Focus: Investment Japan

JETRO, 1221 Avenue of the Americas, NYC, NY 10020July 16, 2003

In recent years, analysts and traders have looked to the end of the March fiscal year as a time when Japanese equity markets were said to rise through artificial measures that sought to prevent banks and major investors from having to write down assets in their portfolios. This year there was a notable absence of this phenomenon and the Nikkei 225 index descended to 20 year lows.

Over the last few months, however, the Nikkei index has reversed itself and recently rose to a 10 month high. This is an increase of over 20% -- surpassing in percentage terms the dramatic rise of the Dow Jones index over the same time period.

Whether this performance will prove sustainable or accurately reflects current fundamentals remains to be seen. While Japan has achieved real progress in implementing structural reform and other measures that are helping to improve efficiency and the overall competitiveness of the Japanese economy, much remains to be done and markets rarely move in linear fashion.

What is clear, however, is that businesses and investors are beginning to recognize the inherent value that lies within the Japanese economy and they are starting to take steps to position themselves accordingly.’

Changing investor and corporate sentiment toward Japan can be viewed as a net positive. However, this optimism should by no means be interpreted as a sign the nation has overcome the many difficulties and risk factors that must be addressed to achieve a sustainable recovery.

Can Japan Adapt to a Higher Interest Rate Environment? Economic theory holds that stronger economic growth should result in higher interest rates. Therefore, while Merrill Lynch Chief Japan Analyst Jesper Koll in a recent Wall Street Journal article described the recent surge in long-term Japanese interest rates from a record low of 0.4% to over 1% as an indication that “Japan's all-out attack on deflation is finally gaining credibility”, higher interest rates will place a greater strain on the debt load of borrowers.

This can be seen in the recent announcement by Japan’s Ministry of Finance that it will charge higher interest rates on loans to government-affiliated institutions. As a result, the Housing Loan Corporation will be charged 1.3% rather than 0.7%. That in turn will effect the pricing of new mortgages. On the corporate front, Mizuho Corporate Bank raised its long-term prime rate by 0.35% to 1.60%. These increases may be small in absolute terms, yet are extremely large as a percentage – and may be indicative of further increases to come. Therefore, the consequences of these and future adjustments remains to be seen and should be watched carefully as they will have real consequences.

While many believe higher interest rates may serve as a constraint on Japan’s economic prospects the sentiment is mixed. This can be seen in the July 10 comments of Morgan Stanley Chief Investment Officer John Alkire in the Financial Times , who noted his belief that higher rates could boost the Japanese economy, stating “Consumption will rise because savvy individuals will stop hoarding money and lock in ultra-low fixed rates for large-ticket items such as mortgages and real estate”.

Will There be a Pickup in Business and Consumer Demand? Fear of deflation compounded by anemic economic growth has contributed to weak consumer demand in Japan. As a result businesses have also cut back their spending. While the Tankan survey suggests this may be about to change, it is not clear whether consumer and business demand will expand sufficiently in the foreseeable future to constitute a source of sustainable growth.

While much has been made of deflation pressures in Japan and its impact on consumer behavior, and it is important to keep these concerns in a proper context. Consumption expenditures in Japan are the same as the United States on a per capita basis . and Japan – the world’s second largest economy accounts for 15% of the world’s total GDP – about four times the size of China. Few markets possess the wealth and sophistication of Japan. The economic changes now taking changes are also having a dramatic effect on the attitudes, behavior and buying practices of Japanese consumers. This trend has been recognized by upscale foreign retailers including Tiffany’s, Prada, Ferragamo, Christian Dior and Coach, who all count on Japan for a significant portion of their revenues growth.

While many improvements remain anecdotal, many experts are sensing signs of change. One particularly relevant comment appeared in a July 13, 2003 New York Times interview with Stephen Mitchell, who heads a team of Japanese equity specialists that manage about $5 billion for J.P. Morgan Fleming Asset Management in London. Mitchell noted “Currently we are forecasting the (Japanese) economy will grow at a 1.2% rate, but we are … revising our … numbers higher. We are looking for consumption, which is about half of GDP in Japan, to start picking up. …. you can feel the energy starting to pick up.”

Optimism is also reflected in the Japanese Cabinet’s “Economy Watchers” survey, an index measuring sentiment among restaurant owners, taxi drivers, and other small business and service workers who are in a sense leading indicators of consumption trends. This index rose 3.7 points to 42.1 in June from the previous month. As with the Tankan results, one must maintain caution when evaluating this statistic, as while representing a real improvement, a reading below 50 still means more people say they are worse off now than three months ago.

Finally, the Nikkei Shinbun recently forecast that bonuses paid by Japanese companies this summer may increase by 3.14% compared with last year. Manufacturing companies, a depressed segment in the economy, are forecast for an even higher rise of 5.07% -- their largest rise since 1990. This could give further impetus to consumption in Japan.

Can Japan Sustain the Movement Toward Economic Reform? Media coverage of the economic reform process in Japan tends to focus on the interplay between Japanese politicians and bureaucrats, as well as the private sector and other important constituencies. The emphasis is on creating a heated drama, measuring which entity has the upper hand, and whether entrenched interests will be able to retard the inevitable changes and economic forces that are now taking hold of Japan.

The need to sustain and expand upon the progress that has been achieved remains critical and many difficult issues remain to be resolved. These include those outlined above as well as the ability to clean up bad loans and restore the health of Japan’s financial system, to promote the dynamism of new businesses, start-ups and technology development as well as labor flexibility and the issues presented by an aging population.

It should be emphasized that every democracy -- particularly one as large and complex as Japan -- contains many different factions and interests with divergent concerns. This can make decision-making complex and difficult to achieve -- particularly in a society such as Japan’s, which places such great emphasis on minimizing dislocation and the development of institutional and societal consensuses.

As a result, there will inevitably be ups and downs and nonlinear movement. In the end, however, the pressures of globalization and need for Japan to preserve its economic viability will lead toward successful implementation of the substantive changes necessary to achieve the goals laid out in the “Action Plan for Economic and Structural Reform” adopted by Japan in 1997.

Since announcing a comprehensive “Action Plan for Economic and Structural Reform” in 1997, the Government of Japan has increasingly recognized the important role it plays in helping to promote reform and the steps that need to be taken to lower Japan’s high cost structure and increase the general attractiveness of doing business in Japan. As highlighted in past Focus newsletters, substantial progress has been achieved over the past six years through a wide variety of initiatives, both in terms of specific achievements as well as the expectations, outlook and behavior of Japanese corporate and government managers. Recent developments include:

Recognizing the important role Foreign Direct Investment plays in promoting innovation, competition and economic vitality, Japan has devoted substantial resources to introducing systemic reforms to promote inward FDI. To facilitate the process by which investments can be made, the government opened “Invest Japan” liaison offices last May at all 12 government agencies, ministries and the Cabinet office. Invest Japan staff will not only promote new greenfield investments, but also M&A and other transactions.

Japan’s newly launched Industrial Revitalization Corporation of Japan (IRCJ) opened its doors on May 8, 2003. It is staffed by 60 experts, who are now moving to purchase the nonperforming debt of, and to provide support to, struggling companies that meet established criteria that demonstrates an ability to reorganize themselves within three years or less. Possessing a five-year mandate before it is dissolved, the IRCJ plans to revitalize at least 100 firms, utilizing public funds and technical assistance to nurture them back to health through comprehensive rehabilitation and reorganization plans.

The injection of ¥2 trillion in public funds into Resona Holdings, Japan’s fifth-largest bank last May, marked the first effective nationalization of a banking institution using new emergency assistance measures. In this unprecedented move, the government has taken the lead to preserve trust and a financial system safety net. This initiative has served to boost confidence in Japan’s determination to deal with its serious banking problems. It was handled professionally and expeditiously -- without fear of systemic risk or deposit runs. Politically, the use of taxpayers' funds faced little opposition in contrast to the past when political opposition has served as a major obstacle to decisive regulatory action.

In recognition of the need to acknowledge and promote the benefits of geographical diversity, 117 Special Zones for Structural Reform have been established as of May of this year. This program provides local governments with an ability to obtain waivers from national regulations in order to facilitate their economic development. Examples include:

- Ota Special Zone for Education: Establishment of a more diverse educational curriculum, including conducting classes in English in elementary, middle and high schools.

- Kitakyushu Special Zone for International Physical Distribution: Providing 24 hour, 365 day a year customs clearance to importers and exporters.

- Kobe Special Zone for Medicine: Accepting credentials of foreign medial professionals to allow their participation in development of biochemical industry through invitations of local research institutes and other approved parties.


Focus: Investment Japan
JETRO, 1221 Avenue of the Americas, NYC, NY 10020July 16, 2003
Businesses & Investors Perceive a Change in Japan's Economic Prospects
In recent years, analysts and traders have looked to the end of the March fiscal year as a time when Japanese equity markets were said to rise through artificial measures that sought to prevent banks and major investors from having to write down assets in their portfolios. This year there was a notable absence of this phenomenon and the Nikkei 225 index descended to 20 year lows. Over the last few months, however, the Nikkei index has reversed itself and recently rose to a 10 month high. This is an increase of over 20% -- surpassing in percentage terms the dramatic rise of the Dow Jones index over the same time period. Whether this performance will prove sustainable or accurately reflects current fundamentals remains to be seen. While Japan has achieved real progress in implementing structural reform and other measures that are helping to improve efficiency and the overall competitiveness of the Japanese economy, much remains to be done and markets rarely move in linear fashion. What is clear, however, is that businesses and investors are beginning to recognize the inherent value that lies within the Japanese economy and they are starting to take steps to position themselves accordingly.’ The Japan External Trade Organization (JETRO) provides the following information examining these issues in greater detail.
Investor Sentiment Toward Japan is Beginning to Improve
	After several years of disappointing forecasts and a distinct lack of enthusiasm about Japan’s economic prospects, there has been a noticeable shift in the sentiment of investors toward Japan. While this trend is still in its initial stages and remains subject to the vagaries and volatility of fast-changing global markets, preliminary indicators detect an emerging sense of optimism from overseas investors as well as in Japan itself. For example: Credit Suisse First Boston global equity strategist Andrew Garthwaite recently advised investors to change the amount of Japanese equities in their portfolios from a 12% underweight to a 2% overweight position. Taking a similar, but slightly more cautious view, the Financial Times reported that Merrill Lynch upgraded Japan in a global portfolio to “neutral” from “underweight” as a hedge on the world economic recovery . In general, media coverage on Japanese investments has been increasing and turning more positive. In the recent midyear Barron’s investor roundtable, for example, which features the views of a small group of prominent fund managers, several recommended the AMEX listed iShare MSCI Japan exchange traded fund (EWJ) as a portfolio holding. Emergingportfolio.com recently reported Japanese equity funds “have now had positive flows in five of the last six weeks as investors are drawn to compelling valuations in Japan equities …” Similarly, volume on the Tokyo Stock Price Index (TOPIX) over the past few weeks has been at its highest level in more than ten years. The Japan OTC Equity Fund (JOF) and Japan Equity Fund (JEQ) are two NYSE-traded closed-end mutual funds that provide U.S. investors with exposure to Japanese assets. Over the past five years they have been trading on average at (-5.39 for JOF and –1.37 for JEQ) discounts to their net asset value. Recently these divergences shifted to significant premiums , amounting on July 8, 2003, to 30.75% and 29.70% respectively. This is far above normal – not only for these securities – but all closed-end funds.
Japanese Executives Are Also More Positive About Their Prospects
	Last month the Bank of Japan released its “Tankan” survey, which showed large Japanese companies have become less negative over the past few months. The Tankan measures the percentage of companies saying business conditions are better minus the percentage saying things are worse. The headline index has been in negative territory since March 2001. In this report companies noted their intention to boost capital expenditures by around 4.9% this fiscal year. This is the first time in several years that big companies have said they will spend more on capital spending. The key index of sentiment rose to -5 from -10 in the previous March survey. While still negative, this was unexpected, as economists surveyed by Dow Jones Newswires had estimated this index would remain unchanged. As one analyst, ING Securities economist Richard Jerram stated in a July 1st Wall Street Journal article, … the Tankan "really confirms that the market has been underestimating the strength of the (Japanese) economy in recent months". Improving prospects are also reflected in the rise of Japanese private machinery orders by 6.5% in May over April. This serves as a positive sign and can be seen as indicating renewed confidence on the part of industrial producers. Another survey of top Japanese executives undertaken by the Nihon Keizai Shimbum also expressed cautious optimism. While about 70% of respondents noted their belief the Nikkei index would not reach 10,000 this year – a figure that has already been surpassed on an intra-day basis – the number of respondents who described the current state of the economy as “deteriorating” declined by 50% -- to about 24% from 36%, since February.
Nevertheless, Japan Still Faces Serious Obstacles and Risk Factors
	Changing investor and corporate sentiment toward Japan can be viewed as a net positive. However, this optimism should by no means be interpreted as a sign the nation has overcome the many difficulties and risk factors that must be addressed to achieve a sustainable recovery. Can Japan Adapt to a Higher Interest Rate Environment? Economic theory holds that stronger economic growth should result in higher interest rates. Therefore, while Merrill Lynch Chief Japan Analyst Jesper Koll in a recent Wall Street Journal article described the recent surge in long-term Japanese interest rates from a record low of 0.4% to over 1% as an indication that “Japan's all-out attack on deflation is finally gaining credibility”, higher interest rates will place a greater strain on the debt load of borrowers. This can be seen in the recent announcement by Japan’s Ministry of Finance that it will charge higher interest rates on loans to government-affiliated institutions. As a result, the Housing Loan Corporation will be charged 1.3% rather than 0.7%. That in turn will effect the pricing of new mortgages. On the corporate front, Mizuho Corporate Bank raised its long-term prime rate by 0.35% to 1.60%. These increases may be small in absolute terms, yet are extremely large as a percentage – and may be indicative of further increases to come. Therefore, the consequences of these and future adjustments remains to be seen and should be watched carefully as they will have real consequences. While many believe higher interest rates may serve as a constraint on Japan’s economic prospects the sentiment is mixed. This can be seen in the July 10 comments of Morgan Stanley Chief Investment Officer John Alkire in the Financial Times , who noted his belief that higher rates could boost the Japanese economy, stating “Consumption will rise because savvy individuals will stop hoarding money and lock in ultra-low fixed rates for large-ticket items such as mortgages and real estate”. Will There be a Pickup in Business and Consumer Demand? Fear of deflation compounded by anemic economic growth has contributed to weak consumer demand in Japan. As a result businesses have also cut back their spending. While the Tankan survey suggests this may be about to change, it is not clear whether consumer and business demand will expand sufficiently in the foreseeable future to constitute a source of sustainable growth. While much has been made of deflation pressures in Japan and its impact on consumer behavior, and it is important to keep these concerns in a proper context. Consumption expenditures in Japan are the same as the United States on a per capita basis . and Japan – the world’s second largest economy accounts for 15% of the world’s total GDP – about four times the size of China. Few markets possess the wealth and sophistication of Japan. The economic changes now taking changes are also having a dramatic effect on the attitudes, behavior and buying practices of Japanese consumers. This trend has been recognized by upscale foreign retailers including Tiffany’s, Prada, Ferragamo, Christian Dior and Coach, who all count on Japan for a significant portion of their revenues growth. While many improvements remain anecdotal, many experts are sensing signs of change. One particularly relevant comment appeared in a July 13, 2003 New York Times interview with Stephen Mitchell, who heads a team of Japanese equity specialists that manage about $5 billion for J.P. Morgan Fleming Asset Management in London. Mitchell noted “Currently we are forecasting the (Japanese) economy will grow at a 1.2% rate, but we are … revising our … numbers higher. We are looking for consumption, which is about half of GDP in Japan, to start picking up. …. you can feel the energy starting to pick up.” Optimism is also reflected in the Japanese Cabinet’s “Economy Watchers” survey, an index measuring sentiment among restaurant owners, taxi drivers, and other small business and service workers who are in a sense leading indicators of consumption trends. This index rose 3.7 points to 42.1 in June from the previous month. As with the Tankan results, one must maintain caution when evaluating this statistic, as while representing a real improvement, a reading below 50 still means more people say they are worse off now than three months ago. Finally, the Nikkei Shinbun recently forecast that bonuses paid by Japanese companies this summer may increase by 3.14% compared with last year. Manufacturing companies, a depressed segment in the economy, are forecast for an even higher rise of 5.07% -- their largest rise since 1990. This could give further impetus to consumption in Japan. Can Japan Sustain the Movement Toward Economic Reform? Media coverage of the economic reform process in Japan tends to focus on the interplay between Japanese politicians and bureaucrats, as well as the private sector and other important constituencies. The emphasis is on creating a heated drama, measuring which entity has the upper hand, and whether entrenched interests will be able to retard the inevitable changes and economic forces that are now taking hold of Japan. The need to sustain and expand upon the progress that has been achieved remains critical and many difficult issues remain to be resolved. These include those outlined above as well as the ability to clean up bad loans and restore the health of Japan’s financial system, to promote the dynamism of new businesses, start-ups and technology development as well as labor flexibility and the issues presented by an aging population. It should be emphasized that every democracy -- particularly one as large and complex as Japan -- contains many different factions and interests with divergent concerns. This can make decision-making complex and difficult to achieve -- particularly in a society such as Japan’s, which places such great emphasis on minimizing dislocation and the development of institutional and societal consensuses. As a result, there will inevitably be ups and downs and nonlinear movement. In the end, however, the pressures of globalization and need for Japan to preserve its economic viability will lead toward successful implementation of the substantive changes necessary to achieve the goals laid out in the “Action Plan for Economic and Structural Reform” adopted by Japan in 1997.

Progress Can Only Be Sustained Through Further Improvements in the Real Economy
	While the prices of individual securities and the Nikkei index can be seen as one indicator of changing sentiment toward Japan and the progress it has achieved, there are many tangible achievements and anecdotal examples that reinforce this sense of sustainable change in Japan. Further movement is indeed essential and Japan’s ability to maintain and build on current progress is likely be determined by its ability to accelerate corporate restructuring and revitalization while managing viable monetary, regulatory and fiscal policies that recognize market realities, while maintaining the consensus that will allow necessary adjustments to occur. The need for sustainable progress is reflected in the comments of J&W Seligman global large-cap fund manager David Cooley, who recently noted in Barron’s “Valuations suggest there’s room to run in Japan. Sure, if you have a cyclical recovery and no proactive management, it all falls back to earth. But with differentiation and management, that all changes”. Domestic & Foreign Businesses Begin to Embrace the Change now Occurring in Japan While Japanese firms in the postwar era have been reluctant to alter traditional business practices in all but the most extreme situations there are signs that companies have begun to recognize the inevitable need for change. At the same time U.S. and foreign companies are coming to recognize the transition that is taking place. As a result, they are now taking steps to reaffirm and expand upon their involvement in the Japanese economy. Citigroup International Chairman Dereck Maughan highlighted Citigroup’s continuing commitment to Japan in a recent Nikkei newspaper interview. He noted Japan accounted for $1.1 billion of $1.5 billion in after tax earnings in Asia in FY2002 – 60% of Citigroup’s total overseas earnings. Through M&A and other business alliances, Citigroup presently has over $8 billion in equity capital invested in Japan – 10% of its total equity. One recent success story that highlights the potential of investing in Japan concerns the purchase of Osaka-based Kansai Sawayaka Bank by WL Ross & Co. in February 2001. Using turnaround techniques to rationalize the bank’s operations and loan portfolio and otherwise improve its profitability and marketing capabilities, WL Ross recently agreed to sell more than 80% of the bank to the Sumitomo Mitsui Financial Group Inc. for about twice the price it paid little more than two years ago. Japanese-led restructurings include the recent case of Kenwood, an audio equipment manufacturer that recently posted its first consolidated net profit in four years. This was achieved by methods the Nikkei Weekly reported as being similar to “those adopted by Nissan … characterized by Western rationalism”. In their coverage, Kenwood President Haruo Kawahara cited key lessons that included “get rid of assets that do not generate value” and “downsize operations to a manageable level”. Another significant Japanese restructuring includes NEC Corp.’s move to spin off its loss-making semiconductor division last November. This division lost ¥3.2 billion in its first fiscal quarter of 2002, even though it enjoyed a 3.6% increase in sales over the same period. The new company is called NEC Electronics Corp. and will be launched in an initial public offering scheduled for July24, 2003. Investors are viewing this development in a very positive light, causing shares in NEC, a company with a present market capitalization in excess of $10 billion, to more than double from a low established in April this year. Japanese financial institutions are now moving to address their problems through changes in their business practices. This includes a move beyond “relationship-” to “credit-based” lending and a desire to rationalize operations and better manage their risk exposure. The market for syndicated bank loans has experienced dramatic growth, from zero in 1997, to ¥4 trillion in 1999 and an estimated ¥12 trillion in 2002. Other changes include the introduction of non-recourse loans and collateralized loan obligations, as well as substantial increases in ATM and other banking service fees as these financial institutions move to cover costs and enhance their profitability and business model. Japanese hospitals, facing cuts in government reimbursements and the pressures of an aging population are adopting what the Nikkei Weekly termed “a strict regimen of rationalization and .. new services ... Non-medical companies are also moving to take advantage of this opportunity. For example, the Shin-Nihonbashi Ishii Clinic in Tokyo in cooperation with a subsidiary of U.S. insurance giant AIG has introduced an emergency care service accessed through a special cellphone. In addition, Nihon Hospital Services, a Mitsubishi subsidiary that helps to lower hospital procurement costs has doubled its number of clients over the past two years. Mitsubishi forecasts a rise in its medical services-related businesses from ¥60 to ¥100 billion by 2005. Small to medium sized businesses, which have suffered severely in the current downturn, are also learning to make adjustments. Manufacturers who struggle to compete against larger rivals as well as overseas competitors are learning to network and join forces using mechanisms such as the NC Network (http://www.nc-net.or.jp). This organization utilizes a factory search database to help businesses locate new suppliers and to market their goods and services. It presently consists of 12,000 member companies, who collectively employ 420,000 workers and possess $42 billion in collective revenues. Japanese firms are also moving to step up the profitability and size of their overseas operations. A Nihon Keizai Shimbun survey of 519 listed companies reported they enjoyed a 46% increase in the consolidated operating profit of their overseas operations in FY 2002. Toyota, which enjoyed the largest profit ever recorded by a Japanese company in FY2002, expects their sales in Russia to quadruple by 2007. On the service side, Lawsons, a Japanese convenience store chain is presently in the midst of developing a network of 300 stores in China, with a scheduled completion date of 2004.
Japanese Government Maintains its Commitment to Economic Reform
	Since announcing a comprehensive “Action Plan for Economic and Structural Reform” in 1997, the Government of Japan has increasingly recognized the important role it plays in helping to promote reform and the steps that need to be taken to lower Japan’s high cost structure and increase the general attractiveness of doing business in Japan. As highlighted in past Focus newsletters, substantial progress has been achieved over the past six years through a wide variety of initiatives, both in terms of specific achievements as well as the expectations, outlook and behavior of Japanese corporate and government managers. Recent developments include: Recognizing the important role Foreign Direct Investment plays in promoting innovation, competition and economic vitality, Japan has devoted substantial resources to introducing systemic reforms to promote inward FDI. To facilitate the process by which investments can be made, the government opened “Invest Japan” liaison offices last May at all 12 government agencies, ministries and the Cabinet office. Invest Japan staff will not only promote new greenfield investments, but also M&A and other transactions. Japan’s newly launched Industrial Revitalization Corporation of Japan (IRCJ) opened its doors on May 8, 2003. It is staffed by 60 experts, who are now moving to purchase the nonperforming debt of, and to provide support to, struggling companies that meet established criteria that demonstrates an ability to reorganize themselves within three years or less. Possessing a five-year mandate before it is dissolved, the IRCJ plans to revitalize at least 100 firms, utilizing public funds and technical assistance to nurture them back to health through comprehensive rehabilitation and reorganization plans. The injection of ¥2 trillion in public funds into Resona Holdings, Japan’s fifth-largest bank last May, marked the first effective nationalization of a banking institution using new emergency assistance measures. In this unprecedented move, the government has taken the lead to preserve trust and a financial system safety net. This initiative has served to boost confidence in Japan’s determination to deal with its serious banking problems. It was handled professionally and expeditiously -- without fear of systemic risk or deposit runs. Politically, the use of taxpayers' funds faced little opposition in contrast to the past when political opposition has served as a major obstacle to decisive regulatory action. In recognition of the need to acknowledge and promote the benefits of geographical diversity, 117 Special Zones for Structural Reform have been established as of May of this year. This program provides local governments with an ability to obtain waivers from national regulations in order to facilitate their economic development. Examples include: - Ota Special Zone for Education: Establishment of a more diverse educational curriculum, including conducting classes in English in elementary, middle and high schools. - Kitakyushu Special Zone for International Physical Distribution: Providing 24 hour, 365 day a year customs clearance to importers and exporters. - Kobe Special Zone for Medicine: Accepting credentials of foreign medial professionals to allow their participation in development of biochemical industry through invitations of local research institutes and other approved parties.

Continuing Progress Will Lead to More Opportunities for Businesses and Investors
	Whether or not one believes Japan has truly hit bottom and the present price appreciation in the Nikkei index accurately reflects its underlying fundamentals -- it is important to recognize Japan’s inherent strength and the potential it offers. This view is reflected in a survey JETRO recently conducted of 449 foreign-affiliated companies in Japan. Even though 41% expect it will take 3-5 years for the Japanese economy to recover and 27% expect no growth at all in the foreseeable future -- 43% sense the opportunities that are arising within their own businesses and therefore have plans to expand their Japanese operations. Continuing movement toward restructuring, reform, business revitalization and deregulation promises over time to provide increasing ongoing evidence of Japan's progress, and commitment, to achieving a full economic recovery. With this in mind, corporate and portfolio investors would be wise to devote more attention to current trends in Japan, to determine how they effect, and potentially benefit, their own investment and business development decisions. Data and statistics presented within this newsletter have been compiled by JETRO from publicly-released media and research accounts. Although these statements are believed to be reliable, JETRO does not guarantee their accuracy, and any such information should be checked independently by the reader before they are used to make any business or investment decision.

For additional information, please contact Satoshi Miyamoto, Executive Director of JETRO NY at Tel: 212-997-0416, Fax: 212-997-0464, E-mail: Satoshi_Miyamoto@jetro.go.jp Focus: Foreign Direct Investment Focus: Mergers & Acquisitions Focus: Entrepeneurship Focus: Economic Revitalization Focus: Industrial Revitalization Focus: Foreign Investment Focus: Bush Visit Focus: Koizumi Visit Focus: Economic Rebirth Focus: Hiranuma Plan Focus: Foreign Direct Investment Focus: Emergency Economic Package Focus: Action Plan Focus: Economic Reform Focus: Okinawa Summit Focus: Small Business Development Focus: New Enterprise Development Focus: Industrial Revitalization Focus: Economic Recovery 4 Focus: Steel Focus: Economic Recovery 3 Focus: Economic Recovery 2 Focus: Economic Recovery
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