Finance – Mutantfrog Travelogue

Japanese people can’t speak English because they live among tainted, Japan-savvy foreigners

It seems to me that a major factor behind Japan’s vaunted problems with the English language could have to do with the learning environment.

Specifically, some Japanese people are not sufficiently aware that Japanese-accented English is often incomprehensible to listeners who are not familiar with it.

I call it the Heisenberg property of language – simply being among Japanese people causes native English speakers (eikaiwa teachers, friends, coworkers, etc) to get used to how Japanese people speak, and of course alter how they speak to ensure Japanese people understand them.

This concept came to my attention in a big way at an investment conference that I recently attended for work.

The keynote speaker was a well-known American investment manager, and when it came time for the Q&A session, there was a roughly even mix of question-askers who were native English speakers, Japanese who asked their questions through the interpreter, and Japanese who opted to ask in English.

The guest speaker had trouble understanding all of the Japanese people who asked questions in English. One person in particular asked something like, “What is your view on Abenomics?” and it took about three tries before the speaker got that it was something about the new prime minister. I understood it the first time because I could hear him say the katakana “abenomikkusu” just really fast and with an attempt at English inflection. But to the American guest speaker, the questioner must have sounded like he was mumbling “obb-nom” instead of the properly enunciated “Abe-nomics” that sounds similar to Reaganomics.

This is just one small example, but I encounter cases of this phenomenon all the time:

Several English-speaking Japanese people in my life have heavy accents, but I can understand them because my years in the country have gotten me used to how Japanese people tend to speak.
Japanese commercials are flooded with simplified English
Eikaiwa teachers tend to use simplified English to make themselves understood in class. I have even known some to incorporate common Japanese phrases like “hora” to get students’ attention.
“Lip my stocking!“

And so on.

If a Japanese person spends all their time in this “Japanese-familiar” bubble, then when it comes time to go face-to-face with a less Japan-savvy foreigner, they are likely to run into trouble.

I don’t necessarily see this as a bad thing. For the sake of communication, speaking to make yourself understood (and listening carefully to understand) is only the most natural thing in the world. I just feel like pointing it out because Japanese people who equate speaking English with native speakers in Japan with “immersion” might be in for a rude awakening if they ever step outside that environment.

Japan Post, enabler of government debt

The Asia Times has an article arguing that one factor giving Japan some financial leeway is its continued ownership of Japan Post Bank. It’s an interesting read that reviews the history and recent politics of the issue:

[T]he Japanese government has a captive funding source: it owns the world’s largest depository bank. As US vice president Dick Cheney said, “Deficits don’t matter.” They don’t matter, at least, when you own the bank that is your principal creditor. Japan has remained impervious to the speculative attacks that have crippled countries such as Greece and Iceland because it has not fallen into the trap of dependency on foreign financing.

Japan Post Bank is now the largest holder of personal savings in the world, making it the world’s largest credit engine. Most money today originates as bank loans, and deposits are the magic pool from which this credit-money is generated. Japan Post is not only the world’s largest depository bank but its largest publicly owned bank. By 2007, it was also the largest employer in Japan, and the holder of one-fifth of the national debt in the form of government bonds.
…
Japan Post Bank started diversifying away from low-interest government bonds into more lucrative investments. In December 2010, sources said it was considering opening its first overseas office in London, “aiming to obtain the latest financial information there to help diversify its asset management schemes.”

But that was before the crippling tsunami and the nuclear disaster it triggered. Whether they will finally force Japan Post’s privatization remains to be seen. Other vulnerable countries have sold off their assets only to wind up in debt peonage to outside creditors.

The Japanese government can afford its enormous debt because the interest it pays is extremely low. For the private economy, public debt IS money. A large public debt owed to the Japanese people means Japanese industries have the money to rebuild. But if Japan Post is sold off to private investors, interest rates are liable to rise, plunging the government into the debt trap it has so far largely escaped.

The Japanese people are intensely patriotic, however, and they are not likely to submit quietly to domination by foreigners. They generally like their government because they feel it is serving their interests. Hopefully the Japanese government will have the foresight and the fortitude to hang onto its colossal publicly owned bank and use it to leverage its people’s savings into the credit needed to rebuild its ravaged infrastructure, avoiding a crippling debt burden to foreign interests.

In a sense, having a reliable buyer of government debt is attractive, but this system is not sustainable, nor can it be “leveraged,” as far as I can tell. Japan Post Bank’s deposits have been falling steadily, both because of the aging population and the unattractive interest rates. The whole reason the bank wants an overseas office is because it is interested in chasing yields in riskier investments, a desperate attempt to provide any sort of meaningful return on deposits. Over the short term, keeping the system in place makes sense, but longer term the country needs to wean itself off excessive debt and retool for a declining population, if that’s even possible.

Update: The writer of this piece works for the Public Banking Institute, a think tank organized to promote the concept of government-owned banks in the US.

Evangelicals say no to Islamic finance… in Korea

The Korean Law Blog reports that a group of evangelical Protestants in South Korea have apparently killed a bill which would recognize tax deductions and other legal benefits for Islamic financial structures.

This sort of silliness isn’t unique to Korea, of course. Followers of the English-language media have undoubtedly seen tons of uproar over the Sharia courts in Britain which can make legally binding judgments under English law. The catch is, of course, that the jurisdiction of these courts is consensual, just like commercial arbitrators or The People’s Court — you are only bound by Sharia rulings if you voluntarily agree to go to Sharia court. So for the non-Muslims in Britain, you’d think it would be a non-issue.

The Korean backlash is just as ridiculous, if not moreso. Not only would the proposed law not hurt anyone, but failing to pass it seems to effectively hurt Korean companies, especially financial institutions, by depriving them of potential business in Islamic countries and from Islamic investors.

(Note that The Korean Law Blog is not the same as the late, great Korea Law Blog run by Marmot contributor Brendon Carr. But for all you comparative law geeks in the audience, it’s a reasonably informative substitute.)

Update on life in Tokyo

A lot has changed for me over the past year and a half. I won’t go into too much detail, but the biggest shift has been my new job. In September 2009 I started translating for an equity research team, which means I spend my days reading and translating reports on publicly listed Japanese companies and the stock market in general.

It’s a fun and deeply interesting job, but it’s had an impact on my commitment to blogging in a big way, for a few reasons. For one thing, I came into the job with a woeful lack of knowledge about stocks and finance. I’ve been spending many nights studying to try and fill in the gaps. Only recently have I felt ready to try and start broadcasting my thoughts again.

Also, all the background research about the Japanese corporate world has had an unexpected side-effect: it more or less satisfies my urge to do the same thing on MFT. I mean, why blog about how Saizeriya serves TV dinners as restaurant food, when I already spent the better part of a day writing the same thing in an analyst report? It feels redundant. Most times, I can’t even be bothered to post something on Twitter.

Recently, I have felt a little more confident in focusing on blogging again. But when I opened the WordPress site, I had a bit of writer’s block. My thinking and interests have changed since the time when I was blogging about pillow-girlfriends and the like. At this point, I don’t know what future posts will look like, but at the very least it now seems kind of pointless to snipe at foreign press coverage of Japan. Working in the investment world with a team of veteran translators has probably skewed my perspective. I will probably spend more time talking about things like the Gyoza no Ohsho training scandal.

Life in Tokyo in 2011

It’s been almost four years since Mrs. Adamu and I moved to Tokyo, and this September will mark the 12th anniversary of my first landing in Japan at Kansai International Airport. The me of 12 years ago probably couldn’t imagine how I’d be living today. Of course my life has taken many unexpected twists and turns, but more generally, the life of a gaijin in Japan seems much more comfortable and less alienating than it used to be, at least from my perspective.

When I was a high school exchange student, my contacts with the home country were basically limited to monthly visits with other exchange students and the occasional rented movie or episode of Full House on Japanese TV. It didn’t matter much because I was concentrating on learning Japanese to fulfill my newfound dream of one day appearing on one of those shows where Japanese-speaking foreigners argue about politics.

But on the flight home something odd happened. Chip N Dale Rescue Rangers was showing on the in-flight entertainment, and for some reason I couldn’t stop laughing at all the cheesy jokes. I had been away from American humor for so long that even a little taste of it made me crack up. It happened again during my Kyoto study abroad days, when about six months in I watched Ace Ventura Pet Detective.

I don’t have those moments anymore.

I am typing this post on a laptop connected to my home WiFi connection, a few minutes after catching up with The Daily Show and Colbert Report. I can download/stream any movie or music I want using one of the world’s fastest Internet connections, while my cable TV opens up even more possibilities. The Net has all the world’s news. Skype lets me video-chat with my parents at holidays. There are two Costcos within a reasonable driving distance, and a decent amount of import stores that allow me to easily and cheaply cook American food if I so desire. I bought a queen-size bed at Ikea. Hyogo and Kyoto in 1999 and 2002 offered none of these, for both financial and technological reasons.

In so many ways, living in Tokyo in 2011 lets me keep my feet in both Japanese and American cultures. Obviously, I would not trade these comforts, but in a lot of ways it muddies the idea of assimilating into Japanese culture and fundamentally feeling like I live in a foreign country. If it mattered to me, I guess I could tilt the balance of my media/entertainment more toward the Japanese side, but it doesn’t. When I was younger I was all about learning to understand Japanese TV and movies and reading manga. But these days I know most Japanese TV is utterly stupid, and it’s rare for me to encounter a manga title that really grabs me (the last one was Ishi No Hana). Who knows, this might be another reason some of my old go-to blog topics seem less interesting now.

Japanese insolvency terms for dummies

When I started translating Japanese contracts, one of the most confusing aspects was the array of similar legal terms that commonly pop up in the “termination” section. Here are some common ones, along with what they actually mean.

差押 (sashi-osae)
Attachment. This is where a creditor “locks down” certain assets to keep the debtor from selling them or giving them away. Once attachment is completed, the debtor cannot legally transfer their ownership of the assets in question. Attachment usually precedes compulsory execution (below). The term is also used to refer to government seizure of evidence during a criminal investigation.

仮差押 (kari-sashi-osae)
Provisional attachment. This is a form of attachment which takes effect during litigation, where there is a chance that the defendant/debtor will have to eventually pay the plaintiff/creditor. If the defendant wins, the attachment is lifted. Assets can legally be transferred when a provisional attachment is in effect, but the transfer can be rescinded later if the provisional attachment becomes a regular attachment.

強制執行 (kyosei-shikkou)
Compulsory execution. This is a court-ordered process to seize the debtor’s assets and sell them at a public auction (競売 keibai), with proceeds going to pay off the creditor(s) and any surplus going back to the debtor. There are separate procedures for real estate, ships, movable assets and intangible assets.

仮処分 (kari-shobun)
Provisional injunction (or, when translated too literally, provisional disposition). This is a court order of some kind, usually to refrain from doing something like selling an asset or negotiating a transaction; it is given during litigation and requires a showing of necessity by the plaintiff as well as (usually) some sort of collateral to compensate the defendant in case the litigation is dismissed.

破産 (hasan)
Bankruptcy. In Japan, this legal term is only used for liquidation bankruptices, not for reorganization bankruptcies. Bankruptcy can be initiated by either the debtor or their creditor and is supervised by a court, which usually appoints an independent trustee to manage the bankruptcy if there are enough assets to pay the trustee. This is by far the most common legal procedure for adjusting debts, with over 100,000 annual petitions every year for the last ten years.

会社更生 (kaisha kousei)
Corporate reorganization (new type). This is a procedure intended to keep large distressed companies afloat by adjusting the due date (and sometimes the amount) of their financial liabilities. It is supervised by a court but requires the consent of creditors and shareholders in varying proportions depending on how the plan would affect their interests. If nobody can agree, the company goes into bankruptcy (above). Shareholders are generally wiped out, management get fired and replaced by a court-appointed administrator, and new equity investors (often prior creditors) get to choose new management. This is the procedure used by JAL, NOVA, Willcom, Dai-Ichi Hotels, Huis ten Bosch and most other high-profile corporate bankruptcies in the last decade: usage of the procedure peaked at 88 filings in 2002, although statistics are only available through 2008 so there may have been a second peak more recently.

民事再生 (minji saisei)
Civil rehabilitation. This is a smaller-scale version of corporate reorganization. It can be used by individuals, but the most frequent users are small companies, mainly because the procedure allows management to remain in control. The procedure is also conducive to selling a business in order to repay its creditors (Lehman Brothers Japan being a recent prominent example), and can sometimes be more beneficial from a tax perspective.

会社整理 (kaisha seiri)
Corporate reorganization (old type). This is an outdated term for an outdated form of small business corporate reorganization which legally ceased to exist in 2000 (although a few cases lingered in courts for several years after that). It was effectively superseded by the civil rehabilitation procedure.

解散 (kaisan)
Dissolution. This is a voluntary procedure which companies can execute at any time by a resolution of a super-majority of shareholders, whether or not the company is broke. Once shareholders vote to dissolve, the company is liquidated (清算 seisan) by a court-appointed supervisor. Creditors get paid off first (in order of priority), followed by shareholders. If there is not enough money to go around, or if there is some other insurmountable problem with the liquidation procedure, the company sometimes goes into special liquidation (特別清算 tokubetsu seisan), which gives the court more leeway to preserve assets and halt asset seizures.

If you want to read a lot more, there is an online outline of Japanese corporate insolvency law here, courtesy of the massive law firm of Anderson Mori & Tomotsune.

Thanks Kamei! Japan’s taxpayers now guaranteeing about 500,000 deadbeats

In the autumn of last year, Shizuka Kamei pushed through a debt moratorium law, primarily with the provincial goal of backing the small real estate companies in his home town of Hiroshima that were hit hard by the recession. At the time, I called this woefully short-sighted:

Small companies across Japan’s countryside that are having trouble making repayments should either restructure themselves, or fail and be restructured by creditors or new management. Many have antiquated management with regards to accounting, employment rosters, operational efficiency, supply chains, etc. Companies that can’t adapt to changed economic environments are supposed to fail. Yes, some good companies caught in unlucky times are destined to be caught in the current credit crunch as they are unable to repay loans and go bankrupt. But bankruptcy is a good thing! It is the engine of economic development that allows bad companies to fail, stifled talent to move elsewhere, assets to be sold at whatever price the market will bear, and bad management to be replaced. Yes, it sucks that people lose jobs and shareholders forfeit their investments, but that’s life! Letting this happen is a necessity for economic growth.

And on top of this, the poor local banks, only barely functioning after 15 years of treading water with the bad loan crisis, will now inevitably reduce their limited lending activities to nothing. There will be no money to lend, thus no local business growth or economic development, and thus no entrepreneurial activity. A short-term benefit for stabilized employment rates means the countryside gets screwed in the long term.

While my concern about small businesses refusing to restructure remained true, my concern for local banks was addressed when the final bill was passed (which you can read in Japanese here). The Japanese government — in other words, tax dollars — provide a statutory guarantee for these deadbeats. The mechanics of this are, under Article 11 of the Moratorium Law, that the government provides sufficient financial backing to the Credit Guarantee Union, which backs the financial institution undertaking the new obligation to support the small business. The Credit Guarantee Union is a government-backed public interest corporation that provides credit and loans to small businesses.

How many people and “small businesses” (defined as a company with less than US$3 million in capital and less than 300 employees) have applied for the moratorium in the last half year? About half a million:

Japanese banks have received a total of 521,030 applications for the easing of loan repayment terms from small and midsize companies and homeowners under the so-called debt moratorium law, the Financial Services Agency said Friday.

The applications, as of the end of March, since the law took effect in December last year involved 13.64 trillion yen and more than 90 percent of them were approved, the FSA said.

Congratulations, Japanese taxpayer — your tax yen are now financing these deadbeats. When the world is buzzing that Japan could be the next Greece, and could be sparked by one of any number of events (a failed Japanese bond auction, a sharp drop in tax revenue, a failure to implement tough fiscal and budgetary standards, a sharp contraction in Japanese GDP, a downgrade in sovereign debt by the ratings agencies), this is one of the worst policies that could be put in place.

North Korea devaluation aimed at confiscating private wealth

Interesting move by NK to crack down on the burgeoning market activity in their country:

North Korea revalued its currency for the first time in 50 years and strictly limited how much old money could be traded for new, moves that appear designed to confiscate much of the cash people earned in market activities the country’s authoritarian government doesn’t like.

The action triggered chaos, according to news outlets in South Korea that specialize in obtaining information from the North, as people rushed to banks and offices of the ruling Workers Party to get information, make exchanges or trade existing North Korean won for euros and U.S. dollars.
…
Initial reports indicated the government would allow only 100,000 old won to be exchanged for new. That would potentially wipe out the holdings of people who have earned and saved in won from market activities for years. Those who have saved in foreign currencies — which, though not illegal, is difficult for ordinary North Koreans — would appear unaffected.

According to an account by NKNet, a Seoul-based Web service focused on North Korea, people in Pyongyang on Monday night pressed party officials to allow more money to be exchanged. In response, according to the report, the officials lifted the exchangeable amount to 150,000 won in cash and 300,000 won in savings accounts.

While the revaluation could simply be aimed at inflation – Vietnam recently devalued as well – the really low per-person limit seems all but certain to wipe out most private wealth. Because in Stalinist North Korea money spends you!

Reminder: the US has yet to make a profit on its bailout investments

Just wanted to pass on this very salient point from Bloomberg columnist Jonathan Weil:

President Barack Obama did Americans a great service yesterday. He boiled down what’s wrong with his administration’s approach to the financial crisis into a single, symbolic statistic.

Striking a hopeful tone during a speech on the first anniversary of Lehman Brothers Holdings Inc.’s collapse, the president said banks have repaid more than $70 billion of taxpayer money that they had accepted from the government. “And in those cases where the government stakes have been sold completely,” he said, “taxpayers have actually earned a 17 percent return on their investment.”

This is the kind of math that helped get Lehman into so much trouble. It’s called cherry-picking.

Let’s be clear: Taxpayers have not earned a 17 percent return on their investment in companies that have accepted federal bailout money. Real-life investors don’t count only their winners. They count their losers, too, including investments that have declined in value and remain unsold.

A few minutes after that bit of bravado, the president identified the “simple principle” in which all his proposed reforms of the financial regulatory system are rooted: “We ought to set clear rules of the road that promote transparency and accountability.” He’s right. We should. A good place to start would be with the people who crunch numbers for the president’s speeches.

Trumpeting the 17% gain on bailout funds returned so far is like saying I invested 90% of my money into a company that’s probably bankrupt, but I must be doing OK because I made a 17% return on the remaining 10%.

Zambian kwacha

Courtesy investorglossary.com, we have another great-looking African currency – the Zambian kwacha!

ZMK is the three-character currency abbreviation for the Zambian Kwacha based on the ISO-4217 standard codes. ZMK is the official currency of the Republic of Zambia. The common usage symbol for the ZMK is ZK. The Bank of Zambia is the government agency that issues the ZMK. The ZMK divides into smaller units of known as Ngwee. One ZMK equals 100 Ngwee. The ZMK is not considered a major currency and is not actively traded in the international currency markets. The value of the ZMK “floats” against other currencies. That is, market forces determine the value of the ZMK. Therefore, the ZMK is convertible into other currencies.

Sure, it’s no South African rand, but I like the shout-out to hard-working peasants!

A random woman flashes some kwacha. (Exchange rate: USD $1 = 5,175 ZMK, but relatively higher inflation means this won’t stay current for long)

FREE MONEY update: 471k screwed up applications

Amazing: 471,567 households applied for their FREE MONEY from the Japanese government, but failed to fill out their addresses correctly!

Friday, July 3, 2009
471,000 Applications For Cash Handouts Sent Back With Wrong Addresses

TOKYO (Kyodo)–A total of 471,567 applications for the government’s pump-priming cash handout program have been sent back to municipalities as they were incorrectly addressed as of last Friday, the Internal Affairs and Communications Ministry said Friday.

The ministry said it will step up its publicity to call on households who have not received the cash benefits of up to 20,000 yen per person to file their applications as they are feared to fail to receive them.

Meanwhile, a survey showed 86.0 percent of households in 1,798 cities, towns and other municipalities across the country have received the cash handouts which have totaled 1,772.6 billion yen as of last Friday.

The municipalities began providing the cash benefits in March to cover about 54.8 million households under the government’s economic stimulus plan.

Of the applications sent back, 73,000 were sent to foreigners, who have often failed to provide moving notices to municipalities in urban and other areas.

The households will lose their right to receive the cash handouts unless they file applications in six months after the municipalities began to accept applications.

“The wrong addresses” apparently means that the addresses on the applications somehow did not match their residence registry (住民票). This could be anything from a kanji mistake to the head of the household neglecting to update his address with the local authorities.

Since Japanese nationals only had to fill out one form per household (foreigners had to fill them out individually since they’re not listed on residence registries for now), each mistaken application might be for multiple people. If we assume the “average household size” of 2.56 people, and roughly assume that all of them were only eligible for the basic 12,000 yen, that means we could be talking about 14.5 billion yen up for grabs.

I wonder what happens if the households “lose their right to receive the cash”? The towns better not get to keep it. It’s about 115 yen apiece for the other 125 million people in Japan, or more than enough to build another of the controversial proposed national anime museum.