Corporate Japan’s Feudal Public Relations

The months of August began with a breaking story from the Nikkei: Hitachi Corporation and Mitsubishi Heavy Industries (MHI) were in discussions to merge. The stories were not clear if the merger would be of some of their business (not that uncommon—see, for example, TMEIC), or their entire business. If it was a true merger of both companies, it would create Japan’s largest company after Toyota.

The reasons for such a merger are obvious, as they are one of many types of Japanese companies facing two problems: a shrinking domestic market, and competition overseas from companies from places that they previously did not have to fight against (namely companies from Korea and China). A merger such as between Hitach and MHI would be a great way for Japan’s top-tier construction/technology/heavy industries companies to collaborate and compete not just again GE and Seimens (their historic rivals) but also Samsung and the growing horde of Chinese companies, when it comes to bidding and seeking overseas projects.

Yet the reaction by both companies to the release was a sharp denial. Hitach put out a one line press release: “The article is not based on a fact.” (When I read this, I was struck by the peculiar English—they surely did not mean to deny the singular fact but not deny the plural “facts,” but that was my first impressiony.) Then we had the MHI press release that reflected an ever worse command of the English language:

Even after a denial of the report this morning related to possible integration of business operations of Mitsubishi Heavy Industries, Ltd. (“MHI”) and Hitachi, Ltd., there have been a continuing flow of inaccurate information and reports pertaining to this matter. We feel uncomfortable that this inaccurate report continues. We hereby reiterate that the series of information is not based upon MHI’s own corporate decision or disclosure, and MHI has no plan to enter into any of the arrangement reported, while we resister strong objections to those inappropriate conducts.

My reaction reading that is to cringe. Why can’t these companies—which have hundreds of foreign employees—use native English speakers to check their English language public statements? You would think this is especially true for such statements that are picked up and read by the international press? This story is almost a month old, but I mention it because a person in Japan’s PR industry (which is basically dominated by two companies, Dentsu and Hakuhodo) just shared with me his insight that, while both these companies used Japan’s PR firms to handle their new product promotion and advertising, they take on this type of “crisis management” by themselves. For all the criticism that this blog has lobbed at Dentsu over the years, my feeling is—it shows! And hearing this, it reminded me of this section from a recent issue of “Terry’s Take”:

Traditional bedrock companies in Japan are proud and feudalistic. This used to be their strength—commonality of purpose, self-sacrificing employees, and no arguments about decisions from the top. However, with the advent of the information age, quality of response and reaction has become more important than unwavering commitment and persistence, and Hitachi in particular has suffered as a result. Perhaps ironic given that the company is so deeply involved in the IT industry.

The Tale of INPEX and the Golden Share

A “Golden share” is a Anglo-European legal concept by which one nominal share carries special veto rights and is able to outvote all other shares in certain specific circumstances. The term arose in the 1980s when the British government retained golden shares in companies it privatized, and later the concept emerged in Russia, Germany, Spain, and Portugal. They are typically held by a government organization, and the shares are over a government company undergoing the privatization. The share gives the government organization the right of decisive vote, thus to veto all other shares, in a shareholders-meeting. In Europe, this share is often retained only for some defined period of time to allow a newly privatised company to become accustomed to operating in a public environment. Wikipedia has more on the concept here.

Readers may be surprised to learn that golden shares were one of the concepts quietly introduced with Japan’s new Company Law of 2006. Under article 108 of the law, “preferred shares with veto rights” (kyohiken tsuki shurui kabushiki) were created, which are referred to as “Golden Shares” (ougon kabu). The shares cannot be transferred, and under guidelines issued by METI and MOJ, they are designed to prevent hostile takeovers. The purpose of golden shares in Japan is therefore somewhat different from the British/European concept, where they are used to transition state companies into the private sector.

The Tokyo Stock Exchange has said that companies with golden shares will not be listed, for the plain reason that they violate the principle of shareholder equality. Following opposition from the business community, on the basis of certain exceptions, such as if a general shareholder meeting approved the listing regardless of the golden shares, and the golden share not violating shareholder profits, this initial policy was changed. Any breach of this principle would result in delisting.

Presently, there is just one listed company in Japan that has golden shares — Kokusai Sekiyu Kaihatsu Teiseki Kabushiki Kaisha, or known in English and Japanese as INPEX. According to Wikipedia, the Minister of METI holds 29.35% of the ordinary shares of INPEX, in addition to just one “A-Class Share (Golden Share).” INPEX is Japan’s largest private company engaged in upstream oil exploration, and METI (and Japan as a whole) probably recognizes that this company is important enough that it shouldn’t be subject to hostile takeovers.

TEPCO and beyond

Tokyo Denryoku, or the Tokyo Electric Power Company, is abbreviated in English to TEPCO and is one of nine regional monopoly electricity companies. TEPCO also has its own Japanese abbreviation, touden. What about the rest of Japan’s eight regional monopoly electricity companies?

They each have their own abbreviation, which you think you could get confused with “Tokyo” and “Tohoku,” “Hokkaido” and “Hokuriku,” and “Chubu” and “Chugoku”. Read and learn:

Hokkaido Denryoku: Hokuden / HEPCO
Hokuriku Denryoku: Rikuden
Tohoku Denryoku: Tohoku EPCO / TOEPCO / ENEPCO (for “Eastern North” + EPCO)
Chubu Denryoku: Chuden / CEPCO
Kansai Denryoku: KEPCO / Kanden
Chugoku Denryoku: Chugokuden, Energia (an English name adopted to avoid confusion with Chubu Denryoku)
Shikoku Denryoku: Yonden
Kyushu Denryoku: Kyuden
Okinawa Denryoku: Okiden

Relaxing the Barber and Beautician Laws

As Adamu noted about a year ago, Japan recently deregulated the laws regarding haircuts, opening up the route for discount barbershops. As I noted in comments, Japan treats 理容師 (riyoushi, barbers) and 美容師 (biyoushi, beauticians) with different legal and health and safety regimes. In summary:
* A barber is generally much cheaper because their scope of work is limited—they can give you haircuts, shaves, perms and dyes, but that’s about it. You can work in this industry as long as you’re operating in accordance with the law, with minimal licensing requirements. The Japanese text of the law is here.
* A beautician is authorised to do a lot more, from nails to massages to hair extensions to whatever else (but they cannot shave your face), but this is more expensive because the required training prior to licensing is more expensive, and the scope of expertise is much broader. Notably, a beautician is prohibited from shaving a man’s beard, which is the exclusive work of a barber. The Japanese text of the law is here.

Both are restricted from working at anywhere other than a licensed and designated place of business. The Barber law reads:

第6条の2 理容師は、理容所以外において、その業をしてはならない。但し、政令で定めるところにより、特別の事情がある場合には、理容所以外の場所においてその業を行うことができる。
Article 6-2: A barber must not conduct work outside a barbershop; provided that, in the terms of a ministry order, in special circumstances, they may do work at a place outside a barbershop.

Then, the Beautician Law reads:

第7条 美容師は、美容所以外の場所において、美容の業をしてはならない。ただし、政令で定める特別の事情がある場合には、この限りでない。
Article 7: A beautician must not conduct work outside a salon; provided that, in special circumstances set by ministry order shall not be so restricted.

Yet in the wake of the earthquake that has devastated the Tohoku region of Japan, the government has relaxed laws on haircutting to allow barbers and stylists in areas affected by the earthquake, allowing them to clip and style at evacuation shelters or any other makeshift location, for a period of two years starting this month.

This might seem like trivia — but as Adamu discussed in his previous post noted above, this does something to chip away “guild-based restrictions” that could result in permanent deregulation and thus lower pricing.

“Expensive Fools,” then and now

Many billions of dollars have been spent by Japan’s top companies in the last decade to develop the next generation of robots — famous for such technical marvels as expressing human emotions on a silicon face, bipedal walking, roller-skating, playing musical instruments, and cooking meals. Japanese companies such as Hitachi, Toyota, and Toshiba are broadcasting ads and posting billboards across the globe that show-off their latest robotic achievements. These products aren’t for sale. You cannot buy they for industrial or commercial use. But their existence suggests a fantastic future where robots will be serving us in all sorts of tasks, both menial and complex.

Too bad this is so utterly removed from reality. For all of Japan’s collective effort in developing its robotics industry, TEPCO has had to turn to iRobot, — a Massachusetts-based company — for the Packbot, a simple yet practical robot equipped with simple claws and cameras, to enter the Fukushima plants. The robot first entered the plants on Sunday (a month after the disaster, after it became clear that no Japanese robots were up for the task) taking measurements and photographs of areas where it was unsafe for humans to venture. (Interestingly, but not surprisingly, Japan has refused robots provided by the Chinese military.)

On that note, iRobot is also the company that brought us the Roomba, a robot that vacuums the floor and which is probably the most popular robot among Japanese consumers — showing that Japan Inc.’s investment in robot technology cannot save it, even in its home market. For all the fanfare in recent years, in truth, Japan’s robots are so advanced that they have skipped a generation of usefulness. The robotics on display by Japan Inc. may be useful in ten years, but they are nothing more than gimmicks today.

Coincidentally, just hours after I read the above article on TEPCO having to go to iRobot for robots to use in Fukushima, I was browsing through Michael E. Porter’s tome, The Competitive Advantage of Nations (which is just as heavy a book as it sounds). Published in 1990, one case study in the book addresses Japan’s robot industry, and I found this section prophetic:

The first robots used in Japan were imported from the United States in 1967. The Japanese robotics industry had its beginning in 1968, when Kawasaki Heavy Industries signed a licensing agreement with Unimation. Kawasaki was both a major potential user of robots as well as a producer of related products and services. It produced a broad range of machinery and parts, including engines, motorcycles, aircraft, machinery, complete plants, and ships. In 1969, Kawasaki began to sell Unimate robots, the first robots produced in Japan. Kobe Steel was also an early licensee of American robot designs.

The early Japanese robots produced results that were somewhat less than expected. They were often referred to as “expensive fools” and many were relegated to the corners of factories to collect dust. However, Japanese firms began to improve upon the robots they imported. Kawasaki redesigned some of the parts of the Unimation machines and upgraded its quality. In the late 1960s, the mean time between failures (MTBF) of an imported robot was less than 300 hours. By 1974, Kawasaki had achieved an MTBF of 800 hours. By 1975, this figure was 1,000 hours.

It’s a total cliche about Japanese business from the late 20th century: “Japan doesn’t invent things well, but they are great at improving things.” It’s a cliche so tired that it’s rarely rolled out much anymore. Yet as I read this, I realized that the observation from 1990 is still true, and is being echoed in real life events more than twenty years later.

Japan must get back to doing what it does best — improving, not inventing. If Japan’s researchers were tasked with improving the Roomba or the Packbot, I bet they’d do an amazing job. But left to their own devices, with the task of making something new, Japanese researchers, for whatever reason — dedicate themselves to creating a robot that can cook okonomiyaki and play the violin — and for what? Another generation of “expensive fools” destined to collect dust, due to the minor value the products provide in industrial and consumer markets.

Sustainable Sushi?

Are you concerned about the overfishing of the oceans, but still want to enjoy the delicious sweet raw flesh of fish? The Monterey Bay Aquarium has recently published a guide to what seafood you should and should not eat in specific areas of the United States. There is unfortunately no guide specific for Japan, but there is a US-centric sushi guide that may be of interest to some readers, and may encourage someone to create a version for Japan. (You’ll note that much of it is not useful because it depends on region — uni, for example, appears in all three categories, depending on its origin in the US).

You can download the pdf at the link.

The “Fly-jin” hype, or: 「フライジン」に該当するページが見つかりませんでした

In English-language news media, everyone is talking about this new word “Fly-jin”, a play on “Gaijin,” i.e. foreigners who have fled Japan in the wake of the earthquake/tsunami/nuclear holocaust [/sarcasm]. Take this article in the Wall Street Journal that everyone is talking about:

The flight of the foreigners—known as gaijin in Japanese—has polarized some offices in Tokyo. Last week, departures from Japan reached a fever pitch after the U.S. Embassy unveiled a voluntary evacuation notice and sent in planes to ferry Americans to safe havens. In the exodus, a new term was coined for foreigners fleeing Japan: flyjin.

The first part of that excerpt is true — foreigners really have fled, and lots of Japanese companies are really pissed about it. I just heard a story of a person fired from a (rather domestic, small-minded) Japanese company for fleeing the country and missing 8 days of work. (I think the biggest problem in this sitaution wast the backward employer and the failure of communication by the fleeing foreign employee.)

But has anyone heard the word “Furai-jin” in actual Japanese conversation? A search of the Japanese version of brought in zero results for “フライジン” and no relevant searches for “フライ人”. A google search for the later brought up lots of pages regarding people who are in love with fly fishing. A targeted google search brought up one thread on a 2ch Japanese chat threat — which is a translation of the Wall Street Journal article! In fact, I find myself in full agreement with a commenter on that 2ch thread:

>”flyjin”(fly + gaijin)

Translation: “‘Flyjin’… I bet the guy who wrote this article came up with that.”

So a challenge to Mariko Sanchanta, author of the above WSJ article: can you show us the word “furai-jin” was used before you put it in your article?

March 14: International Marriage Day

It may be inappropriate to move on to non-earthquake topics, but it just so happens that I just now discovered that today is International Marriage Day in Japan.

I was reading about Philipp Franz von Siebold, the German physician who traveled extensively across Japan for eight years from the time of his arrival in 1823, playing a key role in teaching Europe about Japan upon his return. The wikipedia article also contains this section:

Since mixed marriages were forbidden, von Siebold “lived together” with his Japanese partner Kusumoto Taki (楠本滝). In 1827 Kusumoto Taki gave birth to their daughter, Oine. Von Siebold used to call his wife “Otakusa” and named a Hydrangea after her.

That made me wonder — if mixed marriages were forbidden during the Edo Period, when was the restriction lifted? It took very little research to see that this came on 14 March 1873 (Meiji 6), from which time marriages to foreigners were permitted — a copy of the issued order being shown below. Consequently, 14 March — today — is International Marriage Day (although it’s not widely recognized, and probably no better known than 15 March being Shoes Anniversary Day).

The first recorded international marriage took place on 27 January 1874 between Mr. Juro Miura and Ms. Crausentz Gertamier (accurate Roman alphabet spelling unknown) after they met while Miura’s studied in Germany. They were married at a church in Tsukiji in Tokyo.

Importantly, government approval was required for Japanese women to marry foreigners, and they lost their Japanese citizenship (bungen) upon marrying a foreigner. Similarly, foreign women acquired Japanese citizenship upon marrying a Japanese man. In the 1870s, Japan was still in the process of developing its legal system and the concept of citizenship and citizen were not yet clear. This was put into law by the Meiji Constitution and Citizenship Law that were both enacted in 1899, but the system remained essentially unchanged until 1916, when Japanese women only lost their Japanese citizenship if they acquired foreign citizenship.

Where can an international lawyer go adventuring?

As some readers may know, Curzon is a lawyer — qualified in the US, but working first in Japan and now in Dubai. A common question that I’ve heard through my years of practice is, “How do you practice law if you’re a US lawyer in [Tokyo/Dubai]? Are you advising on US law?”

The answer to that is: no, not really. The role of many US and English lawyers working overseas is that of “international counsel.” (Why that role is generally limited to US and English lawyers is a story for a different day.) International counsel will often know or learn local law, but the biggest role for these lawyers is to “manage the deal.” Consequently, it’s not surprising that one of the core skills that international law firm say they are looking for today in lawyers is “project management skills.”

Of course, international lawyers practicing in various countries around the globe must comply with local law — and countries regulate foreign lawyers and their practice of law in a variety of different ways, which I break into four categories:
Continue reading Where can an international lawyer go adventuring?