The Kanji Aptitude Testing Foundation (KAT), the English name of the Nihon Kanji Nouryoku Kentei Kyoukai, has been in the news over the past weeks for “improper business practices” and high salary and retirement allowance payments to the officers of the board. Like many such scandals in Japan, the matter is partly one of fraud—but the foundation is also a victim of its own wild success, and is a case study in the perils of ignoring gyousei shidou “advice” from the government, and falling victim to the authorities in Livedoor-esque Takafumi Horie style.

KAT is not a kabushiki kaisha (K.K.) private stock corporation, but a zaidan houjin, the oldest and most basic form of the non-profit incorporated entities in Japan roughly translated as “foundation.” It has no members or shareholders, no distributions of profits, and it has no owners, only officers of the board that operate the foundation’s business. (Due to recent reforms, all foundations must now add a board of trustees to act as quasi-shareholders that elect officers). The foundation is not alone in its governance structure. Other similar types of corporations are the shukyou hojin (religious corporation), gakko hojin (school corporation), iryou hojin (medical corporation), and other entities that are the corporate form of ownership and operation for churches, temples, shrines, schools, universities, trade schools, hospitals, elder care centers, and many more of the ordinary institutions of civil society.

But what are these entities to do when they are well managed? Are they to accumulate large cash reserves? The salaries of the board of directors can be raised to an extent, but the officers cannot share in the profits. And for many years, it has been an accepted practice that “non-core” activities of these non-profit corporations can be outsourced to private companies. Hospitals are supplied and consulted, schools recieve their books and other services, and temples buy their incense, from these outside private corporations. Typically, it’s kabuki-style theater of maintaining nominal non-profit status—the private corporations are tyically owned and operated by the very same directors of the non-profit corporation.

(To see one very public example of how this is accepted as legitimate, check out the Japanese web page of the Aso Group, the conglomerate owned and operated by PM Aso’s younger brother, and click the “healthcare” sector. Several hospitals and care centers in Kyoto and Fukuoka are affiliated with the private Aso Group but are non-profit iryou houjin or shakai fukushi houjin. But these entities are listed as secondary to “K.K. Aso Group – Medical Operations Development Department,” “Aso Care Services K.K.”, “Aso Medical Services K.K.”, and other Aso Group entities that manage all non-medical practice services of the hospitals and which are used to extract profit from the hospitals which are required to be non-profit by law.)

KAT issues some of the most popular kanji chinese character tests taken by the citizenry in Japan. Test takers would take certain levels of the test to prove their aptitude in understanding, writing and reading the characters. The tests were wildly popular, such that the group developed plump bank accounts such that it began outsourcing services, such as printing of the tests, to K.K. Oak, owned by Mr. Okubo, the chairman of the board of KAT. Oak subsequently gave off benefits to its subsidiares, which included Okubo family members. The other list of grievances are relatively minor—about 9 million yen (US$90k) was given to various politicians, and about 3 million yen to a temple in Kyoto.

I can report to readers from experience, having reviewed the structures and books of a number of non-profit foundations, school corporations, and medical corporations, that this level of minor fraud is standard operating procedure. Of the thousands of private schools and hospitals operated as so-called non-profit entities, many engage in nepotistic, family-favoring practices that make KAT look minor. But KAT made two big mistakes that brought its operations under scrutiny.

• It ignored a decade of gyousei shidou guidance from the Ministry of Education. Thirteen times, between 1999 and 2007, the Ministry instructed KAT to lower its fees for the top-level course by 500 to 1,000 yen. It also instructed that Okubo should resign as representative of printing house Oak and loosen the ties between the two organizations (KAT rented its main building for US$1.8 million a year from Oak, yet another way in which Okubo profited from the structure).
• It was too profitable. KAT was run the same way plenty of trade schools and hospitals are run, and in my own professional experience, I’ve seen far more dodgy schemes of fraternal profiteering from allegedly non-profit corporations. However, KAT’s tests became a national craze. With its popularlity came wild profits. And with profits came scrutiny.

I know Adamu will SLAM me for using the word “kabuki” in this post, and I could take the cliche train another stop and talk about the nail that sticks up gets hammered down. But as loathe as MF is to those types of analogies, we are seeing instances where they are basically true, where the authorities selectively target only the successful rulebreakers. KAT got screwed in the same way as Horiemon back in 2007. (And on that note, I share Horie’s sentiments recently publicly expressed, and noted here, that he was only targeted because he was a successful rebel, or in other words, that he made the two big mistakes itemized above.) It seems unlikely that KAT will survive in its present form as this scandal continues to spread, and this may be a chance for some of the competitor tests to gain a share of the market. But the two lessons for this for every businessman engaging in the soft fraud that is part of tax, accounting, business, and audit in Japan, make sure that you (1) pay attention to any advice given to you by the government, even non-binding advice, and (2) be ready for the increased scrutiny that will come when you’re profitable. Don’t make the mistakes of Horiemon and KAT.

One placard at the moronic (but apparently well-attended!) anti-tax “tea party” protests reads “You can’t borrow your way out of debt,” and that just floors me, because it just isn’t true and I have the experience to prove it.

After coming back from a high school exchange in Japan and attending a semester of community college, I suddenly decided that I needed to get out of Connecticut and transfer to a four-year univserity as soon as possible. A combination of a lack of preparation, a burning need to get out of my hometown, and plain ignorance of how money works led me to forego cheaper options and attend a private university funded almost entirely on student debt (in a ratio of around 75% variable rate private debt and 25% fixed rate direct federal borrowing). At the end of it I was many tens of thousands of dollars in the hole, but today less than 4 years later I am two months away from being debt-free, all thanks to “borrowing my way out.”

At the end of my education I had a degree in “International Relations” – essentially a liberal arts program.  I left the system without much in the way of skills, but college did give me two things that would come in very handy later on – a bona fide college degree and the time and impetus to dedicate to accumulating knowledge (a good portion of which came through classwork) and compulsively studying Japanese, all without any immediate need to make ends meet.

But without any directly marketable skills and no immediate job prospects, I stayed afloat in Washington DC after graduation through multiple part-time jobs (at one point I was working for four separate companies), occasional parental assistance, and deficit spending with one of those “pre-approved” credit cards they were always sending me back then. I also deferred my student loan repayment to the last possible moment, a decision that added another $10,000 in piled-on interest by the time I started paying.

But I kept at my jobs and eventually landed a gig translating for a law firm. Though I already had some translation skills before starting (documented in early MF posts!), the office experience, from the basic administrative duties of a “legal assistant” to keeping up with the high-paced research activities of my boss, was a very uphill learning curve, and the salary was just barely enough to survive on and pay a $1000 a month minimum payment.

But I somehow managed to stay afloat, and while I left that firm to follow Mrs. Adamu to Thailand, I continued working and improving as a freelance translator. When I eventually made my way to Japan, I easily landed a much better paying job (at a time when the JPY-USD exchange rate was at its most favorable in a decade) that put me on the path out of debt bondage.

So by dint of this experience I know that with a little luck knowing how to learn from people and ask for and accept help, perseverence, development, and talent can end up paying big dividends, as long as you are willing to invest in yourself. My own experience was not ideal as I made some “bad” decisions initially (though I do not regret the path my life took since otherwise there would be no Mrs. Adamu), but then neither is this recession. While many representing the underdeveloped economies argue for sustainable growth free from major-power exploitation, America has been in the grip of the “cult of progress” for more than a century. Our future prosperity is tied to economic growth, so in the bad times we seek to limit the downside through deficit spending and a series of debt rollovers. 

I wonder if any of the protesters have had similar experiences. Perhaps it is tough to relate big, nationwide events to everyday life, but I am shocked that so many are ready to throw common sense to the wind and buy into idiotic catch phrases no doubt orchestrated by Astro Turfers who view them as nothing more than pawns that are useful to serving an end entirely removed from the actual protesters’ interests. There is nothing explicitly liberal or offensive about public works spending, so it doesn’t make sense to oppose in such and ugly and kneejerk way just because it doesn’t come from the right wing’s preferred sectors like the military. And Obama’s budgeting actually improves the tax burden of most families. It is really hard for me to understand people like the “Obama is a fascist BECAUSE HE IS!” guy:

But perhaps Matt Taibbi has it right when he calls these people the peasant class, always ready to hate an external enemy rather than face their own lots in life:

The really irritating thing about these morons is that, guaranteed, not one of them has ever taken a serious look at the federal budget. Not one has ever bothered to read an actual detailed study of what their taxes pay for. All they do is listen to one-liners doled out by tawdry Murdoch-hired mouthpieces like Michelle Malkin and then repeat them as if they’re their own opinions five seconds later. That’s what passes for political thought in this country. Teabag on, you fools.

After all, the reason the winger crowd can’t find a way to be coherently angry right now is because this country has no healthy avenues for genuine populist outrage. It never has. The setup always goes the other way: when the excesses of business interests and their political proteges in Washington leave the regular guy broke and screwed, the response is always for the lower and middle classes to split down the middle and find reasons to get pissed off not at their greedy bosses but at each other. That’s why even people like Beck’s audience, who I’d wager are mostly lower-income people, can’t imagine themselves protesting against the Wall Street barons who in actuality are the ones who fucked them over. Beck pointedly compared the AIG protesters to Bolsheviks: “[The Communists] basically said ‘Eat the rich, they did this to you, get ‘em, kill ‘em!’” He then said the AIG and G20 protesters were identical: “It’s a different style, but the sentiments are exactly the same: Find ‘em, get ‘em, kill ‘em!’” Beck has an audience that’s been trained that the rich are not appropriate targets for anger, unless of course they’re Hollywood liberals, or George Soros, or in some other way linked to some acceptable class of villain, to liberals, immigrants, atheists, etc. — Ted Turner, say, married to Jane Fonda.

But actual rich people can’t ever be the target. It’s a classic peasant mentality: going into fits of groveling and bowing whenever the master’s carriage rides by, then fuming against the Turks in Crimea or the Jews in the Pale or whoever after spending fifteen hard hours in the fields. You know you’re a peasant when you worship the very people who are right now, this minute, conning you and taking your shit. Whatever the master does, you’re on board. When you get frisky, he sticks a big cross in the middle of your village, and you spend the rest of your life praying to it with big googly eyes. Or he puts out newspapers full of innuendo about this or that faraway group and you immediately salute and rush off to join the hate squad. A good peasant is loyal, simpleminded, and full of misdirected anger. And that’s what we’ve got now, a lot of misdirected anger searching around for a non-target to mis-punish… can’t be mad at AIG, can’t be mad at Citi or Goldman Sachs. The real villains have to be the anti-AIG protesters! After all, those people earned those bonuses! If ever there was a textbook case of peasant thinking, it’s struggling middle-class Americans burned up in defense of taxpayer-funded bonuses to millionaires. It’s really weird stuff. And bound to get weirder, I imagine, as this crisis gets worse and more complicated.

I am about to send off my stimulus payment (teigaku kyufukin) application, and just noticed that the application form for Adachi-ku does not fit inside the enclosed reply envelope unless you re-fold it.

Guess I will just have to SLAM it in.

As of this morning, this is what I see as the bottom headline of asahi.com’s top stories:

ペイリン氏、娘の元婚約者と応酬　「うそつき」「売名」(03:03)

 I just don’t see this story as worthy of the Asahi’s status as the 2nd most read newspaper nationwide and the paper of record for the center-left elites. I mean, it’s true that some of Tokyo Governor Ishihara’s more controvertial statements get coverage in Western media, but how in the world does this completely inconsequential Jerry Springer segment matter to any but the readers of Josei Seven, Japan’s equivalent of the National Enquirer?

UPDATE: Well, I guess if the New York Times is sinking to that level, the Asahi was just following suit.

Checking the Brookings Institution’s site on other business, I came across info for this event happening on Friday in downtown DC:  

AN ADDRESS BY THE HON. SHINZO ABE, FORMER PRIME MINISTER OF JAPAN

A New Era Requires New Political Will
Event Summary

On April 17, the Center for Northeast Asian Policy Studies at Brookings will host former Prime Minister Shinzo Abe of Japan for an address on key issues facing Japan, the United States and the world. Prime Minister Abe will discuss Japan’s role in addressing regional and global security concerns as well as the global economic crisis and climate change. He will also explore possible policy approaches to these and other issues for the Japanese and U.S. governments, as both countries and the international community face an era defined by urgent challenges and new leadership.

The Nielsen research company has conducted a global survey on dining out preferences (Japanese PDF). The Nikkei presents the results from Japan. When asked what type of food they prefer when dining out, Japanese respondents said:

1. Japanese (48%)


2. Italian (20%)


3. Chinese (12%)


4. French (7%)

Globally, Japanese food was the fifth most preferred food. Surprisingly, the 46% of Japanese people who eat out more than three times per week is only marginally above the 44% global average.

Japanese people have a comparatively high level of what I would term “gastronomic nationalism” – that is, their preference for their own food far exceeds the global rate of 27%.

Anyone who has spent any time in this country will not be surprised to see Japanese food topping the results. Inside Japan, Japanese food is simply everywhere. The children are raised on government-supplied lunches and mother’s obento box lunches, on TV there is an endless parade of B-list celebrities fawning over the latest restaurant, and on the street the vast majority of eateries are nominally Japanese. On top of that, Japanese food is objectively scrumptious and awesome, a fact not lost on people.

But what exactly is Japanese food? The survey was apparently taken based on the respondents’ own definitions of what “Japanese food” means, but this is not always so clear-cut. Under such conditions, food that might otherwise be considered foreign must have been included under the “Japanese” rubric. ”Japanese food” spans a very wide variety - from obviously Japanese foods like sushi, pickled radishes, and soba buckwheat noodles to more complicated foods that blur the lines between “pure” Japanese food and fusion dishes that have developed over the years. Other foods that may have foreign origins might not be perceived as foreign by some of the consumers (yakiniku aka Korean barbecue comes to mind as I have heard some tell me it is Japanese).

For example, it’s hard to tell whether ramen would be considered Chinese or Japanese (though the recipe is distinctly Japanese, many ramen shops advertise themselves as chuuka (Chinese) and also sell gyoza, which are more or less Japanized versions of Chinese dumplings), or for that matter whether Japanese-style curry can be called Indian (it was apparently adapted from Britain, which itself adapted it from the Indian dish). And then there is the plethora of dishes that are considered youshoku (Western/occidental food) in Japan but would be hard to find on a table anywhere in the actual West. These include omuraisu (ketchup rice wrapped in an omelette) and hambaagu (a bunless hamburger often seasoned and stuffed with onions, served with a variety of toppings such as grated daikon radish (oroshi) and ponzu, a kind of  citrus/soy/vinegar sauce).

Conversely, much so-called Italian food has been considerably Japanized as well (think mentaiko spaghetti), but I doubt many respondents who go into their local Capricciosa to order noodles drowned in spicy fish eggs and mayonnaise would consider themselves to be eating at a “Japanese food” establishment. Confusing things further, many “retro Showa era” restaurants serve a “Neapolitan” spaghetti-and-ketchup dishes, but in a very Japanese izakaya atmosphere. And then there are the “rice burgers” served at Mos Burger, the new  soy sauce-enhanced fried chicken at KFC, and Okinawa-style taco rice (this unlike the other two would be likely termed “Japanese”). I could go on, but it’s getting close to dinner time.

So all that said, the data could be kind of biased in Japan’s case (and the same probably goes for other countries) since Japan has co-opted so much of the Western menu into its own native cuisine. As far as I am concerned, the world is all the richer for it.

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Check the Adamukun blog for Adamu’s shared articles and recommended links.

Awesome citizenship story from an Asahi reporter (translated from page 11 of the Asahi Shimbun April 10 morning edition):

[Correspondent’s Notebook] Sao Paolo, Brazil: A Dubious Fine

I paid a fine the other day.

The reason? It was my duty as a Brazilian.

I was born in Brazil due to my father’s job, but after returning to Japan at age 1 I was raised as a Japanese and never doubted otherwise.

All that changed when the decision was made to dispatch me to Sao Paolo. I headed to the Consulate General Brazil of Brazil in Tokyo to apply for a visa, but they refused to issue one, telling me, “You are a Brazilian.” They said I had no standing to get a visa as visas can only be issued to foreigners.

Brazil is a jus solis country, meaning that you automatically receive citizenship if you are born there. Well I never… Slightly confused, I accepted the green Brazilian passport and headed to my post.

In Sao Paolo, I tried to get my ID card and was told I needed to register to vote. On top of that, since I had neglected to register at age 18, they ordered me to pay a fine. Voting is mandatory in Brazil.

Though I retorted, “Until recently I was a Japanese living in Japan,” the official was ready with a comeback: “Just the other day, a native came in here and insisted, ‘I was living in the jungle until now, so I had no idea about registering to vote.’ But rules are rules!”

Not totally satisfied with the explanation, I gave up and paid the fine of 3.5 real (160 yen or USD $1.60).

(Ari Hirayama)

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Check the Adamukun blog for Adamu’s shared articles and recommended links.

These days, news on the financial crisis is everywhere, and as a result I have learned lots of vocabulary words I might otherwise not have encountered.  Here is a brief list in no particular order:

大恐慌 (Daikyoukou) = The Great Depression. I had seen this word many times before but for some reason never bothered to look up the reading.

サブプライムローン（低信用者向けの住宅ローン） (sabupuraimu roon (teishinyoushamuke no juutaku roon)) = Sub-prime loans (home loans for persons with bad credit).  This phrase – the katakana-ized English followed by the full definition – must have appeared on every single page of the Nikkei every day for at least a year since the crisis broke in August 2008. As the phrase was mostly used as a key word in repetitive and perfunctory background sentences, it has largely been replaced by the more efficient “Lehman shock” (リーマンショック) or some other milestone of the crisis.  Other papers seem to have had different editorial approaches (Asahi used just “sabu puraimu mondai” (sub-prime loan crisis) with no explanation).

特別目的会社 (tokubetsu mokuteki gaisha) - Special Purpose Vehicle/Company (SPV/SPC) – these were the off-balance subsidiaries used by major banks to turn themselves into get-rich-quick schemes by investing in the subprime housing market without reducing their capital adequacy.

てこ入れ (tekoire) = leverage. I have also seen the katakana English レバレッジ and the opposite デレバレッジ

時価会計 (jika kaikei) = mark-to-market accounting. Funnily enough, while Japanese accounting standards at the time of their crisis never had mark-to-market accounting (or consolidated accounting for that matter), the US accounting board has moved to alter its rules to allow banks to hide the value of assets similar to their Japanese counterparts circa 1997. See this article from Baseline Scenario for an enlightening comparison of Japan’s situation with the current US financial crisis, and how it appears that our policy response is looking more and more like Japan’s. Also, the video report on TARP progress from the Congressional Oversight Panel was similarly clear and instructive:

対岸の火事 (taigan no kaji) = literally, “a fire on the opposite shore” is a metaphor for “someone else’s problem.” As in, the US financial crisis is no longer…

製造業派遣 (seizougyou haken) = “temporary labor in the manufacturing sector” (Japanese can be very space-efficient sometimes!), first permitted in 2004.  The labor movement’s reaction to the recession has been to make a counterfactual (and ultimately ignored) demand for wage increases for regular employees while pushing to ban certain types of non-regular employment on grounds that it is unjust. The types slated for the chopping block include temporary day labor services (日雇い派遣 discredited by the shady business practices of the Goodwill Group) and the aforementioned temporary factory work.  For Japanese-readers, I recommend Ikeda Nobuo’s recent post decrying the tendency for Japanese public debate to favor emotional arguments and completely ignore the concept of societal trade-offs (as in, what happens when the employers choose to scale back their businesses rather than incur the burdensome employment costs?).

三種の神器 (sanshu no jingi)- This is the word for the “three imperial regalia” – a sword, a jade necklace, and a mirror – which are symbols of the Japanese emperor’s divinity as descendant of the sun goddess and respectively represent valor, wisdom, and benevolence. In consumption terms, they represent the three modern necessities of a Japanese middle-class household – a color TV, an air conditioner, and a personal automobile. At PM Aso’s press conference last night announcing his new economic growth strategy, he indicated that Japan’s new consumption regalia will be (1) solar batteries (太陽電池）, (2)  electric cars （電気自動車）, and (3) energy-saving consumer appliances (省エネ家電). Apparently, people will be paying for these devices with all the money they will make selling fashion magazines in Taiwan...

Did I miss any good ones?

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Check the Adamukun blog for Adamu’s shared articles and recommended links.