Category: Econ & Business

English teaching in Japan by the numbers

(UPDATE – See my follow-up post for more measures of the industry)

To follow up on my earlier take on eikaiwa as the gaijin community’s whipping boy, I want to try and paint a dispassionate, quantitative picture of the eikaiwa industry itself.  

Back in summer 2006, I noted that the number of participants (newcomers plus extended contracts) in the JET program had been falling steadily after peaking in 2002 at 6,273. A quick check of the MIC website shows that this trend has continued through 2008 (click image and scroll down for better resolution).

 

The 2008 total was 4,682, 25.4% down from the peak. I would expect the pace to slow down a bit, considering they recently extended the maximum contract length from three years to five.

Non-JET ALTs/eikaiwa

In the private sector, METI figures (Excel) show the number of instructors at regulated “foreign language conversations schools” peaked in 2003 at 13,365, but stood at 9,591 as of the end of 2008, down by 28.3% from the peak and 22.4% since the JET Program’s peak.

Figures are less forthcoming about a third segment of the market, non-JET ALTs at schools across the country, but they are available. According to an October 2008 report from the Chunichi Shimbun (thanks Let’s Japan),  the number of non-JET ALTs surpassed JETs in 2006, and by 2007 represented 60% of all ALTs or nearly 8,000 people.

(A quick aside: There is some evidence that the education ministry views the issue of “temporary and contract” ALTs as a considerable problem, as these non-JETs can fall through the cracks in terms of supervision, training, and visa compliance. In February 2005, the ministry issued a letter to boards of education nationwide warning them to ensure that contracts with non-JET ALTs are “appropriate” (apparently in response to unfavorable press coverage) (source).)

Unfortunately, I am having trouble locating the exact figures for non-JET ALTs over time. They can be found by combining the totals of education ministry surveys given to schools asking the status of their English-language education. The only trouble is, the surveys are separated by scholastic level; and they aren’t neatly organized by year.

But I was able to find the total for 2002: 3090. So put together, here is the breakdown of “market share” of instructors in all three segments for 2002 and 2007 (click for full size):

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Non-JET ALTs appear to be quickly becoming the dominant employment type in the industry. JETs went from outnumbering non-JET ALTs 2:1 from being outnumbered by them 3:2. Possibly on a related note, this ratio (1/3 of all instructors are temp/contract) is consistent with the overall ratio of non-permanent workers in the overall workforce.

The tables were turned for conversation schools vs. ALTs as well. The end of 2007 was right when NOVA collapsed, and before that several other schools went bankrupt. This no doubt pinched the number of private teachers.

Interestingly, the totals of both years indicate that the pie was still growing as late as the end of 2007: the total number of teachers grew 7%, from 21,729 in 2002 to 23,130 in 2007. This growth rate matches the 7.0% growth in US citizen registered foreigners over the same period, though it underperforms the overall 16% growth in the number of registered foreigners (PDF). Japan’s total workforce (seasonally adjusted (Excel)), meanwhile, declined 10.1% during this period.

(Note that there are some considerable limitations to this data, though I think it at leasts provides a good chunk of the overall picture. First, I have included all JETs in the total, out of the consideration (emphasized by Curzon) that ALTs, CIRs, and those special physical education instructors all serve the purpose of “internationalization.” Also, “conversation schools” cover languages other than English, though I think it is safe to say English continues to be the overwhelmingly most popular language. There may be some overlap in the “conversation school” and “non-JET ALT” category as some businesses classified as conversation schools might also list non-JET ALTs as “instructors” resulting in some double-counting. These numbers also do not cover private lessons and unregistered schools, nor does it cover some of the related markets, such as private-sector study abroad, English teachers at universities, full-time foreign English teachers at schools, English teaching services provided by foreign governments such as the British Council, Internet services/podcasts, broadcast lessons such as those given on NHK, and book and CD publishing, all of which could add up to hundreds more teachers.)

Prospects – private sector

Although the supply of teachers grew backed by the surge in non-JET ALTs, eikaiwa as a business appears to be shrinking very fast (Excel). After falling for three years starting in 2003, sales boomed in 2006, whereafter the bottom appears to have fallen out from under the industry (Y axis unit = 1 million yen. Click for full-size):

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This precipitous drop coincides with reports at the time of oversupply in the eikaiwa market as the big schools such as NOVA rushed like mad to open schools in every corner of the country. The following years saw the collapse of several schools including NOVA, the former market leader. (UPDATE: this drop also coincides with legal revisions that made it easier for dissatisfied students to request refunds). Teachers may face some serious difficulty as the excess supply adjusts to match demand. This drop in sales far outpaces that of firms listed on the Tokyo Stock Exchange, which are expected to face a year-on-year 6.5% drop for FY2008 (final profits are a different story, but without sales there isn’t much hope of making a profit, is there?).

During this time, Japanese households’ discretionary income fell 1.9% (though slightly less in real terms). With the reputation of the industry damaged and Japanese households concerned about their basic livelihoods, it seems hard to expect that the workers’ desires to make their skills more competitive will save any but the highest quality businesses in this industry.

Prospects – public sector

Meanwhile, recent economic turmoil (annualized 12% GDP shrinkage for Oct.-Dec. 2008 makes Japan the hardest-hit G-7 economy) could put pressure on the public sector as well, as described in a previous comment by Aceface:

I have to wonder how many eikaiwa community understand gloomy future ahead of them. Many local government are now facing rapid decline of corporation tax income due to the down sizing of production in Toyota factories, ANd under such circumstances we can no longer justify this 21st century version of “Oyatoi-Gaijin” we know as JET/ALT.
Aichi, Shizuoka, Gihu,  Mie and Gunma need as much Portuguese/Japanese bilingual staffs as possible since there are tons of works must be done starting from job education for the unemployed. And since they have no extra budgets,most likely gone will be “international exchange”related posts.

While I am not sure what the rules are for funding non-JET ALTs (I am assuming schools can choose to use local taxes, or private schools their budgets), the JET program is funded by redistributed local taxes (chihou koufuzei), doled out to prefectures and municipalities at a pre-determined ratio, plus extra for local administrations with particular plans to use the money. The funds come from “the five national taxes” – income tax, corporate income tax, consumption tax, alcohol tax, and tobacco tax.   The income taxes have been on a downward growth trend since the 1990s, while consumption tax has emerged to rival those as a revenue generator. The sin taxes have maintained a consistent, relatively low holding pattern. The redistribution amount peaked in 2001 and has been falling roughly in line with the corporate income tax. Though 2008 tax receipts were forecast to be up slightly (possibly due to the tax bills for earlier profits), original finance ministry estimates appear to have fallen far from the mark, failing to anticipate the dismal corporate earnings, rising unemployment, and stagnant consumption. This means the major tax revenue sources are expected to fall significantly.

Conclusion

English teaching in Japan looks like it is in for a very rough patch. While this exercise hasn’t been exactly a happy one, I hope it’s been informative. It certainly has been for me.

UPDATE: I have posted some more data on the industry in a follow-up.

Never mix alcohol and cold medicine, kids

Or else you might become the Finance Minister of Japan:

The full story is here. He says it’s the latter, but we all know better.

UPDATE: News services are now reporting that Nakagawa is going to resign, citing this incident as the cause. Apparently they finally got over their implicit agreement not to mention his obvious drinking problem.

A conspiracy mindset setting in?

Looking for a transcript of Treasury Secretary Geithner’s congressional testimony, here is what Google recommended to me as a common search:

“Geithner Jew” — is he even Jewish? Apparently not.

I guess these searches could be coming from curious Jews wondering if one of their own was promoted to high office.

Dubai’s downfall just as spectacular as its rise

NYT has a report on the situation in Dubai:

With Dubai’s economy in free fall, newspapers have reported that more than 3,000 cars sit abandoned in the parking lot at the Dubai Airport, left by fleeing, debt-ridden foreigners (who could in fact be imprisoned if they failed to pay their bills). Some are said to have maxed-out credit cards inside and notes of apology taped to the windshield.

The government says the real number is much lower. But the stories contain at least a grain of truth: jobless people here lose their work visas and then must leave the country within a month. That in turn reduces spending, creates housing vacancies and lowers real estate prices, in a downward spiral that has left parts of Dubai — once hailed as the economic superpower of the Middle East — looking like a ghost town.
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“Why is Abu Dhabi allowing its neighbor to have its international reputation trashed, when it could bail out Dubai’s banks and restore confidence?” said Christopher M. Davidson, who predicted the current crisis in “Dubai: The Vulnerability of Success,” a book published last year. “Perhaps the plan is to centralize the U.A.E.” under Abu Dhabi’s control, he mused, in a move that would sharply curtail Dubai’s independence and perhaps change its signature freewheeling style.
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But Dubai, unlike Abu Dhabi or nearby Qatar and Saudi Arabia, does not have its own oil, and had built its reputation on real estate, finance and tourism. Now, many expatriates here talk about Dubai as though it were a con game all along. Lurid rumors spread quickly: the Palm Jumeira, an artificial island that is one of this city’s trademark developments, is said to be sinking, and when you turn the faucets in the hotels built atop it, only cockroaches come out.

Also, check this video from German TV (in English, via The Big Picture):

Coming soon: Europe to Haneda?

It looks like the legal framework is now in place for flights between Tokyo’s Haneda Airport and the Netherlands. As mentioned in this space last year, the Japanese government has been pushing the notion that Haneda can replace Narita during late night and early morning hours as the capital’s terminal for long-range international flights, and this pairing seems to be the first beneficiary of the idea.

For those detached from the airline industry, KLM (the Netherlands’ main airline) is now owned by Air France, and has been partnered for something like 15 years with Northwest (the #3 international carrier in Tokyo) which is now owned by Delta. Haneda-Amsterdam service could be a boon for the AFKLDLNW bloc in securing a more solid position among frequent business travelers to Tokyo. JAL might be interested in the route as well, but they wouldn’t have the benefit of intra-European feed that KLM enjoys.

Fake investment update

On Dec 22, 2008, I announced that my good friend Dork Yenbuyer and I decided to go all in and invest our life savings in the asset of our choosing, his being yen and mine oil. To recap, here are our initial investments:

– Mr. Yenbuyer invested USD $10,000 at an exchange rate of USD $1 = JPY 89.81 and received 898,100 yen.

– I bought 233 barrels of oil at $42.96/barrel, also a $10,000 investment.

Today, here is where we would be if we immediately liquidated our positions:

– Yenbuyer: at a rate of 89.92, he is down about $12 or a value of $9987.77

– I am not doing nearly so well:  233 barrels of oil at the current price of 35.82 = $8346.06.

How are the prospects?

The yen continues to look good:

The Economist notes that forces appear aligned in favor of further yen appreciation. The article quotes former finance ministry bigwig Eisuke Sakakibara predicting that once the rate hits 85, it “will trigger a wave of stop-loss orders, sending the exchange rate quickly to ¥80 or even ¥75,” precipitating crisis response by the government to intervene, possibly in concert with the US and other G7 nations.

Oil, on the other hand, not so much. With demand likely down for the full year, prices seem to hang on whether OPEC will seriously cut production:

Tough decisions ahead

Despite oil’s record slide from $147 last year to the sub-$40 level, as production cut by OPEC is not a simple matter. Historically, when the market has been oversupplied and the price trend is bearish, some OPEC member become reluctant to cut production, in order to maintain needed revenue to fund government spending, Felson said. That tactic to maintain revenue at all costs has historically driven prices even lower, as was the case in 1997-1999. Hence, those who assume that $30 represents a floor for oil, are assuming incorrectly, he said.

“So far, it looks like a repeat of the late-1990s market. If anything, the pressure to continue to pump oil may be greater now, given the large increase in social spending many OPEC nations undertook during the oil price boom. But the reality is that OPEC must cut production now, or else,” Felson said. “If OPEC doesn’t cut again, we will see prices fall into the mid-$20 range.”

METI rushes to adopt anti-SLAM policies

When you are trade minister and the economy is in trouble, the last thing you need is to get SLAMMED!!!

Thursday, February 12, 2009

ANALYSIS: Exit Strategy Needed As Govt Role Expands

TOKYO (Nikkei)–The Japanese government is becoming more active in combating the ongoing downturn, and while such efforts might be necessary, an exit strategy must be formed so that the economy is eventually able to thrive without life support.

The government is under immense pressure to take action amid the crisis. In early January, the Ministry of Economy, Trade and Industry (METI) hastily created a program to inject public funds into nonfinancial firms. Late last year, METI was flooded with complaints — not only from small and midsize companies, but also from big ones — about the difficulty of securing loans from banks and fundraising through the issuance of corporate paper and bonds.
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The trend toward greater state involvement seems clear in Japan, with ruling-coalition lawmakers and business leaders now calling on the government to save jobs.

“Speed is essential,” said METI Minister Toshihiro Nikai. “Unless we do something now, we will be slammed (by criticism).”
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Private-sector activity is essential to healthy markets. Without an exit strategy, the Japanese government and the BOJ will find it difficult to withdraw to their proper supporting roles, and the Japanese economy will be worse for it in the long run.

Given that the current crisis is arguably the worst since the Great Depression, the government and BOJ likely have little choice but to take action.

I realize this is a semi-serious argument against how offering protection to industry over short-term concerns could crowd out the private sector and possibly lead to a deleterious trade war. But Nikai has it wrong — come September at the latest, the LDP is going to get totally SLAMMED no matter what.

And weren’t “the Japanese government and the BOJ” already fulfilling a fairly intrusive role in the Japanese “markets”? Sure, many of the lost decade/Koizumi-era programs had been put to rest, but not that long ago. Japan remains full of so-called “zombie” companies kept afloat by previous bank bailouts and the like, but these new measures outlined in this article would presumably create a new breed of these – companies that would be insolvent without direct government support (or indirect through government-mandated loans). So while I share the Nikkei’s concern that the government of Japan will soon essentially become the “main bank” of a sizable number of companies, I just want to mention that rather than going from a state of being merely in a “supporting role” to an active role, these measures appear to push the GOJ from an already pretty active role to a very active role.

Tokyo-based scammers targeting gullible UK investors in Nigerian-style scam

This is pretty shady, but I wonder if they are really even in Tokyo?

Phil, a Financial Mail on Sunday reader from Berkshire, was contacted by Calderton Capital Partners, a Tokyo firm that offers investment advice as well as acting as middlemen in mergers and acquisitions.

Calderton had some good news for Phil. It wanted to buy his holding of shares in a small American company called TBXR, and it was willing to pay $130,000 (about £90,000). This priced his holding of just over 31,000 shares at more than $4 apiece – even though the last time Phil had checked the shares were closer to five cents (less than 4p). Still, it was certainly a generous offer. In fact, it topped the almost equally generous offer made to another reader, John from Cheshire, who was also contacted from Tokyo.

This time the contact came from a firm called Cook Capital Partners, and the caller told a curious story. John held shares in an American company called Accupoll that had filed for bankruptcy in 2006. But the caller said Accupoll had been taken over by a different company, Rudy Nutrition, and he represented a bidder who was willing to pay over $98,000 (about £68,000) for John’s shares.

Cook Capital Partners certainly seems to be a busy firm. At the same time as contacting John, it was also in touch with another Financial Mail on Sunday reader, Roger, wanting to buy his shares in yet another company, Genmed Holding Corporation.

And this was the biggest offer of them all – a mouthwatering $240,000 (£166,000) for shares that Roger had every reason to believe were actually worthless!

Now for the snags. Roger, John and Phil were all told that the shares they held carried a legal restriction that stopped the deal going through. But the good news was this restriction could be removed, if they paid legal fees up front.
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The up-front fees were not quite the only snags though. According to investigators at Japan’s watchdog Financial Services Agency, Cook Capital Partners is a scam. It is not registered with the FSA or licensed to carry out shares deals. There is even doubt that it is actually at its Tokyo address and telephone number.

New Kindle model – not yet

Ever since the first Amazon Kindle came out, I was extremely excited by the opportunity to use electronic ink technology to read PDFs, online books, and even the news without having to choose between staring at a backlit computer screen or print out hundreds of pages. The major features all sounded very convenient, and I could even envision using the device as a glare-free translation display. It would almost be worth shelling out $360 if only it weren’t such a new and untested technology.

So now that the next edition is out, things are looking better, sayeth the New York Times:

The Kindle 2 has several incremental improvements over its predecessor, which went on sale in 2007. Amazon said the upgraded device has seven times the memory of the original version, turns pages faster and has a sharper display.

It also features a new design with round keys and a short, joysticklike controller — a departure from the earlier design, which some buyers had criticized as awkward. The device will ship Feb. 24. The price remains at $359.

CNET:

The Kindle 2 is much skinnier than its predecessor, slimming down to 0.36 inches in thickness from 0.7, but it’s only a tenth of an ounce lighter. The storage capacity has jumped from 256MB to 2GB, or about 200 to 1,500 books, and the electronic ink display has improved from a 4-shade to 16-shade grayscale.

The layout of some of the buttons has been restructured, and the new Kindle also has a text-to-speech reader.

But there are still some serious drawbacks that force me to wait until they make further improvements. The Kindle 1’s current blurb about how to read your personal files doesn’t look very attractive:

Personal Files
Eliminating the need to print, Kindle makes it easy to take your personal documents with you. Each Kindle has a unique and customizable e-mail address. You can set your unique email address on your Manage Your Kindle page. This allows you and your contacts to e-mail Word documents and pictures wirelessly to your Kindle for only $.10. Kindle supports wireless delivery of unprotected Microsoft Word, HTML, TXT, JPEG, GIF, PNG, BMP, PRC and MOBI files.
PDF conversion is experimental. The experimental category represents the features we are working on to enhance the Kindle experience even further. You can email your PDFs wirelessly to your Kindle. Due to PDF’s fixed layout format, some complex PDF files might not format correctly on your Kindle.
If you are not in a wireless area or would like to avoid the $.10 fee for wireless delivery, you can send attachments to “name”@free.kindle.com to be converted and e-mailed to your computer at the e-mail address associated with your Amazon.com account login. You can then transfer the document to your Kindle using your USB connection. For example, if your Kindle email address is Jay@Kindle.com, send your attachments to Jay@free.kindle.com.

And who wants to pay 99 cents a month to read blogs?

Blogs
Unlike reading blogs on your PC, Kindle blogs are downloaded onto Kindle so you can read them even when you’re not wirelessly connected. And unlike RSS readers which often only provide headlines, blogs on Kindle give you full text content and images, and are updated wirelessly throughout the day. Get blogs wirelessly delivered to your Kindle for as little as $.99 per month.

This system appears not to have changed with the new version. Basically, you need to convert any file into a proprietary Kindle format before it can be read on the device. But instead of offering an offline tool, they require you to send all files to the Amazon service first to either wirelessly transfer to the Kindle (for a 10 cent fee) or sent to a PC email address so you can use a USB connection to transfer files (converted into Kindle format) from your PC to the Kindle for free. I am guessing they intentionally make this a little cumbersome in order to direct customers to the fee-based services. This library blogger apparently had a relatively easy time of it. Still, as the over-demanding consumer, at this price it just doesn’t seem worth it. When the time comes, however, I am sure I will make full use of user-created guides like this one.

UPDATE: I should mention that this product has never been rolled out for an official Japan release (though the Kindle 2 may be changing this soon), and from what I have heard it does not work properly in the country. So my visions of owning a Kindle are contingent on me either living in the US or the product becoming usable within Japan.