Events C Bryan Jones Events C Bryan Jones

MPower Partners

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.

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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Economy, Columns Jesper Koll Economy, Columns Jesper Koll

Make Japan a Startup Nation

If you had two minutes with the new prime minister, to give your best-shot advice on how to create a better economic future for Japan, what would you say? From a macro perspective, by far the best answer is: Do whatever you can to make Japan a startup nation. But where does economic growth come from? Not from the stuff politicians and technocrats talk about most of the time—e.g., monetary, fiscal, or trade policy. And importantly, it doesn’t come from population growth. It comes from entrepreneurs.

How can government best encourage economic growth?

If you had two minutes with the new prime minister, to give your best-shot advice on how to create a better economic future for Japan, what would you say?

From a macro perspective, by far the best answer is: Do whatever you can to make Japan a startup nation.

But where does economic growth come from? Not from the stuff politicians and technocrats talk about most of the time—e.g., monetary, fiscal, or trade policy. And importantly, it doesn’t come from population growth. It comes from entrepreneurs.

Clear-Cut Correlation

History has confirmed again and again that we only get sustained economic growth when human ingenuity and ambition are allowed and encouraged, and people are empowered to start an enterprise and build their own business.

China long had one of the world’s highest rates of population growth, but it only started becoming an economic miracle when the Communist Party encouraged entrepreneurship and private business in the early 1980s.

More generally, the numbers speak for themselves. When you analyze the world’s 40 leading economies over the past 30 years, you find a clear-cut correlation between the percentage of entrepreneurs in the adult population and the sustainable growth of the country’s gross domestic product (GDP). More entrepreneurs create higher sustainable growth. In fact, if you raise the number of entrepreneurs in the population by one percentage point, your potential GDP goes up by about half a percent.

In even simpler terms, employment data confirms the positive power of entrepreneurship: startups have created 60–70 percent of new jobs in G7 countries over the past 20 years. Specifically, here in Japan, new companies set up after 2010 have provided about 2.3 million jobs over the past decade. In contrast, companies older than 20 years actually destroyed some 800,000 jobs over the same period.

So, dear prime minister, make no mistake—startups and entrepreneurship are a nation’s single most important source of growth and prosperity.

Finding Founders

The need for entrepreneurs is clear, but where do they come from?

Unfortunately, there is no magic bullet, no one simple policy tool that can be turned on to deliver entrepreneurs and create Startup Nation Japan. However, the key ingredients are all in place and, in my personal view, I firmly believe Japan stands at the brink of a golden age of entrepreneurs and startups.

Why? It’s a combination of cyclical and structural forces. Cyclically, the Covid-19 crisis has not only freed up resources but, more importantly, has become a catalyst for many people to rethink their career and life priorities. No matter how small, a startup can finally hire people and build teams, investing in what always yields the highest returns for any new venture: human capital. One of the biggest obstacles for growth and expansion has finally disappeared.

Even the most techy of tech companies, such as Google or Amazon, did not grow by the force of their superior algorithms, business models, or charismatic leadership vision. Instead, they grew as a result of the sweat equity and animal spirits of their team leaders, sales managers, and back-office clerks who pulled all-nighters. Elon Musk’s biggest problem is not tech, engineering, or digital transformation; it is his teams, the people who actually get stuff done.

In Japan, the bar for startups to attract talent has always been especially high because top graduates strongly prefer established companies. Bigger is supposedly safer. Here again, the current recession may well mark an important turning point. Not a week goes by that we don’t read about establishment companies announcing a restructuring plan. All of a sudden, big-company job security is not what it used to be. This is great news for entrepreneurs.

To be specific, I have the good fortune of working as an adviser and angel investor for a couple of Japanese venture capital funds. Over the past six months, all the startups with which we deal have grown their staff and partners. Several have more than doubled the size of their teams. Most importantly, the quality of potential candidates has grown enormously.

One young woman from a top establishment company, who has had no overseas or global experience, told me: “Working at my current employer has been great, but now that I know how good I am, and what I want, staying there puts me at risk. I don’t want to be reassigned to some random project by some random salaryman superior. I want to create my own destiny. Your startup is the best place to do that.”

To be sure, this young woman almost certainly is exceptional, and it may very well be wrong to present her as anything like the new norm for Japanese employees. However, unlike five or 10 years ago, candidates such as her do exist, and it would be wrong to underestimate the powerful ambitions—and awareness of opportunities—that Japan’s young talents and employees are prepared to explore.

Taking the leap from exploring to actually quitting one’s job and beginning a new career at a startup venture is likely to become easier. There’s no doubt that opportunities will increase, large established companies will continue to stagnate, and more young startups will demonstrate high, sustainable growth. Opportunities worth watching include:

  • Healthcare and biotech
  • Professional services and process automation
  • Education and deep tech-based materials
  • Anything serving wealthy Japanese retirees

Some will make a fortune building the Louis Vuitton retirement communities of Japan.

Learning from the Masters

On the structural side, Japan has developed a true and sustainable ecosystem of support for startups and aspiring entrepreneurs. Not a day goes by that the major newspapers don’t advertise a startup competition or venture capital symposium. Even Keidanren—the Japan Business Federation, which is the proud sanctuary of Japan’s corporate culture—now fully embraces innovation and entrepreneurship in its strategic vision. Japan’s elite establishment now knows that BAU—business as usual—is no longer an option.

Most importantly, Japan has a new generation of successful entrepreneurs, people who have built true going concerns, who commercialized and monetized an original idea, who overcame many obstacles and difficulties to build their dream. Sure, they have money to invest; but more fundamentally, many of these new successful entrepreneurs are focused on creating a positive legacy by giving back, mentoring, and advising the next generation.

Hidden from view by media obsession with Silicon Valley superstars, Tokyo, Osaka, and Fukuoka have become hotbeds of private initiatives to grow and develop a startup culture. These include mentorship programs, incubators, accelerators, venture capital funds, and daily discussions on the drop-in audio chat app Clubhouse. This private-sector ecosystem of open discussion, sharing, and networking is vital because a sustainable startup culture can only develop if success is celebrated and, more importantly, if failure is peer-encouraged to become a catalyst for another try.

As Japan’s most successful entrepreneur, Yanai Tadashi, founder of FastRetailing, which owns Uniqlo, supposedly once said, “I failed about 25 times before I finally succeeded.”

All said, the new Japanese golden age for entrepreneurs is very exciting. If I am right, we will have to become more optimistic about the overall outlook for Japan. Because one thing is certain: private entrepreneurship—not government handouts—will build future prosperity.

Dear prime minister, I trust you understand.


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Healthcare, Chubu and Kansai C Bryan Jones Healthcare, Chubu and Kansai C Bryan Jones

HxD 2021

Healthcare x Digital 2021 will carry forth the goal of forging new partnerships and creating new solutions to solve Japan’s most critical community healthcare and individual patient challenges by focusing on three key areas tied to the digital transformation of society and which can help Japan continue to take care of—and provide even better care for—all its citizens.

ACCJ drives innovation by bringing together startups and big pharma

Last August, the American Chamber of Commerce in Japan (ACCJ) announced Healthcare x Digital, an XPRIZE-style competition meant to spur industry-changing technologies and connect Japan-based startups with major pharmaceutical companies and public officials.

Driven by the ACCJ Healthcare Committee—with support from the chamber’s Kansai Chapter—the initiative is led by ACCJ Corporate Sustaining Members AstraZeneca K.K., Bayer Yakuhin, Ltd., Deloitte Touche Tohmatsu LLC, and President’s Circle Member Eli Lilly Japan K.K.

The inaugural event was a huge success, with 28 companies submitting proposals. Three finalists were selected from this pool, and each emerged from the December 1 Pitch Event with awards and prize money to help them continue development of their ideas. Honors went to:

  • Bisu, Inc.: Best Innovation; the Moonshot Prize
  • MediFrame, Inc.: Best Value Proposition
  • MICIN, Inc.: Best Product

Great Opportunity

In a follow-up interview, Bisu Chief Executive Officer Daniel Maggs told The ACCJ Journal that participation in the Healthcare x Digital competition was important to them because “it matters for us to have validation and recognition from the medical industry, because we care very deeply about quality.”

Ryoichi Kusama, co-founder and senior vice president of MICIN, said that his company wants to help the medical industry change from within and become a player that can be trusted. Therefore, “the biggest plus is that it has expanded the collaboration with major pharmaceutical companies.”

And Mediframe CEO Atsushi Wada said that it meant a lot to him to be recognized by AstraZeneca, Bayer, and Lilly. “For them to see the potential in my company made me feel very pleased and encouraged.”

This year’s competition will once again bring together global healthcare leaders with top and emerging tech companies, entrepreneurs, and innovators in the search for new ideas.

Three Challenges

Healthcare x Digital 2021 will carry forth the goal of forging new partnerships and creating new solutions to solve Japan’s most critical community healthcare and individual patient challenges by focusing on three areas:

  • Overcoming the urban vs. rural healthcare divide
  • Reimagining the hospital of the future
  • Empowering patients to own their healthcare

These areas tie into the digital transformation of society and can help Japan continue to take care of—and provide even better care for—all its citizens. Demographic and economic trends are creating a strong contrast between rural and urban regions, and these shifts will require Japan to adopt new healthcare approaches and solutions. One question being asked in this year’s competition is how digital technology can break down the boundaries of distance to provide great and uniform care for everyone, no matter where they live.

Of course, reform of the healthcare system puts great pressure on hospitals to transform themselves and make better use of tools and resources. Technology is certainly key to that makeover, but what are the most innovative digital levers that can open up those paths to greater efficiency?

Another important part of ensuring that the healthcare system remains sustainable is empowering individuals to monitor their own health. A great example of such a tool is Bisu’s home health lab, for which the startup won ¥1 million in funding at last year’s competition. The elegant and easy-to-use system supports a range of tests that anyone can perform at home, allowing early disease detection and providing a way for individuals to track their health and adjust their daily lifestyle habits and decisions.

Joining Forces

At the core of Healthcare x Digital is the goal of bringing together emerging players—who have healthcare ideas, but require partners—with established players looking for innovative ideas to solve healthcare challenges.

This is made possible through the Healthcare x Digital ecosystem, which comprises four groups:

  • Innovators and startups
  • Established companies
  • Government organizations
  • Academic and non-profit institutions

These public, private, and non-profit sector players join forces to deliver all the pieces required to envision and execute groundbreaking solutions.

In the private sector, startups often have innovative digital healthcare ideas, but they lack the partnerships to evolve them. Teaming up with established companies that have the resources to develop an idea and bring it to market can allow the startup not only to grow as a company, but to change the course of future healthcare.

In the public and non-profit sectors, government bodies are searching for solutions to long-term healthcare challenges, such as cost, quality, and access. They want to drive innovation, which can lead to economic growth, but how to drive that change is not always clear. Academics and research institutions have insights that can help effect change, and they need a way to translate this into real-impact non-profit organizations.

Pitch Your Idea

Healthcare x Digital 2021 began accepting submissions on July 1 and the deadline is October 1. Evaluation of submissions is set to start on October 5. Pitches will be evaluated according to the following criteria:

  • Focus on patient and community needs
  • Healthcare x Digital value proposition
  • Need for an ecosystem to flourish

Everyone who participates in Healthcare x Digital will benefit from having their ideas reviewed by top executives from leading international healthcare and technology companies.

Those selected to participate in the Pitch Day will be invited to the full-day virtual event on October 14. Finalists will then take part in the HxD Ideas Day on November 11, a hybrid in-person and virtual event at which they will present to a panel of leading healthcare and pharmaceutical executives—all empowered to initiate business deals and new relationships on behalf of their global brands.

Monetary prizes will also be awarded, and the finalists will meet with senior executives from the organizing sponsors. Winning companies will receive mentoring and support from healthcare professionals and executives from organizing sponsors.

Join us to discover Japan’s most innovative healthcare ideas and develop partnerships to make them a reality.


Sponsors

President’s Circle Sponsor

Eli Lilly Japan K.K.

Organizing Sponsors

AstraZeneca K.K. | Bayer Yakuhin, Ltd. | Deloitte Touche Tohmatsu LLC | i2.JP (Innovation Infusion Japan)

Contributing Sponsors

Dentsu | K&L Gates LLP | NRW Global Business | Omron Corporation | Trilations G.K. | Real Life Sciences

Supporting Organizations

City of Kobe | Embassy of the United States, Tokyo | Foundation for Biomedical Research and Innovation at Kobe | Global Venture Habitat | GVH#5 | LINK-J | Osaka Innovation Hub


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Healthcare, Columns John Carlson Healthcare, Columns John Carlson

Impact of Engagement

Japan faces a very modern problem: its success in delivering universal health coverage and fostering longer life expectancy has led to demographic and social changes that are giving rise to a new set of interconnected healthcare challenges. As the Japanese government moves to reform its healthcare system to address these challenges, new policy approaches will be necessary. With the right approach and policies, Japan can continue to improve the health of its citizens and create a blueprint that aging societies around the world can follow.

Continuing our efforts to communicate the value of investing in health

Japan faces a very modern problem: its success in delivering universal health coverage and fostering longer life expectancy has led to demographic and social changes that are giving rise to a new set of interconnected healthcare challenges.

As the Japanese government moves to reform its healthcare system to address these challenges, new policy approaches will be necessary. Promoting innovation in all areas of the system will allow for increased healthy life expectancy and improved productivity, helping Japan move to the next phase of economic growth. And all this can be achieved while maintaining Japanese patients’ access to the most cutting-edge medicines, technologies, and treatments, while ensuring the security and stability of health and social care.

With the right approach and policies, Japan can continue to improve the health of its citizens and create a blueprint that aging societies around the world can follow.

More Agile Advocacy

On the back of our successful health and retirement work, the American Chamber of Commerce in Japan Healthcare Committee is now moving forward with our biennial health policy white paper. The upcoming report will look different compared with earlier reports. Previous white papers published by the Healthcare Committee have included topics ranging from the use of advance modeling and simulation in pandemic-related planning to improving cervical cancer screening. However, the wide range of topics made it difficult to maintain an up-to-date and compelling narrative in a single document.

Starting with our next white paper, we plan to create more succinct recommendations that fit with the overall messages of our committee viewpoints. The individual viewpoints will become the tools with which to dig deeper into issues featured in the white paper, thus creating a hybrid set of materials that can be updated regularly and used with greater agility in our advocacy. We are excited about the new format, and appreciate the ongoing contributions of member companies.

In the forthcoming white paper, we plan to explore a range of issues, focusing our recommendations across four key themes:

  • Investing in prevention, early detection, and treatment of disease
  • Maximizing healthcare quality and efficiency through digital and data innovation
  • Developing innovation policy, exploring reimbursement models
  • Ensuring the financial sustainability of Japan’s healthcare system

We believe that each theme will help Japan chart a path to more sustainable healthcare, and we encourage you to join upcoming Healthcare Committee meetings to learn more about our ongoing efforts and to help us finalize our recommendations.

To help you consider what form those final recommendations should take, here is more information about each of the key themes.

1. Prevention, early detection, treatment

In recent years, the Japanese government has shifted its focus from simply caring for disease to applying the practices of prevention, early detection, and earlier aggressive treatment to reduce overall healthcare expenditure and to sustain the productivity of its citizens. While significant progress has been made, much more could be done.

2. Digital and data innovation to boost quality, efficiency

Recognizing the need for better healthcare data management, the Japanese government has begun to centralize data platforms, accelerate data-driven innovation programs, and strengthen cybersecurity infrastructures to safeguard against external threats.

Yet, despite these efforts, Japan trails other developed countries in the implementation of a comprehensive healthcare data platform. Much more could be done to incentivize better collection and utilization of healthcare-related data.

3. Innovation policy, reimbursement models

In response to calls for the acceleration of healthcare innovation in Japan, the government launched a healthcare innovation initiative in 2014. Since then, the government has pursued several broad initiatives for research and development support, as well as the registration, authorization, commercialization, and evaluation of new healthcare technologies.

Despite this, reforms made to the pricing of, and reimbursement for, innovative medical technologies threaten to undo the progress made over recent years. With the clear purpose of delivering innovative healthcare to people in need, as soon and safely as possible, more could be done to allocate physical, human, and financial resources to maximize the potential for innovation.

4. The healthcare system’s financial sustainability

Japan’s healthcare system is respected around the world for its quality of care and contribution to long life expectancy. However, the aging society and low birthrate are straining a system designed, starting in 1868, primarily to control infectious and acute diseases in a different population structure. Improving the overall financial health of the system will be critical as more of the population ages and the workforce shrinks further.


ACCJ Healthcare White Papers & Viewpoints

The ACCJ Healthcare Committee strives to stimulate multi-stakeholder partnerships and discussions that will drive healthcare transformation by identifying practical, tangible actions and providing innovative solutions that address patient needs and ensure the sustainability of Japan’s healthcare system. Read advocacy documents and get involved in the committee’s ongoing efforts at: www.accj.or.jp/healthcare-advocacy.


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Do the Right Thing

As the coronavirus pandemic unfolded in early 2020, supply chain disruptions put extreme pressure on many companies. The healthcare industry, in particular, struggled with a shortage of personal protective equipment (PPE), and procuring resources became a difficult—and sometimes risky—business for those in need, as some unscrupulous vendors took advantage of the situation. For others, the crisis was a chance to show how strong ethics provide a solid foundation for long-term business success. One such company is Northfield, Illinois-based Medline Industries, LP.

Medline’s Tomo Hasegawa on the importance of ethics to business success

As the coronavirus pandemic unfolded in early 2020, supply chain disruptions put extreme pressure on many companies. The healthcare industry, in particular, struggled with a shortage of personal protective equipment (PPE), and procuring resources became a difficult—and sometimes risky—business for those in need, as some unscrupulous vendors took advantage of the situation.

For others, the crisis was a chance to show how strong ethics provide a solid foundation for long-term business success. One such company is Northfield, Illinois-based Medline Industries, LP, whose Japan president, Tomo Hasegawa, is scheduled to speak at an upcoming American Chamber of Commerce in Japan (ACCJ) event hosted by the ACCJ Independent Business Committee on November 4.

Topics he will discuss include supply chains and ethical sourcing, and The ACCJ Journal spoke with Hasegawa ahead of the event to find out how Medline weathered the Covid-19 storm of 2020 and what advice he has for leaders trying to make tough choices and guide their companies in a sustainable way.

Sudden Impact

Many of us watched the early days of the pandemic unfold on TV, as initial reports from China painted a confusing and grave picture, but one that felt far away. For Hasegawa, however, the reality of what Covid-19 would bring to the world was much closer.

“We were at the 35th Annual Meeting of the Japanese Society for Infection Prevention and Control, which was being held in Yokohama in February 2020,” Hasegawa recalled. “That was just after the Diamond Princess made its way into the port there. Having the ship right in the backyard of this major medical conference, which was all about infection control, made it very real.”

As the seriousness and widespread nature of the pandemic became clear, Medline began to look at how the situation might affect their business in Japan. Hasegawa said that their initial assessments underestimated the impact.

“We thought it might drive the sales of some PPE and were not thinking about changing what we would do in terms of strategy,” Hasegawa said. “Then, all of a sudden, the next stage of the crisis occurred and there was a business continuity scenario playing out. I don’t think anybody anticipated the entire country of China literally shutting down for two months.”

Supplies Stopped

China manufactures almost half of the world’s supply of PPE. With the source of so many medical supplies cut off, Medline had to quickly work with its Chinese partners to assess the situation and look at alternative ways of obtaining products, including qualifying new substitute PPE offerings.

Recalling the scramble for toilet paper that occurred in spring 2020, and the empty shelves that greeted panicked buyers, he said that Medline faced the same situation with medical supplies, as masks, gowns, and gloves “were literally being hoarded.”

As it turned out, the China supply situation, while acute and unprecedented, was just a harbinger of even bigger issues. China was able to get Covid-19 under control and mobilize its entire infrastructure so that, by the middle of 2020, most of its PPE factories had increased capacity to meet the ever-increasing global demand.

The real crisis turned out to be a shortage of examination gloves. Malaysia supplies 75 percent of the world’s nitrile (synthetic rubber) gloves. Unlike factories that manufacture non-woven PPE products, such as masks and gowns, those that produce examination gloves require significant capital investment and cannot increase capacity in a matter of months. Figuring out how to manage the supply chain was critical, but doing so was not as simple as finding a factory that could churn out PPE. For example, the nitrile gloves supply had a hard constraint and, despite all factories running 24/7, demand outpaced supply by 37 percent, according to the 2020 Personal Protective Equipment Market Report, published by the Health Industry Distributors Association.

“Medline is very proud of how we do sourcing to begin with. We’re very strong advocates of what we call ethical sourcing—we have a supplier code of conduct, for example—and there were certain companies and factories with which, even prior to Covid-19, we chose not to work,” Hasegawa explained.

“This is because we did not agree with how they went about producing products, making money, etc. Coronavirus literally brought out the best and worst of many companies. A lot of suppliers went into a mode that was pure capitalism—supply and demand at its extreme—as the demand skyrocketed,” he said.

Ethical Sourcing

Human rights issues in supply chains is a growing concern and is something investors consider when assessing how a company is doing in the social aspect of its environmental, social, and corporate governance, or ESG, efforts.

In August, Japan’s Ministry of Economy, Trade and Industry began a large-scale investigation into about 2,600 companies listed on the first and second sections of the Tokyo Stock Exchange to better understand where they stand on these issues and what support they need from the government.

Medline is a great example of how a company should approach the matter. Their Ethical Sourcing Program comprises 11 pillars, through which the company carries out its commitment to promote human rights. That involves setting expectations and requirements for its suppliers, assessing and investigating alleged violations, and empowering employees and suppliers with information and training.

The company undertook a comprehensive assessment of its policies and procedures in 2020, and its approach is guided by widely accepted international standards, including the United Nations Guiding Principles on Business and Human Rights.

Medline’s suppliers are obligated to ensure:

  • No forced labor, human trafficking, and slavery
  • No child and underage labor
  • No discrimination and harassment
  • Promotion of health and safety
  • Minimal environmental impact

“These are standards that most companies would normally state, but I think the difference is that we put our money where our mouth is,” Hasegawa said. “We regularly conduct onsite social compliance audits, and we expand and update our supplier risk assessments on an ongoing basis.”

He added that there is a strong belief at the top of the family-managed business that the values which are important to the family should be important to the company. Medline’s stability and success show that the approach works. The company recorded $17.5 billion in worldwide sales in 2020 and has had 54 years of consecutive annual growth. In all but one, the growth was in the double digits.

Focus on Stable Supply

Hasegawa said that Medline’s strong buying power was a real asset during all of last year, as companies were scrambling to secure supply. Not only were they able to minimize price increases from various suppliers as the situation changed, but they were also able to secure much needed supply allocations for their customers.

“It certainly was challenging, not just for us but the entire industry,” he said. “The radical imbalance in supply and demand was unprecedented. Literally, on our supplier side, costs reached levels previously unimaginable. Masks went up by a factor of 16. Gowns and gloves went up by at least five times. That was our cost to procure the products. So, what do you do with that?”

As costs rose, Medline eventually did have to raise their own prices, but Hasegawa said that the way this was done makes him feel proud. “After making initial price adjustments to get the exam gloves business profitable again, we took a different approach where, if we got a cost increase of, say, ¥5 per glove, then we asked our customers to pay that same ¥5 increase. We did not take any incremental profit on top of that to our customer,” he said.

Covid-19 forced companies to make trade-offs. At Medline, the decision was to prioritize stable supply over growing the bottom line. “Our mission is to be a partner for healthcare providers so they can focus on providing care,” said Hasegawa. “We interpreted that as, ‘Don’t stop healthcare’ and focused all our energy on maintaining stable supply to our customers.

“In addition, multiple new customers were willing to pay a higher price to us for the much needed gloves. It was painful to turn away accounts who obviously needed help but we chose to prioritize protecting our existing customers over the opportunity to make more money,” he continued.

“Specifically for gloves, where the pricing truly went out of control all around the world, we saw some very unethical behavior; customers ended up getting something completely different than what they had ordered when they went outside the normal supply chain.” Customers purchased what they thought were medical-grade gloves from a new vendor and received substandard gloves. Even now, around the world, many hospitals are realizing they have stockpiles of inappropriate gloves and are having to replace them.

Medline, Hasegawa said, chose to protect their customers and make sure they did everything they could to ensure that customers received a steady flow of proper supplies. This meant minimizing, as much as possible, the financial impact of price gouging by unscrupulous vendors. This also meant educating customers on how to conserve usage of much needed PPE products such as examination gloves.

Making a Difference, Together

Japan is known for coming together in the face of adversity, and Hasegawa noted that there was very good cooperation among vendors and distributors. While most large companies moved to protect their own customer base, wholesalers worked together to ensure the supply was as stable as possible to hospitals.

“It was all about making sure we got life-saving equipment to the hospitals, to the doctors and nurses who depend on it,” he explained. “That singular focus on the mission to provide not just a service, but to protect the healthcare workers who were doing everything they could to save the lives of Japanese citizens, was very clear to us and, I believe, most of the industry followed suit.”

And that’s a big reason Hasegawa—who says he is fortunate that his personal values mesh with those of the company—believes so strongly in Medline and its role in healthcare. “That tone from the top makes it very, very clear that this is how we want to run the business. And waking up the next day, I always want to be proud of the decisions I made.”


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Adapt, Innovate, Discover, Connect

One of the greatest strengths of our international business community is the varied experiences and skills of our members. I’m proud of the way in which the American Chamber of Commerce in Japan (ACCJ) has transitioned to a virtual environment that allows us to serve the needs of the membership through a robust schedule of events and meetings. But, during the pandemic, tapping into our network for a less formal exchange of ideas and expertise (the way we would during coffee breaks in more normal times) has been a challenge. This month, we’re launching a pilot project to help members discover and connect with other members.

New Wai Gaya platform supercharges ACCJ networking

One of the greatest strengths of our international business community is the varied experiences and skills of our members. I’m proud of the way in which the American Chamber of Commerce in Japan (ACCJ) has transitioned to a virtual environment that allows us to serve the needs of the membership through a robust schedule of events and meetings. But, during the pandemic, tapping into our network for a less formal exchange of ideas and expertise (the way we would during coffee breaks in more normal times) has been a challenge.

This month, we’re launching a pilot project to help members discover and connect with other members. We’re calling it Wai Gaya, a term coined by Honda Motor Company, Ltd. for their practice of convening impromptu meetings among colleagues. At these gatherings, everyone is encouraged to share their ideas—regardless of role or seniority. Wai wai gaya gaya is also a Japanese expression used to describe a lively environment, such as an izakaya, filled with conversation—the words being onomatopoeias meaning chatter—and that’s exactly what we aim to create among members.

Supercharged Networking

Maybe you’d like to find members who have experience negotiating rents with commercial landlords. Perhaps you want to bounce around ideas on a specific business challenge with members who are facing a similar issue. You may want to get some sound advice on how best to leverage your experiences in Japan to take the next step in your career as an expat. Or maybe you’re looking for new business partners and simply want to expand your network.

Using the Wai Gaya platform—developed in-house by the ACCJ—any member can suggest a topic for conversation. The topics will be promoted in our Insider email and can be reviewed on the Wai Gaya website. If you see a conversation in which you would like to participate, just click “I’m interested.” Once three members express interest, we’ll open the ACCJ’s Webex videoconferencing platform to schedule a meeting among up to 10 interested members. We’re keeping the number of participants low to ensure that all parties have a chance to interact.

Nimble Ideas

Inspired by the world of startups and minimum viable products, we’ve built Wai Gaya in-house using a “no-code” platform. This new capability allows us to test ideas without investing a lot of time or resources in their creation. If the membership sees value in Wai Gaya and engages with it, we’ll enhance the platform’s functionality. If it doesn’t take off, we’ll shift our efforts to other new ideas based on input and ideas from the membership.

Beyond Events

Planning and presenting formal events remains the responsibility of ACCJ committees. What Wai Gaya does is provide a venue for those topics and conversations which lend themselves better to conversation rather than presentation.

We all look forward to the day when we can return to in-person meetings, as well as the introductions and chats that happen over coffee during the in-between moments of our events. Our hope is that Wai Gaya will fill this need—at least in part—and that the Wai Gaya model might provide value to the membership even after we emerge from our current virtual mode.


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Education John Amari Education John Amari

Social Impact

If the future of Earth as we know it is to be secured, not just for ourselves but for generations to come, the way we do business has to change. That was the conclusion of scientists in a recently released report by the Intergovernmental Panel on Climate Change (IPCC), a body under the mandate of the United Nations. Serial entrepreneur Priya Sultan agrees with the report’s conclusions, adding that the education system—in addition to business practices—must be upgraded.

US-raised entrepreneur Priya Sultan opens paths to social innovation in Japan

If the future of Earth as we know it is to be secured, not just for ourselves but for generations to come, the way we do business has to change.

That was the conclusion of scientists in a recently released report by the Intergovernmental Panel on Climate Change (IPCC), a body under the mandate of the United Nations. In August, an IPCC working group found that human activity is changing the climate of the planet in unprecedented ways, and that a change in course is necessary.

Serial entrepreneur Priya Sultan agrees with the report’s conclusions, adding that the education system—in addition to business practices—must be upgraded.

For Sultan, a new focus has to be placed on education and business models driven by social outcomes if the challenges identified by organizations like the IPCC are to be tackled. That’s the reason she established Social Impact Lab Japan, a company that incubates, accelerates, and invests in businesses that have societal solutions at their core.

Since its founding in 2019 in Tokyo, Social Impact Lab Japan has supported dozens of aspiring entrepreneurs, including high school and university students, as well as professionals. Working with partners in industry and education, the company isn’t just trialing new ideas; it is also inspiring a generation of founders in Japan—and, in the future, overseas.

It is Sultan’s hope that, by supporting social entrepreneurship, new, socially minded leaders will emerge to define the shape of future business opportunities and solutions.

Social Business

The chief executive officer and founder of Social Impact Lab Japan, Sultan speaks in rapid sentences, a sense of urgency and determination rising in her voice.

“The way that we are living in the world is not scalable or sustainable, it’s not good,” she told The ACCJ Journal. “There are a billion people going hungry every year, and it’s worse now because of the coronavirus pandemic. Why is that?”

But it’s not just solving the challenge of global hunger that motivates Sultan. Lack of access to education is another of her bugbears.

“Why don’t people have access to basic education, things that we took for granted when we were growing up?”

There are three ways to begin tackling both issues, all of which are priorities at her lab, she explained:

  • Education
  • Creating allies
  • Raising awareness about social impact as a solution

For Sultan, “it’s about people hearing that things need to change. And so, you have to inspire more people to effect that change, because you can’t do it alone.”

What’s more, she added, “it’s realizing that social entrepreneurship is crucial to how we do business in the future.”

Young people are amenable to socially driven change and businesses. “They want to spend their money on companies that are doing things the right way,” Sultan said. “And if more companies start to do things that way, we’re going to be able to make the changes that are absolutely needed.”

Inspiring Founders

The motivation behind Social Impact Lab Japan goes back to 2017, when a conversation between Sultan and a female student at Showa Women’s University sparked an idea.

“I told them my story; told them about the Hult Prize. At the end, I remember some students coming up to me to say thanks,” she said.

At the time, Sultan was speaking at Japanese universities in her capacity as the global projects director with the Hult Prize, a global competition that incentivizes students to pitch socially focused business ideas.

“So, this girl comes up to me—I think she was 20 or 21 years old. And she burst into tears. I asked, ‘Are you okay?’ Clearly there was something there.” As Sultan recalls, the student said, “This is the first time in my life that someone told me that I could pursue my own dreams.”

For Sultan, the student’s comment was eye-opening. On reflection, she remembers thinking, “How can you be 21 years old and have this sense of hopelessness?”

Speaking to other students during her tour of Japan, she discovered that this sense of hopelessness ran deep among students, especially regarding their post-university career.

“They would say, ‘I have all these ideas, but when my third year comes, I have to start job hunting so that I’m secure in my final year, and that’s it.’”

In other words, students in Japan—quite apart from professionals already in the workforce—often sideline their ideas about entrepreneurship for the sake of a risk-free career in a large company. Social Impact Lab Japan was established to provide such people with the resources necessary to take their burning ambitions from idea to product or service and beyond.

Impact Lab

Working with socially minded startups and founders, Social Impact Lab Japan provides a platform where ideas are pitched, tested, and prototyped—and incubated or accelerated.

Entrepreneurs there can tap into a wide network of mentors from the private, public, and non-profit sectors to learn the ins and outs of developing and launching a business.

The company does “a lot of sessions with entrepreneurs to help them get the skills they need, and for them to hear different voices, meet different people, and leverage our network, which can give them more resources if they need it,” Sultan said.

Sessions include seminars and workshops on subjects such as purpose-driven leadership, pitching for contests, and mentoring.

“We’re focused on the education side, because I think there is an education and cultural change that needs to happen,” she explained. “People need to get a better understanding of what social entrepreneurship is really about.”

And the result? “You can see them light up when they feel that they can make a change in society, and I notice that particularly with young people, especially high school students,” Sultan said.

Because of social-distancing rules during the coronavirus pandemic, these sessions are conducted via video conference instead of in person.

But it’s not just founders and aspiring entrepreneurs who are the focus of activities at the lab. Companies, too, are important players in their social impact ecosystem.

“In talking to, and doing sessions with, corporates, I noticed that there is a big misunderstanding about the concept of social entrepreneurship,” Sultan said. “I think [they believe that what we do is] charity, but it’s not charity. And the reason it’s not charity is that charity doesn’t work, because it’s a donor-based model, which makes it donor-dependent. If charity worked, we wouldn’t see the problems that we are seeing, such as so many people going hungry, or without water or electricity.”

Time to Change

Born in India and raised in the United Sates, Sultan’s own journey into entrepreneurship could not have been predicted from the choices she made early in her career. Like so many in her peer group, her priority on graduating college was to join the workforce, and to do so in a sector that conformed to societal expectations for job security. That’s why she joined multinational financial services provider Wells Fargo & Company in New York, where she worked for a couple of years as a credit manager.

“It’s banking in New York, so working 90 hours a week [was] normal,” she recalls.

But it was not long after joining the bank that she hit a crossroad: continue or change path. In the end, it was her father’s worry for her well-being that helped her decide.

“My dad came up to me and said, ‘Priya, it’s six in the morning. You’re stressed all the time. And you don’t seem happy with your job, so think about changing it.’”

That very same day, Sultan walked into her workplace and tendered her resignation.

“I walk out of there with no job. I’m 25 years old, and I don’t know what I’m doing with my life,” she remembers.

And yet, only two months later, she set off on a new course, boarding a plane to New Delhi, India’s capital. That was 2009.

Meaningful Mentors

Starting her life in New Delhi, Sultan found refuge in a small garage apartment. Her goal? To begin work at World Health Partners, a sustainable healthcare services provider in the city.

In hindsight, her experiences at the organization played an important role in setting her on her current trajectory. In particular, she found a mentor there who inspired her to pursue a career in the social impact sector.

“Gopi Gopalakrishnan, the director of World Health Partners, took me under his wing and said, ‘I’ll teach you everything I know.’ What I learned was that you can do business and make socially positive changes. And that was something that was not often spoken about more than 10 years ago,” she explained. “He really opened my eyes to how you can make profitable companies and create the positive change that society desperately needs.”

After nine months at World Health Partners—but desiring to add new skills to her knowledge belt—Sultan enrolled at the Hult International Business School in London.

During that period, she herself became a student competitor in the Hult Prize (then the Hult Global Case Challenge). Her team made it to the regional finals.

When she graduated with a masters in international relations, another mentor connected her to a job opportunity at the Hult Prize, which was at the time—more than a decade ago—taking on its very first hires.

Full Circle

As the global projects director at the Hult Prize, Sultan is able to leverage the platform’s international network to support her work at Social Impact Lab Japan.

“We exist in over 121 countries; we have over 3,000 universities that participate every year—and that’s just in the on-campus program,” she noted, speaking about the prize.

In Japan alone, student teams from 50 to 100 universities take part in the Hult Prize’s annual pitch contest. The challenge for students in 2022 is “to create 2,000 jobs by 2024 by thinking globally and acting locally.”

Pitches are made at the campus level, with successful ideas going through regional finals and an accelerator program in the United Kingdom. The top prize of $1 million in startup funding is awarded to one team at a ceremony at the United Nations in New York.

Promoting participation in the competition among universities in Europe and Asia was the main thing that drew Sultan to Japan in the first place.

“I first came to Japan because we saw an opportunity to grow the Hult Prize here. Ahmad Ashkar, the founder of the Hult Prize, said, ‘Priya, why don’t you go and check out the scene.’ This was at the end of 2016,” she recalls.

A year later, Sultan had the encounter with the student at Showa Women’s University, a despairing moment that opened new paths of hope and entrepreneurship. And she has been helping young Japanese talents pursue their dreams ever since.


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Wishing You a Happy Independence Day

Happy Independence Day to our partners and friends at the American Chamber of Commerce in Japan (ACCJ). On the 245th anniversary of the adoption of the Declaration of Independence, the democratic values that underpin the US–Japan alliance continue to bear fruit. Reflecting on the year thus far, we have much to celebrate as our bilateral ties with Japan remain strong.

Greetings to readers of The ACCJ Journal from the US Embassy Tokyo

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Happy Independence Day to our partners and friends at the American Chamber of Commerce in Japan (ACCJ). On the 245th anniversary of the adoption of the Declaration of Independence, the democratic values that underpin the US–Japan alliance continue to bear fruit. Reflecting on the year thus far, we have much to celebrate as our bilateral ties with Japan remain strong. Just as the Declaration of Independence symbolizes peace and prosperity for the American people, the US–Japan Alliance promotes these same values in the Indo–Pacific and across the world.

Steadfast Friendship

The United States and Japan ushered in the year with strong symbols of our steadfast friendship, exhibited through several firsts. In March, Secretary of State Antony J. Blinken and Secretary of Defense Lloyd J. Austin III visited Tokyo on their first trips overseas as Cabinet officials, participating in the Japan–US Security Consultative Committee (2+2). Their visit reaffirmed the enduring strength of our security partnership and its contributions to peace, security, and prosperity in the region and beyond.

We solidified our close bond with Japan when President Joe Biden welcomed Prime Minister Yoshihide Suga as the first world leader to visit Washington. During the visit, the two leaders launched the Competitiveness and Resilience (CoRe) Partnership—as well as the US–Japan Climate Partnership—and pledged to work together to address the global threats posed by Covid-19 and climate change, while resisting challenges to the free and open rules-based international order.

We will need your help in implementing these initiatives and realizing their success in areas that range from boosting innovation and cooperating on research and development to securing critical supply chains.

Finally, we celebrated US–Japan cooperation in space. We witnessed the simultaneous presence of two Japanese astronauts aboard the International Space Station for the first time since 2010. One of the Japanese together with three other astronauts were then ferried from the space station by a commercial SpaceX ship.

One of the Strongest Relationships

The United States and Japan continue to be top trade and investment partners. Our close economic cooperation supports open and competitive energy markets, the digital economy, secure 5G networks, space exploration, and a wide range of emerging technologies.

Of course, we are still grappling with Covid-19, but vaccinations are helping our economies and societies recover. Throughout the pandemic, the United States and Japan have demonstrated that close cooperation in tackling global issues is emblematic of our strong relationship. As we have worked to vaccinate the people in our countries, we have also partnered to ensure the rest of the world has access to vaccines through the COVAX Advance Market Commitment.

I continue to be impressed by the ACCJ’s contributions to our strong economic ties, and your efforts to mitigate the impact of Covid-19. Your leadership—particularly in the areas of digital transformation and pharmaceuticals—has been invaluable in helping to promote hope and prosperity amid this crisis.

Shared Values Tie Us Together

As the two largest market economies in the world, our commitments to defending freedom, championing free and fair trade, promoting diversity and inclusion, and upholding human rights are rooted deeply in our shared values. The ACCJ has played a critical role in strengthening the bonds between our countries, deepening our economic ties with Japan, and advocating for the US business community.

As President Biden and Prime Minister Suga recently affirmed, “an ocean separates our countries, but commitments to universal values and common principles—including freedom, democracy, human rights, the rule of law, international law, multilateralism, and a free and fair economic order—unite us.”

Let us take this Independence Day to celebrate what unites us.


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Staying Focused on the Fundamentals

Japan’s dependency on the world has gone up since the start of Abenomics in 2012. Ten years ago, about 50 percent of profits came from global markets. As Jesper Koll explains, to be a successful investor, cut out the noise and don’t get distracted by smart-sounding stories or headline-grabbing advice. Stay focused on the fundamentals.

The keys to successful investment in Japan

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“If you get the earnings right, you’ll get the investment right.” This was the advice given to me by one of the greatest investors of all time, Julian Robertson. He is the founder of the famous Tiger Fund, which, throughout the 1990s, battled with investment shark turned philanthropist George Soros for the top position as the world’s biggest and best-performing hedge fund manager. To be a successful investor, cut out the noise and don’t get distracted by smart-sounding stories or headline-grabbing advice. Stay focused on the fundamentals.

Local Success

Applying this rule to Japan, the first questions we must answer are:

  • How does Japan, Inc. make money?
  • Where do its earnings come from?

Importantly, the answer is “not from Japan.” For companies listed on the Japanese stock markets, about 64 percent of corporate profits are created from global sales and operations (i.e., exports or offshore production and sales). From a top-down macro perspective, a successful investment in the Japanese stock market is far more dependent on global economic fortunes than on what goes on at home, in Japan.

In fact, Japan’s dependency on the world has gone up since the start of Abenomics in 2012. Ten years ago, about 50 percent of profits came from global markets. The rise from 50 to more than 60 percent is primarily due to Japanese banks and financial firms. Over the past decade, they have become more active overseas—particularly in Asia.

It is a little-known fact that Japanese banks have been the largest provider of credit in non-China Asia for three years running. At the same time, banks’ domestic profit margins are being squeezed by the cap on bond yields forced by the central bank. If interest rates are not allowed to rise, banks cannot grow their profit margins. To get bullish on Japanese financials in general—and banks in particular—we need to see an end to the Bank of Japan’s current policy of yield-curve control (i.e., allowing 10-year bond yields to rise).

Currency Sensitivity and the Hedge Imperative

Further, Japan’s major dependence on the ups and downs of the global economy makes Japanese profits highly sensitive to the currency. When the yen rises, overseas earnings translate into lower yen-based profits. When the yen drops, the yen profits get a nice windfall. Statistically, for every ¥10 of depreciation, Japanese corporate earnings get a boost of about eight percent (if the depreciation is sustained for six or more months).

In other words, the weaker the yen, the better Japan’s corporate profits; and the better Japan’s corporate earnings, the higher the stock market.

For global investors who calculate their returns in US dollars, the combination of Japan’s high dependence on global growth, and the inverse relationship between the currency and Japanese earnings, dictates one very clear piece of investment advice: always currency hedge your yen equity positions. Chances are high that yen-denominated Nikkei gains will translate into much lower US-dollar gains because, basically, the Nikkei only goes up during periods of yen depreciation and dollar strength.

Here we can learn from another master investor: Warren Buffet. Last fall, when he famously initiated his first significant investment in Japanese stocks in more than a decade, he did so on a fully currency-hedged basis. And it has paid off handsomely so far. The yen value of his position is up 20–25 percent, despite the yen being down five to six percent. Without the currency hedge, his performance would be one-quarter to one-fifth less than it is with the currency hedge. In my view, hedging the currency is imperative for best performance if, like Buffet, you measure your returns in US dollars.

Leadership Matters

Of course, this is just the big-picture macro lesson for anyone considering an equity investment in Japan. From here, we’ll have to enter the exciting world of stock-picking, of selecting companies that display high potential for generating rising profits and superior returns.

I am not allowed to go into details and offer advice, but I can leave you with one suggestion: focus on the leader, the CEO. In the end, Japanese corporate performance is dictated primarily by the quality, vision, and aggressiveness of the top-level executives. After decades of misery, Sony Corporation turned itself around when the charismatic Kazuo Hirai took over, and Hitachi Ltd. did so when superstar manager Hiroaki Nakanishi stepped in.

These are just two such success stories. While Japan may well despise and not tolerate the superstar CEO cult so essential to US corporate culture, the reality is that Japan’s consistent top performers and turnarounds can be traced back to an individual star CEO and their leadership style. You won’t find their names in bright lights, in the papers and magazines, or at Davos, but they do exist. Finding them is half the fun and a rewarding part of investing in Japan.


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Partner Content Jarman International K.K. Partner Content Jarman International K.K.

Investing in Kochi Prefecture

For most, investing brings to mind index funds, real estate investment trusts, or property. But what about investing in the growth of your local community via beer, tourism, or fitness? In Kochi, on the island of Shikoku, three families are looking beyond plain profit as they seek to revitalize and secure the future of their communities in unexpected ways.

How three expat families are making a difference in rural Japan


Presented in partnership with Jarman International K.K.

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For most, investing brings to mind index funds, real estate investment trusts, or property. But what about investing in the growth of your local community via beer, tourism, or fitness? In Kochi, on the island of Shikoku, three families are looking beyond plain profit as they seek to revitalize and secure the future of their communities in unexpected ways.

Fitness Fans

Violet and Carlo Pacileo decided to move to Otoyo to help Violet’s mother restore the family’s land. But the enterprising duo decided they could do more.

“Aging populations, businesses dying out, houses being abandoned … these are issues all of Japan’s rural communities are facing. But seeing the impact firsthand in Otoyo was heartbreaking,” Violet explained.

Having spent her career analyzing businesses and investment potential, Violet quickly understood that the community needed an injection of private capital. “After years working for large financial institutions, this is my chance to give back to the community.”

The Pacileos recently received approval to start building a CrossFit box, in other words a barebones gym. While the idea is unconventional, they have done their research. “Shikoku doesn’t have a box yet and the weightlifting association in Kochi told us there are only two facilities where they can drop weights—and both are in public high schools,” Violet said. “I knew then that there would be a market, and that we had to get in while the fitness industry here is still in its infancy.” She expects their new business not only to bring fitness-loving visitors to Otoyo, but also to help improve health issues in the community.

Beer Brewers

Former California residents Kenneth and Masako Mukai moved to Niyodogawa-cho to start a brewery, which opened in November 2020. Although this may seem an odd thing to do in a village of 5,000 people, the Blue Brew Taproom is already a hit.

Kenneth explained that the brewery is having multiple positive effects on the local economy. “Our local post office gets more business from us shipping our products, and the local government receives tax funds from people buying our beer through the furusato nozei program. Sales at restaurants and hotels around us have gotten a boost, as our customers often stay nearby.”

The Mukais buy locally produced items such as tea, ginger, and Satsuma-imo (sweet potatoes), which they use as flavoring, and collaborate with six farmers to grow hops, creating a new market in the community.

They have many supporters among the owners of established businesses in the area, and their positive example has also brought about changes in the village government’s perception of investment from outside. “The chiiki-okoshi kyoryoku-tai program used to be closed to non-Japanese applicants, but, in April, the first American member was accepted and moved here with his family!” Kenneth said.

Hospitality Queen and Organic Farmer

Australian Rosie Moloney and her husband, Tsuyoshi, live in the 1,481-person village of Mihara. They know well the importance of leading by example and engaging with the community.

“When I first presented my plan to start a guesthouse, many locals asked, ‘Who would want to come here?!’” Rosie explained. “People can’t see the value of what they have, and it can take someone from outside to open their eyes and show them the opportunities outside the infamous box.”

Clearly, her guests agree. Rosie now runs two highly rated guesthouses in the Shimanto area, while also engaging in permaculture and helping with Tsuyoshi’s organic rice fields.

“I see such beauty, value, and potential here,” she said. “I started guesthouses to encourage the tourism industry and create new job opportunities.”

Many of Rosie’s guests—Japanese and those from abroad—stay for several days and contribute to the village economy through visits to restaurants and shops, as well as by booking outdoor activities. According to her, “Guests often say that the fondest memories of their trip are [those of] interacting with locals.”


Learn more about Kochi: visitkochijapan.com/en


 
 

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Columns, Tech Tim Romero Columns, Tech Tim Romero

Investing in Smart Agriculture

AI gets a lot of attention these days, but its application to farming is not often in the spotlight. Sagri Co., Ltd. uses AI, machine learning, and mapping technologies to solve social problems. I had the opportunity to talk with CEO Shunsuke Tsuboi about the challenges that agricultural technology startups in Japan face when it comes to funding, as well as the benefits of their technology.

Japan startup Sagri is transforming family farming with AI

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Artificial intelligence (AI) gets a lot of attention these days, but its application to farming is not often in the spotlight.

Recently, I had the opportunity to talk with Shunsuke Tsuboi, chief executive officer of Sagri Co., Ltd., which uses AI, machine learning, and mapping technologies to solve social problems.

On my podcast, Disrupting Japan, Tsuboi and I discussed the challenges that agricultural technology (agtech) startups in Japan face when it comes to funding, as well as the benefits of their technology.

Taking Root

Sagri was founded in June 2018 and uses satellite imaging and data to analyze farmland. The technology scans areas of up to 10 hectares in size, making it particularly suited to Japan, where farms are generally small. The data can be accessed using a smartphone app, and the goal is to help farmers better understand the condition of their soil and identify the best time for harvesting.

The idea for the company took shape in a laboratory at Yokohama National University, where Tsuboi is a mechanical engineering graduate student. His lab is using space-based technology to examine soil, and he and his business partners have been able to apply some of this to their platform, which shares the name of the company.

Applications

If you’ve walked around the Japanese countryside, you’ve probably seen small plots of abandoned farmland. Sometimes these even intermingle with residences in neighborhoods not far outside the capital.

Whether farmland is in use or abandoned makes a difference from a tax perspective, so the government manually checks the status of land each year. The AI behind Sagri’s analysis can determine with 90-percent accuracy whether a field is abandoned, drastically reducing the amount of work required of government staff.

Apart from taxation, the government is also interested in identifying farmland that can be revitalized. Satellite data that provides soil analysis can make that process easier.

Tsuboi noted that a big reason for the abandonment is that the farmers are getting older and are unable to maintain the land. One benefit of the Sagri platform is that machines can receive the data analysis and automatically perform tasks such as applying fertilizer.

Beyond Japan

Agtech is an area in which Japan has a great opportunity to be a world leader, and Sagri is putting its technology to work in India, where there are also many small farms. But getting the financing needed to keep operations going can be difficult. Sagri believes it has a solution.

“Many Indian farmers need loans, but they don’t have the chance to get them,” Tsuboi said. Because there are so many farmers, it is difficult for banks to spread enough money around. To have a better chance of funding, farmers want to show banks that they are a good investment, he explained. Banks cannot get that sort of information using present methods, but the satellite data analysis provided by Sagri can allow them to check the farmland’s condition and potential yields.

Tsuboi sees Africa as the company’s next market, noting potential in countries such as Kenya and Rwanda. Areas of Southeast Asia are also within Sagri’s sights.

Funding

There are not many agtech startups in Japan, but it seems that there should be. With lots of small farms, lots of creative people working on agtech at universities, and venture capitalists (VCs) with money to invest, why don’t we see more?

Tsuboi feels one reason is that VCs and the government both see farmland as low-growth opportunities. And attracting money from abroad, such as from Silicon Valley VCs, is not easy because they are focused on large-scale industrial farming. The farms on which Sagri is focused in Japan and India are too small to attract their interest.

But Sagri has had some success inside Japan, and announced in June that they have secured ¥155 million ($1.4 million) in funding from a group led by Real Tech Holdings Co., Ltd., who was joined by Minato Capital Co., Ltd., Senshu Ikeda Capital Co., Ltd., and Hiroshima Venture Capital Co., Ltd. Also participating is Bonds Investment Group Co., Ltd., whose Hyogo Kobe Startup Fund, established in March, is making its first investment.

Sagri is a great example of a Japanese startup that can assist people at home and also have a much bigger impact—and earn a much bigger profit—abroad. Globally, the company can help millions of small family farms thrive, and they can bring great returns for investors in the process.



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Columns, Healthcare C Bryan Jones Columns, Healthcare C Bryan Jones

Beyond the Pandemic

One reason that foreign companies choose to invest in Japan is the nation’s high-quality manufacturing and services sectors, as well as its technological prowess and innovative workforce. Maintaining the health of the population—beyond the immediate challenges of Covid-19—is, therefore, critical to the future prosperity of the country and the viability of its business environment.

Digital health can guide the way for Japan’s post-virus evolution

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As the ACCJ is dedicated to ensuring a vibrant environment for global business in Japan, advocacy for improved health policy and initiatives is an important part of the chamber’s mission. One reason that foreign companies choose to invest in Japan is the nation’s high-quality manufacturing and services sectors, as well as its technological prowess and innovative workforce. Maintaining the health of the population—beyond the immediate challenges of Covid-19—is, therefore, critical to the future prosperity of the country and the viability of its business environment.

Recognizing this, the ACCJ has worked with the Institute for New Era Strategy (INES) to bring together key leaders in business, government, and academia to discuss the future shape of social security in Japan. The results can be found in the Healthcare Committee white paper Post Covid-19 Recommendations to Realize a Social Security System for All Generations.

Stronger Foundation

Our evolution as a data-based society has allowed us to grasp the impact of Covid-19 in real time, and digital tools have enabled the active cooperation of civil society as the government works to mitigate the threat and limit its damage. While this is an encouraging sign that bodes well for the future of Japanese society, the state of Japan’s infrastructure has been inadequate compared with other countries.

The ACCJ and INES provide ideas on how to build a stronger infrastructure through post-Covid-19 recommendations on how to realize a social security system for all generations, and to promote continued innovation and application of technology that can help Japan provide for the needs of its people in a way that is effective and fiscally sustainable.

The white paper discusses utilizing data technology, shifting financial resources to healthcare and retirement, and raising the health and financial literacy of society.

In terms of digital health and utilizing data technology, areas of focus include:

  • Information usage rights
  • Data collection
  • Database integration
  • Public–private collaboration
  • Telehealth and virtual care

In the case of the last item, the Covid-19 pandemic has thrust this need to the forefront. As most people have been forced to stay home for extended periods, quarantine, or limit visits to clinics and hospitals, healthcare services at a distance has been the only way for many patients and doctors to interact. Particularly those in high-risk categories due to preexisting conditions, and those living in rural areas, have relied on telehealth services to minimize the risk of infection during the pandemic.

Stay the Course

One concern is that, once the coronavirus vaccine rollout is complete and a majority of the population has been inoculated, some digital initiatives that have been embraced might fall by the wayside as Japan fully returns to normal routines.

One recommendation from the joint ACCJ–INES team states: “It is essential to couple the support for telehealth with support for digital prescriptions, and to enable pharmacies to offer home delivery of important medications, all while expanding the overall role of digital technologies in delivering care. These measures will help support the aging population long after Covid-19, and enable new approaches to triaging, screening, and following up, customizing the patient experience, and improving the ability of doctors to monitor and communicate with their patients.”

Doing this will require a change in mindset and policy. While many forms of digital data exist in Japan, the individual’s consent is often not obtained at the time of collection, making it impossible to utilize the information. Even if the data is in the government’s possession, it is still difficult for it to be leveraged due to privacy considerations.

But with Japan’s fiscal strains exacerbated by the coronavirus, now is the time for the government to tackle these challenges. Strong political will and leadership are required to face reality, make the right choices, and share with the public a vision for a better future. And today’s digital tools and the power of data are making this possible and opening a door to a healthier, sustainable tomorrow.


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Partner Content Takehiko Hara Partner Content Takehiko Hara

Covid-related Financial Relief

As relief from economic and financial distress caused by the coronavirus pandemic, you may have received subsidies or grants from the national and/or local government. You may be wondering if you must declare this assistance on your income tax return. Here is a summary of tax treatment and revenue recognition timing published by the National Tax Agency of Japan.

What tax liabilities come with coronavirus help?


Presented in partnership with Grant Thornton

As relief from economic and financial distress caused by the coronavirus pandemic, you may have received subsidies or grants from the national and/or local government. You may be wondering if you must declare this assistance on your income tax return. Here is a summary of tax treatment and revenue recognition timing published by the National Tax Agency of Japan.

Non-Taxable

Payments received from the support fund set up in response to the new coronavirus (article 7 of the temporary special provisions of employment insurance)

Funds received from the allowance set up to support leave taken in response to the new coronavirus (article 7 of the temporary special provisions of the employment insurance law)

Special Fixed Amount Cash Payout (tentative name) of ¥100,000 per household member (article 4, paragraph 1 of the special measures concerning taxation regarding the coronavirus)

Special Cash Payout for Families with Children in Year 2020 (article 4, paragraph 2 of the act regarding coronavirus-related special taxation measures)

Emergency handouts to help support students (Article 9, Paragraph 1, Item 15 of the Income Tax Act

Temporary Special Cash Payout for Low Income, Single-Parent Households (Article 9, Paragraph 1, Item 17 of the Income Tax Act)

Provider Relief Fund related to the coronavirus (Article 9, Paragraph 1, Item 17 of the Income Tax Act)

Discount coupons provided as Support for Users of Company-Sponsored Babysitters (Article 9, Paragraph 1, Item 17 of the Income Tax Act)

Subsidy under the Babysitter Support Project of Tokyo (Article 9, Paragraph 1, Item 17 of the Income Tax Act)

Taxable

Treated as business revenue. Based on:

Payment decisions

  • Covid-19 subsidies (for those who are self-employed and sole proprietors)
  • Tokyo Metropolis Infection Spread Prevention Support Fund

Payment decision or expense incurment regarding:

  • Employment adjustment subsidies
  • Elementary school closure support
  • Rent support
  • Sustaining subsidies for small businesses
  • Business continuity subsidies for agriculture, forestry, and fishing enterprises
  • Subsidies for medical institutions and pharmacies helping to prevent coronavirus spread

Expenses incurred in connection with:

  • Relief provided under the coronavirus-related supplementary aid to offset interest payments

Treated as Occasional Income

Occasional income (revenue–expenses, maximum ¥500,000 special deduction). Based on revenue recognition timing.

Covid-19 subsidies (for employment income earners)

  • Payment decision

Go To Travel Campaign

  • At end of travel or on use of coupon tickets

Go To Eat Campaign

  • On use of meal tickets

Go To Event Campaign

  • On use of event tickets

Treated as Miscellaneous Income

Based on revenue recognition timing.

Covid-19 subsidy (for miscellaneous income earners)

  • Payment decision

 
 

For more information, please contact Grant Thornton Japan at info@jp.gt.com or visit www.grantthornton.jp/en


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Events, Investing Malcolm Foster Events, Investing Malcolm Foster

Third Annual ACCJ Shareholder Forum

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.

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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Features, FDI Julian Ryall Features, FDI Julian Ryall

Attracting Global Investment

Two recent papers produced by committees of the ACCJ have highlighted the considerable opportunities that would result from changes to regulations that currently hinder Japan’s financial sector from attaining its full potential. And with the Japanese government committed to raising Tokyo’s profile as one of the world’s top financial centers, the committees are hopeful that regulatory authorities here might embrace some of the proposals.

Ideas for making Japan a top financial center

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Two recent papers produced by committees of the American Chamber of Commerce in Japan (ACCJ) have highlighted the considerable opportunities that would result from changes to regulations that currently hinder Japan’s financial sector from attaining its full potential. And with the Japanese government committed to raising Tokyo’s profile as one of the world’s top financial centers, the committees are hopeful that regulatory authorities here might embrace some of the proposals.

The Investment Management Committee published a viewpoint entitled Relax or Eliminate Unrelated and Onerous Regulatory Requirements for Marketing of Offshore Funds to Professional Investors Conducted by Global Investment Managers, while the Financial Services Forum released a white paper headlined Reimagining Japan as a Global Financial Center, the latter proposing changes that would drive the nation’s long-term economic growth.

License to Sell

Japan’s financial regulations are designed to protect investors, both retail and institutional, which is a “worthwhile goal” according to David Nichols, executive advisor at EY Strategy and Consulting Co., Ltd. The type of investment is determined by the definition of the investment and the sales license held by the distributor.

“The licenses entail certain responsibilities—some fiduciary and some customer best-interest,” said Nichols, who also chairs the Investment Management Committee.

“While distributors do not have a fiduciary duty to their clients, they are holding their customers’ security purchases in firm accounts,” he added. “As such, the state of the distributors’ balance sheets can impact the client holdings. If the distributor goes bankrupt, clients may have difficulty accessing their investments.” As a result, the Type 1 license required by a distributor has capital adequacy requirements to safeguard investors.

While offshore funds fall under the definition of securities that can only be sold by distributors with a Type 1 license, the fund assets are not part of a distributor’s balance sheet and, therefore, are not impacted by the health of that balance sheet, Nichols pointed out.

“So, the reason the regulations are in force is that offshore funds have been classified as a security but do not hold the same dependency on the distributor’s balance sheet as a normal security does, since the fund assets are held by an independent custodian,” he explained, describing the situation as “an unintended consequence of regulations intended to protect investors.”

To correct the situation would require a root-and-branch revision of the 2006 Financial Instruments and Exchange Act, which would be a major undertaking and would require an amendment approved by the national Diet. Instead, the ACCJ is proposing some administrative changes that the Financial Services Agency can enact and “that would get us to materially the same place,” Nichols said.

Norihiko Tsukada, managing director and head of compliance at BlackRock Japan Co., Ltd. and vice-chair of the Investment Management Committee, identified “certain off-site monitoring items, including daily calculations of capital ratios” as one regulation that is unnecessarily obstructive, although he points out that regulations in Japan are broadly equivalent to those of other jurisdictions. In the United States, however, limitations are less of a concern, as the market there is sufficiently large to make it economically feasible to package investments in US onshore vehicles.

Lost in Translation

Distributors in Japan also face administrative hurdles and language requirements that make it more complicated to set up and run an asset management business. That should be a concern since Tokyo has designs on a larger role in the global financial services market.

The committee has recommended that regulations surrounding the offsite monitoring of investment management companies (IMCs) should be relaxed, as certain reporting items are not relevant to the activities of global IMCs, along with the initial registration process for distributors of standard Type 1 Financial Instruments Business (FIB).

“Tailoring regulatory requirements to address relevant business risks will not impact client protection,” the paper emphasizes, adding that “such relaxation of regulatory requirements would improve the appeal of Japan to foreign investment managers interested in establishing a presence in Japan, and would be consistent with the [government of Japan’s] objectives to promote Tokyo as a global financial city.”

The solution, the committee suggests, would be the creation of a new type of FIB, that might be called a “solicitation-only” Type 1 FIB.

Seize the Moment

Aaron Lloyd, director of Sompo Japan DC Securities Inc., said the regulations are not new, “but you could say that dissatisfaction has reached a tipping point, as many foreign investment management companies would like this regulation changed.”

Failure to seize this opportunity, he believes, may have lasting negative implications—particularly with Tokyo and Singapore competing to attract companies that might be considering leaving Hong Kong as a result of the Chinese government’s recent crackdowns in a city that, until now, has been the Asia–Pacific region’s preeminent financial center.

“Japan should introduce changes,” Lloyd told The ACCJ Journal. “The government should be making it easier for foreign asset managers to solicit their funds, not more difficult. With the costs of maintaining an investment management business high in Japan, it would be a boon to the industry if overburdening regulatory requirements were reduced.”

Driving Disruptive Innovation

The Investment Management Committee’s aims have a good degree of crossover with those of the ACCJ Financial Services Forum, which is confident that Japan can position itself as one of the leading financial gateways for Asia, and prosper were the region to become the leader in global economic growth.

“Financial services firms ultimately help grow capital markets and the economy, which creates jobs and a higher standard of living. They also help solve the financial wellness challenges of institutional and retail investors’ clients in a way that creates confidence and [encourages] participation in capital markets,” said Derek Young, a Chartered Financial Analyst charterholder who is president and representative director for Japan at FIL Investments (Japan) Limited.

Relative to its size and the diversity of its economy, at present Japan’s finance industry “punches far below its weight,” according to Young, who also serves as vice-chair of the ACCJ Financial Services Forum and is a member of Fidelity International’s Global Operating Committee.

Introducing more competition in this sector also helps to drive disruptive innovation in the pursuit of expanding Japan’s capital markets and helping Japanese investors solve the challenges that they face, Young added.

“Japan is the third-wealthiest country in the world, and is a super-aging society,” he pointed out. “The need for assets to last for longer and to provide income makes Japan a prime target for financial services firms that want to help solve that challenge.”

Roadmap

The Financial Services Forum has drawn up an extensive list of recommendations for the Japanese government that can be distilled into six main areas:

  • Make it easier to live and work in Japan, as well as to enter and return
  • Improve governance, transparency, and stewardship
  • Address the need for more specialized professionals
  • Broaden market participation for individual investors
  • Address shortcomings in selected financial regulations
  • Facilitate development of key financial infrastructure functions

In conclusion, the report states that, “Japan possesses the necessary attributes to achieve this goal: a highly educated and motivated population, a diverse and large economy and corporate base to support it, high levels of technological development and adoption, and a stable political environment underpinned by commitment to the rule of law.”

Critically, however, what has been missing to date is a coordinated commitment, across the government and corporate sectors, to address legacy structural shortcomings that are impeding the development of a financial center that leads rather than follows. On its current trajectory, Japan is likely to fall further behind nimbler centers.

“Many of the issues needing attention are challenging to address,” the report concludes. “Nevertheless, developing a more robust financial ecosystem in Japan demands that policymakers take up this challenge with a sense of urgency and determination. Doing so not only would establish Japanese leadership in global finance, but also make a vital contribution to Japan’s long-term economic growth.”

And Young is optimistic that change is in the air.

“One of the most encouraging facets of this white paper exercise was meeting with prominent Japanese government officials about the findings,” he said. “It’s clear that there is existing momentum to change the business environment in Japan, [and] to make it more friendly to foreign investors.

“Change is not easy—especially in a tradition-rich country such as Japan—but we met with very little resistance in a general sense and, instead, were greeted with a friendly acknowledgment that Japan is thinking about ways to improve its positioning as a global financial center.”


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Columns, Publisher C Bryan Jones Columns, Publisher C Bryan Jones

Invest in Your Business—and in Yourself

As we continue building entire issues of The ACCJ Journal around singular themes, this time we take a look at investment—specifically, investing in Japan. From individual entrepreneurs to large organizations, there are many opportunities to be had. There are also many needs to be addressed as the world continues to battle Covid-19 and look beyond the pandemic.

Finding the many paths to personal and financial success in Japan

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As we continue building entire issues of The ACCJ Journal around singular themes, this time we take a look at investment—specifically, investing in Japan. From individual entrepreneurs to large organizations, there are many opportunities to be had. There are also many needs to be addressed as the world continues to battle Covid-19 and look beyond the pandemic.

While we were putting together this issue, corporate Japan was in the midst of the 2021 annual general meeting season, and the American Chamber of Commerce in Japan (ACCJ) Alternative Investment Committee hosted its third annual Shareholder Forum on June 16. Last year, the focus was on facing new challenges amid the pandemic. This year, with an eye beyond the crisis, the speakers talked about active engagement and stewardship, sharing how corporate governance and board diversity are changing as the Financial Services Agency’s reforms—launched in 2015—continue to reshape the landscape. Our coverage of the forum begins on page 10.

Expat Expertise

I had the pleasure of penning two tales of interest to individuals for this issue. Both involve real estate investments but one casts a wider net. A perk of my role as editor-in-chief of The ACCJ Journal is the chance to learn about a wide range of topics from experts. On July 1, I attended a presentation by Tokyo Family Stays Chief Executive Officer Tracey Northcott about minpaku (short-term rentals)—something many people instantly associate with Airbnb. The turmoil surrounding the market in Japan is well known, but, with rules now in place, there are great opportunities for investment. Northcott delivered a wonderful bit of insight into the business, and I recap it all starting on page 24.

For the second piece, I talked to experts from three companies about possible paths for expat investors in Japan, as well as some of the pitfalls which they must navigate. You’ll find their advice beginning on page 40.

Global Investment

One of the Japanese government’s goals is to position the country as a destination for companies looking to relocate their Asia–Pacific headquarters. But there are some obstacles to achieving this.

The ACCJ Financial Services Forum and Investment Management Committee have both recently released papers that recommend changes that could make Japan more attractive. Starting on page 34, we talk to the authors and committee leaders to learn more about these ideas for making Japan a top financial center.

Additional thoughts in this issue come from renowned economist Jesper Koll, who has again written an insightful column for us about the keys to successful investment in Japan. He notes that keeping those bits of headline-grabbing advice in perspective and staying focused on the fundamentals is a must. Find out what else he recommends on page 32.

Invest in Yourself

Lastly, I think it is important to remember that the word “investment” does not always have to be tied to money. It’s also important to invest in ourselves—through learning, taking on new experiences, and challenging our notions. To that end, it was a real pleasure to chronicle the leadership journey of ACCJ Chair and GE Japan President Eriko Asai. Her phenomenal and inspiring story that spans five countries and multiple industries provides a wonderful roadmap for those looking to build a career and reach the highest levels of success. She presented the journey as part of the ACCJ-Kansai CEO Series, and clearly outlined many actionable points that can make anyone a better leader. The story starts on page 16.

As we head into the heat of summer, watch the long-delayed Tokyo 2020 Olympic and Paralympic Games take place, and continue to be encouraged by Japan’s vaccination campaign, I hope you will find a springboard in this issue from which to launch into a prosperous post-pandemic future.


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Columns, President Jenifer Rogers Columns, President Jenifer Rogers

Going Long on the ACCJ

As Japan’s most active and influential international business community, the ACCJ plays a vital role in improving the country’s business environment. As an ACCJ leader, you can put your experience to work to create lasting benefits that extend far beyond the scope of your present role.

Investing yourself in the chamber is a great investment in Japan

In keeping with this issue’s theme, I’d like to highlight an alternative form of investing in Japan that is uniquely available to members of the American Chamber of Commerce in Japan (ACCJ): taking on a leadership role at the chamber.

As Japan’s most active and influential international business community, the ACCJ plays a vital role in improving the country’s business environment. As an ACCJ leader, you can put your experience to work to create lasting benefits that extend far beyond the scope of your present role.

With more than 60 active committees and a broad, best-in-class advocacy program, the ACCJ’s true strength is the expertise and engagement of its members. Serving as a leader in an organization with such bench strength and influence is an investment that can pay meaningful dividends.

For younger executives, it is a way to develop leadership skills and networks to help build your career. For mid-career executives, it can be a great stepping-stone toward future board engagements, career advancement, and professional fulfillment. For senior executives, it’s a chance to give back to the communities in which you’ve flourished, leverage your skills in a more diverse environment, and help mentor the next generation of leaders.

Continuity

This year, the ACCJ board and I have launched a new focus on the resilience and sustainability of the chamber. We appreciate our active leadership and want to strengthen it by encouraging development opportunities in which others—including new members—get involved as leaders. We’ve asked committee chairs and vice-chairs to develop succession plans and to create openings for more members to take on leadership roles.

We believe that having a pipeline of leaders and encouraging rotation will lead to a more dynamic and vibrant chamber. The ACCJ has long been a leader on the diversity front, and we’re challenging ourselves to energize our organization with even greater diversity at all levels. Both these initiatives create tremendous opportunities for interested members to invest their time and expertise in the future of business in Japan.

Payoff

Having a leadership role in the chamber can provide a different experience compared with one in the private sector, as well as opportunities to hone your skills or develop new ones. The ACCJ is much less hierarchical, and more consensus-driven, than many private-sector organizations. As a volunteer body, the chamber can provide a refreshing change of environment as the use of persuasion more than authority is key when navigating the diverse opinions and priorities of the membership.

For many, the ACCJ represents a great opportunity to fine-tune the type of management skills required to meet the needs of today’s workforce. For others, it offers a “mental gymnasium” in which to focus on something outside the usual routine. And for all, it’s a great way to expand your network, get involved in meaningful change, and broaden your professional experience.

Get Started

How do you get involved? A great first step is to speak to members who are in leadership roles today. Ask them about their experience and seek their input on areas where your skills might be put to best use.

For committee roles, speak to the ACCJ programs team or the current leaders of the committees in which you are interested. For Board positions, the Nominations Committee launched their self-nomination campaign in July and is seeking members who would like to put forward their name. We highly encourage self-nominations and welcome anyone who would like to contribute their time and energy.

I have been involved with the ACCJ in various capacities for the past six years, was a member once before—when previously living in Japan—while my parents were both governors in the 1980s. I can tell you that it has been a very rewarding and productive relationship for me, and I know that my parents were proud to be part of the positive changes the chamber has helped to foster in Japan. I want more members to have that experience, and I invite you to take on a leadership role. It’s an investment with a guaranteed high rate of return.


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Book Reviews Keith Kirkham Book Reviews Keith Kirkham

Of One Blood All Nations

There is ample scholarship around Meiji-period Japan and the United States that John Bingham did more to shape America’s initial diplomatic relationship with Japan than any other American. In his biography of Bingham, former ACCJ Executive Director Sam Kidder contributes significantly to that body and makes a persuasive case for the US minister to Japan from 1873 to 1885.

John Bingham: Ohio Congressman’s Diplomatic Career in Meiji Japan (1873–1885)

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I often pass by a wall on which hang portraits of the US Ambassadors to Japan in chronological order. I am drawn to it because I have known a few of them. By comparing the portraits, one can trace the evolution of photography and fashion through the centuries. As the calendar rolls back into the 19th century, the image quality declines until it becomes clear that the portrait is a grainy copy. One of the earliest and most recognizable portraits is of John Bingham, US minister to Japan from 1873 to 1885, the subject of Sam Kidder’s latest book Of One Blood All Nations.

Diplomatic Difference

There is ample scholarship around Meiji-period Japan and the United States, and Kidder’s biography of Bingham contributes significantly to that body. But it also goes further. He makes a persuasive case that “John Bingham did more to shape America’s initial diplomatic relationship with Japan than any other American.”

A leading figure in post-Civil War Reconstruction, Bingham was an Ohio Congressman and one of the prosecutors in the Lincoln assassination case. He was author of the 14th Amendment to the Constitution, which provides equal protection under the law.

Without question, Bingham had an accomplished life before coming ashore in Yokohama. As Kidder’s book details, Bingham’s innate decency, sense of duty, and energy led him to build the framework of the two nations’ diplomatic relationship while overcoming obstacles in nearly every direction.

The author shows the perplexing diplomatic and political knots that bound key issues surrounding the bilateral relationship, and how Bingham untied them. His hard-won success elevated the United States’ relationship with Japan from among its ties to other nations.

Bingham inherited a poorly housed and staffed US mission, with far-flung and nearly frontier consulates and incoherent administration. By management talent and diplomatic skill, he left behind an effective mission that was well networked with Japanese officials, influential, and trusted. His personal integrity and example played a key role in the rise of US prestige in Japan.

Context Matters

Diplomacy is sometimes more a prism than a window, and Bingham’s experience in Congress helped him measure what he could do to advance the bilateral relationship against the United States’ political realities and mood of the time.

To this part of the biography, Kidder brings truly impressive work tracing Bingham’s family, faith, and political connections to provide the context for, and limits of, Bingham’s personal political power. Bingham drew on his contacts for trusted advice, to staff key positions with competence, and for personal support.

Distinct from biographies by others, Of One Blood All Nations displays the author’s understanding of Bingham’s faith as the compass of his behavior and decisions. This is insightful and important. Other historians sometimes default to religious caricatures or shorthand about “beliefs of that period.” Kidder accepts Bingham as he was: an industrious but reserved man whose abundant intellect was yoked with an equal weight of modesty. Bingham’s personal diligence, dislike of ostentation, and his integrity distinguished him from other foreign diplomats of the time.

This diplomatic biography is an entertaining read. Bingham contends with many of the same issues—and character types—encountered in modern diplomacy and expatriate life: managing, or suffering as a result of, lags in communication with the capital; judging between when an immediate decision is required and when to wait; and bridging misperceptions as the only person with a foot in each world.

Bingham is not an unknown historical figure but, until now, rarely has his period in Japan been explored. As the book’s conclusion explains, Bingham’s papers and family were scattered, which makes Kidder’s work even more impressive. Faced with these challenges, another writer might have filled in the blanks with speculation. But Kidder set himself the more difficult task of understanding the subject in context. He does not embellish Bingham’s portrait, but restores it so that its long-lost detail and color emerge.



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Features, Investing C Bryan Jones Features, Investing C Bryan Jones

Outside Options

Over the course of their career, many professionals will live and work in multiple countries. And as expats, they will find financial opportunities and face challenges that those who stay put in their home country may not. Making and managing investments can be complex, but experts interviewed by The ACCJ Journal shared ways to maximize resources, grow wealth, and navigate potentially higher taxes, investment restrictions, and language issues.

Ways to invest as an expat in Japan

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Over the course of their career, many professionals will live and work in multiple countries. And as expats, they will find financial opportunities and face challenges that those who stay put in their home country may not. Making and managing investments can be complex, but experts interviewed by The ACCJ Journal shared ways to maximize resources, grow wealth, and navigate potentially higher taxes, investment restrictions, and language issues.

Alternatives to Consider

“The world of product opportunity for Asian alternatives has dramatically expanded over the past 10 years, and investors can now make lump-sum investments across a variety of single-purpose venture, hedge, and private-equity vehicles,” explained Edward Rogers, chief executive and chief investment officer at Rogers Investment Advisors.

There are a number of possible paths to follow for expat investors. “Many expats are investing in both onshore and offshore structures—in places such as the Cayman Islands and British Virgin Islands—that provide access to a full range of hedge-fund, private-equity, real-estate, and long-only options,” he said.

Argentum Wealth Management’s Martin Zotta, who shares the title of managing director and CEO with co-founder Lloyd Danon, said that many expats “tend to invest in a combination of monthly automated and ad-hoc lump-sum investments.” Monthly options, he noted, put excess savings from each paycheck to work, while lump sums are suitable for investing existing cash holdings and performance bonuses.

And Timothy Gregersen, head of cross-border transactions, investment sales for Japan at Cushman & Wakefield K.K. cited multiple options in real estate that can help expats build their portfolio.

Onshore/Offshore

One of the biggest concerns when choosing to invest is the tax burden that may be incurred. “Historically, the single biggest investment was probably offshore wooden housing structures that provided dramatic Japanese tax relief, but this option has been closed out by the Japanese government,” said Rogers, who founded his firm, in part, out of a desire to implement the Yale Model of endowment for his personal family investments. His first focus was to provide retail access to Japanese—and then broadly Asian—alternative investments, with an entry point of $100,000 per investment. Often, the required minimum would be $1 million.

While offshore was once a top choice, it is getting harder and harder, he said, with the new approach to anti-money laundering (AML) and know-your-customer (KYC) processes making basic retail banking—for individuals as well as small and medium-sized enterprises—very difficult. “Banks make less and less money serving these clients, and are offering them commensurately fewer and fewer services, with the excuse that AML and KYC have created barriers to relationships,” he explained.

With offshore being less attractive, Rogers identified two onshore options that can bring significant tax benefits:

  • Buying or leasing aircraft
  • Angel zeisei

The latter is an incentivized Japanese investment tax system, mainly aimed at individuals, that allows investors to deduct the higher of ¥10 million or 20 percent of their income.

Taking advantage of newer financial institutions can also be beneficial.

“Online banking is most likely the single most important concept for expats on an individual basis,” Rogers explained. “And as small business owners, it is easier to understand and to do so quickly. Large, traditional brick-and-mortar banks charge absurd sums to execute electronic transfers.” These costs should be understood and compared versus online options, he said. “Online wins pretty much every time.”

Property Profits

For those looking to invest in real estate, Cushman & Wakefield’s Gregersen said there are a few ways an expat can access real estate investments, depending on their overall financial objectives and level of risk tolerance. “The easiest option, executionwise, would be to access real estate via listed real estate investment trusts, or REITs,” he explained. “This can be accomplished with a relatively small amount to start, and can easily be added to or divested.”

Investment in direct assets, such as a condo unit or an apartment building, is an alternative path that Gregersen suggested. “This typically involves a larger ticket price, the use of leverage, and transaction costs. Real assets are lumpy—and generally less liquid than listed options—so they should be carefully considered.”

Another possibility that has recently taken shape via crowdfunding platforms is a hybrid of these two. “This could work for those who are looking for investments that aren’t correlated with the stock market and which don’t require as much capital as direct investments,” he said.

If one decides to go the direct investment route, a major obstacle for an expat will be securing financing, according to Gregersen. “Unless the expat has permanent residency, it can be very difficult to source financing at good terms,” he said. “It’s not impossible, but it will be quite challenging.”

He cited two matters that are likely to be more difficult for expats than for Japanese nationals:

  • Transferring funds to close the deal
  • Property, income, and withholding taxes

“Closing a real estate transaction involves transferring large sums of money, so it is important to confirm your bank’s policies and procedures in advance,” he said. “Further, if the expat intends to use funds from overseas, it is even more important to confirm with the bank to which the funds are being transferred what policies and procedures they have with respect to international remittances. Funds can get stuck in transit, and figuring out where they are and why this has happened is not a fun experience.”

Property owners whose primary residence is no longer in Japan will face logistical challenges, he added. “They will need to appoint a tax administrator to handle the payment of annual property taxes and to file income tax documents, in the case of investment property. Further, where owners live overseas and rental income is to be remitted, the funds will be subject to withholding tax at the source. This is also true in the case of a sale.”

Portability Is Vital

Some expats have settled in Japan and have made the country their permanent home. But for most, their time here will be limited, and the decision to pick up and move is outside their control. A promotion or shift in corporate priorities can lead to a sudden relocation.

“In general, expats are looking for portable, flexible solutions as regards access to capital and tax efficiency,” explained Argentum’s Zotta, noting that there is a wide range of international options available to expats, depending on their nationality and financial requirements. “Portability is vital, as most clients will not remain in Japan long term. A good solution for one client may not be suitable for another, so it is essential to clearly understand a client’s financial goals and objectives before presenting the most appropriate solution.”

Argentum specializes in international investment solutions and, for US nationals, US onshore solutions.

“We take a holistic approach to financial advice and our clients’ needs, and prepare recommendations to suit their individual situations,” explained Danon. “During a first meeting, we go through a general Q&A to understand, in detail, what will be the most appropriate choice. We have a broad range of solutions to meet the needs of all clients, and being locally licensed in Japan to offer advice gives us a comprehensive range of options.”

Language Barrier

Japan is well known for its paperwork, and more often than not documents are only in Japanese. Even if an English translation is available, ultimately the Japanese version will need to be completed and filed. Doing so can be challenging even for expats who are fluent in Japanese, as the language of such transactions is complex.

“One key way for expats to deal with the language barrier is to work with a bilingual agent on the purchase, and a bilingual property manager on an ongoing basis,” said Gregersen.

Rogers gave the same advice, saying that investors should learn Japanese, but also noting that simply speaking and reading the language is not enough. “The reality is that investors should be prepared—and willing to pay for high-quality translations of documents to make sure they know what they are investing in.”

Long View

Danon noted that those who intend to live in Japan for the long term should take special precautions. “You should prepare for your parents’ and your own estate planning needs, as Japan has an unusual way of treating and taxing estates between heirs,” he explained. “Estate planning is something our clients have reached out to us a lot more about recently, given Covid-19 concerns and restrictions on movement. Unfortunately, many expats are underprepared—or are generally unaware—of how Japanese inheritance tax laws will affect them and their immediate families.”

Rogers was more blunt. When asked what advice he has for expats planning to retire in Japan, he answered with one word: don’t. “There is no way you want to deal with Japanese inheritance taxes if you don’t have to.”

But for those who do want to settle down in Japan, and wish to put their money to work, there are many investment opportunities to be had. Leveraging the expertise of the foreign community through legal, financial, and advisory services, however, is a key part of successfully investing as an expat.


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Chubu, Columns, Chubu and Kansai Mark Hosang Chubu, Columns, Chubu and Kansai Mark Hosang

Digital Transformation of Committees

When the ACCJ kicked off the transformation of its website platform early last year, the process sparked a conversation among members of the Chubu chapter about what digital tools our committee leaders need to succeed in bringing value to members and addressing pain points.

Removing barriers and ensuring continuity through centralized tech

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When the American Chamber of Commerce in Japan (ACCJ) kicked off the transformation of its website platform early last year, the process sparked a conversation among members of the Chubu chapter about what digital tools our committee leaders need to succeed in bringing value to members and addressing pain points.

Following ACCJ President Jenifer Rogers’s directive to improve succession planning, the Chubu chapter reviewed the impediments that committees were facing. The takeaway was that the committee chair usually has all the documents, templates, and contact lists on their computer, and no one else has access.

As Chubu Programs Committee Chair Ray Proper explained, “I have years’ worth of information about my committee activities on my own shared drive—for my current and past committees—that I think would be much more useful were it accessible to others as part of a formal arrangement.”

Sudden Shift

Often in the past, without warning a committee member may have had to move out of Japan for work. This made it difficult for the remaining members to continue with the committee’s activities. Similarly, if the chair had a sudden medical event or accident, the committee would tread water until they could get back on track. This meant that the bus factor—the minimum number of people who can be hit by a bus before a project comes to a stop—effectively has been one.

Lastly, for committee leaders, an ongoing issue has been new member retention. Sometimes, a person joins a committee, attends a meeting, then never attends another. The feedback we have received from such members to date is that it’s hard to get up to speed, because they don’t know what has been discussed in previous meetings, are unsure how they can contribute, and don’t know what tasks need to be carried out.

Centralizing

To address these issues, the Chubu chapter began piloting the use of cloud storage for the Chubu Walkathon. This was then rolled out to the other committees.

Chubu Community Service Committee Chair Erin Sakakibara shared how the move made a difference this year: “Thanks to cloud storage, we were able to organize all our content and collaborate. It was particularly valuable in providing a base and continuity to build on in subsequent years of the Walkathon,” she said.

“But to be honest,” she added, “though technology is the tool, it also takes human management. You need someone who is organizing files and providing guidance for the team to get the full benefit of the technology. We couldn’t have pulled off the Walkathon without the cloud capability or our captain, who kept us organized and honest in our tasks.”

Having a cloud drive reduced the amount of management required on the part of the chair, as individual members could update and share documents on which they were working. This also eliminated the question of whether a document was the latest version—a crucial timesaver for an event with 220 files, scattered among more than 45 folders, being worked on by 20 people over the course of six months.

Onboarding

Getting new committee members up to speed becomes easier when you can point them to a cloud drive and they can review all the materials and meeting minutes. This helps them quickly get an idea of the committee’s activities, as well as how the group is organized and managed.

The Chubu chapter has also created LINE groups for each committee, allowing speedier communication while also making things more accessible to new members, increasing engagement by adding more touch points.

For successor planning, cloud storage moves the breadth of knowledge from the chair into a repository that all can reference. This can remove the barrier to entry for members and allow current chairs to step down with minimum disruption.

The Chubu chapter will continue to look into other technologies to address issues as well as assist leaders and members, so that the chamber can provide more value to everyone involved.


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