An Evening in the Windy City

The ACCJ Charity Ball returns for an in-person celebration of Chicago

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One of the most popular dates on the social calendar each year is in December. That’s when the American Chamber of Commerce in Japan (ACCJ) hosts the annual Charity Ball. Since the onset of the coronavirus pandemic in early 2020, the exciting gathering has been pushed online. But this year, the winds of change are blowing. On December 3, we’ll unplug from virtual space and step back to a more analog era as we gather at the Hilton Tokyo in Shinjuku to celebrate the Windy City itself: Chicago.

Despite being virtual, the 2020 and 2021 galas brought great fundraising success. But there’s no substitute for the vibrant atmosphere of a live event. So, the ACCJ Charity Ball Committee, in partnership with the ACCJ-Kansai Community Service Committee, has been hard at work to bring the Charity Ball back, live and in person.

The theme will offer attendees a chance to experience Chicago—from food to music to spirits. And don’t worry, there’s no prohibition here! We hope you’ll dress the part and bring back the chorus lines of Chicago or that Blues Brothers look made famous by John Belushi and Dan Akroyd.

Community Support

While the Charity Ball is great fun, and a chance to close out the year by celebrating with friends and networking with business associates, it’s also an important opportunity to raise money for the local community. As the chamber’s biggest fundraiser of the year, the Charity Ball supports the ACCJ Community Service Fund, which provides assistance to recipients for whom relatively small donations have a significant impact.

This year, the selected charities focus on at-risk children—including homes and programs for these children—as well as the homeless and citizen science.

These charities include:

• The Mike Makino Fund
• The ACCJ Community Service Fund
• YMCA/ACCJ Ohisama Camp
• YouMeWe
• Children’s Shelter Okinawa
• Safecast
• Kansai Food Bank
• Minna no Gohan
• Kurumu

You can learn more about these charities on the ACCJ website. Details about the entertainers, food and drink, and the ever-popular raffle will be added as we get closer to the event.

Sponsorships are also available and are a great way to highlight your business while making a real difference in the community.

We look forward to seeing you on the streets of Chicago and toasting the return of the in-person Charity Ball!

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December 3, 2022
Hilton Tokyo, Shinjuku

Tickets and details: accj.or.jp/charityball

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2022 DC Doorknock

From left: ACCJ Executive Director Laura Younger, President Om Prakash, Chair Eriko Asai, and Governor Victor Osumi

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American Chamber of Commerce in Japan (ACCJ) leaders made their first DC Doorknock visit to Washington since before the pandemic June 14–16. ACCJ President Om Prakash was joined by Chair Eriko Asai, Governor Victor Osumi, Special Advisor Christopher LaFleur, and Executive Director Laura Younger as they engaged face-to-face with members of the executive branch and Congress.

The annual DC Doorknock, which was canceled in 2020 and 2021 due to Covid-19, is an important part of the ACCJ’s dialogue with the US Government and is key to the chamber’s advocacy efforts. The delegation received a warm welcome from administration officials, members of the Senate and House of Representatives, the Embassy of Japan, the US Chamber of Commerce, and various think tanks.

“There’s energy and urgency in the US–Japan partnership on all fronts—from the economy to national security,” said Prakash, “[and] we are pleased and encouraged to see the United States leading in the region, and the heightened role Japan has taken on the world stage.”

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Changed Reality

US Ambassador to Japan Rahm Emanuel shares his views on the state of the bilateral relationship

Photos by Miki Kawaguchi/LIFE.14

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When Rahm Emanuel arrived in January as the 31st US ambassador to Japan, he wasted no time in building new connections and strengthening existing ties between the two countries. His experiences as mayor of Chicago, President Barack Obama’s chief of staff, a member of the US House of Representatives, and senior advisor to President Bill Clinton coalesce into a whirlwind of diplomatic energy. He has already visited 10 of Japan’s 47 prefectures and attended events stretching from Hiroshima to Otsuchi, in Iwate. And his love of trains and use of the country’s mass transit has captured the hearts of Japanese media.

On May 16, Emanuel took time out from this fast-paced schedule to speak to members and guests of the American Chamber of Commerce in Japan (ACCJ). Organized by the ACCJ Government Relations Committee, the luncheon at Tokyo American Club saw more than 200 in-person and remote attendees listen as the ambassador shared his thoughts on Japan and the great potential for the bilateral relationship. Emanuel also graciously responded to a range of questions during a lengthy Q&A session.

Following a welcome from committee Vice-Chair Anne Smith, ACCJ President Om Prakash delivered opening remarks. Noting that the ACCJ, as the voice of the US business community, has enjoyed a close and valuable relationship with the US Embassy, Tokyo, over the course of the chamber’s nearly 75-year history, he said, “I can’t think of a better person at the right time in the right place than this man.” In response, the ambassador quipped, “Intros like that make you wish your parents were here, because you know your mother would be proud and your father would be amazed.”

Impact on Investment

Emanuel began by noting that, after two years without an ambassador to its most important ally in the most important region, the White House and President Joe Biden are placing great value on Japan. The bilateral relationship, Emanuel believes, is at an inflection point. “We are no longer discussing, as we have for the past 40 years, alliance protection. I think the US–Japan relationship has matured into alliance projection,” he explained. “Yes, it’s about the two countries, but it is about the two countries projecting forward into the region in a shared way.”

As he said this, the embassy was preparing for Biden’s May 22–24 visit. That the trip took place so soon after the ambassador’s arrival highlights how their long working relationship energizes efforts to build cooperation with the administration of Japanese Prime Minister Fumio Kishida.

Stable, Sustainable Business

The challenges facing the world are many, and some are shaking the foundations of long-held approaches to business operations.

Emanuel said he feels we are transitioning from neoliberalism to a world in which consideration of potential conflict and political turmoil must play a key role in corporate decisions.

“There have been three major events that have shaken people and their calculations of what is going to be the road going forward,” he said. “And it’s a level of uncertainty, and an intensity of uncertainty, that really hasn’t been experienced in a long time when it comes to international affairs and international economics.

“My own view is that low cost and efficiency, which have been the guiding North Star for your individual companies for how you make investments, where you make investments, etc., those North Stars are slowly but surely … being replaced by stability and sustainability. No company today making a major decision economically, internationally, is going to be stuck with a major investment in an insecure, unstable political environment, a country that can one day have major sanctions [placed] on it,” he continued, alluding to the fallout from Russia’s invasion of Ukraine and the potential for future conflicts.

New Calculus

The coronavirus pandemic, he noted, has already exposed the fragility of supply chains, and the war in Ukraine is having a similar impact in how it raises concerns over uncertainty in and around political systems, even in democratic countries. “You’re going to start to change the calculus of how you make investments, based on whether a country is politically stable and if it lives by the rule of law. Does it have the resilience and sustainability that you need as a company?”

Speaking of uncertainty as it pertains to international trade, Emanuel said that we are witnessing the emergence of a new political and economic equation, one that will become clearer over the next five years. To stability and sustainability he added resilience. “Each of those, in some way, becomes more dominant in how we think about political decisions, commercial decisions, and economic decisions.”

He closed by saying that he feels we have a unique opportunity to advance US–Japan relations.

“I said when I was confirmed, I think that what we do in the next three years, as the US and Japan, will determine our relationship for the next 30.”

The ambassador believes that, if Kishida emerges victorious in the July elections, Biden has a chance to build a solid foundation with the Japanese prime minister, with whom he came to be on a first-name basis after they had spent just one day together in May.

Emanuel knows what can happen when there is instability at the top, and how that can impact the bilateral relationship. As Clinton’s senior advisor, he saw six Japanese prime ministers come and go in eight years. “As soon as you started to get to know somebody, they were gone,” he said. “There’s a chance President Biden will have one prime minister for his tenure,” he continued. “That’s a unique opportunity not only to develop a relationship but [to work with] a person who, without an election overshadowing decisions, has the ability to make some real decisions for the future of the US–Japan relationship, including as it relates to the Indo–Pacific.”

To that end, Emanuel applauded Kishida for his leadership in the face of recent global uncertainty.

“One of the things I think Prime Minister Kishida has done very successfully is he has taken the Indo–Pacific and the Transatlantic and collapsed them into a single strategic sphere,” he said. “Just in the past 10 days, he’s hosted the European Union president, the Finnish prime minister, the chancellor of Germany and, two days prior to that, on his visit to Europe, he was with the British prime minister, the Italian prime minister, and the Pope. That should be seen as a way in which Europe now has a vested interest in a free and open Indo–Pacific. That is a major change of where we are politically and a major change of where we are economically.”

Concluding his speech, Emanuel told the crowd: “I look forward to the next three years working with each of your companies and promoting not only your commercial interests but, more importantly, our shared interests.”

Final Frontier

Former astronaut Naoko Yamazaki shares her vision for bilateral space cooperation and spaceports in Japan

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The United States and Japan share a long history of collaboration in space, working together on projects such as the International Space Station (ISS) and the Artemis program, which aims to return astronauts to the moon by 2024 and can also be seen as a preparatory stage for human missions to Mars.

Cooperation between the two countries in the space industry is growing stronger and represents a great pathway for innovation in the bilateral relationship. A significant player in the space travel industry in Japan is the Space Port Japan Association (SPJ), which was established in 2018 and is attracting considerable attention on both sides of the Pacific.

SPJ co-founder and Representative Director Naoko Yamazaki joined members of the American Chamber of Commerce in Japan (ACCJ) on April 21 for an hour-long online discussion organized by the Chubu Aerospace and Manufacturing Committee.

Licensed to Fly

The accomplishments of Yamazaki, who participated as a panelist at the ACCJ Women in Business Summit in 2014, are impressive. Currently she is a member of the Committee on National Space Policy at Japanese Prime Minister Fumio Kishida’s Cabinet Office. And as a former astronaut with the Japan Aerospace Exploration Agency (JAXA), she became the second Japanese women to fly into space when she took part in an assembly and resupply mission to the ISS in 2010 aboard the space shuttle Discovery. She retired from JAXA in 2011.

Besides appearing in the media to promote the SPJ, Yamazaki occasionally meets with government officials in both the United States and Japan. For example, US Ambassador to Japan Rahm Emanuel greeted her and space startup leaders at the US Embassy, Tokyo, in February to discuss bilateral collaboration on the space front.

Direct Connections

During the April 21 webinar, ACCJ members learned that direct cooperation began with the signing of the 1969 US–Japan Space Agreement and has since blossomed into a relationship involving many US-made products. While a young organization, the SPJ has already established relationships with four regional governments interested in hosting spaceports. The projects include:

• HOSPO (Taiki, Hokkaido Prefecture)
• Spaceport Kii (Kushimoto, Wakayama Prefecture)
• Shimojishima Spaceport (Okinawa Prefecture)
• Spaceport Oita (Beppu, Oita Prefecture)

Other cities in Japan are also interested in such an investment in point-to-point suborbital space transportation hubs.

Besides sending future passengers to other planets, spaceports in Japan could become a launchpad from which to transport time-sensitive food and cargo to other locations on Earth. For example, Yamazaki pointed out, entrepreneur and investor Elon Musk proposed in 2017 a plan to use his SpaceX rockets to fly passengers from New York to Shanghai in just 39 minutes.

Supporting STEM

Yamazaki is recognized as a space policy expert not only in Japan but also in the United States. She was recently invited by the University of Pennsylvania (Penn) as a visiting fellow at the Perry World House, a center for scholarly inquiry, teaching, research, international exchange, policy engagement, and public outreach on pressing global issues. She is lending her expertise to Penn so that its students can develop and advance innovative policy proposals, and hopes to see more Japanese students benefit from the experience of studying abroad.

Finally, Yamazaki spoke about her involvement in the Japanese Rocket Society, where she chairs the Sorajo Committee, whose name means women in aerospace. She is a staunch advocate of inclusivity and gender equality in the Japanese aerospace industry—a goal very much aligned with the beliefs of the ACCJ and its member companies. Science, technology, engineering, and mathematics—or STEM—is a growing area of passion for this former astronaut, and we hope to see her and other members of the SPJ at future ACCJ events.

Chubu Walkathon

Annual event raises millions of yen for charity on a sunny day of food, friends, fun, and fitness in Nagoya

Photos by Andy Boone

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On May 22, more than 1,000 participants took part in the 31st Annual Chubu Walkathon International Charity Festival. This year’s event took place on a beautiful Sunday in Nagoya’s Meijo Park and was also livestreamed. More than ¥7 million was raised to support local charities. The Walkathon’s mission is to improve the lives of the less fortunate by creating an opportunity to increase awareness, recruit volunteers, and raise funds at a family-friendly, international outdoor event. More than ¥177 million has been donated over 31 years, and 18 charities received funds in 2021.

Shared Interests and Values

The ACCJ honors 2021 Person of the Year Nobuyuki Hirano

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Each year, the American Chamber of Commerce in Japan (ACCJ) honors those who have significantly impacted the global business environment in Japan with the ACCJ Person of the Year award. Former chair, president, and group chief executive officer of Mitsubishi UFJ Financial Group, Inc. (MUFG) Nobuyuki Hirano was selected as the 2021 Person of the Year not only for his work with MUFG, but also for his tireless efforts to promote better US–Japan business ties.

During a career spanning more than 40 years, and as chair of the Japan–U.S. Business Council from 2017 to 2021 and a current vice-chair of the Keidanren (the Japanese Business Federation), Hirano has helped to strengthen global business. ACCJ members and guests recognized this on April 25 at an in-person event held at Tokyo American Club and livestreamed to remote attendees.

The luncheon began with a VIP session where ACCJ leaders greeted Hirano, after which ACCJ Governor and Financial Services Forum Chair Andrew Conrad welcomed members and guests, and provided background about the award. ACCJ President Om Prakash delivered remarks, saying that, in Hirano, “we are extremely lucky to have someone who is so thoughtful—and very methodical—in how he approaches incredibly complex issues between the United States and Japan, and the entire world.”

Values and Principles

Taking the podium, Hirano expressed his deep honor to have been chosen for the award, and thanked the chamber for its contributions as a member of the Japan–U.S. Business Council. “I appreciate the initiatives of all the ACCJ presidents—Christopher LaFleur, Sachin Shah, Peter Jennings, Peter Fitzgerald, and Jenifer Rogers—during my tenure."

He then addressed the importance of shared values and trust by taking attendees back to the eighties—1983 to be precise—when he had arrived in New York City as a trainee at Morgan Stanley. The two years spent there for his secondment was the start of an extraordinary journey that would make Hirano a bridge between the United States and Japan and lead him to a position on the firm’s board of directors, which he accepted in March 2008.

Speaking of his fellow directors, he said, “They often joke, ‘Nobu, you are the first, and possibly the last, guy who has been elevated from unpaid trainee to Board member.’”

During the 2008 global financial crisis, MUFG made a $9 billion strategic investment in Morgan Stanley—a move that Hirano says exemplifies the importance of shared values and principles between business partners. “This was a significant investment in its huge scale but, more so, in the sense that it is the only successful alliance between globally systemically important banks,” he explained. Worldwide, there are just 30 such banks, often called G-SIBs.

“But I believe it is more than this,” he continued. “James Gorman, now CEO of Morgan Stanley Investment Bank, and I agree that we actually have a similar corporate culture. I think it’s very important that our values and principles are similar, [in areas] such as putting the client first, doing the right thing, and [having] an appreciation for long-term perspective.”

Returning to the present, Hirano noted that there has been a series of global crises in the financial world—roughly one per decade—which “have had a huge impact that exceeded most people’s expectations.” These include the collapse of Japan’s bubble economy in 1990, the Asian financial crisis of 1997, and the global financial crisis that sent shockwaves through the markets in September 2008 with the collapse of Lehman Brothers—the event which brought together MUFG and Morgan Stanley.

Today, we are on the precipice of another shockwave.

“The world is at a critical juncture and has entered a period of great uncertainty. We are undergoing a once-in-a-century period of dramatic change, which has been described as the era of VUCA, or volatility, uncertainty, complexity, and ambiguity,” he said, adding that we are witnessing a crucial moment in history with Russia’s invasion of Ukraine.

“A question we need to ask in today’s society is what role business leaders should play.”

Cooperation on China

As part of his work with the Japan–U.S. Business Council, Hirano has been involved in the Japan–U.S. Business Conference, an annual event first held in Tokyo in 1961. The conference makes recommendations to the Japanese and US governments as well as related organizations.

At the 58th conference last fall—held virtually for the second year in a row due to the pandemic—a key topic of discussion was bilateral cooperation in the face of challenges from China.

“The struggle for supremacy between the United States and China is expected to be prolonged, while the economies of China and other countries are already deeply connected,” Hirano said. “There is consensus among business leaders that decoupling is unrealistic … with a slight difference [being that] Japanese businesses tend to be more cautious about risk due to Japan’s high level of dependence on China and its close geographical proximity. Their US counterparts take a more opportunistic stand.”

While this difference in risk aversion exists, the only way to successfully deal with China, he proposed, is for likeminded countries to continue acting together based on their shared interests and values.

“Working with likeminded countries to reach out to China has also affected the private sector. That’s what I believe,” he said. “In fact, last autumn, we jointly invited guests from the EU government and European industries to the Japan–U.S. Business Council for the first time, to discuss rebuilding the global order as well as sustainability.”

While China may not change course over the short term, in the next few decades, he added, China may face socioeconomic challenges, such as the declining birthrate and aging population. “These might substantially undermine China’s economic growth potential,” Hirano explained. “History shows that the distortions that occur alongside rapid economic growth are concealed until the growth slows. Once the distortions are revealed, they then force major structural reforms.”

Issues Uncovered

It has been more than two years since life as we knew it hit the brakes due to Covid-19. Hirano said the pandemic has not only disrupted the global economic order and increased political and geo-economic tension, but also revealed the global scale of the need to address sustainability issues. These include societal divisions, social inequality, and climate change.

“These problems,” he reasoned, “are largely due to globalization and excessive shareholder capitalism … Whether we like it or not, we will be forced to remodel the current socioeconomic systems that have supported capitalism up to now.

“However, we have no clear idea, yet, how to solve many of the problems. This is partly due to differences in values and principles among conflicting nations.”

This is where he sees the great asset that is the US–Japan relationship, which is built on shared values and principles. It is important, he stressed, for US and Japanese business leaders to discuss how to chart and navigate a course on issues such as carbon-neutrality targets and convey their opinions to local governments.

On this issue, he believes, it is very important that there be cooperation with other countries in Asia, particularly members of the Association of Southeast Asian Nations.

In terms of Japan’s economy, the country’s future may be in jeopardy, Hirano suggested, unless drastic measures are taken to address the serious issues laid bare by the pandemic.

“To overcome this situation, the public and private sectors must act with a sense of urgency to make large structural changes to socioeconomic systems, in particular, and to revitalize and restructure industry through digitization and green transformation,” he stressed.

United by Trust

As a final point, Hirano noted that it is trust which has allowed the United States and Japan to develop such good relations and that, while close-knit cooperation between the governments is no doubt a huge part of this, he believes a major factor is the human connection between the people of both nations, strengthened over many years.

And it is this trust, which “cannot be seen by just looking at economic numbers,” that he considers to be an extremely important asset as we move into a future that is uncertain—not just for countries, but for business partners as well.

“I’d like to conclude by expressing my sincere hope that the business leaders of Japan and the United States will further deepen relations and our mutual understanding which, in turn, will strengthen the relationship—the partnership—between our two countries,” he said. “I also wish for the continued prosperity and success of this excellent institution, the ACCJ.”

Activist Investing in 2022

Fourth Annual ACCJ Shareholder Forum brings together experts from Japan and overseas for a look at the state of the market

Tokyo Stock Exchange President and CEO Hiromi Yamaji delivers the keynote.

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Why should anyone care about activist investing in Japan?

This is the question posed by American Chamber of Commerce in Japan (ACCJ) Alternative Investment Committee Chair Frank Packard as he opened the Fourth Annual ACCJ Shareholder Forum on June 7 at Tokyo American Club. The event, which was also livestreamed to remote attendees, has become an important part of the annual general meeting (AGM) season.

Four speakers explored this through a wide-ranging look at the realities of the Japanese market, corporate governance, activist investing, stewardship, shareholder proposals, and more after the keynote was delivered by Hiromi Yamaji, president and chief executive officer of Tokyo Stock Exchange, Inc. (TSE) as well as director, representative officer, and group chief operating officer of Japan Exchange Group, Inc.

Presenting were:

• Nicholas Smith, strategist with CLSA
• Andrew McDermott, president of Mission Value Partners
• Tsuyoshi Maruki, president and CEO of Strategic Capital
• Seth Fischer, founder and chief investment officer at Oasis Management

Packard himself offered some thoughts during the introduction.

“The past 30 years in Japanese public equities provide an interesting lens for today,” he explained. “I want to make the case that we should pay attention because active engagement in Japan might actually be the best global investment strategy today.”

This was not always the case. After the bubble economy of the 1980s burst, activist investing in Japan during the 1990s was somewhat primitive, Packard said. “Some notorious examples, often American, featured activists making simple demands for immediate action to get quick financial return for themselves, not for the companies or other shareholders. To be clear, activism in Japan did not start with an attractive image. But it’s come a long way.”

Japan’s Financial Services Agency began providing useful frameworks with written regulations in 2014 to encourage corporate governance and investor stewardship. Today, Japan is the world’s second-biggest market for activism. “Activists are doing well by doing good,” he said. These days, you’ll find many other groups addressing important governance topics—diversity of board members, foreigners as directors, and talk about disclosure on environmental, social, and corporate governance topics.”

But, Packard noted, very few people are focusing on the other code—the stewardship code—and what are best practices for improving corporate value. “This absence, we believe, is an opportunity for the ACCJ.”

Is ESG Good?

One of the most frequently heard terms in discussions of investing these days is ESG. And while a focus on improving environmental, social, and corporate governance would appear to be good, there are some growing doubts about how to apply it in a decision-useful and commercial manner.

“In theory, [addressing] climate change is a noble goal. Increasing disclosure of environmental impact, as the TSE has recommended and the ACCJ has advocated, that’s very good, too. But in practice, investing in ESG assets has led to many cases of greenwashing,” Packard said, using the term that refers to making inflated, unsubstantiated, or even false claims about the environmentally friendly nature of a product or practice.

“We’re seeing a lack of agreement on ratings and benchmarks, and some concerns that ESG might actually be too blunt an instrument for financial services,” he explained. “Some of the leaders of financial firms are now saying that, maybe, it’s time to retire ESG and its application for investing.”

Lastly, Packard asked where activist investing fits into today’s financial markets, at a time when all asset classes fell in value for the first time in 30 years. That happened during the first quarter of this year. “This has been very confusing for investors trying to do the right thing. Where can investors go to embrace sustainability and responsible investments? Could the answer be to focus on active investment and active engagement?” he asked. “It’s not only an academic or ethical question, it might also be optimal strategy in the current financial markets.”

A Look at the Market

Next, Yamaji delivered the keynote and spoke about what he sees as very important changes in the Japanese market.

“In addition to the excitement generated by the lifting of Covid-19 restrictions, this also has been an exciting time for us at the TSE as [we] went through a major overhaul this past April, kicking off major changes in the Japanese capital market.”

The TSE revamped its grouping of shares for the first time since 1961, replacing its four-market structure with one comprising three: prime, standard, and growth. The top tier is home to blue chips that have met corporate governance requirements which are higher than those of the previous first section. More than 80 percent of the companies that were listed in the first section have shifted to the prime market.

“As shareholders and investors engage with these companies, Japanese companies are undertaking significant changes to their business growth strategies through realignment of their business portfolio and through their new approaches to corporate governance,” Yamaji added.

The presentation portion of the event covered:

• A vertical review of activism comparison over several years as well as a horizontal view of the different engagements within the AGM season, provided by CLSA’s Smith
• A look at stewardship, what it means, and how it applies to 2022 Japan, as well as additional thoughts on ESG, from Mission Value Partners’ McDermott, who joined online from Tennessee
• A fund manager’s perspective on activism and tools used for preparing shareholder proposals, offered by Strategic Capital’s Maruki
• A recap of some past shareholder proposals and a look at the power of engagement and the 2022 proxy season, presented by Oasis’s Fischer

Packard concluded the event by thanking everyone who made it possible, including the ACCJ programs and communications teams as well as his fellow Alternative Investment Committee leaders, Vice-Chairs Pieter Franken, Deborah Hayden, Jason Topaz, and Christopher Wells. It was a great cooperative success.

Watch The ACCJ Journal for additional extended coverage of the presentations, coming soon.

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2021 Person of the Year Photo Gallery

Photos by Miki Kawaguchi/LIFE.14

From left: ACCJ President Om Prakash, Nobuyuki Hirano, 2021 ACCJ President Jenifer Rogers, and ACCJ Financial Services Forum Chair Andrew Conrad

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On April 25, 2022, the American Chamber of Commerce in Japan (ACCJ) recognized Nobuyuki Hirano as the 2021 ACCJ Person of the Year for his leadership and substantial contributions to the US–Japan relationship.

During a hybrid event held at Tokyo American Club and livestreamed to remote ACCJ members and guests, the former chair, president, and group chief executive officer of Mitsubishi UFJ Financial Group, Inc. (MUFG) spoke about his long career.

The event began with a VIP session where ACCJ leaders greeted Hirano, after which ACCJ Governor and Financial Services Forum Chair Andrew Conrad welcomed luncheon guests and provided background about the award. ACCJ President Om Prakash delivered remarks and welcomed Hirano to the podium.

In addition to his work at MUFG, Hirano served as chair of the Japan-U.S. Business Council from 2017 to 2021, working tirelessly to promote better US–Japan business ties and to further strengthen the international business environment in Japan.

Following Hirano’s presentation and a Q&A session, moderated by Conrad, 2021 ACCJ President Jenifer Rogers presented the certificate.

The ACCJ Person of the Year Award was created in 1996 to enable the chamber to recognize individuals for their outstanding contributions to business and commercial relations between Japan and the United States. Past recipients include: Fujio Cho, honorary chairman of Toyota Motor Corporation; Hiroshi Mikitani, CEO of Rakuten, Inc.; and Caroline Kennedy, the 30th US Ambassador to Japan.

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ACCJ Meets Congressional Delegations

A visit by senators also offered a chance to welcome back former Ambassador Hagerty

From left: ACCJ Vice President Douglas Hymas, ACCJ Chair Eriko Asai, Senator Ben Cardin, Senator Bill Hagerty, ACCJ President Om Prakash, ACCJ Governor Mari Matthews, and ACCJ Vice President Amy Jackson

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The American Chamber of Commerce in Japan (ACCJ) was honored to meet with two congressional delegations this month.

On April 13, ACCJ leaders met with Senator Ben Cardin and Senator Bill Hagerty to discuss economic security and strengthening the US–Japan economic partnership.

This being the first opportunity to meet since the start of the pandemic, ACCJ President Om Prakash presented former US Ambassador to Japan Hagerty with the 2019 Person of the Year Award for his many contributions to the US business community in Japan during his tenure as ambassador and ACCJ honorary president from 2017 to 2019. Senator Hagerty was also a member of the ACCJ prior to serving as ambassador.

On April 16, the ACCJ met with Senator Lindsey Graham, Senator Robert Portman, Senator Richard Burr, and Representative Ronny Jackson to reaffirm the importance of strengthening the US–Japan business relationship and deepening our engagements in the Indo–Pacific region.

We look forward to working with the senators and US government leaders during future DC Doorknocks.

Photo 1: (from left) ACCJ Executive Director Laura Younger, Representative Ronny Jackson, ACCJ Chair Eriko Asai, Senator Richard Burr, Senator Robert Portman, ACCJ President Om Prakash, Senator Lindsey Graham | Photo 2: ACCJ President Om Prakash present former US Ambassador to Japan Bill Hagerty with the 2019 ACCJ Person of the Year Award, a moment long delayed by the pandemic.

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Supplier D&I

WEConnect International’s three-year journey in the Japanese market

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While there is much talk in Japan about diversity and inclusion (D&I) in the workplace, another important, though less-discussed, aspect of D&I involves suppliers. Some major companies have long championed diversity in their supply chains, but the issue is now getting more attention—and progress is being made—thanks to the efforts of socially conscious leaders.

This was the topic of a November 25 virtual event, hosted by the ACCJ-Chubu Programs Committee and entitled Supplier D&I: Three-Year Journey in the Japanese Market. Speaker Setsu Suzuki, chief executive officer and founder of Hunext, Inc., shared how sourcing from women-owned startups is shaping the Japanese economy.

Connecting Women

Suzuki is the Japan project director for WEConnect International, the Washington, DC-based non-profit organization (NPO) that expanded its certification and market access activities to Japan in 2018. She recalled how, in 2017, she was invited by Gary Schaefer, principal officer at the US Consulate Nagoya, to attend the Global Entrepreneurship Summit in Hyderabad, India. Some 6,000 women business owners took part in the three-day event. There she had her first contact with WEConnect International, which helps drive money into the hands of women business owners by enabling them to compete in the global marketplace.

“That’s fantastic, right?” Suzuki exclaimed. “So, I immediately said that I want to be a member of this organization.” After getting to know leaders of the enterprise during the summit, she was asked to become the director of WEConnect in Japan. Three months later, she signed a contract with the international body and led its expansion into the market. Noting that WEConnect International is the only certifying body in the world that supports supplier diversity, Suzuki explained that there are five categories:

• Women
• Challenged
• LGBTQ
• Racial minority
• Veterans

“And women are really key,” she said. Globally, just one percent of procurement by governments and corporations goes to women-owned business.

“WEConnect International began studying this 12 years ago, but the number is still only one percent. We want to push it to two percent,” she explained.

“According to a World Bank report, 32–39 percent of companies around the world are owned by women. So, definitely, women are key to a diverse economy.”

Next, Suzuki introduced the companies among WEConnect International’s 143 member buyers that are most active in Japan:

• Accenture
• Johnson & Johnson
• Intel K.K.
• IBM Japan, Ltd.
• EY
• P&G Japan G.K.
• Microsoft Japan, Co., Ltd.
• Micron Memory Japan, G.K.

“More and more Japanese corporations are starting to pay attention to supplier diversity,” she said.

Where Are the Women?

There are 3.8 million small businesses in Japan, but only 500,000 are owned by women. What constitutes a woman-owned business (WOB)? It seems straightforward, and Suzuki noted that we use the term a lot in English.

But to make it clear what this means by definition, she explained that it should be “an incorporated company with at least 51 percent of the business owned and managed, or governed, by one woman—or more.” The WEConnect certification standards state that ownership “is determined based on title to, and beneficial ownership of, stock, membership interests, or other equity in the business.”

WEConnect allows self-declaration as a WOB. Such registration in their database is free and carries limited benefits.

“WEConnect International … helps drive money into the hands of women business owners by enabling them to compete in the global marketplace.”

There is also the Women Business Enterprise (WBE) designation (pronounced “weebee”). This certification opens the door to the procurement departments of 143 member companies and enables business owners to connect with 12,000 women entrepreneurs in more than 110 countries.

In this case, there is a fee, and membership includes unlimited access to WEConnect benefits. The money is used to fund the NPO’s operations, which are driven by three pillars: certification, connection, and education.

Three-Year Journey

WEConnect International’s launch in Japan took place three months after Suzuki took on her role as country director. The expansion into Japan was made possible through the Strengthening Market Access for Women Business Owners initiative, a consortium that includes Accenture, Intel, and Johnson & Johnson. The founding members are working closely with WEConnect to leverage its powerful global networks and experience working with women business owners, and there are now 28 certified WBEs in Japan.

The launch was marked by a hybrid event, making it possible to connect women business owners from Hokkaido to Okinawa. It was supported by the American Chamber of Commerce in Japan, and Women in Business Committee Vice-chair Makiko Tachimori (Fukui) helped facilitate.

A business-to-business matchmaking event was held on November 26, 2020, in which 10 member buyers, 14 tier-one corporations, and 51 WOBs and WBEs participated. Suzuki said that three women business owners got contracts following the event, showing how even online meetings can really make business happen.

The session will take place again in February—rebranded as the P&G Academy Women’s Entrepreneurs Business Development Program—as an eight-day intensive series.

With the support of Johnson & Johnson and Dell Technologies, WEConnect conducted a survey of 191 Japanese female entrepreneurs in Japan between August and September 2020. According to results, the top challenges faced by WOBs are:

• Balancing work and family (65 percent)
• Gender discrimination (30 percent)
• Market entry (11 percent)

She also noted that many women who responded to the survey cited the issue of surnames as an obstacle to their business lives. Because Japan continues to require that women take their husband’s surname, some women said that they must use a false name in work, so that their husband’s family will not discover that they are entrepreneurs—a role that goes against traditional views of a woman’s place in society.

On the brighter side, Suzuki said that WOBs in Japan are thriving across a wide range of industries. Many fall under the United Nations (UN) Sustainable Development Goals (SDGs), which are an important part of WEConnect International’s activities. The organization is working with governments, the UN, and others to help achieve SDG number five: gender equality in the economy.

Japan WBEs

There are only 28 certified WBEs in Japan, but Suzuki is dedicated to expanding that number. She introduced two success stories during the event, starting with Yuko Takahashi, president of Osaka-based Japan Engine Valve Mfg. Co., Ltd. Known by the brand name Dokuro, the company began producing engine valves in 1949.

Takahashi, who was unable to attend due to a business event, delivered a short, vibrant video in which she flew a drone around the Dokuro offices and production facilities to explain how her company makes after-market auto parts. The parts are shipped around the world to meet the needs of those who own Japanese cars.

Setsu Suzuki

Ayako Mochizuki

Yuko Takahashi

Next, Ayako Mochizuki, a Japan native who moved to the United States at the age of 22, shared her experiences running a small and medium-sized enterprise in Japan, doing business with large companies on a global basis.

In 2014, she became president of IBS Japan Co., Ltd., the 35-year-old value-added reseller of data communication products, founded by her father. She runs the company from her home in Boulder, Colorado, while her father remains involved as an owner in Ebina, Kanagawa Prefecture, where the corporate headquarters is located.

IBS Japan’s mission is to make life easier through the application of technology, and the company was certified as a WBE by WEConnect International in 2019. “Since then, I have had many successes [as a result of] being a WBE,” she said. One such success, she noted, involved the sale of thermal camera technology to a major pharma company soon after the start of the coronavirus pandemic.

Despite these successes, challenges remain—particularly with traditional mindsets about gender roles in business. Mochizuki shared an interesting example from within her own company.

“When I got certified [as a WBE] in 2019, one of my employees—a key person for me—actually told me that I should not be certified,” she recounted. “He said that if we are certified, if they find out that I’m a feminist—that’s the word he used—we are not going to get business, because it’s a male-dominated industry that we serve. He was very concerned.”

She noted that this worry is real in Japan, because the country remains very much dominated by men, and many of the business leaders are aged 60 and over.

So, the shift in mindset takes time. But through the efforts of Suzuki, WEConnect, and women business owners such as Takahashi and Mochizuki, that change is taking place.

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2021 Leaders and Volunteers of the Year

The ACCJ recognizes exceptional contributions from across its three chapters

Listen to this story:

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Each year, the American Chamber of Commerce in Japan (ACCJ) honors members who have shown extraordinary dedication. The ongoing coronavirus pandemic once again made the usual celebratory gathering at Tokyo American Club difficult, so ACCJ President Jenifer Rogers presented certificates as part of a virtual Leadership Forum on December 16.

Leaders of the Year

Royanne Doi

As chair of the Governance Task Force, Doi worked tirelessly throughout the year, leading numerous meetings and discussions related to enhancing the chamber’s governance practices. She ensured that the decision-making process was inclusive and transparent, giving multiple stakeholders opportunities to share input.

Eric Waters

As vice-chair of the Women in Business Committee, Waters played a key role in shaping the agenda and activities while providing the perspective of male leaders and allies—a critical factor in driving change. He inspired other men to step up as allies of women in business, and advance diverse leaders in the workplace.

Julian Bashore (Chubu)

Bashore revitalized the Aerospace and Manufacturing Committee as its chair by recognizing the need for continued aerospace representation while also incorporating the local manufacturing focus that is critical to the Chubu region. And as vice-chair of the Programs Committee, he led the Charity Golf Tournament, enabling the ACCJ to support local charities.

Rica Bradshaw (Kansai)

As chair of the Kansai Community Service Committee, Bradshaw helped restructure the committee’s focus, increase the number of active members, and establish close relationships with local groups to enhance education on environmental issues in schools. She also executed the fundraising alliance with the ACCJ No-Show Charity Ball to support the Kansai Food Bank.

Yuri Ichihashi (Kansai)

Ichihashi was a driving force behind the 10th annual Kansai Leadership Series. The first to be held virtually, this year’s series had a record number of registrants. And as co-chair of the Diversity and Inclusion Committee, her leadership in organizing the 7th annual Diversity and Inclusion Summit Series was indispensable.

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Volunteers of the Year

Noriko Morikawa

A member of the Women in Business Committee, Morikawa’s valuable insights on the workplace challenges facing women in Japan led to better tailored events and an impressive network of speakers. She served as an inspiring speaker herself, as part of the Women in the Boardroom Series, and helped explore collaboration with groups such as the Keidanren (the Japanese Business Federation).

Daisuke Yasumizu

Yasumizu contributed endless energy and expertise to the Healthcare Committee, proactively proposing new speaker programs and advocacy initiatives. He has been a key catalyst in driving greater alignment between the committee and the Healthcare x Digital (HxD) initiative, and provided the ACCJ with crucial information regarding our Covid-19 vaccination rollout.

James Hedden (Chubu)

A supporter of the Chubu Children’s Fund and Chubu Walkathon, Hedden’s commitment to volunteerism and his community is unparalleled. For more than five years, he has devoted immense resources. Most recently he served as “Walk Tanto,” developing new ways to secure funds and creating tie-ins that benefited the charities, sponsors, and participants.

HxD Initiative Team (Kansai)

Torsten Kanisch, Francisco Proaño, Christian Boettcher, and Yasuhiko Iida successfully executed the first ACCJ HxD startup pitch event in 2020, and followed that up this year by increasing submissions by 30 percent. The HxD team embodies all four ACCJ core pillars, and their groundbreaking work is making a positive impact on the chamber’s healthcare and digital transformation goals.

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Special Achievement Award

Robert Noddin

As founder and chair of the F500 CEO Advisory Council, Noddin enabled large-company CEOs to become more actively engaged with the ACCJ. He has also been a strong champion of advocacy with the US government, participating in DC Doorknock visits to Washington. And as a member of the ACCJ Election Governance Task Force in 2020 and the Governance Task Force this year, he has helped bring significant, positive changes to the chamber’s governance.

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No-Show Charity Ball

Annual ACCJ gala offers a chance to give through virtual raffle and auction

Last year, the coronavirus pandemic made planning one of the biggest dates on the American Chamber of Commerce in Japan (ACCJ) calendar difficult, and the Charity Ball Committee (CBC) rose to the challenge with a successful online event that raised more than ¥7.4 million—topping the 2019 gala.

Despite the hope that 2021 would see a return to the traditional format, it was once again impossible to plan such an event. But as a cornerstone of the chamber’s fundraising for community support, the Charity Ball remains a top priority and the CBC has organized a fun and exciting online auction and raffle which will run December 1–11.

“Though much has changed over the past year, what remains consistent is ACCJ members’ passion for supporting and contributing to the communities in which we live and work,” said ACCJ President Jenifer Rogers. “Each year, we are grateful for ACCJ members’ enthusiastic and generous participation in the Charity Ball. This year is no exception.”

Charities

The CBC and the Community Service Advisory Council select several charities to promote, publicize, and support each year with the funds raised through the Charity Ball. Favored are smaller non-profit organizations (NPOs) with specific needs that work to help the homeless and support women’s issues, children, education, and US–Japan relations. Three NPOs to which the ACCJ donated in 2021 through the Community Service Fund are:

• Hands On Tokyo, which focuses on children’s homes, disaster relief, and those with special needs
• Mirai no Mori, which creates life-changing outdoor programs for abused, neglected, and orphaned children in Japan
• Save Food, which provides cooked food through Commune, a cafeteria where people can have meals together and connect

This year, the chosen charities focus on the homeless through the long-established Mike Makino Fund, which supports the Sanyukai homeless shelter as well as the Franciscan Chapel Center and Tokyo Union Church rice programs.

Money raised through this year’s Charity Ball will also support the ACCJ Community Service Funds for Tokyo and Kansai, which traditionally help our communities through food banks, local children’s homes, and programs that assist these shelters for at-risk children and women. For the first time, the ACCJ Kansai chapter is collaborating with the Tokyo chapter on fundraising through the Charity Ball.

“The Community Service Fund is an important part of our charitable giving as it enables us to respond quickly to urgent needs and emergencies that come up,” explained Barbara Hancock, who chairs the CBC and works each year with vice-chairs Lori Hewlett and Kevin Naylor to plan the big event.

Community

Many great entertainers have lent their talents to the Charity Ball over the years, including:

• Steve Gardner
• Felix Sonnyboy
• Kevin McHugh
• Erika Abe
• And more to come!

Due to restrictions on public gatherings, many have lost the opportunities to perform and make a living during the past two years. The CBC would like to highlight them this year and hope that you will support them as they recover from the pandemic.

Likewise, restaurants that have supported the Charity Ball, including Soul Food House and Devil Craft, have also faced businesses challenges, and the CBC encourages you to help these beloved members of our culinary community.

Auction

Singer-songwriter Felix Sonnyboy, in collaboration with artist Erika Abe, is auctioning off a one-of-a-kind, hand-painted sunflower-themed ukulele. The price for this item will include a one-hour ukulele lesson with Sonnyboy and a one-hour painting demo with Abe.

Together with Rambling Steve Gardner—a Charity Ball favorite—Sonnyboy is also presenting a private acoustic concert. The duo is offering either a performance at your office event or home party or a workshop/concert for your service organization, club, or school.

Gardner is also making available some of his amazing photographs from the Old South that are in his book Rambling Mind, which traces the blues across Mississippi in stunning black-and-white imagery.

Art lovers will be thrilled by a major offering organized by 2018 ACCJ Volunteer of the Year (Kansai) Royi Akavia, who is a long-term supporter of ACCJ featured charity Food Bank Kansai. For this year’s auction, Akavia and his companies—Double Bounce Productions, Inc. and KOA Production, Inc.—have arranged a donation which includes art by both himself and six other artists: DAAS, Eamon Harrington, Clifford Land, Roberto Mitrotti, Dorit Schwartz, and Shlomo Tuvia. A curated selection will be available for bid.

More enticing auction items are expected between publication of this issue of The ACCJ Journal and the start of the event. Join us!

While the No-Show format is a departure from the traditional year-end gala, it builds on the great success of last year’s virtual event and offers even more opportunities for ACCJ members and their guests to support the chamber’s mission of helping the community and those in need.

“We look forward to your support for our charities and those who continue to struggle through the prolonged pandemic,” said Hancock. “Please watch our website for updates. We look forward to your participation!”

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YPF Next Generation: From HR Leader to Business Leader

Stryker Japan chief explains why passion is key to a fulfilling career

Being self-aware—cognizant of your unique strengths and what sort of work brings you joy—and not just climbing the corporate ladder because that’s what everyone else seems to be doing is critical to building a satisfying career.

That was one piece of advice shared by Satoshi Mizusawa, president and representative director of Stryker Japan K.K., when he spoke on September 16 at the latest installment of the Next Generation Leader Series, hosted by the American Chamber of Commerce in Japan (ACCJ) Young Professionals Forum (YPF).

Seeking out honest feedback from people around you—including from your subordinates—is also important, said the 43-year-old human resources (HR) leader turned healthcare executive. During his presentation, Mizusawa talked about his life journey and the path that led him to becoming president of one of the leading medical device makers in Japan.

Find Your Passion

“There are actually a lot of people who haven’t thought through what it is they want to achieve in life,” said Mizusawa, urging his listeners to think about what they want to have accomplished by age 60.

“What’s most important is identifying which moments bring you joy and making sure your career aspirations really align with those,” he said. “When that’s clear, then you need to work backward to plan the steps to get there.”

Born and raised in Saitama Prefecture, Mizusawa has followed a career path that, in Japan, is somewhat unusual. In 2002, right after college, he started out at a Japanese electronics company before joining a series of US-based companies. He’s also a rare example of someone who has moved from HR to heading up a business.

Mizusawa spoke frankly about the ups and downs of his life and career, using a graph to chart his career trajectory, with a meandering line that indicated the emotional and professional highs and lows he experienced along the way.

His most difficult experience came when he was just 11, amid tension and conflict between his parents. He was the second of three sons, and his elder brother was drawn toward a rebellious lifestyle. “I wondered why only my family was like this. It seemed like other families were so happy. As I look back now, this was probably the toughest time in my life.”

In middle school, his perspective of the world suddenly expanded thanks to a two-week homestay in Alabama—an experience that would shape the rest of his life. It was the first time he went abroad and first time he rode in an airplane. Everyone around him seemed cheerful, and he even fell in love with an American girl with whom he remained pen pals for seven years. “I began to think that I wanted to get a job that had some international aspect,” he said.

Later, while at Aoyama Gakuin University, he explored study abroad programs, but he didn’t have the Test of English as a Foreign Language (TOEFL) scores to qualify. So instead, he enrolled independently for a year at the University of Alabama, thanks to the influence of his American female pen pal, who he made during his middle school homestay.

First Steps

When Mizusawa joined a Japanese electronic company after college, he desperately wanted to work in international sales. But a grinning personnel staffer told him that he should first get some experience in HR before moving on to other departments—a typical practice in Japan meant to give new employees a breadth of experience.

Mizusawa’s daunting first task was to overhaul the company’s pension system. “I had no interest in this, but I decided to give it my best and hoped that would lead me closer to my career ambitions,” he said. After that, he was sent to business units in Malaysia and Thailand, where he gained a measure of international experience before returning to corporate headquarters.

Three years later, he decided to move to a leading global electronics and energy company and was immediately thrown into an intense, two-year HR training program in Milwaukee, Wisconsin. The program comprised three six-month assignments during which he was expected to build strong working relationships and deliver results—entirely in English.

Functioning in a fast-paced, rigorous environment full of ambitious young Americans who loved to debate and argue, Mizusawa found the program grueling and worlds apart from his Japanese corporate experience.

At one point, he experienced a crisis of sorts when he discovered that he had been left off a group email from a team leader, making him fear that he was viewed as a non-contributing member. “In Japan, if you worked all night, you could somehow solve the problem,” he said. “But in a totally different context, where culture and language were major issues, I really didn’t know what to do.”

Mizusawa approached a Chinese American colleague, hoping they would fix the problem by talking with the team leader. Instead, his colleague said Mizusawa needed to go directly to the team leader himself and tell her that, unless she added him to the group email, he couldn’t do his job. “America isn’t like Japan, where someone might try to help you,” he explained. “You have to take the initiative yourself.”

Being raised in a rough-and-tumble environment with two brothers, Mizusawa wasn’t about to shrink from a confrontation. So, he mustered the courage to go talk with his team leader, who told him it was all an oversight and added him back to the group email chain. “This doesn’t sound like such a big deal as I describe it but, at the time, it was a real crisis for me,” he said. Soon after, he was put in charge of his own team.

Proving Yourself

In 2009, Mizusawa joined a US-based medical device company as senior manager of HR and was later promoted to director. There he gained experience in mergers and acquisitions, as well as staff integration and working with diverse colleagues—his first boss was Argentine and his second was Indian.

When he joined Stryker in 2014 as senior HR director, the company “didn’t have that good a reputation in Japan,” Mizusawa said. They were known for low pay, hard work, and a constantly changing management. “The head office asked me to change that.”

Mizusawa explained that he implemented numerous changes, including moving personnel who had been doing the same job for 10–15 years, creating a talent development program, fostering motivation within teams, and even contributing to the overall business strategy.

Apparently, the bosses were pleased. Three years later, Mizusawa was promoted to vice president, heading up Stryker Japan’s medical and surgical business. This was his first leadership experience on the business side of a company, and he said he studied very hard the first three months to get up to speed.

In 2020, he became general manager, leading Stryker’s legacy business units and expanding his responsibility into orthopedics and other areas. In January 2021, he was promoted to deputy president, with responsibilities for the company’s overall business in Japan and driving growth. In April, he was named president.

When asked how he made that transition from HR to company leader, Mizusawa said his overarching goals have remained the same: set a direction and build the organizational capacity to reach those goals. “It shouldn’t be just fireworks; the vision needs to be realistic,” he said. “And just creating a new system isn’t enough, either. You have to inspire workers and treat them as valuable.” He told participants that, if they feel they have leadership gifts and focus on using them, they, too, may be given opportunities as he has.

More Advice

During the Q&A session, Mizusawa was asked what makes for effective communication. He explained that developing trust is vital. “If you give feedback to someone with whom you don’t have a relationship of trust, they most likely won’t take it very well,” he noted. “But if you do have that kind of relationship, you can have those tough conversations.”

Asked about key qualities for young, aspiring leaders, Mizusawa stressed the importance of being self-aware—something that he absorbed from his time in HR, which involved lots of self-assessments. “I was fortunate that I had a lot of people who gave me feedback,” he said. “And I also sought out feedback. Even now, I seek out feedback from my direct reports, and their feedback has helped me grow.”

Mizusawa was also asked about how to promote diversity and inclusion in Japanese workplaces. He said that when he joined Stryker Japan, there were very few women in sales and senior management. But that has changed. “Women now account for more than 40 percent of directors,” he said, adding that their presence has “brought new perspectives, changed the atmosphere, and made discussions livelier.”

In closing, Mizusawa said that he feels comfortable and fulfilled when he’s leading people. And when he sees that his staffers are motivated, that reinforces his own motivation. But everyone has different talents, and it’s critical that you identify your gifts and then use them, he said.

“Instead of just thinking, ‘I have to climb the corporate ladder,’ try to think about what it is that you enjoy and how that might guide your career,” he said. “I’m 43, so I’m still learning a lot.”

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Entrepreneurship in Japan and Beyond

Oak Lawn Marketing co-founder Robert Roche shares his personal journey

When entrepreneurs consider entering the Japanese market, often they eye the nation’s capital as their starting point. The allure of Greater Tokyo, with its population of more than 35 million, is strong. But ask American Chamber of Commerce in Japan (ACCJ) Vice President-Chubu Robert Roche where you should start and he’ll invite you west, to the city of Nagoya.

It was there that the entrepreneur, investor, civic leader, and philanthropist got his start building businesses, and he believes that the capital of Aichi Prefecture, in the central Japan region of Chubu, remains one of the best places in the country for entrepreneurs.

He expanded on this while also sharing his personal business journey on September 3, during an event hosted by the ACCJ-Chubu Programs Committee. The virtual session was a one-on-one discussion between Roche and his longtime friend and ACCJ-Chubu External Affairs Committee Co-chair Michel Weenick. Together, in 1990, they helped found the American Business Community Nagoya (ABCN), a hub for the US and greater international business communities in Nagoya. The ABCN became the Chubu chapter of the ACCJ in 2000.

The Magic of Nagoya

Roche joined the session from China, where he currently invests and does business in addition to his US and Japanese endeavors. But he remains very involved in Nagoya. In 2018, he returned to Oak Lawn Marketing, Inc., the company he co-founded with Tadashi Nakamura almost 30 years ago, as executive chairman and president.

Although Oak Lawn Marketing, and its Shop Japan e-commerce brand, are well known today, their start is sure to inspire burgeoning entrepreneurs. Roche shared the story.

Recalling those early years after university, when he had recently married, he explained: “My wife’s family is from Nagoya, and they didn’t want me to be anywhere else. So, I had this constraint of needing to figure out something to do. I didn’t know what to do, but [whatever it was] I needed to do it in Nagoya.”

He soon met Harry Hill, a current ACCJ governor who has long been a leader in the Chubu community as well.

“Harry and I became partners pretty much the second day after we met, in 1990. He had his own business, and I had my ‘business’ that really wasn’t a business—it was just me kind of doing stuff,” he shared. “Then he and I formed H&R Consultants together, and that was really the beginning of a successful creation of a business. We are very complementary. He’s very good at stuff that I’m not very good at, and I’m very good at stuff that he’s less good at.”

Roche said that’s how he got started on the entrepreneurial front. At first, they made just enough money to survive. But after expanding H&R and earning a bit more, he got into the import–export business.

On Air

Initially, Roche was importing Tiffany products and L.L. Bean bags. His partner, Nakamura, being a local with lots of connections in Nagoya, was able to set up some meetings with a local TV shopping company.

“In the early 1990s, there was this show called Waku Waku Terebi Shoppingu. They would tape a one-hour program once a month and run it over and over on 25–30 stations. We were lucky enough to secure a four-minute spot for Tiffany,” Roche recalled.

Soon he found himself selling Tiffany items on television in Japanese—a stint that his mother-in-law enjoyed critiquing—and the seeds for Oak Lawn Marketing and Shop Japan were planted.

As a result of these appearances, Roche gained a reputation for having access to the country’s TV shopping market. One day, in 1992, he received a call from a company in Canada that was selling all sorts of products on CNN. Viewers around the world could call a local number in their country and order items such as the now-famous Didi Seven stain remover. But not in Japan.

The company saw Roche as their path into the market. They told him that he needed to have a call center, a fulfillment center, and all sort of other things.

“I didn’t have a call center. I didn’t have logistics ready. I didn’t have anything,” Roche recalled. “I said, ‘Sure we got it, we’re gonna go, you just let us know.’ And then they said that we had to make a minimum order. I asked how much, and we just scrambled to get the money together. And we ordered all this stuff.”

At the start, Roche and Nakamura just ran calls through their tiny 100-square-meter office. They stored products there as well. The calls started rolling in, and the business grew. Doing fulfillment from the office wasn’t easy. “One of the products was a stepper machine, and some days we’d send out 100. We were landlocked, trapped in the office until the Sagawa guy came and took the boxes away,” he remembered.

“If I was a better planner, I would have had all that stuff in place before the first call came. But we just had to adapt. And that was good, because we learned every key part of the business. The very beginning, that was fantastic.”

Accelerated Growth

The business grew incrementally until they were bringing in about ¥1.5 billion per year. At that point, something different was needed to take the next step.

“As entrepreneurs, we love chaos. We love to be the hero. We love for there to be a problem and then come in and solve that problem,” Roche said. “H&R Consultants kind of went through this. Harry and I ran it, and then we brought in John Coomes to run it, and then Scott Reid, and then Harry went back to the States and did a big development. When he came back in 2004, there really wasn’t a spot for either of us at H&R anymore.”

So, Hill joined Oak Lawn Marketing and this, Roche said, is when things really began to take off.

“The company didn’t need a firefighter anymore; it was getting pretty standard. We had a nice foundation, but what really moved it [to the next level] was that Harry just took over and he banged it out,” he explained. “I think that, from an entrepreneur’s perspective, there is always that time when, as a founder, you have to hand off.”

Fast-forward to 2017 and Hill handed back the baton. “But he gave me a much bigger platform than I gave him,” Roche said.

Making Connections

For the success they have had, Roche credits the environment of Nagoya and the easier access to top executives compared with Tokyo.

One of the things he said was most important to him about being a young entrepreneur in Nagoya was the access to people whom he never would have met in Tokyo.

“There were all these real leaders of Japanese industry who we had access to. We never did business with those guys ever, but we learned from their demeanor, and they told us little things like, ‘Don’t say it that way.’ You would say something [in Japanese] and they would kind of twist their head and you would think, ‘Oh, that’s not the way to say that,’” he recalled. “It was this almost subliminal teaching from true leaders [that helped], and we never would have gotten access to that caliber of leader in Tokyo. The big business guys of the ACCJ in Tokyo do, and now we do. But then? No way.”

To make the most of such opportunities, Roche advises entrepreneurs to learn Japanese.

“If you think you can do this without speaking Japanese, you can—you can be that unicorn—but I’ll tell you right now, it’s better to speak Japanese,” he said.

That’s because it’s the unplanned conversations you end up having with people whom you didn’t plan to meet that can make a difference and lead you down unexpected—and fruitful—paths.

“Learn Japanese if you’re going to do business in Japan, because there are all these seasoned guys like Nakamura, who could not have communicated with me in English. And I learned from that guy. That’s what really made a difference.”

More Advice

“Hire planners.” That was Roche’s tip when Weenick asked if he is a better planner today than he was 30 years ago, when he dove right into the pool of TV shopping. Often, entrepreneurs feel as if they can do it all. But to really succeed requires surrounding yourself with those who are more skilled in areas where you are weak, just as Hill and Roche complement each other in their business endeavors.

“My plan, basically, is to hire people to run the business who are better planners than me,” he said. “I hire people who can plan and not react—because I’ll react for them.”

Then Roche gave his biggest recommendation: Don’t take no for an answer. “I was told no every day, 10 times a day. You can’t do that. You can’t do that.” It’s one of the realities of Japan’s very orderly society—with its resistance to deviating from exactly what has been laid out—that can be discouraging to those wanting to explore new ideas.

But he encouraged people not to let the little things that sometimes frustrate expats get to them. “There is a tendency to get a little bit negative on Japan,” he noted. “We’ve all sat through those complaint sessions. Why do they do this? Why is it that way? Why are a bunch of things out of our control? But, really, it’s the positive nature of this that we should focus on. Japan is a very, very good market, because things don’t change much. And the reality is that most people in Japan want to see foreigners succeed.”

To sum it all up, Roche looked back at how, perhaps by lucky chance, he was accepted into the local business community, the mura (village), as he called it, and why it’s important to become part of the group.

“If you hang out in the village long enough, you understand the rules and you just get incrementally bigger and bigger and bigger. And then you can diversify. I do a lot of business in China, and I do a lot of business in the States, but Japan is a really, really nice base, if you can keep it going.”

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MPower Partners

Japan's first ESG venture capital fund

Japan has incredible potential to support innovative startups and for strong economic growth. Yet it continues to fall short compared with the United States and many other countries. Why is this? What can be done to turn the tide, energize business, and bring greater diversity and opportunity to the country?

These questions and more were addressed on July 19, when the American Chamber of Commerce in Japan welcomed Kathy Matsui, Yumiko Murakami, and Miwa Seki, the co-founders of MPower Partners, Japan’s first global venture capital (VC) fund focused on environmental, social, and governance (ESG) criteria. Managing Director Eriko Suzuki joined the three general partners for the virtual event co-hosted by the Women in Business, Alternative Investment, Sustainability, and Kansai Diversity and Inclusion Committees.

Launched in June, MPower is on a mission to empower startups that are providing tech-enabled solutions to societal challenges and to drive sustainable growth through ESG integration.

During the enlightening panel discussion, moderated by Association of Women in Finance President Yuki Hasegawa, the general partners and managing director covered a wide range of topics, including the challenges facing women founders, the importance of diversity on boards, why Japan is falling short of its potential, and why MPower has chosen to focus on startups rather than larger established companies.

Idiosyncrasies

The session began with Hasegawa asking how Japan differs from other countries when it comes to economic potential and ESG.

Murakami explained that, during her eight years with the Organisation for Economic Co-operation and Development (OECD), where she was head of the OECD Tokyo Centre, she worked with a number of interesting data sets which helped her see common elements in different scenarios that lead to economic growth.

“You need to have people who are well educated, you need to have money to invest, and you need to have very good social infrastructure as well as general stability in the society,” she noted, adding that a high level of technology is key.

“When you look at a lot of the data points around those metrics, Japan does extremely well. It is one of the best countries, which has all the elements necessary [in order] to have very strong economic conditions.

“Yet, Japan has not done all that well—especially over the past 20–30 years—relative to the United States and countries in Europe or even Asia,” she said.

This left Murakami wondering what is missing in Japan.

“You’ve got all of these great things—people, technology, money, a very stable social and political environment—and realizing this was actually one of the triggers where I started to think, what can I do? What can we do to change that?”

Matsui expanded on this.

“At least for me, I felt the sense of urgency. There was so much potential, but the situation, or the conditions, in this country didn’t feel urgent enough,’’ said the former vice-chair and chief Japan equity strategist at Goldman Sachs Japan. She retired from the company at the end of 2020 to start MPower.

“We know that Japan needs innovation. We know that Japan needs to leverage its human capital. We know that there’s ¥2,000 trillion in cash sitting under futons. So, who’s going to make that change? Who’s going to start that progress?” she asked. “We are, perhaps, one small grain of salt in this vast landscape, but what is it that we can bring to this dialogue from our own experiences and, frankly, what do we want to do with the next chapter of our lives? That’s what prompted this whole idea generation.”

Diversity also played a key role in the genesis of MPower, added Seki, an associate professor at Kyorin University who spent more than 20 years at Morgan Stanley and Clay Finlay. This is something that she, Matsui, and Murakami felt was lacking in Japan which they could bring to the table to help address the lack of global perspective that sometimes hampers Japan’s growth.

Personal Stories

While the struggle of women founders to find equal footing with men remains a serious issue in 2021, Murakami shared the inspiring story of her mother’s entrepreneurial spirit and success three decades ago.

A housewife until age 47, she opened her first “tiny little drugstore” as she neared 50. The shop did very well, so she opened another, and another. Soon she was running the largest drugstore chain in western Japan.

“She was the only woman in this business, and no one else was like her, which really helped her in terms of understanding the marketplace and where opportunities were,” Murakami explained. “This is going back to the 1990s. Japan was starting to have this demographic crisis, but no one knew about it—except for housewives, who were taking care of their in-laws. In my hometown, [aging] was already starting to occur, but it was really not visible to anyone else—especially not to those big companies based in Tokyo. So she was able to identify this incredible opportunity basically to cater to the silver economy.”

Today, the silver economy—products and services designed to meet the needs of people aged 60 and over—is very lucrative, but at the time that Murakami’s mother was building her drugstore business no one yet knew this was going to be the case. It was a different perspective that allowed her to see things from outside. “My mother, because she was a minority in this business, was able to identify that,” Murakami said.

The story also highlights something that remains an obstacle 30 years later, something MPower hopes to change.

“It was really hard for her to obtain capital. Because she was a woman, because she was a housewife, she had to use my father’s name to take out loans. It was the only way for her to raise funds for her business expansion,” Murakami continued. “So, the moral of the story is, I think, opportunities like that are actually abundant. You just have to be able to look at the same opportunity or situation from a different angle and realize, oh, that is not yet addressed in terms of potential demand or needs. And I think that’s really exciting for us, because there are so many opportunities that have not been discovered. I think we can unlock some of these really interesting opportunities in the Japanese business setting.”

Focus on ESG

Moving to the foundation of MPower, Hasegawa asked about the areas on which the group would like to focus.

Suzuki, a former general partner of global VC fund Fresco Capital and former director of Mistletoe, a social impact-focused VC fund founded by Taizo Son, noted that while most people are familiar with the concept of ESG, they may not realize that it is still early days for ESG in the VC space. MPower sees this as an opportunity and is working on solutions to help startups.

“What we mean by early is there aren’t many frameworks or agreed-upon metrics to measure ESG progress within the startups and private-company space,” she explained. “We are assembling a lot of tools on our end and customizing them for each company. It differs by industry, so startups in a healthcare sector would have different metrics from a startup in a pure software and digital transformation sector. It is customized by the industry of the startup, and also slightly by stage.”

Given that startups in the early stage of development will have a different environment and probably fewer resources compared with those in later stages, MPower is focusing on mid- to late-stage companies, Suzuki said. This is because, she explained, they have a more established foundation on which to incorporate ESG principles.

Globally, ESG is becoming more important to venture capitalists, according to Suzuki. This is especially true in Europe. In the United States, while ESG is important, there has been more focus on diversity, equity, and inclusion given the social dialogue around gender and racial diversity that has been taking place there in recent years. When it comes to ESG, which parts of the acronym are most important differs by company, and some organizations may choose to focus on just one.

“Our stance, and I think this is the overall trend, is that they are all important,” Suzuki said. “But what we are seeing is that startups may not realize this. They might think, oh, we are doing something in [a particular] sector—perhaps it’s an edtech company focusing on social, the S—and we’re contributing to progress in society, so we are okay. However, investors are looking at all aspects and, once these companies go public, they will be looked up on the E and the G as well. So, we are tailoring a lot of these materiality concepts.”

Case Study

Suzuki gave as an example of MPower’s approach its investment in Japanese startup UniFa Inc., which uses the latest technologies to support safe and secure childcare environments by reducing the workload on childcare workers. The company is in the mid to late stages of its launch.

“They are growing and are on their way to becoming a public company quite soon. We have invested in them because we think they are a growing business with all the types of innovation needed in Japan. This is a childtech company that, in Japan, is selling into childcare centers—public and private—and they start out by selling sensors to prevent sudden infant death syndrome. These are high-margin, high-technology solutions. With that, they build relationships with these childcare centers and provide other forms of digital transformation tools for the back end, to enable the service providers to focus on actually taking care of the children rather than doing a lot of paperwork.”

Suzuki explained that, before MPower invests in a company, they want to make certain that the founders are interested in making ESG part of their core business. “We truly believe that incorporating ESG will grow the business and contribute to the bottom line and enterprise value.” They identified such a desire in the leaders of UniFa prior to investment, and the company is very willing to work with stakeholders on all aspects of ESG.

“In terms of next steps, we will be identifying together with the company—and the company itself will be setting—the most relevant ESG metrics that they want to follow, and we will be working with them very periodically, at least quarterly, to achieve some of these,” she said. “We understand the challenges, because startups are resource constrained but, at the same time, they need to grow two or threefold per year. So, they need to balance what types of initiatives they can take on. But we really tried to align with the company that this is not a cost but is really an investment in their growth.”

Why VC?

Given that Murakami, Seki, and Matsui have a collective background that is much more in the public equity market rather than VC, they are often asked why MPower is focusing on unlisted companies as a VC fund rather than as a public market investor. Matsui explained that it is a matter of finding the right companies with which there is a better chance of achieving ESG goals.

Noting fast-moving global trends toward more diversity on boards, she gave as an example Nasdaq, which has a woman president. A change to the requirements being proposed would mandate that a company have at least two diverse board directors to be listed on the exchange.

And such moves are not limited to the United States.

“We’ve already seen here in Japan, over the past few years, institutional investors—be it State Street Global or Goldman Sachs [in] asset management, or proxy advisors like Glass Lewis—demanding in their voting guidelines that at least one diverse board member be present—or at least be worked on—otherwise, they will cast an automatic no vote against management,” Matsui said.

She also noted that many Japanese startups with which MPower speaks say that they have a strong desire to diversify their boards and are desperately looking for candidates. So, if you are interested in becoming a board member, MPower would like to know, as they are starting to help match companies and candidates. “It’s quite different, of course, serving on the board of a startup versus that of a large publicly traded company, but we think there are a lot of amazing learning opportunities that could be had,” Matsui added.

Returning to the reason MPower is focusing on startups, she explained: “We felt that trying to change larger, established companies is quite difficult for a whole host of obvious reasons. It’s important here to recognize that we know there’s a lot of what we call greenwash risk. It’s very easy to tick boxes but much more difficult to actually implement ESG in your core business strategies.”

For MPower to achieve its goals, the founders feel that it is better to work with startups and younger companies, “maybe in their teenage phase,” as Matsui put it, to integrate ESG.

“Perhaps it’s not easy, of course, but it’s easier to integrate ESG values and principles at that younger stage of a company’s development, before they go public, before they are acquired,” she explained. “And we’ve been very positively surprised. We look at domestic Japanese startups as well as overseas startups. Maybe its selection bias, but most of the entrepreneurs we’re meeting are very keen to fix the ESG areas that they deem weak. So, we’re really positively surprised by the direction thus far.”

Fostering Change

Matsui recalled with a laugh something said to her by a foreign investor when she began researching Japanese corporate governance more than 20 years ago: “Kathy, you’re trying to convince vegetarians to become carnivores.” But eventually Japan adopted a stewardship code, in 2014, and a corporate governance code, in 2015. Despite these requirements, the management of many companies is seen as reluctantly going along with something they know they must do but which they “do not really have in the bottom of their hearts and do not really get,” Matsui said. Many do not want to spend money on initiatives around gender diversity, for example. They don’t see the benefit.

“I think the biggest roadblock is that of mindset, [understanding] that this is not a cost, but an investment in their future,” she continued. “And I think that a lot of the governance-related challenges that Japanese companies—at least the large ones—have faced, if you look at the root cause of these problems, stem from an echo-chamber decision-making process. Their past presidents or chairmen—even though they don’t have an official vote—are all hanging around. We call it ghosts in the boardroom.”

Once a company does see the need and benefit, the next step is helping them understand that the process is a marathon, not a sprint, Matsui explained. It must be understood that all the training and education involved in the transition is being done because it makes business and economic sense, not because it is being mandated by regulations.

“If you don’t start with that argument, I think it’s very, very difficult to convince the naysayers or the skeptics why this is important,” she said. “So, to me, having a different perspective and a different point of view to challenge the status quo is one of the most important things that diversity of thought brings to the discussion.”

Social Solutions

What is it that attracts MPower to the ESG space, and what do the partners see as Japan’s competitive advantages and weaknesses?

Seki began her answer by highlighting Japan’s position as a kadai senshin koku, a country with many emerging social issues to tackle. Aging is at the forefront, but the lack of diversity in corporate management and low productivity are problems as well.

“Identifying startups to provide the best solutions to those social issues will be a huge opportunity for us,” she said. “Putting ESG aside, there is a huge funding gap in the VC field, especially in the growth to later-stage funding. That provides us with a huge opportunity to support those startups that are willing to—or are trying to—go global. And the lack of diversity and the aging of society are also great opportunities for companies—and for us as well—to bring diversity to the table.”

Matsui noted that Japanese companies tend to score relatively high for the E in global sustainability studies, but are weaker when it comes to the S and the G. And in terms of the E, meeting the government’s ambitious target of being carbon neutral by 2050 will bring serious challenges to corporations in Japan.

“What some companies are complaining about is that this effectively is a tax on them, if they have to go in that direction,” Matsui said. “So, even though on the surface Japanese companies look like they’re really stronger in the E, just given how rapidly the world is changing they are going to have to double down on their efforts on the E. But also on the S and the G there is a lot of work to be to be done. That is an absolute opportunity for a fund like ours and investors like ourselves to help companies who want to provide those solutions in those spaces.”

Frameworks and Urgency

One need only turn on the news to see how climate change is impacting our lives on a daily basis. Murakami said there has been a lot of discussion about climate risk, but people are beginning to realize that the problem isn’t going away. Efforts must be accelerated, and more agreement on how to measure and report the effectiveness of actions is needed.

Among the initiatives underway this year are the United Nations Climate Change Conference (COP26), to be held November 1–12 in Glasgow, Scotland, and a working group announced on March 22 by the International Financial Reporting Standards (IFRS) Foundation, “to accelerate convergence in global sustainability reporting standards focused on enterprise value, and to undertake technical preparation for a potential international sustainability reporting standards board under the governance of the IFRS Foundation.”

Murakami said these are very exciting moves that everyone should be watching, because one of the problems is that, with so many frameworks in use around the world, it is difficult to really measure what is driving the climate change we are seeing. “Yes, it is hotter, it rains more, and we feel climate change impacting us … but it’s difficult to move the needle when you don’t know where the needle stands.”

MPower has been developing its own framework for measuring and reporting, one better suited to VCs than to large companies, and they have looked at various existing frameworks in the process. But Murakami is looking forward to a consolidation of the hundreds that are currently out there down to just two or three globally accepted standards that can be used as guidelines for companies to measure where they stand on ESG. “I think that’s a very exciting development that we’re actually watching this year.”

Shifting Needs

The aging of society, expanding role of technology, and efforts to mitigate the impact of climate change are all remaking the job-market landscape. Hasegawa asked if the Japanese government is doing enough to address the need for skills in emerging areas and the potential displacement of workers as industries change as a result of the country’s pursuit of carbon neutrality.

Murakami said one of the greatest challenges for Japan is to address the very rigid employment system that makes it difficult for people to reskill themselves and find jobs.

“One thing the government really needs to do is to encourage companies to become a lot more flexible and understand the changing demands of the labor market—and of their customers as well—so that they can adjust the skill sets of their employees by not only reskilling or upskilling them, but also making sure that they can provide opportunities for people who may be joining a company at the age of 25 or 35 instead of 22,” she said.

In addition, there must also be a merit-based compensation system and promotion scheme. That is an area where Murakami feels many companies are trying to change, but have not fully done so yet—in part due to policies and regulations that are preventing them from moving to more merit-based systems.

Empowering Women

While MPower is not focused exclusively on female founders, encouraging more women to pursue entrepreneurial paths and working to close the gender gap in financing is one of their goals. And as Murakami’s story about her mother shows, women often bring a perspective and insight that reveals a solution which men may not see.

But traveling the road to that solution requires money, and one challenge for women looking to raise capital is that most investors are male. Suzuki pointed out that fewer than 10 percent of decision-making investors in the VC space are female, and just four to five percent of VC is invested in woman founders.

A common belief among investors, Suzuki said, is that women are unable to take risks. But studies have found that female founders actually return capital at a greater rate than their male counterparts. They may also be more conservative in terms of the projections they share with investors compared with their male peers, who tend to be more aggressive. But whereas the men don’t necessarily hit their targets, the women tend to be very stable.

“So, there’s a lot of great potential there, and we’d love to see entrepreneurialism in various areas solving some of the issues that women are facing,” Suzuki added, pointing out how the caretaking burden disproportionately falls on women. “That is something we hope to see in the next generation.”

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Third Annual ACCJ Shareholder Forum

Focusing on active engagement and stewardship during the AGM season

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After more than a year of operating during the coronavirus pandemic—and adapting to the changes it has brought forth—companies are facing another season of shareholder meetings. With vaccinations signaling that we may soon emerge from the crisis into a more familiar, although changed, world, leaders are able to focus on other critical areas, such as the environment and sustainability, as well as diversity and inclusion.

On June 16, the American Chamber of Commerce in Japan (ACCJ) Alternative Investment Committee (AIC) hosted the third annual ACCJ Shareholder Forum. Held virtually once again this year, the event brought together six speakers with expert knowledge of the fiduciary and regulatory landscape:

• Satoshi Ikeda, chief sustainable finance officer at Japan’s Financial Services Agency (FSA)
• Nicholas Smith, strategist at CLSA Securities Japan Co., Ltd.
• Paras Anand, chief investment officer for Asia–Pacific at Fidelity International Ltd. (FIL)
• David Baran, chief executive officer of Symphony Financial Partners (Singapore) Pte. Ltd.
• Alicia Ogawa, director of the Project on Japanese Corporate Governance at Columbia University
• Seth Fischer, chief investment officer at Oasis Management Company, Ltd.

The mission of the forum is to address the lack of public information about the existence of shareholder initiatives among listed companies in Japan. This year’s discussion included timely issues for active investors, such as environmental, social, and corporate governance (ESG), climate-change disclosures, the growing emphasis on diversity of boards, and the differing styles of engagement used to achieve successful outcomes.

“These days, lots of attention is focused on boards of directors and corporate governance,” AIC Chair Frank Packard said during his opening remarks. “Less attention is focused on active engagement and stewardship. It is this attention gap that the ACCJ seeks to address with this forum.”

“Active investor engagement can lead to constructive results, and we see that with the Toshiba investigative report. This increased transparency only happened because an actively engaged investor requested an extraordinary general meeting of shareholders,” he added, referring to the revelations in June that the manufacturing giant allegedly colluded with government officials to influence the outcome of votes at its 2020 annual general meeting (AGM).

ACCJ President Jenifer Rogers, who serves as a non-executive director on the boards of three Japanese companies—Mitsui & Co., Ltd., Kawasaki Heavy Industries, Ltd., and Nissan Motor Co., Ltd.—welcomed attendees and shared how the chamber is modeling best practices in terms of governance and member shareholder engagement.

“For almost 10 years, the ACCJ and its members have advocated constructively with the government of Japan to improve corporate governance and investor behavior, to increase corporate value for all investors and stakeholders,” she said. “This event is part of a long-standing interest of our chamber members in these important issues.”

Rogers noted that the coronavirus pandemic has helped hasten the adoption of ESG principles at many companies and prompted more attention to be focused on climate change. “Changed attitudes about sustainability are also—and, should I say, finally—emerging in Japan.”

Response to Reform

Satoshi Ikeda provided perspectives on corporate governance reforms on behalf of the FSA, where he is chief sustainable finance officer. The agency’s reforms were launched in 2015 and recently finalized in time for June’s busy AGM season—despite resistance from Japan’s corporate chieftains.

“To put it bluntly, the corporate governance reform in Japan was really hated by Japanese corporate executives, and it continues to be largely so even today,” Ikeda said, adding that this is no surprise because such moves are intended to strengthen oversight of corporate executives. “It is human tendency to resist being deprived of entitlements,” he noted.

The reforms came after the persistently low profitability and low returns on equity at Japanese corporations came into the spotlight in the early 2010s, Ikeda explained. “It was perceived that Japanese corporate management was maybe too prudent. So, we thought it would be necessary to change the balance.”

Long-term equity investors are in the best position to help realize the “right vision-based finance” in Japan, Ikeda added, despite the negative image that many Japanese have of them as short-term speculators who descend like “a swarm of locusts” and demand an immediate payout through dividends or stock buybacks, and then disappear. But by aligning their interests with those of the company, long-term investors can encourage value creation for shareholders by engaging in stewardship activities, he said.

Reforms to the corporate governance code are also aimed at changing the traditional mindset at Japanese companies that prioritized clients and employees more than shareholders. That way of thinking also was not suitable for responding to civil society organizations pushing agendas, such as greater respect for human rights and addressing climate change.

Expanding Scope

Chris Wells, AIC vice-chair and a partner at law firm Morgan, Lewis & Brockius LLP, explained that, over the past year or so, the thinking about stewardship responsibilities has expanded beyond just improving corporate governance to embracing environmental and social responsibilities. But, he added, the adoption of a stewardship code by investors appears to have had very limited impact on advancing ESG objectives. The framework for the ESG goals envisioned in the stewardship code is “just not working” he explained.

One problem, he stated, is that some companies are criticized for greenwashing—conveying a misleading or false impression about how their products or services are environmentally sound.

What’s needed is the development of a consensus list of ESG metrics—relevant not just to shareholders, but to employees, suppliers, and service providers—that can be used to measure progress toward those goals, Wells said. “We cannot expect Japanese corporate managers, investment managers, or financial intermediaries to take action on ESG objectives if no agreed metrics exist whereby to measure their success.”

Government leadership is needed to help achieve this, Wells added. “Only government action can ensure that investors will receive this information in a consistent format—one in which they can compare apples to apples when making their investment decisions.”

What If?

Nicholas Smith, the Japan strategist for CLSA Securities, used a series of charts to talk about what could happen were Japan to take corporate governance seriously. He said the recently released Toshiba investigation report “totally changed” the governance landscape in Japan. “Activists have been handed a powerful new weapon. A lawyer-mandated investigation is clearly every bit as powerful as US discovery.”

A major reason the Japanese government has focused attention on corporate governance in recent years is that Japan’s ¥1.6 trillion Government Pension Investment Fund has shifted out of low-yielding bonds into stocks, Smith said. This move required three things:

• Investors trusting company numbers
• Companies generating an economic rate of return
• Companies sharing those returns with investors

According to Smith, “This is what corporate governance is about. It’s not about being a goody two-shoes. It’s about not pillaging granny’s pension pot.”

Next, he highlighted how 2021 is shaping up to be a big year for share buybacks, which have already reached three-quarters of last year’s total. Still, half of Japanese stocks are trading below book value, he said, suggesting “real potential in activism as governance issues are ironed out.”

Back in 1995, some 96 percent of companies held their annual meetings on the same day. While that figure has fallen to about a quarter, 82 percent of meetings continue to be held during the same week. This is still “unacceptably atrocious—a deliberate and transparent attempt to make it hard for the owners of these companies to attend the AGM,” Smith noted. And despite the pandemic, most companies are not permitting virtual attendance. Fifty-eight percent don’t permit electronic voting platforms and 55 percent don’t give English documentation, he added. “You couldn’t make this up. It’s almost as if they don’t want their investors to vote.”

The number of activist events in Japan had “exploded” in recent years, Smith stated, with Japan last year being the second-largest global market for activism after the United States.

Thematic Engagements

The forum then heard from three actively engaged managers, beginning with Paras Anand, chief investment officer for Asia–Pacific at FIL, who talked about how active managers are reshaping Japan’s corporate sector.

Anand, who spoke from Singapore, said that one key indicator of change is that five years ago, whenever his team would meet with company leaders, discussions about financial performance would have been separate from any talk of climate or social issues—or those topics would have been squeezed in at the very end. Now, “those two meetings are becoming much more integrated,” he said.

FIL has also held more “thematic engagements” with companies on single issues, Anand explained, such as trying to help address the plight of 400,000 stranded seafarers who operate the huge shipping vessels that carry much of the world’s cargo. These crew members are usually not allowed to disembark for a break or to see their families, meaning they are kind of stuck onboard “floating prisons.”

FIL has worked with shipping companies, airlines, and non-governmental organizations to spotlight the issue and, together with a coalition of investors, wrote a letter to the United Nations outlining measures they felt would alleviate this problem.

Anand said a smart way to amplify your voting rights as an active investor is to lay out your voting policy ahead of time—including what might be some red line issues—to show people how you’re going to vote. FIL has, for example, adopted new policies on climate change and gender-balanced boards that look at how companies are doing on those scores.

In Japan, FIL has adopted a new campaign for gender diversity which asks all investee companies to achieve a level of 30 percent by 2030 for three indicators:

• Percentage of women on the board of directors
• Ratio of women in management positions
• Percentage of all employees who are female

Long View

The second active investor, Symphony Financial Partners founder and CEO David Baran, was interviewed by Alicia Ogawa, director of the Project on Japanese Corporate Governance and Stewardship at Columbia University’s Business School, in a video shot just prior to the forum.

Asked about how he engages Japanese companies, Baran said there are plenty of very good Japanese companies trading at depressed prices. So, rather than getting confrontational with poorly run business, he tries to take a constructive approach. “Isn’t it easier to buy good companies that are trading at deep discounts and help the share price go up?”

Japanese companies aren’t broken, Baran noted, it’s the market that’s broken. “The function of the market as a battleground for discovering value [is broken] and the pricing doesn’t work,” he explained.

Changes that activist investors and corporate governance reforms seek will take time, and habitual practices are hard to break. Japanese companies are often faulted for sitting on too much cash, but Baran pointed out that this is the result of the administrative guidance the enterprises received from the government after the asset bubble of the 1980s burst.

Changing business culture takes time—particularly in Japan. “I think the fuse was lit, it’s just a very long fuse for a lot of these things,” Baran said. “You’re not just dumping a set of rules on the table. You’re saying, ‘Here’s the change in culture. Now you’ve got to learn to adapt to it; decide how you’re going to adopt it.’”

“Companies are living things,” Baran reminded attendees. His team meets with company leadership seven to 10 times a year, and often they are talking about the same topics. “When you leave, they’re like, ‘OK, now I need to absorb that.’ Your conversation does not stop when you walk out of the room.”

You need to take the long view in Japan, but change can accelerate once consensus is reached. “Nothing happens quickly—until it does,” Baran said. “You’re waiting and waiting and waiting … and then the next day you go from zero to 100 miles per hour in execution.”

Positive Response

The third active investor was Seth Fischer, founder and chief investment officer at Hong Kong-based Oasis Capital Management. He highlighted how shareholder activism during last year’s AGM season reached new heights as measured by the number of companies receiving shareholder proposals and the number of proposals submitted by funds, as well as the number of candidates proposed by directors.

In a whirlwind of slides, Fischer gave numerous specific examples of his fund’s engagement with several companies. At last year’s Mitsubishi Logistics AGM, Oasis urged the company to implement a buyback of five percent of its shares, and the company responded with a 5.8-percent buyback.

Oasis also proposed electing outside directors and abolishing the komon system—under which former presidents, chairs, and top executives stay on as senior advisors—a practice seen by many as a hindrance to innovation. The company abolished two komon posts.

Oasis has also been active in Tokyo Dome Corporation, which owns the home stadium of the Yomiuri Giants baseball team. A year-and-a-half ago, Oasis came forward with an asset-improvement plan that went through a “long and quite public engagement with the company,” Fischer explained. At an extraordinary general meeting, Oasis proposed removing three board members, two of whom had held their posts for at least 15 years. Tokyo Dome was taken private by Mitsui Fudosan Co., Ltd. and Yomiuri for a 45-percent premium, and Fischer said, “Our business plans are being fully implemented.”

This year, Oasis plans to submit proposals at the AGM of Tenma Corporation, a plastics manufacturer that has struggled with governance issues following a bribery scandal at one of its Vietnam subsidiaries. The incident has spurred a battle for control between two of the founding families, distracting the company from its main business operations. Fischer’s firm is proposing that three directors be elected to help unify the business “and improve governance at the company.”

Wrapping up the forum, Packard said a key takeaway from the diverse views shared was that, if “activism is viewed constructively and done properly, it can receive the support of management.”

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My Leadership Journey

ACCJ-Kansai CEO Series: GE's Eriko Asai shares how to stay resilient during uncertain times

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Since 2015, the American Chamber of Commerce in Japan (ACCJ) Kansai chapter has hosted the CEO Series, an annual collection of speaker events featuring top executives from leading companies. The sessions are very popular due to their intimate and insightful nature, and the glimpses they offer into the lives of successful leaders. Attendees leave inspired and with actionable advice to help them improve their work lives, while the candid discussion is especially valuable for young professionals starting to build their careers.

On May 19, Eriko Asai, president of GE Japan and ACCJ chair, spoke at an event co-hosted by the ACCJ-Kansai Business Programs Committee and Diversity & Inclusion Committee. She revealed what she had learned on her way to becoming GE Japan’s first female president.

“Today, I’m going to share with you my leadership journey and some of the challenges I’ve experienced over the years that helped me develop my leadership skills and keep myself resilient during uncertain times,” she said.

The landscape has changed significantly since Asai took the helm of GE Japan in January 2018, and the company currently is undergoing its biggest business transformation of the past 128 years. “One of the most important jobs, as a leader, is to drive the cultural transformation and make a difference,” she noted.

Milestones

Asai opened her presentation with a slide labeled “Leadership Journey” on which she charted the major events in her life and career, beginning with her birth in the UK.

More than just a visual representation of education and job changes, the chart tells a story that Asai believes has great value. “I highly recommend that you write your journey like this, because it helps you reflect on who you are, your strengths and weaknesses, why you think about something a certain way, what you care about, what has been consistent in your career journey, and where you want to be in the future,” she explained.

One thing that this writing exercise brings to the forefront is self-awareness which, Asai said, is such an important part of the leadership journey. Noting that her rise to company president was a zigzag, not linear, she outlined her career progression and the skills she learned along the way—a particularly valuable way of looking at professional development and staying the course.

“It’s very important to be intentional about your journey, according to your life stage,” she explained, breaking down the phases of career progression by age:

• Twenties: challenge yourself
• Thirties: work–life balance and expertise
• Forties: leadership
• Fifties: investing in the next generation

When she moved to Japan at age three, to Australia at age nine, and then returned to Japan two years later—all due to her father’s work with a trading company—Asai learned three key skills that would help her become a leader:

• Survival
• Listening
• Adapting to change

Two more skills were added when she chose to study at a UK university, before going to work for Sony Europe in Germany—despite speaking no German:

• Being the minority
• Communication

When she began a series of transitions in her thirties—shifting first to government affairs with Microsoft Corporation, then to healthcare with GE Healthcare, during which time she also served as director of the American Medical Devices and Diagnostics Manufacturers’ Association, later expanding her role to energy and finally becoming president of GE Japan in her late forties—she added two more key traits:

• Self-confidence
• Resilience

Now that she is president, she has taken on roles that help her invest in the next generation. This includes serving as chair of the ACCJ. And, while she leverages her experience to help others grow, she finds herself also refining skills such as:

• Developing people
• Building teams
• Crisis management

“I have lived in many places, in five countries, and have always been a minority in those societies—so I know how it feels when your voice is not heard, how painful it is to be left out with no means to respond,” she said. “Although I didn’t know the word ‘inclusive’ when I was very young, I came to understand what inclusive leadership looks like through my experiences in the early part of life. I’m sure many of you have had similar experiences. It’s very good to reflect on those and think about how you can apply what you learned earlier in life to your workplace today.”

As she noted, her path has zigzagged, so it is important to remember that you can learn at any time. “Leadership is all about acquiring skills at any point in your life. If you didn’t have a particular experience—for example, a chance to live abroad—earlier in your life, you can always do something different in your current life and practice adapting to the change.”

Pandemic Leadership

Next, Asai talked about the current situation and the need for leaders and teams to work together when dealing with a crisis such as the coronavirus pandemic.

“This is a moment when leadership really matters,” she said. “We need to prepare for the worst-case scenario and make sure that people understand the guidelines we have put in place. This takes self-awareness and imagination.”

She said that, in such situations, it is important to follow up with employees who may be feeling left out, or who find it difficult to talk with a manager. “We need to be creative about supporting them in making the work-from-home experience comfortable.”

At the start of the pandemic, Asai set up the national crisis management team for GE Japan, to help it cope with Covid-19 and the potential disruptions to business operations. By working together, helping everyone understand the risks and importance of establishing and following safety guidelines, and listening to employee concerns so that they might feel comfortable and adapt, GE Japan was able to continue being productive and secure.

Once everyone had become accustomed to the new procedures and workstyle, she handed over related responsibilities to the business leaders, who then managed their units and teams on their own.

Strategy and Policy

Expanding on GE’s business transformation, Asai highlighted the importance of focus.

“GE has a 128-year history, but we have really changed our portfolio over the past couple of years,” she explained. “We used to have businesses such as capital, plastics, and even media. But we have divested ourselves of most of the non-core businesses and now are focusing on infrastructure.” The three areas of the strategy are:

• Energy transition
• Precision health
• Future of flight

In terms of policy, GE is working with governments around the world to implement rules and regulations that harness innovation while ensuring a sustainable future. Three key policy areas are:

• Decarbonization
• Decoupling
• Digital transformation

Highlighting the last of these, she reminded attendees that “the ACCJ just released the Japan Digital Agenda 2030 report, which provides comprehensive guidance as to how Japan should leap from here, given that the government is focusing on establishing a digital ministry and there are a lot of changes to come. It’s an important time for the ACCJ to be putting forth a position on this, and we are also doing so at GE.”

Building a Culture of Success

“To make this business transformation, one of the most important jobs as a leader is to drive the cultural change,” Asai said, explaining that, at GE, 50 percent of a team member’s review score is based on performance and 50 percent on leadership behaviors, of which the company has three:

• Act with humility
• Lead with transparency
• Deliver with focus

“When we talk about acting with humility, it sounds obvious. But it’s also surprising that we are talking about it at this point in GE’s long history,” she said. “We are very proud of our technology, but because we are so proud, we have become a little bit arrogant. So, the questions are: How can we become more humble? How do we behave with humility? What does humility look like? We need to discuss and debate this as a team.”

She added that humility is a very important starting point for leadership behavior. “If you think something is wrong, you should say so. We have to be open to this. It has to be a culture of welcoming feedback and acknowledging mistakes.”

Transparency, she explained, goes hand in hand with humility, because without transparency, people will not raise issues and you cannot solve problems. The worst-case scenario for a company is not having the bad things reported up to management level.

“Trust is the base of this transparency,” she said. “And this also goes for leaders sharing bad news with the team in a timely fashion, because, without leaders exercising transparency, the team will not have the courage to share bad news themselves. It goes both ways.”

Delivering with focus relates to our ability to manage the demands of modern life, where it is easy to become distracted or be drawn into doing a task that is not the highest priority.

“In a world where we have so much work to do, we really need focus and speed. And being able to focus on the most important thing is a continuous challenge,” she said. “It is about ruthless prioritization and practice, and I am continually struggling to do that myself. Priorities are so important.”

Takeaways

In closing, Asai recapped five points that she believes can lead to a successful and rewarding career—one in which you might also zigzag your way to the top:

• Leadership is about continuous learning
• Focus on building trust
• Embrace awareness and imagination
• Be mindful of how you use time
• Take control of your life and have fun!

“We live in an uncertain world, so constant change is the norm,” she said. “We are never going to be perfect, so we need to be humble and learn from others. The good news is that you don’t have to be perfect, and you don’t have to know everything, because there’s no way to know everything.”

Building trust, Asai noted, takes time. But “speed of trust,” as she calls it, is very important because when there is trust you can get work done faster.

Being mindful of how you use time also is critical, she said. “In my case, I need to spend about 20 percent of my time reflecting and really thinking deeply, without meetings, and 10 percent or more on people development, talking to people—especially young talent who have points of view to share—and spending time with them outside my work.

“And, obviously, sleep and exercise—all the things that keep you healthy—must be tended to, so it’s very important to carve out time in your schedule for that,” she added in closing. “Making sure you are healthy is, in the end, bringing a healthy spirit to work every day.”

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Are Minpaku a New Asset Class?

How short-term rentals can bring personal, financial, and cultural rewards

Listen to this story:

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Although inbound tourism has been put on hold as the world grapples with Covid-19, Japan was a top destination prior to the pandemic and no doubt will be again. While there long have been plenty of places for visitors to stay—Yamanashi Prefecture is home to the world’s oldest operational hotel, Nishiyama Onsen Keiunkan, which was founded in 705 ad—a new market has been emerging in recent years. Driven by the Japanese government’s focus on tourism as part of its recovery efforts following the global financial crisis of 2008, minpaku (short-term rentals) have become a big opportunity for investors and real estate owners.

On July 1, the American Chamber of Commerce in Japan Alternative Investment Committee welcomed Tracey Northcott, chief executive officer of Tokyo Family Stays G.K. and Tracey Northcott Consulting, to talk about her experience as one of Tokyo’s most successful minpaku hosts and how she grew Tokyo Family Stays into a seven-figure business. She also discussed the ecosystem of services and operating models that provide business opportunities, as well as how hosts can make themselves a valued part of the community by collaborating with neighbors and local business.

Starting Point

While there are plenty of midrange business hotels in Japan, these are not ideal for many leisure travelers as they are neither family nor tourist friendly. They can also be difficult to book if you do not speak Japanese. Minpaku, in contrast, are family friendly, budget friendly, and can easily be booked online in English.

Northcott, an Australia native who has lived in Japan for 21 years, began her minpaku journey in 2011 with a single unit. Four years later, she had 25. She was able to take advantage of a surge in visitors to Japan that followed the easing of visa restrictions in 2013—a development to which major hotels were slow to respond, because of the planning and construction required for such large-scale facilities and the need to maximize their return on investment (ROI).

“The tourists were going to places where the cost of land is very high, such as Tokyo and Osaka,” she said. “When a hotel is built, the company really wants to maximize their ROI, which means they want to put a five-star hotel on the land. So, you didn’t really see a lot of the smaller chains then that you might see now.”

As an example, she noted how companies such as Best Western operate a range of brands and hotel types, from luxury to economy, thus serving the needs not only of executives traveling on business, but also families on vacation. This is common in the United States, but not in Japan.

“There was a massive hole in the infrastructure. But for minpaku hosts, because they use existing buildings, there is a very low barrier to entry, and there was an absolute boom in minpaku growth from 2013 onwards,” she explained.

During her presentation, Northcott highlighted three points that helped that quick growth:

• Lack of regulations
• Plenty of available real estate
• Decades of flat rental prices

“It was a no-brainer for people to do exactly what I was doing—to set up a second or third apartment for rental and then list them on the [online lodging] platforms,” she added.

Backlash and Legal Turns

As more people seized this seemingly easy way to make money, the popularity of Airbnb in Japan took off. In fact, the country became the platform’s second-largest and fastest-growing market after the United States. But as Airbnb grew—particularly between 2015 and 2018—there was a backlash from local communities and businesses. Northcott highlighted six reasons for this:

• Big increase in tourism, but with little improvement to infrastructure
• Popular tourist locations becoming saturated by non-Japanese
• Disruptions to neighborhoods and residents’ usual lifestyles
• Some Airbnb hosts and their guests acting poorly or unprofessionally
• Press reports and TV shows doing gotcha pieces
• Airbnb’s failure to educate the domestic market

These and other concerns led to a poor image of the minpaku industry among the general public and resulted in a push for regulation.

“It was hard when you were a professional host, and you really were proud of what you were doing, but there were some people out there who were giving us all a bad name,” she recalled.

Perhaps in a majority of cases, minpaku listings were in violation of local statutes. But this doesn’t mean they were illegal, as rules for this form of lodging had not been defined. There were a lot of gray areas. Public sentiment against hosts, however, was definitely building.

Initially, minpaku fell under the rules and regulations of the Inns and Hotel Business Act, which was enacted in 1948 to govern the operation of hotels and three other forms of lodging: minshuku (Japanese-style bed and breakfasts), ryokan (traditional Japanese inns), and youth hostels. Minpaku, Northcott explained, is a modern evolution of the minshuku tradition. Changes were needed to keep up with the evolving market, and in March 2016 the Diet passed the minpaku law, formally known as the Private Lodging Business Act.

A big drop in the number of listings accompanied the implementation of the law on June 15, 2018, with Airbnb removing about 80 percent of listings on June 4. In the blink of an eye, the number of available options dropped from 62,000 to 13,800. But this purge, and the clearer rules introduced by the government, led to an increase in the quality of hospitality and allowed the market to mature. Professional hosts and property managers were better able to take advantage of opportunities to build their businesses.

“The people who were just trying to make a buck decided they were going to move on to something a little bit easier,” Northcott said. “That allowed the market to mature, and for professional hosts to really dig into their hospitality style, and to do some market segmentation and outside marketing—all the things that go into a professional business.”

With the Wild West days of minpaku gone, owners must now get a license to rent out a property for short-term stays. The terms and conditions for approvals are strict, while additional fire and safety certification is required. Information about guests must also be reported to the local hokenjo (public health center) every two months. This includes nationalities, dates and length of stay, and the tracking of guests’ movement around the city or country. This health requirement is not specifically tied to Covid-19. It was already in place for hotels as part of the 1948 law.

While the Private Lodging Business Act provides a framework for the operation of short-term rentals, the regulations vary by location. Bookings are limited to stays of 28 days or less—for a total of 180 days per year per facility—but what days are allowed depends on the city or neighborhood. In Tokyo’s Minato Ward, for example, you can only rent on weekends or school holidays. Toshima Ward, in contrast, is rather flexible. And areas that have strong hotel lobbies mostly have been able to keep minpaku out.

Building Success

Once you have your license, what comes next? How do you create a successful business? Some people worry that they might be seen as a pariah in the community. A lot of animosity was shown toward hosts in the years leading up to the minpaku law, and the memory is still fresh for many. But by creating alliances with neighbors and local small businesses, minpaku operators can become valued partners in the community.

The key, Northcott said, is to be transparent in what you are doing from Day 1. Especially in rural areas, if you get to know the officials and explain what you are doing, they are generally ready to help, as they see the benefits to the area. They understand that minpaku can inject significant revenue into the community.

This is related to a minpaku myth that Northcott dispelled during her presentation.

“People, when they start up their business, seem to think that the nightly rate is the only opportunity they have to make money, and discounting is the only marketing strategy they’ve got,” she explained. “But discounting is a bit of a blunt instrument. People who are new to the industry try to use it as a marketing tool, but that’s a race to the bottom. You’re going to get bad guests and you’re not going to have a successful business.”

The better choice is identifying the pain points of your ideal guest to create additional revenue streams. Northcott said she can earn 20–30 percent more over her nightly rate by addressing the needs of guests during their stay. This personal touch includes arranging packages for events such as micro-weddings, anniversaries, honeymoons, and birthdays. Helping create a memorable and special stay is a great way to increase revenue while maintaining a high-quality experience for guests.

And affiliate agreements with third-party service providers, such as restaurants and cafés, private chefs, cultural classes, tour companies, and ticket vendors are another great way to boost your profits while also providing benefit to the local business community.

This approach also allows you to provide guests with an authentic local experience. Many people who book minpaku accommodations want to know what it is like to live in another country. This is an area in which the more personal nature of minpaku excels compared with hotel offerings.

“A hotel is really an accommodation product; it’s a bed, it’s where you stay, and then all your experience is outside the house,” Northcott said. “A minpaku is really a hospitality and experience product. I don’t offer cheap accommodation—that’s not my product. I’m very clear about this in all my marketing. I offer inbound tourists a local experience, and with that they get a whole bunch of information about what it’s like to live in another country, and all the community responsibilities that come along with it.”

Of course, this all takes time and hard work. Northcott noted that minpaku is a full-service hospitality business, so if you’re looking for passive income, it may not be for you. Success requires:

• Having great communication systems and logistics
• Educating guests on community responsibility
• Handholding throughout the guest experience
• Having a 24/7 response system, with redundancies

Beyond the Pandemic

While no one can predict when we will emerge of the ongoing states of emergency, and when Japan will reopen its borders to inbound travelers, Northcott is bullish on a strong recovery.

“Beyond 2021, revenge travel is going to be a thing, there’s going to be an exceptional amount of pent-up demand,” she said. “I know a lot of people in other countries who’ve got their credit card in hand and their fingers hovering over the keyboard. As soon as they can book a flight and the borders are open, they are coming. I don’t think demand is going to be a problem. The tourist marketing machine has already started.”

If you’ve got an entrepreneurial spirit and are looking to invest in something that can be both financially and culturally rewarding, the road ahead looks bright for minpaku.

“It’s a modern evolution of the minshuku tradition,” Northcott reiterated in conclusion. “If you do it right, you have complete control over your profitability and the sustainability of your business.”

While Airbnb may be a name that most people recognize in connection with short-term rentals, Northcott sees them merely as one possible marketing channel, not the only one—and certainly not your identity. You get to build your own brand and you set the course.

“Minpaku allows you to create a unique local experience that lets you have a business of your own that can bring in additional monetization options.”

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Learn more about Northcott’s businesses:
tracey-northcott.com

Learn more about Tokyo Family Stays:
tokyofamilystays.com

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