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February 10, 2009 @ 1:40 am

[…] BizCast Japan #17 has been released at Trans-Pacific Radio. This edition of the show covers Toyota, Sony and firms that seem to be set to do well in the recessionary environment. […]

Comment by Marc Sheffner

February 10, 2009 @ 9:03 pm

Providing info on the Japanese economic and business scene in English is a potentially very valuable service. However, I would like to hear more facts and information and a little less “editorial” comment. For example, how are the prices of the raw materials for cars? How will these prices affect the future of various car industries? Also, why are “hybrid” cars a “dead-end”? Why not be more specific, e.g. hydrogen fuel cells? What quality control issues were there with Toyota, specifically, and when?

Comment by Ken Worsley

February 10, 2009 @ 9:43 pm

Marc, thanks for your comment. Much of the facts based information is what we have published at Japan Economy News. We also use TPR News for that purpose, though recently it hasn’t been on schedule. The BizCast show is a chance to take the facts one step further, into editorial and analysis.

That said, if we were able to release shows more often, one thing we would like to include more of would be some data behind the stories.

Comment by David

February 12, 2009 @ 12:28 am

I want way less facts and way more editorial content

I’ve started listening to TPR on the way downtown, and it’s completely badass. You guys need sponsors so you can broadcast more.

Comment by Steve Henderson

February 16, 2009 @ 6:57 pm

Enjoyed the show, thanks.

As an adjunct to your mention of online and discounted brokerages; the number of households that were involved in the markets at the top of the bubble here in Japan was around 25%, by 2003 that had dropped to 6% (don’t have today’s data for you) whilst the U.S. peaked in 2000 at 57%.
In terms of trying to time markets and also business creation, this does look like an opportune time for these businesses if they have a 10 year minimum outlook. If history is any guide Japan should rival the U.S. in terms of household participation before we are near any type of longer term top again. This doesn’t mean we have reached an absolute bottom yet but participation rates may yield a good clue if you can handle the swings. It’s likely that a fair amount of M&A/market share positioning should follow in this industry once a turn has been discerned.

Comment by Garrett DeOrio

February 16, 2009 @ 10:39 pm

David, did my wife send you? I don’t love men as a rule, but I love you, man.

Comment by Ken Worsley

February 16, 2009 @ 11:59 pm

Steve,

Thanks for the comment, it’s great to see you here! Regarding brokerage accounts, I would very much like to see a demographic breakdown of who tends to own them and how that will fit into Japan’s ineluctable greying and population decline.

Japan still has over 50% of its “investment” money in postal savings accounts, so there is plenty of cash to be pulled out and put into higher-yielding (ie, riskier) investment avenues, as you know. One of the main hurdles to moving that capital from merely being savings to being equity in firms is the fact the Nikkei’s performance is less than stellar, especially when compared to other indexes.

The trend of brokerages in Japan targeting high-net-worth individuals has been pronounced in recent years, as this appears to be the most solid target market worth investing the marking funds to attract, especially for traditional brokerage firms. It will be very interesting to see how they adjust moving forward.

I agree fully with your last sentence. Firms that build strong networks with high levels of client support will be very appealing targets, once the money for M&As comes back online.

Comment by Albrecht

February 18, 2009 @ 2:14 am

Marc,

Thanks for the feedback. Quite honestly, our time management skills need a lot of work as we have to edit out quite a bit in order to try and keep the podcasts under 40 minutes.

Comment by Albrecht

February 18, 2009 @ 2:19 am

Steve,

Interesting insight. However, I’m curious as to what role income tax policy might play in terms of household participation. Given the massive pension deficits, one might assume that eventually the Japanese government will embrace some type of 401(k) scheme. Prior that, do you foresee any impetus for the average Japanese citizen, cautious to begin with, to enter the markets during such turbulent times?

Comment by Steve Henderson

February 18, 2009 @ 11:02 am

Ken,

Didn’t really know how to find you guys till received a link via email….thanks Albrecht.

As for your desire for demographic breakdown, in this case I would say it is unnecesary as fear and greed works equally well in all demographic and economic ranges as an indicator.

The only way to move money out of low yielding (perceived lower risk) assets in to other assets, is for there to be hope and eventual forms of greed being established in the perceived successful future of said asset/s. This only comes after asset prices rise and trends have been established. To that end, the strategy of seeking out high-net-worth individuals is also a flawed strategy until this premise of confidence is established.

The point I was trying to establish is that we can use such information to time entry and exit points in markets in a proactive way rather than a reactive way as the herd do through emotional decision making. Nicer to be ahead of the curve where the risks are generally lower and the rewards are higher, I have always found.

Note of caution, markets always overshoot and take longer than we think to find not only tops but bottoms as well. That doesn’t include the essential bear market bounces, which 2009 in my opinion, is a likely candidate to experience against/as a result of this current level of pessimism.

Comment by Steve Henderson

February 18, 2009 @ 11:30 am

Albrecht,

I think my above response touches on some of the points you make, more specifically, some type of change in government would more likely lead to an implementation of tax changes and possible 401k scenarios. An interesting alternative posed to me on the weekend was a woman taking over LDP leadership…..will leave that to other discussions.

But with the Nikkei around the 7500 level at present, and a likely run into the 6000’s, discontent that usually leads to change of government should really start to play into the story. Even with any of these factors the only way to get involvement will be the return of confidence which should show up in its earliest forms with a run over 10,000 again. 12,000 to 15,000 would be an even likelier spot to have to get through before enough confidence is created. This is a lagging response and that doesn’t really have a chance until the Yen tops out and starts to reverse its gains after all this deleveraging yet to be completed. That said, if you can own the Nikkei in the 5-6000 range, then you are setting up for a longer term great buy spot. And as far as policy is concerned it will lag the people/economy (confidence-and therefore voter support) which lags the market. So market - people and economy - policy; is how I would look at it.

Comment by Ken Worsley

February 18, 2009 @ 11:26 pm

fear and greed works equally well in all demographic and economic ranges as an indicator.

While that’s certainly possible, and might be true, I’m still not sure it’s the primary indicator of the proclivity of a given individual to open a brokerage account. I definitely don’t think it would fly with the marketing gurus.

Anyway, I dug up some numbers relevant to the brokerage account discussion:

http://www.nni.nikkei.co.jp/AC/TNKS/Nni20090217D17VS050.htm

At the end of 2008, overall client assets at Japan’s 21 leading brokerages stood at 170.7428 trillion yen. At 93 yen to the dollar, that’s about $1.836 billion.

This figure is down by 23.7 trillion yen, or 12%, from the end of September 2008, and is also down 55 trillion yen, or 25%, from the end of 2007.

Still, some firms are seeing a net inflow of funds to individual accounts. Nomura reports an inflow of 1.441 trillion yen in the October-December quarter, while Daiwa saw in inflow of 300 billion yen in the April-December 2008 period.

In other words, there’s a lot of room for upside potential, as Steve was pointing out.

There are some interesting quotes in the Nikkei article:

“We are racking our brains over what to recommend to our customers,” Marusan Securities Co. President Eijiro Nagao said in reference to the brutal market conditions.

“We see no signs of market improvement, and are not at all optimistic,” admitted Hiroshi Yamamoto, director at Mito Securities Co

On individual investors:

“The (societal) shift from savings to investment remains unchanged,” said Nobuyuki Iwamoto, corporate senior executive officer at Daiwa Securities Group Inc

The Nikkei ends with a pithy statement that really tells us nothing new:

With competition among brokerages to attract funds from individuals likely to intensify, the successful firms will likely be those that provide increasingly independent-minded investors with appropriate products and services.

Comment by Steve Henderson

February 21, 2009 @ 4:02 pm

Ken,

All of your quotes seem to atest to the answer of motivating an individual, confidence! Confidence is developed at the same time hope and eventually greed are….when markets move in a direction that people like, all the rest will follow. At this point brokerages and banking units are at a loss as they only run on reactions of customers. Customer confidence first - followed by action- in this case, getting involved in the markets. And the next stage will likely start the larger involvement of the population in more sophisticated and less costly ways of accessing markets such as ETF’s and self controlled brokerage accounts at low cost. Even financial planners will have to move this way eventually.

The problem for marketers is that they are powerless (in my opinion) to induce involvement until the people feel the confidence and desire to be involved. So rather than the dollar amount numbers as a guide, I think it is more relevant to look at percentage of involvement. As we all know from these last few years numbers can be deceiving due to leverage and the fact that values will likely still drop while the markets drop.

In the end, until the markets turn around, and then the economy turns around, most of these companies will be fighting over the scraps and trying to position for better times at likely costs they can’t justify, squeezing their margins and share prices in the process.