnation. The EU-Japan FTA and EPA negotiations always seemed to be in the shadow of TPP.

In the meantime, President Trump has decided to withdraw from TPP, and the UK seems to be on the way to BREXIT.

The EU-Japan FTA and EPA negotiations have moved to the center of attention, and seem to near conclusion.

Trade in goods is only one of 14 different working groups – a modern FTA is very complex

1. Trade in goods (including Market Access, General Rules and Trade Remedies)
2. Non-Tariff Measures and Technical Barriers to Trade
3. Rules of Origin
4. Customs and Trade Facilitation
5. Sanitary and Phytosanitary Measures
6. Trade in Services
7. Investment
8. Procurement
9. Intellectual Property (including Geographical Indications)
10. Competition Policy
11. Other issues (General and Regulatory Cooperation, Business Environment, Animal Welfare)
12. Trade and Sustainable Development
13. Dispute Settlement
14. General, Institutional and Final Provisions and Transparency

Don’t be blinded: Free Trade Agreements reduce business costs and risks and create access – but they don’t guarantee business success

the Free Trade Agreement will open new sectors previously closed to any foreign company in Japan, e.g. railways procurement, and reduce many barriers, however, top-class leadership, deep Japan knowledge at all levels of management, sufficient investments, and products or services with a large competitive advantage remain crucial to success in Japan.

Free Trade Agreements reduce business costs and risks, but do not eliminate them.

More about the EU-Japan Free Trade (FTA) and Economic Partnership Agreements (EPA):

BREXIT

Copyright (c) 2017 by Eurotechnology Japan. All Rights Reserved.

How can you reduce your energy bills?

Energy costs in Japan, how to reduce energy costs, and the current energy situation in Japan post-Fukushima are inherently linked and are the topics of this talk given by Gerhard Fasol at the EU Delegation (EU Embassy) in Tokyo on Thursday 19 May 2017.

Electricity prices in Japan compared to EU countries. Electricity charges in Japan are about 40% cheaper than in Germany.

Energy costs in Japan: Even now, post-Fukushima, electricity costs in Japan are not particularly high, if Japan was a EU country, Japan’s electricity costs would be ranked at about 15th or 16th rank.

Japan’s electricity charges are about 40% cheaper than in Germany, and on a similar level as in France or UK.

• Ireland c€59.01
• Germany c€40.28
• Spain c€37.26
• Sweden c€36.11
• Portugal c€33.41
• Denmark c€32.78
• Czech Republic c€31.92
• Cyprus c€31.79
• Austria c€29.88
• Finland c€29.20
• Italy c€26.61
• Slovakia c€26.30
• France c€25.09
• Luxembourg c€24.29
• Croatia c€23.10
• Japan c€23
• Slovenia c€22.68
• UK c€20.19
• Poland c€18.80
• Hungary c€18.35
• ….

(source: Eurostat as of July 2013, energy costs in Japan: electricity costs for Japan are typical Tokyo household electricity charges)

Paradigm shift: redesign the electricity grid

We see a paradigm shift: we need to change how we think about energy. Our electricity supply system has been built over the last more than 100 years and many design principles have been decided 100 years and have then been frozen in, although they might not be the best choices any more in today’s world.

Traditional electricity grids are designed top-down, with large centralized power stations at the top, and a distribution system down to the end users.

This traditional hierarchical top->down integrated grid structure is globally in the process of reinvention. The different services:

1. generation
2. transport
3. grid frequency stabilization
4. distribution

are being split into separate businesses, and each one is being deregulated. In addition, the top-down structure is changed: renewable energy sources, micro-hydropower station and other sources feed electricity into the grid from the bottom-up, requiring changes in the design and management of power grids.

In Japan the traditional electricity grid has three hierarchical layers:

1. Special high voltage (特別高圧)
   1. 500kV, 270kV, 140kV
   2. 60kV
   3. 20kV
2. High voltage (高圧) 6kV
3. Low voltage (低圧) 200V, 100V

These three markets (1) Special high voltage, (2) High Voltage, (3) Low voltage, are approximately of equal size in Japan, and represent each about 1/3 of Japan’s electricity market. The (3) Low voltage market was deregulated on April 1, 2016, and the other two market sectors earlier. Up to March 31, 2016, 10 regional electricity operators had the monopoly in the retail (low voltage) sector of their regions. Since April 1, 2016, all markets are liberated and low voltage segment consumers are free to buy their electricity from a number of suppliers.

50Hz/60Hz

Electricity started in Japan in 1893:

• The first generator in Tokyo was from the German firm AEG, and therefore 50Hz
• The first generator in Osaka was from the US firm General Electric, and therefore 60Hz

Event today the west of Japan has 60Hz, while the east has 50Hz. Since semiconductor electronics enables frequency conversion, and since long distance transport is frequently DC anyway, this 50Hz/60Hz split is very unlikely to change.

AC/DC

For historic reasons, most electricity is delivered to end customers as AC (alternating current), however most consumption today is increasingly DC (direct current). e.g. LED lighting, computers and most IT equipment including data centers require DC electricity. Solar power plants also produce DC electricity. Battery storage also requires and delivers DC electricity. So we might see an increasing shift to DC electricity supplies.

How to reduce your energy bill

Energy costs in Japan: in the past urban design typically maximized electricity sales:

• “All Denka” was a long-term campaign by Japan’s electricity industry to maximize the consumption of electricity
• design model:
  • build the town in order to sell as much electricity/air-conditioners/gas as possible
  • top-down: huge nuclear power stations far away + top-down distribution system
  • single windows, save money on insulation
  • heating in winter, air conditioning in summer

In the future

• communities, companies and household take responsibility of energy locally
• “positive energy buildings”: buildings generate and sell electricity instead of consuming. Example: MORI-Roppongi Hills
• THINK: Marunouchi & MORI Buildings: “we want to be so well prepared for disasters, that people don’t run from our buildings, but that people come to our buildings for safety”
• take responsibility!

How to reduce your energy bill > earn money selling electricity

• cut consumption
  • Insulate
  • buy low-energy equipment, e.g. air-conditioner, washing machine
  • LEDs instead of bulbs and fluorescent tubes
  • energy management system
• generate electricity:
  • solar, wind, heat-exchangers, heat-pumps, co-generation
  • fuel cells (e.g. Bloom (gas), or Enefarm, Panasonic) > off-grid
• negotiate supply contracts, combine gas & electricity & phone/internet to get discounts
  • e.g. all three major phone companies (KDDI, Docomo, SoftBank) sell electricity, internet access etc + electricity. Combine: phone, internet, electricity to get discounts.

Nature governs energy – nature cannot be fooled

Today’s energy situation in Japan is directly a function of the outcome of the Fukushima-Dai-Ichi disaster.

To understand the reasons for why the Fukushima-Dai-Ichi disaster happened, it is necessary to go back in history, there is not one single reason for this nuclear disaster but many starting at the design decisions taken even before the construction started.

It is instructive to compare the situation of TEPCO’s Fukushima-Dai-Ichi nuclear power plant with Tohoku Electric Power’s Onagawa nuclear power plant:

• TEPCO’s Fukushima-Dai-Ichi nuclear power plant: tsunami height = 13 meters, one of the worst nuclear disasters
• Tohoku Electric Power’s Onagawa nuclear power plant: tsunami height = 13 meters: successful shut down without damage, served as a refuge for about 300 people from the neighborhood who had lost their homes in the tsunami and earthquake disasters

Why the difference?

• TEPCO’s Fukushima-Dai-Ichi nuclear power plant: ground elevation was reduced from 35 meters to 10 meters to save cooling water pumping costs
• Tohoku Electric Power’s Onagawa nuclear power plant: Yanosuke Hirai carefully research previous tsunamis, especially the Great Jogan Tsunami of July 13, AD 869, built 13.8 meters above sea level

Read in detail in our review of the Fukushima and Tohoku disasters, 6 years after, our blog of March 11, 2017:
http://www.eurotechnology.com/2017/03/11/tohoku-disaster-6-years/

A few days after the Fukushima-Dai-Ichi disaster, US President Obama sent 150 top nuclear engineers to Japan for 11 months to assist directly the Japanese Prime Minister and the Japanese Government and TEPCO to mitigate the nuclear disaster. The Leader of this team of 150 US nuclear experts was Chuck Casto, who I invited two times to talk at the Ludwig Boltzmann Forum events. Read Chuck Casto’s explanations of the Fukushima Disaster here:

• Chuck Casto: “Balance of Nuclear Power Policy in Post-Fukushima Japan” (9th Ludwig Boltzmann Forum, 16 February 2017)
• Chuck Casto: “Global leadership in the extreme: crisis leadership in post-Fukushima” (7th Ludwig Boltzmann Forum, 20 February 2015)

I also invited the Kiyoshi Kurokawa, the former Chairman of Japan’s Parliamentary Commission into the Fukushima Nuclear Disaster, to speak at the Ludwig Boltzmann Forum:
Kiyoshi Kurokawa: “Groupthink can kill” (6th Ludwig Boltzmann Forum 20 February 2014)

Summary

• Nature governs energy, and nature cannot be fooled (Richard Feynman)
• Global trend: reengineering the grid. Localize, democratize, liberalize, deregulate
• Renewable energy: wind power can cover all of Japan’s energy needs (in principle)
• Energy, electricity and gas market liberalization is going ahead

Interview in The Economist:

Japan energy market report

Renewable energy Japan research report

Copyright (c) 2017 -2019 by Eurotechnology Japan. All Rights Reserved.

Japan GDP growth, growth of 2%/year. Still, Japan’s economy is the same size as in 2000, while countries like France, Germany, UK today are double the size as in the year 2000

Japan GDP growth: We have seen 5 quarters of economic growth in Japan, for the January-March 2017 quarter the consensus is that the Japanese Government is likely to announce economic growth corresponding to an annual growth rate of around 2%/year (update: Japan’s Government announced an annual growth rate of 2.2%/year).

Generally the business mood in Japan is optimistic now, personal consumption and industrial orders are growing. We see investments in preparation for the 2020 Olympics. Venture start-ups and venture investments are growing, while still at a low level, we see venture businesses developing not only in Tokyo, but also in regional centers around Japan.

One mid-term risk to Japan GDP growth is the potential implementation of the postponed consumption tax rate increase.

The big picture however is, Japan’s economy today is approximately the same size as 17 years ago in 2000. During the same 17 years most major economies, e.g. France, Germany, UK have doubled in size. France, Germany, UK’s economies today are about twice the size as in 2000, while Japan’s economy today is about the same size as in 2000. Quarterly GDP figures just measure the short term fluctuations of this long term behavior.

Rico Hizon: so what would Japan have to do to restart long term growth?

Gerhard Fasol’s answer

Japan would have to do three things to restart economic growth long term:

1. Population: Implement policies to make it easier for families to have children, shift spending from the aged to children, improve eduction, shorter work hours, build children’s day care centers, gender equality
2. Implement Prime Minister Abe’s “third arrow”, the reforms. Deregulation not just in a few “special zones” but nation wide.
3. Improve corporate governance to improve company’s growth, globalization and management.

Japan Post trips up on globalization: books YEN 400.33 (US$ 3.6 billion) losses due to an acquisition in Australia – with a Toshiba connection

Japan Post announced a loss of YEN 400.33 (US$ 3.6 billion), and a resulting net loss of YEN 28.98 billion (US$ 260 million) for the fiscal year ending March 31, 2017.

Japan Post Holdings was launched on the Tokyo Stock Exchange with the IPO on Nov 4, 2015.

Investors expect major growth of Japan Post Holdings into a global business, such as Deutsche Post has with privatization and later the acquisition and merger with the global logistics group DH about 20 years ago.

Around the time of the IPO Japan Post announced the acquisition of the Australian logistics group Toll for about YEN 620 billion (US$ 5.5 billion), while Toll’s market cap previous to the acquisition was about YEN 410 billion (US$ 3.7 billion).

Japan Post’s recent write-down at Toll is about equal its pre-acquisition market cap, or about 65% of the acquisition prize.

The deep problem of Japan Post’s steep write-downs at the Australian acquisition Toll, is that this casts doubts on Japan Post’s developments into a global business.

The Toshiba connection: Japan Post’s former CEO, Taizo Nishimuro (西室 泰三), previously served as CEO and Chairman of Toshiba

CEO of Japan Post at the time of the questionable Toll acquisition was no other than Mr Taizo Nishimuro (西室 泰三), former CEO and Chairman of Toshiba, now honorary advisor of Toshiba, who spent all his career at Toshiba, working at Toshiba since 1961. Toshiba is currently in severe difficulties caused primarily by Toshiba’s acquisitions of US nuclear construction firms, however Toshiba’s fundamental problems go back much much longer.

Japan Post Holding [6178]

Japan Post Holdings was founded on 23 January 2006, following the path to privatization of Japan’s national Post Office initiated by Prime Minister Koizumi.

Japan Post Holdings is listed on the Tokyo Stock Exchange (No. 6178), IPO was on 4 November 2015, and has five divisions (since October 2012 three divisions):

1. Japan Post Service (日本郵便株式会社): mail delivery. Merged on October 1, 2012 with Japan Post Network to form Japan Post Co. Ltd.(日本郵便株式会社). Japan Post Co. Ltd is a 100% subsidiary of Japan Post Holdings (Tokyo Stock Exchange: 6178)
2. (Japan Post Network (郵便局株式会社): Post Offices = retail and real estate. Merged with Japan Post Service to form Japan Post Co., Ltd. on October 1, 2012).
3. Japan Post Bank (株式会社ゆうちょ銀行): Tokyo Stock Exchange No. 7182
4. Japan Post Insurance (株式会社かんぽ生命保険): life insurance. Tokyo Stock Exchange No. 7181
5. Toll Holdings: Australian logistics firm acquired by Japan Post. Toll Holdings is a 100% subsidiary of Japan Post Co. Ltd.

Copyright (c) 2017 by Eurotechnology Japan. All Rights Reserved.

Bill Emmott is an independent writer and consultant on international affairs, board director, and from 1993 until 2006 was editor of The Economist. http://www.billemmott.com

Gerhard Fasol is physicist, board director, entrepreneur, M&A advisor in Tokyo. http://fasol.com/

A conversation about Japan’s future

Bill Emmott:

I came first to Japan in 1983 as Economist Tokyo Bureau Chief, staying until 1986. Then in 1988 I came back on sabbatical leave and wrote “The sun also sets: why Japan will not be number one”, which against my expectation when it was published in 1989 found big resonance in Japan. The stock market was plunging, and mine was the most immediately available explanation. Ever since, journalists have constantly asked me what the sun is doing now! It also meant that even when I became editor in chief of The Economist in 1993 I spent much more time focused on Japan than I had expected, visiting as often as I could to keep track of the post-bubble developments, and wrote a book that appeared only in Japanese translation called “Kanrio no Taizai”, or the bureaucrats’ deadly sins. But later, with Prime Minister Koizumi consolidating reforms, and the banking system at last getting cleared up, I sent myself back in 2005 to research and wrote a much more optimistic special supplement for The Economist which became a book, “The sun also rises”.

Throughout the 35 years since I first came to Japan, I have both been fascinated and struck by the fact that although this is in so many ways an inward-looking self-contained nation, foreign observers are listened to and even have a chance of having a positive impact.

One element that had featured consistently in my writings ever since the 1980s had been observations and expectations for a growing role for women in employment and power. This seemed logical given that, at least before the bubble burst, Japan was heading for a labour shortage, but also the Equal Employment Law of 1986 had led to more females being recruited by major organisations. Japan’s excellent education surely meant that the underused half (= women) of the adult population would soon be used more productively.

Of course, this has developed a lot more slowly than I expected or hoped, partly for cultural reasons but also because Japan has not in fact had a labour shortage, until now.

I wanted to meet you, Gerhard tonight because we both are fascinated by the role Japanese women have in making Japan such a fascinating country, and how the many really strong Japanese women could have key roles in bringing growth and dynamic change back to Japan.

• Could Japanese women have bigger roles for the development of Japan?
• What is holding women back in Japan?
• Who are the role models?

I am making interviews with high-achieving Japanese women to try to find answers, and plan to compile them into a book later this year. What would you say, Gerhard? And anyway, how did you end up here?

Gerhard Fasol:

My path to Japan is quite different than yours, Bill. I came to Japan first in 1984 as Fellow of Trinity College Cambridge, and scientist at the Max-Planck-Institute in Stuttgart, part of a project to build a research cooperation with NTT’s R&D labs. I saw that Japan was very important in technology and weakly linked to the outside – and still is today, I think. So in 1984 I decided to make Japan my second professional focus in addition to physics and electronics. Like you – the deeper I get into Japan, the more I learn about Japan, the greater my fascination, and my motivation to contribute.

Now I am working on many different projects, working on international technology M&A projects, and I am also one of a microscopic number of foreigners on the Board of Directors of a stock market listed Japanese corporation – reforming Japanese corporate governance hands-on.

Could Japanese women have bigger roles for the development of Japan?

Gerhard Fasol:

I think that the equal participation of women in leadership is directly linked to the population issue, ie the number of children born.

According to the Inter-Parliamentary Union in 2016 http://data.worldbank.org/indicator/SG.GEN.PARL.ZS

• in Japan 10% of Members of Parliament were women,
• while in Sweden 44% of Members of Parliament are women,
• 37% in Germany and
• 26% in France –
• the world average is 23% women in Parliaments.

In Japan the ratio of women in Parliament has increased from 1% in 1990 to 10% in 2016, so there is progress. If we extrapolate, and if the trend continues, then it might take another 30 years or so until Japan reaches world average in terms of women bringing women’s views into Parliament, and taking part in making the laws. And it might take Japan 100 years to reach Scandinavian standards of women’s participation in making the laws of the land – unless there is some acceleration in Japan.

Japan’s most powerful Ministry, the Ministry of Finance, did not hire any women into career positions for a period of about 10 years!

At the 2015 New Year event of Kyoto Bank, Keidanren Chairman Mr Sadayuki Sakakibara showed that Japan’s spending on aged people is dramatically higher than spending on children, and that this ratio is increasing with time, Japan spends more and more on aged people and less and less on children. There are two ways to look at this situation:

• one way is to say: we have an aging society, therefore its only natural to spend more on
  the aged, and less for children
• the opposite way to look at the same situation is to say: we are spending less and less for children, no wonder we have fewer and fewer children. If we did more for young people, maybe people will have more children….

Actually most Japanese women I talk to want 2-3 children, but many cannot for financial reasons.

By nature, women give birth to children, not men, so more women in decision making positions including Government and Parliament will bring children’s issues into decision making.

As an example, child birth costs in Japan are not covered by health insurance, while they are everywhere in Europe. There are many other open and hidden costs of having children in Japan compared to Europe.

We discussed some of these issues at the recent Ludwig Boltzmann Forum on women’s development and leadership, which I organized here in Tokyo http://www.boltzmann.com/forum/2016-womens-leadership/

What is holding women back in Japan?

Gerhard Fasol:

The most important factor are mindsets. The key to give more power to women in Japan is to change mindsets, to change the way of thinking.

As an example, the Prefecture of Kanagawa in 2015 created the “woman act” committee, under the slogan “women, step by step, take more responsibility”, however this committee both in 2015 and also in 2016 consisted of 11 men – not one single woman leader: http://www.pref.kanagawa.jp/osirase/0050/womanact/
Why not create a committee of 11 women leaders to lead efforts on gender equality in Kanagawa Prefecture? Why not promote women to leadership positions in Kanagawa Prefecture?

Another factor holding women back are the very long working hours common in Japan. As an example, at a recent EU-Japan gender equality conference, the Danish polician Astrid Krag, who was Minister for Health and Prevention at the age of 29 – 32 years, and who has two children, explaned that in the Parliament of Denmark the decision was taken not to take any vote after 4pm, so that Members of Parliament can be back home by 5pm, collect children from daycare centers in time etc. So in the Parliament of Denmark it is guaranteed that Members of Parliament can leave at 4pm. In today’s Japan such action is unthinkable, age 29 – with young children – would be unbelievably young for a Government Minister in Japan. https://en.wikipedia.org/wiki/Astrid_Krag

Late-night or overnight sessions at work, including Parliament, makes life incredibly difficult in Japan for parents with young children, doubtlessly contributing to the small number of women in top positions in Japan.

Who are the role models?

Gerhard Fasol:

Despite these difficulties, there is a substantial number of very strong women in Japan, who have worked their way up into leadership positions.

Examples are the Mayor of Yokohama, Ms Fumiko Hayashi, who succeeded in a very distinguished business career, and the Governor of Tokyo, Ms Yuriko Koike, who won the election on her own as an independent candidate, because she did not receive the backing of her party.

Bill Emmott:

That is great, as I have now interviewed Koike-san and plan to interview Hayashi-san during my next visit. Personally, as well as admiring women who have made it to the top in the tough political world I also admire and am interested in women succeeding as entrepreneurs and as executives in entrepreneurial companies. By starting and building their own companies, women can really create new realities, showing that new organisational cultures are possible in a Japanese context. Do you agree?

Gerhard Fasol:

Japan has quite a number of women entrepreneurs and business leaders, Ms Tomoko Namba, Founder of Japan’s Internet company DeNA come to mind,
https://ja.wikipedia.org/wiki/南場智子
as well as Ms Fujiyo Ishiguro, Founder and CEO of the NetYear Group:
http://www.bloomberg.com/research/stocks/people/person.asp?personId=867078&privcapId=717286

Science is also an interesting area. We have women leaders in Japanese medicine, I invited some for the Ludwig Boltzmann Forum on women’s development and leadership http://www.boltzmann.com/forum/2016-womens-leadership/

Kyushu University has one single full Professor of Medicine Professor Kiyoko Kato, she explains the situation of women in Japanese Obstetrics and Gynecology here http://www.boltzmann.com/forum/2016-womens-leadership/kiyoko-kato-obstetrics-gynecology/
while Professor Kyoko Nomura has built a center to support women medical doctors and women medical researchers at Teikyo University. She spoke about the situation facing women in medicine in Japan here: http://www.boltzmann.com/forum/2016-2/kyoko-nomura/

Towards the future

Gerhard Fasol:

The tantalizing issue is that the key is to change mindsets, and thats at the same time superficially easy, but at the same time incredibly hard. Thus outstanding strong Japanese women – and there are many of them – have a choice either to work their way up to the top in Japan, start their own company in Japan, or on the other hand to move to Europe, elsewhere in Asia, or to the USA – I know several strong Japanese women, including several Japanese medical doctors, who have moved to Europe or USA. They might of course come back to Japan at a later stage bringing global views and experiences to leadership positions in Japan in the future. I am very optimistic for the future of Japan – sometimes I wish things were moving faster.

Bill Emmott:

I agree entirely. I see Japanese women as both victims of the slow speed of change and as solutions to it. They really could make the Japan of 2030 look quite different, in all sorts of ways. It will be fascinating to watch.

Bill Emmott and Gerhard Fasol met at the restaurant MusMus in Tokyo

Copyright (c) 2017 by Bill Emmott and Gerhard Fasol. All Rights Reserved.

Tohoku disaster and Fukushima nuclear disaster lead to Japan’s energy market liberalization

Tohoku disaster: On Friday March 11, 2011 at 14:46:24, the magnitude 9.0 “Great East Japan earthquake” caused a tsunami, reaching up to 40.4 meters high inland in Tohoku.

Japan’s National Police Agency registers 15,894 deaths and 2,562 missing people.

TEPCO’s Fukushima Dai-1 nuclear power plant vs Tohoku Electric Power Corporation’s Onagawa Nuclear Power Plant

One of the world’s worst nuclear disasters started at Tokyo Electric Power (TEPCO) Fukushima Dai-1 Nuclear Power Plant.

The Onagawa Nuclear Power Plant, owned and operated by Tohoku Electric Power Company, and built under Yanosuke Hirai, was closest to the 2011/3/11 earthquake’s epicenter, and survived the quake without major damage and was successfully shut down, and served as a refuge for 300 people from the neighborhood who had lost their homes. There were radiation alarm signals at Onagawa Power Station, but these alarms were caused by radioactive fallout blown from Fukushima-Dai-Ichi by winds, and did not originate from Onagawa.

The Onagawa Nuclear Power Plant was the only nuclear power plant in the region of the Tohoku Earthquake that survived the earthquake without any major damage.

On Yanosuke Hirai’s insistence, Tohoku Electric Power Company built Onagawa Nuclear Power Plant at 13.8 meters above sea level, while during the construction of TEPCO’s Fukushima Dai-1 plant the natural ground elevation was reduced from 35 meters to 10 meters. The Tsunami reached 13 meters height in both locations.

In 1990 Tohoku Electric Power Company (Onagawa Nuclear Power Station Construction Office) published a detailed analysis of the Great Jogan Tsunami of AD 869

Yanosuke Hirai had researched the Great Jogan Tsunami of July 13, 869, which was caused by the 869 Sanriku Earthquake (貞観地震). The results were taken into account in planning the Onagawa Nuclear Power Station, and published in 1990:

Hisashi Abe, Toshisada Sugeno, Akira Chigama, (Onagawa Nuclear Power Station Construction Office)
“Estimation of the Height of the Sanriku Jogan 11 Earthquake-Tsunami (AD 869) in the Sendai Plain”
Zisin (Journal of the Seismological Society of Japan, 2nd Series), Vol. 43 (1990) No. 4 P 513-525

See also the “869 Sanriku earthquake” entry in Wikipedia.

Fukushima nuclear disaster mitigation. US sends 150 nuclear experts headed by Chuck Casto to work with the Japanese Prime Minister and top leaders for 11 months to help deal with the Fukushima disaster

The USA sent a team of about 150 nuclear experts for 11 months to Japan to assist TEPCO and the Japanese Government in mastering the nuclear crisis. This team was headed by Chuck Casto – read some of his conclusions here:

• Chuck Casto: Balance of Nuclear Power Policy in Post-Fukushima Japan
• Chuck Casto: “Global leadership in the extreme”
• Chuck Casto on Japan’s nuclear safety

Japan’s first ever Parliamentary Commission

Japan’s Parliament for the first time ever created an Independent Parliamentary Commission to analyze the nuclear disaster, headed by Kiyoshi Kurokawa, read the summary of his talk “Groupthink can kill” here (including videos describing the Commissions results in simple easy to understand terms).

Three former TEPCO executives have now been indicted by a citizen’s prosecution committee.

Nuclear disaster leads to energy market liberalization in Japan

Japan’s faith in nuclear power was shaken, leading to development of renewable energy, liberalization and long overdue reforms of Japan’s energy sector.

Quakes and after-quakes

The figures show that more than 300 earthquakes of magnitude 5 or larger occurred since the major quake on March 11, 2011 at 14:46. The epicenters of quakes lie mostly where the Pacific Plate moves under the North American Plate on which Tohoku lies.

According to our knowledge earth quakes are mathematically speaking a “chaotic” phenomenon, and scientific arguments are, that it is difficult if not impossible to predict earth quakes with precision. (Figure: Wolfram Alpha LLC)

Nuclear fallout on Tokyo: radiation levels in Tokyo/Shinjuku

Starting with Tuesday 15 March 2011, radioactive fallout came down on Tokyo as shown in the figures below.

Radiation levels in Tokyo (Shinjuku and Shibuya) and Tsukuba:

The blue curve above shows the radiation levels in Tokyo/Shinjuku as measured and published by the Tokyo Metropolitan Institute for Public Health here:

• each hour for the last 24 hours
• daily starting March 1

The red curves show maximum and minimum data as measured by TEPCO in Tokyo-Shibuya, and published here: TEPCO radiation data

The green curves show radiation data measured by Japan’s highly respected AIST Laboratory in Tsukuba (Ibaraki-ken, about 60 km north of Tokyo in direction of Fukushima) and published here: AIST radiation data.

Radiation levels in Tsukuba

The green curves show radiation data measured by AIST Laboratory in Tsukuba (Ibaraki-ken, about 60 km north of Tokyo in direction of Fukushima) and published here: AIST radiation data.

The radiation measurement results in Tsukuba are considerably higher than found in Tokyo, but have decreased close to the top levels found naturally in Austria and in many other countries.

The differences in the data between Tokyo and Tsukuba could be because Tsukuba is 60km closer to Fukushima, could be caused by weather conditions, but they could also be caused by differences in the measurement equipment or a combination of these factors.

Eurotechnology-Japan newsletters in March/April 2011

In a series of newsletters, our company informed our customers, and friends about the nuclear disaster impact on Tokyo. Our newsletters were reposted by our readers to 100s of friends, and in some cases influenced the decisions by foreign subsidiaries here in Tokyo. In the days following the nuclear disaster, it was difficult for non-phycists to understand the true situation, and what the radioactive fallout really meant.

• Understanding radiation in Tokyo: Japan crisis update No. 1 (18 March 2911)
• Radiation in Tokyo: Fukushima disaster update No. 2 (22 March 2011)
• Fukushima disaster impact on Tokyo – Update No. 3 (24 March 2011)
• Impact of the Fukushima and Tohoku triple disaster on Japan’s economy (AlJazeera TV interview, 25 March 2011)
• Fukushima nuclear disaster impact on Tokyo [4] (28 March 2011)
• Fukushima disaster impact on Tokyo [5]: Radiation risk situation for Tokyo, Business risk impact (12 April 2011)

Copyright (c) 2016 Eurotechnology Japan KK All Rights Reserved

by Gerhard Fasol

NTT Docomo announced the start of i-Mode on February 22, 1999 at a press conference in Tokyo

Today, 18 years ago, on February 22, 1999, Mari Matsunaga, Takeshi Natsuno, and Keiichi Enoki announced the start of the world’s first successful mobile internet service to a small number of people who made it to NTT Docomo’s press conference in Tokyo.

For many years, Japan was the global hotspot for mobile internet, mobile broadband, fixed net broadband (FTTH), there is a very long list of inventions, innovation, new services and products which were successfully brought to market in Japan, and in some cases it took 10 years or longer for these same services to succeed elsewhere in the world.

Examples of services and products which saw their invention, or first successful global mass market introduction in Japan include:

• first successful mobile internet services (i-Mode, EZweb, and JSky)
• first camera phone
• first wallet phone
• first mobile payment services
• eMoji
• QR codes and QR codes for mobile phones, QR codes for mobile payment, and 100s of other applications (today booming in China)
• 3G mobile broadband services
• packet switched mobile networks (wireless internet for mobile data services)
• eMoney, and eMoney for mobile phones
• and many many more

Inventing the mobile internet vs capturing global value

Undoubtedly the biggest success story emerging from Japan’s pioneering mobile internet days is SoftBank

After Vodafone acquired a controlling stake in Japan Telecom, it took Vodafone at least one year to realize that instead of a far east backwater waiting for Vodafone, Japan’s mobile market was actually years ahead of Europe at that time. By the time Vodafone realized that instead of sailing into an easy market, they had actually entered the world’s most ferociously competitive market, it was too late, Vodafone sold its Japan operations to SoftBank, which turned out the failing Vodafone-Japan within a few months of intense efforts. SoftBank’s acquisition of Vodafone-Japan and the successful turn-round became the basis for SoftBank to implement Masayoshi Son’s plan to create one of the world’s most important companies.

Other Japanese success stories resulting from pioneering the mobile internet

Japan has created one of the most vibrant smart phone games eco-system, with a large number of smart phone game companies growing, many listed on the Tokyo Stock Exchange.

Beyond games, Japan has created a vibrant sector of internet and mobile ventures, founded in the wave of Japan’s mobile internet and FTTH broadband adoption. However, because of Japan’s well known Galapagos syndrome, few have made it into global success stories yet. However, its not too late.

eMoji made it into MoMa, and the iPhone.

QR codes are all over China, however not monetized by Denso Wave, the Toyota family company which invented QR codes for automotive parts management.

Read up on Japan’s mobile and telecom sector

Copyright (c) 2017 Eurotechnology Japan KK All Rights Reserved

Toshiba is on Tokyo Stock Exchange warning list for possible delisting in March 2017

by Gerhard Fasol

This morning 7:30am I was interviewed on BBC TV Asia Business Report about an update of Toshiba’s ongoing crisis, which has been 20 years in the making.

Here some notes in preparation for my interview.

What is Toshiba’s situation now?

Toshiba’s market cap today is YEN 1024 billion = US$ 9.6 billion.
Toshiba is expected today to announce write-off provisions on the order of US$ 6 billion.
Toshiba owes about US$ 5 billion to main banks as follows:

Mizuho YEN 183.4 billion
SMBC YEN 176.8 billion
Sumitomo Mitsui Trust Holdings YEN 131.0 billion
BTMU YEN 111.2 billion
Total YEN 602.4 billion = US$ 5.3 billion

Toshiba is on notice for delisting by the Tokyo and Nagoya Stock Exchanges, and faces the risk of being delisted by March 15, 2017, i.e. in about 4 weeks from now.

Toshiba is trying to raise capital e.g. by seeking investment in the IC/flash memory division, however, Toshiba seeks to keep control, so Toshiba is trying to raise a minority share, or non-voting shares or similar, in order not to lose control.

How did Toshiba get into a situation to potentially need to write off US$ 6 billion?

Toshiba acquired 87% of the US nuclear equipment manufacturer Westinghouse.

While Westinghouse is a famous name, what Toshiba actually acquired seems to have gone through a period of restructuring.

For an analysis see “Westinghouse: Origins and Effects of the Downfall of a Nuclear Giant”, in the World Nuclear Industry Status Report: https://www.worldnuclearreport.org/Westinghouse-Origins-and-Effects-of-the-Downfall-of-a-Nuclear-Giant.html

In 2015 Toshiba acquired the construction company SHAW’s assets from the Chicago Bridge & Iron Company CB&I for US$ 229 million plus assumed liabilities. CB&I had acquired SHAW for US$ 3.3 billion in July 2012, and SHAW has on the order of US$ 2 billion annual sales.

Why did Toshiba acquire a company for US$229 million, which has US$ 2 billion annual sales, and which was in 2012 acquired for US$ 3.3 billion? Which factors reduced the value of this company from US$ 3.3 billion to US$ 229 million within the 3 years from 2012 to 2015?
Presumably because there are large liabilities arising from nuclear construction, which Toshiba now seems to have to assume.

Cost overruns and delays are not uncommon in the nuclear industry. Similar issues happened with a Finnish nuclear reactor recently, see: https://en.wikipedia.org/wiki/Olkiluoto_Nuclear_Power_Plant

What is likely to happen now with Toshiba? Is Toshiba too big to fail?

Difficult to say what will happen. Toshiba is a huge corporate group with about 200,000 employees and many factories in many countries, so clearly Toshiba is not going to disappear without trace.

The immediate risk is that Tokyo Stock Exchange carries out its warning, and delists Toshiba, which will further increase Toshiba’s ability to raise capital. In the case of a delisting, private equity, and/or government might invest and restructure, and Toshiba might be split up. For example, Toshiba’s nuclear Westinghouse division is totally separate from its very successful flash memory division, there is not much business logic in having both under one holding company.

Impact on UK

Toshiba acquired 60% of UK based NuGeneration with the view to build nuclear power stations in the UK. This project requires Toshiba to contribute to the funding of the nuclear project, for which Toshiba would probably need a financially healthy partner.

What is the big picture? How did Toshiba get into this crisis?

Toshiba’s crisis has been building up for 20 years, and is in my view a consequence of corporate governance issues over a long time.

Essentially, Toshiba should have been reformed 20 years ago from the top down.

Japan’s 8 electronics giants have had essentially no growth and no profits for 20 years. This tragedy has been obvious for many years now, and was a big contributing factor for Japan’s government to reform Japan’s corporate governance laws and regulations, see:

• Corporate governance reforms (ACCJ Journal)
• Changing the way Japanese corporations are managed (Embassy of Sweden, Swedish Chamber of Commerce)
• Changing Japanese management – a talk on 6 October 2016 at the Embassy of Sweden
• Corporate governance reforms in Japan – practical views of a Board Director

Toshiba’s Board of Directors was exchanged in September 2015, and now includes several very capable and experienced Japanese independent Board Directors, but unlike Hitachi, even today neither Toshiba’s Board of Directors, nor Toshiba’s Executive Board include one single foreigner. 

One might think that a huge global group like Toshiba with complex businesses around the globe might benefit from a variety of view points and experiences from different countries at Supervisory Board and Executive Board level – not all just from one single country. Japanese corporations including Hitachi, SoftBank, Nissan and a small number of others are now recognizing the benefits of diversity of experience and viewpoints at Supervisory Board and Executive Board level.

We can only hope that Toshiba’s executives and Board Directors have the experience and ability to solve the extremely complex issues deep inside the bowels of the US nuclear construction industry – far away on the other side of the world.

Japan electronics industries – mono zukuri

Copyright (c) 2017-2019 Eurotechnology Japan KK All Rights Reserved

Changing the way Japanese corporations are managed: Can it make Japanese iconic corporations great again?

A talk by Gerhard Fasol at the Embassy of Sweden organized by the Embassy of Sweden, The Swedish Chamber of Commerce in Japan (SCCJ), and the Stockholm School of Economics

You need to know more details about corporate governance reforms in Japan?

Corporate governance reforms in Japan – practical views

Abstract: Changing the way Japanese corporations are managed

The Executive Management Board and the Supervisory Board are normally independent and composed of different people – except in Japan. In Japan traditionally Executive Management Board and the Supervisory Board are one and the same, ie the Executives of traditional Japanese companies supervise themselves – no surprise that the CEO seldom fires himself!

It is obvious that such self-supervision has big disadvantages, and may be one of the major reasons for Japan’s weak economic growth, and several recent corporate scandals. Companies in basically all other countries are managed by an Executive Management Board, which is supervised by a Supervisory Board, which approves or vetoes all major decisions of the company, and evaluates the performance of the Executive Manager, including the Chief Executive/CEO, and if necessary fires executives including the CEO, and selects and approves the new CEO.

To remedy this problem with the governance of Japanese corporations, Japan’s Government, the Tokyo Stock Exchange, and the Financial Services Agency have been changing the rules to improve the supervision of Japanese companies.

Speaker profile

Dr. Gerhard Fasol is one of a microscopic number of foreigners who is an independent Director on the Management and Supervisory Board, and also a Member of the Audit Board of a stock market listed Japanese corporation, and he will talk from several years of first-hand experience of how Japanese companies are supervised, which changes are on the way, and which further improvements are necessary to improve the management and supervision of Japanese corporations.

Date: Thursday October 6th, 2016, 18:30

Place: Alfred Nobel Auditorium, Embassy of Sweden, 10-3-400 Roppongi 1-chome, Minato-ku, Tokyo 106-0032

Details and registration

Further details here.

To register please contact the Swedish Chamber of Commerce in Japan.

Copyright (c) 2016 Eurotechnology Japan KK All Rights Reserved

SoftBank acquires ARM: acquisition completed on 5 September 2016, following 10 years of “unreciprocated love” for ARM

On 18 July 2016 SoftBank announced a “Strategic Agreement”, that SoftBank plans to acquire ARM Holdings plc for £24.0 billion (US$ 31.4 billion, ¥ 3.3 trillion) paid as follows:

• Cash on Hand: £16.7 billion (US$ 12.5 billion, ¥ 2.3 trillion)
• Loans: £7.3 billion (US$ 9.5 billion, ¥ 1.0 trillion)
• Total: £24.0 billion (US$ 31.4 billion, ¥ 3.3 trillion)

(excluding 20.4 million shares (1.4%) that SoftBank already owned on 18 July 2016).

Acquisition schedule:

• 18 July 2016: Strategic agreement between SoftBank and ARM announced by SoftBank
• 5 September 2016: effective date of Scheme of acquisition
• 6 September 2016: ARM delisted, cancellation of listing of ARM shares
• 12 September 2016: cancellation of listing of ARM US Depositary shares (ADS)

Straight line from SoftBank’s acquisition of Vodafone-Japan to acquisition of ARM

In a detailed interview in Nikkei on 3 September 2016, Masayoshi son explained that he was interested in ARM ever since about 2006, when he saw the paradigm shift from PC to mobile, when he discussed his designs for mobile internet handsets with Steve Jobs, and when he acquired Vodafone-Japan (see: Why did Vodafone fail in Japan? … and miss an opportunity of US$ 83 billion).

SoftBank’s acquisition of Vodafone Japan is explained here: Softbank acquires Vodafone Japan with co-investment from Yahoo KK

SoftBank’s start in telecoms via the acquisition of Tokyo Metallic, SoftBank’s acquisition of Vodafone Japan in combination with having developed YAHOO-Japan into the leading internet service company in Japan, were among the most important stepping stones for SoftBank to become a key global player in mobile communications.

Masayoshi Son: unreciprocated love for ARM for 10 years

In the Nikkei interview of 3 September 2016, Masayoshi Son explains that he had an “one-sided / unreciprocated love for ARM” for at least 10 years, but decided to acquire SPRINT first. After acquiring SPRINT he had to pay down debt before being able to acquire ARM now.

ARM Holdings plc

ARM was founded on 27 November 1990 as Advanced RISC Machines, however the abbreviation ARM was first used in 1983 and initially meant “Acorn RISC Machines”.

Acorn Computers Ltd was founded in 1978 in Cambridge (UK) by Hermann Hauser and Chris Curry to produce computers, and its most famous product was the BBC Micro Computer.

ARM has built an ecosystem of IC design systems and platforms which are at the core of low energy consumption ICs and CPUs for smartphones and many other electronic devices and cars. ARM may become or already is one of the core technology companies for the Internet of Things (IoT).

SoftBank’s ARM Business Department’s name changed to “New Business Department”

On 3 September 2016 SoftBank announced that the name of SoftBank’s ARM Business Department has been changed to SoftBank New Business Department.

SoftBank today and 300 year vision report:

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Google spin-out Niantic Labs’ augmented reality smartphone game booms to the top of charts

Niantic Labs is specialized on augmented reality games. In a previous game, Ingress, players selected about 15 million memorable locations globally. Niantic picked about 5 million of these crowd source generated locations, placed characters out of 740 Pokémon characters at such Pokéstops. Using smartphones, GPS, cameras and their avatars, players hunt Pokémon characters placed at Pokéstops, bring them to arenas/gyms and let their Pokémon characters fight for arenas/gyms. Thats just the beginning, and we can imagine many ways to expand this basic game structure, for example Pokéstops and Gyms sponsored by stores or corporations.

Overcoming Galapagos

Pokémon Go’s success is also significant, because the fundamentally Japanese Nintendo and The Pokémon Company are overcoming the Japan-Only Galapagos Syndrome by cooperating with Google and San Francisco based Google spin-out Niantic.

At the same time, Pokémon Go is also an indication of the power Nintendo can achieve in the smart phone sector. Will Nintendo dethrone current smart phone game kings Mixi and Gung-Ho in Japan?

Everybody loves Pikachu… No. 25 of currently 740 Pokémon characters

For the open day at my older son’s high school, kids made posters introducing their country: the highest mountain, the most characteristic flower, and the most famous person.

One Japanese student writes: “The Prime Minister is the most famous person in Japan, because he decides everything”.

Another Japanese student writes: “Pikachu is Japan’s most famous person, because everybody loves Pikachu”. Which of the two Japanese students knows more about his own country?

Pikachu is No. 25 of currently 740 Pokémon characters, and represents electricity with his zig-zag lightening bolt tail, and bright yellow color.

Pokémon character developer The Pokémon Company estimates the global market for Pokémon characters to be US$ 48 billion.

Nintendo market cap increases from US$ 20.3 billion to US$ 31.5 billion from 6 to 13 July, 2016

Nintendo shares rise from ¥14,055 in the morning of July 6, 2016 to ¥21,830 at close on July 13, 2016

Nintendo market cap rises from ¥ 2.56 trillion (US$ 20.3 billion) in the morning of July 6, 2016 to ¥ 3.09 trillion (US$ 31.5 billion) at close on July 13, 2016

Nintendo boomed around 2009 by disrupting the game world with motion sensing Wii and two-screen handheld DS game consoles. Smartphone disruption reduced Nintendo to pre-2006 size in sales, and profits did not yet recover to pre-boom levels.

Unexpected consequences- The Bank of Kyoto booms, and Bank of Kyoto’s 4.5% holding in Nintendo is worth more than 1/2 of Bank of Kyotos market cap

The Bank of Kyoto owns 4.5% of Nintendo, at close on July 13, 2016, this holding is worth YEN 139 billion (US$ 1.4 billion).

The Bank of Kyoto (TSE Code 8369) at the close on July 13, 2016 has a market cap of YEN 274 billion (US$ 2.64 biliion)

Thus Bank of Kyoto’s holding in Nintendo corresponds to more than one half of its value. This also means that Nintendo is worth about 10 times as much as the Bank of Kyoto.

The Pokémon Company – global market size estimate for Pokémon characters estimate: US$ 48 billion

The Pokémon Company manages and develops the currently 740 Pokémon characters.

The Pokémon Company is a private company owned in equal 1/3 parts by Nintendo KK, KK Game Freek and KK Creatures. KK Game Freek and KK Creatures are both privately held game development companies

More details and analysis in our Report on Japan’s game markets and makers.

Niantic Labs

Niantic Labs, focused on augmented reality games, is a Google spin-out founded in 2010, headed by John Hanke, one of the founders of Keyhole, which is at the basis of Google Earth.

Niantic Labs had staged initial funding of US$ 90 million equally from Google (1/3), Nintendo (1/3) and The Pokémon Company (1/3), and since then an additional Series A round in February 2016, plus we assume that Founder John Hanke, maybe Google at spin-out, other founders likely also own equity. So its not clear to us how much exactly Nintendo owns of Niantec, either directly or via its holding in the Pokémon Company.

There was a augmented reality company in Japan, Tonchi-Dot 頓智ドット株式会社（トンチドット） which created a augmented reality app called Sekai-Camera during i-Mode and Galake-Phones, but it ended all services on January 22nd, 2014.

Japan game market disruption market report:

Copyright (c) 2016-2019 Eurotechnology Japan KK All Rights Reserved

「日本の産科婦人科における女性医師の現状」

Kiyoko Kato, Professor, Department of Gynecology and Obstetrics, Graduate School of Medical Sciences, Kyushu University

加藤聖子、教授。九州大学大学院医学研究院。生殖病態生理学

The Ludwig Boltzmann Forum on Women’s development and leadership was held on Monday 16 May 2016 in Tokyo in honor of Dame Carol Black’s visit to Japan.

View the full workshop program here.

(Summary of Professor Kiyoko Kato’s keynote written by Gerhard Fasol)

Kiyoko Kato, Professor
Department of Gynecology and Obstetrics
Graduate School of Medical Sciences
Kyushu University

Japanese Obstetrics and Gynecology: improving medical care requires gender equality – higher numbers and higher retention of women medical doctors

• 18% of medical doctors in Japan in 2008 are female, 82% are male. Back in 1976 only about 10% of medical doctors were female
• Medical school: in 1976 about 13% of medical students were women, this ratio increased up to about 35% peaking around the year 2000, and subsequently decreases slowly to around 32% in 2008.

Thus the ratio of women medical doctors are slowly increasing in Japan.

The M-curve

About 90% medical doctors enter employment after graduation, remain employed at that level until about 35 years after graduation, when employment ratios slowly decrease due to retirement.

For women medical doctors, the employment ratio curve is M-shaped, with a minimum at about 76% employment approximately 11 years after graduation, at an age around 36 years, after this minimum many women medical doctors enter employment again, reaching similar employment ratio’s as men about 35 years after graduation.

62% of women medical doctors leaving their employment do this because of pregnancy, child birth or child care (80% in case of women younger than 45 years age).

Obstetrics and gynecology medical doctors older than 40 years are predominantly men, while doctors younger than 40 years are predominantly women

For medical doctors aged 40 years and over, obstetrics and gynecology specialists are predominantly men: women obstetricians and gynecology make up less than 10% of doctors at higher ages.

This ratio is reversed for obstetricians and gynecologists younger than 40 years of age: women outnumber male doctors, below 30 years age, women doctors outnumber men nearly by a factor of 2.

There is a clear trend: older medical doctors in the obstetrics and gynecology field are predominantly male, while below the age of 40 years, women dominate by an increasing ratio.

Kyushu University Hospital: Professor Kiyoko Kato is the one and only woman Full Professor of Medicine

Kyushu University has 135 female doctors, and 81.5% are on part-time contracts, only 18.5% have full time employment.

Ratio of women at different levels of the career pyramid:

• Part-time intern doctors: 36.3% are women
• Part-time doctors: 30.1% are women
• Full-time doctors: 8.6% are women
• Assistant Professors: 22 women vs 187 men (11.8% are women)
• Lecturers: 1 single woman vs 48 men (2%)
• Associate Professors: 1 single woman vs 31 men (3%)
• Full Professors: 1 single woman vs 24 men = Professor Kiyoko Kato (4%)

Only one single woman has achieved promotion into each of the higher ranks of Lecturer, Associate Professor and Full Professor, indicating that any women at all in these higher academic medical Professor ranks are rare exceptions rather than the rule (no mention here of still higher ranks, such as Hospital Directors, Deans, Heads of Department, or University President).

Professor Kiyoko Kato then explained her own career, where she spent time studying in the USA, gave birth to her first child in the USA, and then to her second child after returning to Japan. She had to cope with several challenges, e.g where one of the hospitals she worked was shut down. Finally Professor Kiyoko Kato was appointed Full Professor at Kyushu University Medical School.

Professor Kiyoko Kato proposes that three issues need to be solved:

• improve the work environment during pregnancy and child bearing
• re-integration assistance: re-education and support after leave of absence
• remove obstacles to career improvements

Improve the work environment during pregnancy and child bearing: the “Kyushu University Perinatal period cradle net project” 「周産期ゆりかごネットプロジェクト」

With support from the Ministry of Education, Culture, Sports, Science and Technology (MEXT), Kyushu University created the “Kyushu University Perinatal period cradle net project” (2013 – 2017). In Japanese 「周産期ゆりかごネットプロジェクト」, the website is here:
http://www.med.kyushu-u.ac.jp/yurikago/
and an overview of the project can be found here:
http://www.med.kyushu-u.ac.jp/yurikago/data.html

As the websites show, the “Kyushu University Perinatal period cradle net project” is carefully designed, structured and provides a depth of support for women medical doctors to give birth and pursue their career. Women doctors are given part-time positions in the out patient department after returning from leaves of absence.

So far seven women doctors have taken advantage of this program, and several have been assisted to return to full or part-time employment, two are still absent because of a second pregnancy. Part-time work in the outpatient department assisted them to return back to full time employment. Experiencing the hospital as a patient during birth also provided valuable experience.

Re-integration assistance: re-education and support after leave of absence. The Kyushu University Kirameki Project.

To support re-integration after absence, Kyushu University created the “Kirameki Project” (Kirameki = glitter, shine). The Kirameki Projekt is described on the website here:
https://www.kyudai-kirameki.com/

2007-2009 the Kirameki Project helped female medical workers, female doctors, dentists and nurses to re-integrate after leave of absence.

From 2010 the program (“Kyushu University Hospital Kirameki Project”) was expanded to support continuation of the career for doctors, dental doctors, nurses for both men and women, because of delivery, child care, or disease / medical leave.

The aims of the project are to promote women doctors, dentists, and nurses who would have to resign their positions due to family reasons including marriage, children, husband’s job transfer etc, and to help them pursue their career after marriage.

Activities of the Kirameki Project are:

• survey the problems of women doctors, dentists and nurses after marriage
• recruit qualified but “hibernating” female medical personnel
• learning programs
• promote “high spirits”, encourage
• on the job training in the out-patient department

Structured programs of the Kirameki Project:

• Administrative: refresher program
• Reestablishment: getting back to work program
• Suspension/leave: web based education
• Medical specialist: continuing specialist medical education
• Marriage, child-care: continuing education
• Residents, newcomer nurses: basic training
• Students: gender equality education

Remove obstacles to career improvements

Assist women researchers after child birth and during child rearing: support attending international conferences, support system for hiring research assistants and technicians for research support.

Construct a support system:

• Return support after child-care leave: day nursery, team medical care including emergency mutual help system, flexible working time, e.g. 9-5 work day
• Improvement of career: system of supporting female researchers during child bearing and child rearing, grants for female researchers to support technicians

Professor Kiyoko Kato’s wishes and expectations for female doctors

• responsibility and awareness
• gratitude to all who helped
• contribution to medical progress

Notes

Summary of Professor Kiyoko Kato’s keynote written by Gerhard Fasol, view the full workshop program and summaries of all other keynotes here.

Copyright 2016 Eurotechnology Japan KK All Rights Reserved

Dame Carol Black DBE FRCP FMedSci, Principal of Newnham College, Cambridge University, and Expert Adviser on Health and Work, Department of Health and Public Health England

The Ludwig Boltzmann Forum on Women’s development and leadership was held on Monday 16 May 2016 in Tokyo in honor of Dame Carol Black’s visit to Japan.

View the full workshop program here.

(Summary of Dame Carol Black’s keynote written by Gerhard Fasol)

Dame Carol Black DBE FRCP FMedSci
Principal of Newnham College, Cambridge University.
Dame Carol Black has held top positions in medicine and now holds high-level policy advisory positions on health and work in the United Kingdom.

• Dame Carol Black: Profile on the website of Cambridge University
• Dame Carol Black, Principal of Newnham College, Cambridge
• Wikipedia: https://en.wikipedia.org/wiki/Carol_M._Black

Women in healthcare – Women in the British National Health Service

The gender imbalance in the National Health Service is reflected by the facts that 77% of the total workforce is female, while only 7% of female staff are doctors or dentists, ie only 5.4% of total workforce are female doctors or dentists.

41% of Chief Executives are women.

81% of non-medical staff are women.

Alison Wolf and the XX Factor

Alison Margaret Wolf, Baroness Wolf of Dulwich CBE, is a British economist, and the Sir Roy Griffiths Professor of Public Sector Management at King’s College London, see:

• King’s College, London: Alison Wolf, Baroness Wolf of Dulwich, Sir Roy Griffiths Professor of Public Sector Management
• Alison Wolf, Baroness Wolf of Dulwich: https://en.wikipedia.org/wiki/Alison_Wolf,_Baroness_Wolf_of_Dulwich

In her book “The XX Factor: How Working Women Are Creating A New Society” (Profile Books 2013), Alison Wolf writes that women are split into two groups: one group sacrificing family for rapid professional advancements, while the other group of women opts for having children at a young age, and remain in low level positions. As a result, inequality is growing faster among women than among men, and low status and low paid jobs are predominantly done by women:

• 97% of secretaries are female
• 92% of registered nurses are female
• 89% of nursing, psychiatric and home health aides are female
• 90% of maids and housekeeping cleaners are female

The fundamentals: what are the essential characteristics of “good employment”?

• Good work: is stable and safe, allows individual control, is flexible, gives opportunities, promotes wellbeing, reintegrates sick or disabled people if possible.
• Good workplaces: have visible senior leadership and well trained managers, enable staff engagement, empower employees to care for their own health

Good news for medicine, less good news for academic medicine

Generally we have achieved a good situation regarding gender equality in medicine. We have achieved meritocracy, and their are no reports providing evidence for systematic barriers against women’s professional advancement. Both intake and retention for women in medicine is high, and the pay scales are the same.

A study (Royal College of Physicians (RCP) Working Party 2009), investigated the female share of Consultants (= established Senior Medical Professionals in the UK), and showed the ratio of women is highest (38% – 49%) in “more plan-able” and “more people oriented” specializations such as general practice or paediatrics, while women’s share is lowest (8% – 23%) in “more technology oriented” and “more unpredictable” specializations such as anaesthetics or surgical specializations.

There is far less progress in academic medicine, and cultural stereotypes and bias remain, see:

• Carol A. Isaac, Anna Kaatz, Molly Carnes: Deconstructing the Glass Ceiling
• Molly Carnes, MD, MS, Christie M. Bartels, MD, MS, CAROL ISAAC, PhD, Anna Kaatz, MPH, PhD, and Christine Kolehmainen, MD, MS: Why is John More Likely to Become Department Chair Than Jennifer?

Women’s advance into top leadership positions suffers from “cultural” prejudices, e.g. prejudices that women too kind, too caring, not logical or strong enough, or otherwise unsuited to lead.

Prominent leadership roles for women, Prominent medical leadership

Prominent leadership roles need investment in the “extras”, leads leadership dimension in each speciality, and requires career single-mindedness.

Prominent medical leadership requires investment of time “over and above” the ordinary duties, requires professional “stewardship contributions”.

The top 200 leadership positions will naturally go to those who pursue their career goals with a high degree of single-mindedness.

Women choosing the route towards prominent leadership roles need encouragement and support, they need:

• role models
• mentors, and
• sponsors

Role models: Prominent women leaders in UK medicine

• Una O’Brien, Permanent Secretary, Department of Health
• Professor Dame Sally Davies, Chief Medical Officer
• Dame Julie Moore, CEO, University Hospitals Birmingham, NHS FT
• Claire Murdoch, CEO, Central and NW London NHS Foundation Trust
• Professor Jane Dacre, PRC Physicans
• Clare Marx CBE, PRC Surgeons
• Dr Suzy Lishman, PRC Pathologists
• Dr Maureen Baker, Chair, RC General Practitioners

Need to debunk leadership myths

Its important not to fall into the traps of common leadership myths, e.g. that leadership is inborn, that leadership is that of a lone genius, that they must inspire others to follow their vision, the leadership requires formal authority, or that all leaders have common personality features.

We need to avoid similar leadership myths in medicine, e.g. that men naturally make better leaders.

Dame Carol Black: From a shoe-making village in decline to Government Advisor

Dame Carol Black is born in the shoe-making village of Barwell, Leicestershire, went to Grammar School in Market Bosworth, were she became Head Girl, despite her working class background.

Dame Carol Black studied first History, then Medical Social Work and finally Medicine at the University of Bristol, specialized in Rheumatology research, focusing on Scleroderma. Later advanced to Medical Director, Royal Free Hospital, President of the Royal College of Physicians, Chairman of the Academy of Medical Royal Colleges, Chair of the Nuffield Trust on Health Policy, then advising Government as National Director for Health and Work, and now Principal of Newnham College, Cambridge.

A major step was Dame Carol Black’s advancement to Medical Director of the Royal Free Hospital, since this meant not just responsibility for an institution or a group or a department, but also responsibility for the health of a population.

Leading the Royal College of Physicians

The Royal College of Physicians was founded by Royal Charter by Henry VIII on 23 September 1518 with the aim to promote the highest standards in medicine.

The skills required were: understanding a wide landscape, consensual leadership, standing ground when necessary, negotiating with Whitehall (= British Government) and building trust.

Chairing all the Medical Royal Colleges – The Academy, 2006-2009

Dame Carol Black from 2006-2009 chaired this group of 21 independent organizations. As Chair, Dame Carol Black had no executive powers, needed to lead by persuasion and with consensus.

Advising Government

Dame Carol Black shared several of her experiences advising Government and highest ranking Government officials and Ministers.

Key was to become valuable in the eyes of Government officials by giving independent advice based on scientific evidence, in combination with remaining totally unpolitical.

Dame Carol Black became a champion for the “cause” of health and work, and kept totally out of politics, never revealing any political views or opinion, and wrote three major reports.

The Confidence Code – forget perfection…Striving for perfection can waste women’s time, and hold back the best from reaching the top

Perfectionism and lack of confidence is large a female issue, see Katty Kay and Claire Shipman: The Confidence Code – the science and art of self-assurance, and what women should know.

Women tend to be held back by striving for perfection, while men tend to take more risks. Striving for perfection can waste women’s time, and hold back the best from reaching the top.

Women in healthcare, Women and careers, women in scientific careers

The issue of Women in Scientific Careers was examined in the “Science and Technology Committee – Sixth Report – Women in scientific careers” by the British House of Commons Science and Technology Committee in February 2014, which can be downloaded here as a pdf file:
http://www.publications.parliament.uk/pa/cm201314/cmselect/cmsctech/701/701.pdf

This UK House of Commons report finds some common traits which hold women back from reaching top leadership positions, including that women may perceive promotions as undesirable, wait until they meet all perceived criteria for promotion while men often take higher risks and may behave more speculatively, and women may think that “political” skills are required to reach the top.

Finally, to reach top leadership positions, we need:

• self confidence
• aspiration
• risk taking
• resilience
• speaking out
• staying motivated after failure
• mentors, sponsors, role models
• networks
• personal values aligned to organisational values

Notes

Summary of Dame Carol Black’s keynote written by Gerhard Fasol, view the full workshop program and summaries of all other keynotes here.

Copyright (c) 2016 Eurotechnology Japan KK All Rights Reserved

The Ludwig Boltzmann Forum on Women’s development and leadership was held on Monday 16 May 2016 in Tokyo.

View the full workshop program here, Gerhard Fasol’s keynote lays out the objectives of the workshop in the present article.

Gerhard Fasol CEO, Eurotechnology Japan KK, Board Director, GMO Cloud KK. former faculty Cambridge University, and Trinity College, and Tokyo University

Gerhard Fasol
CEO, Eurotechnology Japan KK,
Board Director, GMO Cloud KK.
former faculty Cambridge University, and Trinity College, and Tokyo University

Ludwig Boltzmann Forum on Women’s development and leadership: objectives

There are two immediate objectives for the Ludwig Boltzmann Forum on Women’s Development and Leadership:

1. empower women leaders with global leverage
2. lets change mind sets

I am building the Ludwig Boltzmann Forum as global leadership platform honoring my great-grandfather, and the Ludwig Boltzmann Forum on Women’s Development and Leadership is part if this initiative:

• drive innovation based on science and technology
• “there is no other forum for open discussions among leaders in Japan other than the Ludwig Boltzmann Forum” (said one of Japan’s top technology leaders, former Board Director of Japan’s largest Telecommunications Operator, former President of a large University, and former President of one of Japan’s most important technology organizations)

and as an additional bonus we will create new cooperations and new initiatives.

Ludwig Boltzmann Forum on Women’s development and leadership – my actions so far

Several confidential preparations with Japanese Ministry officials and foreign Embassies in Japan.

One key conclusion from preparations: top priority and most difficult is to change mindsets in Japan regarding empowering women and gender issues

At the 8th Ludwig Boltzmann Forum on 18 February 2016 at the Embassy of Austria in Tokyo, honored by the participation of Her Imperial Highness, Princess Takamado, and Nobel Prize Winner Shuji Nakamura, invited Professor Kyoko Nomura to give the keynote “Gender inequality in Japan: a case report of women doctors“.

Next step is today’s (16 May 2016) “Ludwig Boltzmann Forum on Women’s development and leadership”.

How to change mindsets? Expand the solution space and add new dimensions!

The basic issues, empowering women and men to combine child care and professional development, work towards greater equality and improving decision making by implementing diversity of decision makers are similar all over the world, especially in Europe and Japan.

Learning solutions from each other, expands the dimensionality of the solution space.

Expanding the solution space: learning about The Federal Ministry for Families and Youth

When we are looking for solutions to solve difficult problems, our search for solutions is limited by our experience, knowledge and imagination. Our search for solutions is in space of limited dimensionality. In many cases solutions exist outside the space we are considering.

Therefore to reach better solutions, its necessary to expand this solution space. Looking how other countries solve similar problems is one straight forward way to expand the dimensionality of the solution space, and that is where the Ludwig Boltzmann Forum aims to contribute.

As an example, many people in Japan do not know that most European countries have a Family Ministry (家族省), which represents Families at the Cabinet level. In fact, most Japanese people I have been discussing this issue with are perplexed by the possibility of a Family Ministry (家族省), and usually in response ask, what the tasks of a Family Ministry would be.

If your country does not have a Family Ministry, if you have never heard about a Family Ministry, its difficult to come up with the proposal to create a Family Ministry, and its difficult to imagine what a Family Ministry should do.

At the same time, in today’s internet age, its in theory only a click away to have a look at a Family Ministry: here is the webpage of Austria’s Family Ministry: Das Österreichische “Bundesministerium für Familien und Jugend” (The Austrian Federal Ministry for families and youth, オーストリア連邦家族・青年省)

And here is the current Austrian Minister for Family and Youth, Dr. Sophie Karmasin. 49 years old, with two children, Dr Sophie Karmasin has achieved a Doctorate in Psychology on “consumer behavior in the health market”, from 1993 to 2013, for 13 years she has pursued a very successful career in industry, most recently as Managing Director/CEO of a major market research company, before becoming party independent Minister of Family and Youth. She is not affiliated with any political party, but independent politician since 2013.

Expanding the solution space: wouldn’t it be better to have at least one woman on a committee promoting women’s empowerment?

Compare Family and Youth Minister Dr Sophie Karmasin with the all-male “woman act.” committee promoting women’s equality in Japan’s Kanagawa Prefecture, wouldn’t it be better to have at least one woman on a committee promoting women? But unless you are familiar on how this is done in other countries, your solution space is limited to what you know.

Why did today’s Ludwig Boltzmann Forum on Women’s development and leadership happen? Because of Trinity College Cambridge

At a recent event of Trinity College Cambridge in Hong Kong, I met with Dame Carol Black, and our meeting led to today’s Forum.

Trinity College was founded By King Henry VIII in 1546 by combining the two older colleges King’s Hall and Michael House and seven Hostels. Sir Isaac Newton worked at Trinity College and about 32 Nobel Prize winners are or were members of Trinity College. Trinity College is part of the University of Cambridge

More about Trinity College Cambridge, for example on the website of our Trinity in Japan Society.

Why Ludwig Boltzmann Forum? Who is Ludwig Boltzmann?

Ludwig Boltzmann is one of the world’s most important physicists and we use his results and tools every day. Here are some examples of his work:

• How we measure temperature (Kelvin, Celsius) is directly linked to Boltzmann’s constant k, especially after the new definitions of the SI International System of measurement units
• S = k log W, linking macroscopic entropy to the microscopic statistics of molecules, and linking statistical mechanics with measuring information, and the arrow of time
• the Stefan-Boltzmann radiation law
• Boltzmann transport equations are used to design jet engines and aircraft and in semiconductor physics and many other areas
• philosophy of nature
• and much much more….

I am developing the Ludwig Boltzmann Forum a global leadership platform in honor of my great-grandfather.

Ludwig Boltzmann and women’s development and leadership

1872 Ludwig Boltzmann met Henriette von Aigentler (my great-grandmother), who was refused permission to unofficially audit lectures at Graz University, where Ludwig Boltzmann later became University President. Ludwig Boltzmann advised her to appeal, in 1874 Henriette passed the exam as high-school teacher, and on 17 July 1876, Ludwig Boltzmann and Henriette von Aigentler married.

One of Ludwig Boltzmann’s students is Lise Meitner (November 1878 – 27 October 1968). She was only the second woman to be awarded a PhD in Physics from the University of Vienna. Later she was part of the team that discovered nuclear fission, Otto Hahn was awarded the Nobel Prize for this work. Element No. 109, Meitnerium, is named after Lise Meitner.

Ludwig Boltzmann Forum on Women’s development and leadership – outlook and next steps

• Lets build the Ludwig Boltzmann Forum on women’s development and leadership together
  • Lets empower women leaders
  • Lets change mind sets
• Lets build the Ludwig Boltzmann Forum into a global leadership platform based on science and logic
  • lets expand the solution space for important problems, and work towards implementing these solutions

Ludwig Boltzmann Forum on Women’s development and leadership: Notes

Ludwig Boltzmann Forum on Women’s development and leadership summary written by Gerhard Fasol, view the full workshop program and summaries of all other keynotes here.

Copyright 2016 Eurotechnology Japan KK All Rights Reserved

SONY 70th Birthday: Tokyo Tsushin Kogyo (Totsuko) was founded on May 7, 1946

SONY celebrates 70th Birthday today – SONY’s predecessor Tokyo Tsushin Kogyo (東京通信工業株式会社), Totsuko (東通工) was founded on May 7, 1946 by:

• Masaru Ibuka (井深大), and
• Akio Morita (盛田昭夫)

following preparations going back to 1945.

Outside Japan there is a tendency to focus on one of the two co-founders, Akio Morita, however, as an engineer Masaru Ibuka was as least as important a co-founder.

Masaru Ibuka (井深大), co-founder

Masaru Ibuka (井深大) was a passionate engineer, and drove much of the technical product development, recruiting and leading some of the best engineers.

Read Masaru Ibuka’s obituary in NATURE here: “Obituary: Masaru Ibuka (1908-97). Electrical engineer and co-founder of SONY” by Gerhard Fasol.

Read also: Masaru Ibuka, Founder of SONY, Obituary for NATURE

SONY over the most recent 18 years (1998-2016)

compound annual growth rate (CAGR) = 1.0% over the last 18 years

Essentially, over the last 18 years (FY ending March 31, 1998 – FY ending March 31, 2016), SONY’s revenues=sales have been stable, growing on average 1% per year.

net income/profit margin = 0.4% over the last 18 years

Net income/profits have been 0.4% (approximately zero) averaged over these 18 years – as is characteristic for Japan’s top 8 electronics multinationals.

Back in the days of Trinitron vacuum tube TVs and mechanical Walkman tape recorders, SONY’s products could command relatively high profit margins, the falling edge can be seen in the Figure below: gross profit margins were as high as 8% back in 1998, and net profit margins as high as 3% of sales. However, averaged over the last 18 years, net profit margins average about 0.4%.

SONY’s subsidiary “SONY Financial Holdings Inc” (60% owned by SONY) is by far the most profitable division of SONY

SONY publishes detailed reports of operating profits for its different divisions, showing that by far the most profitable division are Financial Services, which are not an integral part of the SONY Corporation (ソニー株式会社), but a partly (60%) owned and separately managed subsidiary SONY Financial Holdings Inc (ソニーフィナンシャルホールディングス株式会社).

In the latest financial report for the Financial Year ending March 31, 2016, SONY Finance has twice as much income/profit as the next most profitable divisions – SONY’s Financial Services (mainly offering credit card and banking services inside Japan) are and have been by far the most profitable division of SONY for many years.

SONY Financial Holdings Inc (ソニーフィナンシャルホールディングス株式会社) is a subsidiary of SONY, and is independently listed on the Tokyo Stock Exchange [TSE Code 8729], was founded on April 1, 2004, and IPO was on Oct 11, 2007. SONY owns 60% of SONY Financial Holdings Inc’s shares.

Our report: “Japan electronics industries – mono zukuri”

Register and receive an email with a link to a free trial version of our report on “Japan electronics industries” and our newsletters.

Purchase a copy of the report online here.

Copyright 2016 Eurotechnology Japan KK All Rights Reserved

2nd and 3rd Generation Solid State Lighting

For Shuji Nakamura’s invention of high-efficiency GaN double-heterostructure LEDs he was awarded the Nobel Prize in Physics 2014, while his employer sued him in the USA for leaking intellectual property – Shuji Nakamura won this court case, and his employer lost the case. To defend himself and his family, Shuji Nakamura countersued in Japan, and the Japanese court awarded Shuji a substantial award in a settlement. Shuji shared some insights into the comparison of IP lawsuits in US vs Japan with us at the 8th Ludwig Boltzmann Forum.

Shuji moved to the University of California Santa Barbara, and is now building the company Soraa in Silicon Valley with investments from major US VC funds. Soraa may already be or is likely to be soon much bigger in value than Shuji’s previous Japanese employer. Soraa develops 2nd and 3rd Generation Solid State Lighting products.

Energy savings corresponding to 60 nuclear power stations by 2020

The global lighting revolution triggered by Shuji Nakamura’s inventions leads to energy savings corresponding to 60 nuclear power stations by 2020 – 60 nuclear power stations less will need to be built than without Shuji Nakamura’s inventions.

2nd Generation and 3rd Generation Solid State Lighting

With his venture company Soraa, Shuji is now working on 2nd Generation Solid State Lighting (GaN on GaN substrates) and 3rd Generation Solid State Lighting (laser lighting, which allows much higher light density), and which is already in use for car headlights.

Why squeeze Nobel Prize winner Shuji Nakamura into a top-down narrative?

Shuji Nakamura showed with a long list of newspaper clippings, TV show extracts, and Japanese Government agency announcements that he is being squeezed into a top-down innovation narrative, which is at odds with the findings of the Nobel Prize Committee of the Swedish Academy of Science.

Shuji Nakamura asks why he is being squeezed retrospectively into a top-down innovation narrative.

The truth is that most real innovation is bottom-up and disruptive, not government planned and top-down.

At the 8th Ludwig Boltzmann Forum we had intense discussions between Her Imperial Highness, Princess Takamado, Professor Makoto Suematsu, Nobel Prize Winner Shuji Nakamura, Professor Nomura, JST-President Michinari Hamaguchi, and several other Japanese technology and R&D leaders.

Read a summary of Shuji Nakamura’s talk here.

Copyright (c) 2016 Eurotechnology Japan KK All Rights Reserved

summary of Professor Makoto Suematsu’s talk by Gerhard Fasol

Medical research in Japan: Fast-tracking medical research and development in Japan

In April 2015 Japan created the new “Japan Agency for Medical Research and Development, AMED” inspired by the US NIH (National Institutes of Health), “to promote integrated research and development in the field of medicine”.

Professor Makoto Suematsu was selected as the founding President of AMED, to build up this new Japanese national medical research agency.

Professor Makoto Suematsu is not only an outstanding medical professional and researcher, but he is also extremely outspoken about the many changes necessary to “fast-track” medical research in Japan, and particularly to overcome the fragmentation, “the Balkanization” of medical research in Japan, due to several different competing and overlapping supervising Government ministries and agencies in the past.

Professor Makoto Suematsu also explained the priorities he is setting to set out with relatively modest resources.

At the 8th Ludwig Boltzmann Forum we had intense discussions between Her Imperial Highness, Princess Takamado, Professor Makoto Suematsu, Nobel Prize Winner Shuji Nakamura, Professor Nomura, JST-President Michinari Hamaguchi, and several other Japanese technology and R&D leaders.

Read a summary of AMED-President Makoto Suematsu’s talk directly here.

Copyright 2016 Eurotechnology Japan KK All Rights Reserved

Shuji Nakamura’s invention of high efficiency LEDs enable us to reduce global energy consumption by an amount corresponding to 60 nuclear power stations by 2020, for which he was awarded the 2014 Nobel Prize in Physics.

Still, a poster child for bottom-up innovation, Shuji Nakamura was sued by his employer, left for the USA, and is now building a company in Silicon Valley which might soon become bigger than his former Japanese employer.

Why does Shuji Nakamura’s bottom-up innovation not fit into top-down innovation narratives?

Why does Shuji Nakamura’s bottom-up innovation not fit into top-down innovation narratives? Would Japan be a better and faster growing place with a better balance between bottom-up and top-down innovation? Does top-down innovation work at all?

Shuji Nakamura came specially from the USA to address many of Japan’s science and technology R&D leaders at the 8th Ludwig Boltzmann Forum, and explain why it makes no sense to try squeezing his bottom-up inventions into a top-down narrative and why its better to overcome established top-down narratives.

Read how Shuji Nakamura tries to help Japan’s leaders to overcome top-down-only narratives, and understand what bottom-up innovation means.

The 8th Ludwig Boltzmann Forum brought together Nobel Prize Winner Shuji Nakamura, the leaders of Japan’s two major research and technology R&D funding organizations, Professor Nomura, who is working to overcome gender inequality for Japan’s (too few) medical doctors, and several of Japan’s technology leaders to discuss how to accelerate innovation in Japan.

Her Imperial Highness, Princess Takamado honored us by taking a very active part, and asking thoughtful questions to Nobel Winner Shuji Nakamura and other speakers.

Read and join the discussions with Japan’s R&D leaders’ talks held at the 8th Ludwig Boltzmann Forum.
[in Japanese 日本語]

Copyright 2016 Eurotechnology Japan KK All Rights Reserved

Tohoku disaster and Fukushima nuclear disaster lead to Japan’s energy market liberalization

Tohoku disaster: On Friday March 11, 2011 at 14:46:24, the magnitude 9.0 “Great East Japan earthquake” caused a tsunami, reaching up to 40.4 meters high inland in Tohoku.

Japan’s National Police Agency registers 15,894 deaths and 2,562 missing people.

TEPCO’s Fukushima Dai-1 nuclear power plant vs Tohoku Electric Power Corporation’s Onagawa Nuclear Power Plant

One of the world’s worst nuclear disasters started at Tokyo Electric Power (TEPCO) Fukushima Dai-1 Nuclear Power Plant.

The Onagawa Nuclear Power Plant, owned and operated by Tohoku Electric Power Company, and built under Yanosuke Hirai, was closest to the 2011/3/11 earthquake’s epicenter, and survived the quake without major damage and was successfully shut down, and served as a refuge for 300 people from the neighborhood who had lost their homes. There were radiation alarm signals at Onagawa Power Station, but these alarms were caused by radioactive fallout blown from Fukushima-Dai-Ichi by winds, and did not originate from Onagawa.

The Onagawa Nuclear Power Plant was the only nuclear power plant in the region of the Tohoku Earthquake that survived the earthquake without any major damage.

On Yanosuke Hirai’s insistence, Tohoku Electric Power Company built Onagawa Nuclear Power Plant at 13.8 meters above sea level, while during the construction of TEPCO’s Fukushima Dai-1 plant the natural ground elevation was reduced from 35 meters to 10 meters. The Tsunami reached 13 meters height in both locations.

In 1990 Tohoku Electric Power Company (Onagawa Nuclear Power Station Construction Office) published a detailed analysis of the Great Jogan Tsunami of AD 869

Yanosuke Hirai had researched the Great Jogan Tsunami of July 13, 869, which was caused by the 869 Sanriku Earthquake (貞観地震). The results were taken into account in planning the Onagawa Nuclear Power Station, and published in 1990:

Hisashi Abe, Toshisada Sugeno, Akira Chigama, (Onagawa Nuclear Power Station Construction Office)
“Estimation of the Height of the Sanriku Jogan 11 Earthquake-Tsunami (AD 869) in the Sendai Plain”
Zisin (Journal of the Seismological Society of Japan, 2nd Series), Vol. 43 (1990) No. 4 P 513-525

See also the “869 Sanriku earthquake” entry in Wikipedia.

Fukushima nuclear disaster mitigation. US sends 150 nuclear experts headed by Chuck Casto to work with the Japanese Prime Minister and top leaders for 11 months to help deal with the Fukushima disaster

The USA sent a team of about 150 nuclear experts for 11 months to Japan to assist TEPCO and the Japanese Government in mastering the nuclear crisis. This team was headed by Chuck Casto – read some of his conclusions here:

• Chuck Casto: “Global leadership in the extreme”
• Chuck Casto on Japan’s nuclear safety

Japan’s first ever Parliamentary Commission

Japan’s Parliament for the first time ever created an Independent Parliamentary Commission to analyze the nuclear disaster, headed by Kiyoshi Kurokawa, read the summary of his talk “Groupthink can kill” here (including videos describing the Commissions results in simple easy to understand terms).

Three former TEPCO executives have now been indicted by a citizen’s prosecution committee.

Nuclear disaster leads to energy market liberalization in Japan

Japan’s faith in nuclear power was shaken, leading to development of renewable energy, liberalization and long overdue reforms of Japan’s energy sector.

Quakes and after-quakes

The figures show that more than 300 earthquakes of magnitude 5 or larger occurred since the major quake on March 11, 2011 at 14:46. The epicenters of quakes lie mostly where the Pacific Plate moves under the North American Plate on which Tohoku lies.

According to our knowledge earth quakes are mathematically speaking a “chaotic” phenomenon, and scientific arguments are, that it is difficult if not impossible to predict earth quakes with precision. (Figure: Wolfram Alpha LLC)

Nuclear fallout on Tokyo: radiation levels in Tokyo/Shinjuku

Starting with Tuesday 15 March 2011, radioactive fallout came down on Tokyo as shown in the figures below.

Radiation levels in Tokyo (Shinjuku and Shibuya) and Tsukuba:

The blue curve above shows the radiation levels in Tokyo/Shinjuku as measured and published by the Tokyo Metropolitan Institute for Public Health here:

• each hour for the last 24 hours
• daily starting March 1

The red curves show maximum and minimum data as measured by TEPCO in Tokyo-Shibuya, and published here: TEPCO radiation data

The green curves show radiation data measured by Japan’s highly respected AIST Laboratory in Tsukuba (Ibaraki-ken, about 60 km north of Tokyo in direction of Fukushima) and published here: AIST radiation data.

Radiation levels in Tsukuba

The green curves show radiation data measured by AIST Laboratory in Tsukuba (Ibaraki-ken, about 60 km north of Tokyo in direction of Fukushima) and published here: AIST radiation data.

The radiation measurement results in Tsukuba are considerably higher than found in Tokyo, but have decreased close to the top levels found naturally in Austria and in many other countries.

The differences in the data between Tokyo and Tsukuba could be because Tsukuba is 60km closer to Fukushima, could be caused by weather conditions, but they could also be caused by differences in the measurement equipment or a combination of these factors.

Eurotechnology-Japan newsletters in March/April 2011

In a series of newsletters, our company informed our customers, and friends about the nuclear disaster impact on Tokyo. Our newsletters were reposted by our readers to 100s of friends, and in some cases influenced the decisions by foreign subsidiaries here in Tokyo. In the days following the nuclear disaster, it was difficult for non-phycists to understand the true situation, and what the radioactive fallout really meant.

• Understanding radiation in Tokyo: Japan crisis update No. 1 (18 March 2911)
• Radiation in Tokyo: Fukushima disaster update No. 2 (22 March 2011)
• Fukushima disaster impact on Tokyo – Update No. 3 (24 March 2011)
• Impact of the Fukushima and Tohoku triple disaster on Japan’s economy (AlJazeera TV interview, 25 March 2011)
• Fukushima nuclear disaster impact on Tokyo [4] (28 March 2011)
• Fukushima disaster impact on Tokyo [5]: Radiation risk situation for Tokyo, Business risk impact (12 April 2011)

Copyright (c) 2016 Eurotechnology Japan KK All Rights Reserved

i-Mode, Happy Birthday!

Today, exactly 17 years ago, on February 22, 1999, NTT-Docomo launched the world’s first mobile internet service, i-Mode, at a press conference attended only by a handful of people.

NTT-Docomo created the foundation of the global mobile internet revolution, and i-Mode is still a cash-cow for Docomo in Japan, but Docomo did not succeed to capture global value.

i-Mode pioneered many business models, which are today monetized by Apple and Google (mainly via Android).

i-Mode also contributed to make Japan the world’s biggest App market in terms of cash revenues, and helped Japanese app companies to be among the world’s largest and top grossing.

Read in detail in our blog:
“i-Mode was launched Feb. 22, 1999 in Tokyo – birth of mobile internet“

Japan telecommunications industry report

Copyright 2016-2019 Eurotechnology Japan KK All Rights Reserved

The need for focus and active portfolio management

SHARP, supplier of displays to Apple, faces repayment of about YEN 510 billion (US$ 4.2 billion) in March.

Innovation Network Corporation of Japan INCJ (産業革新機構) and Taiwan’s Honhai Precision Engineering (鴻海精密工業) “Foxconn” compete for control of SHARP.

While SHARP makes headlines, the big-picture issues are:

1. corporate governance reforms in Japan
2. the future of Japan’s US$ 600 billion electronics sector, which dominated world electronics in the 1980s but failed to keep up with the evolution and growth of global electronics.

To survive Japan’s old established electronics conglomerates have two choices:

1. focus on a small number of key products (remember Apple CEO Tim Cook showing that all of Apple’s products fit on one small table)
2. actively managed portfolio model

however, for Japan’s economy to prosper, Japan needs many more young fresh new companies in addition to the old established conglomerates.

Interviews for BBC-TV and French Les Echos

Last week I was interviewed both live on BBC-TV and also by the French paper Les Echos about SHARP’s future:

• BBC TV
• Les Echos: Foxconn veut racheter Sharp (22 January 2016)
• Les Echos: Foxconn et un fonds japonais se disputent le sauvetage de Sharp (21 January 2016)

In summary, I said that its not just about SHARP’s current predicament, but its about corporate governance reform in Japan, about reinventing Japan’s electronics sector, and that its more likely at this stage that Japan’s Innovation Network Corporation (INCJ) will take control SHARP, since INCJ is not just concerned with SHARP but with the bigger picture of restructuring Japan’s electronics sector.

INCJ has concepts for combining SHARP’s display division with Japan Display, and has plans for SHARP’s electronics components divisions, and for the white goods division, and other divisions.

SHARP governance: How and why did SHARP get into this very difficult situation?

SHARP is a poster child for the urgent need for corporate governance reform in Japan.

Essentially SHARP assumed that the world market for TVs and PC displays will continue to demand larger and larger and more expensive display sizes, and thus took bank loans to build a very large liquid crystal display factory in Sakai-shi, south of Osaka.

In addition, SHARP, has a huge portfolio of many different products ranging from office copying machines and printers and scanners, mobile phones, high-tech toilets, liquid crystal displays, solar panels, and hundreds of other products. SHARP keeps adding new product ranges constantly expanding its portfolio of businesses, and rarely sells loss making divisions.

Effective and strong independent, outside Directors on the Board might have asked questions during the decision making leading to the building of the Sakai factory. They might have asked for a Plan B, in case the global display market takes a turn away from larger and larger and more expensive displays, or if the competition heats up and prices start decreasing, they might have asked about SHARP’s competitive strengths, they might have also questioned the wisdom to finance an expensive factory via short-term bank loans as opposed to issuing shares to spread the risks to investors.

Its not just outside Directors, shareholders could have also asked such questions.

SHARP has about YEN 678 billion (US$ 5.6 billion) debt, most is short-term debt, and in a few weeks, in March 2016, SHARP needs to repay about YEN 510 billion (US$ 4.2 billion), and needs to find this amount outside.

SHARP is a Japanese electronics company, founded in 1912 by Tokuji Hayakawa in Tokyo as a metal workshop making belt buckles “Tokubijo”, and today one of the major suppliers of liquid crystal displays for Apple’s iPhones, iPads and Macs.

SHARP today has about 44,000 employees, many factories across the globe, sales peaked around YEN 3000 billion (US$ 30 billion) in 2008, and show a steady downward trend since 2008.

Revenues (profits) peaked in 2008, and have fallen into the red since.

What future for SHARP? Focus vs portfolio company

SHARP (or rather, its creditors, the two “main banks” Mizuho and Mitsubishi-Tokyo-Bank, and others controlling the fate of today’s SHARP) needs to decide whether it focuses on a group of core products, in which case it needs to be No. 1 or No. 2 globally for these products. Successful examples are Japan’s electronic component companies.

Or on the other hand, SHARP could be a portfolio company, in which case this portfolio must be actively managed.

What future for Japan’s US$ 600 billion electronics sector?

Japan’s 8 large electronics conglomerates:

• Hitachi
• Toshiba
• Fujitsu
• NEC
• Mitsubishi Electric
• Panasonic
• SONY
• SHARP

combined have sales of about US$ 600 Billion, similar to the economic size of The Netherlands, but combined for about 15 years have shown no growth and no profits. They are poster children for the urgent need for corporate governance reform in Japan.

These 8 electronics conglomerates are portfolio companies, and they need to manage these portfolios actively, such as General Electric (GE) or the German chemical industry are doing. Germany’s large chemical and pharmaceutical industries started active and drastic product portfolio management in the 1990s, and are continuing constant and active portfolio optimization via acquisitions, spin-outs, and other M&A actions, and so is GE.

A stark contrast are Japan’s very successful, profitable and growing electronics component companies.

Innovation Network Corporation of Japan INCJ (産業革新機構)’s dilemma

INCJ aims “to promote the creation of next generation businesses through open innovation” according to its website.

Japan’s NIKKEI financial daily mentions INCJ’s dilemma, whether attempting the rescue of an old conglomerate is compatible with its mission to create next generation business through open innovation.

Why “let zombie companies die” is beside the point

Concerning SHARP some media wrote headlines along the lines of “let zombie companies die”. Thats easy to write, however, SHARP is a group with 44,000 employees, many factories, about US$ 30 billion in sales annually.

“Let this zombie die” is not an option, SHARP has 100s of products, and divisions, and the best solution for each of these divisions is different. And that is exactly what the Innovation Network Corporation of Japan seems to be considering in its plans for SHARP.

I think the way forward is not “to let zombies die”, but to develop private equity in Japan

I think the move of Atsushi Saito, one of the key drivers of Japan’s corporate governance reforms, from CEO of Tokyo Stock Exchange/ Japan Exchange Group, to Chairman of the private equity group KKR is a tremendously important one in this context.

Will there be native Japanese private equity groups with sufficient know-how and ability to take responsibility of restructuring Japan’s electronics sector? Thats maybe the key question.

Why its not really about nationalism

Some media bring a nationalist angle into SHARP’s issues. However, Nissan was rescued by French Renault, UK’s Vodafone acquired Japan Telecom, and there are many other examples, where foreign companies acquire Japanese technology companies.

I don’t think nationalism is an issue here. The key issues is to create and implement valid business models for Japan’s huge existing electronics sector, and more importantly, create a basis for the growth valid new companies – not just reviving old ones.

Japan electronics industries – mono zukuri

Copyright (c) 2016-2019 Eurotechnology Japan KK All Rights Reserved

Economic growth: Almost everyone agrees that economic growth is preferred over stagnation and decline. Fiscal policy and printing money unfortunately can’t deliver growth.

1. Building fresh new successful companies,
2. returning stagnating or failed established companies back to growth (see: “Speed is like fresh food” by JVC-Kenwood Chairman Kawahara), and
3. adjusting the structure and business models of existing companies to the rapidly changing and globalizing world (see: “Japanese management – why is it not global?” by Masamoto Yashiro)

deliver growth.

Governments best help economic growth by reducing friction, and by getting out of the way of entrepreneurs building, turning-round, and refocusing companies.

Some required action is counter to intuition: for example, in many cases reducing tax rates increases Government’s tax income, a fact known for many years. Effective education and research are key to create, understand and apply such non-obvious knowledge.

Companies need efficient leadership, leadership needs feedback, wise and diverse oversight by Boards of Directors, who ring alarm bells long before a company hits the rocks, or fades into irrelevance. Corporate governance reform may be the most important component of “Abenomics”. Read a Board Director’s view on Japan’s corporate governance reforms:

• Corporate Governance Reforms – A board member’s viewpoint (Journal of the American Chamber of Commerce in Japan, ACCJ)
• Corporate governance reforms in Japan – practical views of a Board Director – in greater detail, and with many links and references

Japan’s electrical conglomerates are some of the poster children motivating Japan’s corporate governance reforms. In an interview about Toshiba’s future on BBC-TV a few days ago, I explained that Japan’s electrical conglomerates showed no growth and no profits for about 20 years, and the refocusing Toshiba has announced now should have been done much much earlier, 10-20 years ago (“Speed is like fresh food“). Refocusing Japan’s established corporate giants will release resources for start-ups, spin-outs and growth companies.

Japan can be very good at restructuring and turn-rounds, e.g. see

• Japan Airlines,
• Kenwood, or
• Atsushi Saito’s Industrial Revitalization Corporation of Japan (IRCJ),
• and many more.

Happy New Year!

Gerhard Fasol

Copyright 2016 Eurotechnology Japan KK All Rights Reserved

Corporate governance reforms in Japan progress faster than even one of their key promoters expected, and cost almost no tax payers money

Author: Gerhard Fasol

Corporate governance reforms in Japan are one component of “Abenomics” to bring back economic growth to Japan.

Corporate governance reforms in Japan are driven at least in part by the spectacular stagnation of Japan’s top 8 electronics conglomerates, which 25 years ago dominated world electronics, but largely failed to adapt to the changes driven by much more agile Silicon Valley or South Korea based competitors. The right type of Board Directors, could potentially have rung the alarm bells much earlier, and woken up executive management under their supervision.

A welcome factor is that corporate governance reform costs Japan’s heavily indebted Government almost no money – unlike public works programs, and similar traditional ways of stimulating the economy.

The speed with which Corporate Governance Reforms in Japan are being implemented surprised even one of their main promoters, emeritus Group CEO of the Japan Exchange Group, Atsushi Saito, as expressed in his recent talk.

In March 2014 the shareholders appointed me as independent Board Director of the Japanese cybersecurity company GMO Cloud KK, which is listed on the First Section of the Tokyo Stock Exchange. Our main business are internet security solutions, cybersecurity, digital identity management solutions, and cloud hosting and related services and solutions.

Read an article on Corporate Governance Reforms here in the Journal of the American Chamber of Commerce in Japan (ACCJ), and more below in this post – from my experience practicing corporate governance in Japan as a Board Director.

The main components of corporate governance reform in Japan

The main components of Japan’s corporate governance reform are:

1. The revision of the Company Law (会社法（平成十七年七月二十六日法律第八十六号）), Law No. 816 of July 26, 2005. The latest revision is No. 63 of September 4, 2015 (平成二七年九月四日法律第六三号).
2. The Corporate Governance Code of the Tokyo Stock Exchange (TSE), issued on June 1, 2015, “Seeking Sustainable Corporate Growth and Increased Corporate Value over the Mid- to Long-Term”
   • TSE Corporate Governance Code, English version, pdf file
   • TSE Corporate Governance Code, Japanese version, pdf file
   • Japan Exchange Group site: “Enhancing the Corporate Governance” (English Version)
   • Japan Exchange Group site: “Enhancing the Corporate Governance” (Japanese Version)
3. Japan’s Stewardship Code, issued by Japan’s Financial Services Agency (FSA) on February 26, 2014, “Principles for Responsible Institutional Investors ≪Japan’s Stewardship Code≫- To promote sustainable growth of companies through investment and dialogue”
   • Japan’s Stewardship Code by Japan’s Financial Services Agency (FSA) (English language, pdf file)
   • Japan’s Stewardship Code by Japan’s Financial Services Agency (FSA) (Japanese language, pdf file)
   • Financial Services Agency (FSA) Stewardship webpage (English language)
   • Financial Services Agency (FSA) Stewardship webpage (Japanese language)

What is corporate governance and why?

Japan’s Corporate Governance Code, which was issued by the Tokyo Stock Exchange on June 1, 2015, defines Corporate Governance as “a structure for transparent, fair, timely and decisive decision-making by companies, with due attention to the needs and perspectives of shareholders and also customers, employees and local communities”.

The subtitle of Japan’s Corporate Governance Code is its mission statement: “Seeking sustainable corporate growth and increased corporate value over the mid- to long-term”.

Corporate governance has been analyzed in great detail in Professor John Kay’s analysis of UK’s capital markets: “The Kay Review of UK Equity Markets and long term decision making“, which was triggered by certain M&A transactions among other factors, and published on 23 July 2012.

“The Kay Review of UK Equity Markets and Long-Term Decision Making” has been archived in UK’s National Archives here.

The Kay Review analyzes UK’s capital markets in depth, and argues that its companies’ duty to be successful in the long-term, and its only the success of companies that brings wealth to all stake holders and people who invest in companies, in many cases pensioners. Over the years a fine grained system of specialized service providers has developed between companies on one side, and individual investors on the other side. Professor Kay argues that this system of intermediaries (fund managers, analysts etc) can be seen as “overhead” and needs to be as efficient as possible.

Overall the capital market system needs to be built on long term trust and stewardship, not on anonymous one-time monetary transactions.

The Kay report had important impact, for example it led to the end of the requirement of quarterly financial reports by UK companies, as we discussed here.

Martin Lipton, of the NY law firm Wachtell, Lipton, Rosen & Katz, in an article published on the Harvard Law School Forum on Corporate Governance and Financial Regulation blog encourages the US Securities and Exchange Commission (SEC) to keep the UK developments in mind, when reforming the reporting requirements for US corporations, and also calls for an end to the requirement of quarterly reporting.

Why end the requirement of quarterly financial reports? Because short term focus on quarterly financial performance may cloud the view on long-term success and investment. Intense discussions between fund managers and management are strongly encouraged.

Will the end of quarterly financial reporting reach Japan?

Why Japan’s focus on corporate governance?

GNP as a measure of economic size has many flaws – however many signals, not just GNP, indicate that Japan is the only major economy that does not grow.

While there are many excellent Japanese corporations, overall it is no secret that Japan’s economy has the potential to do much much better.

Japan’s decline was even deplored by Keidanren and Toray Chairman Sadayuki Sakakibara at the 2015 Kyoto Bank New Year Gala event. Stanford Economics Professor Takeo Hoshi has analyzed the factors which caused Japan’s economy to stop growing after catching up with the developed economies, see Professor Hoshi’s recent talk about Abenomics for the Stockholm School of Economics.

A case in point are Japan’s 8 large electronics conglomerates which combined are approximately the same size as the economy of The Netherlands. Unlike The Kingdom of the Netherlands, Japan’s top 8 large electronics conglomerates have not grown for the last 20 years, while on average reporting losses over these 20 years. While Japan’s top 8 electronics conglomerates dominated the global electronics sector, they have been faded, and today Apple alone is about 10 times bigger in market cap/value than all top 8 Japanese electronics conglomerates combined, see: “Japan’s electronics giants – FY2012 results announced. 17 years of no growth and no profits.“

There is much hope that outside directors supervising executive management will bring outside expertise, and improve the performance of company-insider executive management, and if necessary also insist on replacements.

Much faster than expected

One of the most outspoken promoters of corporate governance reform is emeritus Tokyo Stock Exchange Chief Executive Atsushi Saito. In a recent talk, Atsushi Saito expressed his great surprise that corporate governance reform was implemented in Japan must faster than he had expected.

The cheapest part of “Abenomics” – corporate governance reform comes at essentially zero cost to tax payers

Many measures of Premier Minister Abe’s “Abenomics” stimulation programs pump borrowed Government Bonds (JGB) money into the economy, thus cost money and ultimately increase Japanese very large Government debt.

By comparison, corporate governance reforms cost essentially zero cash and don’t further increase government debt.

Theory and practice

Non-diversity: about 0.6% of Japanese Board Directors of listed companies are non-Japanese

As of 17 December 2015 Japan has 3504 listed companies on the exchanges operated by the Japan Exchange Group:

• TSE 1st section: 1933 (incl. 6 foreign companies)
• TSE 2nd section: 544 (incl. 1 foreign company)
• Mothers: 219 (including 1 foreign company)
• JASDAQ Standard: 750 (including 1 foreign company)
• JASDAQ Growth: 44 (including 0 foreign company)
• TOKYO PRO Market: 14 (including 0 foreign company)
• Total: 3504 (including 9 foreign companies)

In addition there are three regional exchanges:

• Fukuoka Stock Exchange
• Nagoya Stock Exchange
• Sapporo Stock Exchange

Assuming there are about 10 Board Directors per company, there are about 35,000 Board Directors of listed companies in Japan. Of these approximately 200 are foreigners, ie. about 0.6% of Directors of listed Japanese companies are foreign (I am one of these).

Maybe 10-20 of Japan’s public companies are “Englishized” such as Rakuten or SoftBank, or hire simultaneous interpreters at Board Level (you’ll see Directors with headphones listening to the interpreted/translated version of what is being said – of course slowing and filtering understanding and communication)

All other approx. 3490 Japanese Stock Exchange listed companies are run 100% in Japanese language at all levels including Board level – and almost exclusively by Japanese men.

In a rapidly globalizing world, these companies desperately need global input from many nationalities, different backgrounds, and genders at Board level in Japanese language, but the number of people providing this depth of diversity, having the qualifications and being able to function at Board level in Japanese in addition to several other languages is severely limited – this is one of several factors limiting Japan’s growth after having caught up with developed countries in the 1980ies.

What are the main issues?

Diversity delivers better decisions and better results

Japan has many outstanding leaders, such as SoftBank’s founder Masayoshi Son, or Kyocera’s founder Kazuo Inamori, who also founded part of today’s KDDI, and who turned around Japan Airlines from bankruptcy in his 80s.

Some Japanese Executives are outstanding leaders, however, many are not, but function more like chief administrators – as in any other country.

Outstanding leaders don’t fear working with excellent people and will attract top leaders. However, chief administrator type executives will fear for their power and will assemble teams who fear to speak out, as can be observed in many recent corporate scandals in Japan, and many other major countries. Corporate scandals and corporate governance failures may happen anywhere, not just in Japan.

Diversity at top management levels and Board levels has many benefits, as has been proven in many studies. Diversity delivers better decisions and better results. Boards of Directors are one way to bring diversity to decision making.

Overcoming stagnation

Many major Japanese corporations show no growth and no income for the last 20 years.

A showcase example are Japan’s top-8 electronics conglomerates. Combined they are as large as the economy of the Netherlands, but contrary to The Netherlands, they have shown no growth for the last 17-20 years, as well as losing money on average over all these years. Of course, as a consequence the market capitalization = value of these top-8 electronics companies has decreased dramatically. While Japan’s top-8 electronics companies dominated 60% or more percent of the global electronics industry in the 1980, they have fallen steep. Clearly a dramatic example of failed corporate governance, and surely a big push for Prime Minister Abe to put so much priority on improving Japan’s corporate governance, together of course with the need to improve employment, and returns for pension funds to fund Japan’s aging population.

Three forms of corporate organization: splitting supervision and execution

Traditionally, executives supervised themselves at Board level

Traditional Japanese corporation have a Board of Directors composed of corporate executives, i.e. the executives supervise themselves without external supervision or input. Supervision is done by the Kansayaku Board (corporate auditor’s Board) which however has limited powers on corporate decision making.

Japan’s corporate government reforms now give Japanese companies options to split execution (executives, 執行役員) and supervision (Board Directors, 取締役).

Japanese corporations now can chose between three forms of organization

• company with Kansayaku Board
• company with Supervisory Board
• company with three committees:
  • Nomination Committee
  • Audit Committee
  • Remuneration Committee

According to the new Corporate Governance Code, the Board (independent which of the three options is selected) has the following three duties:

1. setting the directions of corporate strategy
2. encourage and support appropriate risk taking by senior management
3. supervise Directors and executive management, including senior executives (執行役員)

Connecting the dots: the link between accounting issues and the space shuttle Challenger disaster

Toshiba’s recent accounting issues reflect much deeper fundamental problems – of course.

I see parallels between Toshiba’s accounting issues and the space shuttle Challenger disaster: Nobel Prize Winner Richard Feynman determined that the cause of the space shuttle Challenger disaster was the failure of top management to communicate with the people doing the work (“genba”, 現場): “Appendix F – Personal observations on the reliability of the Shuttle, by R. P. Feynman“.

Space shuttle Challenger’s top management was insisting to keep the planned launch date fearing public relations issues, while the workers and engineers on the ground, “genba”, knew that they were not ready. But top management at space shuttle Challenger did not listen to “genba”.

My advice to Japanese corporations: embrace and learn to love diversity!

Embrace and learn to love diversity! Diversity delivers better results overall. We all learn from each other.

My advice to foreign investment funds seeking more influence on Japanese companies

Shouting at the CEO or Boards of Japanese companies will not help – many foreign activist investors have already proven this fact many times. Insisting on your superior knowledge will not make you many friends – as anywhere else.

You need to develop trust and relationships. You need to start by learning Japanese, understanding Japan, and earn trust and contribute with achievements, or partner with people who have: KKR hired Japan Exchange Group emeritus CEO Atsushi Saito.

There are no increasing numbers of examples, where outstanding Japanese corporations careful listen to outside advice from investors, and thus become even more outstanding: SONY and robotics maker FANUC come to mind.

My advice to foreign companies operating in Japan

Your subsidiary in Japan is a Japanese corporations and needs corporate governance. There have been a long list of corporate governance failures leading to huge problems and losses at foreign subsidiaries in Japan, in the financial sector, the elevator sector, the pharmaceutical sector and several others.

Make good use of the Board of Directors of your Japanese subsidiary corporation.

Need to know more?

Copyright (c) 2015-2019 Eurotechnology Japan KK All Rights Reserved

by Gerhard Fasol

Did Volkswagen underestimate Mr Suzuki?

Over the last 18 years myself and our company have worked on many foreign-Japanese company partnerships, therefore we always have great interest in business partnerships involving Japanese companies, and have followed the Volkswagen-Suzuki relationship closely.

We published two blog articles after the ICC Arbitration Court issues judgement sealing the Suzuki-Volkswagen divorce, and before we became aware of the Volkswagen Diesel issues:

• Suzuki Volkswagen “Wagen-san” divorce: a teachable moment (19 September 2015)
• Mr. Suzuki didn’t want to be a Volkswagen employee, and that’s understandable (Prof. Dudenhoeffer via Bloomberg) (20 September 2015)

When I was asked to brief German President Horst Köhler on April 3, 2005 about Japan’s technology sector, my advice included the following:

Interaction with Japan enforced total restructuring of leading US companies, including INTEL and MOTOROLA. According to my knowledge, there are almost no European companies yet which were forced to totally restructure their business due to interaction with Japan. I feel that this may happen in the future.

Volkswagen could be a candidate now, although US agencies and courts are now primary actors, Suzuki’s role may not be negligible.

Volkswagen had already lost out against Suzuki, and Suzuki’s CEO Mr Osamu Suzuki in the 1980s when India started to build an Indian automotive industry. India had considered to build India’s car industry based on Volkswagen’s Beatle, but decided to go with Mr Osamu Suzuki instead. Maruti Suzuki India Limited (マルチ・スズキ・インディア) achieved 45% market share in India’s passenger car market in 2014. Suzuki Motors owns 54% of Maruti Suzuki, and Mr Osamu Suzuki is greatly respected as Japan’s No. 1 top India expert.

When Mr Osamu Suzuki entered into the Maruti Suzuki India Joint-Venture, he reportedly insisted to have 100% decision making and management rights in the Joint-Venture.

Links between the Suzuki-Volkswagen and the Volkswagen Diesel issues time lines.

We can see interesting links in the time lines of the Suzuki-Volkswagen relationship and the Volkswagen Diesel issues:

• Suzuki in 2005 decided to enter into a partnership with FIAT (not Volkswagen) on Diesel motors. This is 4 years earlier than the announcement of the Suzuki Volkswagen relationship on 9 December 2009.
• 1 July 2011: Osamu Suzuki publicly airs his frustrations with “Wagen-san’s” intentions in his Japanese language blog in Japan’s Nikkei “スズキとワーゲンの今とこれから （鈴木修氏の経営者ブログ）” (“Suzuki and Wagen now and the way forward”) (may need Nikkei subscription). In his blog, Mr Osamu Suzuki writes: “we looked at Wagen’s technologies, and could not find anything we need”.
• Sept 2011: Suzuki’s Board decides to terminate the partnership
• 18 Nov 2011: Suzuki gives notice to Volkswagen of termination of partnership, Volkswagen does not reply (says Suzuki)
• 24 Nov 2011: Suzuki files for arbitration at International Court of Arbitration of the International Chamber of Commerce (ICC) in London
• 30 Aug 2015: ICC Arbitration Court issues judgement, finalizing the Suzuki-Volkswagen divorce
• 17 Sep 2015 8:45am: Suzuki purchases back 119,787,000 of its own shares previously owned by VW
• 18 September 2015: Press announcement by The ICCT “EPA’s notice of violation of the Clean Air Act to Volkswagen“
• 18 September 2015: EPA notice of violation to Volkswagen (See: EPA announcement), EPA website concerning Volkswagen
• 18 September 2015: California Air Resources Board (CARB) letter to Volkswagen, “Re: Admission of Defeat Device and California Air Resources Board’s Request”

Time line of events relevant to the Suzuki Volkswagen relationship

• 16 Nov 1970: “Maruti technical services private limited” (MTSPL) to create an Indian automobile industry, first CEO: Sanjay Gandhi. Sanjay Gandhi contacted Volkswagen AG to seek a cooperation to produce an Indian version of the VW Käfer (Beatle). However, a cooperation with Volkswagen did not work out. The company failed in 1977, and was reborn as Maruti Udyog Ltd by Dr V. Krishnamurthy.
• 1982: Maruti Udyog Ltd and Suzuki entered into a licensing and joint venture agreement, creating Maruti Suzuki India Limited (マルチ・スズキ・インディア), which in 2014 achieved a 45% market share of India’s passenger car market.
• 20 0ctober 2005: Suzuki and FIAT announce a partnership on FIAT’s Diesel engines (see: Suzuki announcement)
• 6 March 2006: Suzuki and GM announce the reduction of GM’s stake in Suzuki from 20% to 3%, strongly reducing the GM holding in Suzuki, which had started in August 1981. (see: Suzuki announcement)
• 9 Dec 2009: VW-CEO Martin Winterkorn and Suzuki-CEO Osamu Suzuki announced the “comprehensive partnership” at a press conference in Tokyo (see: joint Suzuki Volkswagen press announcement)
• 9 Dec 2009: Suzuki transferred 107,950,000 treasury shares to Volkswagen AG, valued approx at 226,695,000,000 yen (= approx. US$ 2.3 billion)
• 15 Jan 2010: VW purchased 19.89% of Suzuki shares for about € 1.7 billion
• March 2011: Volkswagen writes in the annual report that Volkswagen “significantly influence financial and operating policy decisions” at Suzuki
• 1 July 2011: Osamu Suzuki publicly airs his frustrations with “Wagen-san’s” intentions in his Japanese language blog in Japan’s Nikkei “スズキとワーゲンの今とこれから （鈴木修氏の経営者ブログ）” (“Suzuki and Wagen now and the way forward”) (may need Nikkei subscription)
• Sept 2011: Suzuki’s Board decides to terminate the partnership
• 18 Nov 2011: Suzuki gives notice to Volkswagen of termination of partnership, Volkswagen does not reply (says Suzuki)
• 24 Nov 2011: Suzuki files for arbitration at International Court of Arbitration of the International Chamber of Commerce (ICC) in London
• 2013-2014: The International Council on Clean Transportation (ICCT) conducts a research project in collaboration with the West Virginia University to determine real world, away from test rigs, emissions from diesel cars in the USA. Project leader is John German. ICCT tests a VW Jetta, a VW Passat, and a BMW X5, and finds that in real world driving conditions, the VW Jetta exceeds the US-EPA Tier2-Bin5 Nix (Nitrogen Oxide) emission standards by 15 to 35 times, the VW Passat by 5 to 20 times, while the BMW X5 generally conformed to the standards except in extreme conditions. The fact that the BMW X5 conforms to the standard for the ICCT was proof that the technology to conform existed. (see: ICCT announcement)
• 30 Aug 2015: ICC Arbitration Court issues judgement and holds the termination of the partnership valid, orders VW to sell all Suzuki shares back to Suzuki (or a 3rd party selected by Suzuki), and orders Suzuki to pay damages for breaking the agreement
• 17 Sep 2015 8:45am: Suzuki purchases back 119,787,000 of its own shares previously owned by VW via Tokyo Stock Exchange ToSTNeT-3 system for 460,281,547,500 yen (approx. US$ 3.9 billion), completing the termination of the partnership and capital alliance with VW
• 18 September 2015: Press announcement by The ICCT “EPA’s notice of violation of the Clean Air Act to Volkswagen“
• 18 September 2015: EPA notice of violation to Volkswagen (See: EPA announcement), EPA website concerning Volkswagen
• 18 September 2015: California Air Resources Board (CARB) letter to Volkswagen, “Re: Admission of Defeat Device and California Air Resources Board’s Request”
• 26 Sep 2015: Suzuki announced the transaction to sell all 4,397,000 Volkswagen shares which Suzuki owns to Porsche Automobile Holding SE, completing the termination of the partnership and capital alliance with VW

The International Council on Clean Transportation (ICCT) study on real-world exhaust emissions from modern diesel cars

The ICCT noted that there is a wide discrepancy in emissions by cars under test conditions and in real live road driving conditions, and conducted the project on real-world exhaust emissions from modern diesel cars.

The report can be dowloaded here as a pdf file: “REAL-WORLD EXHAUST EMISSIONS FROM MODERN DIESEL CARS“

“In-Use Emissions Testing of Light-Duty Diesel Vehicles in the United States”

The ICCT contracted with the Center for Alternative Fuels, Engines and Emissions (CAFEE) at West Virginia University to test the real road emissions of three cars in the USA. This study is explained on the ICCT website “In-use emissions testing of light-duty diesel vehicles in the U.S.”

The final report can be downloaded here: “Final Report: In-Use Emissions Testing of Light-Duty Diesel Vehicles in the United States. by Dr. Gregory J. Thompson (Principal Investigator)“.

Copyright (c) 2015 Eurotechnology Japan KK All Rights Reserved

No partnership works without meeting of minds, with opposite agendas and colliding expectations

by Gerhard Fasol, All Rights Reserved. 20 September 2015, updated 27 September 2015

Suzuki Volkswagen – bottom line first:

• Volkswagen wanted Suzuki more than Suzuki needed Volkswagen
• Suzuki-CEO Osamu Suzuki: “we looked at Wagen’s technologies, and could not find anything we need” (Osamu Suzuki’s blog in Nikkei, in Japanese language)
• Volkswagen underestimated Suzuki’s strength and resolve, and didn’t do the required homework
• Volkswagen overestimated its own leverage on the opposite side of the world from Wolfsburg
• Partners with opposite agendas and colliding expectations, without communication and no homework can’t partner
• Its not about “cultural differences”. Not at all.

On 9 December 2009 a beaming Martin Winterkorn (VW-CEO) was celebrating the new “comprehensive partnership” with Suzuki Motors, and Osamu Suzuki, the 79 year old CEO of Suzuki, was looking the other way, avoiding Mr Winterkorn’s eyes – as you can see in Reuters’ photograph of the occasion.

Reuters reported, that Mr Osamu Suzuki was asked how he would feel about a German CEO of Suzuki Motors in the future, and his answer was unambiguous: Mr Suzuki emphatically stated that Suzuki will not become a 12th brand for Volkswagen, and that he does not want anybody to tell him what to do.

Wall Street Journal reported, that Suzuki and Volkswagen would negotiate details in the weeks or months to come. We now know that these negotiations did not lead anywhere, and were never concluded satisfactorily.

It is obvious that there never was any “meeting of minds”, the expectations were colliding, and the CEOs had not a single language in common in which they could talk directly. At the press conference they looked away from each other.

Osamu Suzuki airs his frustrations with “Wagen-san” in his Japanese language blog in Nikkei – the world’s largest business daily

Mr Suzuki (Chairman of Suzuki Motors), wrote in his Japanese blog, that “ending the partnership with Volkswagen (Wagen-san as he calls VW) was like the relieve I feel after having a fishbone stuck in my throat removed”

On 1 July 2011, Suzuki-CEO Osamu Suzuki informs the world about his frustrations about “Wagen” (ワーゲン), via a blog post “スズキとワーゲンの今とこれから （鈴木修氏の経営者ブログ）” (english translation: “Suzuki and Wagen now and the way forward”). Osamu Suzuki’s blog post can be read here (may need Nikkei subscription).

Professor Ferdinand Dudenhoeffer, Director of the Center for Automotive Research at the University Duisburg-Essen according to Bloomberg, summarized: “Mr Suzuki didn’t want to be a Volkswagen employee, and that’s understandable”.

VW’s reply: “The tail is not going to wag the dog” (VW-CEO Winterkorn cited in Der Spiegel on 19 Sept 2011)

Germany’s leading intellectual and business weekly Der Spiegel on 19 Sept 2011 quotes VW-CEO Martin Winterkorn about the VW-Suzuki relationship: “Da wackelt der Schwanz nicht mit dem Hund” (the tail is not going to wag the dog, which I guess has the meaning that Mr Winterkorn perceived Suzuki Motors as the junior partner who cannot have any independent power in a relationship with Volkswagen).

Suzuki Volkswagen alliance time line

• 9 Dec 2009: VW-CEO Martin Winterkorn and Suzuki-CEO Osamu Suzuki announced the “comprehensive partnership” at a press conference in Tokyo
• 9 Dec 2009: Suzuki transferred 107,950,000 treasury shares to Volkswagen AG, valued approx at 226,695,000,000 yen (= approx. US$ 2.3 billion)
• 15 Jan 2010: VW purchased 19.89% of Suzuki shares for about € 1.7 billion
• 1 July 2011: Osamu Suzuki publicly airs his frustrations with “Wagen-san’s” intentions in his Japanese language blog in Japan’s Nikkei “スズキとワーゲンの今とこれから （鈴木修氏の経営者ブログ）” (“Suzuki and Wagen now and the way forward”) (may need Nikkei subscription)
• Sept 2011: Suzuki’s Board decides to terminate the partnership
• 18 Nov 2011: Suzuki gives notice to Volkswagen of termination of partnership, Volkswagen does not reply (says Suzuki)
• 24 Nov 2011: Suzuki files for arbitration at International Court of Arbitration of the International Chamber of Commerce (ICC) in London
• 30 Aug 2015: ICC Arbitration Court issues judgement and holds the termination of the partnership valid, orders VW to sell all Suzuki shares back to Suzuki (or a 3rd party selected by Suzuki), and orders Suzuki to pay damages for breaking the agreement
• 17 Sep 2015 8:45am: Suzuki purchases back 119,787,000 of its own shares previously owned by VW via Tokyo Stock Exchange ToSTNeT-3 system for 460,281,547,500 yen (approx. US$ 3.9 billion), completing the termination of the partnership and capital alliance with VW
• 26 Sep 2015: Suzuki announced the transaction to sell all 4,397,000 Volkswagen shares which Suzuki owns to Porsche Automobile Holding SE, completing the termination of the partnership and capital alliance with VW

A teachable moment

• “Comprehensive partnership” without meeting of minds does not work
• Partnerships are hard when CEOs on both sides don’t have any language in common, thus can’t talk to each other – and have exactly opposite expectations from the start and don’t address them until its too late
• Processes and methods successful in Europe or USA often don’t work in Japan
• Its not about “cultural differences”. Not at all.
• Its about trust, respect, communication and “meeting of minds”, shared (not opposite) expectations and agendas.
• Speaking at least one language in common helps.
• more details and analysis here

Financial aspects

• VW made approx. US$ 1.3 billion profit on the Suzuki shares it owned from 2009-2015
• Suzuki broke even approximately on selling own treasury stock to VW and repurchasing the same shares back from VW a few days ago, and on temporarily owning 2.5% of VW, but still may have to pay compensation to VW.
• Read detailed financial analysis here.

During the period 2009-2015 both VW and also Suzuki share prices increased substantially. The reason that VW made substantial financial profits from the VW-Suzuki share transactions, while Suzuki did not, is that Suzuki used 1/2 of the proceeds of selling Suzuki treasury stock to VW for R&D, thus had a much smaller holding of VW shares than VW did of Suzuki shares.

With cash reserves of approx. US$ 8 billion Suzuki will be just fine, and can now focus on expanding Maruti-Suzuki’s 37% market share of India’s passenger car market and other exciting growth projects.

And Volkswagen can now focus on growth markets, and Toyota – and other very pressing issues.

Copyright (c) 2015 Eurotechnology Japan KK All Rights Reserved

Quarterly financial reports: can they be the trees which obscure long term growth of the forrest?

As a Board Director of a Japanese company traded on the Tokyo Stock Exchange I have to study and approve monthly, quarterly and annual financial reports, and I share responsibility for the future success of the company.

It is obvious that the longterm success and growth of the company is the most important priority for all stake holders. So how useful are quarterly financial reports? Lets look at some recent developments and at an example below from our Report on Japan’s Telecommunications Industries.

UK setting the trend!

Britain’s leading economist, Professor John Kay, created the Review of UK Equity Markets and Long-Term Decision Making which he reported to the UK Secretary of State for Business, Innovation and Skills in July, 2012.

Motivated by Professor John Kay’s report, the UK regulator removed the requirement for companies to publish quarterly financial reports.

Mark Zinkula, CEO of Legal & General Investment Management, one of UK’s largest investment management firms, around 8 June 2015 wrote a carefully worded letter to 350 UK company Chairmen, recognizing that each company has different circumstances, and encouraging them to report the most meaningful key metrics and to omit reporting quarterly financial results if these don’t contribute to longterm value creation. You can download Mark Zinkula’s letter as a pdf file here.

Martin Lipton, of the NY law firm Wachtell, Lipton, Rosen & Katz, in an article published on the Harvard Law School Forum on Corporate Governance and Financial Regulation blog encourages the US Securities and Exchange Commission (SEC) to keep the UK developments in mind, when reforming the reporting requirements for US corporations.

The European Union (EU) reduced the reporting requirements including the requirement for quarterly financial reporting.

Will Japan and other important countries such as USA follow this trend as well?

Quarterly financial reports: pro’s and con’s

Essentially all well managed companies have fine grained financial management systems which document the financial position of the company at any moment in time.

As an example, when Kazuo Inamori rebuilt Japan Airlines from bankruptcy, he created a reporting system which calculates the profit/loss of every single flight in real time: i.e. when a Japan Airlines flight from Tokyo arrives in San Francisco, the pilot and everyone else knows before landing in San Francisco whether this particular flight was profitable or not – while before Japan Airlines bankruptcy, profit/loss (mainly losses for the last years leading up to bankruptcy) was determined on a full company basis every 3 months in arrears. Read Kazuo Inamori’s talk here. Clearly Kazuo Inamori thinks that such fine grained profit/loss awareness is a crucial component for Japan Airlines’ revival from bankruptcy.

Its obvious that for today’s IT systems the creation of quarterly financial reports from such fine-grained measurement systems such as Kazuo Inamori had installed at Japan Airlines does not cause much additional effort or costs once the coding is done.

Quarterly financial reports: trees vs. the forrest

Quarterly financial reports can be complicated to understand for highly cyclical industries: lets have a look at the quarterly vs annual reports of Japan’s mobile operators from our Report on Japan’s Telecommunications industries.

The figures below show exactly the same financial data – the net income (= profit) of Japan’s mobile operators NTT-Docomo, SoftBank and KDDI over the last 10-15 years:

• Upper Figure: quarterly net income (thick curves) vs annual net income (thin curves)
• Lower Figure: quarterly net income (thin curves) vs annual net income (thick curves)

It is hard to draw conclusions from quarterly income curves above. Most eye-catching is that SoftBank’s quarterly income results became much more fluctuating in the last two years. Its hard to judge the relative performance of Docomo, SoftBank and KDDI from the quarterly income curves.

Annual net income curves give a much clearer picture. Annual figures clearly show that SoftBank caught up and overtook Docomo and KDDI in net profits.

As Mark Zinkula points out that every company and every industry is different. In the case of Japan’s mobile operators, annual figures give a clearer picture.

Will quarterly financial reports become voluntary and go away? They might partly in the UK, and maybe also in other countries. As so often in finance, the UK sets the global trends.

Quarterly financial reports & the Toshiba accounting issues

Quarterly financial reports can be the trees and annual reports the forrest… seeing the forrest can be more important than seeing individual trees

Would focus on annual and long-term performance have prevented Toshiba’s accounting issues?

Copyright (c) 2015 Eurotechnology Japan KK All Rights Reserved

by Gerhard Fasol, All Rights Reserved.

Sanyo Shokai pivots from Burberry to Mackintosh and other brands

Burberry Japan pivots to direct business to solve Burberry’s “Japan Problem”: for the last approx. 50 years Burberry’s business in Japan was not Burberry’s business at all, but run under license by the Japanese company Sanyo Shokai and the giant trading company Mitsui. Sanyo Shokai’s core business was developing its own product lines Blue Label and Black Label and selling them under the Burberry Blue Label and Burberry Black Label brands.

Almost every day a foreign company approaches us to help them find a “Japanese partner” to build their business in Japan…

There are many examples of very successful Japan-market-entries via partnerships. Success stories include: Oracle, Salesforce.com, Starbucks, Fuji-Xerox, Yahoo, SuperCell, and many more, and until a few months ago, Burberry.

Read our analysis here, and background facts here.

Burberry found an excellent Japanese partner in 1965, Sanyo Shokai, backed by giant trading company Mitsui, and Sanyo Shokai built a terrific business for Burberry in Japan! Not only did Sanyo Shokai import Burberry products to Japan, but Sanyo Shokai also developed two enormously successful sub-brands for Burberry in Japan: Burberry Blue Label and Burberry Black Label. And Sanyo Shokai kept transferring substantial royalties/license fees to Burberry’s headquarters.

Actually it turned out that almost all the business value for Burberry in Japan was in the Burberry Blue Label and Burberry Black Label sub-brands, which were developed by Sanyo Shokai in Japan, by Japan and for Japan – and with the required Japanese quality and customer service. Sanyo Shokai also contributed the Japanese Burberry flagship store in one of the world’s prime luxury shopping areas, Ginza, and about 300-500 Burberry stores all over Japan – many in prime locations.

In June 2015, Burberry terminated this very successful licensing relationship.

Now after their divorce, both Burberry and Sanyo Shokai rebuild their businesses in Japan from scratch:

• Burberry lost 300-500 stores which belong to Sanyo Shokai, and Sanyo Shokai’s flagship store in Ginza, and essentially has to build a Burberry business in Japan from zero, while former partner Sanyo Shokai is busy moving former Burberry customers over to Mackintosh and other Sanyo Shokai brands, with Mackintosh in almost the same segment Burberry is now entering afresh
• Sanyo Shokai licensed the Mackintosh brand from Osaka based Yagi Tsusho, and is now pivoting 300-500 stores in Japan from the Burberry brand to the Mackintosh brand, and other Sanyo brands

Some puzzles about this split

• why has Burberry not decided on a less disruptive transition? For example, acquiring Sanyo Shokai comes to my mind. Acquisitions in Japan are not unheard of, and since Sanyo Shokai is a publicly traded company, well established rules apply.
• why did Sanyo Shokai over the 50 years since starting the relationship with Burberry not build its 100% owned brand? Much smaller Yagi Tsusho managed to acquire Mackintosh, why did not Sanyo Shokai within the last 50 years acquire or develop a 100% owned and successful brand? With Blue Label and Black Label, Sanyo Shokai has proven its ability to build and develop brands, why not under their own brand?

There are a number of other puzzles here. Has this transition been well thought through?

It will be interesting to see where both Burberry and Sangyo Shokai will stand 10 years from now – 10 years from this divorce. Both certainly are in challenging situations in Japan now after this divorce. Will both survive in Japan? Or only one of the two?

Read more details here.

Foreign companies seeking to build a business in Japan via a partnership, and Japanese companies seeking to build the business of foreign companies in Japan can certainly learn from this case study. Although its fashion and apparel, many of the underlying issues also apply in all other business areas, such as electronics, and technology.

Copyright 2009-2019 Eurotechnology Japan KK All Rights Reserved

by Gerhard Fasol

Independent 3rd party committee chaired by former Chief Prosecutor of Tokyo High Court

On 12 June, 2015, Toshiba announced corrections to income reports, and at the same time engaged an independent 3rd party investigation committee headed by former Chief Prosecutor at the Tokyo High Court, Mr Ueda, to investigate. This independent 3rd party committee submitted their report yesterday, and held a Press Conference this evening.

Lets look at the announced Toshiba financial data in detail. The figure below shows:

• Toshiba’s previously reported operating income/profits (blue curve),
• corrections announced by an internal committee on June 12, 2015 (green curve),
• corrections announced by the independent 3rd party committee on July 20, 2015 (red curve).

The combined amount of downward corrections determined by the independent 3rd party committee is YEN 151.8 billion (US$ 1.22 billion) in total.

Lets put this amount into context:

• annual sales: approx. YEN 6000 billion (US$ 60 billion)
• annual operating income (average over last 17 years): YEN 148 billion (US$ 1.5 billion)
• annual net income (average over last 17 years): YEN 19 billion (US$ 190 million)

Therefore the downward correction summed over the years corresponds to:

• approx. 2.5% of average annual sales
• approx. 103% of average annual operating profits, ie more than a full year of average operating profits
• approx. 8 years of net profits

Toshiba – typical for Japan’s large electronics corporations – operates with razor-thin profit margins: Toshiba’s net profit margin averaged over the last 17 years is 0.25%.

Therefore, the downward correction corresponds to 8 years of average net income/profits.

• Blue curve shows Toshiba’s initially reported operating income.
• Green curve shows corrections determined by an internal examination, announced on June 12, 2015. Corrections amount to approx. YEN 50 billion (= approx. US$ 0.5 billion).
• Red curve shows corrections determined by the independent 3rd party commission, chaired by former Tokyo High Court Chief Prosecutor Ueda and announced on July 20, 2015. Corrections amount to YEN 151.8 billion (= approx. US$ 1.22 billion)

Japan electronics industries – mono zukuri

Copyright (c) 2009-2019 Eurotechnology Japan KK All Rights Reserved

Dentsu switches from JGAAP to IFRS accounting standards with big impact on KPIs

Dentsu dominates Japan’s advertising and media industries, and attracts some of the most creative Japanese talent, although Dentsu is not the first advertising agency in Japan – that priority belongs to Hakuhodo.

From April 1, 2015, Dentsu decided to switch to IFRS accounting standards from Japan’s JGAAP standards. For FY2014, Dentsu reports financial results both using IFRS and JGAAP standards, giving us the fascinating opportunity to compare both accounting standards for a major corporation.

So how big is Dentsu? For FY 2014 (April 1, 2014 – March 31, 2015) Dentsu reports (we have rounded the figures):

• Turnover (IFRS) = ¥ 4642 billion (=US$ 37 billion)
• Net Sales (JGAAP) = ¥ 2419 billion (=US$ 19 billion)
• Revenues (IFRS) = ¥ 729 billion (=US$ 6 billion)

For operating income, net income and other data IFRS and JGAAP measure quite different KPIs.

Disruption is on the way: CyberAgent based on blogs, Recruit based on classified advertising and HR, LINE based on sticker communications, and many more…

Managing Japan/West cultural issues via the Dentsu-Aegis-Network

As for many Japanese corporations, Dentsu’s challenge is to leverage a dominating position in Japan into a global business footprint, while managing the well-known cultural issues. Dentsu’s approach was to acquire the French/UK agency Aegis, and then via Dentsu-Aegis acquire a string of agencies all over Europe:

• abaGada in Israel
• Mindworks in Greece
• Lesmobilizers in France
• explido in Germany
• Socializer in Poland
• Ymedia and Wink TTD in Spain
• Simple Agency in Italy
• and more….

Dentsu and Dentsu-Aegis

Dentsu dominates Japan’s advertising space, and is a very very strong force in Japan’s media industry sector, through control and management of major advertising channels with an overwhelming market share in Japan, and has been working hard to leverage its creative power and strength in Japan into a larger global footprint.

A big step forward towards a larger global footprint for Dentsu was the acquisition of the London based Aegis Group, announced on July 5, 2012.

Read our report on Japan’s Media Landscape

Copyright (c) 2009-2015 Eurotechnology Japan KK All Rights Reserved

Japan’s mobile telecommunications sector continues to grow

The global mobile internet and smartphone revolution started in Japan in 1999, and Japan’s mobile telecommunications market is the world’s most advanced and most vibrant. Much mobile innovation and inventions, such as camera phones, color screens for mobile phones, mobile apps (i-Appli in Japan), and mobile payments were invented and first to market in Japan.

Globally the first mobile internet started in Japan in February 1999 when NTT-Docomo brought i-Mode to market. NTT-Docomo did not succeed to develop global business based on i-Mode, however, SoftBank took the lead, and is now building a global business built on Japan’s telecommunications sector’s strengths.

To understand Japan’s telecommunications market read our report:

Japan mobile operators grow revenues to over US$ 170 billion in FY2014

While former monopoly operator NTT-Docomo’s business continues to shrink since its peak in 2002, KDDI is growing its predominantly domestic Japanese business slowly but steadily.

SoftBank on the other hand drives rapid growth with domestic Japanese acquisitions (Vodafone-Japan, Japan Telecom, eMobile and Willcom) and overseas acquisitions, which include US operator SPRINT, US mobile phone retailer BrightStar, Finnish game company SuperCell and many others – not to mention SoftBank’s investment in Alibaba.

Operating profits rise to approx. US$ 25 billion in FY2014

Operating profits and net profits are steadily increasing for Japan’s three mobile operators combined.

Former monopoly operator NTT-Docomo’s operating profits peaked in 2002, and have been steadily decreasing since this peak.

Both challengers KDDI and SoftBank on the other hand are growing operating profits steadily: KDDI mainly domestically in Japan, with relatively small global business, while SoftBank has dramatically increased business outside Japan with a series of acquisitions and investments, including US operator Sprint, US mobile phone distributor BrightStar and Finnish game developer SuperCell.

To understand Japan’s telecommunications market read our report:

Copyright 2015 -2019 Eurotechnology Japan KK All Rights Reserved

A discussion between UBIC (today: Fronteo) CEO Masahiro Morimoto and Dr. Gerhard Fasol

From Japanese/Chinese/Korean (CJK) e-discovery, to data forensics, virtual data scientist and predictive coding

Masahiro Morimoto founded UBIC Inc. on August 8, 2003 to stem the huge losses he saw Japanese corporations incurring due to litigation abroad. English-only software cannot be used for e-discovery of documents in Japanese, Chinese or Korean, and UBIC Inc initially focused on e-Discovery for these double-byte languages. Today, UBIC has grown beyond CJK e-discovery, into applying artificial intelligence tools to predict human behavior from emails and social media, forensics and other fields. Cloud based services are increasing rapidly. Recently, UBIC acquired the US e-discovery company TechLaw Solutions, expanding US business.

UBIC was founded on August 8, 2003
Traded on:
Tokyo Stock Exchange (Code 2158), IPO on November 6, 2007
NASDAQ (Symbol UBIC), IPO on May 16, 2013

UBIC Inc. Financial Data for the Financial Year 2014

(ended March 31, 2015, $1=119.96yen)
Revenues: YEN 6274 million (US $52.3 million)
Operating income: YEN 266 million (US$ 2.2 million)
Net income: YEN 260 million (US$ 2.1 million)

Market capitalization: YEN 33.25 billion ($276 million) ($1=120.17)

Note: on July 1, 2016 the company name was changed from UBIC to FRONTEO.

Discussion between Mr Masahiro Morimoto, CEO and Chairman of the Board, UBIC Inc. (today: Fronteo) and Dr. Gerhard Fasol

1. Question (Dr. Gerhard Fasol): You announced your most recent financial results on May 13, 2015. Could you kindly give us some of the highlights and some comments?

   Answer (Masahiro Morimoto): For UBIC, the fiscal year ended on March 31, 2015, was memorable for three main reasons:

   1. First, we successfully acquired TechLaw Solutions, a well-established US e-discovery company.
   2. Second, we launched Lit i View EMAIL AUDITOR, a product powered by our proprietary AI program.　
   3. And third, we have promoted several innovative projects with business partners.

   It was not by luck alone that UBIC achieved record high revenue, but as a result of great effort. We achieved both organic and inorganic growth. Our company is entering a new era now.

2. Question (Dr. Gerhard Fasol): The core of your business is e-discovery with special focus on Asian languages. Can you tell us more about the current state of the e-discovery market, your competitive advantage, and how you can assist your clients?

   Answer (Masahiro Morimoto): Our strength lies in operations that enable us to integrate and manage data within Japan. This is of particular value to the increasing number of Asian companies that do not want their highly confidential data to leave the country. At the same time, we provide an end-to-end, full e-discovery service. Our high level technology has enabled us to develop our own e-discovery reviewing tool, Lit i View.
   Further, our document review services in Asian languages including Japanese that use Predictive Coding, our proprietary AI technology developed by the in-house team, can cut costs while improving the quality of reviews, which can account for up to 70% of discovery costs.
   Lastly, our consultants and project managers can help in bridging any gap there might be between Asian companies and US attorneys, so that complex matters and projects may proceed smoothly for both sides.

3. Question (Dr. Gerhard Fasol): I understand that most of your work is ultra-confidential, since your work is in the field of data security. However, could you tell us about one or two successes so we can get an idea of how UBIC is able to help clients, and the reason they like working with you.

   Answer (Masahiro Morimoto): One of our customers, which regularly faces cases filed by non-practicing entities (NPEs) in the US, was able to reduce their e-discovery costs by up to 40% by utilizing our services based on our proprietary AI technology. We have heard that achievement garnered a special company award.
   (Note added by Gerhard Fasol: NPE’s are often nicknamed “patent trolls”).

4. Question (Dr. Gerhard Fasol): I understand that your core product is Lit i View. Can you explain the main characteristics of this electronic data analysis platform, and tell us why it is so important for your customers?

   Answer (Masahiro Morimoto): Currently in Lit i View, we have three types of products.

   1. First, Lit i View E-DISCOVERY, which is an e-discovery support product;
   2. second Lit i View XAMINER, a digital forensics tool; and
   3. third the Lit i View EMAIL AUDITOR, our email auditing tool.

   The feature that these three products have in common and which is unique is that they are equipped with Virtual Data Scientist (VDS), UBIC’s AI software, which enables them to analyze big data.
   Furthermore, Lit i View fully supports data in English, Chinese, Japanese, and Korean, and accurately displays multi-byte characters. In contrast, conventional e-discovery tools developed in English-speaking countries cannot accurately process legal documents written in Asian languages or multi-byte characters, without experiencing problems such as garbling.
   Asian companies, which thus are at a disadvantage in terms of the e-discovery process, have found that Lit i View provides an effective solution to their problems. We are receiving very positive reviews from clients in Asian countries, who tell us that they truly need to use Lit i View for documents in Asian languages.
   For further information, see http://www.ubicliv.com/en

5. Question (Dr. Gerhard Fasol): Virtual Data Scientist (VDS) is important part of your business model, could you explain us about Virtual Data Scientist?

   Answer (Masahiro Morimoto): At UBIC, we do not consider big data to be merely an accumulation of data, but a collection of people’s thoughts and behavior outcomes. We define behavioral informatics as an analytical interpretation of behavior, and the synthesis of information science (including statistics, mathematics, data mining, and pattern recognition) and behavioral science (including psychology, criminology, and sociology).
   Conventional approaches to big data merely analyze past incidents, from which they extract some facts. But, in behavioral informatics, we are able to predict the future, and we do so by basing our analytics on human cognition and by generating patterns of human and social behavior.
   The highly accurate Virtual Data Scientist software applies a behavioral informatics approach to analyzing big data, thereby making it possible for one to find whatever information is being sought.

6. Question (Dr. Gerhard Fasol): Predictive Coding is another concept for the basis of your business. Could you explain us Predictive Coding?

   Answer (Masahiro Morimoto): Predictive coding is based on the concept of text mining and AI technology. When e-discovery uses predictive coding, our VDS software analyzes and emulates the e-discovery review sample produced by experienced attorneys, before carrying out the rest of e-discovery review processes. Our AI software not only applies e-discovery to the review of documents at a speed more than 4,000 times faster than that achievable by humans, but also avoids the wide discrepancy in review results that often result from human error. Furthermore, our AI software has proved to be more than 90% accurate in extracting information for e-discovery reviews. Although in litigation, e-discovery is the most expensive process, costs can be cut drastically with our AI. If people use our predictive coding in addition to conventional keyword searches, relevant legal documents will no longer be omitted as often happens when only keyword searches are conducted and keyword settings are misconfigured.

7. Question (Dr. Gerhard Fasol): Your cloud hosting services appear to be the most rapidly growing area of business, accounting for more than half your revenue. Can you explain what this means for you? Will all your services simply move to the Cloud, or are your Cloud services a new class of products? What benefits do your customers derive from using your Legal Cloud?

   Answer (Masahiro Morimoto): Before answering your question, I would like to explain about our business and work flow of e-discovery. E-discovery has several steps such as identification, preservation, collection, processing, analysis, hosting, document review, and production. We charge for each of the steps. Hosting service is one of the steps of e-discovery, and its purpose is to store the data which has been loaded to the hosting server after collection, processing, analysis, and document review. Unlike the e-discovery process which only takes between one to twelve months to complete, hosting service usually lasts more than five years. One reason that the data which has been processed and reviewed by attorneys must be kept for a long time is that there is high possibility of reusing the data in case of multiple lawsuits and other issues for one particular case, for instance. Furthermore, these data are too valuable and expensive to discard since these data can be leveraged across multiple matters. These are the reasons why hosting revenue has been growing. It is a kind of recurrent revenue for us.
   To answer your question regarding whether we plan to move all our products to the Cloud: we will provide cloud solutions to our customers continuously. But, it depends on the customer and the market requirement. Although we must have cloud solutions to meet the market requirement, we provide all types of solutions such as cloud and on-premise products and services.

8. Question (Dr. Gerhard Fasol): When I discuss the Cloud with customers and friends, automatically almost the first question concerns security. How do you ensure the security of your Cloud services, and do you see this security as a business opportunity for your company?

   Answer (Masahiro Morimoto): In our Intelligence Cloud Service, clients’ data are securely managed. First, only permitted users have access to restricted virtual desktops; second, we have secure communication networks; third, our communications system has a firewall; fourth, we employ VLAN-based logical separation for network segments; and fifth, we have disaster recovery centers for redundancy operations.
   Currently, our priorities do not include offering Cloud-related security business solutions, since our main business is not only offering Cloud services.

9. Question (Dr. Gerhard Fasol): I have two questions regarding your TechLaw Solutions acquisition.
   1. First, could you explain the reasons for the acquisition of this electronic discovery and litigation consultancy?
   2. And second, it is a fact that mergers involving US or EU companies on the one hand, and traditional Japanese companies on the other, are often difficult, and sometimes the two companies lead almost independent lives, without really integrating. That being the case, how are you overcoming cultural issues, and could you give some advice to companies undertaking Western-Japanese mergers? What are your key experiences and the conclusions you have drawn that might be applied to ensure successful Western-Japanese company mergers?

   Answer (Masahiro Morimoto): In answer to the first part of your question, we acquired TechLaw Solutions – a US e-discovery consultancy and solutions provider that has been in business for more than 30 years – as part of our strategy to expand our e-discovery market share, with a view to giving ourselves a high-profile presence in the US. Since TechLaw Solutions already has developed a large number of sales channels, its acquisition has given us a unique opportunity to establish the UBIC brand in the US.
   Regarding the second part of the question, all companies have their own culture, so even companies with identical national backgrounds have different cultures. To ensure there are no cultural obstacles when companies merge, it is necessary to recognize and accept that differences exist. UBIC has always respected cultural diversity, and so does not perceive it to be a major challenge.
   Most important of all is the need to share clear, solid, and positive goals, and to clearly visualize the path to those goals. I accompanied members of the UBIC management team on a visit to TechLaw Solutions. We held a number of team meetings, during which I continued to make every effort to convey to them my thoughts, regarding what we expected would be the outcome of the acquisition, the degree to which I believed Techlaw Solutions could help UBIC grow, and the reason I had confidence in our technology.
   At the same time, I held one-on-one meetings with all key employees, and made sure that each of them was enthusiastic about their work and that they held values akin to those upheld by UBIC. Had there been no relationship of trust or the support that comes from sharing common goals, it would have been hard for the companies to merge successfully. But, once we found we had the same goals and could help each other, the cultural differences became non-issues.

10. Question (Dr. Gerhard Fasol): Your venture company is certainly one of the most successful, having grown rapidly into a global corporation that continues to expand. What are the main factors behind your success? Since improving conditions for the setting up of businesses is one of Prime Minister Shinzo Abe’s growth strategies for Japan, based on your experience, how would you suggest conditions might be improved for entrepreneurs?

    Answer (Masahiro Morimoto): One piece of advice regarding how to improve conditions for entrepreneurs concerns the Japanese education system. Schools should teach children, from a young age, about entrepreneurs and startups.
    Although the climate surrounding fundraising has improved, one critical drawback that Japanese entrepreneurs face is the difficulty in attracting smart, competent people to work for startups in Japan. In Silicon Valley, very competent new university graduates are eager to work for startups or small companies with less than five employees. They do not target Fortune 500 or well-known companies, or even companies such as Facebook or Twitter. In Japan, however, very competent students tend to want to work for big-name companies, rather than startups.
    Part of the problem is that we have not learned about startups and entrepreneurship, which makes it difficult for such businesses to attract young Japanese. For example, I used to be a public servant working for the Japan Maritime Self-Defense Force (JMSDF) prior to working for Applied Materials Japan Inc. But then, having a specific goal that I wished to achieve, I set up my own company. Yet, even at that time, had I had the option of working for a startup, I would not have done so, because the concept of startups was so ill-defined.
    Our children need to be taught that there are any number of work possibilities, ranging from being a florist, an astronaut, an entrepreneur or an employee at a startup. We also should teach our children that working for a large company is not the only option. In Japan, we still believe that large, well-known companies are “safe,” “good,” and, thus, “socially acceptable.” It is interesting to note that, these days, even some of the big companies are setting up-within their organizations-business incubators.
    Japanese media have begun to mention startups and entrepreneurs, while some universities have launched incubator programs to draw students into this area of expertise. This is important, since the younger generations should be made aware that there are any number of ways in which they can utilize their skills.
    There are several reasons for UBIC’s success. One factor is that we are a strong team, committed to a goal. Whereas one person alone can achieve relatively little, a great team with members who empower each other and work together can achieve great things.
    A second reason is that we have a clear corporate mission which is shared by the team. Fortunately, it dovetails well with the current social environment. When we launched our e-discovery business, our mission was to provide secure and cost-effective solutions for Japanese and other Asian companies facing litigation. Based on our expertise in analyzing of huge volumes of litigation-related data in English and several Asian languages, we have been able to develop our behavior informatics analytical tool, which makes it possible to predict how people will think and act based on the human conditions and behavioral norms.
    A third factor behind our success is the strong commitment to working as a team. Our motto – “Enthusiasm, Persistence and Impression” – was chosen to motivate our team to persevere in committing to our shared mission.

11. Question (Dr. Gerhard Fasol): How did you finance the startup of UBIC? Did you accept venture capital? And what are your thoughts on the use of venture capital in Japan?

    Answer (Masahiro Morimoto): I believe that, in Japan, the overall environment for venture capital has improved, but I did not use venture capital because, in those days, there was little understanding of the benefits of incubating startups over the long term; mostly, their objective was short-term investment for profit.
    As a result, when startups got support from venture capitalists, they had no choice but to make a profit by, for example, opening more stores than they may have thought prudent. The results, at times, were fortunate and I did not wish to have such constraints. I wanted to be able to manage my company with a long-term vision. Nowadays, however, one finds venture capital enterprises even in Japan that want to incubate companies with a long-term vision. The situation has improved immeasurably.

12. Question (Dr. Gerhard Fasol): You have started a number of new ventures in the medical field as well as the social networks. Can you tell about your vision for the future of UBIC?

    Answer (Masahiro Morimoto): We would like to contribute to the creation of a better future for society through the application of information analysis. At the same time, we hope to introduce a new approach to behavior informatics, on the basis of our extensive experience in litigation support and the application of innovative technologies developed through our research.
    Currently, many businesses are providing solutions for big data analysis of human behavior. But the amount of big data is so huge, that it is difficult for people to conduct in-depth analyses. Generally, little more than average results are produced, without specific topic-related differentiation.
    Our AI technology, however, which has been developed by our legal technology specialists, closely emulates human ability and behavior. In addition, it replicates tacit knowledge: the wisdom, and intuition of experts. In other words, our technology can reproduce what is difficult to verbalize. As a result, we are able to analyze subtleties, sensitivities, and distinctive aspects of individuals, which can for example, form the basis of medical diagnosis and individual consumer behavior and preferences.
    Our vision is to provide AI-based solutions that enable each person to realize his or her individuality and potential in order to develop creativity at work and in other settings.

13. Question (Dr. Gerhard Fasol): Can you tell us the reason you decided to become an entrepreneur and start UBIC? What is your advice to other entrepreneurs who wish to set up their own business in Japan, or globally?

    Answer (Masahiro Morimoto): Well, at first I had no intention of becoming an entrepreneur. But, I developed a strong sense that I had to do something for those Japanese companies that were incurring huge financial losses as a result of litigation abroad. At the time, there were not many forensic or e-discovery services in Japan that offered strong support. That was why, after having accumulated from scratch the know-how required to set up a company, I established my own enterprise. My mission today is to support companies worldwide with our AI, which can emulate experts’ behavior and apply their wisdom to that we can continue to come up with appropriate business solutions.
    My advice to entrepreneurs and people who want to set up their own company is to have a clear mission, and to commit to this with persistence and the support of a strong team.

Copyright (c) 2015 Eurotechnology Japan KK All Rights Reserved

Corrections amount to 2 1/2 years (31.5 months) of average annual net profits

by Gerhard Fasol

Sales stagnation combined with almost zero net profit of Japan’s top 8 electronics companies creates increasing pressure to improve performance: top 8 electronics groups stagnate while Japan’s top-7 electronics parts makers thrive

Toshiba over the last few weeks published a number of announcements, and corrections to these announcements concerning accounting issues. Toshiba also engaged internal and independent external expert commissions to analyze possible accounting discrepancies, these committees have made preliminary announcements.

At a recent Press Conference, the CEO of the Japan Exchange Group (JXP) which includes the Tokyo Stock Exchange, Mr Atsushi Saito, said that “he feels very much ashamed for Toshiba”, and that “he cannot understand how Toshiba can be so lazy about their accounting”.

To understand Toshiba in the context of Japan’s electronics industry, read our report on Japan’s electronics industry sector:

Toshiba in the context of Japan’s electronics industry sector: top-8 electronics groups stagnate while electronics parts makers thrive

Japan’s top-8 electronics giants – including Toshiba – have essentially stagnated for the last 17 years with negligible growth and negligible profits. Japan’s top 8 electronics groups combined have sales approximately as large as the economy of The Kingdom of the Netherlands. However, the big difference is, that in the 17 years since 1998, the economy of The Netherlands has approximately doubled, while Japan’s top 8 electronics companies have not grown their sales at all over these 17 years. Expressed in Japanese YEN, the combined sales of Japan’s top 8 electronics companies in FY1998 is about the same as in FY2014.

Japan’s electronics parts makers are a very different story: similar to The Netherlands, Japan’s top-7 electronic parts makers have grown to more than twice the size over the 17 years from FY1998 to FY2014. Some of the Japanese electronics parts makers have growth targets which should allow them to overtake Japan’s current incumbent electronics groups!

To understand Japan’s electronics sector, read our report.

The stagnation of sales growth combined with almost zero profits over 17 years of Japan’s top 8 electronics groups, of which Toshiba is one, certainly puts much pressure on Japan’s electronics groups to improve performance. This pressure might be the background of accounting issues.

Lets look at the actual Toshiba financial data in detail

The figure below shows Toshiba’s previously reported operating income/profits (blue curve), and the recently announced preliminary corrections (red curve). The combined amount of downward corrections is about YEN 50 billion (US$ 0.5 billion) in total.

Lets put this amount into context (financial data from our Report on Japan’s electronics industries):

• annual sales: approx. YEN 6000 billion (US$ 60 billion)
• annual operating income (average over last 17 years): YEN 148 billion (US$ 1.5 billion)
• annual net income (average over last 17 years): YEN 19 billion (US$ 190 million)

Therefore the downward correction corresponds to:

• approx. 0.8% of average annual sales
• approx. 33% of average annual operating profits
• approx. 2 1/2 years (31.5 months) of net profits

Toshiba – typical for Japan’s large electronics corporations – operates with razor-thin profit margins: Toshiba’s net profit margin averaged over the last 17 years is 0.25%.

Therefore, the downward correction corresponds to 31.5 months of average net income/profits.

Toshiba accounting corrections amount to approx. 33% of average annual operating income

Japan electronics industries – mono zukuri – report

Copyright (c) 2015-2019 Eurotechnology Japan KK All Rights Reserved-2019

Japan’s iconic electronics groups combined are of similar size as the economy of The Netherlands

Parts makers’ sales may overtake iconic electronics groups in the near future – they have already in terms of profits

In our analysis of Japan’s electronic industries we compare the top 8 iconic electronics groups with top 7 electronics parts makers over the period FY1998 to FY2014, which ended March 31, 2015 for most Japanese companies. Except for Toshiba, all Japanese major electronics companies have now officially reported their FY2014 results.

Japan’s iconic 8 electronics groups (Hitachi, Toshiba, Panasonic, Fujitsu, Mitsubishi Electric, NEC, SONY and SHARP) combined are as large as the economy of The Netherlands – but while the economy of The Netherlands doubled in size between 1998 and 2015, the sales/revenues of Japan’s iconic 8 electronics groups combined showed almost zero growth (annual compound growth rate = 0.4%) and almost zero income (profits).

Japan’s top 7 electronics parts makers on the other hand – similar to the Netherlands – more than doubled their combined revenues (sales) over the 17 years from FY1998 to FY2014, and earned healthy and increasing profits.

While several of Japan’s iconic electronics groups are fighting for survival, Japan’s parts makers have very ambitious growth plans – some of them may well overtake the traditional electronics conglomerates in sales – they have already in terms of profits. And they aggressively acquire around the world.

Detailed data and analysis in our Report on Japan’s electronics sector

Japan’s electronics parts makers combined more than doubled sales over the last 17 years

Japan’s iconic top 8 electronics groups showed almost no growth over the last 17 years

Japan’s electronics parts makers grow – the traditional electronics groups stagnate

Japan electronics industries – mono zukuri

Copyright 2009-2019 Eurotechnology Japan KK All Rights Reserved

Only with freedom and democracy, the values of open society and professionalism can the investment chain function effectively

The iconic leader of the Tokyo Stock Exchange since 2007, now Group CEO of the Japan Exchange Group gave a Press Conference at the Foreign Correspondents Club of Japan on June 12, 2015, a few days before his retirement, to give an overview of his achievements and to review the status of Japan’s financial markets today.

Atsushi Saito expresses his satisfaction and pride and surprise about the big improvements in corporate governance and the mind change happening in Japan now.

Atsushi Saito has worked as equity analyst in the USA, experienced the US pension fund debate, and when he was pushing for reform of corporate governance in Japan around 1990 was ignored or even criticized. He is surprised to see that these changes he has been keeping pushing for since 1990 are actually implemented now.

Atsushi Saito directly expressed his shame about the accounting problems recently revealed at Toshiba, and contracts Hitachi, which has independent outsiders, women and non-Japanese foreigners on the Board of Directors, with Toshiba which has not. Atsushi Saito directly said: “I am very puzzled why Toshiba is so lazy to check their accounting”.

Atsushi Saito – leading the Tokyo Stock Exchange since 2007

Leading the Tokyo Stock Exchange since 2007, Atsushi Saito aspired to create an attractive investment destination in Tokyo for investors from all over the world with the following achievements:

• modernized the trading systems
• developed a self regulatory body
• merge with Osaka to create Japan exchange group

Reform corporate governance to improve capital efficiency and corporate value of Japanese companies

The most imperative challenge has been left untouched for far too long: reform of corporate governance in Japan to improve capital efficiency and corporate value of Japanese companies.

Recently we introduced the Corporate Governance Code and we see a shift of mindset in Japanese companies.

Structural impediments remain remain in Japan’s financial market

Structural impediments remain remain in Japan’s financial markets, indirect finance from Banks remain a significant force in corporate finance.

Japanese investment bankers continue to fall way behind European and US rivals.

The post financial crisis regime under Basel 3 puts breaks on excessive leverage.

When global economy returns to high growth, we are not able to rely solely on money centered banks – banks will not be able to provide enough capital satisfy demands in a growing world economy.

Foresee demands for international organizations WorldBank, ADB and new AIIB and private equity funds.

With FinTec, we expect unbundling across separate financial service lines

With fintec, combining financial services and technology, we expect increasing unbundling across separate service lines for banking services, between settlement, wire transfers, loans and other services.

We will see more financial services.

Over dependence on main banks, risk aversion, lack of sense of duty by corporate managers led to the death of Japanese equity as an asset class

In Japan, as a consequence of dependence on indirect finance by money centric main banks, deep involvement of the main banks in corporate management, Japanese companies grew increasingly risk averse shied away from dynamic investment, and ultimately damaged corporate value.

There was a demise of the sense of duty by corporate managers use equity capital efficiently, and as a consequence of these factors, we saw a global divestment from Japanese stocks, eventually leading to the death of Japanese equity as an asset class.

Pushing since 1990 for reform of corporate governance in Japan, Atsushi Saito was not only ignored but even criticized

Atsushi Saito working as an equity analyst in the USA, followed the US pension debate, and started to push for reform of corporate governance in Japan around 1990, he was not only ignored but criticized.

Japan’s recent miraculous turn on corporate governance took Atsushi Saito by complete surprise

Today Japan addresses corporate governance, there is a miraculous turn of mindsets and regulatory framework. We saw:

• amendment of companies act
• corporate gov code
• stewardship code

That these changes could happen came as a complete surprise.

Atsushi Saito hopes that this momentum can be maintained, and fiduciary duties of pension fund managers towards beneficiaries will be strengthened to nurture greater professionalism among Japanese institutional investors, similar to The Employee Retirement Income Security Act of 1974, or ERISA act in the USA.

Only with freedom and democracy + values of open society + professionalism can the investment chain function effectively

Only with freedom and democracy, the values of open society and professionalism can investment chain function effectively. This pattern is what defines truly advanced economy

The recent transformation has brought Japan back into the focus of professional investors globally and a new dawn beckons for Japan.

All stakeholders must remain focused to follow through these early signs of change to ensure that Japan welcomes a brighter future.

Questions and answers

Q: Japan not joining the Asian Infrastructure Investment Bank (AIIB) will deprive Japan of opportunities?

A: The Japanese Government did not say that it will not join the AIIB, but today there is no clear set of rules for the AIIB, the governance structure is unclear. To use tax payers money our government needs to be prudent before they make a decision on investment. There are about 20 international banks and similar organizations, 19 of them have clear governance rules. All except AIIB have clear governance rules. In case of AIIB China will have about 30% holding. Probably our Government will wait before making a decision, and Atsushi Saito thinks this is reasonable.

Q: Will Tokyo Stock Exchange enter into international alliance?

A: Stock Exchange business is a very nationalistic business – only USA has multiple exchanges. All other states have one single Exchange totally under control, regulations, culture by single states. Theoretically Exchanges between different countries can merge, but none succeeded. We saw no case in the world were Exchanges from different countries merged successfully, all such cooperations failed.

Q: Plans of Toyota to have non-traded convertable shares?

Its up to their shareholders. Legally they did not violate any rule.

Japan does not have any priority on special stocks.

I see a discrepance in the USA: The US aggressively raises the voice for rights of shareholders, and corporate governance elsewhere. At the same time US companies are the largest issuer of special stocks for special owners, e.g. for Google or Facebook, more than 50-60% of voting power is dominated by the founders of these companies. –
I see a discrepancy, its an ironical discrepancy. I am talking to the leaders of US : US is very nosy about our corporate goverance, protection of shareholders, but how do they protect shareholders of Google or Facebook?

Q: What is your advice for Japanese economy to regain vitality and energy, for Japan to become No. 1 in the world?

A: I am very concerned about efficient capital use and corporate governance. When I was securities analyst in USA, I was always asked about financial data of Japanese corporations.

• Fuji Film had huge cash on the balance sheet – their competitor, the yellow-color photo company was always diligent with share holders, paid dividends, did share buy-backs. Fuji spent much R&D on pharmaceuticals and diversification. The Yellow color photo company disappeared, and Fuji Film is very healthy. Accumulation of sleeping capital is useless. But efficient use of capital is crucial.
• when GM went bankrupt it was discovered that they had great technology, like electrical car projects which had been stopped. GM had stopped these R&D projects, because shareholders had insisted to stop R&D spending, and pay hire dividends, and ultimately went bankrupt.
• Toyota had 3 trillion yen cash. This was heavily criticized. Toyota was secretely developing electric cars – now LEXUS electric car is bestseller in USA.

We are concerned to respect shareholders, but shareholders’ short term wishes are not always best for the company.

Even BlackRock wants long-term enterprise development rather than short term cash benefits.

Q: Impact of weak YEN on Stock Exchange

A: Even with weak yen, our trade balance is negative. Yen rate is not pushing export from Japan. Japan is manufacturing outside of Japan. Trade account is negative, capital account is black, currency account is black. Overseas subsidiaries are sending dividends back to Japan at the yen rate of 120. Its smart return in the capital account. Our industry structure has changed, we are not exporting on the back of weak yen, so we are not criticized.

Q: plans after retirement

A: I decided: no job – I will take rest.

Q: Disclosure. Often financial data are exposed early in Nikkei or Japanese press prior to official disclosure.

A: I am often asked about this. I don’t know how the press gets their information, its a free market for the press. As long as they don’t do any insider trading or use this information privately, I don’t see anything wrong with early public disclosure. Its a competitive issue between journalists, we cannot critisize competition among journalists. Very sharp journalists pick up information, we are not the police we cannot stop them. Its a competitive world – even for journalists.

I live far outside from Tokyo, sometimes journalists wait at the door to my home in the suburbs. I think this is an invasion of my privacy, and I don’t tell them information at my home.

Q: Trust in the stock market, low Japanese retail investor participation.

A: Advanced states have 60-70% own domestic investors, not outside foreign investors.

Foreign professional investors have immediately responded to the logic of our corporate governance reforms. Especially US and UK pension managers have immediately responded to the improved efficiency of our markets. Investment professionals in London, New York, Scotland can evaluate the meaning of our regulatory changes.

Japanese professional or private investors could not understand the improvements we have done, they did not react.

Mutual funds however are at record hights and we have 8 million ELISA private pension investments in Japan now. People start to build their own pensions now, so retail investors are coming into the market.

We have a normal quiet market now here in Japan regarding sales of equities.

Q: Tokyo as a financial center?

A: If you ask the same question to London, they will say that with IT all transactions are global. There may be arbitrage on the prices. If you compare Shanghai and NY, the trading volume in Shanghai is higher than in NY, but Shanghai not a global financial center, because they are not liberalized in capital in and outflow, they are No. 1 only in volume.

The definition of Financial Center of the World has changed.

We want to be one of the better places in financial business globally. We want to offer convenient and friendly conditions for financial people to come to Tokyo, as one of the centers for financial business.

Tax plays a very important role to define financial centers. London or NY or Tokyo cannot follow a city state like Singapore. We cannot have the same tax system. Tokyo is far bigger than Singapore.

“Global financial center” is a vague subject for me.

Q: Do current prices accurately reflect corp performance. Foreign investors: speculative short-term gains? will foreign investors pull out when Bank of Japan money flush ends?

A: I don’t think the Japanese market is overheating at all. I think the short term speculators have already left Japan.

Long term investors have long asked for change in Japan, Japan did not listen, but now for the first time Japan is listening and changing, and I am feeling longterm investors are understanding this change. We have long term investors here now in Japan.

Q: is high-frequency trading a danger for Stock Exchange?

A: Flash Crash in US was due to the diversity of exchanges. There are 50-60 markets in US. Flash Crash artificially made, not becaue of speed of trading.

Our rules for pricing system here in Japan, we learnt this since the Edo era, we cannot have flash crash, we limit the price changes, we are cooling the trading. Our system of pricing is different than in the USA.

We have many high-frequeny traders from abroad, and they appreciate our system. US high frequency traders critized us up to 10 years ago, but today they appreciate our pricing system here in Japan, they want to learn our Stock pricing system. This has really been a big change for us.

Q: False accounting at Toshiba. Impact on trust in Japan’s stock market.

A: I feel very ashamed for Toshiba. Toshiba should be the mentor or leader of Japanese industry – not the opposite.

Hitachi is a huge contrast to Toshiba. Hitachi aggressively introduced outside board members, foreign and women board members. Hitachi is investigated by outside and foreign board members.

Toshiba is a total contrast to Hitachi.

I am very puzzled by that – why is Toshiba so lazy to check their accounting.

We hope that auditors and accounting houses are more professional and more serious. They told us that their subsidiaries have different accounting system. They must have intentionally checked that point.

My answer: my feeling is one of shame. We should definitely not repeat this type of thing.

Q: Why do Japanese company accumulate so much cash reserves.

A: One reason is that Japanese labor laws compel Japanese companies to have reserves to pay for restructuring. We introduced changes in corp governance, and many companies now use the cash for M&A to acquire foreign companies, or e.g. Fanuc has increased dividends.

I am optimistic for Japanese companies, because they are using cash more efficiently now.

see also:

Copyright (c) 2015 Eurotechnology Japan KK All Rights Reserved

LINE is currently a private company and LINE’s company value is generally estimated in the US$ 10-15 billion range, so if we include LINE, the combined market value of Japan’s top 5 smartphone game companies is on the order of US$ 24 – 29 billion.

Top grossing apps in Japan’s iPhone and Google Play/Android app stores on June 6, 2015

Japan’s smartphone app market is the world’s largest in terms of cash revenues according to AppAnnie. Lets analyze which apps are at the top-grossing in the world’s largest app market.

Japan game market report (398 pages, pdf-file)

iPhone app store top grossing ranking (June 6, 2015)

1. Monster Strike by MIXI
2. Puzzle & Dragons by GungHo
3. Final Fantasy Record Keeper by DeNA
4. LINE by LINE Corporation
5. Actual powerful pro baseball by KONAMI
6. all 25 top-grossing iPhone apps on June 6, 2015

Google Play Android app store top grossing ranking (June 6, 2015)

1. Monster Strike by Mixi
2. Puzzle & Dragons by GungHo
3. LINE Disney tsumu tsumu by LINE Corporation and Walt Disney Corporation
4. White Cat Project by Colopl Inc.
5. Sword and sorcery. Logres of Swords and Sorcery – original popular online RPG by Marvelous Inc.
6. all 25 top-grossing Google-Play store Android apps on June 6, 2015

Market capitalization of the companies involved:

• Mixi: YEN 443 billion (US$ 3.5 billion)
• GungHo: YEN 580 billion (US$ 4.6 billion)
• LINE: unlisted
• Konami: YEN 324 billion (US$ 2.6 billion)
• Colopl: YEN 312 billion (US$ 2.5 billion)
• Marvelous: YEN 86.8 billion (US$ 0.7 billion)

Analyzing the market capitalization of these companies, it is obvious that a large part – or all – of the value is in the smartphone games.

As an example, Mixi’s core business was the mixi Social Network, which lost weight with the success of Facebook in Japan, until the breakthrough success of its Monster Strike game during FY2014.

How are foreign companies doing in Japan’s smartphone app market?

Disney achieved consistently high rankings in cooperation with LINE for the tsumu-tsumu game.

Next highest ranking foreign game is the Finland based, 73.2% SoftBank owned, Clash of Clans by Supercell on rank 12.

Japan game market report (398 pages, pdf-file)

Copyright (c) 2015-2019 Eurotechnology Japan KK All Rights Reserved

Japan game market report (398 pages, pdf-file)

1. No. 1 Monster strike (by Mixi)
2. No. 2 Puzzle & Dragons by GungHo
3. No. 3「LINE: ディズニーツムツム」LINE Disney tsumu tsumu (by LINE Corporation & Disney)
4. No. 4「白猫プロジェクト」”White Cat project” by COLOPL Inc.
5. No. 5 「剣と魔法のログレスいにしえの女神・人気の本格オンラインRPG」Sword and sorcery. Logres of Swords and Sorcery – original popular online RPG by Marvelous Inc.
6. No. 6 「クイズRPG 魔法使いと黒猫のウィズ」”Quiz RPG magic using black cat whiz” by COLOPL Inc.
7. No. 7 「グランブルーファンタジー】」Grandblue Fantasy by Cygames Inc. (Cygames is a joint-venture company between CyberAgent (74.04%) and DeNA (24.03%), originally founded in May 2011 as a subsidiary of CyberAgent Corporation)
8. No. 8 LINE PokoPoko by LINE Corporation
9. No. 9 LINE by LINE Corporation
10. No. 10 FINAL FANTASY Record Keeper by DeNA
11. No. 11「実況パワフルプロ野球」”Actual powerful pro base ball” by KONAMI
12. No. 12 Clash of Clans by Supercell. Supercell is now valued at US$ 5.3 billion and 73.2% owned by SoftBank.
13. No. 13「ファントム　オブ　キル」”Phantom of the Kill” by gumi Inc.
14. No. 14 Love life! School Idol Festival by KLab Inc.
15. No. 15 OnePiece Treasure Cruise (by Bandai Namco Entertainment Inc)
16. No. 16 LINE POP2 by LINE Corporation
17. No. 17「スクールガールズストライカーズ」”Schoolgirl strikers” by Square Enix Ltd.
18. No. 18 Dragon poker by Asobism Co Ltd
19. No. 19 Dragon Quest Monsters Superlight (by Square Enix)
20. No. 20 「戦国炎舞 ‐KIZNA‐ 【人気の本格戦国RPG】」Sengoku Enbu – KIZNA – (popular true waring states RPG) by Sumzap Inc (株式会社サムザップ) (Sumzap Inc. is a 100% owned subsidiary of CyberAgent Corporation).
21. No. 21 LINE Rangers by LINE Corporation
22. No. 22 Summoners War by Com2uS Corporation (a South Korean game developer company)
23. No. 23 「ブレイブフロンティア 【無料本格RPG-ブレフロ】」 Brave Frontier by Alim Co Ltd
24. No. 24 「消滅都市」 　Extinction capital – Everything in its right place. By Wright Flyer Studios Inc.
25. No. 25 「ユニゾンリーグ◆-ユニフレと冒険-人気本格オンラインRPG」Unison League – (popular original RPG) by Ateam Inc.

Japan game market report

(398 pages, pdf-file)

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1. No. 1 Monster strike (by Mixi)
2. No. 2 Puzzle & Dragons by GungHo
3. No. 3 FINAL FANTASY Record Keeper by DeNA
4. No. 4 LINE by LINE Corporation
5. No. 5「実況パワフルプロ野球」”Actual powerful pro base ball” by KONAMI
6. No. 6「LINE: ディズニーツムツム」LINE Disney tsumu tsumu (by LINE Corporation & Disney)
7. No. 7「チェインクロニクル・本格シナリオRPG／エヒクロ」”Chain chronicle original scenario RPG / Chaincro” by SEGA Corporation
8. No. 8「白猫プロジェクト」”White Cat project” by COLOPL Inc.
9. No. 9 Love life! School Idol Festival by KLab Inc.
10. No. 10 MOBIUS FINAL FANTASY by Square Enix Inc.
11. No. 11 「剣と魔法のログレスいにしえの女神・人気の本格オンラインRPG」Sword and sorcery. Logres of Swords and Sorcery – original popular online RPG by Marvelous Inc.
12. No. 12 Clash of Clans by Supercell. Supercell is now valued at US$ 5.3 billion and 73.2% owned by SoftBank.
13. No. 13 LINE PokoPoko by LINE Corporation
14. No. 14 「クイズRPG 魔法使いと黒猫のウィズ」”Quiz RPG magic using black cat whiz” by COLOPL Inc.
15. No. 15 「戦国炎舞 ‐KIZNA‐ 【人気の本格戦国RPG】」Sengoku Enbu – KIZNA – (popular true waring states RPG) by Sumzap Inc (株式会社サムザップ) (Sumzap Inc. is a 100% owned subsidiary of CyberAgent Corporation).
16. No. 16 Dragon poker by Asobism Co Ltd
17. No. 17 「グランブルーファンタジー】」Grandblue Fantasy by Cygames Inc. (Cygames is a joint-venture company between CyberAgent (74.04%) and DeNA (24.03%), originally founded in May 2011 as a subsidiary of CyberAgent Corporation)
18. No. 18 Dragon Quest Monsters Superlight (by Square Enix)
19. No. 19 OnePiece Treasure Cruise (by Bandai Namco Entertainment Inc)
20. No. 20 Game of War – Fire Age by Machine Zone Inc. (a Palo Alto based game venture company)
21. No. 21 Summoners War by Com2uS Corporation (a South Korean game developer company)
22. No. 22 Tsuri Suta (Tsuri = Angling) (by GREE)
23. No. 23 LINE Manga – free popular manga, daily renewed content by LINE Corporation
24. No. 24 Hunter x Hunter Battle Allstars (by NamcoBandai Games Inc)
25. No. 25 Puyo puyo!! Quest (by Sega Corporation)

Japan game market report (398 pages, pdf-file)

Copyright 2015 -2019 Eurotechnology Japan KK All Rights Reserved

Its not just Nintendo being disrupted, its the whole Japanese video games industry

In the most recent version of our report on Japan’s game industry, we added 24 publicly listed new smartphone game companies (listed on the Mothers market or the second or first sections of the Tokyo Stock Exchange), and we also added not-yet-publicly-traded LINE, and we will add more in future editions.

Japan game market report (398 pages, pdf-file):

There has been much media focus on Nintendo and how it is affected by the rise of smartphone freemium games, and how it will react. But our analysis shows that its not just Nintendo thats affected, but the whole traditional Japanese video game industry.

Smartphone games disrupt:

During financial year just ended, 24 publicly listed Japan’s smartphone game companies earned twice as much income as all top 8 traditional video game companies combined.

Combined net income in FY2014 (which for most companies ended on March 31, 2015) for 24 publicly listed Japanese new smartphone game companies is about YEN 200 billion (about US$ 2 billion), compared to a combined net income of about YEN 100 billion (about US$ 1 billion) for all top 8 traditional Japanese video game companies:

Japanese smartphone games have global impact and capture global value

Japanese smartphone game companies are in leading positions on global scale (Source: AppAnnie):

• The globally No. 1 ranked top grossing company for iOS and Google-Play app stores combined is a Japanese company: LINE
• 2 out of the top-10 top-grossing smartphone game companies globally (iOS plus Google-Play app stores combined) are Japanese companies
• 5 out of the top-10 top-grossing apps globally (iOS plus Google-Play app stores combined) are Japanese apps

Learn more about Japan’s games industries

Japan game market report (398 pages, pdf-file)

Copyright 2015 Eurotechnology Japan KK All Rights Reserved

Taking Nintendo intellectual property and characters to smartphones

Nintendo was founded on September 23, 1889 by Fujasiro Yamauchi in Kyoto for the production of handmade “hanafuda” cards. Nintendo Headquarters are still located in Kyoto (you can see the Nintendo headquarters building from the Kyoto railway station).

The Chinese characters used to write Nintendo’s original Japanese company name in Japanese mean something like “leave the responsibility to heaven or to god”.

Nintendo has been through many pivots during its more than 100 years history, and Nintendo can afford to take its time to do things right, and it did when smartphones started disrupting industry sector after industry sector, and did not stop disrupting the games industry.

Nintendo has a home advantage – the epicenter of the global games industry is in Japan, and not surprisingly, Japan is by far the world’s No. 1 biggest smartphone games market by cash income (other markets are bigger in terms of free downloads, but Japan is No. 1 globally in terms of cash revenues). So Japanese game companies have a big home advantage.

The No. 1 company ranked by gross revenues of the combined total iPhone + Android app market is also a Japanese company.

Yesterday, March 18, 2015, Nintendo announced to join forces with DeNA to jointly develop smartphone games including subscription based game services as a platform to leverage Nintendo’s iconic intellectual properties and characters.

Do you understand the big picture of Japan’s games industries, which drive the global game market? Make sure you do – and read our report:

Copyright 2015 Eurotechnology Japan KK All Rights Reserved

Sir Stephen Gomersall: Princess Chichibu Memorial Lecture to the Japan British Society at Ueno Gakuen, Tokyo, 5 March 2015

Sir Stephen Gomersall: It is a great honour to be giving this lecture this evening.

HIH Princess Chichibu was a charming and broad-minded Patron of this Society and of the many charities to which she devoted her later life. I remember her as a frequent visitor to the Embassy in the 70s, in her dusky blue or apple green kimonos, and occasionally turning up to watch when a British University Rugby team came to Japan.

She also personified the affinity between Japan and the United Kingdom which has its origin in our historical ties and in the nature of our peoples. I felt this throughout my years of living in Japan, and my job as Ambassador was made incomparably easier by the goodwill and respect of many segments of Japanese Government and society towards Britain. But we can’t assume that things will always continue in the same way: images can lag behind reality, and relationships have to be nurtured and given concrete meaning.

Our friendship, differences and challenges

So I’ve chosen to talk about why two countries which are so geographically remote and different from each other have a strong affinity and interest in developing our cooperation; and some of the joint challenges we face, and the contrast in the way our two countries have adapted to the huge changes of the last decades.

Three changes

The biggest change to affect the whole world over this period is what is loosely called globalisation.

Globalisation can be defined as the results, in economic, social and cultural terms, of the mobility of capital, production and people in a free global economy, and of the consequent international division of labour.

This has coincided with a second and more destabilising set of changes in the global structure of power, and the weakening, if you like, of any over-arching system, legal or military, of world governance. This began with the dissolution of the Soviet Union, has continued with the shift from the old G7 to the newer G20, the rise of China in particular, and consequent changes in the position of the United States. New threats of terrorism originating in failed states, and in Japan’s case, the threat from North Korea, are part of this troubling mix.

One can add a third change – the internet, digital and media revolutions – which to the positive have empowered people outside government, helped development in poor countries and created massive consumer convenience; have made political protest easier, as in Egypt and Ukraine; but on the negative have opened new possibilities for cyber warfare and terrorist recruitment, and arguably in the West at least, accentuated the short-termism and sensationalism of contemporary politics.

So I would like to talk, not from an academic standpoint, but from my experience about how I perceive Japan and the UK have been impacted and coped with these in our foreign policy, politics, economy and industry.

The Tea Ceremony as metaphor

But let me first explain how the Art of Tea came into the title.

A very small act of globalisation took place when my friend and fellow Embassy language-student, Robert Cooper and I decided that the study of Tea might be a good route to immersion in a part of Japanese culture and presented ourselves for induction to the Master of the Tea Ceremony at Tokeiji in Kamakura. This is a very famous temple, and its lightly constructed, almost translucent tea house had a special and very tiny door, hardly the size of a dog kennel, through which new initiates had to prostrate themselves on first entry. This had not been built for gaijin, but Robert, who went first in his jeans, an American shirt and dazzling white tennis socks which he thought sufficiently close to tabi, and I crawled through it into the presence of a shocked but stoical Sensei within.

This wizened figure, with a loosely wrapped kimono and upright hair, then intoned to us in courteous but almost impenetrable Japanese some of the history of the Temple, the relationship between Tea and Zen, the necessity of subordination of self, and the rewards which might be ours through striving for perfection in the art of making tea and the service of others. Thereafter we attended almost every week for a year, and slowly learned to be less clumsy in the complex handling of cloths and utensils and better to master the numbing effects of sitting for four hours on our ankles.

After some months, what had been a pain yielded to appreciation of the surroundings, the shadows of leaves on the sunlit walls of the teahouse, and even the beautiful kimono of the younger female class members who usually started the afternoon round. Our teacher was the Sensei’s daughter, a wan lady who kept a steely eye on our sequence of movements, and admonished us and the other students kindly if our foot strayed onto the border of the tatami or our fukusa slipped out of our trouser belts. Thus a whole afternoon could pass in eight rounds of tea, and hardly a word would be said beyond the ritual appreciation of the received cup. By contrast, the mizuba, with its utilitarian sink and stone floor where the cups were washed would be a hive of chatter among the arriving and departing housewives or men students arriving after Saturday work. And when it was all over, we would walk with painful knees down the temple steps to re-join the noise and fumes of the motorcars and the ding dong of the railway crossing by Enkakuji, heading for the bar.

We were constantly encouraged to improve our Art, and always made welcome. We got used to the silence, and began to appreciate that mastering of the physical act of making tea could be a gateway to a sense of harmony, appreciation of nature and the seasons, and communion with a group of people united in performing this simple act of service as beautifully and selflessly as possible.

Being drawn into this world was genuinely precious and even cleansing, and in my mind became a metaphor for many aspects of Japanese life and organisation which are built on a preference for the group, harmony, equality, service, perfection and self-discipline.

But at the end there was always a real world outside.

Now of course I don’t suggest for a moment that traditional Japanese art and culture seeks only to create or perpetuate a perfect illusion, but there is a sense in which the British tradition has been to venture out and throw oneself wide open for better or for worse, while the Japanese is more comfortable with consensus, even silence, its own familiar peer groups and known relationships. Japan makes internal pacts and compromises, which for the purposes of this lecture go under the guise of the Art of Tea.

Foreign Policy and standing in the world.

Britain and Japan have very different philosophical traditions, part of which originates from the 250 years during which Britain went through maritime Empire and industrial revolution, while Japan remained cloistered under the Bakufu. Post-war Britain has remained confident of its place at the international top table, its close relationship with the United States, and its continuing network of international connections. Apart from a moment of hubris in the Suez invasion, it has justified or demonstrated this through its active role in the UN Security council, the retention of its nuclear deterrent and military participation, at a higher level at any rate than our other European allies, in international actions in Iraq and Afghanistan.

Japan too has been at its strongest when it has been open and looking outward. The isolation of the Bakufu was ultimately self-defeating, while Japan surged forward after the importation of Chinese scholarship in the eighth century, and became a successful modern state after the Meiji revolution. The post-war Constitution enabled Japan to re-establish itself internationally, and enjoy a period of high growth through access to foreign technology, domestic capital and world markets. It is distressing sometimes to hear the Constitution described as “anti-Japanese”.

Today’s Japan has established itself as a country with a peaceful foreign policy, an economic power house making an important contribution to international economic cooperation; opinion polls show Japan internationally much admired except in China and Korea. Japan has significant soft power based on its culture.

The baseline for the modern UK-Japan relationship can be set in the eighties and nineties, when Japan was the pre-eminent nation in Asia, and the UK still the leading pro-American voice in the EU. During this time a core UK-Japan agenda was developed, based on the very similar views of what kind of world we wanted to see after the collapse of the Soviet Union.

The elements of this agenda are built around free trade, the rule of law, peaceful conflict resolution and support for the United Nations. The UK and Japan were co-architects of the Kyoto Protocol on Climate Change in 1997. Britain enjoyed support at the UN from Japan on action on Iraq and Libya; the UK supported Japan’s first deployments of self-defence forces to the Gulf and Afghanistan.

This political relationship continued during the Blair-Koizumi period, predicated on strong support for our mutual ally, the United States.

Relations with the United States

The United States is a huge friend and guarantor for both Japan and Europe, but cannot be expected to defend us if we don’t defend ourselves. Noticeably it was the United States which flew sorties in the East China Sea not long ago after a particular Chinese threat to the Senkakus, just as it was the United States which did the same when the Russians recently made menacing noises towards the Baltic States. But with a Congress no longer so clearly internationalist or prepared to step into every security breach and rightly demanding more burden-sharing from its allies, Japan and Europe need to have the capabilities, and relationship with America, to fulfil our side of the bargain.

What I have described is, and should be, the base state of a UK-Japan relationship founded on cooperation between two closely aligned countries. As global number three and number six economies we each have an important voice – if we can use it effectively – and this in turn depends upon our economy, defence, and international friendships and alliances.

But since 2008, a number of clouds have passed across the European and Japanese skies. One is disillusionment with the consequences of the invasion of Iraq and the troubles in the Middle East; another big one the global financial crisis of 2008, which had huge consequences in the EU; and a third the rise, part opportunity, part threat, of China, together with heightened tension in East Asia as a whole. Viewed from Japan, an increased UK/European focus on China came at exactly the point that Japan-China relations began to deteriorate. These are among the factors which have caused both sides to become more preoccupied with issues close to home. Perhaps changes in the Japanese Government didn’t help either, but they are reasons why both sides may have questioned whether the relationship was really as important to the other as we traditionally maintained. The outstanding UK response, public and private, to the Great Tohoku Earthquake was a big affirmative, but even so these questions remain in the air.

Two nations in retreat?

Compared with our past, some people will ask whether in fact we are now looking at two nations in retreat.

The reaction in Britain to UK deployments to Iraq and Afghanistan, at the popular level, has been quite deep. Although both missions were partially achieved and people were very proud of our troops, these nonetheless exposed the difficulty for our relatively lightly armed forces in dealing with unorthodox warfare. Increasing resources had to be committed with diminishing political returns. Since the end of the Cold War, successions of defence reviews have eaten away at the numbers of personnel and front-line units in our forces. And our spending – though better than most Europeans, is perilously close to the minimum 2% of GNP level expected by NATO.

A second is the dominance of domestic issues in politics, and sudden concern about the future of Britain as a United Kingdom. We are now facing a general election. The battle-ground is likely to be the economy, where the two large parties – Conservative and Labour – in reality have not a lot dividing them on economic philosophy, and not a lot of room in any case for manoeuvre in trying to reduce the national deficit, but still appeal to the electorate daily in terms of what benefits they can deliver to their traditional followers – what Labour refers to as “ordinary people”, and the English middle class and better-off voters for the Conservatives. New promises over the health service, welfare provisions, taxation, university tuition and the like burst daily on the airwaves and then fizzle. This is a rather narrow-band form of politics over how to divide resources within the society to the benefit of one group or another, with very little search for consensus on these difficult issues. Since party membership has fallen dramatically, it is not certain how much core loyalty exists to these parties within the electorate. In the meanwhile an anti-European, anti-immigration party has been taking support from both major parties; and the Scottish National Party, after losing the referendum on independence by 55-45%, has bounced back and will certainly press for further separation should it hold influence in Westminster after 7 May.

This is not good news for anyone.

One plausible factor behind this fragmentation of current British politics is that globalisation has created different categories of winners and losers from those familiar in the traditional class divide, and that devolution has actually broken the Westminster system of politics. Regional disparities, particularly between London, the North and Scotland, are now accentuated by rhetorical politics. Another element is that across the country there are groups of people, mainly white, older or unemployed, with lower skills or shrunken pensions who feel threatened by immigration and the cutting back of the welfare state. Concepts of community and identity have become confused. While the Mayor of London can revel in the vigour of London’s “melting pot” society, in other regions the disparity of wealth and opportunity can create an anti-metropolitan, anti-traditional party backlash, resulting in a large increase in disaffected or floating voters.

The third is the UK’s relationship with Europe, and here again there is a parallel with Japan.

The founding purpose of the EU was to achieve peace in Europe after the Second World War through economic integration. It achieved this spectacularly well between France and Germany, together with rising living standards for the poorer agricultural regions of Europe. The same logic applied in the eighties and nineties, when enlargement was extended to Greece, Spain and Portugal who made the transition from dictatorship to democracies. Mrs Thatcher recognized this and argued not only that the Single Market should be accelerated, but that Europe should act together in international affairs whenever it could achieve more by speaking with a single voice in the world. She vehemently opposed the idea of one government for Europe, but in reality the major countries have never wanted that, and the threat disappeared when the EU was enlarged to 26 countries in 2004. Game set and match to Britain, you would have thought.

However, instead of celebrating the victory of Mrs Thatcher’s vision of Europe as a voluntary Union of sovereign member states, parts of the media and Conservative party have continued to brand the European Union as a conspiracy to take British money, to over-regulate our life, and limit the UK’s national sovereignty, and this drip, drip, drip of anti-EU argument from within his own party led Mr Cameron to open the Pandora’s Box of a referendum on our continuing membership in the next parliament, if he is re-elected.

The current bone of contention with the EU is on the impact of the free movement of people, a basic principle of the Union, which is blamed for excessive immigration, even though the UK economy has desperately needed foreign labour to function. The Government says it needs “reforms” to recommend a yes vote, but is not yet specifying what those reforms need to be.

We know what Japan thinks about this, because it has openly said that Japanese investment in UK is for the EU.

And the Americans have equally said they hope the UK will remain a strong voice in Europe.

Former Prime Minister John Major has argued, most cogently from the Tory side, that if outside the EU, the UK would be “much diminished” internationally, and would still have to conform to EU regulations while having no part in deciding them.

That is why I am not so pessimistic about the eventual result, but it is an issue we could do without when the Middle East is in tatters and the Russians are in the Ukraine.

Japan’s position in Asia

This invites comparisons with Japan’s position in Asia.

The rise of China gives China a weight very like that of Germany within the EU, in terms of regional balance, but unlike the EU, there is no regional framework to moderate tensions between Japan, China and Korea or build a collective Asian Economic Community.

A recent Gaimusho briefing I attended on Japan’s security environment gave great detail on the number of China’s incursions around the Senkaku Islands and unilateral moves in the South China Sea; but was designed to show Japan as the sinned-against party, and Japan’s self-restraint, with no discussion of possibilities for improving relations.

Maintaining balance with China requires patience and steel. Economically Japan cannot re-surpass China, nor can it take the support of South East Asian countries for granted should it come to a stand-off.

Given the speed of increase in China’s defence spending, a posture of increased preparedness on Japan’s part, and ability to cooperate more with allies, is certainly justified.

Even without constitutional change, Japan’s defence doctrine is evolving fast with regard to collective self-defence and military exports, though not the percentage of defence spending in the budget. The UK would I’m sure support Japan’s becoming a “normal” military power, but the manner in which it is done will have a considerable effect on the acceptance of regional countries and allies alike. If based upon deterrence and proportionate response to potential threats, it will be well understood. However Japan does suffer in the view of its allies whenever things are said and done politically which look like poking the adversary in the eye.

The counterpart of deterrence has to be engagement, and building structures for the long term which will moderate trilateral relations for the better. The economic interdependence between Japan and China is already such that both countries fortunately have a strong interest in keeping tensions within bounds, and this can be further built on. A Kohl/Mitterrand moment, when the two leaders held hands in a French war cemetery, looks a long way off in Asia, but Mr Abe is a strong leader and, though I know it is a much dismissed view here, there are useful lessons to be learned from the political achievements of the European Union. Benefits must also come from encouraging young people to travel between Japan, China and Korea.

Though I’ve discussed China, I haven’t found much so far to say about TEA!

The concern most frequently voiced among Japanese friends is lack of interest of young people in foreign study or travel, and the very poor level of attainment in languages among Japanese businessmen, politicians and academics, leading to Japan being discounted in international gatherings, and leaving the floor open to competitors, China particularly, to exploit.

We are here in a university with high standards in international communication, so I won’t stir that particular pot, but revert to the issue later in the context of business.

To summarize the story so far, I do think voters respond positively to politicians who have a long-term strategy for strengthening their nation and can articulate to their people where they want their country to stand in the world and what needs to be done.

Mrs Thatcher’s appeal to many beyond her own party was that she was prepared to confront the reasons for the UK’s economic decline and do something about it. And two very important points underlying her policies were pretty immutable truths of international affairs – the first being that a nation’s influence is in direct proportion to the strength of its economy; and the second, that in a world where threats can come from unexpected quarters, nations need to secure their own defences, through adequate armed forces and strong alliances.

Though we are geographically distant, it is very important that the UK recognize its interest in East Asian Security, and Japan continue to play its part in Europe. There would be no better way of symbolizing that than the early conclusion of the EU-Japan Free Trade Agreement.

Economy and Industry

Let us turn now to the economy. Here we see rather greater contrast.

Benefits of Globalisation for Britain

Britain has benefited hugely from globalisation. As I see it, Japan has been slower to adapt but has strength in depth.

As you know, Britain went through a severe economic decline in the 1950s to 70s when our largely nationalised heavy industries, and many of the people who worked in them, were cut back as a result of global competition, from Japan among others. The Thatcher government finally brought labour market reforms, privatisation of public assets, and encouragement of foreign investment into manufacturing. The liberalisation of financial markets established London as a global centre for financial and other services. Manufacturing has declined in volume, but improved in quality, and the UK remains a world centre for research and innovation in universities.

This structure continues to form the backbone of the UK economy, with the state sector – government, education, health and public services, accounting for 43 percent of GDP. The relative flexibility of our economy, and the ability of the pound to float against other currencies, account for our outperformance of other Eurozone economies in the last two years, though that is not to say that there are not considerable weaknesses as well, as I will come to.

I remember being chided by Japanese commentators for the “Wimbledonisation” of the UK economy – acting as host to foreign players but having very few national champions. And I remember a huge joy when for a while Japanese Sumo was dominated by Mongolian and Baltic wrestlers. However, whether you call it Wimbledonisation or having an open economy, it accords with British traditions and basically works for the UK.

It has continued apace, with the government welcoming Chinese investment in UK infrastructure, Tata buying our steel and automotive companies, Japan investing in UK energy, etc. It is open house.

And of course we have the advantage of English being the international language of business, the south side of Hyde Park being the recreational space for thousands of French families.

From an economic standpoint, our two major challenges are still the public finances and education/skills.

Japan and globalisation

Japan by contrast has been harder hit, arguably because it has protected its domestic market more.

In the manufacturing sector, Japan has huge assets at home – very high levels of engineering, a disciplined workforce, and is a global leader in quality. But it now has if anything too much hard productive capacity relative to the size of the domestic market. Twenty five years ago, protectionism in the US or Europe was a reason for Japanese companies to transfer production overseas, but now the reason is demographic contraction and the extreme difficulty of making substantial margins at home. In our own company, though everything has been done to avoid loss of domestic jobs, the ratio of workers in Japan to locals overseas within our workforce has fallen from two-thirds to nearer half.

Twenty years ago, it was already evident that Japanese companies trading abroad, and therefore exposed to global competition, could be extremely flexible even in the face of the yen moving from 100 to 70 to the dollar. On the other hand, domestic sectors – retail, banking, insurance companies – with only other Japanese firms as competition, were very slow to consolidate and restructure, and as a result suffered in some cases slow deaths by overcrowding and indebtedness.

In high tech one found not Wimbledon but Galapagos – whereby mobile phone companies for example took their domestic market to very high levels of specification, making it difficult for new entrants from outside to come in, but sacrificed the opportunity to determine the global standards being set in the international market, ceding the leadership in the process to the US and Korea.

Even now, Japan’s percentage of Foreign Direct Investment to GNP is the lowest for any OECD country, and with most markets matured and fully supplied by domestic incumbents, it is hard to see that changing.

The common thread behind many of these stratagems has been to avoid disruption to the Japanese market through having foreign competition within, and to maintain employment – in other words the policies of the TEA HOUSE. And yet these have not staunched the hollowing out and increasing disparity of wealth in rural Japan compared with the metropolis. What is far more likely to stimulate new domestic growth is more competition from new players, market reform to liberate new forms of industry – for example in high-volume agriculture – and population growth.

If the aim is to increase domestic demand, “where is the third arrow?” is still the key question. So far, it seems, quantitative easing has produced a short term benefit for large corporations in stock values and profits from overseas earnings, but these have not yet trickled through to wages and domestic consumption – and could be another example of a policy which produces contrary results by shrinking from reform.

Immigration is a hot topic

Given the UK’s shortage of skills, and Japan’s shortage of young people, it’s not surprising that Immigration is a hot potato for both countries.

Britain has always had open doors to immigration for economic reasons. During our post-war recovery, we accepted migrants from our former colonies to do low-grade jobs.

This was brought home to me when I acted as a part-time census officer in 1971, and discovered that a single road of terraced houses in inner London was neatly segregated between old white widows, with their cats and milk-bottles, the Mediterranean Italian and Greek migrants, never there to accept the census form because they were presumably out partying, Indian and Pakistani families fearful of the authorities and barely prepared to respond from behind a chained door, the old Caribbeans from Jamaica and Trinidad, unable to write the form themselves, but proud and welcoming to their tidy homes, and other black working class households, only scraping it together economically, and often working all hours.

Since then the Asian communities have spread to many Midlands and Northern cities and become middle class. They have high aspirations for the education of their children, who look like Asians but behave like their British peers. These communities are now becoming represented in local government, teaching, broadcasting, Parliament and even the Cabinet. They are increasingly the backbone of our medical services.

Because of the turmoil in the Middle East, there is a portion within the Muslim communities, which is prone to radicalisation by fundamentalist Imams or jihadi social media – and a constant worry to our security services.

Since the 1980s the Government has severely curtailed further immigration from non-EU countries, so that these communities are now to all intents and purposes indigenous and there is no way or intention to repatriate them.

A second source of immigration has been the European Union. Freedom of movement is a basic principle, under which many Brits have gone to work or retire in Europe, and many Europeans, primarily from Poland and Eastern Europe, have come to work in the UK. They come under a legal right, but in significant numbers. Net migration into the UK was 298,000 last year.

A third group are refugees from conflicts in Africa and the Middle East – Somalis, Kurds and North Africans, entering illegally from other parts of the EU. This is a humanitarian issue for the EU, with the burden falling much more heavily on France and Italy.

It is the inability to limit the second category of able-bodied and work-hungry immigrants from EU countries which arouses the most controversy, especially in the run-up to an election. Go into any British hotel or restaurant, and you will find Spanish or East European receptionists, waiters and cleaners. Look for a builder fix your house, and a Pole will probably be more reliable.

This shows a key weakness of the British economy, which is a shortage of skills, and also gives rise to complaints among the unskilled population that “foreigners are taking their jobs”. The right-wing UKIP party then lay this all at the door of the EU, claim that migrants are defrauding the social security system, and that our country, saved by our Forefathers from German invasion during the Blitz etc., is is now being taken away from us. Fortunately this is a war of words, rather than on the street, but still a powerful message to some older voters.

In reality EU residents in the UK, of whom there are 1.4 million, pay much more in taxes on their income than they consume in social benefits. And it is inconceivable that the health service could function, or all the public construction projects planned in the next decade be completed, without a heavy involvement of foreign labour. The government is seeking to provide more welfare to work and apprenticeship opportunities to young British people. But the danger is in the effect this could have in the short term if we are faced with an EU referendum.

Japan’s situation is completely different, but still has to confront the reality that Japan will inevitably decline unless it can find an answer to its ageing and shrinking population. It is hard to envisage permanent immigration from Asia to Japan of the sort Britain accepted two generations ago, even though the British example on assimilation is quite encouraging. It is equally implausible that artificial intelligence – robots that substitute for human workers – will be able to build roads, sewers, or power stations in the future. Emotion will have to give way to pragmatism. And more work permits for qualified foreign workers will have to be introduced to support industries like construction and transport and increased foreign tourism. When this happens on a significant scale, international marriages are bound to occur, and issues of nationality of husbands and children arise.

I came across such pragmatism ten years ago in Akita when a number of EU Ambassadors were invited by the Governor to give a seminar on attracting foreign investment into the Prefecture. In the evening he offered a splendid reception with three entertainments; first the local lads demonstrating the Kanto-matsuri with lanterns on poles; second a Japanese lady of advanced years performing an elegant geisha dance, and third a cacophonous bunch of Filipina wives of local farmers performing a bamboo dance.

So this topic is a slight deviation from the Anglo-Japanese theme but is critical to the future of both countries, and one that touches companies like mine who need to become more globalised.

Globalisation poses tough challenges for Japanese companies, but is the only way forward.

Now let me turn to the experience of my own company.

Hitachi, with its characters for the “rising sun” and its resonant creed of “Harmony, Sincerity and Pioneering Spirit” has often been taken as a proxy for Japan itself, and its production did indeed exceed 1% of Japanese GNP thirty years ago.

Today it is very good example of a company having to make a profound transition in order to grow within the global economy.

Hitachi started out as late as 1910 as a motor-winding outfit for the mining industry in Tohoku, but quickly advanced into power generation, electrical control and traction equipment. These elite divisions were the breadwinners and training grounds for generations of Presidents. The company creed was monozukuri – perfection in manufacturing – and ochibo hiroi – wasting nothing and learning from experience. Hitachi also prided itself on its research capability, clustered in leafy campuses on the Ibaragi hillsides. So large was the company in the area, that when the Tohoku Earthquake hit in 2011, it suffered structural damage to 2000 buildings.

When I joined I was impressed by the Hitachi’s serious ethos, and by the dedication to quality of product. I am a proud employee and would always risk my shirt on the company’s ability to deliver a product. I did however notice that the grand men who ran the company back then seemed very out of touch with the international world, that the organisation was very hierarchical, that a company of 380,000 people worldwide behaved as if it were a universe in itself, and for all its technological excellence, it produced rather modest profits.

This great company was not just a tea pot, it was a TEA PLANTATION! I say this to emphasize how far things have come since then.

Much has been written about the contrast between Japanese and UK companies, most notably Ronald Dore’s book “British Factory, Japanese Factory” of 1970 contrasting Hitachi and GEC, and a much more recent book by Inagaki and Whitaker in 2005 called “The New Community Firm” . This also charts the rise and decline of Hitachi as a classic Japanese “community company”, with very little diversity, but in which loyalty was repaid by security. By the late ‘90’s the need to globalise to survive was already being internally articulated, but the authors found that the policies touted to achieve that were implemented with lip-service only. Comparing Hitachi with its American equivalent GE, then under Jack Welch, it concluded that a company dedicated to looking after its core community of Japanese permanent employees would really struggle to introduce the degree of performance management and profit-oriented decision-making of a western enterprise.

This was the company I joined in 2004 as the first foreigner made responsible for proposing and implementing an overseas regional strategy. This job has given me many excitements, and a ringside seat in understanding the roots of the company and the huge changes and sacrifices which it has had to make to get to today’s position.

For example, at that time we were making televisions. Rather than have other people assemble them locally to our design, using components taken from the market, our management had invested huge sums in a modern factory in Miyazaki, employing thousands. One by one the shining models came out, each supposedly a winner, but never at a price at which we could make a profit in the European market. The simple fact was that there was global over-supply, and though we could make supremely good products, others could do so for half the price or less.

This story was repeated in semiconductors, displays and hard disk drives, leading in 2008 to losses at a level never seen by any Japanese company, and was the origin not only of a decision to exit these commodity sectors, but also to bring in a new management which reset the company’s strategy to the provision not of products but of solutions, not in the consumer, but in the global social infrastructure market.

Slowly this is paying off, but again it requires a shift in organisation and management which challenges every tea-drinking tenet of the so-called community firm.

To explain what I mean,

1. In value creation, the key is no longer production, but innovation: this requires individualism, and the breaking of internal silos. It needs teamwork and people with a combination of disciplines, rather than those who have perfected a single one. Monozukuri still matters, but is no longer a winning ingredient.
2. Japanese companies are very technology rich; but to take that technology overseas in the form of infrastructure projects requires a whole new range of skills which do not exist within a traditional manufacture and export organisation. Local political knowledge, commercial, project finance and management capability, and usually a local engineering base for customisation of technology; and the development of local supply chains to match global or local prices.
3. It requires the whole factory-led power structure to be turned inside out, and authority shifted to the front line, where the customer is. This is a complete break with the tradition whereby power resided with the factory side in Japan, to one where more commercial people outside Japan should become the key decision-takers. Sales units which previously handled foreign markets from Japan become redundant. It also means that the system of promoting domestic engineers over a lifetime into the leadership of the big business units will also evolve, marking a huge shift in career expectations.
4. In total, a gene pool heavily weighted to engineering needs to become multifaceted, and above all, international. This means changing the system whereby operations overseas are managed by expats on two or three year tours; it means promoting non-Japanese into leadership positions; it means measuring performance objectively, and promoting people with leadership potential much earlier in their careers; and recruiting young people with different backgrounds and skills. Implementing such change takes a long time.
5. One of my annual duties was to lecture the new intake of 800 young Japanese for 30 minutes on what it is to be “global”. My message was simply to travel, absorb, and think for yourself. “Talk to them in English” the Chairman said – “it will be good for them”. Well I tried, but since language was never among the entry criteria, the result was a predictable blank wall. Reverting to Japanese, I then joined the other executives for a walkabout among the new recruits at the drinks which concluded the induction ceremony. I pitched in to a group of young men, who shied away from me as if I had the ebola virus. I persisted in English for a while, but finally said to them in Japanese, “oh well then, what business group are you due to join?” “Ah, we, we’re the baseball group!” came the reply. The community firm lived on. More encouragingly I found two young girls who seemed more anxious to engage me in conversation. Not realising their nationality to begin with I engaged them in Japanese, whereupon they explained that they were foreign graduates, one Korean and one Chinese, from technical universities in the Kansai. “Goma-san”, they said, still in perfect Japanese, and looking around the room of 800 future colleagues. “What should we do to survive in a company like this?” I thought this question was a sign of great promise, and advised them to win respect as professionals, and voice their own opinions, firmly and politely.
6. Diversity is a weak point in many organisations, not only in Japan, but often proves in practice to be liberating for all concerned. The most enjoyable team I ever worked in was the UK Mission in New York in the 1990s where over half of our front line negotiators and the entire legal team were women. It is part, but only part of creating a healthy atmosphere of camaraderie and internal competition within a team. Unfortunately the role of many good women in the company is still to make TEA.
7. Governance is another vital topic, in the light of the Olympus and other similar failures. Part of the greatness of the Chairman who rescued the company from its disaster of 2008 was to bring diversity into the Board of Directors. I was quickly followed by three other non-Japanese Board members, two Americans and one Singaporean, all eminent in their fields. The Japanese Directors too were business men and women of deep experience. Simultaneous interpretation was provided, but it soon happened that conversation would flow spontaneously into English as well. More than that, with the introduction of foreigners who thought it was their duty to speak their opinions in Board meetings, the Japanese members also perked up and became much more interested in debate. It was a huge leap forward. By any international standards, the Board was a model. But my conclusion was that it is not the composition of the Board, but its degree of oversight and influence which is the real issue. The key shift is to move from a situation where the Board simply gives legal authority to decisions already made by the Executive, to one where the Board also debates strategy and can examine the management of the company.
8. In other words, governance should be not TEA, but SPARKLING WATER.

Huge contribution of Japanese companies to the UK economy.

Japanese companies have made a huge contribution to the UK economy and to the Government’s aim, still only half achieved, of rebalancing the economy towards manufacturing. It is estimated that they provide 140,000 jobs, and most notably the surplus in automotive exports that the UK now enjoys is in large measure due to Japanese (and now significantly Indian) investment.

Hitachi’s two largest overseas projects are coincidentally in the UK, and both very visible and vital from the point of view of renewing the country’s rail and power infrastructure. There isn’t time to go into detail, but in September we will open a factory in North East England to build the next generation of intercity and commuter trains; and the second is to plan and hopefully build a privately owned and operated nuclear power plant based on our latest Japanese operating design.

As a Brit of course, I’m very proud that the company is prepared to commit such huge investment to the British market. But from a company point of view, what is most encouraging are that these are transformational projects in the company’s journey towards becoming globally competitive.

In the rail case, the decision has been taken to put the global headquarters of the rail business in the UK. Even Japan now comes under this organisation. And that is the consequence of the exceptional foreign leader brought into the business twelve years ago.

In the nuclear case, it was a courageous decision to take a business which after the Fukushima earthquake had suffered a sudden domestic collapse, and re-orient it towards the global market. It is anything but simple, but a hugely motivating challenge.

Conclusions

On Japan-UK relations

On the UK-Japan relationship, I believe there is a huge reservoir of good will, common interest and complimentary talent. To sustain it we should focus not on sentiment but on what we can do together to address today’s issues – trade, conflict prevention, international development, anti-terrorism, and including now collaboration in defence preparedness.

With Japan there is a bond of trust, magnified by the contribution Japan continues to make to the UK economy and its support on international issues. This, and our common values, should be reflected in a special quality of political relationship and cooperation. Frequent dialogue and mutual openness, even in addressing our problems, is hugely valuable.

We must commit to burden-sharing with the United States through having sufficient readiness to look after ourselves in the first instance.

As far as Britain in Europe and Japan in Asia are concerned, retreat into isolation is an illusion and a dead end. We need to make these relationships work, and business should lead both countries to sensible policies.

More generally on world affairs.

With regard to globalisation and management

Putting the inner community first is a very natural and admirable human instinct, but as a principle of politics or business organisation it does not work.

Because we live in a globalised and competitive world, we have to be strong and efficient. More good and strength comes through openness and letting talent rise and lead.

There are many ways of binding an organisation together. The greatest is shared pride in success. Community, charity and compassion is precious but belongs at level of local and personal life.

Good politicians and business leaders are those who allow creativity and diversity to flourish, but can also articulate a sense of direction and what is right and wrong.

Finally

Because of my background I have spoken with the perspectives and beliefs of someone who wants to see Japan and the UK play a role in shaping the world, and companies like my own be Japanese but international at the same time, realising their full potential value in the global market place. I accept that that is not everyone’s view. It is possible to argue that living standards in Japan are good and creativity abundant in many areas; and that somehow, even without disruptive change, Japan can keep its head down and will find ways of dealing with the issues we have talked about. As you gather, my response would be that it is very difficult for companies in particular to maintain a static state in a competitive world – you are either a competitor or not, though you can change from one to the other; and the same goes, as we saw after the Thatcher reforms, for nations too.

But it is also a slightly regretful belief, for as I love this country and its attachment to personal loyalty and all the things we enjoyed in that first tea experience, I understand why many, perhaps in this audience, might take that view.

Stephen Gomersall, Tokyo, March 2015

(Stephen Gomersall was British Ambassador to Japan from 1999-2004, and Hitachi’s Chief Executive for Europe and subsequently Board Director from 2004-2014. He is now Adviser to the CEO, Hitachi Ltd.)

Copyright (c) 2015 Sir Stephen Gomersall and Eurotechnology Japan KK All Rights Reserved

Report on “Japan electronics industries”

https://www.eurotechnology.com/store/j_electric/

Dr Chuck Casto: Leader of the US Integrated Government and NRC efforts in Japan during the Fukushima nuclear accident in 2011

I don’t think that there is anyone with deeper insight into the Fukushima-Dai-Ichi nuclear disaster, its management, causes and consequences, than Dr. Chuck Casto.

Dr Casto arrived in Japan a few days after March 11, 2011, representing the US Government regarding the Fukushima-Dai-Ichi nuclear disaster, and heading a team of 150 US nuclear industry experts, and for 11 months advised the Japanese Prime Minister and Ministers on the Fukushima-Dai-Ichi disaster management.

Dr. Chuck Custo is licensed nuclear power station operator, and as regional NRC Regulator was responsible for the safety of 23 US nuclear power stations.

We were lucky and honored to have Dr. Chuck Casto as one of the keynote speakers at the 7th Ludwig Boltzmann Forum in Tokyo.

Click to read a summary of Dr Chuck Casto’s keynote
Dr. Chuck Casto: Global leadership in the extreme: crisis leadership in post-Fukushima.

Related talks (click to read summaries of the talk and watch videos):

• Dr. Chuck Casto’s talk at the Foreign Correspondents Club in Tokyo about nuclear safety and the Fukushima-Dai-Ichi disaster
• Hirohiko Izumida, Governor of Niigata Prefecture, hosting the world’s largest nuclear power station talks on nuclear safety
• Yukiya Amano, Director General of the International Atomic Energy Agency (IAEA) talks about nuclear safety
• Professor Kiyoshi Kurokawa, former Chairman of Fukushima Nuclear Accident Independent Investigation Commission by National Diet/Parliament of Japan – Groupthink can kill

Reading the talks above will give you a good insight into the key causes and implications of the Fukushima-Dai-Ichi nuclear disaster by the world’s best experts directly involved in this nuclear disaster management.

Copyright (c) 2015 Eurotechnology Japan KK All Rights Reserved

Hopes for Japan and Germany share at least part of the path to renewable energy

Germany’s Federal Chancellor Angela Merkel, Physicist with a PhD (Chancellor Angela Merkel’s PhD thesis is available here) and several scientific publications to her credit, visits Tokyo today Monday 9 March and tomorrow Tuesday 10 March 2015.

Angela Merkel’s official interview preparing for Japan visit

In the official interview commenting on her Japan trip (watch on YouTube here), Chancellor Merkel says: “Wir setzen jetzt sehr auf erneuerbare Energien. Und ich glaube, Japan sollte auch diesen Weg gehen – und geht ihn ja auch. Und wir sollten ihn vor allem in Deutschland und Japan auch ein Stueck zusammen gehen. Das heisst, ich werde dort auch ueber den Ausbau erneuerbarer Energien sprechen.”

Our translation to English: “We put much emphasis on renewable energy now. I think Japan should also go along this path – and indeed goes along this path. We should proceed on this path at least partly together. This means, I will talk about the expansion of renewable energy during my Japan visit.”

Report: Energy efficiency – opportunities for Japan and Europe

The Konrad-Adenauer-Stiftung, a German public policy think-tank financed by German Government funds, recently organized conferences on Energy efficiency in Tokyo, Kyoto and Kobe, and engaged our company to produce a report on “Energy efficiency – opportunities for Japan and Europe”.

Download the report free of charge as a pdf-file here from the Konrad-Adenauer-Stiftung website (pdf-file).

If you need to know more, read our reports:

• Japan energy market (21st edition)
• Renewable energy Japan (9th edition)

“Renewable energy Japan” research report

Copyright 2015 Eurotechnology Japan KK All Rights Reserved

Globalizing Japan’s high-tech industries

At the Bank of Kyoto’s New Year celebration meeting, Japan’s stagnation and need for globalization were center of discussion – despite focus on globalization, the present author was more or less the only non-Japanese invited and attending(!).

The Chairman of Japan’s Industry Federation KEIDANREN, Mr Sakakibara (Chairman of Toray (東レ株式会社)), deplored that Japan’s economy is the only major industrial country not growing, and emphasized the need to overcome Japan’s well known Galapagos syndrome.

In an effort to overcome lack of growth in Japan, Japanese companies over the last years have been extremely active acquiring European technology companies – actually our company advised several Japanese companies’ M&A teams on European acquisition strategies and opportunities.

Japanese companies are particularly active acquiring European technology companies – this year alone, the EU-Japan investment registry shows Japanese acquisitions in Europe totaling € 6 billion – far more than European acquisitions in Japan this year.

Japanese acquisitions 2015 in Europe include:

• Canon’s tender offer for Swedish CCTV leader Axis AB for US$ 2.8 billion
• Sosei acquires Cambridge University spin-out Heptares Therapeutics for up to US$ 400 million
• Hitachi to acquire rail technology companies AnsaldoBreda and Ansaldo STS for EURO 2 billion
• NTT Communications to acquire German data center operator e-shelter for US$ 840 million
• Nikon to acquire Scottish Optos plc “The retina company” for approx. US$ 387 million

Post-merger know-how and execution are key

It is well-known that EU <-> Japan post-merger management requires substantial management know-how. While such management known-how has been built up between US-Japan over many years, EU-Japan investments had only a shorter time to develop, and in many cases companies are not willing to invest sufficiently in such know-how. As a consequence the majority of EU <-> Japan investments has failed unfortunately – poster-children are the failures of Vodafone’s acquisitions in Japan and the failures of Docomo’s investments in EU, and there are many more examples.

To overcome these problems, several recent Japanese investments are substantial investments but short of 100% where local European management is kept in place – following the Renault-Nissan success story. Indeed, Carlos Ghosn has emphasized that the Renault-Nissan investment would probably have failed, had it been a 100% take-over.

Copyright 2015 Eurotechnology Japan KK All Rights Reserved·

Galapagos-Syndrome: NTT Docomo failed to capture global value

On February 22, 1999, the mobile internet was born when Mari Matsunaga, Takeshi Natsuno and Keiichi Enoki launched Docomo’s i-Mode to a handful of people who had made the effort to the Press Conference introducing Docomo’s new i-Mode service. KDDI soon followed with EZweb, and J-Phone with Jsky (J-Phone was acquired by Vodafone, which was unable to manage J-Phone, Vodafone then sold the company to SoftBank).

i-Mode’s popularity soon exceeded any expectation: Docomo for some periods had to limit new subscriptions.

With Steve Jobs’ love for Japan, and Apple’s intense supplier relationships with Japan, its not farfetched to see connections between i-Mode and iPhone, in particular the i-Mode ecosystem and Java-based i-Appli’s are forerunners of today’s apps and apps-ecosystems.

At that time there was no Wikipedia, and Docomo had no English-language website at all, so our company Eurotechnology Japan KK’s information was more or less the only English language information openly available about i-Mode. We were bombarded by requests from many major semiconductor firms, telecom operators, investment banks, students and world-famous business schools for our i-Mode report and related business development and strategic work.

Learn about Japan’s telecom markets: read the 65th edition of our report.

Today 5 of the global top-10 top-grossing Apps are Japanese

While Docomo never managed to capture global value from inventing and first introducing the mobile internet, the No. 1 top-grossing company globally, and five of the top-10 globally top-grossing Apps for iOS and Google-Play combined are Japanese (source: App-Annie).

Japan’s app market is the world’s largest in terms of cash revenues

Its also no coincidence that in terms of cash value, Japan’s is the world’s largest app-market for iOS and Google-Play combined, bigger than the US market and the Chinese market in terms of cash value. (source: App-Annie).

App-Annie’s data to our knowledge only cover the iOS and Google-Play app-stores, not the i-Mode and other mobile internet businesses, so Japan’s actual mobile app economy is even larger than App-Annie data show.

Which are the top-grossing apps in Japan?

• Japan’s 25 top grossing iPhone apps
• Japan’s 25 top grossing Google-Play apps

i-Mode is still alive and kicking – and a big business for Docomo

i-Mode is still today the mobile internet system for Docomo’s traditional flip-phones which are still an important part of the market, and recently made headlines since sales for traditional flip-phones were rising, while smartphone sales were (temporarly?) dropping.

i-Mode (and EZweb for KDDI, and Yahoo-mobile for SoftBank) will still be important business for some time to come in Japan.

Copyright (c) 2015 Eurotechnology Japan KK All Rights Reserved

Japan game market report (398 pages, pdf-file)

AppAnnie showed that in terms of combined iOS AppStore + Google Play revenues, Japan is No. 1 globally, spending more than the USA. Therefore Japan is naturally the No. 1 target globally for many mobile game companies!

Android Google Play – Japan “Top Grossing” apps ranking of February 18, 2015:

Note that the Android/Google Play ranking shown here is very similar to the iOS top grossing ranking.

• No. 1 Puzzle & Dragons by GungHo
• No. 2 Monster strike (by Mixi)
• No. 3 白猫プロジェクト (= white cat project) (by Colopl Inc.)
• No. 4 クイズRPG 魔法使いと黒猫のウィズ (= Quiz RPG (role playing game) The World of Mystic Wiz, the which and the black cat wiz) (by Colopl Inc.)
• No. 5 LINE Disney tsumu tsumu (by LINE Corporation) (ツムツム = Tsum Tsum)
• No. 6 LINE PokoPoko (by LINE Corporation)
• No. 7 Dragon Quest Monsters Superlight (by Square Enix)
• No. 8 LINE (by LINE Corporation)
• No. 9 Final Fantasy Record Keeper (by DeNA Ltd)
• No. 10 LINE Rangers (by LINE Corporation)
• No. 11 Love life! School Idol Festival (by KLab Inc.)
• No. 12 Logres of Swords and Sorcery – popular online RPG (by Marvelous Inc.)
• No. 13 Runaway lives motorcycle Tiger (by Donuts Co Ltd)
• No. 14 Clash of Clans (by Supercell)
• No. 15 Chain chronicle – real scenario RPG (ChainChro = チェンクロ) (by SEGA Corporation)
• No. 16 Actual powerful pro-baseball (実況パワフルプロ野球) (by KONAMI)
• No. 17 Schoolgirl strikers (by Square Enix)
• No. 18 Puyo puyo!! Quest (by Sega Corporation)
• No. 19 LINE POP2 (by LINE Corporation)
• No. 20 Granblue Fantasy (by Cygames Inc)
• No. 21 Drift Spirits (by Bandai Namco Games Inc)
• No. 22 Pro baseball Pride 2014 (by Colopl Inc.)
• No. 23 Sengoku Enbu – KIZNA – (by Sumzap Inc)
• No. 24 Dragon poker (by Asobism Co Ltd)
• No. 25 Gandam Conquest (by Bandai Namco Games Inc)

Japan’s iconic game companies created many game categories – this tradition carries over to mobile gaming now.

Japan game market report (398 pages, pdf-file)

Copyright 2015 Eurotechnology Japan KK All Rights Reserved

AppAnnie showed that in terms of combined iOS AppStore + Google Play revenues, Japan is No. 1 globally, spending more than the USA. Therefore Japan is naturally the No. 1 target globally for many mobile game companies, and quite a few of the top grossing apps in Japan are of foreign origin – can you guess which?!

Japan game market report (398 pages, pdf-file)

iOS AppStore-Japan “Top Grossing” ranking of February 10, 2015:

Note that the iOS ranking shown here is very similar to the Android / Google Play top grossing ranking.

• No. 1 Monster strike (by Mixi) from rank 2 on July 13, 2014
• No. 2 Puzzle & Dragons by GungHo (from rank 1 on July 13, 2014)
• No. 3 白猫プロジェクト (= white cat project) (by Colopl Inc.)
• No. 4 Dragon Quest Monsters Superlight (by Square Enix) (from Rank 12 on July 13, 2014)
• No. 5 LINE Disney tsumu tsumu (by LINE Corporation) (ツムツム = Tsum Tsum) (from Rank 3 on July 13, 2014)
• No. 6 Final Fantasy Record Keeper (by DeNA Ltd)
• No. 7 LINE (by LINE Corporation)
• No. 8 Love life! School Idol Festival (by KLab Inc.) (was rank 9 on July 13, 2014)
• No. 9 LINE PokoPoko (by LINE Corporation)
• No. 10 Logres of Swords and Sorcery – popular online RPG (by Marvelous Inc.) (was rank 14 on July 13, 2014)
• No. 11 Clash of Clans (by Supercell) (was rank 5 on July 13, 2014)
• No. 12 Runaway lives motorcycle Tiger (by Donuts Co Ltd)
• No. 13 Drift Spirits (by Bandai Namco Games Inc)
• No. 14 Actual powerful pro-baseball (実況パワフルプロ野球) (by KONAMI)
• No. 15 Sengoku Enbu – KIZNA – (by Sumzap Inc) (was rank 8 on July 13, 2014)
• No. 16 Sword Art Online Code Resister (by Bandai Namco Games Inc)
• No. 17 Chain chronicle – real scenario RPG (ChainChro = チェンクロ) (by SEGA Corporation)
• No. 18 Schoolgirl strikers (by Square Enix)
• No. 19 Summons Board (by GungHo Online Entertainment)
• No. 20 Puyo puyo!! Quest (by Sega Corporation) (was rank 11 on July 13, 2014)
• No. 21 Granblue Fantasy (by Cygames Inc)
• No. 22 LINE Manga – daily reload of popular manga free of charge (by LINE Corporation)
• No. 23 Brave frontier (by Alim Co Ltd) (was rank 4 on July 13, 2014)
• No. 24 Dragon poker (by Asobism Co Ltd) (was rank 6 on July 13, 2014)
• No. 25 LINE POP2 (by LINE Corporation)

Japan game market report (398 pages, pdf-file)

Copyright 2015-2019 Eurotechnology Japan KK All Rights Reserved

Abenomics?!

The trick of course is the third arrow, the reforms. Read what Professor Takeo Hoshi has to say about Abenomics, Japanese economist, who has worked his way up US Universities, and has now reached the position of Professor of Economics at Stanford University. By the way, here is my talk at Stanford University – some years ago, but much of it still applies today.

Japan’s energy

Japanese people’s views on nuclear power are polarized, and its unclear and unpredictable when nuclear power stations will be switched on again in Japan. Read what the Governor of Niigata Prefecture has to say, who hosts the world’s largest nuclear power plant with 7 reactors and 8 GigaWatt capacity.

According to the Japanese Energy Fundamental Law, the Government has to publish an official Energy Basic Plan at regular intervals. You can read the 4th Energy Basic Plan published on April 11, 2014, and listen to a commentary on it for The Economist here on YouTube. The 4th Energy Basic Plan starts with the assumption that Japan is poor in natural energy resources, which of course is only true if we restrict “natural energy resources” to fossil resources. Japan is actually potentially very very rich in renewable energy sources, as the scenario plans developed by Japan’s Industry and Economy Ministry (METI) and Japan’s Environmental Ministry show.

Solid state lighting saves energy

GaN LEDs were invented and commercialized in Japan, and Shuji Nakamura, Isamu Akasaki and Hiroshi Amano won the 2014 Nobel Prize in Physics for this work. Read the summary of Shuji Nakamura’s keynote at the 5th Ludwig Boltzmann Forum.

Post-Galapagos and globalization of Japan’s technology groups

To overcome Japan’s Galapagos issues and to acquire technologies and market access, Japanese companies are acquiring overseas: read a list of Japanese acquisitions in Europe here.

Foreign companies in Japan, and Japanese companies overseas face a dilemma: expensive expatriates with limited local know-how, or local management? Japanese companies seem to have finally reached the conclusion that Japanese managers eg sent to Germany are in most cases not the best choice to lead a German-based multinational company – here are some great recent examples:

• Docomo acquires a majority stake in net mobile AG, however net mobile AG remains a publicly listed company. Read details here.
• NTT DATA acquires SAP solution provider itelligence AG, however itelligence AG remains an independently managed company under the founder’s management, and grows aggressively via acquisitions all over the globe. Read details here.
• NTT Communications acquires a majority of Integralis, Integralis is renamed NTT Com Security AG, however NTT Com Security AG remains traded on the m:access market of the Munich Stock Exchange. Read details here.

Carlos Ghosn is very well aware of such multi-cultural management issues and how to solve them, however too many EU companies in Japan are not. If they were, EU investments in Japan could be at least 50% higher – as you can read here.

Best wishes, and much success in 2015!

Copyright 2015 Eurotechnology Japan KK All Rights Reserved

Preparations:

EU Japan FTA trade negotiations initiated: At the 20th EU-Japan Summit of May 2011 the EU and Japan decided to start preparations for both a Free Trade Agreement (FTA) and a political framework agreement (Economic Partnership Agreement, EPA).

For updates and further details see: http://eu-japan.com/eu-japan-agreements/eu-japan-trade-negotiations/

May 2012: after one year of discussions, the EU agreed with Japan on an agenda for future negotiations covering market access.

On 18 July 2012, the EU Commission asked the EU Member States for agreement on opening Free Trade Agreement negotiations with Japan.

On 29 November 2012, the Council authorized the Commission to start trade negotiations with Japan.

The EU Japan FTA trade negotiations were officially launched on 25 March 2013 by EU President Jose Manuel Barroso, President Herman Van Rompuy and Japanese Prime Minister Shinzo Abe.

• Impact Assessment of EU Japan FTA Free Trade Agreement, 18 July 2012 (pdf file)
• 25 March 2013, Launch of negotiations: Joint statement by the President of the European Commission, José Manuel Barroso, the President of the European Council, Herman Van Rompuy, and the Prime Minister of Japan, Shinzo Abe
• Note of 25 March 2013: “A Free Trade Agreement between the EU and Japan”

EU Japan FTA trade negotiations: First round (Brussels, 15-19 April, 2013)

Press release: First Round of EU-Japan Trade negotions (Brussels, 19 April 2013)

EU team leader: Mauro Petriccione, Director in the European Commission’s Directorate General for Trade

Japan team leader: Ambassador Jun Yokota (横田淳), Ministry of Foreign Affairs

Japanese Ministry for Foreign Affairs, Press Release

EU Japan FTA trade negotiations: Second round (Tokyo, 24 June – 3 July 2013)

Japanese Ministry for Foreign Affairs, Press Release: Second Round of Negotiations on the Japan EU Economic Partnership Agreement (EPA) as well as a Japan EU Strategic Partnership Agreement (SPA)

EU Japan FTA trade negotiations: Third round (Brussels, 21-25 October 2013)

Japanese Ministry for Foreign Affairs, Press Release: Third Round of Negotiations on the Japan EU Economic Partnership Agreement (EPA)

EU Japan FTA trade negotiations: Fourth round (Brussels, 27-31 January 2014)

Japanese Ministry for Foreign Affairs, Press Release: Fourth Round of Negotiations on the Japan EU Economic Partnership Agreement (EPA)

EU Japan FTA trade negotiations: Fifth round (Tokyo, 31 March – 4 April, 2014)

Press release by the Foreign Ministry of Japan (4 April 2014)

EU Japan FTA trade negotiations: Sixth round (Tokyo, 7-11 July 2014)

Sixth Round of Negotiations on the Japan EU Economic Partnership Agreement (EPA) (Foreign Ministry of Japan, Press release)

EU Japan FTA trade negotiations: Seventh round (Brussels, 20-24 October 2014)

Japanese Ministry for Foreign Affairs, Press Release: Seventh Round of Negotiations on the Japan EU Economic Partnership Agreement (EPA)

EU Japan FTA trade negotiations: Eighth round (Tokyo, 8-12 December 2014)

Japanese Ministry for Foreign Affairs, Press Release: Eighth Round of Negotiations on the Japan EU Economic Partnership Agreement (EPA)

• Leader of Japanese delegation: Deputy Foreign Minister (外務審議官（経済)), Yasumasa Nagamine (長嶺　安政)
• Leader of EU delegation: Raffaele Mauro Petriccione, Deputy Director-General, European Commission, Directorate-General for Trade

Copyright 2014 Eurotechnology Japan KK All Rights Reserved

Record, summary and commentary by Gerhard Fasol

Governor Hirohiko Izumida: “Nuclear power operating companies should have their headquarters at the nuclear power plant in order to immediately take responsibility and respond.”

Governor Hirohiko Izumida (泉田裕彦) is elected by the 2.3 million people of Niigata Prefecture to be responsible for their lives, safety and assets. The world’s largest nuclear power plant, Kashiwazaki Kariwa Nuclear Power Station (柏崎刈羽原子力発電所) with seven reactors and 8 GigaWatt power, is located in Niigata Prefecture, but as all other nuclear power stations in Japan, it is currently switched off.

On October 15, 2014, Governor Izumida in his official role, explained a long list of detailed safety concerns, and a list of necessary changes in legislation and emergency command regulations in order to ensure nuclear safety. These safety concerns include the reduced responsibilities of the new Japanese Nuclear Regulatory Commission (NRC), which limits its responsibility to technical issues, and shies away from the broader issues of nuclear accident management, in particular, IAEA’s fourth level and fifth level of defense-in-depth. Governor Izumida demands a full investigation of the Fukushima nuclear disaster which should address who is responsible, and in particular also why the knowledge of the meltdown was hidden for more than two months.

Niigata Governor Hirohiko Izumida’s safety concerns – overview:

1. Safety concerns regarding the Nuclear Regulatory Commission (NRC)
   1. the Fukushima accident was not yet sufficiently investigated or reviewed
   2. shrinking jurisdiction of the NRC. Regulatory safety standards have been reduced to performance standards. NRC have reduced their actual work.
   3. insufficient support for IAEA “defense-in-depth”. No provision at all for IAEA fifth level, and insufficient provision for IAEA fourth level response
   4. insufficient support for municipalities
2. Safety concerns regarding nuclear accident preparations
   1. no meltdown countermeasures
   2. decision making during crisis, e.g. seawater flooding of a reactor in risk of meltdown. Salarymen including Presidents of companies are not equipped for such serious decisions during crisis.
   3. emergency response under high radiation. Revision of labor laws is necessary. Immediate response team needs to be created.
3. Safety concerns regarding evacuation policies
   1. unification of legal systems: natural disaster response and nuclear disaster response needs to be integrated, and two-tiered command structure needs to be unified
   2. decisions of nuclear disaster response needs to be reformed
   3. insufficient response for sheltering in place when evacuation is impossible
   4. current regulations for the distribution of Iodine tablets are impossible to implement. Need for realistic regulations which can actually be implemented in case of disaster.
   5. Disaster response under high radiation levels: reform of labor laws necessary. Need to clarify hierarchy and issue of orders during emergency. Must review laws for command structure, responsibility and compensation.
   6. Other concerns: screening and decontamination, safety of assets in evacuation areas, nuclear disaster prevention system.
4. Safety concerns regarding TEPCO
   1. Inadequate investigation and review. No one has taken responsibility for the Fukushima accident. TEPCO has not explained who was responsible for the 2 months delay in acknowledging the meltdown.
   2. Economic issues are given priority over safety. TEPCO should have their headquarters at the nuclear power station in order to immediately take responsibility and respond.

Kashiwazaki Kariwa Nuclear Power Station (柏崎刈羽原子力発電所)

Kashiwazaki Kariwa Nuclear Power Station (柏崎刈羽原子力発電所) is the world’s largest nuclear power station, and consists of 7 reactors with a total capacity of about 8 GigaWatt. It began operations in September 1985.

Kashiwazaki Kariwa Nuclear Power Station is located about 220km from Tokyo, in Niigata-ken in the village Kariwa (刈羽村) near the town Kashiwazaki (柏崎市), and about 80km from the Niigata Prefecture capital Niigata-shi. Niigata Prefecture has about 2.3 million population.

At the time of this article, the Kashiwazaki Kariwa Nuclear Power Station, as all other Japanese nuclear power stations, is completely switched off, and the time of a potential restart of any of its seven reactors is unclear.

The Heisei 19 (2007) Chuetsu Offshore Earthquake” (平成１９年新潟県中越沖地震)

The Heisei 19 (2007) Chuetsu Offshore Earthquake” (平成１９年新潟県中越沖地震)

• http://en.wikipedia.org/wiki/2007_Chūetsu_offshore_earthquake
• Niigata Prefecture Government record for the 2007 Chuetsu Offshore Earthquake
  • http://www.pref.niigata.lg.jp/bosai/0716jishin.html

The Heisei 19 (2007) Chuetsu Offshore Earthquake” (平成１９年新潟県中越沖地震) took place on July 16, 2007 at 10:13am of magnitude 6 on the Japanese Shindo-Scale, and caused fires and a number of other worrying defects at Kashiwazaki Kariwa Nuclear Power Station.

Lessons learnt and implemented from the fires and other defects caused by the 2007 Chuetsu Offshore Earthquake at the Kashiwazaki Kariwa Nuclear Power Station

Hirohiko Izumida was Governor of Niigata at the time of the 2007 Chuetsu Offshore Earthquake on July 16, 2007. The Kashiwazaki Kariwa Nuclear Power Station was about 20km from the epicenter, the ground at the Nuclear Power station dropped about 1.5 Meters leading to a fire of the transformer at the nuclear reactor Unit 3.

Due to the damage caused by the earthquake, Niigata Prefecture Government had no communication link to the Kashiwazaki Kariwa Nuclear Power Station, all we could do was to follow the fire on public television. There had been a hotline, but it was not secure, and because of the dropped land, the entrance door to the building containing the hotline connection became warped and the hotline became unaccessible at the nuclear power station.

Land dropped by 1.5 meters and distorted pipes which caused the fire. We are concerned that similar damage could render the venting tubes dysfunctional.

Governor Izumida insisted that a seismically secure communications building and hotline should be built at Kashiwazaki Kariwa Nuclear Power Station and also at other nuclear power stations including the Fukushima Nuclear Power stations.

We requested TEPCO very strongly to build a secure building for a secure hotline between the Nuclear Power Station and the Prefectural Government Office. Initially, TEPCO rejected this request, because at that time such a hotline was not required by regulations, and Governor Izumida was told that it should be sufficient to use mobile phones for emergency communications (note that Japan’s mobile phone networks were largely out of service for several days after the March 11, 2011 Tohoku earthquake).

Governor Izumida insisted that a seismically isolated building for a hotline and a secure hotline be built, and because of the strong instance this hotline was built. Governor Izumida also insisted that the same type of secure communications buildings and hotlines should be built at other nuclear power stations including Fukushima Dai Ichi. The secure communications building and hotline at Fukushima Dai Ichi was only completed 8 months before the March 11, 2011 earthquake.

Governor Izumida feels, that if he had not insisted on the construction of secure communications buildings and hotlines at Fukushima and Kashiwazaki-Kariwa nuclear power stations, there might be no-one living in Tokyo today.

Governor Izumida demands improvement of fire fighting infrastructure at nuclear power stations.

At the 2007 Chuetsu Offshore Earthquake the underground emergency water supply lines were destroyed, and the fire fighting forces could not help and had to leave the nuclear power plant. We insisted on improvements of the fire fighting infrastructure.

Governor Izumida has grave concerns on the current work of the Nuclear Regulatory Commission (NRC)

We have grave concerns on the Nuclear Regulatory System today, as the Fukushima accident has not yet been fully investigated. Therefore it is not yet possible to draw all necessary lessons from the Fukushima disaster for the necessary new nuclear regulatory system.

We believe that the current Nuclear Regulatory Commission (NRC) is shrinking its responsibility: we believe that the current Chairman Tanaka of the Nuclear Regulatory Commission is restricting his responsibility to a narrow range of technical issues, and withdrawing from his responsibilities for the wider safety issues.

The law says, that the Nuclear Regulatory Commission “must ensure the safety of the usage of nuclear power”. Governor Izumida thinks that the current commission and it’s Chairman Tanaka is not fulfilling this obligation to ensure the overall safety, and instead focuses only on a limited range of technical issues.

Insufficient support for “defense-in-depth” recommended by the IAEA: NRC does not take responsibility for the Fifth Level of IAEA defense-in-depth

The International Atomic Energy Agency (IAEA) recommends a system of “defense-in-depth“, which includes mitigation of nuclear accidents in different levels.

IAEA levels of defense-in-depth:

1. First level: Prevention of abnormal operation and failures
2. Second level: Control of abnormal operation and detection of failures
3. Third level: Control of accidents within the design basis
4. Fourth level: Control of severe plant conditions including prevention of accident progression and mitigation of severe accident consequences
5. Fifth level: Mitigation of radiological consequences of significant off-site releases of radioactive materials

Fifth Level response is absent – NRC needs to build fifth level response

Governor Izumida: The current Japanese Nuclear Regulatory Commission essentially does not take any responsibility at all for the fifth level of the response in depth recommended by the IAEA, and in case of the Fourth Level

Fourth Level response is insufficient – NRC needs to expand fourth level response

Governor Izumida: the current Japanese Nuclear Regulatory Commission restricts its responsibilities to hardware issues and does not touch on operations.

Insufficient support for municipalities

The communication between Japanese Nuclear Regulatory Commission (NRC) and the local authorities is totally inadequate, basically the NRC does not listen to us directly, although we – the local Government authorities – have to take care of the local population when an accident occurs.

Insufficient preparations for the case of a nuclear accident

Other countries are taking very detailed preparations for the case of nuclear accidents or melt-downs: for example European countries are requiring core catchers, and the US has centralized response forces. Governor Izumida feels that in Japan preparations are totally insufficient and need to be much improved.

“Salarymen” employees, including company Presidents, in case of a melt-down are not equipped to take necessary decisions for example to inject sea water for cooling, which is certain to destroy a US$ 5 billion investment

Current decision making processes and legal frameworks are totally insufficient for the case of nuclear accidents.

To be specific, at the time of the Fukushima Nuclear disaster on March 14th – 15th, TEPCO employees could not make the necessary decision quickly enough to pump seawater into the Fukushima nuclear power station.

“Salarymen” employees, even if they are Presidents of companies, are not equipped to take decisions which destroy equipment which represents US$ 5 billion (YEN 500 billion) investment, as injecting seawater for cooling as in the case of Fukushima Dai Ichi. We need regulations to take necessary decisions quickly.

A further problem is that when private company employees work at the nuclear accident location, they are governed by the common labor laws, so they cannot be forced to work at dangerous high-radiation locations. This also needs to be solved.

Command structure currently leads to confusion in case of nuclear accidents

With the current legal framework in Japan, in the case of a natural disaster, the State Minister in charge of disaster prevention sets up Disaster Headquarters.

In the case of a nuclear disaster however, the Head of the Nuclear Regulatory Agency sets up its own Disaster Headquarters. So if we have a natural disaster and a nuclear disaster concurrently, as in the case of Fukushima, we have two competing Disaster Headquarters, which leads to great confusion.

In the case of natural disasters, the local authorities can issues evacuation orders. However, in the case of a nuclear disaster, the Prime Minister gives the evacuation orders – again a reason for inconsistencies and confusion.

Also the provisions for people who cannot evacuate for health or other reasons is inadequate.

Many current regulatory provisions are impossible to implement

As an example, according to the standards by the NRC for nuclear accidents, the population within a 5km – 30km radius needs to be sheltered in-doors, in the case of Kashiwazaki-Kariwa this population is about 440,000 people. According to current regulations, Iodine tablets need to be distributed after the accident occurs. If venting becomes necessary 8 1/2 hours after the accident, this means that current regulation requires that Iodine tablets must be distributed to 440,000 people within 8 1/2 hours. The medical association tells us that it is impossible to distribute Iodine tablets to 440,000 people within 8 1/2 hours.

It is one thing to create regulations on paper, but Governor Izumida asks the NRC to create regulations which can actually be implemented.

Q&A

Q: How can the NRC reduce its responsibilities by itself, while these responsibilities are surely fixed by the relevant laws?
A: The law says very clearly that the NRC is responsible for ensuring the safety of nuclear power. I feel that the Chairman of the NRC Tanaka is reluctant to meet with the local authorities, and I think only recently has he started to talk to TEPCO, probably following pressure. Mr Tanaka is a teacher, a Professor of nuclear technology, so I believe that he is focusing to much on the technical issues, focusing on the nuclear technology, and that he neglects the wider issues of safeguarding the lives and assets of the people.

Q: What you are saying sounds very obvious and common sense. Why does nobody else except you speak out clearly about these issues?
A: I think there are two reasons:
1. I had first hand experience as Governor of the 2007 fire at the Kashiwazaki-Kariwa Nuclear Power Station caused by the 2007 Chuetsu Offshore earthquake,
2. As Governor of Niigata I was deeply involved from the beginning in the Fukushima Dai Ichi nuclear accident, I heard all the communication and information from the Fukushima nuclear power station, the Government and TEPCO and experts.
Therefore I have direct experience with nuclear accidents, and know which developments are likely to happen. I can imagine which sequence of events are likely to occur as a consequence of nuclear accidents. Therefore I can speak with confidence.

I should also say that some of the points raised are not just points raised by Niigata Prefecture. There is an Organization of Governors of those Prefectures where nuclear power stations are located. Many of the points I have raised are shared by all Governors of Prefectures with nuclear power stations. No-one in this organizations has raised objections to the points I am raising.

Q: NRC Chairman Tanaka says that Japan now has the world’s strictest safety regulations. Is this true?
A: I am the Governor of Niigata Prefecture, therefore all my statements refer primarily to the safety of the Kashiwazaki-Kariwa Nuclear Power Station in my prefecture.

The new Nuclear Safety Standards of Japan do not include any provisions at all regarding the fifth level of the “defense-in-depth” recommendations of the IAEA, and in case of the fourth level they do not go deep enough at all. Therefore my conclusion is that Japan’s new Nuclear Safety Standards are not the strongest in the world.

Q: Do you think that concerns about nuclear accident mitigation plans and evacuations plans are holding back the restart of nuclear power plants in Japan?
A: My primary mission as Governor is to safeguard the safety, lives and assets of the citizens of our Prefecture. TEPCO knew from very early on that a nuclear meltdown occurred at Fukushima Dai Ichi, yet TEPCO hid this fact for more than two months. If an organization does not reveal the information about something that serious we cannot make any reasonable evacuation plans. To make evacuation plans we need to have reliable information about the actual situation. We have to ask the question whether an organization that hides the truth can even have the right to operate a nuclear power plant. The first step needs to be to thoroughly investigate the Fukushima Disaster and to determine where the responsibilities lie. Before we have such an investigation we cannot even think about restarting nuclear power plants.

Q: Don’t you think that nuclear power has any positive points? Are you saying there are zero benefits in operating nuclear power stations?
A: My responsibility as Governor of Niigata is for the safety and lives of the citizens of Niigata, and I am speaking in my official capacity as Governor of Niigata. Therefore all my comments about restarts are limited to Kashiwazaki-Kariwa nuclear power station and TEPCO. It is not my responsibility to talk about the general issues of what Japan as a country should do about nuclear power.

Regarding Kashiwazaki-Kariwa nuclear power stations and TEPCO my position is very very clear.

However, regarding TEPCO, TEPCO hid the crucial information of the nuclear meltdown for two months. My question is whether such an organization has the right to operate nuclear power stations at all. Before this question is not addressed, I cannot enter into any discussions about restarting the Kashiwazaki-Kariwa nuclear power station.

Q: Don’t you think seven nuclear reactors in one location are too many? In Germany only two reactors are permitted at one location.
A: This question has also been raised by our population. However among experts we hear differing opinions. We need to look not only at technical issues, but also at management structures. Therefore at our Prefectural Government we have formed a committee of experts and we are investigating this and other safety questions in detail.

Hirohiko Izumida, Governor of Niigata Prefecture talks about nuclear safety – watch on YouTube:

Hirohiko Izumida, Governor of Niigata Prefecture

Hirohiko Izumida (泉田裕彦) is the elected Governor of Niigata-Prefecture, elected by the people of Niigata. He assumed office on October 25, 2004, two days after the Niigata Chuetsu Earthquake.
Governor Izumida was born on September 15, 1962 in Kamo, Niigata Prefecture
March 1987, graduated from the Law Department of Kyoto University.
April 1987, entered Ministry of Economics and Industry METI, energy resources bureau
June 1994, visiting researcher at the University of British Columbia.
June 1998, Prime Minister’s Office
July 2001, Land and Transportation Ministry
November 2003, Head of the Gifu Prefecture Industrial Labor Bureau
October 2004, elected Governor of Niigata Prefecture

• Hirohiko Izumida (Wikipedia, English)
• 泉田裕彦 (ウィキペディア、日本語)
• Official page of the Governor of Niigata, 新潟県知事公式ホームページ
• Hirohiko Izumida personal webpage, 泉田裕彦個人ホームページ
• 泉田裕彦 (@IzumidaHirohiko) – Twitter

Copyright (c) 2014 Eurotechnology Japan KK All Rights Reserved

by Gerhard Fasol

The Chinese Newspaper Southern Weekly interviewed me about Shuji Nakamura’s invention of the blue LED and the background to his Nobel Prize. Here some of my answers.

Read the article in Southern Weekly in Chinese language here: 【2014诺贝尔·科学】无人相信的发明

Shuji Nakamura: when he first announced his breakthrough, most people just did not believe him initially. But you are an exception. What made you believe in Dr Nakamura?

At the time when I first heard Shuji Nakamura’s results around 1992 – long before Bob Johnstone hear about these results (Bob Johnston is a friend of mine, and I know him for a long time – but Bob Johnstone is a journalist, I am a Physicist) I had worked about 18 years in physics research, at many of the best research labs in the world. So I had at that time already a very long experience in research. When I heard Shuji Nakamura’s talk at the Physics Conference in Nagoya, I could immediately judge from his talk that this was a very very important result. So I visited Shuji Nakamura at his laboratory at the company Nichia in Anan several times for discussions, he gave me copies of his papers and patents and I studied his research papers and his patents, and he also showed me the blue LEDs so I could see for myself. I had worked a long time in this field already, so I could understand that his work was true, and I could also see the working blue LEDs with my own eyes. Such blue LEDs did not exist before, so it was clear that he had succeeded in this breakthrough.

At that time I knew almost all research groups in the world working on blue LEDs, at IBM, Hitachi, SONY, and many University labs and national labs globally, and I knew the status of their research. It was obvious that Shuji Nakamura had won this race.

It is true that many people did not believe his results initially. That was because these people did not make the same effort that I made to visit Shuji Nakamura and study his results.

For example, I send a report about Shuji Nakamura’s breakthrough to the German Physical Society member’s journal for publication, and the Editor rejected my article initially, because he showed this report to German Professors in this field. They had not heard about Shuji Nakamura’s work, so they had never heard about this blue LED breakthrough and were working in their own labs on II-VI compounds which was a dead end. Because they considered themselves as the top experts in the field they rejected my report on Shuji Nakamura’s work.

I told the Editor that I am right, and the German experts are wrong, the Editor believed me and printed my report about Shuji Nakamura’s work. You can read this report online here (in German language):
http://onlinelibrary.wiley.com/doi/10.1002/phbl.19950511004/abstract

Some researchers question whether Dr Nakamura made the blue LED on his own. Why do people criticise his achievement and what is the truth? Do these rumors continue after the Nobel Prize was announced?

Every researcher “stands on the shoulder of giants”, of course now work is done in total isolation, and always rests on some previous results. Even Einstein, who did not read many scientific papers and worked out many results on his own from zero point, of course used many results of others.

Therefore Shuji Nakamura’s work of course relied on the hard work of many other researchers before him. For example he used the production technology called MOCVD (Metal Organic Chemical Vapor Deposition), which he learned in Professor Ramaswamy’s group at the University of Florida (Professor Ramaswamy was working in the office next to mine at Tokyo University for about 1 year, so I know him also very well). Shuji Nakamura also could read the published part of Professor Akasaki and Professor Amano’s excellent results on GaN compounds – Professor Akasaki and Amano’s work were also awarded the Nobel Prize at the same time as Shuji Nakamura.

Shuji Nakamura could not have done his work without the support of the Founder and Chairman at that time of the company Nichia, Mr. Nobuo Ogawa. Shuji Nakamura introduced me to his Chairman Mr Nobuo Ogawa and I had lunch with him several times and discussed how he supported Shuji Nakamura’s work financially and as the leader of Nichia. Mr Nobuo Ogawa at that time owned about 1/3 of the company Nichia, so he could take major decisions such as supporting Shuji Nakamura.

I believe that at Nichia there are two people without whom this work would not have happened:

1. Chairman Nobuo Ogawa and
2. Shuji Nakamura

Neither could have done the work alone, and both together were necessary to achieve this
breakthrough at Nichia. Also, when Shuji Nakamura went to Mr Nobuo Ogawa and proposed to work towards the discovery of blue GaN LEDs, at that time, Shuji Nakamura did not have a PhD, and no great research success stories behind him, although he has done successful development of red LEDs, but which were not commercially successful. Without a PhD I think there would have been almost no one except Mr Nobuo Ogawa who would have supported Shuji Nakamura’s proposal, certainly no large corporation, government supported research agency, or University, and without a PhD he would have had zero chance to win a peer-reviewed research grant from large research agencies.

Unfortunately Mr Nobuo Ogawa passed away some years ago, so he cannot enjoy the Nobel Prize celebrations.

Of course at Nichia, Shuji Nakamura could attract a number of very excellent assistant researchers, but it is very clear that Shuji Nakamura was the leader of the Blue LED research at Nichia who was leading a group of assistant researchers who essentially followed his leadership and were doing this work because of him and under Shuji Nakamura’s leadership. I am very convinced that if Shuji Nakamura would not have been working at Nichia, this invention would not have happened at Nichia. This is quite obvious to anyone who understands how science works.

Of course there are some people who envy Shuji Nakamura. Excellent people celebrate Shuji Nakamura’s success and get inspired. Mediocre people spend their time spreading rumors and talking bad about Shuji Nakamura, don’t listen to them. I have heard some of these rumors, and I have checked most of them direct with Shuji Nakamura, and I am convinced that these rumors are wrong.

Maybe some of the people who spread stupid rumors about Shuji Nakamura have failed in their own work, and don’t like someone else succeed?

About the Nobel Prize: The Nobel Prize in Physics is decided by the Nobel Prize in Physics Committee of the Swedish National Academy of Science. When I have worked in Europe, I met some of the members of this committee and I can tell you that they are all very very excellent Physicist. I am convinced that they are doing a very excellent job in checking in great detail how Shuji Nakamura achieved his results, and I am sure they have checked out all these rumors and found that they are untrue.

As a colleague of Dr Nakamura’s, could you describe a little bit about his style in research?

First of all like all excellent researchers Shuji Nakamura is extremely passionate, driven by passion for his work, and he is a maniac, working very very hard. When I was working on the book with Shuji, he was working with me on 30., 31., December, 1st of January all over the New Year period without break, exchanging emails with me in the middle of the night etc.

Secondly he is driven by intuition – he is a genius. Maybe you know that when Shuji studied at the University of Tokushima, the University did not have a Physics Department, so Shuji did not study full Physics but won the Physics Nobel Prize! I am Physicist, I have full Physics University training even to a PhD level, and I can tell you that Shuji has a very deep understanding of Physics, but he has essentially learnt this all by himself! Not through a University Physics degree!

I think his work is very intuitive. He has a very deep understanding of Nature, and follows his intuitions, his feelings, much more than anything he has learnt from the books.

More information:

• https://www.eurotechnology.com/2014/10/09/shuji-nakamura-nobel-prize/
• https://www.eurotechnology.com/store/solidstatelighting/
• http://www.amazon.com/exec/obidos/ISBN%3D3540665056/
• http://www.sciencemag.org/content/272/5269/1751.summary
• http://www.sciencemag.org/content/275/5302/941.summary
• http://www.sciencemag.org/content/278/5345/1902.summary
• https://www.eurotechnology.com/2013/08/31/nakamura-fasol-blue-led/
• https://www.boltzmann.com/2013/02/5-ludwig-boltzmann-forum-2013/

Copyright 2014-2019 Eurotechnology Japan KK All Rights Reserved

by Gerhard Fasol

Shuji Nakamura, Isamu Akasaki, Hiroshi Amano enabled the global lighting revolution

The Nobel Prize in Physics 2014 was awarded in equal shares to Isamu Akasaki, Hiroshi Amano and Shuji Nakamura “for the invention of efficient blue light-emitting diodes which has enabled bright and energy-saving white light sources”.

While red and green LEDs were invented long ago, efficient blue LEDs did not exist until Akasaki’s, Amano’s and Nakamura’s long series of inventions. Blue LEDs are needed to create white light.

The invention of blue GaN based LEDs enables the global lighting revolution. By replacing legacy light bulbs, fluorescent tubes etc by GaN LEDs, a big fraction of the world’s electricity can be saved, and the effect is even bigger in the developing world where still today many people use extremely expensive oil for lighting. Read a detailed analysis of the economics of lighting here.

The mainstream blue-LED scientific community was working on a dead-end: II-VI compounds

Of course the importance of blue LEDs was understood for a long time, and in the 1980s and 1990s all major industrial and University labs were working towards this holy grail – Hitachi, SONY, Philips, IBM, lots of Universities in Europe and US and elsewhere had groups working towards blue LEDs – but they all worked on II-VI compounds, which turned out to be a dead end.

The way much (not all – and thats the way towards Nobel Prize class discoveries) of mainstream established incremental research works, in most established labs, to get peer reviewed grants for research towards blue LEDs in the 1980s, this had to be II-VI work.

It needed strong willed people as Shuji, Akasaki and Amano to take a totally different approach outside the mainstream. Its to the credit of JST and other Japanese funding agencies to have supported Amano and Akasaki’s work. Shuji on the other hand ‘only’ had one person to convince: the owner and founder of Nichia Mr Nobuo Ogawa- and did I say that Shuji did not have a PhD at that time?

Which research agency would give a couple of million $ to a researcher without a PhD but with a big almost unreachable target who still has to learn the methods (MOCVD in this case) to work towards this target – other than Mr Nobuo Ogawa?

Shuji Nakamura actually introduced me to Mr Nobuo Ogawa in Anan (Tokushima-ken), and we had several curry lunches in a restaurant next to Nichia Chemical Industries Headquarters. I asked Nichia-Chairman and Founder Nobuo Ogawa how he decided at the time to fund Shuji Nakamura’s one-year stay at the University of Florida in Professor Ramaswamy’s group to learn MOCVD (by the way Professor Ramaswamy was my office-neighbour when I was Associate Professor on the NTT Telecommunications Chair at Tokyo University), and fund Shuji Nakamura’s work to the tune of many US$ million, which at that time was a large fraction of Nichia’s overall sales.

To my question how Mr Nobuo Ogawa took the decision to support Shuji Nakamura, Mr Nobuo Ogawa simply answered: “How did you chose your wife, Gerhard?”.

Shuji Nakamura, Isamu Akasaki, Hiroshi Amano worked on III-V compounds and achieved the lighting breakthrough

While the mainstream scientific blue-LED community worked with high intensity towards this dead end without knowing that they devoted their lives and their students to a dead-end, Akasaki and Amano over many years painstakingly solved one problem after another to create electronic devices based on the III-V compound semiconductor GaN and its variations.

Shuji Nakamura then built on Akasaki and Amano’s work, solved the three major and many many minor problems remaining to create commercially viable blue LEDs. But the work did not stop there: Shuji Nakamura also created white LEDs, UV LEDs, blue Lasers (e.g. for SONY’s blue-ray DVD players and displays) and a lot more. (read about Shuji Nakamura’s breakthrough work in great technical detail here: The Blue Laser Diode)

Shuji Nakamura, Nichia Kagaku Kougiyou and releasing Japan’s creative power

Shuji Nakamura was also a very diligent writer of patents and wrote a large number of very strong patents. These inventions together with patents propelled his then employer Nichia Kagaku Kougiou from a maker of phosphors (which were used for cathode ray tubes and fluorescent tubes) to one of the most important semiconductor companies. For these inventions, Nichia paid Shuji Nakamura a salary approximately on the level of a Japanese primary school teacher, plus a few US$ 100 bonus for the inventions.

Lets not go into the law suits between Nichia and Shuji Nakamura here, but let me say, that I have never found the complete story explained in the media. Most media reports give a very incomplete picture of the true story of the law suits between Nichia and Shuji Nakamura. – I guess most media just copy from each other in this case…

I noticed Shuji Nakamura’s work first around 1992 at the Japanese Applied Physics Conference in Nagoya, where Shuji gave a talk about his GaN work. I visited Shuji a couple of times in Anan (Tokushima-ken), he introduced me to the founder of Nichia, Mr Nobuo Ogawa, without who’s support Shuji’s work would have been impossible. With Nobuo Ogawa’s death, Shuji decided to move to the USA, to Santa Barbara, where he is working today. Interestingly, when Shuji was looking for a job, he had lots of offers from USA, but none from Europe and none from Japan… Why that?

Shuji developed deep insights about issues holding back Japan, and has shared his advice on many occasions, including also the Ludwig Boltzmann Forum, which I annually organize in Tokyo as a leadership platform. Read about his talk here, where Shuji passionately calls for changes – even a revolution – in Japan, to unshackle Japan’s creative energies.

To learn more about the Blue GaN LEDs and lasers, and their invention:

• “Room-Temperature Blue Gallium Nitride Laser Diode”, SCIENCE, 272, p. 1751-1752 (21 June 1996)
• “Fast, cheap and very bright”, SCIENCE, 275, p. 941-942 (14 Feb 1997)
• “Longer live for the blue laser”, SCIENCE, 278, p. 1902-1903 (12 Dec 1997)
• The Blue Laser Diode by Shuji Nakamura et al, (Springer-Verlag, October 2000, ISBN 3-540-66505-6), and read some background to this book here
• Market report and analysis of the solid state lighting market which we used to brief about 100 investment fund managers: “Solid State Lighting” (12th edition)

and of course you can also read Shuji Nakamura’s, Isamu Akasaki’s and Hiroshi Amano’s 100s or even 1000s of original scientific publications.

Copyright (c) 2014 Eurotechnology Japan KK All Rights Reserved

Dr Charles “Chuck” Casto: leader of the US Government response to the Fukushima Dai Ichi Nuclear disaster

When President Obama expanded the Operation Tomodachi to include the nuclear disaster, Dr. Charles Casto was selected to lead the US Government response.

Read also:

• Dr Chuck Casto: “Global leadership in the extreme: crisis leadership in post-Fukushima” at the 7th Ludwig Boltzmann Forum in Tokyo
• Gerhard Fasol: “Fukushima nuclear disaster: 5 years since the Tohoku earthquake and tsunami on 2011/3/11 at 14:46:24 – 5 years and many lessons learnt since the Tohoku and Fukushima disasters”

First time, where a first world country assists another first world country in a major crisis

We are very good at providing humanitarian support from first world countries to second or third world countries.

However, it is unprecedented for a first world country to assist another first world country in a crisis of this magnitude. The Fukushima Dai Ichi Nuclear crisis is without doubt the most serious international crisis we ever had in peace time. How do we respond to first world to first world crisis?

How do we respond in a prolonged “nat-tech” (natural – technology) disaster in a first world country?

Need for protocols and frameworks for information flow in case of large scale first world disasters

Dr Casto feels there is a need to establish international protocols and frameworks for information exchange and cooperation in the case of this kind of large scale disasters.

Time lost: It took 10 days until an understanding and a framework for the exchange of information was established

In this case there was much information missing, information was “unknowable”, since the reactors were unaccessible. Big disconnect in the availability of data.

No one engineer had all the information. Sources of information were unfamiliar. It was necessary to go high enough in the administration to understand the situation. It took about 10 days to establish an understanding

Kantai meetings started on March 21st, 2011 – about 10 days after the start of the disaster, until a framework for understanding the disaster was established and a rhythm for the exchange of information.

Speed of the response must be at least as fast as the speed of the accident evolution. Achieving sufficient speed is a challenge for Governments. Governments tend to be too slow.

Five crisis caused the Fukushima Dai Ichi accident:

1. Earth quake
2. Tsunami
3. Nuclear event
4. Societal crisis
5. Policy crisis

To understand the Fukushima disaster and in order to solve and to respond it is necessary to analyze all these five crisis.

Fukushima Dai Ichi: A system breakdown, an organizational accident, imbalance of power.

It is necessary to understand the balance of power, the history of how the electricity industry developed over time, and how nuclear industry was established in Japan.

Most expertise rested in the hands of the 9 utilities, giving all power to the utilities. This imbalance of power is a major component of the accident.

Unless all five crisis are addressed and solved, including the societal crisis and the policy crisis, nuclear power is unlikely to start again in Japan.

Need to share responsibility.

Today most power and responsibility is with the regulator. However, it is necessary to share power and responsibility between regulator, Government, and the utilities.

It needs to be clear that the utilities are responsible for safety.

Need for national dialogue on how much risk the people of Japan are willing to accept.

Elected officials need to have a national dialogue to understand which level of risk the people of Japan are willing to accept. Only the people can decide.

The level of acceptable risk needs to be determined by the elected officials in dialogue with the people, that level of acceptable risk needs to be set in law, and then the regulator needs to regulate to this level of acceptable risk. It is not the role of a regulator to determine the level of acceptable risk.

If the national dialogue results in the result that no level of risk is acceptable, then there will be no nuclear power operating.

The Government needs to prove to the people that Fukushima Dai Ichi can be resolved.

The regulator needs to address emergency planning in dialogue with the population.

We cannot permit another accident like Fukushima Dai Ichi happen anywhere else in the world again.

When traveling through the evacuated zone around Fukushima Dai Ichi, it is clear that we cannot ever let such an accident happen anywhere else again in the world.

We have to learn about the science of nuclear energy. I want the Fukushima disaster to be treated in science books – not just in history books. We need to understand the science of nuclear power.

Q & A

Q: Do Mr Yoshida’s notes show that operating a nuclear power plant in emergency is too difficult to handle for humans?
A: We need an incident command system to be bigger than the crisis. Such an accident is too big for one single person. No one single person can have all the knowledge required for such a disaster.

Q: Are six or seven nuclear reactors at one single plant too much for one single plant manager?
A: Dr Casto worked several years on a three unit site. We should treat each reactor individually. We should have six or seven leadership structures for each reactor, and then one overall leader.

Q: Were we lucky that the disaster occurred on a working day, rather than on a weekend?
A: We need a command system that is of sufficient size. If we have more people than this its good, but we cannot have less than the sufficient size to respond to the accident.

Q: Prime Minister Naoto Kan has been under heavy criticism. Do you think if Abe and the LDP would have been in power, that the crisis management would have been better?
A: Without doubt the response would have been different with different leaders in charge. The difference I saw in Japan compared to other countries: in all other countries we have independent Government people at the site of the nuclear power station, who will be at the control room, and work independently for the Government. One of the issues of Prime Minister Kan was, that he did not have any independent source of information, he had to use other organizations, and he felt that he did not have a reliable source of information. It is necessary to flatten the organization. The people at the top need to be able to talk to the people on the location of the accident.

Q: With the reactors being US designed, did US teach Japan enough about disaster response?
A: We need to look at the evolution of nuclear technology and security over the years since the first introduction. In the US a huge amount of regulations was created since the beginning of nuclear power in response to Three-Mile-Island and other accidents. However in USA maybe we have too many layers of regulation now. Adding more and more layers of regulations does not necessarily improve safety.

Q: What could have been the worst case scenario?
A: I believe that after the first week the worst was over, when the water was cooling the cores I thought we had overcome the worst. So after March 15th maybe the worst point was overcome. Also there is not a linear relation between the number of reactors and the created damage. The radiation damage depends on wind, weather and many other factors. Overall I underestimated the severity of the accident initially.

Q: What did Japan do right?
A: Yoshida-san was absolutely right to inject sea water. Injecting sea water was key to mitigating the ultimate outcome of the disaster.

Q: What did Japan do wrong?
A: The isolation of the plant from the outside was wrong. The Fukushima Dai Ichi plant become more and more isolated as the accident progressed, and had to rely on their own resources. McArthur said – most failures in war time can be summed up in two words: “too late”. Not reacting fast enough, and not getting resources to the site in time.

Q: What have we learnt from the Fukushima disaster?
A: We learnt to make plants more resilient. We need the plants to be resilient for 72 hours, so that the national Government has time to bring in additional resources from distant locations.
In the USA we have established FLEX: two locations in the USA with massive amounts of equipment, which can be flown into the site if there is a significant problem. We have checked in advance that the equipment fits into the airplanes and can be transported properly. We need sufficient equipment available, but far enough away, so that it is not destroyed by a disaster at the site, as in the case of Fukushima.

Q: Japan’s Government says that today’s safety regulations are the highest in the world. Do you think this is true?
A: I think this is likely to be true for the technical aspects of the regulations – but I have not checked this in detail. However, the society issues and emergency planning, evacuation plants, sheltering plans are equally important. Maybe technical people are less interested in these societal aspects, but we need the policy and societal side in case the technology side fails. We cannot neglect the society and policy issues (crisis four and five above).

Q: What about the command structure?
A: I think for the initial 10 days the command structure was unclear, but was unified after the first 10 days from March 21st. Then we started the bilateral US-Japan meetings, and that also solidified the command structure.

Q: What do you think about Prime-Minister Naoto Kan’s helicopter visit to Fukushima Dai Ichi?
A: If I was in place of Prime Minister Naoto Kan, who did not feel he got reliable information, if I am the commander and don’t have anyone I trust on the site, I would also go and look.
I talked with Governor Thornberg of Three-Mile-Island: for him the lesson learnt was to “anchor the facts”. He interrogated the facts, and he interrogated the people who brought the facts. “Anchoring the facts” was why he succeeded in the Three-Mile-Island. A major leadership lesson learnt is that you need to understand the facts.

Q: How many experts did US send, and how did they help?
A: US Government brought in 150 US experts, the best 150 people we have in the USA in the nuclear industry, and we had regular meetings of about 30-40 US experts with the Japanese cabinet every day starting with March 21st, 2011.

Q: There are rumors that TEPCO wanted to withdraw completely from Fukushima Dai Ichi?
A: I don’t know the answer, maybe no-one knows. But I am sure there would have been sufficient protection and resources at Fukushima Dai Ichi to deal with the accident. Currently there is an enormous effort with large resources to deal with the accident, and there is much progress.
I believe that Yoshida-san at Fukushima Dai Ichi, and Masuda-san at Fukushima Dai Ni with their teams did an outstanding job given the situation and given the resources they had.

Q: Are you pro-nuclear?
A: I am not pro-nuclear, I am not anti-nuclear. I am pro-safety. Every human activity including nuclear energy has risk. Coal has risk. Gas has risk. The people need to decide what level risk they want to accept. If the people decide they want nuclear power, then I can help to make nuclear power safe.
Direct communication between Government, nuclear plant operator and population is required. In Three-Mile-Island the population found out about the nuclear accident because journalists overheard a walkie-talkie conversation at the plant, and the Chernobyl disaster was found out via Sweden. Why not establish a direct information link between the nuclear power plant and the population via mobile phones?

Dr. Charles “Chuck” A. Casto

Charles Casto was leader of the US Nuclear Regulatory Commission (NRC) delegation supporting the Japanese Government during the initial 11 months of the Fukushima nuclear disaster, and to ensure the safety of US citizens in Japan during this period. For this work he was awarded the Presidential Distinguished Services Award in 2012. He is Regional Administrator for the Region III of NRC overseeing the nuclear regulation in Iowa, Illinois, Indiana, Michigan, Minnesota, Missouri, Ohio and Wisconsin, where he has regulatory responsibility for 23 reactors and a large number of other users of radioactivity. Previously Dr Casto has served many years as certified Reactor Operator and Instructor, and in many other leadership positions in the US nuclear industry.

Dr Casto’s talk and Q&A on YouTube

Further information:

• Dr Charles Casto and Sarah Green: “The Fukushima meltdown that didn’t happen“, about the management of Fukushima Dai Ni during the the crisis
• Charles A. Casto: “Crisis management: A qualitative study of extreme leadership“, (2014), Dissertations, Theses and Capstone Projects. Paper 626. A Dissertation
  presented in partial fulfillment of the requirements for the Degree of Doctor of Business Administration in the Coles College of Business, Kennesaw State University
• Dr Chuck Casto: “Global leadership in the extreme: crisis leadership in post-Fukushima” at the 7th Ludwig Boltzmann Forum in Tokyo
• Gerhard Fasol: “Fukushima nuclear disaster: 5 years since the Tohoku earthquake and tsunami on 2011/3/11 at 14:46:24 – 5 years and many lessons learnt since the Tohoku and Fukushima disasters”

Copyright (c) 2014 Eurotechnology Japan KK All Rights Reserved

Murata and its robots

Murata introduced their newest Cheerleader robots in a press event on September 25, 2014 in Tokyo.
Purpose of the robots is brand building and advertising of the company’s components and capabilities.

Watch the Cheerleader robots dance synchronously here:

Murata Manufacturing (村田製作所)

While Japan’s eight electronics conglomerates stagnate in both revenues and income for the last 15 years, many of Japan’s electronic component manufacturers are thriving, as explained in detail in our report on Japan’s Electronics industries.

It is maybe not a coincidence, that many of the most successful electronics manufacturers are located in Kyoto, including Murata Manufacturing (村田製作所) – away from the politics of Tokyo.

Ceramic capacitors are at the core

At the core of the business are monolithic ceramic capacitors with a 35% market share globally. A single typical smartphone includes about 700 such ceramic capacitors, a laptop computer about 800, and a tablet computer or TV set about 600, and a car about 200.

Overcoming commoditization and maintaining pricing power by achieving overwhelming global market shares

For most manufactured electronic components, Murata is able to achieve overwhelming global market shares, e.g. 35% for monolithic ceramic capacitors, 70% for ceramic filters and resonators, 60% for radio connectivity modules and 95% for shock sensors.

Globalization

While company culture is strongly determined by Kyoto entrepreneurial traditions, Murata has 14 companies in USA, 13 companies in Europe, 27 companies in Greater China, 17 companies in the rest of Asia, and 30 companies in Japan. For our detailed analysis and comparison with other Japanese electronics companies, read our report on Japan’s Electronics industries.

Cheerleader robots highlight components and communication modules and “3S” competence: Stabilization, Sensing and Synchronization

Cheerleaders robots are a group of robots, bodies are balancing on rolling balls, and their bodies are equipped with motors to drive the balls, position and balance sensors and communication modules to synchronize the robots’ motion.

Murata “3S”: Stabilization, Sensing and Synchronization

The bigger picture: Murata’s robots, the big wide world, and open innovation

As presented by Murata today, the cheerleader robots, Murata Boy and Murata Girl, are closed stand-alone systems, essentially for advertising and branding the company’s products.

SoftBank, on the other hand, is working to create a developer community around its Pepper robot, and SoftBank’s SPRINT subsidiary is planning to sell Pepper in the USA from 2015. Pepper has been developed for SoftBank by the company Aldebaran, founded by Bruno Maisonnier.

Google has acquired a range of robot companies, and is developing self driving cars.

In the USA, the DARPA Robotics Challenge is driving competition to develop robots.

iRobot has a program for developers.

LEGO switched from a closed “waterfall” model for developing the LEGO Mindstorms system to an open innovation model with huge success.

There is a huge contrast between these robotics programs which are community based, aim to create developer communities, develop API’s (application develop interfaces) and in some cases use open source software – and on the other hand the Murata robotics program, which seems to be a closed program creating one-off closed robot systems.

I believe that Murata’s robots could create much more global impact, if they would move from a corporate branding exercise to a platform for developer communities. In my view, Murata’s Cheerleaders – if they could talk – might shout out for being opened up. Imagine the creativity which could emerge from school classes or students programming the Cheerleaders via their APIs or SDKs.

Japan electronics industries – mono zukuri

Copyright 2014-2019 Eurotechnology Japan KK All Rights Reserved

https://www.cnbc.com/video/2014/09/16/why-apple-pay-isnt-as-revolutionary-as-it-seems.html

Mobile payments Japan, e-money and mobile credit (200 pages, pdf file)

In business the first-comer does not always win the game

Japan’s NTT-Docomo tested two types of wallet phones, manufactured by Panasonic and SONY with 5000 customers between December 2003 and June 2004, and introduced mobile payments and wallet phones on July 10, 2004 – over 10 years ago.

ApplePay therefore could be developed based on over 10 years of experience with mobile payments in Japan. ApplePay is expected to be introduced for the USA market in October 2014, and we can expect Apple to introduce ApplePay to other markets including Japan in due course.

It will be particularly interesting to see how ApplePay and the already established mobile payment and NFC payment ecosystems in Japan will integrate.

For detailed analysis read our reports:

• Mobile payments in Japan, e-money and mobile credit
• SUICA and e-money for transport
• Wallet phones in Japan

Mobile payment Japan, e-money and mobile credit report:

Copyright (c) 2014 Eurotechnology Japan KK All Rights Reserved

Apple Pay vs Japan’s Osaifu-Keitai: watch the interview on CNBC

https://www.cnbc.com/video/2014/09/16/why-apple-pay-isnt-as-revolutionary-as-it-seems.html?play=1

Mobile payments Japan, e-money and mobile credit (200 pages, pdf file)

Japan’s Osaifu keitai mobile payments started on July 10, 2004, after public testing during December 2003 – June 2004

Two different types of Docomo‘s “Osaifu-Keitai“, manufactured by Panasonic and by SONY, were publicly tested by 5000 customers between December 2003 – June 2004. Docomo’s Oseifu keitai mobile payment system builds on SUICA NFC stored fare cards, which JR-East brought to market in Tokyo on November 18, 2001, after long years of development and public testing, where the author of this newsletter was one of the testers.

Apple-Pay was developed building on almost 15 years of NFC payments in high volumes in Japan

Therefore, those who wish to make predictions about how the Apple-Pay market is likely to develop can use the experience gained during 15 years in Japan.

There are also some open questions, which will probably be answered after we can all check out Apple-Pay after September 19, 2014. One point which is very important is the speed of transactions – especially in transport applications such as the London or Tokyo Subways – read about this in the next section of this newsletter below.

Read more below, and in our reports on mobile payments and electronic money in Japan:

• Mobile payments in Japan, e-money and mobile credit
• SUICA and e-money for transport
• Wallet phones in Japan

The speed of NFC mobile payments – and why does it take 10 years to reinvent the wheel?
and: what is the speed of Apple-Pay transactions?
faster than 100 milliSeconds? or 500+ milliSeconds?

On July 17, 2012 The Wallstreet Journal reported, that as far as Transport for London is concerned, there is no viable mobile payment solution available at this time, because to the knowledge of Transport for London at that time, mobile payment transactions take longer than 500 milli-seconds, which is too slow for Transport for London requirements (e.g at Picadilly station during the rush hour).

Interestingly, in Japan “mobile SUICA” payments have been used in Tokyo successfully since January 28, 2006 at the world’s busiest railway stations including Shinjuku and Shibuya – arguably more busy than Piccadilly Circus in rush hour, with transaction speeds faster than 100 milli-seconds – according to The Wallstreet Journal, London Transport did not even know about this.

Read in more detail about this issue in our blog here: “Mobile payments: 10 years to reinvent the wheel?“

Therefore one obvious question we have about Apple-Pay is whether the speed of Apple-Pay transactions is in the 500+ milli-second range – unacceptable for Transport for London, or faster than 100 milli-seconds – as is Tokyo’s state of the art since January 28, 2006…
I guess we will soon learn the answer to this question.

Why is it that Japan does not capture the global value which Apple and Apple-Developers will create and capture now?

Japan developed mobile payments, e-cash, credit cards in mobile phones and at least as much functionality as Apple-Pay and an open API and a mobile payment and e-cash developer ecosystem over the last 10-15 years.

Why does Japan leave all the global value on the table for Apple and Apple developers?

Actually, I personally had discussions over the last 15 years will all major players in Japan’s mobile payment and e-cash field, crowned by 1-1 discussions with Docomo’s CEO at that time – Dr. Tachikawa – I wrote about one of these meetings in The Wallstreet Journal, of course without mentioning the details: “Wallstreet Journal leadership question of the week – Japanese leadership“.

Essentially my conclusion at that time, and today is, that Japanese companies never showed any interest at all in developing global business to capture the global value of mobile payments, e-cash and the related businesses. Japanese companies did not even try, and were not even interested in discussing the globalization of mobile payment and e-cash technologies and business models.

You can read about Japan’s Galapagos issues here:

• Japan’s Galapagos Effect, talk for the American Chamber of Commerce in Japan
• Galapagos effect: how can Japan capture global value from Japan’s new technologies and new business models?

All opportunities are not lost of course for Japanese companies in the mobile payments and e-cash fields, but most if not all of Japan’s early-mover advantage has evaporated with Apple-Pay.

In business, sometimes the second or third mover can be commercially more successful than the first mover, and it will be very very hard even for a united Japan Inc to stand up to Apple.

Apple Pay vs Japan’s Osaifu-Keitai: watch the interview on CNBC

Mobile payments Japan, e-money and mobile credit (200 pages, pdf file):

Mobile payment Japan, e-money and mobile credit report

Copyright (c) 2014-2019 Eurotechnology Japan KK All Rights Reserved

With improved management skills, EU owned business in Japan could be at least € 50 billion high than it is today

Many companies would wish to have a larger business in Japan, and generally the overall amount of direct EU investment in Japan is considered low. We show below that the value of EU investments in Japan could be at least € 50 billion higher than they are today, if some decisions had been taken differently.

We found a way to measure the value of management skills!

We analyzed the EUROSTAT data for direct investments between Japan and EU, and combining the EUROSTAT data with stock market capitalization data of relevant public companies we found a way estimate the value of management skills and management decisions in the EU-Japan direct investment field!

The figure above shows the EUROSTAT data for direct investment by EU companies in Japan and vice-versa:

• the combined total of Japanese direct investment stock in EU (i.e. the acquisition of EU based companies by Japanese companies) in 2012 was about € 152.1 billion,
• while the combined total of EU investment stock in Japan (i.e. the acquisition of Japanese companies by EU companies) in 2012 was about € 87.5 billion – substantially lower.

The fact of a relatively low EU investment stock is often superficially explained by “Japan is a closed country”, “cultural differences”, “low profitability in Japan”, “Japan is unattractive for foreign investment” etc.

Actually, the figure above shows, that if Vodafone would have been successful in managing Japan Telecom, that Vodafone had acquired, and if Daimler would have been successful in managing Mitsubishi Motors that Daimler had acquired, total EU investment stock in Japan would be at least € 50 billion higher than it is today.

How do we arrive at this estimation?

Mitsubishi Motors value today

Determining the value of Mitsubishi Motors today is straight forward. Mitsubishi Motors is a public company, traded on the Tokyo Stock Exchange (Securities Code 7211), and as of September 10, 2014, the market capitalization is YEN 1197 Billion = € 8.8 billion. If Daimler would have successfully managed Mitsubishi Motors Daimler would today own Mitsubishi Motors with a valuation of € 8.8 billion, and potentially even higher because of synergies.

Estimating the value of Vodafone’s acquisitions in Japan, had it been successful

Estimating the value of the companies Vodafone would own today in Japan, had it been successful in managing the company Japan Telecom it had acquired is more complex.

Essentially Vodafone acquired Japan’s 2nd largest full-service fix-net, internet, data-center and mobile general telecom operating company Japan Telecom (which had been built on railway rights of way, and had been majority owned by Japanese railway companies, before Vodafone acquired Japan Telecom). In about 30 or more separate investment banking transactions (which made investment bankers very happy), Vodafone acquired Japan Telecom, then split the company into several parts, and all parts in the end are today owned by SoftBank. The major transaction was the sale of Vodafone KK to SoftBank, however in total there were about 30 or more transactions.

As of today (September 10, 2014), there are three general telecom operating companies in Japan’s telecom market:

• NTT Group, (Tokyo Stock Exchange Code 9432), market cap YEN 8025 billion = € 58 billion
  • NTT-Docomo (Tokyo Stock Exchange Code 9437), market cap YEN 8128 billion = € 59 billion
  • NTT-East
  • NTT-West
  • NTT-Communications
  • NTT-Data
  • and 100s more subsidiaries
• KDDI: (Tokyo Stock Exchange Code 9433), market cap YEN 5655 billion = € 41 billion
• SoftBank: (Tokyo Stock Exchange Code 9984), market cap YEN 9545 billion = € 69 billion

Therefore, if Vodafone would have succeeded in managing the company Japan Telecom it had acquired, it can be expected that a fictitious “Vodafone-Japan 2014” today would have a market value on the order of somewhere in the range between € 40 billion (KDDI) and € 70 billion (SoftBank). Now, since Vodafone – if it would have been successful and continued to develop successfully until this day in Japan, would not have the Alibaba and Yahoo-Japan, and 1500 other investments that SoftBank owns, nor the dominating market share that Docomo owns in Japan, we can assume that a fictitious “Vodafone-Japan 2014” would have a valuation similar to the one KDDI has today. Thus we conclude that Vodafone if it had been successful in managing Japan Telecom, would today own a business in Japan worth about € 40 billion.

Of course there are many more companies than Vodafone and Mitsubishi-Motors & Daimler, but because of their enormous size, in terms of statistics these companies totally dominate the overall statistics.

Estimating the value of Japan management know-how: € 50 billion in the case of Vodafone and Mitsubishi Motors/Daimler

We argue now, that if Daimler would have known how to manage Mitsubishi Motors correctly, and if Vodafone would have known how to manage Japan Telecom correctly, then today this knowledge would have created value of about € 50 billion in Japan, and the EU investment stock in Japan would be about € 50 billion (56%) higher than it is today.

The pitfalls and traps facing EU companies over managing Japanese companies

Foreign companies doing business in Japan face a number of dilemmas. Maybe the biggest dilemma is a situation which arises, when there is no Japan know-how represented on the Board of Directors of the mother company. This was the case for Vodafone, and it took Vodafone’s CEO and Board of Directors several years to realize that Japan Telecom could not be managed with the same “standard global management methods” as in all other markets. At that time, when Vodafone’s global CEO realized that “Japan is special”, Vodafone removed Vodafone-Japan from reporting to a Singapore-based Asia-GM, and moved Vodafone-Japan to report directly to the CEO, however this was only of many other problems, and also came far too late. NOKIA’s NSN also made a similar move years later, fortunately not too late. Read here for a more detailed discussion of the Vodafone-Japan case.

Another dilemma regularly arises about the management and governance structure of foreign subsidiaries in Japan. There are 100s of ways of organizing the management of foreign subsidiaries in Japan, and “cookie-cutter” approaches usually fail.

There are many more dilemmas, and this article shows, that solving these dilemmas correctly is worth many billion Dollars/Euros in the case of large corporations, and of course also of substantial value for small corporations and venture startups.

With better Japan management know-how, the EU investment stock in Japan could be at least € 50 billion higher:

Copyright 2014 Eurotechnology Japan KK All Rights Reserved

Japan plans to build world’s largest storage battery testing laboratory

Wind farms and solar plants deliver electricity not continuously, but output depends on weather, wind and solar illumination conditions. Battery storage technology is necessary to store solar electricity produced during the day for usage during night hours when the sun does not shine.

Storage battery testing laboratory planned

The Japanese Government is planning to build the world’s largest testing laboratory for batteries up to a capacity of 2 Giga Watt hours, largest in the world. Planned investment is on the order of YEN 13 billion (US$ 130 million).

The purpose is to develop and test battery storage systems for integration with renewable energy generation systems such as solar plants and wind farms

Carlos Ghosn, Chairman and CEO of Renault, Nissan and the Renault-Nissan Alliance

The Renault-Nissan Alliance was started on March 27, 1999 with Renault acquiring 36.8% of outstanding Nissan shares, and with Nissan acquiring 15% of Renault later in 2001. Chronological details can be found in the EU-Japan Direct Investment Register.

Carlos Ghosn speaks at the Foreign Correspondents Club of Japan (FCCJ) as President and CEO of Nissan Motor Company Limited

On July 17, 2014, Carlos Ghosn spoke as President and CEO of Nissan Motor Company at the Foreign Correspondents Club of Japan (FCCJ) in Tokyo, we summarize his talk here in this article.

Nissan leads innovation and brings new technologies to market:

Nissan has made great progress to make driving easier, safer and more environmentally friendly.

Nissan to bring autonomous drive vehicles to market before 2020.

Nissan Leaf has become the leading zero emission vehicle by a large margin.

Four major socio-economic megatrends reshape the automotive industry

Innovation and new technologies allow Nissan to address the four global socio-economic megatrends:

1. Rise of global megacities: increases the need to ease congestion, reduce emissions, improve traffic management
2. Need for in-car communications: must satisfy the needs of the connected, digital generation. Our vehicles must be as connected as smart phones and tablets
3. Aging society: need to bridge the generation gap. Seniors need technologies to drive safely until later age.
4. Must embrace gender diversity: must respect the role women play as consumer purchasers, as decision makers, managers and leaders throughout the car industry

Nissan is determined to innovate in each of these areas and by developing new technologies, Nissan aims to address the opportunities created by these four major megatrends.

1. Rise of global megacities

Today 30 cities of more than 10 million people, including Tokyo, Osaka, Beijing, Shanghai, Sao Paolo, Mexico, Mumbai. Number of megacities will reach more than 50 by 2030, with 1/3 being in China. With the rise of mega-cities in China, it is not surprising that China increases support for electrical vehicles to reduce pollution. China aims that 30% of Government vehicles are electric, and to eliminate sales tax on all electric vehicles.

20% of CO2 emissions come from transport, therefore automotive industry must be part of the solution.

Nissan introduces ENV200 electric vans in Europe and later this autumn here in Japan. Electric vans have the potential to change the cost economics of fleet management.

Autonomous driving can help to reduce pollution and congestion

Nissan is seeking regulatory changes and consumer adoption to make autonomous driving a reality. Nissan seeks workable regulatory standards.

Automatic lane changing and automated parking can increase convenience and safety.

Difference between autonomous driving and self driving cars

Autonomous drive is about relieving drivers of repetitive tasks, particularly in congested or long-distance situations, while the driver remains in the drivers seat and control.

Self driving cars don’t require human intervention, and remain a long way from commercial reality. Only suitable for tightly controlled environments at slow speeds, and face a regulatory minefield.

Nissan focuses on autonomous drive systems that can be introduced over 4-5 years.

Nissan’s timeline until 2020 for the introduction of autonomous drive systems:

• end of 2016:
  1. traffic jam pilot for congested highways,
  2. fully automated parking systems
• by 2017 expect parking to be fully automated
• 2018: multiple lane controls, allow cars to circumvent obstacles and change lanes
• before 2020: intersection autonomy, navigate city cross roads without driver intervention

2. Connected car

Deploying “Nissan Connect” system with bluetooth, apps, cloud base systems.

Nissan expects more than 1.5 Million Nissan cars to be connection to enhanced communications by 2015, using cloud systems, delivering access to social media, entertainment apps and voice recognition systems.

3. Aging population

Last year introduced 22 new technologies alone.

4. Gender diversity

Must serve the women customer base and employ women talent.

Women control 65% of consumer spending overall, and women make the final decision on the purchase of more than 60% of cars.

In the past the vast majority of Nissan employees were men – while 60% of car purchase decisions are made by women! This means that Nissan was missing out on many business opportunities by having an overwhelmingly male workforce and management.

In Japan, 7% of Nissan’s managers are women, more than double the average for large Japanese manufacturers, in the past the ratio at Nissan of women in management was 3%, so we have already increased the ratio. Aim to increase the ratio of women managers to 10% by 2017. More women managers ensure that women take part in product management and planning – this is important since the majority of purchase decisions are taken by women.

Nissan has a program to make dealerships more woman friendly.

Carlos Ghosn – watch on YouTube here:

Carlos Ghosn – Question and answers

Q: vision for Google’s Android system

Carlos Ghosn: autonomous driving and self driving is very important, and every major car manufacturer is working with Google. Every car manufacturer wants to keep control of its own products. Car makers do not want to become just maker of simple hardware, but wants to control the products.

A baby born today has a 50% chance to live longer than 100 years, on average people lose their drivers license sometime around 80 years age. Therefore technology has to change, and technology can help older generation to stay mobile for a longer time.

Q: what is your favorite exchange rate

Carlos Ghosn: I have always been consistent, that US$ 1 = YEN 100 is neutral. We don’t want to have a handicap from the exchange rate. An exchange rate of 100 is perfect to allow us to do our job. YEN/$ = 100 is a neutral position

Q: do you intend to go into politics and become President of Lebanon?

Carlos Ghosn: Very low probability. I am being accused of accumulating too many jobs. I have just been renewed for another period of four years as CEO of Renault by the shareholder meeting in May 2014. I can make my best contributions where I am now.

Q: to you prioritize profit margin or market share? what is your strategy for emerging markets? what are your problems in global platforms?

Carlos Ghosn: Power 88 = 8% profit margin, 8% global market share. Profit enables growth.

We go to every emerging market. Leadership must begin in emerging markets. We are No. 1 Japanese brand in China. We are aiming to become No. 1 Japanese brand in Russia, in Europe and in South America, particularly in Brazil.

We are fighting to become the 2nd brand in Japan.

Growth without profit will not last. Without profit we cannot grow, we cannot invest.

The long term trend counts. To understand what Nissan is doing you must look at the long-term trend:

• Nissan in 1999: 2.4 million cars, 2 Trillion Yen debt
• Nissan in 2014: 5.2 million cars sold, 1 Trillion cash, presence in twice as many countries

We are creating joint platforms with Renault, Daimler, Mitsubishi, and Ashok Leyland in India.

We are the only company which is successful and productive with alliances. What counts are not handshakes of top management in front of cameras, but the actual platforms and cooperation projects we deliver.

The Renault-Nissan Alliance is a world champion in alliances.

The automotive industry today is an industry of scale. The largest players are the most competitive and have the highest profits.

I am not saying that this will always be like this, this could change. But today the automotive industry is an industry of scale, where to be successful we must offer a large range of products in different product segments.

Success for small automotive companies is very difficult, they have to offer a extremely special, hugely attractive model to compete.

Q: any comments about your salary

Carlos Ghosn: What is the question about my salary? The question about my salary comes up regularly at every shareholder meeting and is a kind of ritual. We follow systematic principles. Nissan is in search for global talent.

As example the head of Infinity last week left us for Cadillac. There is a global fight for talent, remuneration should not be a handicap but an asset.

I have no discretion on the market for talent.

We take into account the efficiency of the company, and also local sensitivities, but we have to be competitive. We cannot say: “we need this expert, but we cannot pay him”.

We have YEN 1 trillion cash and we are making US$ 6-7 billion profit – saying “we want this talent no matter what” is a sign of vigor and vitality.

We will see more and more global professional talent in Japan with established record.

Q: Why is it important to have women in all roles of leadership, and do you have examples

Carlos Ghosn: I support the Japanese Government in aiming for more women in management.

Concerning Nissan: 60% of all car buyers are women, and what women are looking for in a car is very different to what men are looking for. Therefore women need to have a strong role in designing cars. We need female designers, female engineers, female marketers. Women in decision making positions is not optional but mandatory.

• 80% of women going to a car dealer want to have a woman sales person, 20% don’t care.
• 50% of men prefer a woman, 50% prefer a man sales person.

Therefore logically, we should have lots of women sales people in our stores, at least 50%. However, at present we only have about 15% women sales people in our stores. This is not logical and must change.

Q: Green cars?

Carlos Ghosn: I believe electric cars are most important, and US and China will lead. Infrastructure investments and the speed of development for infrastructure are an issue.

Infrastructure is a much bigger challenge for fuel cell cars than for electric cars. Selling 500-1000 cars is not the issue, 100,000 – 200,000 is the issue.

Q: Is there friction between Nissan’s mono tsukuri culture, and Renault’s freedom to work less?

Carlos Ghosn: The two companies contribute together. Both companies have successes. Renault has a very big success with the Dacia platform, the M-1 platform, is selling more than 1 million cars, and is unique. Renault also has a very strong mono tsukuri culture.

As another example, Renault will now move into China on the basis of Nissan’s business platform in China. Renault will copycat Nissan’s plans of building business in China.

Q: Departure of Nissan Infiniti Chief Johan de Nysschen, and search for successor:

Carlos Ghosn: we have a global fight for talent. 49% of Nissan’s top management have 13 different citizenships. Its not that 49% are all French. Diversity is out strength. There is war for talent, and that is normal.

We have to accept that some talent leaves us when the mission is finished. We have people dedicated on searching for global talent all the time. You can be sure that this job will be soon filled again.

Q: electrical car charging infrastructure:

Carlos Ghosn: it is in our interest to have the highest number of electrical cars. We are pushing towards standardized charging infrastructure. We all want to promote zero emission cars.

Q: Tesla has made patents free: will you use Tesla’s patents?

Carlos Ghosn: we are first in electrical cars, we have enough patents, we have no reason not to use Tesla’s patents, but we don’t.

Q: conflict between growth and quality issues

Carlos Ghosn: The most important is to take any problem immediately out of the hands of the consumer. That is why we see more recalls recently. First we recall and take the problem away from the consumer, and then we solve the problem.

We have an Executive Vice-President for consumer satisfaction and quality, who has full power to reduce all risks on quality.

Q: you want to increase the ratio of women in management to 10% by 2017, and Prime-Minister Abe wants 30% women in management by 2020.

Carlos Ghosn: I am very modest, and Prime Minister Abe is very ambitious. I do not want a burst of women in management with failures afterwards. I want to advance safely without massacres. I am prudent and conservative.

We had less than 2% of woman managers, today we have a solid 7%, and I want to go a solid 10% of woman managers. I don’t want a “flavor of the day”, I want solid stable progress.

Q: how does your strategy regarding autonomous driving differ from your competitors?

Carlos Ghosn: we do not know what our competitors are doing. Everyone moves to autonomous driving, because consumers want:

• drivers want more time
• drivers want more pleasant time

We want to be the pioneers, the battle is to be first and to associate the image of being No. 1 to the brand. We are not aiming to be late with a more perfect product, we want to be first with significant autonomous driving features.

Copyright (c) 2014 Eurotechnology Japan KK All Rights Reserved

Japan’s mobile phone base station market

Japan’s mobile phone base station market is about US$ 2.6 billion/year and for European companies Ericsson and Nokia the most important market globally, although certainly also the most difficult one.

Nokia is No. 1 with a 26% market share, and Panasonic is No. 5 with 9% market share.

European investments in Japan

Nokia acquiring Panasonic’s network division is one of many investments and acquisitions in Japan by European companies. For more details, see the EU-Japan M&A register.

Panasonic to focus on core business, Nokia to expand market share in Japan

Panasonic, after years of weak financial performance, is focusing on core business. Nikkei reports that Panasonic is planning to sell the base station division, Panasonic System Networks, to Nokia.

Succeeding in Japan at the second try, learning from initial failure:

We see a pattern here: after failing spectacularly trying to build a mobile phone business in Japan for almost 20 years without success, Nokia is now winning the second time round.

It can be hard for foreign companies to build a business in Japan, and many fail. Interestingly, there is a long list of famous companies that succeed on their second attempt after initial failure, this list includes:

• IKEA: failed first time in 1974, succeeds now
• DAIMLER: failed spectacularly first time with Mitsubishi Motors, now successful with Mitsubishi Fuso trucks – read the time line here
• NOKIA: failed first time after trying for 20 years (1989-2008) to sell mobile phones in Japan, now successful with mobile phone base stations and network infrastructure

Read a detailed timeline in The EU-Japan Investment Register.

Nokia expands No. 1 position in Japan

Our analysis of Japan’s mobile phone base station market shows, that Nokia became No. 1 in Japan’s base station market with the acquisition of Motorola’s base station division. Acquisition of Panasonic System Networks will expand Nokia’s NSN to expand market leadership in Japan’s mobile phone base station market.

I believe without success in Japan’s mobile phone base station market, there is a big chance Nokia as a company, or at least Nokia’s NSN division would not exist any more at all today.

With a market share of 26%, approx. US$ 700 annual sales in Japan, Nokia is No. 1 market leader in Japan followed by Ericsson on 2nd position. With the acquisition of Panasonic’s base station division, Nokia should be able to expand its market share beyond 26%+9% = 35% and expand its leadership, especially via Panasonic’s deep relationship with Docomo.

Because Docomo with its very deep pockets, is traditionally the first globally to develop and bring to market the most advanced radio technologies, a deeper relationship with Docomo will also help Nokia to develop and bring to market new communication and radio technologies. Thus I believe the impact on Nokia will be far more than an increase of the market share in Japan from 26% to 35%.

Panasonic System Networks

Panasonic System Network’s market share is estimated at around 9% of Japan’s mobile phone base station market, while international sales are essentially non-existent. Thus Panasonic System Network’s global market share is negligible, giving Panasonic little possibility for the scale necessary to operate a stable profitable longterm base station business.

Japan’s mobile phone handset makers and base station makers have for many years focused on serving Japan’s internal market only, and in particular have focused on Japan’s No. 1 mobile phone operators NTT Docomo. This gave Japan’s mobile phone base station makers a temporary home advantage, however with the value shift from hardware to software, they lack scale, and are subsequently uncompetitive globally. More about Japan’s Galapagos effect here.

Over the last 15 years since 1998, Panasonic has shown no growth in revenues, and average net losses of YEN 85 billion (US$ 0.85 billion) per year, as typical for most of Japan’s top 8 electronics companies and as we analyze in detail in our report on Japan’s Electronics Industries.

Panasonic is on 5th rank with about 9% market share in Japan’s mobile phone base station markets, and has little chance and not the capital to scale its base station and mobile phone businesses globally. For Panasonic in it’s current very limited financial situation, focus on core business areas is very prudent.

The context: EU investments in Japan

While Japanese investments in Europe are booming, recently European investments in Japan have been stagnating after Vodafone’s withdrawal from Japan, and there are very few new European investments in Japan. Could it be that Nokia’s investment in Japan starts a new trend of renewed European investments in Japan?

Understand Japan’s telecommunications markets

Report on Japan’s telecommunications industry
(approx. 270 pages, pdf file)

Copyright (c) 2014-2019 Eurotechnology Japan KK All Rights Reserved

• iOS App Store ranking of June 6, 2015 here.
• Google Play Store ranking of June 6, 2015 here.

Japan game market report (398 pages, pdf-file):

Bold figures show rankings in February 2014

1. No. 1 Puzzle & Dragons by GungHo
2. No. 2 Monster strike (by Mixi)
3. No. 3 LINE Disney tsumu tsumu (by LINE Corporation & Disney) (Tsum Tsum) (was rank 23)
4. No. 4 Brave frontier (by Alim Co Ltd) (was rank 19)
5. No. 5 Clash of Clans (by Supercell) (was rank 13)
6. No. 6 Dragon poker (by Asobism Co Ltd) (was rank 17)
7. No. 7 Tsuri Suta (by GREE) (same rank 7)
8. No. 8 Sengoku Enbu – KIZNA – (by Sumzap Inc, subsidiary of CyberAgent) (was rank 8)
9. No. 9 Love life! School Idol Festival (by KLab Inc) (was rank 14)
10. No. 10 LINE Rangers (by LINE Corporation)
11. No. 11 Puyo puyo!! Quest (by Sega Corporation) (was rank 9)
12. No. 12 Dragon Quest Monsters Superlight (by Square Enix) (was rank 3)
13. No. 13 Ange Vierge – No. 2 Public Morals Committee Member girls battle (by Sega Corporation)
14. No. 14 Logres of Swords and Sorcery – popular online RPG (by Marvelous Inc.)
15. No. 15 Pro yakiyu PRIDE (by Colopl Inc) (was rank 6)
16. No. 16 Merc Storia (by Happy Elements KK)
17. No. 17 Candy Crush Saga (by King.com Ltd) (was rank 15)
18. No. 18 OnePiece Treasure Cruise (by Bandai Namco Games)
19. No. 19 SG GUNDAM GENERATION FRONTIER (by Bandai Namco Games)
20. No. 20 Summoners War: Sky Arena (by Com2u2 Corp., a South Korean game company)
21. No. 21 Quiz RPG Witch and black cat quiz (by Colopl) (was rank 2)
22. No. 22 LINE Pokopang (by LINE Corporation (was rank 5)
23. No. 23 World soccer collection S (by KONAMI) (was rank 24)
24. No. 24 Frozen Free Fall (by Disney)
25. No. 25 Gundam Area wars (by NamcoBandai Games Inc) (was rank 18)

Dropped out of the top 25 since February 2014:

• February 2014:No. 10 Gunzei RPG aoi no sangokushi (by Colopl)
• February 2014: No. 11 Bousou retsuden tansha tora (by Donuts Ltd) (a motobicycle race game)
• February 2014: No. 12 Dragon league X (by Asobism Co Ltd)
• February 2014: No. 20 Chain cronicle. Original scenario RPG. Chencro (by SEGA Corporation)
• February 2014: No. 21 LINE Play (by LINE Corporation)
• February 2014: No. 22 LINE Bubble! (by LINE Corporation)
• February 2014: No. 25 Hay Day (by Supercell)

AppAnnie showed that in terms of combined iOS AppStore + Google Play revenues, Japan is No. 1 globally, spending more than the USA. Therefore Japan is naturally the No. 1 target globally for many mobile game companies, and quite a few of the top grossing apps in Japan are of foreign origin – can you guess which?!

Japan’s iconic game companies created many game categories – this tradition carries over to mobile gaming now.

Building a business in Japan is not trivial

Many foreign game companies have failed and given up. Foreign game companies that have recently given up in Japan include Zynga and Habbo Hotel. EA has given up twice, and is now undertaking the third entry to Japan. To understand some of the key mistakes foreign companies make in Japan, read our blog about why Vodafone failed in Japan.

Lets have a look at the list of top grossing games in the Apple iOS AppStore today. Out of the 25 top grossing games in the AppStore, quite a few are by foreign originating companies. Can you guess which these are by reading the list above?

Japan is certainly not a “closed market”. It is obvious that Apple does not discriminate in any way against foreign companies in Japan – and neither do Japanese consumers!

Interestingly, neither Nintendo, nor Rovio’s games, such as Angry Birds appear among the 200 “top grossing games” in Apple’s iOS Japan AppStore.

Japan game market report (398 pages, pdf-file):

Copyright (c) 2014-2019 Eurotechnology Japan KK All Rights Reserved

Renewables in Japan is not just solar…

Looking superficially at Japan’s renewable energy sector, its easy to overestimate geo-thermal energy, and to underestimate biomass.

Biomass electricity generation capacity is about 5 times higher than geo-thermal

Currently the installed biomass electricity generation capacity is about 5 times higher than for geo-thermal energy production – a fact often overlooked in superficial discussions.

Biomass electricity production is included in Japan’s new feed-in-tariff program which started in July 2012, and is also very generous.

The figure above shows approvals for electricity generation projects from biomass under the new feed-in-tariff program, and demonstrates that after a slow start, approvals are now picking up. The sum of biomass generation facilities operating before the introduction of the new feed-in-tariffs plus approvals since July 2012 approaches 4 GigaWatt, which corresponds approximately to the generation capacity of 4 nuclear reactors.

Understand Japan’s renewable energy

Our report on Japan’s Renewable Energy Sector (pdf file, approx. 219 pages)

Understand Japan’s energy sector

Our report on Japan’s Energy Sector (pdf file, approx. 227 pages)

Copyright 2014-2019 Eurotechnology Japan KK All Rights Reserved

In the single month of March 2014 Japan approved almost as much renewable energy projects as all solar ever installed in Germany

Japan’s ten regional electricity monopoly operators traditionally kept renewable energy below 1% following an unwritten rule. Tokyo Electric Power Company (TEPCO) kept renewable well below this magic 1% limit – until recently TEPCO’s renewable energy ratio was about 0.05%, slightly “greener” than Kansai, and Shikoku Electrical Power Companies with 0.03% renewables, and Chugoku Electrical Power Company with 0.02% of renewables in their energy mix.

Complete reversal of Japan’s previous “no renewables” strategy

Switching off all nuclear power stations combined with extremely high natural gas (LNG) prices forced change of this “no renewables” strategy in Japan, and Japan quickly moved in the opposite direction with some of the highest feed-in-tariffs globally, about three times higher than in Germany. (To understand the details of LNG costs and prices for Japan, read our Japan Energy Report, where you’ll find month-by-month data of Japan’s coal and gas payments, as well as the price developments and the reasons for the extraordinarily high prices Japan pays for LNG and LPG).

Solar plants ever installed in Germany total about 36.5 GigaWatt – Japan almost approved as much renewables in the single month of March 2014

Germany’s Federal Network Agency (Bundesnetzagentur) published detailed data of solar energy projects installed and approved for subsidy in Germany. As of May 31, 2014, all solar power ever installed and approved for subsidy in Germany amounts to 36.5 GigaWatt (peak). The figure above shows that Japan’s Industry Ministry METI approved about 26.7 GigaWatt of solar projects under the feed-in-tariff program during the single month of March 2014 alone.

Here are the actual figures of renewable electrical power projects approved by METI under the FIT program during the single month of March 2014 alone:

solar projects less than 10kW: 159,070kW = 0.16GW
solar projects over 10kW: 26,521,483kW = 26.5GW
Subtotal solar (all sizes): 26,680,553kW = 26.7GW
Total all types of renewable energy: 27,436,598kW = 27.4GW

The figure also shows that March 2014 is somewhat an anomaly – because feed-in-tariffs are reduced each year on April 1 at the beginning of the new financial year, METI cooperates with applicants to approve large numbers of applications during the last month of the previous tariff. Thus renewable project applications in Japan have developed an annual rhythm.

“Renewable energy Japan” research report

Copyright 2014 Eurotechnology Japan KK All Rights Reserved

Japanese electricity companies’ business models face massive disruption by technology innovation and the Fukushima nuclear accident

With the annual general shareholder meetings completed and financial results published, we have analyzed the financial results of Japan’s 10 regional electric power companies (plus several other Japanese electricity companies, including J-Power) in detail.

We find that each of Japan’s electrical power companies has its own particular circumstances, and some are coping better than others, while of course Tokyo Electric Power Company is a special case due to the incalculable costs of the Fukushima nuclear accident, and due to possible changes in case of a change of Japanese Government policy regarding TEPCO.

Our financial analysis shows, that revenues of Japan’s electricity sector have increased substantially, due to increased electricity costs. On the other hand, revenues of Japan’s electricity companies overall have been declining steadily since a peak around 2005, i.e. ten years ago.

Switching off nuclear power generation contributes to financial problems, but is clearly not the root cause

From our analysis it is obvious that the financial profitability issues of Japan’s electricity sector have started about 10 years ago, long before nuclear reactors were switched off due to the Fukushima accident – while of course the switch-off of nuclear power does contribute to a worsening of the financial situation in the last 3 years.

Clearly, the electricity deregulation which is now on track with regulatory and legal changes, was long overdue, and in my opinion is more due to the declining profitability of Japan’s electricity sector, than immediately triggered by the Fukushima accident. The financial data clearly show that a change of business model for Japan’s electricity sector is needed.

Chugoku Electric Power Company as an example

Our analysis shows that each of Japan’s 10 regional electricity companies have different financial circumstances.

We discuss Chugoku Electric Power Company which serves the area around Nagoya in the middle of Japan as an example. The Figure below shows that Chugoku Electric Power Company’s income peaked around 2004-2005, about ten years ago, and since then has been continuously falling, with net income dropping into the red for the first time for Financial Year 2008 (ending March 31, 2009), about two years before the Fukushima nuclear disaster. An important point to consider is that only about 10% of the electricity generation capacity of Chugoku Electric Power Company is nuclear power, which is one of the lowest ratios of nuclear power in Japan. It follows logically, that switching off this 10% of nuclear generation capacity has a much lower impact than for other regional power companies, where the nuclear contribution was about 30%.

We conclude that the peak around 2004-2005 in profitability followed by a long decline in profitability indicates a deep rooted need for change of business models which was exacerbated but not directly caused by the Fukushima nuclear accident. Japan’s Government is now reacting to this fact by deregulating the electricity sector.

Japan electricity: Why do current business models need to change?

• Japan’s regional electricity companies enjoyed monopoly power within their regions, where the electricity prices were regulated by Government, and in exchange electricity companies could enjoy a financial model where they could charge costs + profits to customers. There was no competition and little incentive to reduce costs
• Japan will now follow the global trend from top-down electricity grids with large central generation facilities and a top-down distribution grid to more de-centralized, localized smart-grids, driven by technological progress, and the emergence of renewable energy.

Renewable energy Japan – research report

Japan’s energy sector – research report

Copyright 2014-2019 Eurotechnology Japan KK All Rights Reserved

European Institute for Japanese Studies EIJS

Announcement and summary on the website of Stockholm School of Economics.

This talk is based on data from our reports:

European Institute of Japanese Studies (EIJS) Academy Seminars

About the talk: Japan’s electricity architecture was put in place in 1952 and was not much changed until 2011. Electricity liberalization, introduction of smart meters and smart grids bring very large investments in Japan’s energy infrastructure, and are creating huge opportunities for Japanese and foreign companies in Japan’s energy sector. At the same time there is much uncertainty about Japan’s nuclear program -will Japan’s nuclear power plants restart? The talk will explain Japan’s energy architecture today and how we arrived at today’s situation and will give you some tools to understand possible scenarios for Japan’s energy and electricity future.
As an introduction, you may watch Gerhard’s interview for The Economist about Japan’s energy situation here

About the speaker: Gerhard came first to Japan in 1984 to help build what was NTT’s first international R&D cooperation and has worked with Japan ever since. Gerhard is founder and CEO of Eurotechnology Japan KK, where he has worked for 100s of US, EU and Japanese companies on M&A and business development, and he is independent Member of the Board of Directors
of the Japanese company GMO Cloud KK, a cloud services company with about 500 employees and traded on the Tokyo Stock Exchange. Gerhard is also the creator and curator of the Ludwig Boltzmann Symposia on Energy, Entropy and Leadership. Gerhard graduated with a PhD in Physics from Cambridge University, Trinity College, was tenured faculty at Cambridge University in Semiconductor Physics, Associate Professor at Tokyo University’s Electrical Engineering Department, and the first foreigner to lead an elite Sakigake Research project of Japan’s Science and Technology Agency.

Date and place – Japan’s electricity and new energy policy

Date: Wednesday, June 18th, 2014
Time: 6.30 p.m. – 7.00 p.m. Drink & Snack (served before lecture), 7.00 p.m. – 9.00 p.m. Lecture and Discussion
Place: Alfred Nobel Auditorium, Embassy of Sweden, 10-3-400 Roppongi 1-chome, Minato-ku, Tokyo 106-0032
Fee: JPY3,000 per person, payable at the door, Free for those who are from sponsoring companies, Free for students, please bring your student ID
Language: English
Registration required:Please sign up by June 13 (Fri.) via e-mail to eijsjap (at) gmail (dot) com for the attention of Ms. Futagawa (EIJS Tokyo office)
In cooperation with the Embassy of Sweden

If you can’t attend the talk on June 18th, 2014 at the Embassy of Sweden, you can download our reports on Japan’s energy situation here:

Japan’s energy market – report:

Renewable energy Japan – research report

Copyright Eurotechnology Japan KK. All Rights Reserved.

Watch The Economist interview on Japan’s energy policy.

Read our report on Japan’s energy sector,
and our report on Renewable energy in Japan.

Many times, often several times a day, I get asked about what will happen with Japan’s nuclear power stations – today alone twice. So here is the answer I usually give – please note that I am Physicist, and I know a lot about the Physics of nuclear power, and although I have personally avoided working in the nuclear physics field (which is much wider than nuclear power), I do not have a personal opinion for or against nuclear power:

Quick answer: it is impossible for anyone, including the Prime Minister of Japan, to know with any certainty.

Long answer: Japan is a democracy. Japan currently is quite polarized for or against nuclear power. Everyone knows that some Japanese leaders including the Prime Minister Abe, are in favor of nuclear power. On the other hand, many outstanding opinion leaders are strongly against nuclear power in Japan, these include Nobel Prize Winner Kenzaburo Oe, and also the former Prime Minister Koizumi. Currently we can observe the evolution of a democratic process in Japan to reach a consensus on the future of nuclear power stations in Japan. This process is different for every single nuclear power station, and it is impossible for anyone to make predictions.

Obviously the owners of the nuclear power stations hope to restart their power stations as quickly as possible, and they are supported by many industrial leaders and the current Prime Minister. They need to obtain the agreement by the newly established nuclear power regulator, which was newly established because the Parliamentary Committee which investigated the Fukushima nuclear disaster established that the cause for the nuclear disaster was “regulatory capture”. This committee was chaired by Kiyoshi Kurokawa, and you can read one of his speeches “Groupthink can kill”, and watch YouTube movies explaining the results of his committee here.

Sofar none of the nuclear power station was cleared by the new nuclear safety agency, and no one knows when the safety inspection program will be concluded for any of the nuclear power stations, nor which stations will be cleared to restart (in principle) and to which the nuclear safety agency will refuse the clearance.

However, clearance by the nuclear safety agency is by far not enough. In addition, in Japan, nuclear power stations need the agreement of the local communities, i.e. the local mayors and Province (Ken, Prefecture) Government Prefects. As an example, the world’s largest nuclear power plant is Kashiwazaki-Kariwa, it is currently owned by the Tokyo Electric Power Company to supply Tokyo with electricity, and it is located approximately 80 km from the Prefecture capital city Niigata-shi, which has about 1 million inhabitants. The current very outspoken Governor (Government Leader) of Niigata-Prefecture, Hirohiko Izumida (泉田 裕彦), has clearly stated his opposition both to the restart of the Kashiwazaki-Kariwa nuclear power station, and secondly he has also stated that he considers Tokyo Electric Power Company unsuited to manage a nuclear power station. Read and watch a video of Governor Hirohito Izumida here. I have read speculations that as a consequence it might be thinkable that ownership and/or management of the Kashiwazaki-Kariwa Nuclear Power station could be transferred to a different power company to overcome this local resistance. But it is not possible for anyone to predict how this will play out.

It is my understanding also, that in Japan it is not clearly defined which local authorities have to agree before a nuclear plant can operate, and which distance from the nuclear power station is still close enough that agreement of local authorities is needed. In my understanding also it seems to be unclear which type of local authorities have veto power: The Prefect (i.e. the chief of the Prefectural Government), cities, towns, villages etc. There seems to be much uncertainty here, which did not exist in the past, or which did not come out into the open in the past.

Another factor is the local geological situation for each nuclear power station. In Japan there are legal requirements that nuclear power stations need to be located away from active geological faults. Recently there have been investigations by geological experts about the geological conditions near the nuclear power stations, but my understanding is that many questions are still unsettled at least for some of the nuclear power stations.

Still another factor are the courts. Traditionally Japanese courts have rejected all complaints against the operation of nuclear power stations, but I hear that recently some court complaints against the operation, or against the restart of nuclear power stations have been successful. Court decisions also cannot be predicted by anyone.

So in summary: No-one can possibly predict what will happen with Japan’s nuclear power stations. When pushed, I sometimes say that a possible scenario will be that about 10 out of Japan’s approx. 50 nuclear power stations might be restarted in about 3 years from now. However, no one can know this for sure, and no one can assign a probability to any outcome.

There have been enquires by some non-Japanese/foreign media, which interviewed a number of experts, asked them to estimate the probability for each of Japan’s nuclear power plant, and then took some kind of average of these experts opinions. I was also asked to participate in this experts’ enquiry, but I refused to participate, and said that simply no one can know with any precision at all.

Watch The Economist interview on Japan’s energy policy.
Read our report on Japan’s energy sector,

and our report on Renewable energy in Japan.

Copyright 2014 Eurotechnology Japan KK All Rights Reserved

Reuters reports that Japan’s Prime Minister Abe urges company boards to reform corporate governance to include independent directors. I added the following comment.

Corporate governance Japan: exercise of shareholder power and emergency situations

The question of independent Board Directors is often framed in terms of exercising shareholder power over the company, as is the main message of the article above. Another focus of discussions on the role of outside independent directors, is during emergencies, and here the Olympus case is often cited.

Corporate governance Japan: steady state contributions of independent directors

However, in my experience in Japan, including my work as a non-Japanese independent Board Director of a public Japanese company, enlightened companies will welcome independent Board Directors for their know-how and contributions to the company – in the end the market decides.

Corporate governance Japan: Docomo vs SoftBank

As an example, lets compare NTT-Docomo and SoftBank. NTT-Docomo has a homogeneous pure Japanese Board, while SoftBank has independent Directors from many different countries and from many different walks of life. SoftBank recently overtook NTT-Docomo in terms of market cap, revenues, operating income and net income. https://www.eurotechnology.com/2014/05/07/softbank-overtakes-ntt-docomo-kddi/
In the end regulations have limitations, and the realities of the market decide, as is the case of SoftBank.

Corporate governance Japan: SoftBank and SPRINT

As another example, SoftBank appointed Marcelo Claure, CEO of Brightstar Corporation and of Bolivian origin, to the Board. Masayoshi Son announced the appointment with the following words: “Marcelo’s experience as an entrepreneur and businessman who created and successfully grew a global telecommunications company will bring an invaluable perspective to Sprint’s board.” Note that Masayoshi Son clearly states that Marcelo Claure is appointed to bring invaluable know-how and experience to SPRINT, Masayoshi Son does not seem to be motivated by “increasing the power of the shareholders over Sprint“.

The “power of shareholders” is usually a matter or last resort, when all other methods fail. Usually, when you have to show your power, its too late.

Copyright 2014 Eurotechnology Japan KK All Rights Reserved

“Keeping the lights on – deregulation and Japan’s energy mix”

The interview is based on our reports:

Japan energy policy – interview outline:

Japan energy policy Question: Is the new energy policy of Japan’s Government an appropriate response to the situation or a missed opportunity

Answer summary:The Government in its new strategy summarizes Japan’s energy situation and proposes a cocktail of different energy sources. Everyone knows that Prime Minister Abe is pro-nuclear energy, but that does not mean that he is against other energy sources, such as renewables. The new energy strategy paper though misses KPIs, Key Performance Indicators. There are no many numerical targets.

Japan energy policy Question: It is often repeated that Japan is poor in energy sources, is this true?

Answer summary:Yes, that is often repeated without thinking, and thats also the case in the introduction of the new policy paper. This is only true as long as we restrict our view to traditional carbon based primary energy sources such as oil, gas, or coal. But if we widen the view to renewables such as wind, water, solar, biomass, and geo-thermal energy sources, then Japan is actually very rich in primary energy sources, and could even aim for energy self-sufficiency. Off-shore wind alone would be sufficient to make Japan energy self-sufficient.
Just by repeating the statement many times, that Japan is poor in energy sources, does not make this statement true.

The new energy policy paper also starts out by saying the Japan is poor in primary energy sources. This is not true if we widen the view to renewable energy sources.

Japan energy policy Question: Re-engineering the electricity grid. Can you explain the concept?

Answer summary:The electricity grid has evolved over many years, maybe 100-150 years. The traditional architecture of the electricity grid is a top-down one-way distribution network from large central power station such as large coal-, gas- or oil-fired power stations or nuclear power stations, to consumers. The traditional electricity grid is similar to the arteries in the human body, where there is the heart in the center, and the arteries distribute the blood to the extremities. This traditional top-down grid has served us very well for a long time, but the time as come now to evolve the grid to the next stage. There will be more distributed power generation, which feed in electricity in the opposite direction from the extremities, and there will be more intelligence in the grid.

Japan energy policy Question: How do you see Japan deal in the future with supply and demand management, how do you see electricity prices evolve in Japan?

Answer summary:With the liberalization there will be more flexibility in the pricing of electricity and supply and demand management. Prices will not necessarily go down, but will depend much more on the timing of demand, on demand/supply management, or on the value of electricity. For example, mission critical electricity consumers such as data centers or hospitals will need a different type of electricity supply, than washing machines in households. Demand/supply management and smart grid will manage the timing of less critical electricity usage.

Economist briefing “Keeping the lights on – deregulation, new and renewables and Japan’s energy mix” handouts

Japan energy market report:

Copyright 2014 Eurotechnology Japan KK All Rights Reserved

Japan game market report (398 pages, pdf-file):

Japan is the cradle of many global games

Japan created much of today’s global game market with icon’s such as Nintendo. However, today the moment has been taken over by new online game companies. Their combined income now exceeds the traditional icons.

Top Japanese game companies: disruption by newcomers making mobile apps

We wrote in our blog first back in 2009 about the disruption of Nintendo’s blue ocean (Wii and DS) by smartphone app stores.

Top Japanese game companies: top 25 public game companies have added market cap of US$ 30 billion

Today, 25 Japanese online game companies listed on the Tokyo Stock Exchange, have a combined market cap of about YEN 3000 billion (US$ 30 billion).

These are (data of May 9, 2014):

1. Konami (TSE Code 9766)
2. DeNA (TSE Code 2432) market cap = YEN 246 billion (US$ 2.5 billion)
3. Gree (TSE Code 3632) market cap = YEN 216 billion (US$ 2.2 billion)
4. Square Enix Holdings (TSE Code 9684)
5. …
6. …
7. Capcom (TSE Code 9697)
8. …
9. GungHo (TSE 3765), market cap = YEN 612 billion (US$ 6 billion)
10. …
11. …
12. …
13. …
14. …
15. …
16. …
17. Colopl (TSE Code 3668), Market cap = YEN 257 billion (US$ 2.6 billion)
18. …
19. …
20. …
21. …
22. …
23. …
24. …
25. find the full list in our report on Japan’s game sector

Total market cap= YEN 2954.2 billion (=US$ 29 billion)

Top Japanese game companies: list above does not include LINE

This list does not include LINE, which is a private company, and has built a substantial games business.

Japan game market disruption – market report:

Copyright 2014 Eurotechnology Japan KK All Rights Reserved

LINE announced quarterly revenues on their website, the revenue data are redrawn below, with approximate US$ amounts shown as well.

Extrapolating assuming continued linear growth, we can estimate expected annual LINE revenues of YEN 70 billion (US$ 700 million) for the full year 2014.

Yesterday I was interviewed by Wall Street Journal about future prospects for SONY, and we discussed SONY‘s need for new “killer” products. Considering Facebook’s acquisition of WhatsUp, we thought SONY would need a “killer application” such as LINE. However, since SONY‘s current market cap with US$ 18 billion is of similar size as WhatsApp’s acquisition value, and presumably LINE’s value will be in a similar range. Thus purely theoretically, considering the growth rates of both companies, it would be more appropriate for LINE to acquire SONY than the other way round. Purely theoretically of course.

Read our report on Japan’s games sector

Copyright 2014 Eurotechnology Japan KK All Rights Reserved

SoftBank presents annual results for the Financial Year which ended March 31, 2014 today, NTT-Docomo and KDDI presented their results a few days ago. Using projections published by SoftBank and using data found in the Japanese business press over the recent days, we have compared SoftBank, Docomo and KDDI financial results:

SoftBank overtook both Docomo and KDDI in all major KPIs: SoftBank’s annual revenues, operating profits and net after-tax profits are higher than NTT-Docomo’s and KDDIs.

To understand SoftBank, read our report about the Softbank Group, and read our report on Japan’s telecom sector.

The reason for SoftBank overtaking NTT-Docomo and KDDI are both excellent performance of SoftBank’s core businesses, mobile communications and media in Japan, and also a series of recent investments: SuperCell, GungHo, SPRINT, BrightStar, eMobile/eAccess, Willcom and more which all have been very successful investments sofa, not counting Alibaba, which of course is an amazing success story.

Going forward, of course the key questions now are the turn-round of SPRINT, and whether SoftBank can succeed with the much rumored acquisition of T-Mobile in the USA, and possibly also a major European acquisition.

We have today updated our Report on Japan’s telecommunications landscape, to include latest financial and subscriber data, and latest M&A activities: Japan’s telecommunications market is one of the world’s most active also regarding M&A and restructuring.

SoftBank overtakes Docomo and KDDI in Market cap (data for May 7, 2014):

SoftBank: ¥ 8908.9 billion (US$ 89 billion)
NTT-Docomo: ¥ 7049.5 billion (US$ 70 billion)
KDDI: ¥ 4925.2 billion (US$ 49 billion)

SoftBank overtakes Docomo and KDDI in annual revenues:

SoftBank overtakes Docomo and KDDI in annual operating income:

SoftBank overtakes Docomo and KDDI in annual net income:

Learn more about SoftBank, Masayoshi Son, and his 30/300 year vision for SoftBank

Report on “SoftBank today and 300 year vision” (approx 120 page, pdf file)

Japan’s telecommunications industry

(269 pages, pdf file)

Copyright (c) 2014 Eurotechnology Japan KK All Rights Reserved

Corporate governance Japan is now in the focus of Prime Minister Shinzo Abe’s reforms

Reform of corporate governance is an ongoing issue in Japan, and part of Prime-Minister’s Abenomics’ “third arrow” revival efforts. Here is a note, that I added to a recent article in The Economist, entitled “Corporate governance in Japan – A revolution in the making“:

“Outside Directors” is only one step along the way to end the “inbreeding problem”. Bringing diversity into the management of Japanese companies is critical for growth in Japan: non-Japanese directors, women directors, non-Japanese women directors.

Corporate governance Japan: in the end the markets decide whether diversity is necessary, or whether in-breading wins

Of course the market decides: I believe that companies which do not bring in management diversity will find lower market capitalization than those which do.

I am European and independent Board Member of a Japanese company, traded on the Tokyo Stock Exchange. Since all business and all board meetings are in Japanese, full command of business Japanese is necessary, including the ability to read a big volume of Japanese reports 100s of pages long sometimes from one day to the next.

Corporate governance Japan: very few non-Japanese are capable of functioning on the Board of a Japanese corporation

There are only very very few non-Japanese people with the qualifications to serve as independent Board Directors, who have the necessary full command of Japanese. So there is a substantial bottle neck against bringing diversity into Japanese corporations even if there was a strong pull from Japanese corporations. Currently only a few excellent Japanese corporations exercise this pull, to pull in non-Japanese external Board Members.

One company which is remarkably advanced is Hitachi – Hitachi several outside and non-Japanese Board Members, including also one foreign woman recently.

Copyright 2014 Eurotechnology Japan KK All Rights Reserved

by Gerhard Fasol

Report on Japan’s game makers and game markets

Japan is the world’s No. 1 top grossing app market both for iOS apps and for Android apps, as we discussed before.

Supercell Japan: investments by SoftBank and GungHo

Supercell recently opened operations in Japan, and attracted major investment by SoftBank and SoftBank affiliate Gung-Ho.

Supercell currently advertises with large scale posters on the platforms of one of the busiest rail stations globally, Tokyo-Shibuya. Currently Supercell’s “Clash of Clans” is ranked on No. 10 position of top grossing iPhone Apps for all categories combined, while GungHo’s “Puzzle & Dragons” is on No. 1 (Gung-Ho is investor in SuperCell).

Supercell Japan on rank 10 in the top grossing ranking of the iPhone app store:

“Top Grossing” ranking in the iPhone AppStore for all categories combined:

1. Puzzle & Dragon by GungHo Online Entertainment
2. Monsterstrike by mixi
3. LINE Pokopang by Naver Japan
4. Brave Frontier by Alim
5. PyuoPuyo!! Quest by Sega
6. Dragon Poker by Asobism
7. Disney Tsumu Tsumu by Naver Japan
8. Pro Yakyu Pride 2014 by Colopl
9. LINE by Naver Japan
10. Clash of Clans by Supercell

Copyright(c) 2014 Eurotechnology Japan KK All Rights Reserved

by Gerhard Fasol

On April 25, 2014 NTT-Docomo announced annual results for FY2013 (April 1, 2013 – March 31, 2014) and explained the way forward.

Annual revenues are YEN 4461.2 billion (US$ 33.6 billion),
operating income is YEN 819.2 billion (US$ 8.19 billion),
net income is YEN 464.7 billion (US$ 4.6 billion).

These figures are of course amazing results, and Docomo remains one of the most important mobile operators globally.

Docomo financial report – technology roadmap:

Docomo is now planning to:

• introduce VoLTE in summer 2014,
• quad-band LTE with 150Mbps in FY2014,
• LTE-Advanced with 225Mbps in FY2014/2015,
• and aim for 10Gbps bandwidth beyond FY2015,

ensuring that Docomo will remain a leading edge mobile operator for the foreseeable future.

Docomo financial report – announces failure in India:

Still, there are some shadows on Docomo’s amazing success story:

• Docomo announced withdrawal from the joint-venture with TATA-Teleservices in India, thus another of Docomo’s ventures to create growth outside Japan has failed. This is the last in a very long string of failures of NTT-Docomo outside Japan, after having lost about US$ 10 billion on investments in KPN-mobile, AT&T-Wireless, and Hutchinson, and the attempt to develop i-Mode mobile internet services in many countries.
• NTT-Docomo has now been overtaken by SoftBank on most key performance indicators (KPIs). SoftBank has achieved higher overall subscriber numbers, higher revenues, higher operating income and higher net income than NTT-Docomo.

Copyright 2014 Eurotechnology Japan KK All Rights Reserved

Economist Corporate Network held a breakfast briefing today April 24, 2014 for about 50 Japan-CEOs and executives.

Shigeki (Sean) Miwa, General Manager of SoftBank’s CEO Office, and Representative Director & CEO of Bloom Energy Japan KK, and EVP of SB Energy Corporation

Mr Shigeki (Sean) Miwa, General Manager of SoftBank’s CEO Office, and Representative Director & CEO of Bloom Energy Japan KK, and EVP of SB Energy Corporation, explained SoftBank’s and Masayoshi Son’s reasons for entering the energy business, and he explained Bloom Energy’s offering of energy sources based on very efficient fuel cells in Japan.

Gerhard Fasol, CEO of Eurotechnology-Japan

Gerhard Fasol, CEO of Eurotechnology-Japan, gave an overview of Japan’s energy situation, and an outlook into the future.

You can find detailed data and analysis in our report on Japan’s energy sector, and on Japan’s renewable energy sector.

Renewable energy Japan – research report

Japan energy market report:

Copyright 2014 Eurotechnology Japan KK All Rights Reserved

Horizon2020 is the world’s largest research program, undertaken by the European Union, and it is open to cooperation with researchers from all countries including Japan.

EU encourages Japan participation in Horizon 2020

Actually, the EU strongly encourages participation from Japan: Maria Cristina Russo, Director for International Cooperation in the Directorate-General for Research and Innovation of the European Commission, pointed out that currently Japan is on 12th rank in the number of joint research programs with the EU – behind Mexico, and Marocco, but one place above Argentina and Egypt.

To encourage more participation by Japanese organizations in EU Horizon-2020 projects, the EU held a conference at the EU Delegation in Tokyo on April 14, 2014.

Read a report of the Horizon-2020 Tokyo conference here.

Horizon 2020 Japan presentations

• Yoichiro Matsumoto, Executive Vice President, The University of Tokyo: Japan’s research needs to go global
• Anders Karlsson, Vice President for Global Academic Relations, Elsevier, Tokyo: EU-Japan Science collaboration – a “bird’s eye view” on publication patterns & opportunities for collaboration
• Maria Cristina Russo, Director for International Cooperation, Directorate-General for Research and Innovation, European Commission: Horizon2020 – the chance to go global
• Kazushi Watanabe, General Manager, Business Development, Sumitomo Precision Products, Aerospace & Defense: Experience of international collaboration. FP7 project: Surface heat exchangers for aero-engines
• Naoto Kobayashi, Center for Research Strategy, Waseda University: FP7 project and internationalization of research at Waseda University
• Yoichi Iida, Director, Aerospace and Defense Industry Division, Manufacturing Industries Bureau, METI: Japan-EU cooperation in civil aeronautics industry
• Satoru Ohtake, Senior Executive Director, Science and Technology Agency: closing remarks

Copyright 2014 Eurotechnology Japan KK All Rights Reserved

by Gerhard Fasol

It is wrong that Japan has all technology to decommission Fukushima Dai-ichi

“It is wrong that Japan has all technology to decommission Fukushima Dai-ichi. The IAEA strongly recommends international cooperation for the decommissioning of Fukushima Dai-ichi nuclear power plants”, is the strongest statement Mr Yukiya Amano (天野之弥), Director General of the International Atomic Energy Agency (IAEA) made today at the Foreign Correspondence Club in Tokyo in a very carefully worded presentation.

IAEA is currently preparing a report about Fukushima Dai-ichi which will be completed by the end of this year, 2014.

We are often asked, whether nuclear power is safe, the answer is that no technology is 100% safe. A multilayer defense is required against risks, in-depth defense. Safety levels are now higher than they were before the Fukushima Dai-Ichi nuclear accident.

IAEA: non-proliferation, nuclear safety, and other programs

Let me introduce The International Atomic Energy Agency (IAEA). The IAEA has three roles:

1. Advise on nuclear power and nuclear safety. In this area, IAEA has no authority. IAEA only can advise. IAEA also helps developing countries which are are thinking to introduce nuclear power.
2. Prevent nuclear proliferation. In this area, IAEA has authority.
3. Other projects, for example in healthcare and decease prevention. For example, IAEA used radiation to disable breeding by insects distributing malaria and other illnesses.

IAEA is not an international nuclear safety regulator. IAEA can only advise on nuclear safety. IAEA does not influence countries, but provides comprehensive assistance.

Of course nuclear safety is intrinsically international: one country’s nuclear accident is all countries’ nuclear accident.

IAEA position on nuclear power

The IAEA has the position that nuclear technology is affordable and useful. IAEA is much more than a “nuclear watchdog”. IAEA also helps to make nuclear technology available for developing countries.

IAEA advises countries introducing nuclear energy. Today we have 437 nuclear power plants globally, and 72 are under planning or construction. Growth of nuclear energy is mainly in Asia, especially China and India, but also in Europe and in developing countries.

30 countries use nuclear power, and 60 countries are considering to start using nuclear power in the future.

IAEA and nuclear security

A growing role for IAEA is nuclear security, to advise on proper protection of nuclear materials, for example to prevent dirty bombs. IAEA provides guidance and measurement equipment. IAEA is ready to assist Japan in advising on nuclear security for the Tokyo Olympics in 2020. Next week, we will have a Nuclear Security Summit in Den Haag.

IAEA prevents proliferation, prevents spread of nuclear weapons

The main current issue is Iran, and Iran has taken positive steps forward, but much remains to be done.

Regarding North Korea, the IAEA is currently not involved inside North Korea, but ready to help. The IAEA calls on North Korea to fully cooperate with IAEA.

IAEA motto is “Atoms for peace”.

Q&A

• Question: Is it right to release contaminated water into the ocean?
  Answer: It is common practice globally, to release contaminated water into the ocean, provided contamination is sufficiently low, and it is essential to talk to stake holders, e.g. fishermen. Storage is not a long term solution. IAEA recommends to release contaminated water into the ocean after proper treatment of the water, and after consultation with stake holders. IAEA recommends release into the ocean, because storage is cost and human resource intensive, and these resources need to be used in other areas of the decommissioning work.
• Question: Should not Japan have higher safety requirements because Japan is in an earthquake zone?
  Answer: IAEA does not discriminate against any countries, and strong earthquakes are also known to happen in Europe. Strong earthquakes and tsunami can occur anywhere.
• Question: what is IAEA’s position regarding the prioritization of the Sendai nuclear plant in Kyushu?
  Answer: IAEA does not take party in such decision making. Regulation is the responsibility of each country, and IAEA says that the regulator must be robust, independent and well funded.
• Question: Prime-Minister Abe says that Japan’s nuclear safety regulations now are the strictest in the world. What about missing evacuation plans?
  Answer: It is not IAEA’s role to rank countries. Broadly speaking, Japanese regulations today are broadly in line with global regulations recommended by IAEA, and Japan has requested the IAEA to review the Japanese nuclear safety standards. IAEA makes safety standards, recommends the use of these standards, and if requested, sends missions to assist.
• Question: why do you say “broadly”?
  Answer: Nuclear safety is a huge and complex field. In our view, Japanese nuclear safety regulations are broadly in line with global regulations, and IAEA will evaluate Japanese safety regulations on request by the Japanese Government.
• Question: Did IAEA warn that pre-Fukushima Dai-Ichi-disaster Japan’s nuclear regulator did not fulfill IAEA criteria: (1) robust, (2) independent, and (3) well funded?
  Answer: IAEA did warn in polite language that more independence was needed.
• Question: What was the Japanese Government’s response?
  Answer: The Japanese Government’s response was, that the regulatory body was sufficiently independent.
• Question: IAEA promotes nuclear power, and sets safety standards. Is there no conflict of interest between these two roles?
  Answer: The IAEA is not a global regulator. In each country separately an independent in-country regulator is responsible for regulation in that country. IAEA supports, provides training for in-country regulators.
• Question: Who assesses IAEA?
  Answer: The member states assess, and will end the tenure of the Director General if they are not satisfied.
• Question: Did IAEA hide nuclear radiation information in the days after the Fukushima Dai-Ichi disaster?
  Answer: The IAEA came on a radiation measurement mission to Tokyo and Fukushima on March 18, 2011 one week after the Fukushima Dai-Ichi disaster, reconfirmed the measurements on March 19, 2011, the next day, and published these data.
• Question: Japan has 331 kg Plutonium. What is the target?
  Answer: There are three issues: (1) Safeguard: this material is placed under IAEA control, assure that all material is used for peaceful purpose, and short-notice controls by IAEA are included by Japan, (2) nuclear security: is the responsibility of each state under IAEA guidance, (3) transparency, including future use: it is the responsibility of the Japanese Government to provide transparency regarding future use
• Question: do you think that 30-40 years will be sufficient for complete decommissioning of Fukushima Dai-Ichi?
  Answer: I don’t know. Good understanding of the melted core takes very long time. At present we have no understanding of the melted core. IAEA recommends international cooperation. It is wrong that Japan has all technology. It is IAEA’s recommendation to cooperate internationally. Decommissioning the most difficult nuclear power plant will help to decommission all other nuclear power plants.
• Question: what about the shortage of workers for decommissioning Fukushima-Dai-Ichi?
  Answer: Shortage of workers in nuclear plants is a global phenomenon.

Copyright 2014 Eurotechnology Japan KK All Rights Reserved

Many press articles get SoftBank market share in Japan wrong

With SoftBank‘s acquisition of US No. 3 mobile operators Sprint and the possibility that Softbank/Sprint will also acquire No. 4 T-Mobile-USA, SoftBank and Masayoshi Son are catching global headlines.

SoftBank market share in Japan: Many media articles report wrong data, because they forget to include group companies

• “SoftBank $73 Billion Payoff Fuels Japan Startups Push” Bloomberg, March 19, 2014
• “SoftBank warns of less profitable year ahead”, Financial Times, May 7, 2014
• “Japan Billionaire Son Invokes Do-or-Die Spirit in SoftBank U.S. Push”, BloombergBusinessweek of May 12, 2014

These articles state SoftBank’s market share in Japan’s mobile market as 25% and say that KDDI Group has more subscribers than Softbank Group in Japan, but is this really true?

What is SoftBank‘s true market share in Japan’s mobile communications markets?

Detailed subscriber data and analysis of Japan’s telecom markets in our Report on Japan’s telecom sector.

SoftBank recently acquired eMobile/eAccess, and has been the court-appointed reconstruction partner of Willcom, after Willcom’s financial failure. Therefore eMobile/eAccess and Willcom are also part of the SoftBank group, and SoftBank plans to merge both. In addition, Wireless City Planning (WCP) are also part of the SoftBank group. You will find these transactions, the logic and reasoning behind them explained in great detail in our reports on SoftBank and on eAccess/eMobile.

List of mobile operators on Japan’s market today:

We have the following mobile operators currently in Japan – subscription market shares are shown in brackets (subscriber numbers for Docomo, KDDI and Softbank are as of February 28, 2014, while for other operators the latest officially reported numbers are used):

• NTT Docomo Group (40.8%)
• KDDI Group (28.9%)
  • AU
  • UQ Communications
  • fixed line and other businesses
• SoftBank Group (30.3%)
  • SoftBank
  • eMobile/eAccess (note: eMobile, eAccess and Willcom are now combined into Ymobile)
  • Willcom (now merged into Ymobile)
  • Wireless City Planning (WCP)
  • fixed line and other businesses
• several virtual mobile operators, e.g. Japan Communications Inc. who lease communications capacity e.g. from Docomo and retail this leased capacity to their own subscribers

The SoftBank group including eAccess/eMobile, Willcom and Wireless City Planning has actually more than 30% of Japan’s mobile subscriber market – not 25% as some articles write.

For detailed market data, statistics and analysis of Japan’s highly competitive mobile communications market, read our market report on Japan’s telecom markets, which includes analysis and data for Japan’s wireless, fixed, ADSL and FTTH markets, and detailed financial data, analysis, and comparison of the financial performance of NTT, NTT Docomo, SoftBank and KDDI.
We are also preparing reports on Japan’s cloud and data center markets –

Learn more about SoftBank, Masayoshi Son, and his 30/300 year vision for SoftBank

Copyright (c) 2014 Eurotechnology Japan KK All Rights Reserved ;

(President of Tokyo Institute of Technology. Materials scientist specialized on nano-materials and high-performance materials)

Keynote presented at the 6th Ludwig Boltzmann Symposium on February 20, 2014 at the Embassy of Austria in Tokyo.

Tokyo Institute of Technology – short history

• 1881: founded as The Tokyo Technical School
• 1929: elevated to a degree-conferring university as Tokyo Kogyo Daigaku (Tokyo Institute of Technology)
• 2004: reorganized as an independent administrative institution “National University Corporation Tokyo Institute of Technology”

Tokyo Institute of Technology – Statistics as of May 1, 2013

• Undergraduate students: 4,790 (of which 180 are foreign students)
• Graduate students: 3,611 Masters students + 1,512 Doctorate students = 5,123 (of which 943 (18.4%) are foreign students)
• Research students: 90
• Academic staff: 1,148
• Administrative staff: 472

Tokyo Institute of Technology – The mission is to develop a new and vibrant society

• produce graduates with a broad understanding of science and technology with both the ability and the determination to take on leading roles in society
• create and support innovative science and technology that will lead to sustainable social development

Tokyo Institute of Technology – Detailed mission statements cover three areas

• education: produce masters graduates who will thrive globally, and doctorate graduates who will come world’s top researchers are leaders
• contributions to society and international activities
• research: produce globally recognized results. Reform the research and support systems, in particular multi-step support for young researchers.

Tokyo Institute of Technology aims to become a world class university with greater diversity in faculty and students by 2030

Major educational reform plan (2013-…)

1. Reborn masters and doctoral courses
2. Reorganize departments, curriculum, courses
3. Change from year-based study to credit based study
4. Increase teaching in English, and numbers of foreign students
5. Align with world top class universities for student transfers and credit transfers
6. Enhance professional practice education for industry

A key challenge is that students primarily focus on earning credits to graduate, and lack a sense of mission to develop professional skills or to cooperate in our diverse global society. We need to change this type of behavior to create scientific leaders for the global arena.

We want to create a more flexible curriculum, that can be completed in a shorter time, so that students have more time for personal professional development and international exchange activities and communication skills.

Tokyo Institute of Technology: The Board of Directors decided on three pillars for education reform on September 6, 2013

1. Build education system to become one of the world’s top universities
2. Innovate learning
3. Promote ambitious internationalization

We will move to a new and more flexible curriculum system, where undergraduate schools and graduate schools are blended.

Tokyo Institute of Technology: new initiatives

We are introducing a number of initiatives including active learning, a faculty mentor system where every faculty member mentors 5-10 students, increased numbers of lectures in English, invited top global researchers, provide facilities for foreign researchers, and broaden academic cooperation agreements and mutual accreditation of credits and degrees.

<img src=”http://www.eurotechnology.com/b/wp-content/uploads/2013/08/20140220_IMG_4885.jpg” alt=”Professor Yoshinao Mishima, President of Tokyo Institute of Technology” width=”590″ height=”924″

Copyright·©2014 ·Eurotechnology Japan KK·All Rights Reserved·

(Representative Director and Chairman of the Board of JVC KENWOOD Corporation)

Keynote presented at the 6th Ludwig Boltzmann Symposium on February 20, 2014 at the Embassy of Austria in Tokyo.

Background reading:

JVC KENWOOD Corporation was incorporated on October 1, 2008, and has 20,033 employees as of October 1, 2013.

KENWOOD corporate vision: Creating excitement and peace of mind for the people of the world

KENWOOD overview

Total sales for fiscal year ending March 2013 was YEN 306.6 Billion (approx. US$ 3 Billion).

JVC KENWOOD today has four business divisions:

• Car Electronics (CE): 33% of total sales
  • car navigation systems
  • car audio systems
  • CD/DVD drive mechanisms
  • optical pick-ups
• Professional Systems (PS): 30%
  • digital land mobile radio
  • amateur radio
  • security cameras
  • professional video cameras
  • emergency broadcasting equipment
• Optical & Audio (O&A): 22%
  • action camera
  • home audio systems
  • all-in one tower design audio systems
  • camcorder with wifi
  • 4K projektor
  • headphones
• Entertainment Software (SE): 13%
  • Victor Entertainment Group
  • Teichiku Entertainment

Issues of the electrical industry of Japan:

• 1970s: overwhelmed with vertical integration and self-sufficiency
• 1980s: appreciation of the yen (1985 Plaza Accord)
• 1990s: collapse of the Bubble (1991), relocation of production to Asia, three excesses:
  • debt
  • facility
  • employment
• 2000s: lost 20 years

Going forward, Japan has the option of growth under new business models, or continue to stagnate with matured industries

While there is dramatic global market expansion in many business areas in the global electrical industry, e.g. for Lithium Ion Batteries, DVDs, Car navigation units, DRAM, Japan’s market shares are falling in most sectors. For example, Japanese market shares for LCD, DVD players, Lithium Ion batteries, or car navigation units have fallen from almost 100% global market share 5-10 years ago to 10%-20% today.

Restructuring mature industry can generate more economic benefit than innovating a new industry:

• large established market, although low growth
• reduced number of players in the market following consolidation

Revitalization of JVCKENWOOD

• the current main business as the core – not new business
• speed, like “fresh food”
• eliminate hidden waste and loss costs
• eliminate vested rights

Kenwood in 2002 was in a disastrous condition:

• net income (loss): YEN -27 Billion (= US$ -270 million) losses
• debt: YEN 110 Billion (= US$ 1.1 billion)
• accumulated losses: YEN 45 Billion (= US$ 450 million)
• net worth: YEN -17 Billion (= US$ -170 million)

Restructuring by March 2003:

1. Financial restructuring: Dept/equity swap. Moved from YEN 17 billion negative net worth to positive within 6 months
2. Business restructuring: focus on core business. Terminated cellular phone business.
3. Cost restructuring: 30% cost reduction. Closed 3 factories. Voluntary retirement.
4. Management restructuring: management consolidation. Eliminate huge wastes and losses in subsidiaries.

Restructuring in FY2003 achieved a V-shape recovery. Net income margin was improved from -8% in FY3/2002 to 2%-4% in recent years.

In mature markets, growth is achieved through M&A, reducing the number of players in the market. As the top player in the market, profitable growth improved:

Main four players in the car electronics after-market before Kenwood-JVC merger:

1. Pioneer
2. Kenwood
3. Sony
4. JVC

after the JVCKENWOOD merger, and restructure to minimize losses from the TV business:

1. JVCKENWOOD
2. …
3. …

JVC and KENWOOD formed a capital and business alliance in July 2007, followed by management integration in October 2008, and a full merger in October 2011. The business portfolio was restructured, and in particular big losses in the TV business were reduced. Fixed costs were reduced by 40% by selling off assets, reduction of production and sales sites, and 25% voluntary retirement.

This structural reform was completed in the FY3/2001, and led to another V-shaped recovery, and to profitable growth under the new medium term business plan.

The JVC-KENWOOD merger led to big jumps in market share in many markets, and thus to very much improved profitability.

How can Japan become competitive again?

Why did Japan’s mass production type electronics fail? Answer: Japanese management failed to deal with globalization and digitalization.

Other factors that contributed to Japan’s failure are vertical integration, technology leakage from exporting production facilities, insufficient added value compared to the high Japanese labor costs, and lack of money for investment, because Japanese companies largely relied on bank loans instead of equity.

Japan’s heavy electrical industry on the other hand is competitive – why?

1. Creative know-how in the heavy electrical industry is in human brains, therefore more difficult to leak to competitors under Japan’s employment circumstances.
2. huge capital investment is needed, and almost fully depreciated in Japan. Therefore the depreciation costs exceeds HR costs.

How can Japan become competitive again?

Japan needs to accelerate growth strategies in those areas, where Japan has competitive advantage, and where Japanese industries can differentiate themselves. Examples are industrial areas which depend on a long-term improvements and advanced technologies, and techniques of craftsmen, and in next generation technologies.

JVC KENWOOD takes action to innovate

• JVCKENWOOD invested in a venture capital fund: the WiL Fund I, LP to reinforce alliances with potential ventures in Japan and overseas
• JVCKENWOOD invested in ZMP Inc. to promote car telematics and car auto-control

Copyright (c) 2014 Eurotechnology Japan KK All Rights Reserved

(Academic Fellow of GRIPS and former Chairman of Fukushima Nuclear Accident Independent Investigation Commission by National Diet of Japan)

Keynote presented at the 6th Ludwig Boltzmann Symposium on February 20, 2014 at the Embassy of Austria in Tokyo.

Professor Kurokawa set the stage by describing the uncertain times, risks and unpredictabilities in which we live – while at the same time internet connects us all, all while the world’s population increased from about 1 billion people in 1750 to about 9 billion people today.

Major global risks in terms of impact and likelihood are (General Annual Conference 2013 of the World Economic Forum):

• severe income disparity
• chronic fiscal imbalances
• rising greenhouse gas emissions
• cyber attacks
• water supply crisis
• management of population aging
• corruption

Top trends for 2014, ranked by global significance (World Economic Forum, Outlook on global agenda 2014):

• rising social tensions in Middle East and North Africa
• widening income disparity
• persistent structural unemployment
• intensifying cyber threats
• diminishing confidence in economic policies
• lack of values in leadership
• the expanding middle class in Asia

This changing world needs a change of paradigm:

• resilience instead of strength
• risk instead of safety

Many recent “Black Swan events” bring home that:

• accident happens
• machine breaks
• to err is human

Fukushima Nuclear Accident Investigation Commission NAIIC of the Japanese Parliament:

Professor Kiyoshi Kurokawa chaired the Fukushima Nuclear Accident Independent Investigation Commission (NAIIC) by the National Diet of Japan, which was active from December 8, 2011 to July 5, 2012. While Parliamentary commissions to investigate accidents, problems and disasters are quite frequent in most Western democracies, this was the first time ever in the history of Constitutional Democratic Japan, that a Parliamentary investigation commission was constituted.

Examples of Parliamentary commissions in other western democracies are:

• Three Mile Island, USA 1979
• Space Shuttle Challenger, USA 1986
• 9.11 Terrorist Attack, USA 2001 and many many many more in USA
• Oslo’s shooting incident, Norway 2011
• Mad Cow Disease, UK 1997-, and several Parliamentary commissions every year in UK

The records of the Parliamentary Commission for the Fukushima Disaster can be viewed here.

Fukushima Nuclear Accident Investigation Commission of the Japanese Parliament NAIIC key results: Fukushima nuclear disaster was caused by “regulatory capture”

The key result of the Parliamentary Commission is, that the Fukushima nuclear disaster was caused by “regulatory capture”, a phenomenon for which there are many examples all over the world and which is not specific to Japan. Regulatory capture was studied by Goerge J Stigler, who was awarded the Nobel Prize in 1982 for “for his seminal studies of industrial structures, functioning of markets and causes and effects of public regulation”.

Since the full report of the Independent Parliamentary Commission NAIIC is long and complex to read, few people are likely to read the full reports and watch the videos of all sessions.

Therefore short summary videos the key results of the Independent Parliamentary Commission NAIIC were prepared both in Japanese and in English.

The simplest explanation of The National Diet of Japan Fukushima Nuclear Accident Independent Investigation Commission NAIIC Report (English):

1. What is the NAIIC?

2. Was the nuclear accident preventable?

3. What happened inside the nuclear plant?

4. What should have been done after the accident?

5. Could the damage be contained?

6. What are the issues with nuclear energy?

わかりやすいプロジェクト　国会事故調編

１。国会事故調ってなに？

２。事故は防げなかったの？

３。原発の中でなにが起こっていたの？

４。事故の後対応をどうしたらよかったの？

５。被害を小さくとどめられなかったの？

６。原発をめぐる社会の仕組みの課題ってなに？

“Groupthink can kill”

We need leaders to be accountable, and we need to understand that “Groupthink” can lead to disasters.

We need the obligation to dissent instead of compliance.

The Nuclear Accident Independent Investigation Commission (NAIIC) was like a hole body CT scan of the Governance of Japan.

Richard Feynman when charing the Space Shuttle Accident investigation wrote in 1986: “for a successful technology, reality must take precedence over public relations, for nature cannot be fooled.

For his work chairing the Nuclear Accident Independent Investigation Commission (NAIIC) Professor Kurokawa was selected as one of “100 Top Global Thinkers 2012” by Foreign Policy “for daring to tell a complacent country that groupthink can kill”.

Professor Kurokawa was awarded the AAAS Scientific Freedom and Responsibility Award “for his courage in challenging some of the most ingrained conventions of Japanese governance and society.

“Japan is clearly living in denial, water keeps building up inside the plant, and debris keeps piling up outside of it. This is all just one big shell game aimed at pushing off the problem until the future”, New York Times, quotation of the day, September 4, 2013 Professor Kiyoshi Kurokawa

Copyright (c) 2014 Eurotechnology Japan KK All Rights Reserved

(Gerhard Fasol, CEO of Eurotechnology Japan KK. Served as Associate Professor of Tokyo University, Lecturer at Cambridge University, and Manger of Hitachi Cambridge R&D Lab.)

Keynote presented at the 6th Ludwig Boltzmann Symposium on February 20, 2014 at the Embassy of Austria in Tokyo.

Ludwig Boltzmann, the scientist

Ludwig Boltzmann’s greatest contribution to science is that he linked the macroscopic definition of Entropy which came from optimizing steam engines at the source of the first industrial revolution to the microscopic motion of atoms or molecules in gases, this achievement is summarized by the equation S = k log W, linking entropy S with the probability W. k is the Boltzmann constant, one of the most important constants in nature, linked directly to temperature in the SI system of physical units. This monumental work is maybe Boltzmann’s most important creation but by far not the only one. He discovered many laws, and created many mathematical tools, for example Boltzmann’s Equations, which are used today as tools for numerical simulations of gas flow for the construction of jet engines, airplanes, automobiles, in semiconductor physics, information technology and many other areas. Although independently discovered, Shannon’s theory of noise in communication networks, and Shannon’s entropy in IT is also directly related to Boltzmann’s entropy work.

Ludwig Boltzmann, the leader

Ludwig Boltzmann was not only a monumental scientist, but also an exceptional leader, teacher, educator and promoter of exceptional talent, and he promoted many women.

One of the women Ludwig Boltzmann promoted was Henriette von Aigentler, who was refused permission to unofficially audit lectures at Graz University. Ludwig Boltzmann advised and helped her to appeal this decision, in 1874, Henriette von Aigentler passed her exams as a high-school teacher, and on July 17, 1876, Ludwig Boltzmann married Henriette von Aigentler, my great-grand mother.

Another woman Ludwig Boltzmann promoted was his student Lise Meitner (Nov 1878 – Oct 27, 1968), who later was part of the team that discovered nuclear fission, work for which Otto Hahn was awarded the Nobel Prize. Lise Meitner was also the second woman to earn a Doctorate degree in Physics from the University of Vienna. Element 109, Meitnerium, is named after Lise Meitner.

Nagaoka Hantaro, First President of the University of Osaka – Ludwig Boltzmann’s pupil

The first President of Osaka University (1931-1934), Nagaoka Hantaro (1865 – 1950) was Ludwig Boltzmann’s pupil around 1892 – 1893 at Muenchen University.

Ludwig Boltzmann, a leader of science

Ludwig Boltzmann was connected in intense discussions with all major scientists of his time, he travelled extensively including three trips to the USA in 1899, 1904 and 1905, about which he wrote the article “Die Reise eines deutschen Professors ins El Dorado”, published in the book “Populäre Schriften”.

Ludwig Boltzmann published his first scientific publication at the age of 21 years in 1865. He was appointed Full Professor of Mathematical Physics at the University of Graz in 1869 at the age of 25 years, later in 1887-1888 he was Rektor (President) of the University of Graz at the age of 43 years.

He spent periods of his professional work in Vienna, at Graz University (1869-1873 and 1876-1890), at Muenchen University (1890-1894). When working at Muenchen University, he discovered that neither he nor his family would not receive any pension from his employment at Muenchen University after an eventual retirement or in case he dies before retirement, and therefore decided to return to Vienna University in 1894, where he and his family were assured of an appropriate pension. During 1900-1902 he spent two years working in Leipzig, where he cooperated with the Nobel Prize winner Friedrich Wilhelm Ostwald.

Ludwig Boltzmann did not shy away from forceful arguments to argue for his thoughts and conclusions, even if his conclusions were opposite to the views of established colleagues, or when he felt that philosophers intruded into the field of physics, i.e. used methods of philosophy to attempt solving questions which needed to be solved with physics measurements, e.g. to determine whether our space is curved or not. Later in his life he was therefore also appointed to a parallel Chair in Philosophy of Science, and Ludwig Boltzmann’s work in Philosophy of Science is also very fundamentally important.

I discovered the unpublished manuscripts of Boltzmann’s lectures on the Philosophy of Science, stimulated and encouraged by myself, and with painstaking work my mother transcribed these and other unpublished manuscripts, and prepared them for publication, to make these works finally accessible to the world, many years after Ludwig Boltzmann’s death.

Ludwig Boltzmann was a down to earth man. He rejected the offer of Nobility by His Majesty, The Emperor of Austria, i.e. the privilege to be named Ludwig von Boltzmann (or a higher title) instead of commoner Ludwig Boltzmann. Ludwig Boltzmann said: “if our common name was good enough for my parents and ancestors, it will be good enough for my children and grand children…”

Summary: understanding Ludwig Boltzmann.

Boltzmann’s thoughts and ideas are a big part of our understanding of the world and the universe.

His mathematical tools are used every day by today’s engineers, bankers, IT people, physicists, chemists… and even may contribute to solve the world’s energy problems.

Ludwig Boltzmann stood up for his ideas and conclusions and did not give in to authority. He rejected authority for authority’s sake, and strongly pushed his convictions forward.

What can we learn from Ludwig Boltzmann?

• empower young people, recognize and support talent early.
• exceptional talent is not linear but exponential.
• move around the world. Connect. Interact.
• empower women.
• don’t accept authority for authority’s sake.
• science/physics/nature need to be treated with the methods of physics/science.
• no dogmas.
• support entrepreneurs, Ludwig Boltzmann did.

Copyright 2014 Eurotechnology Japan KK All Rights Reserved

(by Gerhard Fasol, CEO of Eurotechnology Japan KK. Served as Associate Professor of Tokyo University, Lecturer at Cambridge University, and Manger of Hitachi Cambridge R&D Lab.)

Keynote presented at the 6th Ludwig Boltzmann Symposium on February 20, 2014 at the Embassy of Austria in Tokyo.

(in preparing this talk, I am very grateful for several email discussions and telephone conversations, and for unpublished presentations and documents, to Dr Michael de Podesta MBE CPhys MInstP, Principal Research Scientist at the National Physical Laboratory NPL in Teddington, UK, who has greatly assisted me in understanding the current status of work on reforming the SI system of units, and also his very important work on high-precision measurements of Boltzmann’s constant. Dr Michael de Podesta’s measurements of Boltzmann’s constant are arguable among the most precise, of not the most precise measurements of Boltzmann’s constant today, and therefore a very important contribution to our system of physical units).

Boltzmann constant k, the definition of the unit of temperature and energy

Temperature is one of the physics quantities we use most, and understanding all aspects of temperature is at the core of Ludwig Boltzmann’s work. People measured temperature long before anyone knew what temperature really is: temperature is a measurement of the average kinetic energy of the atoms of a substance. When we touch a body to “feel” its temperature, what we are really doing is to measure the “buzz”, the thermal vibrations of the atoms making up that body.

For an ideal gas, the kinetic energy per molecule is equal to 3/2 k.T, where k is Boltzmann’s constant. Therefore Boltzmann’s constant directly links energy and Temperature.

However, when we measure “Temperature” in real life, we are not really measuring the true thermodynamic temperature, what we are really measuring is T90, a temperature scale ITS-90 defined in 1990, which is anchored by the definition of temperature units in the System International, the SI system of defining a set of fundamental physical units. Our base units are of fundamental importance for example to transfer semiconductor production processes around the world. For example, when a semiconductor production process requires a temperature of 769.3 Kelvin or mass of 1.0000 Kilogram, then accurate definition and methods of measurement are necessary to achieve precisely the same temperature or mass in different laboratories or factories around the world.

The SI system of physical units

The SI system consists of seven units, which at the moment are defined as follows:

• second: The second is the duration of 9 192 631 770 periods of the radiation corresponding to the transition between the two hyperfine levels of the ground state of the cesium 133 atom.
• metre: The meter is the length of the path travelled by light in vacuum during a time interval of 1/299 792 458 of a second.
• kilogram: The kilogram is the unit of mass; it is equal to the mass of the international prototype of the kilogram.
• Ampere: The ampere is that constant current which, if maintained in two straight parallel conductors of infinite length, of negligible circular cross-section, and placed 1 meter apart in vacuum, would produce between these conductors a force equal to 2 x 10-7 newton per meter of length.
• Kelvin: The kelvin, unit of thermodynamic temperature, is the fraction 1/273.16 of the thermodynamic temperature of the triple point of water.
• mole:
  1. The mole is the amount of substance of a system which contains as many elementary entities as there are atoms in 0.012 kilogram of carbon 12
  2. When the mole is used, the elementary entities must be specified and may be atoms, molecules, ions, electrons, other particles, or specified groups of such particles.
• candela: The candela is the luminous intensity, in a given direction, of a source that emits monochromatic radiation of frequency 540 x 1012 hertz and that has a radiant intensity in that direction of 1/683 watt per steradian.

The definitions of base units has long history, and are evolving over time. Today several of the definitions are particularly problematic, among the most problematic are temperature and mass.

SI base units are closely linked to fundamental constants:

• second:
• metre: linked to c = speed of light in vacuum
• kilogram: linked to h = Planck constant.
• Ampere: linked to e = elementary charge (charge of an electron)
• Kelvin: linked to k = Boltzmann constnt
• mole: linked to N = Avogadro constant
• candela:

Switch to a new framework for the SI base units:

Each fundamental constant Q is a product of a number {Q} and a base unit [Q]:

Q = {Q} x [Q],

for example Boltzmann’s constant is:
k = 1.380650 x 10-23 JK-1.

Thus we have two ways to define the SI system of SI base units:

1. we can fix the units [Q], and then measure the numerical values {Q} of fundamental constants in terms of these units (method valid today to define the SI system)
2. we can fix the numbers {Q} of fundamental constants, and then define the units [Q] thus that the fundamental constants have the numerical values {Q} (future method of defining the SI system)

Over the next few years the SI system of units will be switched from the today’s method (1.) where units are fixed and numerical values of fundamental constants are “variable”, i.e. determined experimentally, to the new method (2.) where the numerical values of the set of fundamental constants is fixed, and the units are defined such, that their definition results in the fixed numerical values of the set of fundamental constants. This switch to a new definition of the SI system requires international agreements, and decisions by international organizations, and this process is expected to be completed by 2018.

Today’s method (1.) above is problematic: The SI unit of temperature, Kelvin is defined as the fraction 1/273.16 of the thermodynamic temperature at the triple point of water. The problem is that the triple point depends on many factors including pressure, and the precise composition of water, in terms of isotopes and impurities. In the current definition the water to be used is determined as “VSNOW” = Vienna Standard Mean Ocean Water. Of course this is highly problematic, and the new method (2.) will not depend on VSNOW any longer.

In the new system (2.) the Kelvin will be defined as:

Kelvin is defined such, that the numerical value of the Boltzmann constant k is equal to exactly 1.380650 x 10-23 JK-1.

Measurement of the Boltzmann constant k:

In order to link the soon to be fixed numerical value of Boltzmann’s constant to currently valid definitions of the Kelvin, and in particular to determine the precision and errors, it is necessary to measure the value of Boltzmann’s current in terms of today’s units as accurately as possible, and also to understand and estimate all errors in the measurement. Several measurements of Boltzmann’s constants are being performed in laboratories around the world, particularly at several European and US laboratories. Arguably today’s best measurement has been performed by Dr Michael de Podesta MBE CPhys MInstP, Principal Research Scientist at the National Physical Laboratory NPL in Teddington, UK, who has kindly discussed his measurements and today’s status of the work on the system of SI units and its redefinition with me, and has greatly assisted in the preparation of this article. Dr Podesta’s measurements of Boltzmann’s constant have been published in:
Michael de Podesta et al. “A low-uncertainty measurement of the Boltzmann constant”, Metrologia 50 (2013) 354-376.

Dr Podesta’s measurements are extremely sophisticated, needed many years of work, and cooperations with several other laboratories. Dr. Podesta and collaborators constructed a highly precise resonant cavity filled with Argon gas. Dr. Podesta measured both the microwave resonance modes of the cavity to determine the precise radius and geometry, and determined the speed of sound in the Argon gas from acoustic resonance modes. Dr Podesta performed exceptionally accurate measurements of the speed of sound in this cavity, which can be said to be the most accurate thermometer globally today. The speed of sound can be directly related to 3/2 k.T, the mean molecular kinetic energy of the Argon molecules. In these measurements, Dr. Podesta very carefully considered many different types of influences on his measurements, such as surface gas layers, shape of microwave and acoustic sources and sensors etc. He achieved a relative standard uncertainty of 0.71. 10-6, which means that his measurements of Boltzmann’s constant are estimated to be accurate to within better than on millionth. Dr. Podesta’s measurements directly influences the precision with which we measure temperature in the new system of units.

Over the last 10 years there is intense effort in Europe and the USA to build rebuild the SI unit system. In particular NIST (USA), NPL (UK), several French institutions and Italian institutions, as well as the German PTB (Physikalische Technische Bundesanstalt) are undertaking this effort. To my knowledge there is only very small or no contribution from Japan to this effort, which was surprising for me.

What is today’s best value for the Boltzmann constant k:

Today’s accepted best value of Boltzmann’s constant is the “2010 Codata value”:

k = 1.380 6488 . 10-23 JK-1, and the standard uncertainty is:
su = 0.000 0013 . 10-23 JK-1

Copyright 2014 Eurotechnology Japan KK All Rights Reserved

(Former President and Emeritus Professor of Tokyo Institute of Technology. Inventor of VCSEL (vertical cavity surface emitting lasers), widely used in photonics systems)

Keynote presented at the 6th Ludwig Boltzmann Symposium on February 20, 2014 at the Embassy of Austria in Tokyo.

VCSEL: how Kenichi Iga invented Vertical Cavity Surface Emitting Lasers

My invention of vertical cavity surface emitting lasers (VCSEL) dates back to March 22, 1977. Today VCSEL devices are used in many applications all over the world. I was awarded the 2013 Franklin Institute Award, the Bower Award and Prize for Achievement in Science, “for the conception and development of the vertical cavity surface emitting laser and its multiple applications in optoelectronics“. Benjamin Franklin’s work is linked to mine: Benjamin Franklin in 1752 discovered that thunder originates from electricity – he linked electronics (electricity) with photons (light). After 1960 the era of lasers began, we learnt how to combine and control electrons and photons, and the era of optoelectronics.

If you read Japanese, you may be interested to read an interview with Genichi Hatakoshi and myself, intitled “The treasure micro box of optoelectronics” which was recently published in the Japanese journal OplusE Magazine by Adcom-Media.

Electrons and photons

Who are electrons? Electrons are just like a cloud expressed by Schroedinger’s equation, which Schroedinger postulated in 1926. Electrons can also be seen as randomly moving particles, described by the particle version of Schroedinger’s equation (1931).

Where does light come from? Light is generated by the accelerated motion of charged particles.

Electrons also show interference patterns. For example, if we combine the 1s and 2p orbitals around a nucleus, we observe interference.

In a semiconductor, electrons are characterized by a band structure, filled valence bands and largely empty conduction bands. The population of hole states in the valence bands and of electrons in the conduction bands are determined by the Fermi-Dirac distribution. In typical III-V semiconductors, generation and absorption of light is by transitions between 4s anti-bonding orbitals (the bottom of the conduction band) and 4p bonding orbitals (the top of the valence band).

In Japan, we are good at inventing new types of vertical structures:

• in 607, the Horyuji 5-Jyu-no Toh (5 story tower) was built in Nara, and today we have progressed to building the 634 meter high Tokyo Sky Tree Tower.
• in 1893, Kubota Co. Ltd. developed the vertical molding of water pipes
• in 1977 Shunichi Iwawaki invented vertical magnetic memory
• in 1977 Tatsuo Izawa developed VAD (vapor-phase axial deposition) of silica fibers
• in 1977 Kenichi Iga invented vertical cavity surface emitting lasers (VCSEL)

Communications and optical signal transmission

History of communications spans from 10,000 years BC with the invention of language, and 3000 BC with the invention of written characters and papyrus, to the invention of the internet in 1957, the realization of the laser in 1960, the realization of optical fiber communications in 1984, and now since 2008 we see Web 2.x and Cloud.

Optical telegraphy goes back to 200 BC, when optical beacons were used in China: digital signals using multi-color smoke. Around 600 AD we had optical beacons in China, Korea and Japan, and in 1200 BC also in Mongolia and India.
In the 18th and 19th century, optical semaphores were used in France.

In the 20th century, optical beam transmission using optical rods and optical fiber transmissions were developed, which combined with the development of lasers created today’s laser communications. Yasuharu Suematsu and his student showed the world’s first demonstration of optical fiber communications demonstration on May 26, 1963 at the Tokyo Institute of Technology, using a He-Ne laser, an electro-optic crystal for modulation of the laser light by the electrical signal from a microphone, and optical bundle fiber, and a photo-tube at the other end of the optical fiber bundle to revert the optical signals back into electrical signals and finally to drive a loud speaker. For his pioneering work, Yasuharu Suematsu was awarded the International Japan Prize in 2014.

VCSEL: I recorded my initial idea for the surface emitting laser on March 22, 1977 in my lab book.

Vertical Cavity Surface Emitting Lasers (VCSEL) have many advantages:

1. ultra-low power consumption: small volume
2. pure spectrum operation: short cavity
3. continuous spectrum tuning: single resonance
4. high speed modulation: wide response range
5. easy coupling to optical fibers: circular mode
6. monolithic fabrication like LSI
7. wafer level probe testing
8. 2-dimensional array
9. vertical stack integration with micro-machine
10. physically small

VCSEL have found applications in many fields, including: data communications, sensing, printing, interconnects, displays.

As an example, the Tsubame-2 supercomputer, which in November 2011 was 5th of top-500 supercomputers, and on June 2, 2011 was greenest computer of Green500, uses 3500 optical fiber interconnects with a length of 100km. In 2012: Too500/Green500/Graph500

IBM Sequoia uses 330,000 VCSELs.

Fuji Xerox introduced the first demonstration of 2 dimensional 4×8 VCSEL printer array for high speed and ultra-fine resolution laser printing: 14 pages/minute and 2400 dots/inch.

VCSEL: Some recent news:

The laser market is estimated to be US$ 11 billion by 2017.
VCSELs move to optical interconnects.
By 2019 the optical interconnect market is estimated to reach US$ 5.2 billion.

VCSEL: In summary

VCSEL photonics started from minor reputation and generated big innovation. VCSELs feature:

• low power consumption: good for green ICE
• high speed modulation beyond 20 GBits/second
• 2D array
• good productivity due to monolithic process

Future: will generate ideas never thought before.

Copyright (c) 2014 Eurotechnology Japan KK All Rights Reserved

Israeli Venture funds introduce Israeli ventures to Japanese investors

Acquisition of Viber by Rakuten draws attention in Japan to Israeli ventures

The recent acquisition of the Israel-based OTT (over the top) communications company Viber by Rakuten for US$ 900 Million has drawn attention in Japan to Israel’s innovative power, however many Japanese companies are already cautiously investing in Israel while keeping a low profile, we learnt at the “Start-up Nation Israel 2014” Israel Japan Investment Funds meeting on March 4, 2014 at the Hotel Okura in Tokyo.

Most of the companies presented at the conference were highly sophisticated computer security, medical equipment, and similar “mono zukuri” type ventures, but also included a “selfie” app for auto-portrait or group photos using iPad or iPhone.

By the way: our company is currently working to sell an Israeli venture company to Japan as an exit for investors, and to accelerate business development in Japan for this company.

Her Excellency, Ambassador of Israel to Japan, Ms Ruth Kahanoff opened the conference:

Economic Minister of Israel to Japan, Mr Eitan Kuperstoch explained that while there is substantial investment in Israel’s ventures by many major Japanese corporations, there is much scope for increases. Japan’s investment added together are on the order of 1% of foreign direct investments to Israel:

Pitches by Israeli Venture Funds

• BRM Group: actually a privately held fund, strictly speaking not venture capital
• Vertex Venture Capital: Japanese investments by Hitachi, Fujitsu, Murata, NTT-Soft, Muratec, Advantest, NTT-Finance, Nomura, SMBC, SII, JAFCO, SEIKO Electric, Monex, Toyo Ink Group, Aizawa Securities
• CHIMA Ventures: medical devices, minimal invasive surgery tools.
• TERRA Venture Partners: Terra invests in about 16-20 (4-5 per year) for a 1-2 year incubation period, followed by a “cherry picking” process. Terra VP invests in companies surviving the “cherry picking”. Veolia, GE, EDP, Clearweb, Enel are partners.
• Giza Venture Capital: 5 funds, US$ 600 million under management, 102 investments, 20 active, 38 exits. Examples are: XtremIO, Actimize, Telegate, Precise, Plus, msystems, cyota, Olibit, Zoran, XTechnology. A particular success story is XtremIO: the team of 21 people (including secretary) turned US$ 6 million investment into a US$ 435 million cash sale to EMC.
• StageOne Ventures: Early stage US$ 75 million fund, 17 investments.
• Gillot Capital Partners: seed and early stage. Focus: cyber security.
• SCP Vitalife Partners: 2 funds, US$ 230 capital under management.
• Magma Venture Partners: focus on information and communications sector. Created over US$ 2 billion in acquired company value. Biggest success story: waze (crowd sourced location based services), return on capital investment: 171-times.
• OrbiMed Healthcare Fund Management: largest global healthcare dedicated investment firm.
• Nielsen Innovate:

Presentations and Panel discussion

Arik Klienstein: Driving innovation in Israel – the 8200 impact

8200 is a unit within the Israeli Defence Forces similar to the US NSA – technology based intelligence collection. 8200 veterans lead many Israeli start-ups including NICE, Verint, Check Point, paloalto.

8200 and the start up culture:

• Select the best people out of high school or college
• Short first formal training. Most of training done on the job
• Flexible dynamic organizational structure
• Direct and constant relationship with the end user
• “Think out the box” mentality – no assumptions. Hierarchy-less flat structure
• Must win attitude!

Tal Slobodkin (Talpiot 18 Graduate): The Talpiot program

Talpiot is Israel’s elite Israel Defense Forces training program, dedicated to create leading research and development officers for the various branches of the Israeli Defence Forces. Program was created in 1979, about 1000 graduates today.

Selection process:

• starts with 15,000++ high school seniors
• 100-150 attend next level of leadership assessment
• 50-75 reach final selection committee
• 30-40 enter the program
• 25-35 graduate

Training and assignment:

• three full academic years
• full dual degree in Maths and Physics, most graduate additionally in Computer Science or other subjects
• military training
• significant exposure to all cutting edge military and non-military innovation
• develop management skills
• graduates pick own final assignment
• minimum assignment is additional 6 years, average tenure in Israeli Defense Forces is 10 years

Notable graduates:

• Yoaf Freund: Professor at UC San Diego, Goedel Prize winner
• Elon Lindenstrauss, Professor of Mathematics at the Hebrew University and winner or 2010 Fields Medal
• Marius Nacht, co-founder of Check Point Software
• Eli Mintz, Simchon Faigler, Amir Natan, founders of Compugen Ltd
• Founders of XIV, sold to IBM for US$ 400 million
• Eviatar Metanya, head of National Cyber Bureau
• Ophier Shoham, head of Israel’s Defence R&D Agency (Israel’s DARPA)

Elchana Harel (Harel-Hertz Investment House): Japanese investments in Israel

94 Japanese investments in Israeli High-tech during 2000-2014:

• ICT: 41 investments
• Semiconductors: 25 investments
• Life sciences: 11 investments
• VC funds: 17 investments

Characteristics:

• Most investments are strategic, not financial, not exit driven
• Most investments are direct into target companies, and relatively small by global standards: up to US$ 3 million
• In many cases “silent investments”: e.g a Japanese electronics company does not want their Japanese competitors to know that they invest in Israel
• Japanese investors mostly follow Israeli or US lead investors. Japanese investors seldom lead.

Japanese acquisitions in Israel:

• Nikken Sohonsha: NBT
• Yasukawa Robotoics: Yasukawa Israel (Eshed), Argo Medical Robotics
• Sun Corporation: Cellebrite
• SBI: Quark Pharma
• Rakuten: Viber

Japanese presence in Israel:

• R&D Centers: Hitachi Data, SONY, Toshiba
• Service centers serving Intel: Tokyo Electron, Nikkon, Daifuku

Japanese-Israeli Joint Ventures:

• Altair – SoftBank/Willcom
• Given Imaging – Suzuken / Marubeni
• Toshiba – CMT
• Takeda – J&J – Orbimed (joint incubator)

David Heller: cooperation of Israeli investment funds with Japan

Israel’s venture capital fund industry was created by Israel’s Government creating the Yozma Fund of Funds: Israel’s Government invested a total of US$ 100 million in 10 VC funds (US$ 10 million per fund) under the condition that these funds had to attract much larger non-Government investment. In total the Yozma Fund of Funds invested US$ 100 million and resulted in a VC fund industry with a total of US$ 17 Billion of VC funds raised since 1993.

There is a relatively large number of Japanese investments in Israeli funds, however, the combined total investment is rather low, approximately 1% of all foreign investments in such funds. Thus there is much scope for increased Japanese investments in Israeli funds and ventures.

Copyright 2014 Eurotechnology Japan KK All Rights Reserved

Steve Jobs donates history to Stanford University in order to focus on the future

Steve Jobs and SONY – when Steve Jobs when returned to Apple in 1996, and now SONY are faced with the same question: what to do about corporate archives and the corporate history museum? Interestingly Steve Jobs, and SONY reach exactly 180 degrees opposite answers to the same question:

• Steve Jobs donates Apple corporate archives and company museum to Stanford University
• SONY sells headquarters building, and keeps SONY corporate archives and company museum

Why opposite answers to the same question? Could it be good advice for SONY, to learn from Steve Jobs, and donate SONY-Museum and SONY-Archives to a University, and focus much more on the future?

Apple donates history collection to Stanford University:

Steve Jobs returned to Apple with the Apple purchase of NeXT on December 10, 1996. One of the first things Steve Jobs did was to orient the Apple into the future by donating the Apple Computer Inc. Museum and historical collections to Stanford University, as documented in Stanford University’s news release dated November 18, 1997. Apple’s archives are now at Stanford University’s Silicon Valley Archives.

Steve Jobs gave away Apple’s history documents in order to focus on the future.

SONY sells headquarters buildings but keeps SONY Archives and SONY Corporate History Museum:

SONY’s actions are almost exactly 180 degrees opposite to Apple’s and Steve Jobs’: according to Wallstreet Journal, The Japan News by Yomiuri, and other news sources, SONY sells the former headquarters buildings, but reports say that SONY will keep the SONY Archives and the SONY Corporate History Museum (ソニー歴史資料館).

To understand SONY’s financial situation over the last 15 years, read our Report on Japan’s electronics industry.

Why does Steve Jobs reach the 180 degrees opposite conclusion to SONY management when faced with the same question?

• Is this a manifestation of Japan’s “Galapagos syndrome”?
• Could this mean that SONY isn’t as forward looking as Steve Jobs when he returned to Apple in 1996?
• Could it be good advice for SONY, to donate SONY-Museum and SONY-Archives to a University, and instead focus on the future?

Japan’s electronics industry sector – research report, including SONY

Copyright 2014 Eurotechnology Japan KK All Rights Reserved

Initially, London Stock Exchange and Tokyo Stock Exchange created Tokyo-AIM as a joint-venture company in order to create a jointly owned and jointly managed AIM Stock Market in Tokyo, modeled according to the very successful London-AIM model.

“Tokyo Stock Exchange has learnt enough from the London Stock Exchange to set up a similar market on its own” NIKKEI on March 26, 2012

However, on March 26, 2012 NIKKEI reported that “Tokyo Stock Exchange has learnt enough from the London Stock Exchange to set up a similar market on its own. TSE plans to improve the rules of its own new market, so that TSE can create a more welcoming market” (our translation of the original Japanese NIKKEI article to English).

London Stock Exchange withdraws from joint venture, and Tokyo Stock Exchange takes 100% control of Tokyo AIM

London Stock Exchange withdrew from the venture, and Tokyo Stock Exchange took over 100% of Tokyo-AIM. Essentially, London Stock Exchange AIM’s venture into Japan failed, while the stock market created by the venture continues without London Stock Exchange’s involvement. As explained in our blog here, these events are very very similar to what happened with NASDAQ about 10 years earlier!

Tokyo AIM name changed to TOKYO PRO Market and TOKYO PRO-BOND Market

In 2012, the name was changed from Tokyo-AIM, to TOKYO PRO Market and TOKYO PRO-BOND Market. Details can be found here:

• TOKYO PRO Market
• TOKYO PRO-BOND Market

Some background about the mistakes which led to the failure of both NASDAQ and London Stock Exchange AIM to build business in Japan can be found here:

• Tokyo-AIM stock market rebirth under TSE alone? – Will Tokyo-AIM go the same way as NASDAQ-Japan?
• for general comments of why foreign companies typically fail in Japan see our “FAQ about How to fail in Japan“

Copyright 2014 Eurotechnology Japan KK All Rights Reserved

10 out of 25 top grossing apps in Japan are of foreign origin

Japan game market report (398 pages, pdf-file)

AppAnnie showed that in terms of combined iOS AppStore + Google Play revenues, Japan is No. 1 globally, spending more than the USA. Therefore Japan is naturally the No. 1 target globally for many mobile game companies, and 10 out of 25 top grossing apps in Japan are of foreign origin!

Japan’s iconic game companies created many game categories – this tradition carries over to mobile gaming now.

Building a business in Japan is not trivial

Many foreign game companies have failed and given up. Foreign game companies that have recently given up in Japan include Zynga and Habbo Hotel. EA has given up twice, and is now undertaking the third entry to Japan. To understand some of the key mistakes foreign companies make in Japan, read our blog about why Vodafone failed in Japan.

Lets have a look at the list of top grossing games in the Apple iOS AppStore today. Out of the 25 top grossing games in the AppStore, 10 are by foreign originating companies. Can you guess which these are by reading the list below?

So Japan is certainly not a “closed market”. Actually, it is obvious that Apple does not discriminate in any way against foreign companies in Japan.

Interestingly, neither Nintendo, nor Rovio’s games, such as Angry Birds appear among the 200 “top grossing games” in Apple’s iOS Japan AppStore.

Apple iOS AppStore-Japan “Top Grossing” games ranking – 10 out of the 25 top grossing apps in Japan are by companies of foreign origin

Can you guess which 10 are by companies of foreign origin?

(read the rankings on July 13, 2014 here)

February 4, 2014:

• No. 1 Puzzle & Dragons by GungHo
• No. 2 Quiz RPG Witch and black cat quiz (by Colopl)
• No. 3 Dragon Quest Monsters Superlight (by Square Enix)
• No. 4 Monster strike (by Mixi)
• No. 5 LINE Pokopang (by Naver Japan)
• No. 6 Pro yakiyu PRIDE (by Colopl Inc)
• No. 7 Tsuri Suta (by GREE)
• No. 8 Sengoku Enbu (by Sumzap Inc)
• No. 9 Puyo puyo!! Quest (by Sega Corporation)
• No. 10 Gunzei RPG aoi no sangokushi (by Colopl)
• No. 11 Bousou retsuden tansha tora (by Donuts Ltd) (a motobicycle race game)
• No. 12 Dragon league X (by Asobism Co Ltd)
• No. 13 Clash of Clans (by Supercell)
• No. 14 Love life! School Idol Festival (by KLab Inc.)
• No. 15 Candy Crush Saga (by King.com Ltd)
• No. 16 LINE (by Naver Japan)
• No. 17 Dragon poker (by Asobism Co Ltd)
• No. 18 Gundam Area wars (by NamcoBandai Games Inc)
• No. 19 Brave frontier (by Alim Co Ltd)
• No. 20 Chain cronicle. Original scenario RPG. Chencro (by SEGA Corporation)
• No. 21 LINE Play (by Naver Japan)
• No. 22 LINE Bubble! (by Naver Japan)
• No. 23 LINE Disney tsumu tsumu (by Naver Japan)
• No. 24 World soccer collection S (by KONAMI)
• No. 25 Hay Day (by Supercell)

Japan game market report

(398 pages, pdf-file)

Copyright (c)2014 Eurotechnology Japan KK All Rights Reserved

Disruption of Japan’s games sector: in a previous blog post we showed that just three newcomers (Gree + DeNA + Gungho) produce more profits than the top 9 traditional game companies combined.

Lets look at some more disruption from the perspective of Japan’s iPhone App store. Lets look at Flappy Bird vs Angry Birds…

Flappy bird Angry Birds ultimate disruption: iOS Japan AppStore “free” games ranking

February 3, 2014, in the “free” ranking in the games section of the iPhone AppStore, we find LINE dominating.

And newcomer Flappy Bird has overtaken Angry Birds by a long margin. Angry Birds Go! appears on rank No. 97 – which actually in Japan is not that bad, given the huge revenues in Japan – as App Annie has shown, Japan’s the world’s biggest grossing apps market both for iOS and Android – so No. 97 in the world’s biggest App market is not that bad.

In a subsequent article we analyze the top grossing 25 apps in the iOS AppStore.

• No. 1 LINE: Disney tsumutsumu
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• No. 6: LINE SONIC DASH S
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• No. 9: LINE Go!GO!GO!
• No. 10: LINE PARTY Run
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• No. 17: Puzzle & Dragon by GungHo
• No. 18: Flappy Bird
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• No. 23: LINE Pokopang
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• No. 30: LINE Dozer
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• No. 97: Angry Birds Go!

iPhone AppStore “Top Grossing” games ranking

February 3, 2014:

• No. 1 Puzzle & Dragons by GungHo
• No. 2 Quiz RPG Witch and black cat quiz (by Colopl)
• No. 3 Dragon Quest Monsters Superlight (by Square Enix)
• No. 4 Monster strike (by Mixi)
• No. 5 LINE Pokopang (by Naver Japan)
• No. 6 Pro yakiyu PRIDE (by Colopl Inc)
• No. 7 Tsuri Suta (by GREE)
• No. 8 Sengoku Enbu (by Sumzap Inc)
• No. 9 Puyo puyo!! Quest (by Sega Corporation)
• No. 10 Gunzei RPG aoi no sangokushi (by Colopl)

See our following blog for an analysis of the ranking of “top grossing” games in the Japan iOS AppStore.

Learn more about Japan’s games industries

Japan game market report (398 pages, pdf-file)

Copyright 2014 Eurotechnology Japan KK All Rights Reserved