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A monthly review of the latest developments in Japan’s IT, telecom, and life sciences sectors

April 2004 - Volume VII, Issue IV

Triangle Technologies is the leading Japan Israel business development and investment advisory firm
www.triangletech.com

Dan's Desk

From Triangle's CEO

Loyal Dan’s Desk readers. Today you will get answers to the exam. A high score means, you should stay home. A low score means you will make lots of money in Japan. If you can stay home and still make lots of money in Japan, then tell me how to do it and I will join you.

Exam

Do you fit the Japanese market, or better to stay home? Please answer this simple yes/no exam and I will send you the scoring protocol next month with a summary of the results. Each item begins with “I believe that….

“…I need to decide which market to enter- Japan or China. Y/N

1 if you answered Y. The decision to enter one OR the other markets is usually absurd and the question itself usually reflects profound misunderstandings about BOTH Japan and China. Decide about Japan. Decide about China. Don’t decide about either Japan or China. If you are market-resource constrained, then the choice is not Japan or China, but US, Europe, SE Asia, China, India, Japan – how should I prioritize these markets? But choosing between China and Japan is like choosing between Poland and California (I am exaggerating of course, to make a point). BTW the latest Business Week issue “Is China Overheating?” And read the recent Economist special report on China (Mar 20, 2004), “Behind the Mask”. A preview: “The constraints imposed…have produced a ‘darker reality’ behind the impressive statistics and soaring skylines….”

“…When Microsoft has bug-free products, so will we. Y/N

1 if you answered Y. If you are MS, you can force the market to accept buggy products. Until then, this statement is usually an excuse for saving money on SQA or for sloppiness. Be thorough and test products carefully, preferably by a Japanese partner.

“…The Japanese business culture has Westernized. Y/N

1 if you answered Y. Usually this statement covers up an excuse for being culturally insensitive and for not investing time and energy understanding how the fundamental cultural principles do dramatically influence business success. Of course, around the periphery Japan is more international, more gaijin-friendly. But the underlying values of reliability, sincerity, preparation, harmony, frugality, risk-aversion and others – are intact.

“…Quality is a marketing issue. Y/N

1 if you answer N. One of the best ways to market your products in Japan is by earning a reputation for having a reliable, bug free, smooth, user-friendly, serviceable, and well performing product with good and accurate documentation. Sorry – in Israel we still have a long way to go here, but there are examples of high tech companies with excellent quality first generation products in Japan.

“…Japanese lack creativity but are great at manufacturing. Y/N

1 if you answered Y. The Japanese are tremendously creative. I wrote about this 2 or 3 Dan’s desks ago. WATCH OUT for Japan’s biotech and pharma industry in a few years.

“…All start ups’ first products are bad. Y/N

1 if you answered Y. This is an excuse for not building quality deeply into the culture of the company.

"…Being polite, friendly, gracious, quiet, self-effacing - these are all signs of weakness. Y/N

1 if you answered N. These are believed to be signs of weakness in Israel – in Japan they are signs of self confidence and strength.

“…I will invest in product adaptation if the customer will commit to buy. Y/N

1 if you answered Y. “If you build it, they will come.” The way to succeed in Japan is to build a high quality product based on an understanding of the market. There is a fundamentally flawed unconscious assumption that the US is THE market, and everywhere else is “foreign.” Wait 2 decades or so – India, China, Japan will take over.

“…Are these guys crazy?!*&% Y/N

1 if you answered Y. I do not know anyone who is successful in Japan who has not felt this way from time to time.

“…Having a good quality product will reduce my support costs. Y/N

1 if you answered N.

“…I am more clever than most Japanese executives. Y/N

This is tough, but 1 if you answered Y. Americans (and some Israeli’s) talk the talk, but Japanese walk the walk. See below.

“…The most important thing in selling to Japanese companies is to clearly explain your value proposition. Y/N

1 if you answered Y. Start listening, and stop explaining how and why customers in a different business culture should accept your definition of what they want. Many Japanese (and many Europeans) bristle at the American marketing approach which involves powerpoint, handwaving, TCO, cocky 35 year olds, and loud talking about why we are so great and the others are so bad, and basically why customers are stupid. This is a great way to destroy any personal credibility you may have. And although they are polite and smile, most Japanese are unconvinced by American style marketing and can hardly wait for the presentation to end. And don’t mistake silence for agreement, placidness, or stupidity – oh noooo.

“…The Japanese expect perfection. Y/N

1 if you answered Y. Surprised? Japanese expect excellent quality and sincere STRIVING for perfection.

“…Japanese companies can benefit from Israeli creativity and innovativeness. Y/N

2 if you answered Y. I remember when Bibi told a forum of senior Japanese executives that Israel can learn manufacturing from Japan and Japan can learn about innovation from Israel. Come on. The Japanese are net exporters of IP.

“…The customer is always right.” Y/N

1 if Y. Surprised? The customer is God, according to the Japanese saying. Now, as Jews we know that God is not always right, and we can indeed argue and negotiate with God. But he is God, after all, and if we want to get to heaven, we should certainly pay attention to what he wants.

“…If I can sell in Germany and Switzerland, I can sell in Japan. Y/N

1 if Y. Sorry – this is a common mistake. The similarity among Germany, Switzerland and Japan ends with the statement that they are all more thorough than the Americans. But the Japanese can out-yeki the yeki’s (Germans) with their samurai swords tied behind their backs.

“…Shit! They are driving ME crazy. Y/N

1 if you scored N. They even are driving themselves crazy, you can bet on it.

And for extra credit (2 points) answer the following:

“…When Japanese visit Israel (without our main tourist attraction, Sheikh Yasin, who would want to visit here, anyway?) I like to take them to the great Japanese restaurants we have.” N/N

Dan

***TRIANGLE TECHNOLOGIES NEWS***

Due to the Passover in Israel and the Golden-Week in Japan, there is no significant news.

***ISRAEL-JAPAN NEWS***

+GOOD CHANCE TO IMPROVE THE WITHOLDING TAX

The governments of Japan and the United States are discussing, for several yearsm possibilities to alter taxation agreements between them. They recently signed a “Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income”. A practical outcome of this agreement is to change the current withholding tax on software imported to Japan. As you know, most software companies are exposed to such a tax today and there are some mechanisms to minimize this tax.
We recommend you to consult your accountants to further study this issue.

***BUSINESS NEWS***

+KEY MEASURE OF BUSINESS CONFIDENCE AT SEVEN-YEAR HIGH

(AFP, April 2nd): The Bank of Japan's key quarterly survey (Tankan). showed business confidence has improved across the board. The large manufacturers' index rising to plus 12 from plus seven. Large non-manufacturers, which had been a weak spot, picked up to plus five from zero. The sentiment index for small- and medium-sized manufacturers stayed negative at minus three from a minus 10 in the December and The small- and medium-sized non-manufacturers is minus 20 from minus 25.
The companies surveyed for the Tankan expected the dollar-yen exchange rate to average 108.43 yen for the new fiscal year to March 2005 which began Thursday.

+DAIMLERCHRYSLER DROPS MITSUBISHI MOTORS

(nikkei.co.jp, Apr 23) DaimlerChrysler has said that it will provide no further funding to Mitsubishi Motors, it leaves Mitsubishi with a $7bn shortfall in funds and significantly impacts the company's ability to issue new shares. DaimlerChrysler bought 37% of Mitsubishi in 2000, and is likely to put the stake up for sale. Analysts speculate that the radical change of heart was forced on the company by its major shareholder, Deutsche Bank, which has seen mounting problems from Daimler's takeover of Chrysler in the USA.

+TOYOTA TO BECOME 1ST JAPANESE FIRM WITH OVER Y1 TRILLION PROFITS

(Kyodo News) Toyota Motor Corp is set to become the first Japanese company to post a group net profit of more than 1 trillion yen. The nation's largest automaker is projected to post a group net profit of about 1.1 trillion yen for the fiscal year ended March 31.

+NTT TO START FIBER OPTIC-BASED IP PHONE SERVICE IN AUGUST

(Kyodo News, April 29) Fixed-line telecom carriers NTT East Corp and NTT West Corp said Wednesday they will start offering optical fiber line-based Internet protocol (IP) telephony service for individual customers in August.

***GENERAL TECHNOLOGY NEWS***

+NEW RED LIGHT EMISSION COMPOUN

(yahoo.com, Apr 2, 2004): Japanese researchers have come up with a new type of tin oxide microcrystal compound which can emit 400% red light than current compounds. The new material can be used in TV tubes to dramatically increase luminosity. Scientists say that with further research, similar materials in other colors could be combined to produce white light and thus replace flurosescent and other forms of lighting.

+INT'L SUPERCONDUCTIVITY LAB DEVELOPS 40GHZ SWITCH CHIP USING SFQ CIRCUIT

(Nikkei Electronic, April 20): The Superconductivity Research Laboratory (SRL) of the International Superconductivity Technology Center has developed a 4 x 4 superconductor switch chip with an operating frequency range of 40GHz, which is 100 times that of semiconductor switches. The body size of the chip is 5mm x 5mm. "If Internet traffic loads continue to increase at the current rate, routers with a maximum capacity of 40Tbps would become necessary by around 2010" says SRL.

***LIFE SCIENCES AND ENVIRONMENT NEWS***

+REGULATORY REORGANIZATION IN JAPAN'S PHARMACEUTICAL INDUSTRY

Japan's Ministry of Health, Labor and Welfare (MHLW) is undertaking major regulatory reform based on the revised Pharmaceutical Affairs Law (PAL) under which it has established the Pharmaceutical and Medical Device Agency (PMDA) -- a new agency to conduct reviews of medical devices and pharmaceuticals -- on April 1, 2004. PMDA was formed from the merger of the Pharmaceutical and Medical Device Evaluation Center (PMDEC), the Organization for Pharmaceutical Safety and Research (OPSR) and the Japanese Association of Advanced Medical Equipment (JAAME).
Under PMDA, services provided by these organizations, including product approval reviews, were consolidated. However, MHLW retains the power for final approval of drugs and medical devices. For further information see www.pmda.go.jp

+SALIVA STRESS TEST

(nikkei.co.jp, Apr 22) Yamaha Motor, Nipro Corp., and researchers at Toyama University, have announced a new device which can test a patient's stress levels from their saliva. The device works by measuring amylase, the digestive enzyme found in saliva. The researchers were working on original research by the Northwestern University Medical School in the US, which found that the levels of amylase increase dramatically when a subject is under stress. Yamaha expects to market the portable system for around JPY10,000 next year.