Japanese Business: Keeping it in the Family

Andrew Carnegie, a 19th-century tycoon, famously said that inherited wealth “deadens talents and energies”—one reason why he gave most of his fortune to charity. Business research tends to support the Carnegie thesis. Companies controlled by heirs often underperform competitors that have professional managers. Except, apparently, in Japan.

A forthcoming paper* in the Journal of Financial Economics finds not only that inherited family control is still common in Japanese business, but that family firms are “puzzlingly competitive”, outperforming otherwise similar professionally managed companies. “These results are highly robust and…suggest family control ‘causes’ good performance rather than the converse,” say the authors.

Japan boasts some of the world’s oldest family-run businesses, and many family firms—Suzuki, Matsui Securities, Suntory—break the rule of steady dynastic decline. So how do Japanese firms do it? The answer, says the paper, is adoption.

Read the rest of the story: Adult adoption in Japan: Keeping it in the family.

Japans Hitachi in Deal with Britain for High-speed Rail Project

Japans Hitachi will supply nearly 600 train carriages for Britains inter-city high-speed rail project in a deal worth £4.5 billion, the company and the British government said Wednesday.The giant conglomerate won the project along with British partner John Laing in 2009 but negotiations had been delayed after a change of government in Britain.The firms will supply 92 complete trains — comprised of 596 carriages — to replace the ageing fleet on Britains inter-city rail networks, with Hitachi holding a 70-percent stake in the consortium while John Laing has 30 percent.

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TonenGeneral to Buy Exxon’s Exit of Japan for $3.9 Billion

TonenGeneral Sekiyu KK agreed to buy partner Exxon Mobil Corp.’s Japanese business in a $3.9 billion deal that may force the oil refiner to seek new alliances.

TonenGeneral will acquire 99 percent of Exxon Mobil Yugen Kaisha, which produces and sells fuels, using cash and bank loans, the Tokyo-based company said yesterday.Refiners in Japan are grappling with rising operating costs after a 2010 order from the government to upgrade their oldest plants to extract more fuel from crude. While Japan’s consumption is declining due to a shrinking population and greater use of hybrid and electric autos, the transaction also reflects Exxon Mobil Chief Executive Officer Rex Tillerson’s strategy of focusing on oil exploration.

“TonenGeneral will struggle to recover their acquisition costs unless they find a strategic partner,” said Osamu Fujisawa, an independent energy economist in Tokyo.

“There are no Japanese refiners that can partner with Tonen. So, it should be someone from the Middle East.”

Read the rest of the story: TonenGeneral to Buy Exxon’s Japan Refinery Unit for $3.9 Billion.

Japan Loves Innovation, but Entrepreneurship? – These start-ups may surprise you

Japan is mad about innovation. From tech gadgets to inventively designed products, it is a place hungry for cutting-edge. Why then are there so few entrepreneurs? Culture, many say, is to blame. With an aversion to standout much less fail, the Japanese spurn start-ups. But what culture doesn’t hate losing?

The better answer is Japan’s complicated bureaucracy and regulation that makes it difficult to launch and raise capital for an enterprise. According to the World Bank’s Doing Business index, Japan ranks 107 out of 183 countries for ease of starting a business. Venture capital is scarce.

Both are inadequate responses for true entrepreneurs. That’s at least what I witnessed tonight when all of Tokyo’s start-up stars came out for an awards fete hosted by U.S. Ambassador to Japan John Roos. Ambassador Roos has promoted, more than any other American chief of mission, entrepreneurship, encouraging Japanese innovators to “aim global.”

Read the rest of the story: Japan is mad about innovation. Can it get crazy about entrepreneurship?.

Pictured is Real-F 3D, a start-up in Japan that makes 3D models of your face.

Japan Nuclear Companies Stacked Public Meetings

An independent investigation in Japan has revealed a long history of nuclear power companies conspiring with governments to manipulate public opinion in favour of nuclear energy.

One nuclear company even stacked public meetings with its own employees who posed as ordinary citizens to speak in support of nuclear power plants.

"The number one reactor has been operating for 30 years and I’ve never had a problem selling my rice or vegetables because of fears of radiation," a man posing as a farmer told a gathering of citizens discussing a proposal to use plutonium fuel at the Genkai nuclear plant on the southern island of Kyushu.

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Citigroup Being Investigated in Japan by Financial Regulators

Citigroup is being investigated by Japanese regulators for possible infractions related to its marketing of financial products and could face its third major punishment in Japan in 7 years, a source with knowledge of the matter said.

Japan’s Financial Services Agency (FSA) is probing whether Citigroup failed to offer sufficient explanations to customers about investment trusts, which are similar to mutual funds in the U.S., and other financial products, the source said.

The regulator is also looking at whether controls against money laundering were sufficient, following punitive action in recent years for lax oversight in that area, the source said.

Read the rest of the story: Citigroup Faces Regulatory Scrutiny in Japan.

Tokyo, Okinawa usher in antigang legislation

Local ordinances prohibiting companies from trading with organized crime syndicates will be put into force Saturday in Tokyo and Okinawa with the expectation of stopping their cash flow funds and eventually putting the mob out of business.

Some legal experts welcome the moves by the Tokyo Metropolitan Government and the Okinawa Prefectural Government, but they also urge local police to properly disclose to the general public detailed information about gangs so they can avoid trading with them and provide concrete examples of cases being banned by the new ordinances.

Tokyo and Okinawa are the last prefectures to enforce such measures against underworld syndicates.

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Fear for jobs ignites ‘English crisis’ in Japan

It’s eight in the morning in a Tokyo office building, and a dozen middle-aged Japanese businessmen sit inside small booths, sweating as they try to talk English to the instructors in front of them.

"I hope my wife will understand my hobby," one 40-something man says, opening his mouth widely around the English words.

He is one of legions of Japanese businessmen, or "salarymen," struggling with a language they thought they had left behind them in school as fears mount that the growing push by Japanese companies into overseas business will mean a dark future for them without usable English.

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Japan takes Canada to WTO over renewable energy rules

Japan asked the World Trade Organization on Wednesday to form a legal panel to decide whether Canadian provincial backing for solar and wind energy projects gives an unfair advantage to domestic equipment makers.

Japan has given up direct attempts to resolve a spat over an Ontario scheme that guarantees prices for renewable energy as long as it is generated with Canadian-made equipment, Japan’s ambassador to the WTO said in a letter to the chairman of the WTO’s disputes division.

"Consultations failed to resolve the dispute. As a result, Japan respectfully requests that a panel be established to examine this matter," Ambassador Yoichi Otabe wrote.

Read the rest of the story: Japan takes Canada to WTO over green-power rules.

M&A: Sony Leads Japan Inc. Eyeing Deals With $2.4 Trillion

After hoarding $2.4 trillion in cash, corporate Japan is pursuing overseas takeovers like never before to boost returns. Sony Corp. and Fujifilm Holdings Corp. are among the companies with the biggest incentive to chase deals.

More than $25 billion of cross-border acquisitions have been struck by Japanese companies this year, on pace to exceed the record amount of deals announced in 2006, according to data compiled by Bloomberg. The buying spree comes as Japan’s currency climbed to its highest level since World War II versus the dollar and the world’s third-largest economy fell into its third recession in a decade after being rocked by the nation’s biggest earthquake on record.

Japanese companies are using their buying power on foreign takeovers after slumping demand at home destroyed almost half their equity value in the past five years.

Read the rest of the story: Sony Leads Japan Inc. Eyeing Deals With $2.4 Trillion: Real M&A.