Econ & Business – Page 9 – Mutantfrog Travelogue

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%.

Showdown at Narita: JAL vs. Ugly Americans vs. the DPJ

Various media sources have been reporting that JAL is now the subject of a tug-of-war between Delta and American Airlines, both of whom are interested in taking a large minority stake in Japan’s largest airline. (Korean Air and Air France have also popped up as “angel investors” in some reports.)

Let’s start with some background.

This is the ex-Narita route map of Delta Air Lines following its acquisition of Northwest. Delta is the #3 carrier at Narita with about 330 flights/week, compared to JAL’s 870 and ANA’s 500.

Northwest, whose operations account for the vast majority of Delta’s combined total, was the first airline to serve Japan following World War II. It provided the technical assistance which was necessary for JAL to start up in the early 1950s, and it has maintained an Asian mini-hub in Tokyo since the immediate postwar era. Delta came into the picture much later: they flew a very odd Portland-Nagoya route for a while in the 1980s, then pulled out of Japan completely, then came back in the 90s with a daily Atlanta flight. While Northwest was well-entrenched with travel agents and corporate travel desks, Delta relied more on feed from its US and Latin American route network out of Atlanta.

Now that Delta has absorbed Northwest, American is the small fry among US carriers at Narita, with just 70 weekly flights in comparison to Delta’s 330, United’s 150 and Continental’s 80. Despite this, AA has great marketing in Japan and their brand is fairly well-known here. Their saving grace is an extensive partnership with JAL through the oneworld airline alliance: JAL sells tickets on AA transpacific and US domestic flights, while AA sells tickets on JAL transpacific, Asian and Japan domestic flights. The carriers also cooperate with each other’s mileage programs, so that one can get JAL miles by flying AA, and vice versa.

AA has been doing fairly well lately, at least as far as US “legacy” airlines go. It just raised a cool billion dollars by selling frequent flyer miles to Citibank, which will, in turn, be dishing out more and more AA miles to credit card holders in the future. It also has more efficient planes trickling in to replace older MD-80 models in its US domestic fleet, which will improve its overall fuel efficiency and make it more competitive with the likes of Southwest and JetBlue.

JAL, on the other hand, is a financial disaster. Its “equal merger” with Japan Air System, which was supposed to make it more competitive in the domestic market, ended up creating two tracks of unionized employees, aircraft and operational infrastructure within the company, and this dichotomy has still not been sorted out. JAL still has a smattering of international routes that it doesn’t really need, most of which date back to the postwar economic explosion when the government basically tried to get JAL to fly everywhere in the world, on top of the extensive ex-JAS network within Japan that generally doesn’t mesh with the international network at all. On top of that, it has a huge, disorganized and fuel-hungry fleet of planes, and no money to swap them all out for a more streamlined fleet. JAL today looks a lot like Pan Am did in the 80s, and we all know what happened to Pan Am.

The Ministry of Land, Infrastructure and Transport has been pressing JAL to tie up with Delta for a few months now, according to media reports. Its reasoning is that the two carriers can code share, fill each other’s empty seats and tacitly cede certain markets to each other’s flight operations, much as JAL and American do now. Since Delta has many more routes from Narita, and significant overlap with JAL’s route network, turning the two competitors into allies would help JAL’s finances and justify some level of public funding to keep them afloat. Or at least, that was MLIT’s reasoning as of Taro Aso’s last day in power: New Transport Minister Seiji Maehara is being mum about the situation and implying that the Development Bank of Japan and private financial institutions may be on their own in financing a turnaround plan.

Delta has its own initiative to throw money on the table, and Delta’s interest basically explains American’s interest. I’ll let Cranky Flier, one of my favorite aviation bloggers, explain:

My guess is that [Delta’s Asian routes out of Narita] absolutely suck wind right now. If Delta is really losing a ton of money as I suspect, they could eliminate all those routes and either use the slots to fly to the US or transfer them to JAL. The additional connectivity in Tokyo that they could gain from this link-up would add a bunch more traffic to feed all that US-Tokyo flying Delta does now. (You people in Portland could breathe a sigh of relief, because this could probably help that flight come off the edge of the cliff.)

This move could make a big, immediate difference on the bottom line. If Delta can pour some money in but get it back out very quickly in the form of improved profits, then it’s a no-brainer. …

Of course, if JAL leaves, oneworld loses, so American has now come back with its plan to invest in JAL.

To this, I would only add that although Delta has inherited Northwest’s excellent sales and operational staff in Tokyo, Delta has not been making much effort to publicize its acquisition of Northwest here, except through a few ads here and there that are apparently direct translations of the ads they use in the US. This indicates to me that they are not particularly interested in developing their brand in Japan, despite the fact that it is now their most important overseas market. It’s much easier, from Delta’s perspective, to let JAL sell seats out of Japan under its own brand.

Some analysts and reporters have also raised the topic of Haneda slots, with very little clarification as to why Delta would care about Tokyo’s downtown, mostly-domestic airport. As many MFT readers know already, the Japanese government is slowly making Haneda more international. They are building a new international terminal and have started the legal documentation necessary to allow nonstop service from Haneda to Southeast Asia, Europe and other new destinations, primarily during late-night and early-morning hours when Narita is closed. The United States is not on the table yet, but many observers believe that an “open skies” treaty to open the aviation market between Japan and the US is long overdue, and with that treaty would come the ability to serve Haneda from the US. The most interesting aspect of Haneda for trans-pac flyers is that it will be open 24 hours, potentially allowing early morning or late-night flights between Tokyo and the West Coast that wouldn’t eat up a working day on either side of the ocean. Delta and American should both have an interest in such a service, especially if they can be assured of good domestic feed within Japan out of Haneda, which JAL is best positioned to provide.

It won’t be an easy ride, though. Whoever bails out JAL will have to sort through their mess of operational issues in order to get some return on the investment.

Okada: No need for vice-minister press conferences; Nikkei: Take it back NOW

My new circumstances give me access to most of the daily papers, in real live dead tree format. So today I looked at the Nikkei and came away with some thoughts:

Nikkei has an editorial forcefully demanding that the DPJ scrap any plans it might have to eliminate press conferences for every ministry’s vice-minister (事務次官). The piece is a reaction to a recent comment from incoming foreign minister Katsuya Okada that they wouldn’t need to hold their own press conferences because the traditional vice-minister inter-ministry meetings will be discontinued. Under LDP rule, the meetings had become a sort of shadow cabinet meeting and a manifestation of bureaucrat rule.

Calling the suggestion “rash,” the editorial writers lecture Okada that the people in power always try and reduce the number of press conferences as a way to escape scrutiny, and that it’s not up to those in power to decide what the public’s right to know is. One example of the benefits of these press conferences is that the agricultural vice-minister recently had to step down for making inappropriate comments at his press conference about a tainted rice scandal.

I checked, and none of the other major newspapers felt the need to devote an editorial to this issue (the Yomiuri for its part allotted its second editorial to lionizing Ichiro for his new hitting record). But I wouldn’t be surprised if some follow the Nikkei’s lead.

The incoming DPJ administration is expected to open up the press clubs in government institutions, which previously have been almost exclusively limited to domestic, mainstream newspapers and TV stations. Hence, the mainstream news media are on the watch for any signs they could lose their biggest asset – privileged access to those in power. The newspapers are more exposed to damage on this front than TV stations as the news is their only business, at least in their principal medium. The Nikkei in particular just got done posting its first loss since it started publishing figures, for the first half of 2009.

In principle, I agree with the Nikkei’s point that the powerful should be held up to scrutiny. But the Nikkei is changing the subject. Okada didn’t necessarily say he wanted to reduce the number of press conferences. As far as I can tell, Okada’s is merely saying that if the vice-ministers aren’t going to be in a position to speak for their ministries, of course they shouldn’t have press conferences. Maybe a political appointee would be the more appropriate person to put in front of the podium.

In fact, the DPJ’s plans to open up press clubs to independent media will open up government, so I would not be worried if the government stops holding press conference for people who are supposedly irrelevant anyway. The DPJ shouldn’t listen to the Nikkei. Remember, the media will try to portray itself as a defender of the public good, when in fact it’s an institution that’s exploited government secrecy for decades to its financial benefit. I would be happier if the Nikkei spent its vast resources not on acting as stenographers for the government and occasionally getting someone to say stupid things in public (as they did to make the vice minister resign), but instead on actual investigations.

Buy two teiki and save money, legal and perfect for budget-conscious salarymen

(Updated with note; corrected)

A lot of new stuff going on in my life prevents me from posting much, but I felt I should weigh in with this tip for fellow commuters in Japan:

Business weekly Shukan Diamond President has an article that explains how you could potentially save around 9,000 yen a year by buying two commuter passes — one that goes most of the way, and another that covers the rest of the ground. Because of the oddities of Japan’s train pricing system, your commuter pass might go up or down if you split your commute into two separate passes.

But it’s not as simple as buying two train passes along the same route. If you do that, generally you’ll have to either get off and on again halfway through your commute, or explain to the station attendant every time you get off the train. Not practical.

But one successful example they give is this: If you live in Omiya and commute to Tokyo Omori station, you could save 9,060 yen a year by buying one pass from Omiya to Ochanomizu, and the second from Ochanomizu to Tokyo Akihabara to Omori. This will let you ride all the way to Tokyo Omori (and let you stop at Ochanomizu at no charge if you want).

As you can see, it can get kind of complicated. To help sort things out, someone has developed an application that determines the most advantageous route for any given individual. Sadly, it’s already gone viral and is thus unavailable.Those who don’t want to wait for them to add server space and Google ads can try experimenting with Yahoo’s train route finder in the meantime (if you’re desperate, try waiting until late late at night when most others are sleeping. If you do, open a mirror site for the rest of us!).

The article states that this practice is hardly new and has been used by train-savvy salarymen for some time now.When some of Tokyo’s planned new routes come online it should create whole new levels of complexity to exploit.

(Diamond article found on Yahoo Japan front page)

Note: This practice is not the same as a train scam known as kiseru in which the rider has a ticket for the beginning and end of the trip but skips out on the rest of the fare.

Japan Lower House election – Meet the candidates Part 2: Tairo Hirayama (DPJ, age 37)

I am running out of time before the election (and have lots of research to do before my major live-streaming/blogging event tomorrow night), so I’ll be quickly running down the rest of the ticket in Tokyo’s 13th district:

Tairo Hirayama (DPJ, age 37) – This guy has been just about ubiquitous around Ayase recently, much more so than his LDP rival Ichiro Kamoshita.

Profile: This first-time candidate was a guest lecturer at Akihabara’s Digital Hollywood University (a school specializing in IT and media) where he taught a class on e-commerce. His main occupation is running a non-profit organization that helps small companies set up e-commerce websites. While not as prolific as Kamoshita, Hirayama has authored several books including Net Shop Management Standard Guide – 37 Iron-clad Rules for Attracting Customers and Sales Promotions Known only to Top-selling Stores.

He is originally from Iki, a tiny island in Nagasaki prefecture between Kyushu and Tsushima where his parents run a ryokan (traditional Japanese inn). I assume he is running in Adachi-ku because that’s where the DPJ placed him. He does not claim any prior affiliation with the area.

A turning point in his life came in 1995 when as a student at Waseda University he volunteered for the rebuilding effort following the Great Hanshin earthquake that devastated the Kobe area. It was there that he learned how to lead people; it’s also where he met his wife Sachiko, with whom he now has three children.

Policy: His campaign vans and literature all feature a big sticker announcing his support for the DPJ’s childcare cash handout program. Under the program, most families with children will receive 26,000 yen a month until their kids finish middle school. He’s made that the centerpiece of his campaign. He’s also been emphasizing his youth – the masthead of his website contains a logo with the word “age 37” in flames.

In an Asahi policy questionnaire, he said he’d like Japan to be known as a nation of “peace and culture.”

Chances of winning: The Nikkei-Yomiuri joint poll showed Hirayama slightly ahead. I’d say he will probably win backed by the groundswell of support for a DPJ-led government. He has the backing of 80% of DPJ supporters.

Something interesting: Hirayama’s wife Sachiko (apparently in her early 30s), who worked at a local Kyushu TV station before getting married, is no slouch – she won a female entrepreneur award in 2007 (with a 3 million yen grand prize!) from FujiSankei and Daiwa Securities for her creative business plan to open a “next-generation store” in Tokyo based on her online business Ikimonoya, an online retailer of gourmet Japanese food. The site is run under the brand of the Hirayama Ryokan, the traditional Japanese inn located on Iki that has been in her husband’s family for three generations. She is president of the ryokan company and her husband Tairo is the Representative Director (some sources say Tairo’s mother is the okami-san, the Japanese term for lead hostess/general manager, while others say it’s Sachiko now). Unfortunately the site shows no indication that they actually opened a store since she won the award in March 2008. She reportedly lives on Iki full time, so it must be very lonely for her husband in Tokyo.

Sachiko Hirayama

More facts about Japanese convenience stores from Shukan Toyo Keizai

Shukan Toyo Keizai has an article on the state of convenience stores in Japan. Amazingly, all the major chains are planning to grow their number of stores (where can they even fit these days?). Anyway, here are some of the more interesting takeaways:

There are 42,204 convenience stores in Japan, according to the industry association. And they are still growing!
A major source of new store openings is the relocation or reconstruction of existing stores. In FY2008, 7-11 Japan opened 874 stores, of which 429 were relocations of existing stores. Many of the relocations are to make room for parking lots following road widening or other changes to the market. (I recall a local Sankus did this about a year ago, now they are about a block further away with a shiny new parking lot).
Convenience stores earn most of their money off royalties from franchise owners. But with so many stores out there, it’s getting harder to find new people willing to make the investment. Now is a relatively good time to look for new franchise owners thanks to the recession. People tend to be more willing to start up a convenience store franchise when the economy is bad. To combat this difficulty, recently convenience store companies have been trying to get franchise owners to invest in multiple stores.
80% of people who sign up to be convenience store franchise owners are men in their 30s and 40s. To own a convenience store, you usually must work at one for a year as a trainee, but you can shorten this by taking an exam after 6 months.
To own a Circle K usually requires a 3 million yen initial investment, but incentive programs can reduce this to 650,000 yen.
As with many chains, convenience stores exercise tight control of their franchises. Apparently, they even hire the clerks. Many convenience store companies have their own placement services to do the hiring. This is no doubt a key source of the foreign workers we see on a regular basis.

10 years on: Coming to Japan

This year marks the tenth anniversary of my first journey to Japan, as a Rotary Youth Exchange student going to school and generally getting in trouble in Osaka.

Since then, I have flown a hundred thousand miles, earned three diplomas, and have seen my Japanese high school closed down and stupidly renamed while my American high school gets shuttered due to the swine flu.

I still have many memories of that first year, and for the next eleven months, will be sharing some of those memories here on the blog. (Those of you who don’t care can simply avoid the jump, and Adamu will still regale you with tales of the Adachi-ku ballot). Continue reading 10 years on: Coming to Japan

Japan’s impromptu commuter lines: Kita-Ayase and Hakata-Minami

The mass transit oddity in my backyard

I live almost right next to one of the oddest pieces of the Tokyo subway network: the tail end of the Chiyoda Line between Ayase and Kita-Ayase. On a map, it looks like a normal green line, but in reality, it’s anything but normal.

The north end of the Chiyoda Line is practically located at Ayase. From Ayase, the trains continue through onto the Joban Line toward Chiba and Ibaraki. To get to the last station on the Chiyoda Line, you have to walk to “Track 0” at the end of the southbound platform, then board a three-car 5000 series train (an older Tokyo Metro model which now populates the railways of Indonesia), which might not come for 20 minutes. When it does come, you’ll be treated to a mind-numbingly slow ride, such that the folks at Chakuwiki say “it’s like a tourist train” and “you might as well have walked.”

As is the case with most public transit oddities in Japan, there are political factors which led to this situation.

Kita-Ayase is located just south of the railway yard which services all the Chiyoda Line trains, as well as Yurakucho and Namboku Line trains (which can access the Chiyoda Line through tunnels near Kasumigaseki and Ichigaya). The yard opened along with the Chiyoda Line in 1969; at that time, the only passenger stops were between Kita-Senju and Otemachi, but the line to Kita-Ayase was being used to shuttle trains back and forth. Ayase opened for business as a passenger station in 1971, but the branch to Kita-Ayase remained for servicing only.

The people living around the rail yard saw all these trains passing right before their eyes, and so they petitioned the Teito Rapid Transit Authority to build a station at Kita-Ayase, which opened for business in 1979. Because of limitations on available space, the station has a very small platform which can only accommodate a three-car train–hence the use of special sets made of otherwise retired rolling stock. Also unlike the rest of the Chiyoda Line, the Kita-Ayase branch has platform doors due to the fact that its trains have only one conductor.

Following precedent

Ten years later, something very similar happened in Fukuoka. The Sanyo Shinkansen “bullet train” route, which began service to Fukuoka in 1975, terminates at a large rail yard in Nakagawa, a town about eight kilometers from Hakata Station (the main station in Fukuoka). The surrounding area was a quiet and bucolic zone when the line was planned, but doubled in population between 1960 and 1970, then doubled again between 1970 and 1980.

At some point in the late seventies or early eighties, the locals got fed up with the shoddy state of public transport to central Fukuoka. Back then, the only option was to take a bus, despite the fact that there was a beautiful high-speed rail line running straight from their backyard. So they petitioned the train company to build a new station, just like the good citizens of Ayase did, and got their wish for commuter trains in 1990.

There was one big administrative issue which held up the planning of the new passenger service. Japan’s national railway company had just been broken up, and the new service was uncomfortably on the edge of two new companies’ jurisdictions. JR Kyushu had been given authority to operate all local JR service in Kyushu, but JR West had been given authority over the Sanyo Shinkansen. The ultimate solution was to keep the station property and the line under JR West control, but subcontract operation of the new station to JR Kyushu.

Until 2008, the Hakata-Minami Line was operated by old 0-series Shinkansen trains, the same airplane-styled model that plied the Tokaido route in the 60s and 70s. These were retired, and now the line is mainly plied by current-series Shinkansen trains which continue directly to Shinkansen operation after dropping people off at Hakata. The trains are treated as limited expresses, even though the trip is only ten minutes long and costs 290 yen (190 base fare and 100 yen surcharge).

Although the Hakata-Minami Line is much nicer and much more convenient than the Kita-Ayase spur, it shares one common inconvenience: a short platform. Hakata-Minami Station can only handle eight-car trains, whereas Sanyo Shinkansen train sets run up to sixteen cars.

There is one other line on the boundary between Shinkansen and regular lines: the branch line between Echigo-Yuzawa and Gala-Yuzawa in Niigata Prefecture. This line is served by Joetsu Shinkansen trains from Tokyo during the winter ski season, but it is not treated as part of the Shinkansen; rather, it is treated as a limited express, carrying a 100 yen surcharge just like the Hakata-Minami Line. (The Gala-Yuzawa ski resort itself is incidentally owned by JR East, which is why you see ski packages advertised so heavily on JR trains in Tokyo during the winter.)

Must-see video on Youtube and the American quest for authenticity

Thanks to Gen Kanai for passing on this landmark lecture on Youtube culture and how it’s turning all Americans into attention whores who can only find validation through media exposure:

This appears to be on the same page as J Smooth’s observations about how even as the Youtube generation mourns Michael Jackson’s death, now that everyone is a media star they must deal with the same pressures of public exposure that Jackson faced:

Renting in Japan vs America – Part 2

Last week I began this series with a post detailing my experience, and what I know about the system of renting a place to live in the US, mainly focusing on details that are of particular note for a comparison with Japan. I then followed up with an interlude on anecdotes of racial discrimination in the American housing market, as discrimination in apartment rental is widely discussed in Japan. I had intended to continue sooner, but we’ve had so much active discussion on the blog over the past week that I decided to hold off for a bit longer. In this post, I will describe what I know about the process of renting a residence in Japan, explaining the peculiarities of the fee structure and the search process, but not getting much into the actual laws or regulations. I decided to keep these separate as I believe it is important to first discuss the reality of the system before trying to analyze how it compares with the letter of the law. In the next post I will describe my own experiences in searching for and renting here in Kyoto, as well as providing the details of my current contract as a case study.

In Japan, the vast majority of rentals go through real estate agents, and direct rentals from a landlord are quite rare without a personal connection of some kind. A typical rental process goes as follows:

You go to a real estate agent, tell them what you’re looking for, they show you information on some potential rentals, you pick ones you want to see. This process may begin online, and there are plenty of websites for browsing real estate, but once you indicate your interest and head over to the office, things are pretty much the same.

The agent will first call the party responsible for the property, be it the actual landlord, management company, or another real estate firm to check availability, verify conditions, and arrange a viewing time. As rental units are often cross-listed with multiple agencies, they need to coordinate schedules to make sure prospective renters don’t run into one another, and that the key is available. Once one or more viewings have been arranged, the agent will then drive you around in the company car to view the properties. They will show you as many as you like without complaint, and without expecting any charge, as these services are all provided for by the introduction fee paid upon completion of a rental lease.

Once you pick one you like, they sit you down, read and explain the contract clause by clause (apparently a legal requirement) and then you sign/stamp it, pay them, they hand over the key and documents related to required disaster insurance or activation of utilities, and get to move in. After moving in, you never have any dealings with the real estate agent again, but instead usually deal with a management company (管理会社), who actually accepts rent on behalf of the owner, and fields any questions you have regarding repairs etc.

When moving in, one usually has to pay first months rent, key-money, security deposit, real estate agent fee, and an insurance fee. The monthly bill may include a ‘common maintenance fee’ (共益費) to cover costs relating to the common areas of the building, usually a few thousand yen a month (compared with a typical rent of tens of thousands yen). In the US, condo or coop residents pay a similar maintenance fee, but for rental units it is subsumed into the general rental fee. As far as I can tell, there is no logical reason for this separate fee, except to make the advertised rent look smaller than it really is.

The term ‘key money’ is the standard translation of the Japanese term reikin (礼金), which literally means something like money given in thanks, or as an obligation. According to Wikipedia, reikin actually started as a gift given to the landlord by the family of a young student or single worker who moved from the country to the city, in exchange for the landlord watching after the naive new arrival. This gradually became institutionalized, and over the decades shifted from being a payment intended to cement a two-way social obligation (as the word implies) to a simple up-front fee paid to the owner when renting a place to live. Today, reikin equal to 1, 2 or even 3+ months rent is ubiquitous, although apparently common in some regions than others. Unlike a security deposit, reikin is never returned, regardless of how long one stays in the place, and the amount is also unrelated to how long one intends to stay. The legal status of has always been ambiguous, generally assumed to be technically illegal, but with no clear guidelines or alternative to paying it.

Key money does exist in the US, but is both explicitly illegal and quite rare. The only place I am aware of it being common is Manhattan, where building superintendents are known for requiring a cash bribe in exchange for leasing a desirable apartment, particularly those with rent-controlled below market-rate rent, although it probably exists in other markets as well. The two big differences are that reikin in Japan is both clearly advertised, and grudgingly tolerated, while key money in Manhattan is always an under the table cash, due to its status as a clearly illegal bribe, and that in Japan reikin always goes to the landlord, while in Manhattan it often goes to the super instead. In recent years, there has been an increasing trend to offer reikin-free apartments in exchange for a slightly higher monthly rent, which is obviously superior for anyone who isn’t completely sure they will be staying in the same place for many years, or who lacks enough savings to easily spare the hundreds or thousands of dollars (equivalent) that one has to piss away on reikin.

Security deposits (shikikin – 敷金) are also standard in Japan, and usually equal one or two months rents, as in other countries. Supposedly, landlords in Japan are far more likely to con you out of your security deposit than in most other countries, but I am told that if you press hard enough you can usually get most of it back. A good contract will specify that certain accouterments, such as the tatami mats, wallpaper, fusuma (wooden/paper screens) are “disposable” items, damage to which shall not be charged from the deposit.

Sometimes, the reikin and security deposit are combined into a somewhat bizarre ‘guaranty money’ (hoshoukin – 保証金), in which one pays a certain large amount, from which a certain smaller amount may be returned at the conclusion of the lease. This is functionally identical in every way to having a separate reikin and deposit, except that by using a different fee structure the real estate agent can disingenuously advertise the unit as ‘no reikin!!!’ while in reality being just as bad. Hoshoukin is usually 2-4 months rent, or equal to the amount that reikin and security deposit would be combined.

As I mentioned earlier, there is also a fee paid to the real estate agent, usually equal to one month rent, but sometimes companies will offer a fee equal to 1/2 month rent. Disaster insurance is also mandatory, at least when renting a house (I don’t recall for apartments), but is not particularly expensive, perhaps in the range of ￥10,000-20,000 per year.

The last fee that needs mentioning is the ‘renewal fee’ (更新料). Most apartment leases in Japan are for one or two years, after which one generally has to pay a renewal fee, usually equal to one month rent per year of lease. In Japan, one can generally cancel a lease with no penalty by giving only one month notice, which is actually one of the reasons that landlords had been hiking up the reikin for so many years-to compensate for the possible loss of income due to a very short-notice vacancy. (And also just because they can get away with it.) The renewal fee is essentially interim reikin, discouraging tenants from making an unscheduled move in the middle of their lease, and helping to prevent loss of long-term rental income to the landlord.

While not a fee exactly, I can’t end this post without discussing the guarantor system. When renting a place in North America, ones credit worthiness is based on the credit score, which is ultimately derived from one’s entire financial history. The landlord checks the customer’s credit score, perhaps also looking a recent tax statement for proof of current earnings, and then allows them to rent if they seem sufficiently trustworthy. Generally, a co-signer or personal guarantor is only needed in cases where the renter hs no credit history or income, such as the case of the college student I mentioned in the first post. In Japan, there is no personal credit score, with personal guarantors required for and and all rentals. The guarantor (hoshounin – 保証人) the guarantor co-signs the lease with the renter, and is therefore legally on the hook should the renter skip out on rent, or refuse to pay for damages in excess of the security deposit. The guarantor’s creditworthiness is generally based on proof of income, and can be anyone that makes enough money. Foreigners can actually serve as guarantors, although permanent residency may be required. For renters who don’t have a relative, boss, teacher, or well-off close friend to serve as a guarantor there are also companies that provide guarantor services-essentially rent insurance-for around ￥50,000.

So, there you have a general overview of some of the unique properties of Japanese rental arrangements. I’ll move on to my personal experience in the next part, but I’m sure everyone will bring some corrections/additions/information on local variance to the comment thread below.