* * * * * * * * 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, June 11, 2017, Issue No. 900

– What’s New — New “Airbnb Law” is Bigger Than Just Cheap Room Shares
– News — JPY5bn venture fund for Nihon Unisys
– Upcoming Events
– Corrections/Feedback
– Travel Picks — Ouchi-juku in Fukushima, Tattoos in Shibuya
– News Credits

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+++ WHAT’S NEW

On Friday June 9th, the National Diet (Parliament) passed legislation
that will legalize home-sharing, otherwise known as “Minpaku”. Initially
the main beneficiary will be Airbnb, who now becomes the first U.S.
sharing economy company to make it big in Japan. The new law will take
about a year to be implemented while the Ministry of Land,
Infrastructure, and Transport (MLIT) formulates the regulations, which
will then be overseen and enforced by the Japan Tourism Agency (JTA).
With the passage of this new law, home-sharing will be allowed
throughout Japan, not just in the current special zones of Osaka and
Ohta-ku (Tokyo).

As a result of law’s passage, social media boards have lit up with
comments for and against. Proponents of home-sharing are concerned about
how restrictive the new law’s details will be and whether Japan’s
overzealous regulators may yet still shoot themselves in the foot by
strangling the sector. For example, not only will there be an annual
usage limit of 180 days, but Minpaku home owners will have to register
with local authorities, follow safety and cleanliness rules, and even
have a sign out the front of their property declaring that the location
is a home-share.

Actually this latter requirement is a master stroke by the anti-home
sharing hotel lobby, since many otherwise interested people will be
reluctant to advertise to their neighbors they are subletting. Amongst
other things, having such a sign will invite cranky and nosy neighbors
to complain to the host every time they see “suspicious-looking”
foreigners wheeling strollers around the neighborhood, or speaking too
loudly in a foreign language.

The Anti-home sharing cohort on the other hand are split between those
who wail that the world is going to end for hoteliers who are unfairly
bound by much stricter rules while amateurs can do whatever they like,
and those who think that the new regulations may actually suffocate or
kill off the home-sharing movement. Indeed, this second group are rather
satisfied that the law has been passed, since it now very much restricts
market forces and thus profits.

However, our take is that while the home-sharing movement will indeed
respond to market needs, it will continue to grow and after the 2020
Olympics (before which, anyway there is a chronic accommodation
shortage) will possibly become a threat to hotel operators. Why? Well,
economics. Sure, currently the average room in Tokyo rents out on Airbnb
for around JPY7,000~JPY10,000/night, which means the home sharer is
making about JPY210,000~JPY300,000 on a room that probably costs them
about half of this in mortgage, utilities, and other fees. Although
reducing the rentable nights per year by half (to 180 nights) will mean
that their profits drop to just break even, so long as an equivalent
hotel room in the same neighborhood goes for JPY14,000~JPY20,000, there
is plenty of scope for those Airbnb hosts to put up their prices and yet
still be cheaper than an equivalent hotel.

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———————————————————–

[…Article continues]

We think this Airbnb law is quite far-reaching and goes beyond simple
economics and dealing with local vested hospitality interests. We need
to step back from the legislation and ask ourselves a very simple but
important question: “Why did the Abe government approve home-sharing?”
Yes, the nominal answer is that it’s because the government is concerned
about a shortage of accommodation for the Olympics. However, the
government could have dealt with this issue in a number of other more
controllable ways. For example, by parking a number of massive ocean
liners in Tokyo Bay and servicing them with 10-minute water shuttles.

No, we think that the Japanese bureaucracy, being as intelligent as it
is, has another deeper objective in mind.

If we look at this government’s more radical policy moves in the last 5
years, we see a definite preference for easy economic wins that can be
had on a mega-scale. As examples:
1) Diluting the value of the yen with Quantitative Easing (QE), which
transferred the burden of financing economic pump-priming to every
Japanese resident. This was easy policy thinking, with the most
difficult part being that of getting buy-in from international trading
partners. The asset the government leveraged (besides a lot of tax-payer
yen) was the Japanese public’s tolerance for fiscal abuse so long as
they get government stability in its place.
2) The same thinking was applied when the government’s biggest financial
investment bodies (Bank of Japan – being not really an independent
central bank, the Government Pension Investment Fund, Japan Post, and
the Development Bank of Japan) were directed to start buying up publicly
listed company stocks, so as to create the illusion of a healthy stock
market. The asset leveraged in this case was the public’s ignorance of
how stocks work, and because so few Japanese actually own stocks, thus
there is a narrow spread and a small number of people tapping the
financial benefits.
3) In the tourism sector, easy money has been created by easing travel
visa restrictions for China and a host of other nearby countries.
Statistics suggest that 8 inbound tourists in just one 5-7 day visit
have the same discretionary spending power as 1 Japanese living here for
a whole year. If that statistic is correct, then the 26m tourists
expected to visit Japan this year are equivalent to city the size of
Osaka, with all the consumption and value that that city creates, but
interestingly without virtually any of the social welfare (old age
homes, schools, etc.) costs or any additional infrastructure costs. So
this is easy money on a mega scale. The asset leveraged here was the
desire of neighboring countries’ lower income citizens to repeat-visit
Japan.

Now home-sharing promises to be a similar “lucrative-and-mega” policy
domain. Firstly, with the passing of the legislation, the many Japanese
players angling for a piece of the market are now enabled to go out and
invest. We expect that annual investment levels will be in the trillions
of yen and will create a building boom in small-scale domestic
dwellings. While infrastructure and big building projects require a ton
of expertise and capital, refurbishing or extending small domestic
dwellings does not. This will create a mini-boom in neighborhood
handypeople and suppliers like the Cainz DIY home improvement chain.

Secondly, and perhaps even more important, the home-sharing paradigm
allows ordinary people to take assets they already have, time and a
spare room, and turn them into cash with little investment. This will be
the secret sauce that drives Minpaku, and how ordinary people benefit is
what Airbnb and other Minpaku players need to be pounding on. Although
Japanese are highly sensitive to what their neighbors think and how they
might judge them for the cheap (and potentially bothersome) act of
renting out a room to strangers, for many older singles and younger
families the benefit of receiving an extra JPY100,000/month will be too
tempting. The average Japanese is cash poor by first world standards and
the high cost of housing keeps them poor. Minpaku offers the possibility
of taking a mortgage millstone and turning it into a revenue source.

It is our belief that the government is undertaking a vast social
experiment with the Minpaku law. If the experiment goes well, then the
third benefit will be more legislation to loosen other sectors where
there is a natural supply of assets that no one is using properly.
Vehicle usage is an obvious target. Another is farmland and
sharecropping. Another is crowdfunding of new companies, so as to bypass
risk-averse banks.

So things could get interesting in the next few years, so long as the
regulators don’t kill the golden goose.

…The information janitors/

***————————****————————-***

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

+++ NEWS

– JPY5bn venture fund for Nihon Unisys
– Motor maker Nidec invests US$500m in Vietnam
– Lowrider car exports to Japan are booming
– Tax take expected to fall
– Another scandal threatens Abe government

=> JPY5bn venture fund for Nihon Unisys

Although no longer related to its parent, Unisys Corporation in the USA,
Nihon Unisys is very much alive and well, and these days has sales
rivaling the U.S. firm. Long a conservative IT powerhouse specializing
in fintech, Nihon Unisys is recently realizing that it needs to increase
its pace of innovation or get left behind in challenges from Google,
Amazon, and others. Accordingly, the company announced on Friday that it
would establish a JPY5bn venture capital fund to invest in start-ups
involved in IoT, robotics, and of course fintech. (Source: TT commentary
from 4-traders.com, Jun 09, 2017)

http://bit.ly/2sgPXgz

=> Motor maker Nidec invests US$500m in Vietnam

Although you don’t hear about it much these days, the China-Plus-One
manufacturing diversification strategy is still very much at the top of
most manufacturer’s agendas. The latest big investment to hit the
headlines is Kyoto-based precision motor maker Nidec, which is investing
US$500m in various plants there over the next 5 years. The plants will
employ around 15,000 staff and are projected to produce upwards of 10m
motors for household appliances such as air conditioners and
refrigerators. Most of the output is expected to go to exports, although
company says that the value of the local market after the investment is
expected to increase to around JPY300bn. (Source: TT commentary from
asia.nikkei.com, Jun 09, 2017)

http://s.nikkei.com/2r7GRhW

=> Lowrider car exports to Japan are booming

Interesting photo-centric article from San Diego about the popularity of
the lowrider culture in Japan. Vehicles are typically purchased and
customized in the USA then exported to Japan, although there are some
shops (like the URL below) that customize in Japan. Because the whole
point of lowriders for Japanese is to be highly visible, the market
wants bling. Lots of chrome and big wheels fitted to vehicles like
Chrysler’s 300C Hemi, Hummer H2 and H3, Escalade, and of course older
1960 vehicles such 1964 Chevrolet Impala SS coupe. The article is
actually about the Mopona Car Show and Swap Meet, Japan’s largest
lowrider meet-up, held in Ibaraki late May each year. (Source: TT
commentary from Sandiegouniontribune.com, Jun 09, 2017)

http://bit.ly/2sQi1Eq (Ibaraki lowrider meet)
http://bit.ly/2sgFWjm (reference story)
http://bit.ly/2r7zbwk (Japan’s top lowrider custom shop)

=> Tax take expected to fall

For the first time since 2009, the general account tax revenue paid by
companies and individuals to the government is expected to fall to
JPY55.86trn or less, some hundreds of billions of yen less than
projected. The cause of the decline is both a fall in the profits being
made by companies – mostly due to the recent re-strengthening of the yen
– and in individuals’ income, due to weaker salary growth (and the
transition of a large number of workers out of the workforce). ***Ed:
While falling tax revenues is a problem, given the ever-expanding cost
of social services, JPY55trn in incoming tax is a whole lot better than
the recent low point of just JPY43trn – which is where Japan was just
8-9 years ago.** (Source: TT commentary from japantimes.co.jp, Jun 10, 2017)

http://bit.ly/2sgPQBF

=> Another scandal threatens Abe government

As we reported several weeks ago, PM Shinzo Abe is caught up in another
favors-for-mates scandal, this time over a friend’s veterinary school in
Imabari, Ehime Prefecture. Although Abe had tried to dodge the
accusations, it seems that someone in the education ministry kept notes
of the PM office’s pressuring the ministry to facilitate assistance of
the new school – including a large no-strings-attached subsidy – at a
time when there is a glut of veterinary schools and few new applications
are being approved. Copies of the notes were presented by the opposition
in a Diet session, the government is refuting their authenticity, and
the opposition has now successfully forced the setting up of an
investigatory panel within the education ministry to see whether the
evidence is real or not. (Source: TT commentary from nydailynews.com,
Jun 09, 2017)

http://nydn.us/2rYSN71

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

———– ICA Event – Thursday 15th June —————-

Speaker: Jeff Crawford, Founder and Lead Consultant of JC Digital
Title: “The Top 10 Digital Marketing Mistakes Made by Japanese Companies
in 2017″
Details: Complete event details at http://www.icajapan.jp/
Date: Thursday 15th June, 2017, 6:30pm Doors open
Cost: 1,000 yen (members), 2,000 yen (non-members). Open to all. No sign
ups at the door!
RSVP: By 5pm on Monday 12th June 2017
Venue: Room F, 9F, Sumitomo Fudosan Roppongi Grand Tower, 3-2-1
Roppongi, Minato-ku, Tokyo, 106-0032
———————————————————–

+++ CORRECTIONS/FEEDBACK

No corrections today.

***————————****————————-***

+++ TRAVEL DESTINATIONS PICKS

=> Fukushima Top 10 Attractions

Despite the tragedies that occurred in Fukushima over five years ago,
this northern prefecture – one of Japan’s largest – is open for
business. You won’t find hordes of other travelers here, leaving you to
enjoy the sites in serenity. What you will find are beautiful castles,
old post towns, numerous traditional crafts and mouth-watering food. The
top of our list of Top 10 things to do is Ouchi-juku in Shimogo. This
old post town was once located on the road that connected parts of
Tohoku with the shogunal mausoleums of Nikko in Tochigi Prefecture. Even
today, the village is remarkably well preserved, making visitors feel as
if they have stepped back into the Edo Period. The few dozen houses
double as craft shops and small eateries, many of which serve
miso-slathered rice dumplings or handmade soba noodles. The best view of
the town comes from the viewpoint near the hillside shrine.

http://bit.ly/2t8UtKq

Get Inked at Studio Muscat
Modern Japanese tattoo designs in Shibuya

If you’re looking to decorate your body with some unique yet distinctly
Japanese tattoo designs, Studio Muscat might just be the right
destination for you. Muscat is run by the effervescent Asao-san in the
heart of Tokyo, in a quiet residential area just south of Shibuya. First
opened in 2003, Muscat’s studio interior is an impressive canvas of
modern Japanese aesthetics, and welcomes both those looking to expand
their collection as well as those getting their first tattoo.

Asao-san applies tattoos to her clients, alongside three fellow Japanese
artists: Haruka, Shinya and Eiji – who collectively offer a wealth of
experience and individual styles. Those wishing to visit Muscat will
need to arrange a booking in advance, which involves a consultation to
help decide what design you want. No matter what you are looking for,
Muscat offers a wide range of designs including Japanese, artistic,
tribal, watercolor, geometric, and dotwork styles.

http://bit.ly/2t8ADzd

***————————****————————-***

***********************************************************
END

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+++ ABOUT US

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

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