Japan: Ripe for Re-Assessment* Michael Clifton Senior Trade - - PowerPoint PPT Presentation

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Japan: Ripe for Re-Assessment* Michael Clifton Senior Trade - - PowerPoint PPT Presentation

Mar 26, 2023 522 likes •674 views

Japan: Ripe for Re-Assessment* Michael Clifton Senior Trade Commissioner Osaka, Japan * Title from Lowy Institute Paper by Dr Malcolm Cook and Huw McKay The Economic Purgatory is Over Five consecutive years of unbroken growth

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Japan: Ripe for Re-Assessment*

Michael Clifton Senior Trade Commissioner Osaka, Japan

* Title from Lowy Institute Paper by Dr Malcolm Cook and Huw McKay

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The Economic Purgatory is Over

  • Five consecutive years of unbroken growth
  • Elimination of the ‘three excesses’ - headcounts, debt

and production capacity

  • Company profits up 10% on average – 5 consecutive

years of growth

  • Non-Performing Loans down 66% since 2001
  • Golden Cycle – increases in capital expenditure, rising

land prices and end of deflation

  • M&A activity soaring – 2,775 cases in 2006
  • Unemployment below 4% - job vacancies exceed

applicants

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SLIDE 3

But the more things change…

  • Corporate insularity and fickle consumers
  • Reliance on long-held relationships
  • Distrust of financial investors
  • Limited expertise in financial re-engineering
  • Companies don’t like to sell – the system favours incumbents
  • Lack of shareholder pressure to improve investor returns
  • High cost of regulation
  • Low levels of FDI – 2.8% in Japan Vs 22% in USA and 37% in UK
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SLIDE 4

Issues and Challenges

  • Demographic pressures
  • Ageing population
  • Shrinking workforce
  • Mid-career hires
  • Women in the workforce
  • Productivity gap in services sector
  • Lagging consumer confidence
  • 60% of GDP depends on consumer

spending

  • Temps and part timers now 30% of the

workforce

  • Slow wage growth (just 2% since 1997)
  • Regulatory changes
  • Increased M&A and foreign investment
  • Shareholder activism
  • Benefits of deregulation
  • Triangular mergers
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SLIDE 5

Demographic Pressures

2005: 126 million 2050: 100 million 2100: 64 million Loss of 14 million productive workers by 2030

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Demographic Pressures…So What?

  • Growth potential capped in 1.5-2% range
  • New revenue sources needed
  • Companies need growth offshore, plus labour saving technologies onshore
  • Toshiba/Westinghouse
  • Nippon Sheet Glass/Pilkington
  • Auto-Bake
  • Need to tackle low productivity in services sector (70% of employment and GDP)
  • Need to attract and retain women in the workforce
  • Downwards jolt in wages bill as older workers replaced by younger, cheaper

staff

  • Wither the family business…?
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SLIDE 7

Top Level Commitment

  • Aim to increase FDI from 2.8% to

5% of GDP by 2010

  • Investment critical to compensate

shrinking market size, and

  • Improve competition
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SLIDE 8

Regulatory Changes

  • Competition policy reforms have delivered real change:
  • Average electricity prices down 39.1% since 1994
  • Electricity market grew over 18% during this period
  • Freight transport prices down 27.5% during period 1994-2004
  • Cell phone prices down 60% during period 1993-2005
  • Ban lifted on cross border, triangular mergers
  • Changes to Anti-Monopoly Law
  • M&A activity has quadrupled in 10yrs to 2006 (621 → 2775)
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Change Leads to Opportunity

  • Investment in the market
  • Labour-saving technologies (hardware & software)
  • Healthcare: services, training, IT
  • Childcare services
  • Financial services
  • Global supply chains for trading houses and other global players
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SLIDE 10

The Pacesetters

  • Aconex
  • KeepPad
  • Hansen Technologies
  • SystemsGo Corporation
  • Impact Investing
  • Auto-Bake
  • Niseko
  • Nihon Harmony Resorts
  • Deep Powder Tours
  • Niseko Adventure Centre
  • Cheetham Salt
  • George Weston Foods
  • Detmold Packaging Group
  • Japan Australia Corporation
  • Anca
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SLIDE 11

The Pacesetters

  • Macquarie Shinsei Advisory Company
  • targeting infrastructure assets include telecommunications, media and transportation
  • in response to favourable economic trends and the ongoing public-to-private sector shift
  • Babcock and Brown Japan Property Trust

– 36 office, retail and residential properties valued in excess of $1bn – returns in excess of 29% in year ending Dec06

  • Challenger Kenedix Japan Trust
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Key Messages

  • Japan’s ‘lost decade’ is now an historical footnote
  • Japan is in the early stages of a “Third Opening”
  • Japan’s demographics present real opportunities for astute entrepreneurs
  • Is Australia lagging the competition? Act now or risk missing the boat.
  • Support is at hand - JETRO, Austrade and many others
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Achieving Success in Japan

  • Know your strengths
  • Be prepared to spend time, resources and effort
  • Relationships matter
  • Maintain highest standards of quality and safety
  • Maintain cultural identity – Australians are not Japanese.
  • Follow up early and often
  • Some of the best niche markets can be found in regional Japan