* * * * * * * * TERRIE’S TAKE – BY TERRIE LLOYD * * * * * *
A weekly roundup of news & information from Terrie Lloyd, a long-term
technology and media entrepreneur living in Japan.
(http://www.terrielloyd.com)

General Edition Sunday, April 23, 2017, Issue No. 893

– What’s New — Who Is Responsible if Your Airbnb Home Burns Down?
– News — Joggers receive chemical burns at Tama River
– Upcoming Events — Terrie’s Entrepreneur Seminar
– Corrections/Feedback
– Travel Picks — Two nice cafes: one in Shinjuku Gyoen, one in Shimane
– News Credits

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+++ WHAT’S NEW

It seems that quite a few of our readers are interested in the upcoming
“Airbnb Law” (the room-sharing, or Minpaku law). If room-sharing does
become legal as expected, we believe it will unlock a mini-boom in local
housing markets of independent investors buying up properties that can
be converted to Airbnb listings. And of course, it’s not just Airbnb, we
are aware of at least 3 local competitors (Hyakuzen Renma, Rakuten, and
China’s Tujia JP subsidiary) with tens of thousands of properties
between them as well.

Does this mean that the market will be flooded with new accommodation?
Will rates plummet?

We’ve been watching Airbnb in Japan closely for over a year now, and
when there is an oversupply, such as in the winter months, the rates do
come down by about 30% if you want to keep your place full. If the
amount of supply doubles or triples in the next 12 months after the law
changes, for sure this will impact earnings in popular areas. But at the
same time, as we have seen this last week, the government plans to do
whatever it can to keep the growth of Inbound tourists rising. They seem
really serious about hitting 40m a year.

Their latest move was to lower the visa requirements for Chinese people
wanting to get multiple re-entry visas for Japan. This law change alone
will probably double the number of annual Chinese visitors to 12m people
a year. If this happens, and given that almost 50% of Chinese travelers
to Japan are now repeaters (and thus more confident than first-timers),
those extra Minpaku rooms are going to quickly get taken up by the market.

So we believe that investing in real estate suitable for Airbnb use
(separate houses rather than shared apartments, purchases in tolerant
neighborhoods, popular tourist destinations, etc.) will long-term be a
good move.

We’re of course not the only ones thinking this, and readers have
already started asking us questions about the risks of renting out. For
example, one reader asked a pertinent question about who we think will
bear liability if a minpaku guest starts a fire or causes some other
significant and life-threatening problem. Specifically, his question reads:

**********
=> Minpaku and Housing Insurance

“Insurance in Japan is now so highly regulated that the admin you have
to do (particularly for housing insurance for renters) means few
corporates want to do business in the Minpaku sector….. And yet
private Minpaku owners want to be covered ….. I guess they need their
renters to insure themselves?”

“If you think about it, cars that drive themselves represent a similar
issue. Current insurance policies are made assuming there is a
driver…. so in Japan who holds responsibility for an accident in a
self-driving car? The car maker or the owner?”

“It seems to me that the Minpaku sector has a similar problem. When a
tenant causes a minpaku house to burn down and it takes 2 other
dwellings nearby with it, where does the responsibility lie? And what of
the 3rd party houses?”

**********

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http://bit.ly/2mfoJzF
———————————————————–

[…Article continues]

Yeah, good questions, so we turned to our law firm for advice. They
obliged, and in the process alerted to us to the fact that the
government appears to be looking to put the onus mostly on the Minpaku
owner, and separately to the owners of any properties nearby. Their
answers were as follows:

=> Q1. Who holds liability for damage caused to a Minpaku property?

*** TT: With respect to a normal leasehold property, a renter normally
needs to buy their own damage insurance, however, Minpaku renters are
“unspecified users” and it is not practical for each tenant to buy
insurance. A report entitled “Designing the Minpaku Service System” (see
URL below) was compiled by the Committee for Minpaku Services, convened
by the Ministry of Health, Labor and Welfare and the Japan Tourism Agency.
Page 7 of the report says that Minpaku owners will be “urged” to buy
damage insurance for the safety and security of their renters, and
therefore the authorities will expect Minpaku owners to insure themselves.

http://bit.ly/2oWwxuv (Minpaku rules)

It is worth noting that Sompo Japan Nipponkoa Himawari Life Insurance
started selling insurance products for Minpaku renters from last Autumn,
but while nominally for renters, in fact the products appear to be
targeted more at the Minpaku owners.

http://bit.ly/2oCas0Q (insurance article)

=> Q2. If a Minpaku dwelling burns down and takes 2 other dwellings with
it, where does the responsibility lie?

*** TT: If there is damage to a Minpaku dwelling, caused by the tenant,
then that tenant is responsible for their default (Article 416 of the
Civil Code) under their contractual relationship with the owner.
Therefore, the owner can seek damages against the renter under Article
416 of the Civil Code, providing the blaze was caused by fault or
negligence by the renter.

If there is damage to a neighboring dwelling, then the owner of that
neighboring location can also seek damages against the tenant under
Article 709 of the Civil Code. However, the Act on Civil Liability for
Fire Caused by Negligence will be applied and this means that gross
negligence by the tenant must be proved. Apparently this is hard to prove.

If the neighbor decides to seek damages against the Minpaku dwelling
owner, under Article 709 of the Civil Code, the Minpaku owner’s
responsibility for damages will only be recognized if there was gross
negligence by the owner. That said, the neighbor may be able to file an
action against the Minpaku owner for liability as the possessor and
owner of the structure that burned down, also under Article 709.
However, as set by judicial precedent (a judgment of the Osaka District
Court made on April 11, 1932), the Minpaku owner will only bear
responsibility for damages when there was gross negligence by the owner,
or a defect in the installation or preservation of any structure on the
land.

More likely, though, is that the Minpaku owner and the neighbor will
respectively make insurance claims under their own damage insurance.

=> Q3. And for self-driving cars?

*** Fully automated driving has not yet become a reality in Japan, and
damage claims in accidents caused by an automated car are under discussion.
In fact, there was a special feature article entitled “Automatic Driving
and Civil Liability” in the Jurist magazine, No. 1501 about this topic.
Also, the Ministry of Land, Infrastructure, Transport and Tourism has
established a committee for “Damage Claims from Automated Driving”, but
this committee has only convened twice so far.

In the case of damages due to a victim, the car manufacturer might
become liable for compensation, under Article 3 of the Product Liability
Act. Furthermore, car owners and users of automated driving cars might
also become personally liable to compensate, under Article 709 of the
Civil Code.
In the case of damage due to the car owner, the car manufacturer might
be liable for compensation, on the basis that they sold a car that could
cause an accident.

So the moral of this story is that if you’re planning to buy into the
Minpaku market, plan to get insured first.

…The information janitors/

***————————****————————-***

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———————————————————–

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

+++ NEWS

– Mitsubishi Heavy exits cruise ship building
– Japan Post sold a bill of goods?
– Right-wing school goes bankrupt
– Japan to ease Chinese visa rules yet again
– Joggers receive chemical burns at Tama River

=> Mitsubishi Heavy exits cruise ship building

After losing JPY254bn on two ships delivered to a foreign ship operator,
Mitsubishi Heavy has declared that it is calling it quits on building
cruise ships for foreign clients. The company faced a series of
challenges in delivering the two enormous cruise ships to the Aida line
of Germany. These include unexpected design and specification changes,
elaborate interiors beyond the norm for Japanese lines, and three
different onboard fires during construction. The company will continue
delivering smaller ships to local customers. ***Ed: This is the new
reality, that even when a Japanese company is able to get manufacturing
opportunities back in Japan thanks to the weaker yen, they will still
find it difficult to compete. International customer expectations and
sophistication for non-core work goes far beyond their current
capability.** (Source: TT commentary from nikkei.com, Apr 22, 2017)

http://s.nikkei.com/2oBeCGc

=> Japan Post sold a bill of goods?

Apparently Japan Post will write off as much as JPY200bn (US$1.8bn) from
its investment to buy Australian logistics firm Toll Holdings, a company
it paid AU$6.5bn for just two years ago (May, 2015). The Japanese parent
ordered a restructuring of Toll late last year, resulting in new
management and an upcoming loss of about 1,000 jobs. Various reasons are
being given for the failure of Toll’s business, which looked so
promising back in 2014 and 2015. The biggest of these is the sluggish
economy in Australia since 2015, followed closely by increased
competition from Australia Post, DHL, and Singapore Post-backed Couriers
Please. ***Ed: But you also have to wonder if the previous owners didn’t
do a bit of pump-and-dump structuring as well? Will be interesting to
see if Japan Post follows the path of several other Japanese acquirers
recently, launching a lawsuit against the previous owners to claw back
some of its purchase price. Maybe too late to do so, though.**

http://bit.ly/2q3OUvn

=> Right-wing school goes bankrupt

In a case of simple karma, the school encouraging emperor worship and
rightwing hate speech towards minorities, has just applied for
protection from its creditors, in a limited form of bankruptcy. The
original principal was Yasunori Kagoike, who found himself at the center
of a political scandal when he told reporters last month that he
received an envelope with JPY1m in it from Akie Abe, the wife of the
Japanese PM. Of course the Abes denied the gift, but his accusation
escalated moves by creditors who were about to finish a new elementary
school facility for him. Kagoike’s daughter, Chinami, is now running the
school and trying to “crash-land” the family business and keep it going.
***Ed: Good luck with that. Rather obvious that they are being made a
scapegoat by the rightwing establishment.** (Source: TT commentary from
mainichi.jp, Apr 21, 2017)

http://bit.ly/2p9clGv

=> Japan to ease Chinese visa rules yet again

The Immigration Bureau has confirmed that Japan will further relax visa
rules for Chinese tourists, starting May 8th, 2017. The rules will allow
visitors with annual income of just JPY3m to receive a multiple re-entry
visa, down from the previous requirement of JPY4m in annual income.
***Ed: China is already the biggest source of inbound tourists, with
6.37m people in 2016. Our guess is that by lowering income requirements
by 25%, about 50% more people at the base of China’s employment pyramid
will be eligible for repeat visits. If correct, this means around 1m
Chinese will be likely to travel to Japan in a given month.** (Source:
TT commentary from reuters.com, Mar 30, 2017)

http://reut.rs/2pSrF87

=> Joggers receive chemical burns at Tama River

In what may be an unfortunate first for local joggers, apparently a Tama
River walkway used frequently by joggers and families caused three
people chemical burns due to lime leaching out from the freshly laid
concrete. The burns occurred on a new section, and it appears that
workers added the standard amount of lime to a mix that already had the
correct lime ratio in it. The excess seeped out to the surface of the
walkway after recent heavy rain and was concentrated enough to burn
right through the joggers’ footwear. ***Ed: Not like Japanese laborers
to mess up, but luckily this incident was contained. The Tama River is a
popular destination for families around Tokyo and teams with people in
the weekends.** (Source: TT commentary from japantimes.co.jp, Apr 21, 2017)

http://bit.ly/2ohPKs8

NOTE: Broken links
Some online news sources remove their articles after just a few days of
posting them, thus breaking our links — we apologize for the inconvenience.

***————————****————————-***

+++ UPCOMING EVENTS

——— Terrie Lloyd’s Entrepreneur Seminar ————-

Have you ever thought about setting up your own company in Japan? Or,
are you already running one and wondering how to move up to the next level?

Local Australian/Kiwi entrepreneur Terrie Lloyd, is running a seminar
for people who want to form their own companies. Terrie has established
17 companies in Japan over the last 34 years, and has a lot of
experience to share about how to structure and run your business when
first starting up. Terrie has successfully had seven M&As of previous
companies and is currently building a software company and a travel company.

Date: May 20, 2017
Location: Roppongi, Tokyo
Details: http://bit.ly/OjWZIr

***————————****————————-***

+++ CORRECTIONS/FEEDBACK

1. In TT-891 we discussed the future of Amazon-style online shopping
deliveries in Japan. One reader tells us that penalizing (or rewarding)
consumers for being home for shipments may not work.

=> Reader says:

Although online scheduling is more efficient for the delivery company,
your assumption that sufficient customers would use an online delivery
scheduling service to justify this action is debatable. As an Amazon
Prime customer, I would hate the idea of setting up an online account to
schedule a delivery and would find the whole process tedious. Yes, you
could “fine” customers with a hefty charge like TD did, to force people
to use online scheduling, or you could simply make it a requirement for
using Amazon Prime. However, forcing people to use online scheduling
would be at the expense of sales and customers.

2. In TT-892, we messed up in our calculation of what a travel agency
consultant costs. The correct basis for calculation should have been:

On average a travel agent take 2-12 hours to call multiple suppliers by
phone, then quote, adjust, and requote the 3-4 times that a standard
customer needs and expects. Leads usually come in from the agent’s
website and about 10% of those leads actually convert into business.
Commission on a piece of business is about 10%.

* One consultant – 160 hours a month
* One website – 100 leads a week (300-400/month)
* Average sale closing time – 6 hours
* Average spend per person for a 7-day tour – JPY350,000 (they buy
airfares elsewhere)

So per consultant:
* 160 hours/6 hours = 26 leads, closing 3 as actual business
* JPY350,000/10% commission x 3 deals = JPY105,000/month (And the
company will need 3-4 consultants to process all leads)

As you can see that even working furiously into the late evenings (i.e.,
100+ hours of overtime per month), an average consultant would still
only make about JPY250,000/month for the company. Not enough to cover
their personnel cost, rent, systems, overheads, and ads for the website.

***————————****————————-***

+++ TRAVEL DESTINATIONS PICKS

=> Cafe La Boheme, Shinjuku-Gyoen
Kimi no Na wa (Your Name) cafe matches up in real life

Cafe La Boheme is a parkside cafe and dining experience sure to have
high nostalgic value to fans of the 2016 film “Kimi no Na wa” (Your
Name). A popular cafe before the movie, the cafe setting where Taki
conducted his part-time job as a waiter has now become an attraction for
fans of the recent animated feature. True to the movie, the cafe is
filled with young workers in uniformed attire serving appetizing Italian
selections.

With massive windows and views of the neighboring Shinjuku-Gyoen park,
the location is one of the highlights of this quiet cafe. The cafe is
situated perfectly for a tea or coffee break after viewing one of
Tokyo’s most famous parks.

http://bit.ly/2q3BYpo

=> Meguruya: Classy Travelers’ Cafe, Shimane,
Turn back time in a traditional Meiji-period home

The little historic port town of Yunotsu, known for its hot springs and
the nearby Iwami Silver Mines (both are World Heritage Sites), has
several cafes, inns, and bathhouses in remodeled old buildings along its
single winding lane. Memories of Meguruya in particular stand out in my
mind long after my visit.

Entering the first floor of the cafe from the street, you’ll see ground
level space making an “L” around a raised platform of beautiful hardwood
flooring. This enables the designer to have tables and chairs in the
front of the cafe while also having comfy sofas and traditional seating
on the floor at low tables. The large, slatted windows bring in soft,
natural light.

A display of handmade goods for sale, brought back from overseas by the
owner himself, also extends from the entrance to the back of the room.
On display are earrings, bracelets and other accessories, as well as
bags, clothing, and even colorful South American hammocks. On the raised
section, along the walls, there’s antique furniture and a slick DJ
booth. A narrow wooden staircase with built-in drawers and cabinets
rises to the second floor, which acts as the guesthouse space.

http://bit.ly/2pTcVZt

***————————****————————-***
***********************************************************
END

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+++ ABOUT US

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

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