ISA 600 Explained
The International Federation of Accountants has updated the International Standard on Auditing 600 (ISA 600), and the revised standard went into effect on December 15, 2023. What are the advantages and disadvantages of the revisions when it comes to group audits?
What are the pros and cons of the latest update to the International Standard on Auditing?
The International Federation of Accountants has updated the International Standard on Auditing 600 (ISA 600), and the revised standard went into effect on December 15, 2023. What are the advantages and disadvantages of the revisions when it comes to group audits?
Firstly, a group audit refers to an audit of consolidated financial statements where the parent company and its subsidiaries are viewed as a single economic entity or “group.” It is often conducted by the parent company’s auditor, known as the group auditor, and encompasses the financial information of the parent company and its subsidiaries. As the group auditor will provide an opinion on the consolidated financial statements, it is essential that they are satisfied with the work completed by component auditors or local audit teams.
The group audit is necessary because businesses often operate through different legal entities and across different geographical locations. For an accurate view of the group’s financial situation, auditors must assess financial statements at both the parent and subsidiary levels and follow the standards established by the relevant auditing bodies.
International Standard on Auditing 600 (ISA 600) (Revised), Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors) deals with special considerations that apply to a group audit, including when component auditors are involved. The standard is effective for audits of group financial statements for periods beginning on or after December 15, 2023, and aligns with recently revised standards which emphasize the assessment of risk, including ISQM1 and ISA 220 (Revised) and ISA 315 (Revised 2019). There is increased emphasis on the responsibilities of auditors relating to professional skepticism, planning and performing a group audit, two-way communications between the group auditor and component auditors, and documentation.
The changes are intended to:
- Encourage proactive management of quality at the group engagement and the component levels
- Keep the standard fit for purpose in a wide range of circumstances and in a developing environment
- Reinforce the need for robust communication and interactions during the group audit
- Foster an appropriately independent, challenging, and skeptical mindset on the part of the auditor
ISA 600 (Revised) sets out the responsibilities of the group auditor for providing the audit opinion on the group financial statements, including components such as subsidiaries, associates, joint ventures, and non-controller entities.
Advantages
Viewed from the component auditor’s side, relying on a variety of useful information regarding management’s rationale from the group auditor can reduce the risk of material misstatement and detection risk when conducting audit components.
One significant change is the introduction of the risk-based approach as a framework for planning and performing a group audit engagement. This means more focus on identifying and assessing the risks of material misstatement and performing further audit procedures in response to the assessed risks. The group auditor develops initial expectations and, based on these, may involve component auditors in risk assessment procedures, as these individuals may have direct knowledge and experience with the entities or business units that could be helpful in understanding the activities and related risks.
According to the standard, the group engagement partner may take responsibility for directing and supervising component auditors in different ways, such as:
- Discussing identified and assessed risks, issues, findings, and conclusions
- Participating in the closing or other key meetings between the component auditors and component management
The discussion between the group auditors and component auditors provides the opportunity to understand how and where the entity’s financial statements may be susceptible to material misstatement due to fraud. This is done by considering external and internal factors affecting the group that may create an incentive or pressure for group management, component management, or others to commit fraud. The discussion between group engagement partners and other key management team members also provides a chance to identify risks of material misstatement relevant to components where there may be impediments to the exercise of professional skepticism. In other words, the involvement of the group auditor enhances the effectiveness of component auditors.
ISA 600 (Revised) strengthens and clarifies the importance of two-way communications between the group auditor and component auditors as well as various aspects of the group auditor’s interaction with component auditors. However, there are many types of restrictions that may exist, such as on access to people and information (e.g., component management, those charged with governance of component, component auditors) as well as audit documentation.
Viewed from the group auditor’s side, the revised standard provides guidance on ways to overcome restrictions. The group auditor may be able to visit the location of the component auditor or meet with the component auditor to review their audit documentation. They may also be able to review the relevant audit documentation remotely when not prohibited by law or regulation and request that the component auditor prepare and provide a memorandum that addresses the relevant information.
Disadvantages
The application of ISA 600 (Revised) may also bring some downsides.
According to the requirements, the role of group auditor increases, as does the workload of component auditors. The group auditor may involve component auditors to provide information or perform audit work to fulfill the requirements of the standard.
Component auditors can be—and often are—involved in all phases of the group audit. The group auditor shall take responsibility for the nature, timing, and extent of further audit procedures to be performed, including determining the components at which to perform further audit procedures. This responsibility is demonstrated through meeting the requirements of the consolidation process and considerations when component auditors are involved.
Communication
ISA 600 (Revised) includes enhanced documentation requirements and application material to emphasize the link to the requirements of ISA 230 and other relevant ISAs. The required documentation includes:
Basis for the group auditor’s determination of components
Basis for the group auditor’s determination of the competence and capabilities of component auditors
Documentation of the direction and supervision of component auditors and the review of the work
Additional considerations when access to audit documentation is restricted
The strength and clarity of the importance of two-way communications between the group auditor and component auditors in the standard are likely to result in more work for the group engagement team. This is particularly true regarding the enhanced responsibilities in evaluating the component auditor’s communication and the adequacy of their work, the sufficiency and appropriateness of audit evidence obtained, and communicating with group management and those charged with governance of the group. References in the standard to the definition of “engagement team” includes the group auditor and component auditors.
As mentioned, the group auditor will involve component auditors and clarify the instructions for the risk-assessment procedures. However, in practice, there are some instructions from the group auditor that may not be suitable for component auditors, and this can lead to some aspects of the instructions not being effective.
These changes to the standard will take time to implement, comply with, and complete for both the group auditor component auditor sides.
Generally, both sides should make sure that they understand the new requirements and that audit methodologies are updated accordingly and in a timely manner. They should also reassess the models being used for considering component materiality and aggregation risk to determine whether they are still appropriate.
For more information, please contact Grant Thornton Japan at info@jp.gt.com or visit www.grantthornton.jp/en
Internal Controls, Sustainability, and IFRS
With two new sustainability standards in effect for annual reporting as of January 1, 2024, companies may need to reassess their internal controls to ensure they are compliant with disclosure requirements.
How two new sustainability standards impact reporting and disclosure, and what companies should consider to ensure they are compliant.
On June 26, 2023, the International Sustainability Standards Board (ISSB) unveiled its first-ever standards for sustainability disclosure. Designated International Financial Reporting Standards (IFRS) S1 and S2, they focus on general sustainability- and climate-related disclosures.
As demand grows from investors, regulators, customers, and other stakeholders for companies to disclose their sustainability practices and impact on the environment and society, these standards could help with the assessment of a company’s long-term sustainability, its ability to manage risks and opportunities, and to compare companies across industries.
IFRS S1, General Requirements for Disclosures of Sustainability-related Financial Information, requires companies to disclose financial information about their sustainability-related risks and opportunities that is useful to primary users of general-purpose financial reports in making decisions related to providing resources to the company. IFRS S2, Climate-related Disclosures, requires companies to disclose the same related to climate.
As this information could affect the company’s cash flow, access to financing, or cost of capital, the requirement for reporting and transparency might influence strategy, objectives, and decision-making processes.
With these new sustainability standards taking effect for annual reporting periods beginning on or after January 1, 2024, companies should reassess their systems of internal controls to comply with the disclosure requirements.
The table below shows internal controls that companies may need to consider.
| Internal Control Areas | Points to Consider |
|---|---|
| Data collection, verification, and management | · Accuracy and reliability of sustainability data for reporting · Manage the increased volume of sustainability data |
| Risk assessment and management | · Controls and processes to identify, assess, and manage risks and opportunities · Consistency with its strategic decisions and operations |
| Technology infrastructure | · Invest in new technology and IT controls |
| Training and awareness | · Invest in employee training and awareness programs · Policies and procedures to evaluate competencies |
| Governance | · Establish authority and responsibility |
| Integration with financial reporting | · Communication and monitoring from management and those charged with governance · Facilitate external audit |
| Stakeholder engagement | · Inclusion of processes for engaging with stakeholders |
Data Collection, Verification, and Management
The IFRS standards and reporting promote transparency and accountability regarding sustainability- and climate-related risks and opportunities. By requiring the collection and validation of data, a company can ensure accuracy and reliability for reporting.
Doing so will require robust internal controls similar to those used in financial reporting, and internal controls may need to be updated to manage the storage, access, and protection of a larger volume of data. As sustainability reporting is often required by regulatory bodies or industry standards, integrating sustainability metrics into internal controls helps ensure compliance and reduces the risk of penalties and legal issues.
Risk Assessment and Management
As sustainability reporting involves identifying, assessing, prioritizing, and monitoring risks and opportunities related to sustainability and climate, internal controls must include processes to effectively assess, manage, and mitigate risks. It is also key to ensure that those charged with governance have considered trade-offs associated with the risks and opportunities.
Sustainability reporting also highlights long-term sustainability goals and opportunities. Therefore, aligning internal controls with these goals can ensure that strategic decisions and operations are consistent with sustainability objectives.
Technology Infrastructure
Companies may need to invest in new technology and IT controls to manage sustainability data, especially if they are transitioning to digital reporting platforms. Information systems should be able to capture internal and external sources of data related to sustainability and climate risks and opportunities.
Training and Awareness
Companies may need to invest in employee training and awareness programs to ensure that all personnel understand the sustainability goals and the importance of reporting, and can carry out their internal control responsibilities. Companies may need to monitor the contributions of employees to these objectives. Processes may include policies to determine whether appropriate skills and competencies are available or will be developed to oversee strategies designed to respond to risks and opportunities related to sustainability and climate.
Governance
Sustainability reporting may necessitate changes in corporate governance to ensure that sustainability considerations are integrated into strategy and decision-making processes. Internal controls should reflect shifts in governance by having a governance body (which may include a board, committee, or equivalent) or individuals responsible for oversight of risks and opportunities related to sustainability and climate. Companies should also consider updating policies and procedures to reflect the responsibilities of those charged with governance and management.
Integration with Financial Reporting
Aligning the processes for sustainability and financial reporting requires careful coordination and internal controls to ensure that both are accurate and consistent. Policies and processes should consider how, and how often, those charged with governance and management are informed about sustainability- and climate-related risks and opportunities and decisions on significant transactions. Companies may also need to establish controls and policies to facilitate external audits of their sustainability disclosures to ensure that the data, processes, metrics, and targets adhere to reporting standards.
Stakeholder Engagement
Internal controls may need adjusting to address the broader set of stakeholders associated with sustainability reporting compared with traditional financial reporting. Sustainability reporting can lead to increased stakeholder scrutiny and engagement, and effective internal controls can help manage these interactions and ensure that stakeholder concerns are addressed, and the company’s reputation maintained. Communication methods should take into considering the timing, audience, and nature of the engagement.
As the ISSB is currently developing these sustainability standards, we expect that additional standards might be promulgated to address the needs of the stakeholders. Regular reviews and updates of internal controls, policies, and procedures are necessary to adapt to changing sustainability reporting standards and evolving practices.
Companies focusing on sustainability could drive innovations and efficiencies in their processes that lead to cost reductions. Internal controls can monitor and optimize these changes to ensure that they are implemented effectively and align with the company’s strategies, objectives, and decision-making processes.
For more information, please contact Grant Thornton Japan at info@jp.gt.com or visit www.grantthornton.jp/en
Serene Shrines and Sauruses
As a tourist destination for inbound visitors, Fukui Prefecture often gets short shrift, especially compared with more glamorous neighbors such as Kyoto and Ishikawa Prefectures. But this may start to change when the Hokuriku Shinkansen adds Fukui, Tsuruga, Awara Onsen, and Echizen Takefu Stations to its pit stops in March 2024.
Fukui Prefecture offers crafts, fossils, relaxation, and so much more.
Presented in partnership with Fukui Prefecture
Photos by Florentyna Leow
As a tourist destination for inbound visitors, Fukui Prefecture often gets short shrift, especially compared with more glamorous neighbors such as Kyoto and Ishikawa Prefectures. But this may start to change when the Hokuriku Shinkansen finally adds Fukui, Tsuruga, Awara Onsen, and Echizen Takefu Stations to its pit stops in March 2024.
For now, Fukui’s sightseeing spots remain relatively quiet and uncrowded, making it an ideal road-trip destination for those with a little more time to spare. Our visit this fall takes us around the cities of Katsuyama, Awara Onsen, and Echizen—all of which yield rich rewards for the visitor willing to rent a car and take the wheel.
Mossy Matters
Gently sloping and meandering, the stone path to the main building of Heisenji Hakusan Shrine is flanked by towering cedars. It is serene, save for birdsong; few visitors are here on a weekday morning. The mid-morning sunlight filtering through the canopy casts dappled patterns of light and shadow on the velvety green moss blanketing the ground, yesterday’s rain heightening the dewy verdure. It’s so absurdly beautiful that I almost want to curl up on the moss and never leave.
However, if you ask historian and resident head priest Hiraizumi Takafusa, the gorgeous mosses on the shrine precincts aren’t the be-all and end-all of these grounds. “It’s not like we promote this place with its moss. We supposedly have over 200 types of moss,” he says. “I can recognize only 20 of the varieties.” According to Hiraizumi, the history of the shrine and the surrounding area are the true highlights.
Located on the edges of Hakusan National Park in what is now Katsuyama City, Heisenji Hakusan Shrine was established as a Buddhist temple in 717 by a monk named Taicho. For centuries, it operated as both Shinto shrine and Buddhist temple—as was common practice prior to the Meiji Restoration—and served as a base for pilgrims making their long, arduous way on foot to the sacred mountain of Hakusan.
At its peak, thousands of monks lived on the precincts, which were about 10 times the size of the present-day sprawling shrine complex. It’s mind-boggling to consider. It will surprise no one familiar with Japanese temple architecture that the complex burned down in the 16th century and was subsequently rebuilt.
The formal separation of Shintoism and Buddhism in the 1870s meant that it became a Shinto shrine first and foremost. However, its name points to vestiges of its Buddhist ties from centuries past—it is a rare instance of a Shinto shrine whose name ends in -ji, meaning “temple.”
The shrine has much to offer history buffs, especially when paired with a visit to the more famous Eiheiji Temple, about 40 minutes away by car. But even without a deep interest in Japanese history, the beauty of this shrine complex alone is mesmerizing enough to warrant an hour or two spent strolling around the grounds. I could happily spend that long peering at feathery mosses, watching long-legged spiders and beetles navigate the moss-furred stumps and stone steps.
The shrine is best visited in spring, fall, or rainy season. Winter is beautiful, too, but perhaps impractical for a visit given the snowy conditions.
Coming of the Raptors
Ask the average Japanese person what Fukui is famous for, and there’s a high chance they’ll say dinosaurs. You could point to any number of reasons for this. For example, many of the dinosaur fossils discovered in Japan were found here. Six new species were identified in (and named after) Fukui: Fukuisaurus tetoriensis, Koshisaurus katsuyama, Fukuiraptor kitadaniensis, Fukuititan nipponensis, Fukuivenator paradoxus, and Tyrannomimus fukuiensis. And, Katsuyama City is home to the world-class Fukui Prefectural Dinosaur Museum (FPDM), which is also an institution dedicated to ongoing dinosaur research and education.
But really, the main reason everyone associates Fukui with dinosaurs is that the area leans hard into being the self-styled Dinosaur Capital of Japan. Dinosaur motifs are everywhere in Fukui: themed restaurants, hotel rooms, playgrounds, stationery, hand towels, and even regular road signs. You’ll find huge dinosaur animatronics outside Fukui Station (they sport Santa hats in winter) and Dr. Raptor on a bench inside. One of the prefectural mascots is a green dinosaur, Rapt-kun, named after the fukuiraptor. I should stress that all this is mostly delightful, rather than gimmicky.
Unsurprisingly, the FPDM is beloved by locals and out-of-prefecture visitors alike. It’s so popular that you’ll see a flashing sign board en route to the museum asking whether you’ve reserved your tickets, which tend to sell fast during summer vacation and major public holidays. The museum even fills up some weekdays.
In truth, I’ve never been interested in dinosaurs, but the FPDM does an excellent job of conveying just how cool these ancient animals are. The main hall is an impressive start to the museum. In a domed exhibition space crammed with dioramas, fossils, and full-body dinosaur skeletons—10 of the 50 specimens on display are actual fossils—I spent a fair amount of time staring at the all-too-realistic T-Rex animatronic glaring ferociously at all of us. If this is what our prehistoric ancestors had to contend with, I am happy to be living in modern times.
As befits one of the world’s leading dinosaur museums, the FPDM has clearly invested in competent translators: the English-language captions are well done, if a tad dry. Plus, it’s fascinating to see how giant raptors evolved into tiny birds over millions of years. It’s well worth spending a few hours here, even more so if you have kids in tow. A shopping spree at the museum’s 100-percent dinosaur-themed gift shop is optional but thoroughly encouraged.
A Bath of One’s Own
Located in what feels like the middle of nowhere (although just a short drive from the Tojinbo Cliffs), Awara Onsen is one of Fukui’s only hot spring towns of note, famous for its healing waters and local cuisine.
We spent the night at the historic ryokan Haiya, whose name translates to House of Ash, a tribute to the craftspeople who produced fine ash used in dyeing clothes worn by Kabuki and Noh theatre actors. The unintentionally amusing name notwithstanding—Uncle Roger would have a field day—Haiya is a ryokan I’d spend several nights in every month if I had the time and money.
Built in 1884, the inn sprawls over three buildings with a total of 43 rooms. The property retains its Meiji-era architectural trappings—along with modern updates like Wi-Fi and coffee machines—and is large enough that a map might almost come in handy for finding one’s way in the maze of winding corridors. All rooms in the original 1884 Shofuan Annex and the recently renovated Kangetsutei Suites, and most of the rooms in the Jurakutou Building, have traditional Japanese garden views.
According to the inn, the room assigned to me—Korin (光輪), meaning “halo” or “nimbus”—was named by Prince Takamatsu. I have no way of verifying this, but the name certainly suits the space with its high ceilings, intricate latticework on the sliding doors, tasteful tableware, 16 tatami mats of space (for up to six people), a private moss-covered garden, and outdoor cypress bath. Best of all, I have it all to myself. Perfect for pretending to be a wealthy writer on sabbatical.
Food and baths are the real draw at most ryokan, and Haiya is no exception. The kaiseki dinner was a leisurely, two-hour affair, a parade of little dishes showcasing freshly caught seafood from the Sea of Japan and produce from the nearby Sakai Plains.
Two highlights from dinner: One, a whole live abalone cooked jigokuyaki-style, or “hell-grilled,” right in front of you until it stops moving. Bouncy yet tender and ocean-fresh, this style of abalone is not for the squeamish. The other, okami’s sake purin, a creamy pot of custard made ever more beguiling with its undertones of boozy umami. To our dismay, this is not a year-round staple, but a seasonal dessert. The idiom “ichigo ichie,” or “for this time only,” has never felt so salient and cruel. (More reason to plan a return trip next October.)
But it’s Korin’s cypress bath I keep coming back to in my mind. Before I checked out, there was a moment where a shaft of sunlight pierced the gap in the bamboo screens in front of the bath just so, illuminating wisps of steam curling up from the surface of the hot water. There was something simple yet transcendent about all these elements coming together for a few minutes before the sun moved on.
The Pleasures of Pottery
In addition to crafts like making washi paper and knives, Fukui is also known for its pottery: Echizen-yaki, or Echizen ware. Notable for its understated coloring, and usually being fired sans enamel, this type of pottery centers on one of the Six Ancient Kilns of Japan, the others being Seto, Tamba, Bizen, Tokoname, and Shigaraki.
Echizen ware is, in fact, a recent term. According to the permanent display at the Echizen Old Kiln Museum, it was coined by the researcher Kuemon Mizuno and Fujio Koyama between 1942 and 1945 as a way to group a number of disparate pottery styles local to the region under a single categorical umbrella. Perhaps unintentionally, this seems to parallel the municipal mergers of the Meiji Era, where many villages and hamlets were amalgamated into new or existing cities.
Both the Old Kiln Museum and the Fukui Prefectural Museum of Ceramics (FPMC) next door have much to offer the ceramics lover by way of exhibitions and beautifully made pieces to add to one’s suitcase. There’s also a traditional teahouse and garden where you can sip on green tea from Echizen ware. But there’s nothing quite like getting your hands dirty to appreciate, on a visceral level, the craft that goes into a piece of pottery.
My visit to the FPMC included a workshop using the electric potter’s wheel. The task was to shape a vessel—anything I wanted, as long as it had a mouth. I had 30–90 minutes. As seems to be true of all craftspeople, ceramicists make their craft look easy when it is anything but. It’s more challenging than it looks to maneuver a solid, spinning hunk of clay. Too little pressure and nothing happens; too much pressure and all hell breaks loose. (Here’s a life lesson: never wear a nice white shirt when taking a ceramics workshop.)
Fortunately, there was a skilled staff member on hand to guide my hands and help fashion the clay into something vaguely presentable. Unless you’re a quick learner, it’s not possible to master the electric potter’s wheel in a single session. It takes practice and more than a little intuition. More saliently, using the wheel is hell on your lower back.
If your work primarily involves a computer, as mine does, it’s easy to forget the pleasures of creating something with your hands, no matter how messy or clumsy the result. Taking a ceramics workshop at a place like the FPMC is a great way to reconnect with the physical world. Reservations here are mandatory, particularly if you’d prefer instruction in English (there are only two English-speaking members on staff). For those living in Japan, they’ll fire and mail the finished piece to you for an additional fee.
Lustrous Lacquer
The Echizen Lacquerware Hall is not somewhere you’d chance upon unless you were looking for it. Located in Sabae City—these days more famous for spectacles than anything else—this unassuming building is all too easy to drive past. Of course, this would be a waste, since it’s a fine place to view superb examples of lacquerware, watch artisans make lacquer magic, shop for lacquerware, and even try out various types of lacquer art for yourself, from applying lacquer to plain wood or painting already-lacquered wood.
This was the final stop on our two-day tour; we were there for the chinkin experience. Briefly put, this involves carving a design onto a lacquered surface, applying a thin layer of lacquer into the engraved lines, then covering it with gold dust or leaf. You then take your finished work home. How difficult could this be?
As the saying goes, these were famous last words. After tracing a motif of your choice onto a lacquered surface—I foolishly chose a detailed crane drawing—you then use a spindly metal chisel to gouge out the lines you’ve drawn, scraping away from yourself in a single direction. Engraving is not at all like drawing; my lines were nowhere as precise as I wanted them to be. Those with fine motor skills will have a better time of it.
I had never thought much of lacquer as a craft, but I gained a newfound respect for lacquer artisans that day. Having tasted a little of what it’s like to carve a design, the exquisite details on the lacquerware on display at museums and exhibitions have taken on more weight and meaning. These days, my clumsily carved crane plate sits on my dining table, reminding me not to take for granted the craft behind beautiful handmade things.
Learn more and plan your visit …
Heisenji Hakusan Shrine
Fukui Prefectural Dinosaur Museum
Haiya
Fukui Prefectural Museum of Ceramics (Japanese only)
Echizen Lacquerware Hall
Japan Unlocked
Looking to enter the Japan market? Want to improve your existing operations? As part of Kreston Global, the world’s 13th-biggest accounting network and 10th-biggest in Japan, Kreston ProWorks helps companies establish a foothold in Japan.
Kreston ProWorks opens doors with local expertise and global reach.
Kreston Global, the world’s 13th-biggest accounting network in terms of revenue according to UK-based trade magazine International Accounting Bulletin (IAB), is now the 10th-biggest in Japan per the IAB, up one spot from the year before.
With 160 independent member firms and 25,000 experts across 750 offices in 115 countries, Kreston Global provides unparalleled access to a wealth of international resources and expertise.
There are three member companies in Japan. Two provide audit services and the third, Kreston ProWorks, offers a full slate of inbound accounting, payroll, tax, and corporate services.
Established in 2007 by Marek Lehocky, the firm has built a strong reputation as an indispensable partner for companies looking to enter the Japanese market. “Our mission is to make setting up and operating businesses—including immigration, accounting, payroll, labor, and tax compliance—as easy as possible in Japan, so our clients can focus on building their business,” Lehocky told The ACCJ Journal.
Full Slate of Services
Kreston ProWorks delivers a nimble team of bilingual experts with intimate knowledge of how processes in Japan differ from those in other countries. Specialists in inbound accounting, tax, payroll, and human resources, Kreston ProWorks offers a much wider range of services than other companies:
- Company formation and corporate services
- Employer of record (EOR)
- Immigration and business license support
- Legal and transactional support
- Nominee representative
- Virtual office services
- Market entry and business consulting
EOR, for example, is especially helpful, as it allows companies to come in for a short time and deploy resources quickly to complete a specific project. It is also a way to test the waters when considering Japan market entry without investing in a full move.
“With all the requirements and steps involved, it can take at least seven or eight months before people can come into the country,” Lehocky said. “We can cut that to just three or four months with foreign employees and a few weeks with local hires.”
Local Knowledge Matters
Just as understanding the local market is key to a business’s success, so are local operations. While many companies provide services offshore, Kreston ProWorks does everything in Japan.
“Clients want to have closer proximity to Japan, because Japan is a black box of sorts, and they want to make sure that the people who are handling their operations actually understand the intricacies and nothing is being lost in translation,” Lehocky explained. “We act as our clients’ internal team of experts and ‘goalkeepers’ for each of the service areas that we provide. We stay on our client matters and drive the parts that we are in charge of so our clients can focus on other parts of their business. Communication and getting things done is a key to success.”
If you are interested in exploring market entry or are already here and wondering if you are doing everything the right way, Lehocky invites you to get in touch.
“Reach out,” he says. “We would be happy to arrange a time to introduce ourselves and get to know you and your needs. You always have alternatives.”
Get in touch today for a free consultation:
Carla Willmes, business growth and communications lead
cwillmes@krestonproworks.com
03-4520-5530 • www.krestonproworks.com
The Hunt for DX Champions
Despite being a nation renowned for assimilating advanced machinery and technology into everyday life, the reality of Japan’s IT workforce paints a very different picture. But Robert Half Japan is supporting clients undergoing digital transformation and is seeing promising progress.
Japan faces an uphill climb when it comes to digital transformation.
From left: Marcus Aakerholm and Lyndsey Hughes (Photo: Shelley Mae Photography)
Despite being a nation renowned for assimilating advanced machinery and technology into everyday life, the reality of Japan’s IT workforce paints a very different picture.
According to a survey of companies conducted by the Ministry of Internal Affairs and Communication, Japan’s information and communication technology (ICT) sector is falling short when it comes to digital transformation (DX). This is largely due to a lack of qualified technology talent. In 2018, there was a shortage of about 220,000 ICT workers, and the shortfall is expected to reach 450,000 by 2030.
At the same time, Japan’s economic landscape is experiencing a generational shift, influenced by new government policies and changing regulations designed to elevate the country to the global DX standard.
Slow Road to DX
Robert Half Japan supports clients undergoing digital transformation and is seeing promising progress.
“In many Japan-headquartered global companies, the pace of change has tended to be slow and incremental,” said Managing Director Lyndsey Hughes. “But this has started to shift over the past few years and momentum is building.”
“Even prior to Covid-19, we had started to see signs of large Japanese corporations incorporating their DX agenda into their corporate vision and hiring ‘disruptive’ senior executives from outside the organization—even from outside Japan—to expedite transformation,” he said. “It seems now there really is an appetite and a glimmer of commitment from corporate Japan to transform their global businesses.”
The 2022 IMD World Digital Competitiveness Ranking ranks Japan 29th out of 64 countries examined in terms of know-how, development of digital technologies, and preparedness to exploit digital transformation. Asian countries finishing ahead of Japan include South Korea (8th), Taiwan (11th), and China (17th).
Hughes noted that many companies have been stalling in their DX initiatives, often because they lack real commitment from the top, face resistance from middle management, or are short of know-how on how to manage global functions. They may also struggle to attract, and appropriately compensate, ‘new’ skill sets to implement the change.
DX touches every area of an organization, he explained, and while every company faces its own unique set of challenges, there are consistent themes that Robert Half is hearing from its customers. These include overhauls to human resources policies to adopt pay-for-performance compensation to attract specialized talent.
Robert Half is seeing companies start to take diversity, equity, and inclusion initiatives seriously, and many are ready to pay higher agency fees to prioritize the scouting of female talent as well as hiring, and even importing, more foreign talent. And while there is still a long way to go to embrace all types of diversity, at least the conversations have started, Hughes said.
In addition, large Japanese companies are beginning to move away from in-market IT to globally distributed IT functions that allow them to benefit from scale, respond more quickly to market changes, and mitigate cybersecurity risks.
There has also been a surge in the hiring of chief data officers to centralize data and analytics expertise, as well as breaking down data silos and harnessing the power of data across an organization.
Too many companies are entering uncharted DX territory, Hughes pointed out, and often lack the skills and expertise to deliver on such projects. This is where Robert Half and its business consultancy subsidiary, Protiviti, come in.
Helping Hand
“At Robert Half Japan, we have a strong focus on placing bilingual technology talent with foreign affiliates in Japan to bridge with their HQ, or to global Japanese firms looking to bridge their overseas subsidiaries,” explained Marcus Aakerholm, division director of business transformation. “As an enterprise, we have a unique capability to support DX initiatives in different ways, whether by placing permanent employees across various functions, specialist contractors to jump into different projects, or through Protiviti.
“In many cases, we offer a tailored and blended solution of outsourced consulting assignments combined with project contractors and permanent resources,” he added. “This allows us to respond flexibly to the fluid and diverse needs of our customers, across their global operations.”
Aakerholm has witnessed firsthand the unique market conditions affecting DX in Japan.
“A typical scenario for our team is assisting foreign-affiliated organizations that need to undergo a corporate-wide system update,” he said. “In these cases, the US office will send an internal team to implement the changes but, due to the unique market requirements here, their efforts are rarely implemented or understood by domestic teams. Our bilingual project managers and functional experts bridge that gap.”
Robert Half supports many Japan-headquartered clients that require bilingual talent with subject matter or technology expertise to interact with overseas subsidiaries.
In one example, Aakerholm’s team helped a global media company by bringing in a specialist consultant with the required language abilities, project management skills, and knowledge of system implementation to complete the introduction of finance modules of the Workday system.
Look Within
“When a company needs to evolve, it’s not just about bringing in new people,” said Hughes. “Organizations also need to create a culture of internal evolution so they can continue to adapt to changes in the market, customer needs, and so on.
“Generally, organizations think in functional silos, and those silos are often lacking a specific skill set,” he said. “But those skill sets may exist elsewhere in the organization. There are all sorts of capabilities floating around in every company, perhaps in a different function or a different market, so there isn’t necessarily a need to rush out and hire quickly.”
Smart leaders are adept at unearthing the hidden potential in an organization, he added, and creating an environment of empowerment to enable the enablers.
One Robert Half client innovated by introducing a “chief future officer” role and invited a relatively new hire to join the company’s transformation steering committee, alongside senior leaders from across the business, to bring a fresh perspective and add a new voice.
“People new to the organization often have the clearest minds to and come up with innovative solutions,” Hughes said. “Younger generations want their voices to be heard, to feel they are contributing, so tapping into their passion and capabilities is very important and can be a key catalyst for successful DX.
“Often, a manager thinks the candidate they need is a reflection of who they are and their own skills,” he said. “But they need to identify where they and their organization are coming up short and then find the person to fill that gap.”
The deficiency might be a hard skill set, such as expertise in a new technology stack or building global enterprise architecture standards, but it might also be the ability to champion new ways of doing things, exposure to different industries, or diversity in hiring to bring in better creative problem-solvers.
“I believe leaders need to be deliberate in understanding the current skill, personality, and knowledge gaps,” Hughes said. “And then ask themselves what their team members can do to help drive the transformation, what unique talents can they bring to the table.”
Register now to learn, connect, and get inspired by Robert Half Japan networking events: roberthalf.jp
Ancient Trails, Modern Tales
Many visitors to Japan are familiar with the Tokaido Shinkansen. What they may not know is that the tracks run alongside an ancient route built not for bullet-train carriages but rather palanquins. We take a tour through Kanagawa Prefecture to explore past and present.
Traversing Kanagawa reveals paths from long ago and comforts of today.
To keep feudal lords loyal during the Edo Period, the Tokugawa shoguns forced them to live in the new capital of Edo every other year. And when they returned to their home province, they had to leave their families behind in the capital as hostages.
The back-and-forth journey they had to make was long, something we discover firsthand on a hot and sunny autumn day under the guidance of local Shin Kaneko. As the nationally licensed tour guide leads us along a stone-paved road running through the beautiful forest—beams of sunlight piercing the leafy canopy of towering cedar trees—we find ourselves on a trek made by nobles and commoners alike for hundreds of years.
Many visitors to Japan are familiar with the Tokaido Shinkansen. What they may not know is that the tracks run alongside an ancient route built not for bullet-train carriages but rather palanquins. Thankfully, unlike passengers of old, today’s travelers need not bite on rope to protect their tongues from the rough ride.
Born and raised in Hakone, Kaneko also spent six years in France and five in the United States growing up. Later, he studied business at the University of Southern California and set off on a career as a strategist for Japanese retail giant Aeon Co., Ltd. But the call of home—and nature—grew louder and louder, and he left Tokyo life in 2015 to make his way back to the lakeside haunts of his childhood.
As Kaneko observed English-speaking visitors staring holes through maps as they tried to guide their own way, he decided to create Explore Hakone, a bespoke agency that provides tours limited to one group per day. And by group, I mean a family, a couple, or a solo adventurer. This personal treatment has made Kaneko’s adventures very popular among those seeking to experience authentic Japan. And today, we get to experience it for ourselves.
The development of the Old Tokaido Road, Kaneko explains, is tied to key events in Japanese history, and the preferred paths through the Hakone area have changed over the centuries. Some 1,300 years ago, during the Nara and Heian Periods, people used the longer, flatter Ashigara Mountain Pass to the north, which runs along the border of Kanagawa and Shizuoka Prefectures. But when Mount Fuji erupted in 802, the path was covered in ash and became difficult to traverse. Travelers began opting for the shorter but more mountainous route we are taking today.
I can only imagine how difficult the climb up and down these hills must have been in those days, when the path was paved with thinly cut and dried bamboo. It wasn’t until 1860 that the large stones which now mark the trail were put in place.
As we make our way through the tranquil woods on our seven-hour, 6.5-kilometer hike, Kaneko shares an enormous amount of the trail’s fascinating history.
The section of the 500-kilometer Old Tokaido Road that we’re traversing is known as the Hakone Hachiri, the 32-kilometer stretch between the Odawara and the Mishima post stations. Hakone Sekisho is located at Lake Ashi, one of 53 checkpoints erected by the Tokugawa Shogunate. Due to the very steep climbs—the total elevation change is about 900 meters—travelers during the Edo Period needed regular breaks. There were once nine teahouses on the route offering refreshment. Today, just one remains: Amazake Chaya.
We stop for an energizing cup of amazake, the warm non-alcoholic rice drink from which the rustic rest stop takes its name. Paired with two surprisingly filling pieces of mochi rice cake, the amazake was a welcome respite, as it must have been for those ancient sojourners.
While rejuvenating for the next leg of our journey under the thatched roof of history, we talk to Satoshi Yamamoto, the current owner of the business that has been passed through his family for 13 generations.
For more than 400 years, the doors of Amazake Chaya have been open, every single day. The only time they were closed was for a brief period during the coronavirus pandemic.
“I want to keep the teahouse as it has always been, serving people in a traditional way,” Yamamoto says. “Although we own the teahouse, the atmosphere is created by our customers. We only provide service. The culture and story behind [Amazake Chaya] have been made by travelers for centuries.”
He says he also enjoys meeting travelers from abroad and learning more about other cultures while sharing his own.
“While the world might change, communication between us and the travelers will never change,” Yamamoto adds. “They may have different outfits, they may speak different languages, but the concept of welcoming guests will always remain the same.”
Back on the road with renewed energy, we pass across one of the highest points between Tokyo and Kyoto and begin our descent to Lake Ashi, our final destination.
As we near the Hakone Sekisho checkpoint, we walk under the shade of 400-year-old cedar trees planted by the shogun to shelter travelers from the elements at this key point of their long journey. A nice gesture. But off in the distance is Otamaga Pond, named after a woman who was captured and beheaded for sneaking out of Edo. So, while the shogun could show kindness, he also showed no mercy. You played by his rules. But those rules also brought peace to Japan after nearly two centuries of civil war and upheaval, allowing art and culture to bloom and the society we know today to take shape.
Kijitei Hoeiso
After the long hike along the Old Tokaido Road, my legs are demanding a reprieve. Fortunately, Kijitei Hoeiso ryokan was happy to oblige.
Nestled in the verdant hills of Hakone, the traditional Japanese inn is a delightful escape from the stresses of modern life. Like Hakone Hachiri, Hoeiso transports you to a simpler time when nature was an integral part of life.
We are welcomed by the inn’s owner, Kenichiro Hara, who shares a bit of the property’s history as we gaze out windows that dissolve against the lush backdrop of the mountainside. In the distance, we see the open-air hot springs we’ll visit later tonight.
And as a tease of the delectable flavors to come, we are offered yumochi, a traditional Japanese sweet made of rice flour. During my 27 years in Japan, I’ve enjoyed many such sweets, but this is truly a standout. (I even went out of my way to visit the shop near Hakone Yumoto Station the next day and buy more as gifts.)
After the exertion of the day’s hike, I’m certainly feeling peckish, and a highlight of my stay is the cuisine. Hoeiso is renowned for its menu that features pheasant—a game bird often associated with the British countryside that is actually native to Asia—and the chef’s creativity does not disappoint.
Of particular note is how Hoeiso can accommodate various dietary needs and preferences. While the pheasant menu is very popular, vegetarian options are readily available—something not easy to find in Japan.
I opted mostly the standard course, but, because I do not eat most seafood, Hoeiso prepared a course that was perfect for my palette. This is often a sticking point for me in Japan, but is no problem here.
Steamed pheasant egg custard with ginger and tri-colored dango dumplings lead the way ahead of pheasant round with salt from Sado Island, sashimi of fresh pheasant breast with ponzu, and pheasant and shiso porridge. Just highlights of an overflowing kaiseki course dinner bursting with color and flavor.
As dusk gives way to the darkness of night, I grab my towel and make my way to the private outdoor onsen situated alongside a mountain stream. I cannot adequately express how rejuvenating it is to sit alone in the steaming water, the sound of the trickling stream dancing in the background as I look up at the twinkling stars in the pitch-black sky. I’ve rarely felt so connected to the universe as in this moment. It’s as if the energy of distant worlds is flowing around me.
Retiring to my spacious room, I gaze out the windows at the night sky that is normally obscured by city light and recall those childhood evenings of stargazing in my grandmother’s countryside front yard.
Carefully prepared amenities make for a restful night.
The next morning, Hara and several Hoeiso staff see me off as I board the bus to Hakone Yumoto Station. An impeccable ending to an absolutely relaxing stay.
Kamakura Gardens
From Hakone, we make our way around Sagami Bay to Kamakura, seat of the first Kamakura shogun, Minamoto Yoritomo, more than 400 years before the Tokugawa shogunate developed the Old Tokaido Road. But we’re not here to see the usual landmarks such as the Great Buddha. Instead, our journey today takes us around the historic city to explore its rich heritage through gardens.
We meet our guide, Saori Imoto, just outside Kita-Kamakura Station. Imoto is a garden designer who studied in Japan before moving to the United Kingdom. The Kamakura local joined her husband there when he was transferred for work and found the perfect opportunity to build on her love of horticulture. Studying in London, she became an expert in English garden design and has won multiple awards for her work. Since returning to Japan, in addition to crafting landscapes for clients, she has been sharing the beauty and history of Kamakura with visitors through private guided tours.
Central to our adventure are the area’s Zen temples, home to many of Kamakura’s most beautiful gardens. And our first stop is Engaku-ji. Founded in 1282, it is one of Japan’s most important temples and the second of what are known as Kamakura’s Five Mountains or Gozan.
“The reason I choose this temple,” she explains, “is that it has a beautiful Japanese garden and is surrounded by mountains, so we can see a lot of natural scenery as well.”
As we approach the Butsuden main hall, small children from the nearby kindergarten are practicing in the courtyard for their upcoming undokai, or sports day. Surrounded by a circle of seven juniper trees, they run, jump, and laugh as popular kids’ music plays on portable speakers. It’s a striking juxtaposition of ancient and modern culture and traditions.
The excitement of the children also contrasts with the reason we find evergreens here.
“Zen temples are very strict, and the monks need to concentrate on meditation and train very hard every day,” Imoto explains. “If there are a lot of deciduous trees, like cherry trees or Japanese maples, the monks can enjoy the seasonal transformation. They’re not allowed to do that, so Zen temples prefer planting evergreen trees, which create a calm and unchanging atmosphere, and show longevity.”
And the reason for seven? “Odd numbers are believed to bring good fortune,” Imoto says. “When we plant symbolic trees, we never use even numbers; we use odd numbers, because they cannot be divided.”
After touring the temple’s halls, we come upon a tranquil garden that reflects the landscape of Japan. A small pond at the center represents the sea, undulations conjure mountains, and gravel paints the coast.
To Western eyes, the lack of color may seem unusual. But, Imoto explains, there’s a reason for the absence of flowers. “In Japanese gardens, we try to replicate the natural scenery of Japan.” That means mountains, not fields—some 70 percent of Japan is mountainous. “Mountains are covered with trees, so we use a lot of trees instead of flowers,” she adds. “This creates a calm atmosphere, highlighting the simple beauty typical of Japanese gardens.”
In need of a rest, we stop at Butsunichian, an open-air café on the temple grounds that serves green tea as well as other light drinks. The tea is refreshing—I opt for hot matcha despite the unseasonably warm day—and am soon ready for the hike to our next destination.
As we leave the temple grounds and walk along backstreets, the lack of tourists is noticeable. While Kamakura teems with visitors, we’re enjoying a quiet tour using routes only the locals know. And we’re learning a great deal about the area along the way as Imoto shares details about the hidden spots we pass.
After a long walk, we arrive at Eisho-ji, Kamakura’s only nunnery, founded by a wife of Tokugawa Ieyasu in 1636.
The grounds are covered by higanbana, or red spider lily. This striking flower, Imoto explains, is a symbol of Ohigan, a Buddhist period that falls around the spring and autumnal equinoxes. Higanbana mark the September observance. During this time, whose name means “other shore,” Higan, the world of enlightenment, and Shigan, our own world of greed and earthly desires, are believed to come closest to one another. This makes it the ideal time to remember those who have passed and to focus on spiritual awakening.
To end our exploration of Kamakura, we visit a cemetery at nearby Jufuku-ji Temple where Hojo Masako, the wife of the first Kamakura shogun Minamoto Yoritomo, is said to be buried. Masako was key to Yoritomo’s success and the power of the Kamakura Shogunate. Following his death in 1199, she became a nun but continued to yield great influence over the government until she passed away in 1225.
As we search for her final resting spot, we cross paths with a group of students who have dropped by the graveyard after school. Given Masako’s place in history, Imoto notes, they study about her in class and are curious to see the tomb firsthand. Like us, they use smartphones and GPS to locate the alcove tucked away in the back of the grounds.
As has happened many times during our two days in Kanagawa, past and present intersect in ways that highlight just how far back the history and culture of Japan stretch. There’s also something new to learn and explore.
Learn more and plan your visit …
Hakone Reset
✉️ info@explore-hakone.com
Kijitei Hoeiso
✉️ kiji@hoeiso.jp
Kamakura’s Gardens
✉️ info@mitate.kyoto
Cities on the Hills
While Tokyo has established itself as one of the world’s leading urban centers, it can still improve its cultural magnetism, livability, and attractiveness for overseas businesses. Helping the city rise in the world’s esteem by gradually transforming Tokyo is at the heart of Mori Building’s mission.
Mori Building’s signature complexes connect communities
Azabudai Hills
In our globalized society, it is only natural to compare cities to one another—assessing their relative strengths and weaknesses to help us determine exactly where they stand in the world.
And while Tokyo has established itself as one of the world’s leading urban centers, it can still improve its cultural magnetism, livability, and attractiveness for overseas businesses.
Helping the city rise in the world’s esteem by gradually transforming Tokyo is at the heart of Mori Building’s mission. And central to this goal is the development of its Hills projects, starting with ARK Hills in 1986. This was followed by Roppongi Hills in 2003; Toranomon Hills, with its four distinctive towers and new metro station that were in development from 2014 to 2023; and finally, Azabudai Hills, which just opened in November.
The Hills are the brainchild of late Chairperson Minoru Mori, who espoused the concept of “vertical garden cities,” which are based on the ideas of the famed architect Le Corbusier and infused with advanced technology and modern perspectives. The complexes are built tall, on single large floor plates that have been created out of small plots of land, which Mori aggregates by negotiating with individual landowners over decades.
As well as being architecturally impressive, these complexes are united by common themes. They are green, they are locations that improve the safety of their surrounding neighborhoods, and they offer a stimulating cultural atmosphere.
Azabudai Hills Food Hall
A Green Base
When visiting the Hills, you are not only struck by the towering skyscrapers that are the complexes’ hubs, but by the greenery that can be found at their ground levels.
As Mariko Murata from Mori Building’s Environmental Promotion Unit explains, nowhere is this more apparent than at Azabudai Hills. “Based on the design and concept by Heatherwick Studio, who designed the landscape of the low-rise area of Azabudai Hills, about 320 plant species have been selected that express each season. For example, the Central Square is planned around deciduous trees from the native vegetation of the area, so that visitors can feel the changes of the four seasons.”
She points out that by building high on a large scale, the Hills projects are not only able to support beautiful green spaces but also be more environmentally sound. “With this method, we can increase green coverage by up to 30 percent and energy efficiency by up to 40 percent. In addition, we can significantly improve environmental performance, as the buildings have a much longer life and the use of energy and resources is a great deal more efficient.”
Azabudai Hills orchard
Safe Havens
The Hills also stand out for their safety. As well as featuring structures that can easily withstand natural disasters such as earthquakes, they are central locations where residents can go in times of need. As Takashi Hosoda, senior manager at Mori Building’s Disaster Emergency Office points out, “Mori Building has been engaged in redevelopment projects in its hometown of Minato Ward under the slogan, ‘cities to escape to, rather than flee from.’” Roppongi Hills can accommodate 5,000 people, Toranomon Hills 5,200 people and Azabudai Hills 3,600 people who may be unable to return home in the case of an emergency.
The company has taken the lessons of the past—such as the Great Hanshin-Awaji Earthquake of 1995 and the Great East Japan Earthquake of 2011—to heart, recognizing the necessity for secure systems and infrastructures. Through cooperation between the public and private sectors, Mori Building has strengthened both the hardware and software systems of the complexes to ensure the safety of tenants, residents, visitors, neighbors, and the employees who use the buildings and facilities it manages and operates.
Hosoda adds that the complexes will allow the quantity and quality of disaster preparedness in Minato Ward to improve, helping “the urban structure to be transformed to one in which ‘homes, offices and the town [Hills] where you are now are the safest places to be.’”
Toranomon Hills dampers
Grand Designs
As well as creating areas around Minato Ward that are both green and secure, Mori Building aims to strengthen their cultural capital. Yoshinao Matsushima, the PR and Promotion Group senior manager in the Cultural Affairs Department, explains that with Roppongi Hills, which is home to the Mori Art Museum, the company was inspired to address the fact that Tokyo needed a cultural center to rival locations such as New York’s Lincoln Center, London’s Covent Garden, and Paris’ Centre Georges Pompidou.
To establish locations that are culturally rich, the Hills complexes not only house galleries with exhibits by the world’s leading artists, but pieces of public art that are meant to create spaces that enrich people’s everyday aesthetic lives, Matsushima points out. “The Hills feature artworks that visitors to the city can touch and enjoy. There are many works by internationally acclaimed artists, so visitors can enjoy high-quality, genuine art experiences at any time.”
United by the aim of drawing people in with green oases and stunning art, while also creating safe refuges, Mori Building has its eyes not just on the immediate future, but generations ahead. As Murata reveals: “In this era of fierce intercity competition, where people, goods, capital, and knowledge gather in attractive cities across borders, a city’s potential and possibilities have a great impact on the economy as well as the future of urban living. In this context, Mori Building has created the grand design for Tokyo with a long-term perspective of 50 to 100 years and is striving to achieve it.”
Azabudai Arena at dusk
Cracking the Code
As digital transformation touches every aspect of how we work and communicate, businesses face ever more complex challenges. The evolution of cybersecurity means that companies must rethink how they hire for this critical task. Robert Half shares how to secure the best cybersecurity talent.
Recruiter Robert Half shares how to find the best cybersecurity talent.
From left: Robert Half cybersecurity team members Fabrizio Fumagalli, Steven Li, Kani Taeng, and Naoto Hamada
As digital transformation (DX) touches every aspect of how we work and communicate, businesses face ever more complex challenges when it comes to protecting data—whether it is their own or that of customers. The evolution of cybersecurity means that companies must rethink how they hire for this critical task.
Steven Li, senior division director for cybersecurity at recruitment company Robert Half, told The ACCJ Journal that they see a lot of companies going through digital or IT transformations to shared service models, including for security.
“One of the challenges with security is that it’s all about data, and it’s all about being able to see your entire ecosystem or environment using a single source of truth or a single tool,” he said. “And a problem you may face is how to bring different business units that you’ve acquired onto a common platform for security operations and vulnerability management, so that when someone asks, ‘Are we impacted by this incident?’ you can answer with a degree of confidence.”
Robert Half advises clients on how to do just that and helps them find the right people to lead that transformation.
Expertise Matters
From a people perspective, previously siloed teams are being consolidated on a group level to create a centralized point of contact for cybersecurity that then provides support to each business unit, Li explained. Instead of outsourcing technical tasks to consultants, companies are now looking to hire specialists for their internal teams. But with much of this talent coming from outside Japan, domestic salaries are an obstacle.
“Employees here in Japan are typically rewarded based on tenure and age instead of merit and skill,” he noted. “To get around this, some companies have started to offer contracting solutions. They’ll say, let’s do a fixed-term contract. And with this fixed-term contract, we can step outside the bounds of our salary structure and give the specialist what the [global] market is paying, and a little bit more.”
This is important as there is an estimated shortfall of 190,000 cybersecurity professionals in Japan.
“Our clients are sharing that they need people who are application security engineers and can dynamically test the code.”
“Japanese companies are not used to hiring mid-career security professionals. They are used to hiring graduates, so to bring in someone mid-career, they don’t know how to do it, where to find them,” Li explained.
“Good cybersecurity engineers don’t typically fit the traditional model of an IT person. They may not have finished university, but they are adept at problem-solving and seeing patterns that other people might miss. We’ve placed people like this, and our clients have been absolutely happy with them,” he added.
Recruiting Manager for Cybersecurity Naoto Hamada shared an example of how Robert Half successfully placed a candidate who made a big difference for their client. But to do so, they had to overcome a challenge common in Japan: hesitation to change jobs.
“It was for a key project, and closing the role was a high priority. However, it’s challenging to find this talent in Japan,” Hamada explained. “We were able to find a match, and he received a competitive offer. But just one day before the deadline, on a weekend, he messaged me and said, ‘I can’t take this.’”
The problem wasn’t the offer but that he felt sympathetic towards his current manager should he leave.
“After receiving the message, he asked me to come meet at his station in person. I outlined the benefits of joining this international company and how it would provide him the career growth opportunities in line with his goals,” Hamada explained. “In the end, the key element was that we helped him visualize his priorities, then compare them to his current company. Based on this exchange, he decided to sign the offer and is now a key member in the newly created incident response team at his new company.”
Working hands-on in this way is at the core of Robert Half’s approach to recruitment. An important part of that are cyber risk meetups, which they host to bring together security professionals to share information and experiences which can help bridge the gap in cyber skills. A recent senior leaders’ meetup at Deloitte focused on ransomware resilience, and a public security meetup at Microsoft focused on software supply chain security.
“If we all share best ideas, best practices, and experiences, and implement those, perhaps we can improve cybersecurity maturity in Japan,” Li said.
Changing Regulations
Another thing to consider is the impact of changing regulations. Fabrizio Fumagalli, Robert Half’s recruiting associate director for cybersecurity, pointed out changes to ISO 27001, an international standard for information security management systems.
“This was updated in 2022, and companies have three years to comply,” Fumagalli said. “There are a few notable requirements on code security and the code supply chain. Companies need to be extremely careful about what’s in their code and conduct appropriate audits to assess where vulnerabilities may be.”
On average, about 80 percent of the code in a typical application is open source, Fumagalli noted, so it can be difficult to know what vulnerabilities may be hiding there. As a result, companies will need people in security who are proficient in software development.
“Instead of relying on documents from an external vendor, companies need a specialist who can check the code to ensure it is secure. Teaching security is easier than teaching the development side, so that is where companies’ priorities should be,” he added.
Specific to Japan, he said, is the need for mid-career cybersecurity talent. “You cannot randomly reassign, or do rotations, as most Japanese companies do. Due to the specific set of skills needed for the role, there is an urgent need for individuals who are experts in cybersecurity.”
Li added: “Our clients are sharing that they need people who are application security engineers and can dynamically test the code, play around with it, see if they can break it. Or do static analysis by reading the code itself and figuring out where the logic problems are. These skills are in extremely high demand.”
Partner for Success and Security
In closing, Li said that Robert Half is working to change the perception of recruitment in Japan and to help clients look beyond the numbers and the next quarter. If you are reassessing your cybersecurity, Li, Fumagalli, Hamada, Taeng, and the Robert Half team are ready to expand upon this approach and partner with you to build the best teams for today and the future.
Register now to learn, connect, and get inspired by Robert Half Japan networking events: roberthalf.jp
2023 Tax Reform Proposals
On December 16, 2022, the Government of Japan released its 2023 tax reform proposals. The amendments contain changes to the rules related to gifts and inheritance tax. The proposals are usually promulgated into law by the end of March and enter into force on April 1. Here is an overview of what to expect.
How changes to gift tax rules and audits may impact you
On December 16, 2022, the Government of Japan released its 2023 tax reform proposals. The amendments contain changes to the rules related to gifts and inheritance tax. The proposals have been promulgated into law and entered into force on April 1. Here is an overview of the changes.
Seven Year Lookback for Gifts
Currently, gifts bestowed within three years of the giver’s death are added back to the estate of the deceased for Japan inheritance tax (IHT) purposes. The value of the assets is reduced by any gift tax paid at the time the gift was received, and this amount is then subject to IHT along with the other assets of the deceased.
To offset this, one aspect of long-term estate planning is to make small annual gifts which are taxed at gift-tax rates lower than the effective IHT rate that would be levied if the gifts had remained part of the estate.
The reforms increased the lookback period to seven years for gifts made on or after January 1, 2024. This brings Japan in line with countries such as the United Kingdom.
Unlike the UK, however, there is no gradual reduction in the value of the gift over the seven-year period. One hundred percent of the gift’s value is added back to the taxable estate, regardless of whether it was made seven years or one day prior to death. A ¥1 million deduction is allowed for gifts made between three and seven years prior to someone’s passing.
The chart below shows this in action:
This change has a significant impact on lifetime estate planning, as gifts made on or after January 1, 2024, will be subject to a seven-year lookback for inheritance tax purposes.
For expats, discussion about Japan IHT planning with overseas parents can be difficult—especially if being subject to the Japanese rules would impact overseas planning. However, these proposed changes will accelerate the need for gift planning during 2023.
Valuation Methods for High-Rise Apartments
Although there are no specific amendments, another issue that needs to be considered in the near future is the government’s discussion of amending the rules surrounding the IHT valuation of apartments in high-rises.
Currently, there can be a large disparity between the fair market value of an apartment and its tax basis for IHT purposes. This is due to the use of various tax valuations that reduce the IHT value. For apartments in certain parts of Tokyo, the IHT value can be significantly lower than the fair market value. This disparity can be used to reduce the value of an estate considerably for IHT purposes. The government has indicated that it will look to close this avenue for tax planning in the future.
Tax Audit Statistics
The government also released its tax audit statistics in December, covering audits conducted between July 2021 and June 2022. Direct comparisons to previous years are unreliable due to the impact of the Covid-19 pandemic on the tax authority’s ability to conduct audits. However, the number of audits involving overseas assets increased by 20 percent over the previous year and is approaching the level seen prior to the pandemic. About two-thirds of the cases involved undisclosed assets in North America or Asia.
Additionally, the number of simple inquiries where the tax office contacts a taxpayer by post or phone increased by eight percent over the previous year and is 40 percent higher than pre-pandemic levels. This indicates that the tax office has shifted to less formal inquiries as a means of identifying taxpayers who require a full audit.
Summary
The increase in the lookback period for gifts accelerates the need for planning before the end of the year. This will be necessary to ensure that gifts fall out of the scope of IHT sooner. Current planning utilizing high-rise apartments may also need to be revisited in light of the anticipated changes.
As always, with any informal contact from the tax office, it is wise to consult with your tax advisor before submitting a response.
For more information, please contact Grant Thornton Japan at info@jp.gt.com or visit www.grantthornton.jp/en
Fantastical Fukui
There are many reasons to visit Fukui, a small tadpole-shaped prefecture facing the Sea of Japan. It’s home to a bevy of traditional crafts, magnificent temples, rugged landscapes, and some of Japan’s best freshly caught winter crab and sweet shrimp. All this begs the question: Why isn’t Fukui more well-known? We take you on a visit.
Nestled near the Sea of Japan, Fukui Prefecture is rich in cultural experiences
Presented in partnership with Fukui Prefecture
Photos by Florentyna Leow
An artisan at work in the Takefu Knife Village
There are many reasons to visit Fukui, a small tadpole-shaped prefecture facing the Sea of Japan. It’s home to a bevy of traditional crafts, including washi papermaking and knife forging, a world-class dinosaur museum (complete with life-sized raptor animatronics), magnificent temples, rugged landscapes, and some of Japan’s best freshly caught winter crab and sweet shrimp. Situated between tourist favorites Kanazawa and Kyoto, it’s an obvious pitstop when visiting both cities.
All this begs the question: Why isn’t Fukui more well-known?
Call it a serious case of middle-child syndrome. Although Fukui has all the ingredients for a fun weekend getaway, it’s often overlooked in favor of its glamorous neighbors. But this makes it ideal if you’re looking for travel minus the crowds. When planned right, a visit to this ferociously underrated prefecture offers an eye-opening look into Japanese craft, cuisine, and culture.
Paper Matters
Paper rarely merits a second glance in our daily lives. Money, flyers, utility bills—paper is just there in the background. But a sheet of washi is a different story. From uchiwa (summer fans) to wagashi wrapping, handmade paper has a warmth and elegance unmatched by most machine-made papers.
If Fukui has a signature craft, it’s Echizen washi paper. There are many varieties, all beautifully textured and supple, delicate yet durable. With its 1,500-year history of washi production, Echizen City is one of Japan’s top washi producers in terms of quality, quantity, and variety—more than earning its nickname "washi no sato," or the home of Japanese paper.
Faced with a decline in demand for washi—in large part due to fewer people using partitions and screen doors—papermakers have had to get creative with new paper products for contemporary consumers. These days, you can find washi earrings, bags, and even socks and jackets. The lampshades by Osada Washi, a family-run washi company in the Imadate district of Echizen City, are especially modern and striking. The intricate floral patterns are all drawn freehand with paper pulp and wrapped around acrylic stands as tall as totem poles.
But to appreciate washi, there’s no substitute for making a sheet of paper by yourself. I visited Ryozo Paper Mill, another family-run business in the Imadate district, to experience the production process.
It was early winter, and the snow was starting to pile up. Winter is the best season for papermaking, I was told, because the raw material in the pulp doesn’t spoil as quickly in the cold. I quickly realized two things: handling paper pulp feels like plunging your hands into a vat of ice-cold egg white; and papermaking is bloody hard work. Made the traditional way, tesuki washi (handmade paper) involves quickly dipping a large wooden frame fitted with a bamboo screen into a tub of paper pulp, then swishing liquid pulp back and forth until the screen is evenly coated. The frame is heavy enough that I almost dropped it the first time.
With no small amount of assistance from Kyoko Yanase, one of Ryozo Paper Mill’s main craftspeople, I finally managed to get even coverage on the screen. She set the frame on the ground and placed a large spiral-patterned metal mold on top—like a stencil, but in reverse. Following instructions, I flicked a showerhead up and down while moving it across and above, the spray of water droplets creating thousands of tiny holes in the paper. When she lifted the mold, before us lay a large sheet of perforated washi embossed with spirals. Dried, the paper resembled embroidered lace.
I had made a sheet of rakusui-shi, or “water-dropping paper,” an uncommon variety of washi made by very few craftspeople in Japan. It was gorgeous. I couldn’t believe how much fun I’d had making it. Suddenly, every sheet of washi I’d seen in Fukui made sense, each the result of skill and technique honed over a lifetime.
Sharp as a Knife
If paper is best made in the cold, the fiery process of knife-making feels like its thermal opposite. Working near the charcoal-powered forge, with its constant heat, can make your time in a knife workshop warm, toasty, and downright sweaty—from the physical labor involved in making knives, that is.
Once known as Takefu, Echizen’s history of knife-making stretches back 700 years, beginning with sickles and fighting swords to bonsai tools and chef’s knives. Today, Japanese chef’s knives are loved worldwide for their quality, sharpness, and durability. One small facility in particular attracts a steady stream of knife enthusiasts from all over the world looking to add to their collection and learn more about the traditions and techniques behind Echizen’s hand-forged knives.
Started as a cooperative between a dozen local independent knife manufacturers, Takefu Knife Village is something of a curiosity. The facility was built in 1993 but, looking at these incongruously sleek buildings in the middle of rural Fukui, you’d be forgiven for thinking it new and under-promoted. The 20-minute drive there from JR Takefu Station is poorly signposted for what’s meant to attract tourists. It’s the kind of place where “if you know, you know.”
At Takefu Knife Village, you can shop for knives, but also learn about local knife-making history, take a workshop, and watch the artisans at work from an observation deck. Because it’s a cooperative by name and in practice, the craftspeople from all the different knife companies share equipment and make their products in the same space. There’s no secretive squirrelling-away of technique and know-how; it’s an unusually democratic operation compared to many other industries.
Speaking of workshops: If you have six hours, you can learn the basics of making a knife from one of the craftspeople in the dedicated backyard building, experiencing almost every step of the process from hammering to forging to attaching the handle. If you don’t, an hour or two can give you the skills required to sharpen chef’s knives at home like a pro.
I didn’t have six hours, or even an hour, so I compromised by trying out a treadle hammer to flatten vaguely blade-shaped bits of steel. Most knifemakers work on a single blade at a time. Here, they stack two blades together and hammer them simultaneously, in what is a technique supposedly unique to the Echizen region. I appreciated the efficiency of getting to screw up two blades at the same time.
Using a treadle hammer, if you have never tried it, is an awesome and challenging feat of hand-foot-eye coordination plus some physical strength (neither of which I possess). You heat two steel molds in fire until they’re bright red, remove them with tongs, and set them under the hammer. With your right foot, you gently press a pedal to activate the murderous pulverizing hammer while simultaneously moving the blades counterclockwise, making sure the hammer pounds the surface evenly while the steel is still hot and malleable. Lose your grip and your blades will come out weird. Move too slowly and the cooled steel will simply break. The phrase “strike while the iron is hot” suddenly made complete sense.
It was one of the coolest things I’d ever done in my life. I would also never have visited this place without a car. As with most places in rural Japan, the lack of public transportation infrastructure is probably Fukui’s largest barrier to becoming a more tourist-friendly destination. Officially named “Geisha de GO,” the “one-coin taxi” service offered by Echizen City is an ingenious stopgap solution. Buy taxi tickets (each worth ¥500) at the tourist information center near JR Takefu Station, hop into a taxi (or ring one up), point at one place on a list of major tourist destinations in the area (including the paper mills and Takefu Knife Village), and they’ll drive you there.
Disappearing Art
Fortunately, not every place of interest requires a taxi ride, especially if you only have time for a quick wander around one stop in the prefecture. For example, Oyanagi Tansu, the fourth-generation maker of tansu (Japanese storage chests or cabinets), is a mere 15-minute walk from JR Takefu Station.
A workshop tour here offers incredible insight into the disappearing art of tansu-making, which requires a mastery of three separate crafts: sashimono (wood joinery), lacquering, and metalwork. A dwindling number of craftspeople specializing in each of these tasks means that Oyanagi now handles the entire process from start to finish. Completing a single tansu can take anywhere from six months to a year. I’ve never been so dazzled by cabinets, and have to hastily leave before I shell out several hundred thousand yen for a karakuri tansu full of hidden trick mechanisms and secret drawers—perfect for hiding my stack of diaries. If home ownership ever becomes a reality for me, this is where I’d order my storage chests.
Even nearer Takefu Station—seven minutes on foot—is Urushiya, a buckwheat noodle restaurant set in a traditional wooden house. Its claim to fame is having once served Echizen oroshi soba (soba with grated radish) to the Showa emperor. We ate our way through plates of pressed sushi, tempura, and an array of bite-sized appetizers. The noodles alone were worth the wait.
If you’re alighting at JR Fukui Station, you could take a 10-minute bus ride to Komego Miso for a fun afternoon diversion. Take a guided tour of the factory (they’ve been making miso for 190 years, which the staff mentioned almost as an afterthought), join a flavored miso ball-making workshop (which you then use to make instant miso soup in a mug), buy miso by weight, or have lunch at second-floor cafe misola, where everything from beer and ice cream to soup is spiked with miso.
Maybe you’re only in Fukui for a lunchtime train transfer. In that case, drop by Fukufuku Chaya in the Tourism Promotion Building next to Fukui Station for the Echizen Seikogani-zukushi, a winter-only snow crab-themed feast. A crab-stravaganza, if you will. Wedged between two souvenir shops, it’s hardly the most atmospheric restaurant, but who cares when lunch consists of four crab dishes, several sides, and soba to finish?
Morning Mantra
However, if I could only choose one experience worth the extra trek out of central Fukui, it would be joining the morning prayers at Eiheiji, whose name translates to “Temple of Eternal Peace.”
Ensconced on a cedar-covered mountain slope 15 kilometers east of Fukui City, this 13th-century Zen Buddhist temple complex is one of the largest, most-visited temples in Japan. (Fun fact: Steve Jobs almost took tonsure here.) It’s not far, but with more forest than buildings in its vicinity, this serene monastery is remote enough to feel a world away.
In 2019, Eiheiji and tourism corporation Fujita Kanko teamed up to open Hakujukan, an 18-room inn located in front of the monastery that embodies traditional Japanese aesthetics. The facility caters largely to foreign tourists interested in experiencing the world of Zen without forgoing material comforts like multi-course dinners, alcohol, and hot spring baths. This may induce mild cognitive dissonance, but Eiheiji has always been a temple and popular destination for tourists. It’s never pretended otherwise.
At 5:30 a.m., we gathered in the lobby and followed our guide up the slope to the temple, trudging through ankle-deep snow in the dark. It took us at least 40 minutes to get through the doors, remove our shoes, listen to an opening lecture by one of the senior monks, and climb a succession of staircases through winding corridors before we reached the main hall—and we’d still seen but a fraction of the 70-building complex.
At half past six, dozens of barefoot monks clad in black robes filed into the hall, sat in orderly rows, and began the morning prayers. I was raised in a culturally Buddhist environment, so listening to monks chant sutras wasn’t new, but listening to about 60 of them do it in perfect unison was. A monk at the front set the pace and rhythm with a drum. Another struck prayer bells at regular intervals, each bong echoing in the hall. I had no idea what any of the words meant. My pulse quickened, I felt compelled to sit straighter. Their voices seemed to coalesce into a single booming entity, expanding to fill the air. A tidal wave of sound enveloped us, and it felt like I was drifting on a vast, inky sea. It shifts your perspective, when you can see yourself taking part in a centuries-old practice of people coming together to pray. It felt good to feel so small.
Was this worth the trip to Fukui? I certainly thought so. Only time will tell if Fukui receives the attention it deserves. In the meantime, I’d pay it a visit before everyone else finds out.
Learn more and plan your visit …
Osada Washi
Ryozo (Japanese only)
Takefu Knife Village (Japanese only)
Oyanagi Tansu (Japanese only)
Urushiya (Japanese only)
Komego Miso
Fukufuku Chaya (Japanese only)
Eiheiji
Hakujukan
Past Meets Future
The glass panel separating the Enoura Observatory’s gallery from Sagami Bay erupts in an orange glow. It’s the summer solstice and the sun rises in perfect alignment with the long, narrow gallery designed by Japanese contemporary artist Hiroshi Sugimoto. The fiery spectacle is just one of the wonders that awaits travelers in Kanagawa Prefecture.
Kanagawa Prefecture offers travelers a gateway to Japanese culture, tradition, and breathtaking nature
Photo © Odawara Art Foundation
The glass panel separating the Enoura Observatory’s gallery from Sagami Bay erupts in an orange glow. It’s the summer solstice and the sun rises in perfect alignment with the long, narrow gallery designed by Japanese contemporary artist Hiroshi Sugimoto. The fiery spectacle, a cornerstone of this extraordinary project which intertwines art and nature, illuminates Sugimoto’s famous black-and-white seascapes photography series, which lines the wall and leads you to the edge of the water.
Visiting this gallery is an incredible start to our tour of four stops in Kanagawa Prefecture that take us through time, capturing deep tradition and forward-looking vision. While Tokyo may top the list for travelers exploring Japan, neighboring Kanagawa once played the same role and today is home to some of the nation’s most beautiful scenery and opportunities to come face to face with Japan’s deep history.
This first stop, the expansive facility nestled in the Enoura district of Odawara along the outermost edge of the Hakone Mountains in Kanagawa Prefecture, opened in 2017 and is home to many of Sugimoto’s works. It is managed by the Odawara Art Foundation, which he established in 2009.
As we stand alongside a long wooden table supported by a massive stone, Odawara Art Foundation Director Haruko Hoyle starts our tour by explaining how the observatory has grown. The striking table was designed by Sugimoto using 1,000-year-old cedar saved from Yakushima, a small island south of Kyushu, in Kagoshima Prefecture, whose ancient forest was designated a World Heritage Site in 1993. The stone was once a washbasin at a temple on Mount Koya and has been crafted into a leg for the table. The design reflects the mission of Sugimoto’s New Material Research Laboratory, which the artist set up in 2008 with architect Tomoyuki Sakakida, to preserve traditional methods of craftsmanship as well as traditional materials.
Stones play a major part in the Enoura Observatory concept. Sugimoto, who has made New York City his home since 1974, was in Japan during the pandemic and could not get back to New York for three years, Hoyle explains. “So, he kept buying more stones and developing this site.” The result is inspiring. A variety of stones from around Japan, each with an interesting history and connection to the country’s past, are preserved on 9,500 square meters of a former citrus grove.
Exploring the observatory is a contemplative experience—and that’s by design. “[Sugimoto] didn’t want people to just stay inside, looking at his artwork, so he developed this concept,” Hoyle says. “People can come here, get away from their busy life, and contemplate where they came from, where they are going, and their ideal relationship with nature.”
The architectural alignment that allows the summer solstice spectacle is an example of this intentional reconnection with nature. So is the design of a 70-meter-long tunnel of stone and rusted corten steel which runs underneath the gallery and creates a similar view of the winter solstice. A light well at its center provides a refuge for contemplation. This reflection on how ancient people looked to the sky and built astronomical markers, such as Stonehenge in England, is part of Sugimoto’s philosophy.
“He really wants this to be a future ruin,” Hoyle explains. “Five thousand years from now, all the glass will be shattered, no wooden structure will remain. All that future people might see are the stones and tunnel.”
They may also see the remnants of the hillside amphitheater, where the Odawara Art Foundation presents classical theater and avant-garde stage performances, including traditional Japanese Noh.
The stone steps and seats were meticulously designed by Sugimoto, who traveled to Italy to measure those of an amphitheater there to precisely recreate a millennium-old venue for artistic presentation. The seating looks out on a stage of optical glass that aligns with sunrise on the winter solstice.
Another reflection on Japan’s past, and a reprieve from modern life, can be found in the Uchoten teahouse, the style of which was inspired by that of a national treasure in Kyoto and designed by 16th-century tea master Sen no Rikyu. But Sugimoto gave the small space a local touch.
“As this was an abandoned citrus grove, there was a small storage [shed] which was used for harvesting,” Hoyle explains. “He took the corrugated tin roof off very carefully and placed it on top of the teahouse. Today, when it rains, you hear the ‘ton, ton, ton’ sound of the falling drops, so he named it Uchoten, ‘rain-listen-heaven’.”
Inside is a scroll bearing calligraphy, written by Sugimoto himself.
Like the stone stage, the room is aligned with the equinox. “On that morning,” Hoyle says, “we open the door and take the scroll down. The sun shines through the entrance and the alcove becomes pink.”
It’s yet another example of the precision with which Sugimoto has created a loving and visionary tribute not only to nature and art but to nature as art. It’s well worth a trip to Odawara to traverse the tunnel, stroll through the groves, and sense the pulse of history presented in unexpected ways.
Okada Museum of Art
Photo © Okada Museum of Art
From the coast of Sagami Bay, we wound our way along mountain roads into the depths of Hakone to visit the Okada Museum of Art.
The facility welcomed its first guests in 2013 and is celebrating its 10th anniversary this year. With an exhibition area of 5,000 square meters (54,000 square feet), it is the area’s largest museum.
The first glimpse of art can be seen on approach to the museum entrance. At 30 meters (98 feet) wide by 12 meters (39 feet) high, it is difficult to miss. Kotaro Fukui’s enormous mural entitled Kaze/Toki (Wind/Time) depicts the Wind God and Thunder God, painted on 640 gold-ground panels. These guardian deities of Hakone soar through the air overlooking the popular foot baths in front of the museum. The baths are continuously filled with natural alkaline hot spring water and are free to use for guests or ¥500 for those not viewing the exhibits. Drinks and sweets are available from the accompanying café.
As we made our way around the museum exterior, we came upon trails running up the hillside. The area is particularly beautiful in autumn, when the foliage is ablaze in fiery colors, but also tantalizingly tranquil in winter, when snowfall casts the sloping hill in ethereal white. A mix of wooded areas, trickling streams, delicate waterfalls, and picturesque ponds, the entire path around the garden and can take 10–20 minutes to fully traverse. Admission is currently free and open to the public.
Photos © Okada Museum of Art (except lower right)
But the true delights are inside the five-story museum, where you’ll find an extensive collection of more than 450 treasures from Japan, South Korea, China, and other East Asian countries.
As the doors slide open to the first collection, I’m astounded by the spaciousness of the presentation. Museums in Tokyo can often present challenges to the viewer, who finds themself competing for position in tight spaces just to see works amid crowds. But here, in the dimly lit vastness, there’s no difficulty in getting up close, and the austere dark blue walls provide a framing which vividly brings these incredible works of art to life.
Learning about the art is easy, thanks to the LCD touch screens placed in front of many pieces which offer notes in Japanese, English, Chinese, and Korean.
Each of the first two exhibition floors has a distinct flavor and story to tell as you stroll the timeline of artistic and cultural history.
The first houses ceramics from China’s Han Dynasty (206 BC–AD 220), Tang Dynasty (618–907), and Qing Dynasty (1644–1911), along with those from Korea’s Goryeo (918–1392) and Joseon Dynasties.
The second features Japanese art, primarily screen paintings from the Momoyama (1573–1600) and Edo (1603–1868) Periods. Taikan Yokoyama’s 1926 work Mt. Fuji, a sprawling 94x873 centimeter hanging scroll, is a centerpiece of the floor’s collection and is on display through June 4.
Images © Okada Museum of Art
The third floor is reserved for special exhibitions. For example, at the time of our visit, Jakuchu and Isson • Transcending Time, an exhibition featuring Edo-Period painter Jakuchu Ito and Isson Tanaka, an artist from the Showa Period, was on display. Part 1 of the Okada Museum of Art’s 10th anniversary celebration, the exhibition continues through June 4, and if you visit on your birthday, you and a companion can view it for free. Part 2, featuring Utamaro and Hokusai, will run from June 11 to December 10.
On the fifth floor are pieces of religious art, including sutra manuscripts, paintings, and Buddha statues from Japan’s Heian (794–1185) and Kamakura (1185–1333) Periods. The craftsmanship of these wood-carved figures is astounding.
With such a wealth of art on display, it takes about two hours to view the entire collection.
After browsing the works, return to the garden entrance and Kaikatei to unwind against the backdrop of nature as the soothing splash of a waterfall can be heard across the carp pond. Named after a hotel popular with foreign visitors that stood on the same property in the late 1800s, the renovated Japanese house is a memorable place to enjoy dishes such as horse mackerel tempura udon and dorayaki, a small pancake-like sandwich filled with sweet red bean paste.
A visit to the Okada Museum of Art is not only a delightful way to learn about the history of Japan and the region, but a refreshing escape to nature.
Admission is ¥2,800 for adults and university students and ¥1,800 for elementary through high school ages.
Jochi-ji Houan
An hour from Tokyo, hidden in a forested valley behind Jochi-ji Temple in Kita-Kamakura, is a quaint little tea house that time forgot.
Built in 1934 by journalist Tai Sekiguchi, Houan is home to three tea rooms—one an eight-tatami space that accommodates eight to 10 people and a smaller room of four mats which looks out onto the garden behind the house. Smaller still, a separate tea house based on the famous Ihoan tea hut inside Kyoto’s Kodai-ji Temple offers an intimate ceremony space for two people.
Houan was designed by Bunzo Yamaguchi, one of the leaders of Japan’s modernist architectural movement, and is an example of the sukiya style of Japanese architecture, which dates back to the Momoyama Period (1573–1600). Based on a natural aesthetic and rustic simplicity, sukiya is intended to exist in harmony with the surroundings; and Houan certainly does.
But as Yukiyo Matsuzaki, planner at Kyoto-based travel experience company Mitate, Ltd. and founder of Kamakura Mind explains, “Yamaguchi studied modernist architecture in Germany, so Houan is a fusion of traditional Japanese and modernist styles which creates a unique tea house.”
We explore the house on arrival with Matsuzaki and Southi Yokoyama, a professor of the Omotesenke school of tea ceremony. Yokoyama shares about the connection green tea has to the area, and some of its roles in Japanese history.
“Kamakura had a lot of Zen temples and many people practiced Zen meditation, so they used green tea as a sort of stimulate to keep awake during meditation,” she explains. And on a fiercer note, she adds, green tea was a favorite of samurai warriors before going into battle.
Samurai, we learn, were once buried in the caves along the back side of the garden, which were also used as a training ground and a grave for Zen monks.
We turn our attention to the main space and the tokonoma, the alcove commonly found in Japanese-style rooms, or washitsu. In the space is a kakejiku (hanging scroll) with calligraphy showing Zen words appropriate for the season, and alongside an ikebana flower arrangement. In recognition of the sacred nature of the tearoom, we bow to each and carefully read the inscription.
As we prepare to take part in the tea ceremony, we learn the proper way to wash our hands in the tsukubai (washbasin) outside before entering the tea house.
Hands cleansed, we take our positions, kneeling on the tatami, and Yokoyama explains each step of the ceremony. (Don’t worry, if kneeling for an extended period isn’t your style, Houan can provide chairs.)
Having watched the master prepare the tea, it’s now time to learn the proper way to drink and to show appreciation, as well as to savor the delectable wagashi (Japanese sweet) which accompanies the tea to take away the bitterness. I’ve eaten more wagashi than I can count in my many years in Japan, but this morsel, crafted by local artisan Kuu, is easily one of the most delicious I’ve ever tasted, with a splash of citrus that is eye opening. You can learn to make wagashi from Kuu in another experience offered here by Kamakura Mind. You can even enjoy your creation as part of the tea ceremony.
When the time comes to drink, admiring the beauty of the bowl is a key part of the experience. I take a close look at the playful yet restrained craftsmanship as I gently rotate the cup in my hands. Finally, I sip the tea and gently slice the wagashi in half. Savoring these flavors through the silent steps of this centuries-old tradition is a momentary escape into tranquility.
In addition to tea ceremony, Kamakura Mind also offers workshops for other traditional Japanese arts, hosts corporate training retreats, provides a venue for Zen meditation, and even guides hiking tours along the trail to the Daibutsu, the Great Buddha of Kamakura—a journey that takes about an hour and a half at a leisurely pace.
A mix of historical perspective and cultural immersion, our hour-long visit to Houan made for a particularly peaceful and memorable morning in this beautiful city that served as Japan’s capital for almost 150 years.
Hasedera
Just a short walk from Hase Station on the quaint and historic Enoden train line is Hasedera, an eighth-century Buddhist Temple that is one the oldest and most significant in Kamakura.
Formally the Kaikozan Jishion Hasedera, it is believed to have been founded in 736 after an 11-faced Kannon Boddhisattva statue washed ashore on Nagaiura Beach in Sagaminokuni and was brought to Kamakura.
Hasedera is the fourth of the four temples on the Bando 33 Kannon pilgrimage route, and as we arrive a group of visitors were gathering near the entrance to conclude their own journey.
We’re greeted by one of the temple’s monks who will lead us on a guided tour of the beautiful grounds featuring koi ponds, rock gardens, waterfalls, and a variety of trees and flowers. Famed for its hydrangea in summer, Hasedera is also delicately painted pink in spring, when the cherry blossoms burst forth, and brilliantly picturesque in fall, when the leaves turn. As we tour in late January, plum blossoms are beginning to dot the branches.
As we stroll through this tranquil setting, we come to Bentendo Hall, where we see the eight-armed statue of Benzaiten, the Goddess of Water and Wealth and the only female among the Japanese Seven Gods of Fortune. As we move past her, we enter the darkness of the Bentenkutsu Cave. Inside, Benzaiten and her 16 followers are chiseled out of rock walls.
As our guide explains, legend says that Kobo Daishi, known as Kukai when he was alive, traveled across Japan to spread Buddhism and secluded himself in this very cave. Here, he meditated and attained a state of spiritual communication with Benzaiten, and carved a wooden statue of the goddess with eight arms. Kukai, who lived from 775 to 835, founded the Shingon school of Japanese Buddhism.
Past the stone figures, we duck deeper into the cave. The low ceilings mean we must crouch to navigate the catacomb-like corridors. Partway through, we happen upon a small chamber filled with miniature Buddhas on which visitors have copied sutras as they wish for good fortune.
Emerging from the cave, we make our way up the hill and into Kannondo Hall, which houses the statue of the Kannon Boddhisattva that is said to have washed ashore in 736. Standing an astonishing 9.18 meters (30.1 feet) tall, it is one of the largest wooden Buddhist statues in Japan and is the centerpiece of Hasedera. According to legend, it has been enshrined here since the temple’s founding 1,300 years ago.
As the hall long predates the advent of electric lights, viewing the statue was not always as easy as it is today. Long ago, our guide explains, lanterns were hoisted up alongside the statue so that it was possible to see the Kannon Boddhisattva’s face in the darkness.
A particular treat during this part of our tour was the recitation by our guide of a sutra, “Enmei Jukku Kannon Gyo” or the “Life-Extending Ten-Line Kannon Sutra.” We joined in by following the words provided in both kanji and romaji.
In the Kannon sutra, Kannon appears in 33 different forms to best appeal to the nature of each individual whom they are guiding out of suffering and toward enlightenment. We come face to face with these 33 avatars in the form of exquisitely detailed, life-size wood carved statues as we make our way through the museum which adjoins the chamber where the nine-meter Kannon Boddhisattva resides. Opened in 1980 as one of the first temple museums in Japan, the space presents many ancient artifacts that tell the history of Buddhism and the area surrounding Hasedera.
Upper left photo © Hasedera
We also examine the bonsho (temple bell), made in 1264 and now preserved in a glass case. The third oldest bonsho in Kamakura, it bears the earliest known inscription of the name Hasedera. It was replaced in 1984 with the current bell after an astonishing 720 years of service.
As our tour draws to a close, we make our final stop at the Kaikoan Restaurant where we enjoy green tea and mitarashi dango, a Japanese sweet of three skewered rice dumplings glazed with a sweet and savory sauce. The restaurant even offers vegan options based on the traditional recipes of Buddhist monks.
As we unwind by the window, the panoramic view across Yuigahama Beach and Sagami Bay is enchanting, and it is easy to understand why Kamakura drew so many seeking connection with nature here all those centuries ago.
Learn more and plan your visit …
Enoura Observatory
📞 0465-42-9170
Odawara Art Foundation
✉️ info@odawara-af.com
Okada Museum of Art
📞 0460-87-3931 ✉️ nishidate.hiroshi@okada-museum.com
Hasedera
📞 0467-22-6300 ✉️ soumu@hasedera.jp
Japan to Foster Global Cooperation at the G7
In May 2023, the G7 Summit will be hosted in Hiroshima against the backdrop of a severe global energy crisis and supply chain disruptions that are stoking the fires of inflation, shaking consumer confidence, and threatening the most economically vulnerable in our society. METI will focus on three key policy areas: trade, climate and energy, and digitalization.
METI focuses on three key policy areas: trade, climate and energy, and digitalization
In May 2023, the G7 Summit will be hosted in Hiroshima against the backdrop of a severe global energy crisis and supply chain disruptions that are stoking the fires of inflation, shaking consumer confidence, and threatening the most economically vulnerable in our society.
Climate change, Covid-19, and Russia’s aggression against Ukraine are fueling global concern. In a speech given at the Center for Strategic and International Studies in January, Yasutoshi Nishimura, Japan’s Minister of Economy, Trade, and Industry, expressed his alarm, saying “the global shocks that have occurred, one after the other in the span of only a little more than two years, have truly been a wake-up call.”
All three challenges are likely to be high on the agenda at the G7 Summit and relevant ministerial-level meetings to be held throughout the year. The Ministry of Economy, Trade and Industry (METI) will take the lead at the ministerial meetings, along with relevant ministries, and aims to drive discussion and policy action in three key areas—trade, climate change and energy, and digitalization.
Revitalizing Global Trade and Investment
Trade is a key policy issue, especially given the rise of serious supply chain disruptions due to Russia’s devastating war in Ukraine.
“Russia’s aggression against Ukraine has shaken the international order, and there are concerns about a global economic slowdown,” said Takuya Kimura, principal director of METI’s Multilateral Trade System Department. “At the G7 meetings, we would like to emphasize the importance of upholding the free and fair economic order.”
Topics will include:
- Promotion of trade and investment
- World Trade Organization reform
- How the G7 will deal with unfair trade practices that distort markets
- Proposals for strengthening economic security
Even if these key issues are addressed, the global economy faces insurmountable hurdles without the existence of healthy trade and investment relationships between nations. METI’s work at the upcoming G7 Summit will include laying the foundation for future progress.
Around the world, shortsighted trade practices could lead to unfair trade. Such practices include forced technology transfer, whereby foreign companies operating in a host nation are required to carry out all processes—from design and development to the manufacturing of advanced technology products—in that nation, possibly forcing companies to share their sensitive technologies with the host nation’s companies.
Nishimura said that we must build a world where “countries will come together based on trust and strengthen their cooperation under the banner of free trade, without slipping into protectionism.”
Climate Change and Energy in Focus
Japan is looking to promote green transformation, or GX, which can rewrite the rules of the prevailing socioeconomic system by inducing transformational changes, without shoehorning emission reductions and economic growth into an either-or relationship.
“Green transformation is a major keyword in Japan,” explained Shinichi Kihara, deputy director general for technology and environment at METI. “The idea is that emissions reduction and economic growth are not in a trade-off relationship. Instead, they can coexist.”
GX will not stop at Japan’s borders, and the government will make efforts to approach countries responsible for major emission outputs while also providing appropriate support to developing nations that are in the process of transitioning to a green regime. Ultimately, Japan seeks to promote GX in all sectors, including energy and industry.
At the same time, the energy crisis has put the spotlight on global energy security. Nishimura believes it is necessary to undertake decarbonization in a way that is fully compatible with ensuring a stable supply of energy, and that it will be important to undertake various and practical pathways that fit the needs and expectations of individual nations.
Japan will make the utmost efforts to promote its clean energy transition, including installing the greatest possible amount of renewable energy facilities and using nuclear plants as much as possible.
Minister Yasutoshi Nishimura
Boosting Digitalization
Another major transformation underway is digital transformation, or DX, which has been defined as the creation of new value through innovation made possible by the adoption of digital technology that aims for the creation of a more prosperous society. The role of digitalization as a bulwark against unpredictable events has been highlighted in recent years by global challenges such as the Covid-19 pandemic and Russia’s aggression against Ukraine.
The free flow of data in the face of arbitrary restrictions and ensuring data integrity are essential if the digitalized world is to operate as intended.
In a move that has garnered positive international feedback, Japan proposed a guiding principle, Data Free Flow with Trust (DFFT), which seeks to enable cross-border free flow of data while addressing privacy, data protection, intellectual property rights, and security concerns. The principle was first suggested by then-Prime Minister Shinzo Abe at Davos 2019, and later endorsed at the G20 Osaka Summit in June 2019. Since then, the DFFT has been widely accepted as a primary principle for international digital policy coordination in various international forums.
Reaching a global consensus or convergence on the rules that involve privacy and security will take time. The G7, currently under Japanese presidency, is expected to formulate the priorities in operationalizing the DFFT so that countries can work together despite their varied approaches to data governance. Vigorously moving the DFFT into its operational phase, the Japanese government has announced that it will establish an institutional arrangement to promote interoperability across data regimes, implement the priorities that have been identified by the international forum, and advance solutions for cross-border data transfer through public–private cooperation.
It is also important to redesign governance for a digitalized society. DX technologies, such as artificial intelligence, the Internet of Things, and the metaverse, now have the ability to fundamentally reshape the way companies operate and how individuals relate to society.
It is vital to explore new governance options, including involving multiple stakeholders in discussions on how to flexibly update governance systems in response to changes in the operating environment.
International Cooperation Is the Only Way Forward
At the end of the day, the G7 is not just about the interests of advanced industrialized nations, but about building a way forward together with the entire international community.
“In 2023, Japan will host the G7 Summit, and the United States, India, and Indonesia will chair APEC, the G20 Summit and ASEAN, respectively,” Nishimura said. “While working in cooperation to deal with global-level issues, we will lay out for the international community a path forward for building a new economic order.” It will be also essential for Japan to work in coordination with the Global South to tackle various global challenges. “Japan, working within that partnership, is fully determined to fulfill its significant responsibilities.”
The Toranomon Hills Station Tower: Transforming a Neighborhood
Home to a buzzing community that melds business and art with innovation and tradition, Toranomon is one of Tokyo’s most vibrant and interesting neighborhoods. And later this year, the area will take a bold step with the opening of Toranomon Hills Station Tower.
This fall, Mori Building's new project will elevate innovation in business, retail, and art
Tokyo Node Hall
Home to a buzzing community that melds business and art with innovation and tradition, Toranomon is one of Tokyo’s most vibrant and interesting neighborhoods. And later this year, the area will take a bold step with the opening of Toranomon Hills Station Tower. The new facility will help to expand and evolve the Toranomon Hills complex as a new international hub and global business center where various businesses and global players gather to disseminate new ideas and values.
The 49-story tower will be located above Toranomon Hills Station, the first new station on the Hibiya Line in 56 years. For many visitors, the first experience will be stepping into the Station Atrium—an impressive three-story, 2,000-square-meter plaza brilliantly illuminated with natural light. The space serves not just as a point of passage for travelers and commuters, but a welcoming entrance to the entire area.
Toranomon Hills Station Tower will be completely integrated with the new station and connected to Mori Tower’s Oval Square by the large-scale pedestrian T-Deck, significantly improving pedestrian flows. This continues the work done with the construction of Toranomon Hills Mori Tower, which integrates with Loop Road No. 2, seamlessly connecting central Tokyo with Haneda Airport.
In addition, a bus terminal on the first floor of Toranomon Hills Business Tower offers access to airport limousine buses and the Tokyo Bus Rapid Transit network. Together, these will strengthen Toranomon Hills as a transportation node of the gateway connecting central Tokyo with the world.
The pedestrian path to the Toranomon Hills Station Tower, nicknamed “The T-Deck.”
The Station Atrium
Along with 32 floors of office space, Toranomon Hills Station Tower features the innovative Tokyo Node, a 10,000-square-meter interactive communication facility that will take up part of the eighth floor and the 45th to 49th floors. Tokyo Node features a main hall and three galleries, which can be used on their own or as a single integrated space. The space will also be home to four dining facilities that can be used in conjunction with events.
On the rooftop, a sky garden and pool help create an unforgettable atmosphere for events. On the eighth floor, the facility features a cutting-edge laboratory for research into future urban experiences. Tokyo Node aims to be a space from which new content and creativity can be shared with the world.
The Station Tower completes the redevelopment of Toranomon Hills that began in 2014 with the opening of Toranomon Hills Mori Tower. This was followed by the Toranomon Hills Business Tower in 2020, which is home to Arch, an incubation center for business creation that has attracted more than 110 major corporations, as well as CIC Tokyo, an innovative coworking space that serves as a hub for the startup ecosystem in the city. In 2022, Toranomon Hills Residential Tower opened in the complex, providing an unmatched standard for urban residential living. In total, the urban complex will include about 300,000 square meters of office space, 730 residential units, 26,000 square meters of retail space, 370 hotel rooms, and 21,000 square meters of green areas.
Tokyo Node sits atop the Toranomon Hills Station Tower.
Spaces for All
Shoppers will have a great deal to look forward to this fall, as there will be a broad variety of stores in Toranomon Hills Station Tower. Spanning from B2 to the seventh floor, a retail space featuring about 80 stores will cater to a broad range of needs. One of the highlights will be the T-Market, boasting 27 restaurants, delis, and food stores where shoppers can pick up an array of gourmet items. Altogether, the retail space will more than double what is currently available in the Toranomon Hills area.
The tower will also house the Hotel Toranomon Hills, the first in Hyatt’s Unbound Collection to be launched in Tokyo. Space Copenhagen of Denmark is responsible for the hotel’s stunning interior design, which combines natural materials with traditional Japanese architecture.
The sleek and modern look of Toranomon Hills Station Tower itself was designed by Shohei Shigematsu, partner at international architecture design group OMA. The tower’s design is informed by the idea of creating an “urban axis” that links Toranomon Hills with the surrounding neighborhood in a seamless, natural way.
Throughout the engaging and welcoming space, there will be captivating works of public art—from a scintillating work created with software-controlled LEDs to paintings and sculptures. These aesthetic touches combine to create an inspired atmosphere.
Toranomon Hills Station Tower is set to help Toranomon Hills continue to steadily evolve as a mixed-use complex that integrates with the urban infrastructure, achieving an impact comparable to that of Mori Building’s epoch-making Roppongi Hills. This fall, the new project will elevate the neighborhood to greater heights of innovation in business, retail, and art.
Investing in Biotech
To help Japan capture a market forecast to grow to up to $4 trillion by 2040, METI has created an $8 billion fund to support biomanufacturing, a field that encompasses technologies which leverage genetic technology to maximize the ability of microorganisms to produce substances.
From plastics that melt in the sea to cultured foie gras, Japan is pushing innovative technologies forward with government support
In terms of taste, IntegriCulture’s prototype cultured foie gras has been praised by culinary experts as having a good balance of richness and sweetness.
A decade on from Dr. Shinya Yamanaka’s win of a Nobel Prize for his research into induced pluripotent stem cells, or iPS cells, Japan is lagging in bringing biotechnology to a market forecast to grow to up to $4 trillion by 2040.
To help capture this huge opportunity, Japan’s Ministry of Economy, Trade and Industry (METI) revealed plans last fall for an $8 billion (¥1 trillion) fund to support biomanufacturing. The field encompasses technologies that leverage genetic technology to maximize the ability of microorganisms to produce substances.
Hirokazu Shimoda, director of METI’s Bio-Industry Division, explained why the country plans to go big on bio.
“It is only a matter of time before the global manufacturing industry is replaced by bioprocesses,” he said. “That’s why we are making medium- to long-term investments on the scale of about ¥1 trillion to build a system for companies in the biotechnology and drug discovery markets to develop and manufacture in Japan, then earn money in the global marketplace.”
As well as driving economic growth, biomanufacturing is also expected to be key in solving global issues such as marine pollution, global warming, and food shortages. Some top players in Japan’s biomanufacturing field are already making a difference in those areas.
Green Planet
In 2011, Kaneka Corporation achieved the world’s first commercial production of plastic that degrades in the ocean. The Osaka-based company plans to quadruple the production capacity of its biodegradable biopolymer called Green Planet to 20,000 tons in January 2024.
Kaneka began developing Green Planet in the early 1990s, when global environmental problems such as global warming began to emerge. The project was launched due to the strong desire of researchers to provide environmentally friendly products that don’t depend on fossil fuels.
Green Planet has qualified for the BiomassPla Identification and Labelling system, awarded to materials composed of biomass. It has also received the OK Biodegradable MARINE certification, issued by TÜV Austria Belgium NV/SA for materials that biodegrade in seawater.
Osaka-based Kaneka Corporation plans to quadruple the production capacity of its biodegradable biopolymer called Green Planet to 20,000 tons in January 2024.
Currently, Green Planet is used in straws, plastic shopping bags, cutlery, food containers and agricultural supplies. Seedling pots made with the material can be left to biodegrade after being buried in the soil. Kaneka is studying the material’s effects on natural cycles, including changes to bacteria in the soil.
“The focus of our research is to expand the range of physical applications for which Green Planet can be used,” explains Dr. Shunsuke Sato, a researcher at Kaneka’s Agri-Bio & Supplement Research Laboratories. According to the company’s own estimates, the combined annual production volume of plastic alternatives in Japan, the United States, and Europe currently is about 25 million tons. The market for Green Planet as a substitute for traditional plastic is expected to expand as regulations tighten and awareness grows.
Looking to capture this demand, Kaneka is focusing on carbon dioxide (CO2) as a new raw material for mass production of Green Planet. The goal is to recycle CO2 using microorganisms thereby creating a new process of manufacturing that can address both environmental problems and economic development. Sato explains: “We have the technology to do this in the lab. For mass production, we need to develop a culture process that efficiently converts gas components, such as CO2 and H2 [Dihydrogen], into Green Planet.”
Redefining Meat
Culturing has deep roots. For hundreds of years, humans have used and improved upon it to make wine, cheese, and more. In recent years, new culturing techniques have unlocked the process for making lab-grown cultured meat, redefining what we believed to be possible.
One pioneer of this movement is IntegriCulture Inc. As competition in the development of cultured meat heats up globally, this Japanese startup is the world’s first to succeed in producing cultured foie gras. Dr. Yuki Hanyu, IntegriCulture’s CEO, began research in 2014 on the CulNet System, a unique cell culture technology for manufacturing cultured meat. In 2019, he completed a prototype of cultured foie gras using duck liver cells.
The expansion of the worldwide market for cultured meat provides a tailwind for development. According to market forecasts by US consultancy A.T. Kearney, cultured meat will make up 35 percent of the meat market by 2040. Hanyu believes that the spread of cultured meat will depend on price, taste, and consumers’ belief in its safety.
In terms of taste, IntegriCulture’s prototype cultured foie gras has been praised by culinary experts as having a good balance of richness and sweetness. The first commercial sales are planned for 2024 in Singapore, a market with a precedent. In 2020, Singapore approved the sale of cultured chicken developed by a US company. Domestically, IntegriCulture is aiming to begin sales in 2025, but Japan’s screening standards for areas such as safety have not yet been decided.
Kaneka researcher Shunsuke Sato
IntegriCulture CEO Yuki Hanyu
The potential advantages that come with cultured meat are enormous. IntegriCulture’s CulNet System makes it possible to produce cultured meat at about one ten-thousandth the cost of conventional culture methods. With conventional methods of cultivation, ingredients contained in the blood, such as the serum necessary for cell culture, are expensive and seen as an obstacle to commercialization. However, with CulNet System, IntegriCulture has succeeded in maintaining the appropriate nutritional content without using expensive ingredients. It can also culture cells from various animals including fish.
IntegriCulture plans to sell the CulNet System to food manufacturers and other organizations, and to work together with them to develop technologies that will enable mass production.
“Leveraging our core strength of engineering technology, we want our system to find its proper place in the world,” said Hanyu, who first got involved in so-called cellular farming because he wanted to make the cultured meat he read about as a child in science fiction novels. To this day, he continues to strategize about what he can make with biotechnology, taking inspiration from his beloved world of science fiction.
Companies such as Kaneka and IntegriCulture are just the tip of the iceberg in terms of Japanese biotechnology’s true potential. “Japan is good at the zero-to-one stage of research and development, but is often less adept at scaling up as an industry on the global level,” explains Kaneka’s Sato. That’s exactly what METI aims to change, helping these pioneers and other like them with the funding they need to mass produce and commercialize their innovative biotechnologies.
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Perfect Powder
Hakuba Hotel Group (HHG) has been a driving force behind the development of the area over the past 10 years and manages a portfolio of more than 50 premium chalets and apartments situated in prime locations surrounding the Happo-One Resort. ACCJ members get 10 percent off at any HHG property this winter.
A luxurious winter escape from Tokyo is just a few hours away in Hakuba
Glistening lakes and rivers in summer, flamingly vibrant foliage in fall, and delicate powder snow in winter have made Hakuba a top destination for Japan’s international residents in recent years. The explosion of expats flocking to the valley for powder skiing and reconnecting with nature is boosted by other things that separate Hakuba from similar resort areas in Japan: its proximity to Tokyo and its international flair.
Hakuba Hotel Group (HHG) has been a driving force behind the development of the area over the past 10 years. Launched in 2012 with the purchase of the Hakuba Springs Hotel, HHG has grown from a small hotel operator to the Hakuba Valley’s largest hospitality company. The group owns or manages hotels, apartments, chalets, travel agencies, and events, as well as restaurants and bars featuring some of Asia’s most premium accommodations and dining. HHG is truly all things Hakuba.
Chalets and Apartments
HHG manages a portfolio of more than 50 premium chalets and apartments situated in prime locations surrounding the Happo-One Resort, host to downhill and Super-G Alpine skiing during the 1998 Nagano Winter Olympic and Paralympic Games. The properties combine the creature comforts of Western homes with the convenience of a fully serviced hotel. Guests can access a 24-hour concierge team, receive food and wine deliveries, and use complimentary resort and restaurant shuttle services.
The newest property is the ski-in, ski-out Roka Apartments. Completed in 2021, the eight serviced luxury units are the most exclusive in Hakuba.
Hotels
HHG hotels range from rustic and cozy to modern and sleek. The flagship property The Happo is among the most modern in Hakuba, having recently reopened after extensive renovation. With 30 rooms in the heart of Happo Village, 200 meters from the Happo-One slopes and surrounded by Hakuba’s best dining and nightlife, The Happo features onsen and Finnish sauna, a restaurant, bar, café, rental shop, and retail store.
Dining
Mimi’s Restaurant & Bar is the jewel of the Hakuba culinary scene and among the few true fine-dining experiences in the valley. This HHG venue has ranked as Hakuba’s No. 1 restaurant on TripAdvisor for several years running. Other group restaurants include The Rabbit Hole, Blizzard Pizza, and The Grill.
Premium Partnerships
HHG is proud to be partnering with Land Rover to provide the most stylish shuttle service in Hakuba. Chalet and apartment guests receive complimentary shuttles to the ski slopes and local restaurants in Range Rover and Defender vehicles.
The group has also teamed up with Hyperice to help guests at The Happo recover and recharge with premium massage guns after a day of powder skiing.
Book Now for a Discounted Vacation
We’re proud to offer all ACCJ members 10 percent off any HHG property this winter.
Visit hakubahotelgroup.com and use booking code ACCJ2023 to secure your discounted accommodations.
Yonezawa Artistry
Legacy and vision. Two words that describe and drive Gentaro Nitta’s Nitta Textile Arts and Michiko Yamakuchi’s Yozando. Both are eminent textile enterprises based in Yonezawa City, Yamagata Prefecture, and manifest a celebration of the past as the industry looks toward the future.
Local textiles reflect a passion to create and determination to preserve
Formal kimono safflower with luxurious crimson hue. Photo: Nitta Fabric Art Inc.
Legacy and vision. Two words that describe and drive Gentaro Nitta’s Nitta Textile Arts and Michiko Yamakuchi’s Yozando. Both are eminent textile enterprises based in Yonezawa City, Yamagata Prefecture, and manifest a celebration of the past as the industry looks toward the future.
Nitta Textile Art Inc.
To fifth-generation head Gentaro Nitta, “the past is not a burden, but a window.” Nitta Textile Art’s forward-thinking production model triumphantly draws on the past to produce one-of-a-kind, hand-crafted elegance made from the highest quality silk, woven on wooden looms by local experts employing skills passed down for centuries. These silk masterpieces, painstakingly colored with locally sourced dyes made from hand-picked safflowers, radiate colors ranging from the subtlest hues of pearl to the company’s renowned shades of crimson.
It’s not that Nitta’s traditions—its safflower cultivation and silk dyeing techniques—are separate processes; rather the agricultural and artistic traditions merge to form an integrated whole, developed together over centuries and applied organically and harmoniously in response to the land and local climate.
Conditions, Nitta explains, change throughout the year, according to the season. In sum, the human arts—be they agricultural or artistic—depend on and reflect the demands of the land and the challenges of the climate.
The Yoneori Komon range includes a wide variety of products with seasonal as well as traditional designs. Photo: Yamakuchi Orimono Yozando
Yamakuchi Orimono Yozando
Designer, proprietress, and curator Michiko Yamakuchi leads a whirlwind tour of her multiple facilities, including a quaint retail shop, coffee-house art gallery, and petite cabin that houses her coffee bean roasting ovens. An extraordinary manufacturing site reveals the enormous Japanese-Italian weaving machines which bring Michiko’s designs to life, while a cavernous art gallery houses art pieces by internationally recognized artist Hideo Yamakuchi.
Michiko’s creativity is manifest in the intricate, unbroken patterns of her seasonal designs (shown above), be they purses, handbags, tablemats, coasters, or traditional furoshiki wrapping cloths. The seamless patterns echo the finest, perfectly aligned wallpapers.
Colors and designs are abundant and change with the seasons; winter holiday products are currently on view. Items are reversible—for example, red on white on one side, white on red on the other.
Most other products affirm the designer’s emphasis on a practical aesthetic that instills beauty in everyday objects, such as bags for smartphones and temple diaries, and by using washable cotton fabrics and creating designs that reduce leftover materials.
Together, Nitta Textile Art and Yamakuchi Orimono Yozando provide a window not only into Yonezawa’s artistic past but also its future.
Supply Chain Woes
Nowadays, it is common to hear and to read in the news that the world is experiencing unprecedented supply chain woes. China lacks coal and paper. The United States has a shortage of toilet paper and toys. And India is low on microchips. Why is this happening? Here are four current issues that negatively impact the world’s supply chains.
Four causes of worldwide shortages and how to address them
Photo: Photo by Tom Fisk from Pexels
Nowadays, it is common to hear and to read in the news that the world is experiencing unprecedented supply chain woes. China lacks coal and paper. The United States has a shortage of toilet paper and toys. And India is low on microchips. Even we, the masses, have experienced delivery delays and found that certain items, previously one click away, are out of stock. Why is this happening? Below are four current issues that negatively impact the world’s supply chains.
1. Lockdowns (Still) in the World’s Factory: China
Economists say that companies with an overreliance on factories in China are the most vulnerable in this supply chain crisis. But this describes most companies. Back in the early 2000s, when an outbreak of severe acute respiratory syndrome, or SARS, forced China to temporarily shut its manufacturing capacity to control the virus, the country had just the sixth-largest economy in the world, with a nominal gross domestic product (GDP) of $1.4 trillion. Fewer than 20 years later, China’s economy had grown to be the world’s second largest, with a nominal GDP of $14.72 trillion in 2020.
China has also become the producer of 28.7 percent of all the world’s goods, and exports $2.6 trillion of worth of products annually. This makes it the top exporting economy. Coupled with its number-two ranking for imports, it’s no wonder China has garnered the moniker “the world’s factory.”
How did China achieve such a rise? By making itself a manufacturing powerhouse and primary recipient of foreign investments thanks to a large, cheap, but capable labor force and low tax rates. With these manufacturing credentials under its belt, and huge amounts of trade coming in and out, China became a key player on the world stage.
More than two years into the coronavirus pandemic, as vaccines were being rolled out and populations inoculated around the globe, Covid-19 became a norm in our daily lives. We all thought that lockdowns were a thing of the past. But China has continued to implement a zero-Covid strategy, loosening its grip on the population only as 2022 draws to a close under growing pressure from weary citizens.
China’s zero-Covid policy required strict quarantine, even if just a handful of cases are reported. As a result, tens of millions of people in at least 30 regions of China have been ordered to stay at home under partial or full lockdowns. How changes will affect the severity and impact of countermeasures remains to be seen. Until now, these lockdowns have caused massive disruptions to China’s manufacturing activities that have translated into worldwide supply chain interruptions.
2. Worldwide port congestions and bottlenecks
As we all get back to our normal lives and try to move on from the bad memories of the pandemic, economic activity has restarted and demand for various goods are returning to pre-pandemic levels. This hefty appetite from various economies—on top of the prevailing delivery backlogs and shortages caused by the pandemic—has put massive strain on the world’s ports. The situation has been exacerbated by various businesses trying to pile up their respective stocks in the face of supply uncertainties.
Ninety percent of global trade is transported via sea. Delays caused by port congestion have driven up the cost of many goods or, in the worst cases, caused depleted stock of some much-needed items. For example, the United States, the world’s largest importer and second-largest exporter, has seen its ports experience unprecedented cargo ship backlogs. Billions of dollars’ worth of goods are stranded off the coasts of the United States as there’s neither enough manpower nor resources to unload them. Ultimately, this causes delays in delivery to end users. The same thing is happening at major ports around the world.
This existing issue has caused cargo prices, as well as average port-to-port waiting times, to multiply to record levels.
3. Power levels: on red alert
As businesses around the world struggle to address the ongoing logistical and manufacturing disruptions caused by the pandemic and existing production backlogs, another problem has arisen: Where to source power?
It is a given that power is necessary to fuel manufacturing capacity around the world and keep goods in production, but meeting demand means overcoming challenges.
In the Pacific, China last summer experienced its worst heatwave and drought in six decades, and its power source portfolio suffered. Hydroelectricity, the country’s second-largest source of power, yielded an all-time low output due to the much lower water levels at hydroelectric plants. To conserve electricity, the government took steps such as ordering the closure of factories, demanding that air conditioners be set to above 26 degrees Celsius, or shutting down elevators for the first three floors in some provinces. The regions affected are key manufacturing centers for semiconductors, solar panels, and batteries, and the reduced production affected some of the world’s largest electronics companies.
Europe has been on red alert since March as economic sanctions imposed on Russia for its war in Ukraine, measures which include the cessation of gas imports from Russia, have diminished energy supplies. Russian gas normally accounts for about 40 percent of European Union (EU) fuel imports. As winter starts, the EU is bracing for two scenarios—one in which a few member states experience power cuts and another in which blackouts occur in many member states at the same time. Can you imagine the famous Eiffel Tower on a lights-off schedule? The EU is also the location of some of the world’s biggest manufacturing brands, hence this development will mean further disruptions to the global supply chain.
4. Russia’s economic embargo, Part II
As the West and its allies impose costly economic sanctions on Russia to cripple its economy and ability to fund its military operations in Ukraine, they have also cut themselves off from what Russia contributes to the supply chain. Aside from oil and petroleum products, industry relies on the country for metals, including nickel, palladium, platinum, rhodium, aluminum, and copper. These minerals are key components in the production of automobiles, semiconductors, aerospace components, packaging, renewable energy, and other industrial products.
Russia also specializes in chemical production, particularly of the potassium compound potash and ammonia, key ingredients in fertilizers. This area may be impacted most as Russia accounts for roughly 10 percent of ammonia and five percent of urea production globally, as well as 20–25 percent of global ammonia exports. The country is also a significant producer and exporter of potash, delivering about 18 percent of the world’s supply in 2021. Low or no supply from Russia, combined with the existing issue of high energy prices, is likely to result in significant disruption to the supply of fertilizers for the foreseeable future.
It is very evident that manufacturing companies were caught flat-footed as these developments were thrust upon us and found to be overly reliant on certain countries to produce their products. Many have preferred suppliers for materials and labor located in countries where conditions have impacted manufacturing. As these supply chain woes were often not considered in corporate contingency plans, it is normal to execute short-term reactive solutions, such as stockpiling supplies and chartering private container ships. But companies know that these are just temporary fixes and recognize the need for permanent solutions.
Recently, we began to see companies start to implement long-term strategies to “de-risk” their supply chains. Steps may include finding new and more diverse sources of raw materials, widening the list of suppliers, and setting up independent factories in multiple parts of the world to cater to demand in specific regions, diversify operations, and minimize risk.
Even though these long-term action plans will further exhaust significant resources, it is indeed worth the investment for a company to secure its operations and, most importantly, to ensure an uninterrupted supply chain to meet consumers’ unending demand for goods.
For more information, please contact Grant Thornton Japan at info@jp.gt.com or visit www.grantthornton.jp/en
Setting the Stage for Green Transformation
If renewable energy production is not doubled by 2030, power outages and energy system disruptions could become everyday affairs. To help the international community rise to what may be this generation’s greatest challenge, and to showcase some of the technologies that will assist the world in meeting it, the Ministry of Economy, Trade and Industry (METI) organized Tokyo GX (Green Transformation) Week. The 10-day event ran from September 26 to October 7.
Japan gathers leaders and experts for key conference on decarbonization
If renewable energy production is not doubled by 2030, power outages and energy system disruptions could become everyday affairs. The World Meteorological Organization’s State of Climate Services annual report, released on October 11, has found that nations around the world are far off the 7.1-terawatt target needed to keep global temperatures from rising 1.5 degrees Celsius above pre-industrial levels.
Setting 2050 net-zero goals is well and good, but it is clear even more immediate action is needed.
To help the international community rise to what may be this generation’s greatest challenge, and to showcase some of the technology that will assist the world in meeting it, the Ministry of Economy, Trade and Industry (METI) organized Tokyo GX (Green Transformation) Week. The 10-day event, which ran from September 26 to October 7, was a series of 10 international conferences focused on the many aspects of GX. The conferences covered everything from clean energy sources to carbon capture, highlighted some of the latest technological developments in a wide variety of fields, and explored joint policy frameworks in Asia.
Tokyo GX Week wrapped up a month ahead of the 2022 United Nations Climate Change Conference (COP27), which was held November 6–20 in Sharm El Sheikh, Egypt. The GX Week conferences looked ahead to the issues that this key global gathering would address. Japan will also host the G7 meeting next year, and world leaders can build on the groundwork established during Tokyo GX Week to reach ambitious and sustainable strategies that will influence the future of our planet.
Inaugural Meeting
More than 140 countries aim to be carbon neutral by 2050, but achieving this goal is no simple matter. GX offers a way forward. The strategy is a bold one, and seeks to bring about a change in economic, social, and industrial structures, so that they are driven by clean energy and spur economic growth and development through emissions mitigation.
To drive this strategy, METI hosted the inaugural Global Green Transformation Conference (GGX) on October 7, the final day of Tokyo GX Week. GGX was the first time that leaders and industry experts gathered to begin charting a path towards global GX.
The GGX addressed everything from how to incentivize the public and companies to turn to green products and services to introducing a new way to evaluate the reduction in CO2 emissions by using these products and services. It also tackled the tough questions related to establishing a more workable framework for decarbonization and rule-making that will help the whole world thrive.
Drawing the World
The conference was held in a hybrid format and more than 1,300 people attended online and in person. Given the significance of the event, it drew an impressive selection of participants. Speakers and panelists included representatives from five G7 countries, two international organizations, and 12 universities as well as research institutes and private companies.
Keynote speeches were delivered by prominent speakers from around the world:
- Shinichi Nakatani, state minister of METI
- John Kerry, special presidential envoy for climate from the United States
- Peter Bakker, president and chief executive officer of the World Business Council for Sustainable Development (WBCSD)
- Frans Timmermans, executive vice president of the European Commission
- Mathias Cormann, secretary-general of the Organisation for Economic Co-operation and Development
- The Right Honorable Lord Callanan, parliamentary under secretary of state (minister for business, energy, and corporate responsibility) of the United Kingdom
- Fatih Birol, executive director of the International Energy Agency
In his keynote address, Nakatani pointed out that the time for the world to act is now and highlighted some of the ways in which Japan has set a rigorous path for itself.
“First, by the end of the year, we will formulate a 10-year roadmap for GX investment, which aims to realize ¥1.1 trillion in investment through public–private sector cooperation over the next 10 years,” he explained. “Second, we will establish the GX League, a voluntary emissions trading framework for companies with ambitious reduction targets, which will be fully operational by 2023. And third, we will promote transition finance in the industrial sector, particularly high emissions industries.”
State Minister Shinichi Nakatani delivers his keynote address.
Nakatani also introduced the key topic of “mitigation contribution”—a means of evaluating the positive effects of a company’s influence on decarbonization that may lie outside its supply chain or national boundaries. The topic was subsequently referred to as “avoided emissions” at COP27. He explored this by presenting the example of a company selling heat pumps. If inefficient gas heating systems are replaced by efficient heat pumps the company produces, this may lead to a reduction in total global emissions. However, the company’s own emissions may rise due to the increased production of the heat pumps. While such a company is positively contributing to global emission reduction, it may be criticized for increasing emissions. This does not undermine the crucial importance of emission reduction from the company, but clearly indicates the need to recognize a new perspective.
Currently, mainstream frameworks focus on the reduction of greenhouse gas (GHG) emissions of a specific organization or entity, and it is key to continue to support the efforts based on these frameworks. But if a mechanism can be created to appropriately value avoided emissions, and resources such as finance can be directed to entities that are promoting these efforts, it will encourage the diffusion of green products and services and promote the achievement of net-zero emissions through economic growth.
Avoided emissions are being explored in the private sector through international partnerships, but if governments begin to support the concept and encourage more companies to incorporate it in their decarbonization efforts, it can lead to greater innovation across a wide swath of industries.
Looking ahead to the G7 in Hiroshima next year, Nakatani was optimistic.
“While each country has its own position, Japan will support the world’s GX while furthering international goals so that developing and developed countries will work in unison to promote initiatives that transcend barriers,” he said.
The G7 and other international forums will also offer the Japanese government opportunities to further discuss and refine the avoided emissions concept.
In his initial remarks, Peter Bakker put the task of the conference in stark relief, given the need to develop a strategy to combat climate change.
“We need full-fledged system transformation … We need to change everything,” he said. “The energy we use, the food we eat, the transport solutions that we look for. Therefore, being here at the Global Green Transformation Conference is a unique opportunity to engage with all of you about what needs to happen.”
First Movers
GGX was also groundbreaking because it marked the first event in Asia for the First Movers Coalition (FMC) of the World Economic Forum (WEF). The coalition was launched in November 2021, following COP26, with a distinct aim to decarbonize key economic sectors—such as materials and long-range transportation—which are critical to organizations around the world, but which generate 30 percent of annual GHG emissions.
More than 50 companies are members of the FMC and, as Nancy Gillis, program head for Climate Action and the FMC with the WEF, explained, their participation sends a message.
“When a company joins the First Movers Coalition, what they are doing is signing a demand commitment,” she explained. “That means that they are making a commitment to buy products and services [as] they do now. But instead of buying the products and services that they’ve bought historically, they choose those with more GHG emissions consequences.”
Gillis said the FMC is a natural fit for Japan, given the country’s dedication to innovative, green technologies. She added that transportation company Mitsui O.S.K. Lines, Ltd. made an ideal member of the FMC, and its commitment to decarbonization can drive innovation in many fields. Toshiaki Tanaka, the company’s representative director and executive vice president, explained that the time was right to join the coalition: “What we need now is to take concrete actions to reduce our value chain emissions. But at the same time, we are going beyond the value chain and taking urgent action to mitigate emissions outside of our value chain by supporting emerging [carbon dioxide removal] technologies. Therefore, we decided to take part in the First Movers Coalition, a platform where we can leverage our collective purchasing power to develop and scale zero carbon technologies.”
From left: Nancy Gillis, Shinichi Nakatani, Acting Deputy Chief of Mission for the US Embassy in Japan Philip Roskamp, and Toshiaki Tanaka at the FMC in Japan panel discussion.
Towards a Greener Society
Other panel discussions during GGX tackled the ways in which GX can be implemented in markets, the setting of standards, and international cooperation. “Designing a Green Market” explored methods for reducing emissions from the perspectives of supply and demand. Panelists agreed that there is no single policy that will lead to net-zero GHG emissions, but that it is necessary to create an environment which leads to the greater diffusion of green products.
The topic of avoided emissions was a recurring theme during the conference, and in the panel discussion “Standards and Evaluations Promoting Green Products/Services,” participants explored it in detail. They concurred that it is important to expand evaluation frameworks beyond the reduction of supply chain emissions to consider how countries and companies are helping cut GHG emissions through indirect means.
One key point that needs to be addressed when it comes to avoided emissions is to which products and sectors efforts can be applied. Participants in the discussion brought up the idea that it is important to establish clear differences between avoided emissions and existing GHG protocols and nationally determined contributions (NDCs), because the concept’s importance lies in additionally evaluating the contribution to global emission reduction, rather than undermining the efforts of a company to reduce its own emissions.
Panelists also pointed out that it is necessary to establish a strict method for evaluating avoided emissions. For example, subtracting avoided emissions from NDCs and Scope 1–3—that is, a company’s direct and indirect emissions—would be a form of greenwashing, and should be avoided when establishing these guidelines.
Finally, in the panel discussion “International Cooperation for Developing a Green Society,” participants delved into the thorny topic of working across borders to develop decarbonization strategies. The participants pointed out the importance of recognizing each country’s circumstances in setting cross-border policies. Considering the increasing dichotomy between the positions of developed and developing countries, the importance of developing a society which realizes both economic growth and emission reduction was also raised as an important topic. Business is an important enabler for these societies, and frameworks such as the Joint Crediting Mechanism—a system by which developed nations collaborate with developing nations to reduce greenhouse gas emissions—and business in adaptation could offer win–win actions for both developed and developing countries.
Following on the insightful conversations at GGX, METI hosted an event at COP27 about avoided emissions. During the session, the WBCSD—which founded the Scope 1–3 standards—gave an overview of their developing guidance for the concept. METI has also included countries such as the United Arab Emirates, host of COP28, and the United States, as well as representatives of the financial sector, including members of the Glasgow Financial Alliance for Net Zero, in the discussion.
Conversations that began at GGX are expanding to a wider group of stakeholders, and next year, when Japan hosts the G7 meeting, METI will escalate the dialogue on these key issues that will help future generations live on a greener Earth.
Tax and Trends
Yamada & Partners can help non-Japanese better understand how their assets are taxed and assist them in reducing their tax liability while accurately reporting income and assets.
Understanding Japan’s asset-related taxation system and shifts in audits
Understanding how income and assets are taxed in Japan can be a challenge for anyone, whether citizen or non-Japanese resident. And for those with significant wealth, investments, and real estate, a lack of understanding can lead to higher-than-expected taxes. Finding your way around the meshwork of regulations and calculations can be difficult, however, as most documents published by Japan’s National Tax Agency are only available in Japanese. Likewise, filings must be done in Japanese.
Yamada & Partners can help non-Japanese better understand how their assets are taxed and assist them in reducing their tax liability while accurately reporting income and assets.
“The tax system in Japan is one of the most complex in the world,” said Saori Koiso, an Osaka-based certified public accountant and senior tax manager with Yamada & Partners. The firm, founded in 1981, specializes in international tax consulting, inheritance and real estate, and tax compliance, among other services. Koiso hosts the webinar which covers:
- Individual income tax
- Inheritance tax
- Gift tax
- Audit trends
Individual Tax on Financial Investments and Real Estate
Individual income tax in Japan ranges from 15.105 to 55.945 percent. In the webinar, Koiso explains the brackets, deductions, and how capital gains, foreign assets, and real estate are taxed.
Capital gains derived from the sale of land and buildings are taxed separately from other income, and at different rates depending on whether they are considered short- or long-term. Various other factors, such as location of the property, residency status of the owner, and how the lessee uses the property also play a role.
Assets and liabilities—both domestic and foreign—must also be reported. The value of those assets at the time of taxation could be impacted by the international currency market, which has seen great turmoil with regard to Japan in 2022. On October 20, the Japanese yen slipped past ¥150 against the US dollar for the first time since August 1990, and there are warnings that it could slide to ¥170. This dramatic shift in currency value can have a significant impact on taxation for those who hold financial assets or own real estate overseas.
Understanding value thresholds and who must report what, and when, can make a big difference in minimizing the chance of an audit and avoiding penalties for misreporting. In the webinar, Koiso explains the key points of the system.
Inheritance Tax
Planning for the future is also important, but can be tricky when dealing with an unfamiliar system and language. If you live in Japan and continue living here, and one day pass away here, then your family members will be responsible for paying inheritance tax in Japan.
Japanese inheritance tax rates are among the highest in the world, Koiso said, in some cases reaching 53.2 percent. Understanding the rules that determine this amount is vital to minimize the impact, but can be difficult when most documents explaining the system are only available in Japanese.
Yamada & Partners’ on-demand English webinar will help you understand the rules contained in these documents.
An important thing to note is that individual heirs are taxed rather than the estate itself, as is done in the United States and many other countries. What’s more, the scope of the tax depends on a variety of factors, including:
- Whether or not the heir lives in Japan
- The heir’s visa status
- The nationality of both the heir and decedent
Another factor that has been used to determine inheritance tax liability is the period of residence, but changes were made to this in the 2021 tax reform. Under the new rules, those who have maintained a domicile in Japan for fewer than 10 of the past 15 years are only taxed on assets located in Japan rather than worldwide, as was the case before. This applies to particular types of visas, as defined by the Immigration Control and Refugee Recognition Act, but many categories are applicable to American Chamber of Commerce in Japan members, including investor/business manager, legal/accounting services, researcher, and intracompany transferee.
Also important to consider are ways to ease the process for a spouse or children left behind. Japan has rules which differ from those of the United States and other countries, and inheritance tax in Japan is calculated in accordance with the statutory inheritance ratio set forth in the Japanese Civil Code. And because there is no probate system in Japan, transferring money from a bank account can be complex for heirs if there is no will.
There are many more complexities to navigate when planning for the eventual inheritance tax, and this on-demand English webinar will help you better understand the rules and plan accordingly.
Tax Audit Trends
There have also been changes in how the National Tax Agency approaches audits. Due to the growing diversification and internationalization of asset management, the agency has increased active investigation of high-net-worth individuals with an eye towards overseas assets. Those with significant securities, real estate investments, and particularly high ordinary income have been on the radar.
The number of incorrect declaration cases grew each year from 2016 to 2019 before dropping in 2020 due to the coronavirus pandemic curtailing investigations. Of the 4,463 audits of personal income tax filings by wealthy individuals conducted in 2019, incorrect declarations were found in 3,837. The average amount of underreported income per case was ¥17.67 million and additional tax levied was ¥5.81 million. And while audits dropped to 2,158 in the first year of the pandemic, the average unreported income rose to ¥22.59 million, an increase of 127.8 percent year over year. Additional tax averaged ¥5.43 million.
As has been the trend in the past, cash and deposits are the most common underreported assets, and North America is the top region in which these assets are located.
The National Tax Agency is using the Standard for Automatic Exchange of Financial Account Information, better known as the Common Reporting Standard (CRS) to obtain data about individuals’ overseas transactions and assets by effectively utilizing the CRS system. And while the United States has not adopted the system, it does participant in the Global Forum on Transparency and Exchange of Information for Tax Purposes and has a tax treaty with Japan which allows the National Tax Agency to obtain information.
Be Prepared
Whether misreporting involves ordinary income, inheritance or gifts, capital gains, foreign assets, or real estate, understanding the system and rules—and working with professionals who know how to ensure that you are in compliance—is a must in today’s complex and interconnected world of global finance.
For more information, please visit Yamada & Partners at www.yamada-partners.jp/en/
From Mist to Medals
Just over an hour by train from Shinjuku, the Godo area of Isehara, Kanagawa Prefecture, lives up to its name, which means “gate of the gods.” The mists rising from nearby Sagami Bay often shroud the peak in mysterious clouds, leading to the nickname Afuri-yama (Mount Rainfall). And tucked away in the lush foothills is Kikkawa Jozo, a century-old sake brewery that is gaining international acclaim.
Kikkawa Brewery is innovating its way to international gold
Mount Oyama, part of the Tanzawa Mountains, is one of Japan’s most sacred mountains. And tucked away in its lush foothills is Kikkawa Jozo, a century-old sake brewery that is gaining international acclaim.
Just over an hour by train from Shinjuku, the Godo area of Isehara, Kanagawa Prefecture, lives up to its name, which means “gate of the gods.” The mists rising from nearby Sagami Bay often shroud the peak in mysterious clouds, leading to the nickname Afuri-yama (Mount Rainfall).
Abundant rain filters through the rock and becomes the groundwater from which Kikkawa draws to make its sake and instill it with a rich flavor and full aroma.
For six generations, the Kikkawa family has worked its magic. Since the founding of the brewery in 1912, a long line of artisans has been combining the area’s clear water and top-quality rice to create their sake, Kikuyu.
However, in 2020, things were looking bleak. Facing bankruptcy and with no one to take over, it seemed that the sake brewery’s proud tradition was at an end.
Fortunately, the Shimada Group swept in, taking the brewery under its wing and providing a rather unusual kuramoto (brewery owner)—former architect Norimichi Goto—to lead the way. “I aimed for the sky by designing skyscrapers, but now, instead, I am diving into the deep ocean of sake-making traditions, which is very rewarding,” Goto said.
His first months on the job were not easy. “I walked into a rough situation. The brewery was on the brink of closing,” Goto recalls. “They hadn’t even ordered rice for the next season; that’s how dire things were.”
Left: Oyama Afuri Shrine (Photo: Kunihiko Meguro, Shinto Priest of Oyama Afuri Shrine)
Center: Kikkawa toji Masanori Mizuno • Right: Kikkawa Afuri sake
But he soon came to realize the strength of the brewery’s traditions and connections to the Isehara community. And he was impressed by how the toji (master brewer), Masanori Mizuno, and his team refused to abandon ship.
“I was so deeply touched that they stayed, and it is thanks to their hard work, and the support from the community and Oyama Afuri Shrine, that we got things running again so quickly,” Goto said.
While Kikkawa is still producing the locally beloved Kikuyu brand, with the change in leadership in spring of 2021 came a new brand, Afuri. Despite being new, the Afuri brews have already received gold medals at multiple world-class sake competitions. Nari, a refined junmai daiginjo, even won the Platinum Award at the prestigious Kura Master competition in 2022 in Paris.
“We want to push the boundaries of sake, creating new varieties and bringing our products to new markets, to share the culture of sake with as many people as possible,” Goto shared.
This includes combining traditional processes with innovations that allow the brewing process to be more sustainable, such as reducing waste by only polishing away 10 percent of the rice surface or switching from oil-powered steamers to more efficient electric ones.
For those interested in trying Kikkawa’s new generation of brews, why not sample Rosy-Kasumi, a low-alcohol sake (just eight percent) that is gaining attention for its beautiful, fresh flavor. The use of an unusual pink yeast gives several of the Afuri varieties, such as the floral ‘Ohana, a festive, rose-hued tinge. More expert sake drinkers will be enthralled by Terra/Y, another Kura Master gold medalist made using minimally polished rice and slowly aged at low temperatures for an elegantly sweet finish.
This is definitely a brewery to watch.
Learn more about Kikkawa:
www.kikkawa-jozo.com/en/