Japan Offers Investors Growth as Well as Value


NEW YORK -- (BUSINESS WIRE) -- November 11, 2003

The Japan External Trade Organization New York (JETRO NY) released a newsletter today highlighting changing business and investor sentiment toward Japan. It can be viewed at: http://www.jetro.go.jp/usa/newyork/focusnewsletter/focus29.html. A summary is posted below:

• Japan's Current Problem Arose as a Result of its Past Success

The Japanese people joined together following the Second World War to pursue rapid industrialization. With success came new challenges in the form of lower-cost competitors and reinvigorated U.S. and European firms. By the mid-1990s Japan recognized the need for comprehensive change. Dramatic progress has been achieved through deregulation, more efficient and transparent accounting and corporate governance and other policy
innovations.

• Improving Economic Conditions Leading to Increased Investor Interest in
  Japan

According to Thomson Financial, there were 837 Japanese M&A transactions during the first half of 2003. This is an increase of 54.8% over the same period last year. During this time, worldwide M&A activity decreased 6.2%. Thomson notes "US-based companies were the biggest investors ... with 35 transactions valued at US$7.05 billion, holding 92% market share."

• Japan Retains a Strong Competitive Edge in Many Leading Industries
  

Japanese corporate R&D budgets are estimated to total approximately $74 billion in the current fiscal year -- the fourth consecutive annual increase. Their contributions are having a major impact in the electronic, electrical, IT hardware, engineering, automobiles, parts and chemical industries.

• Japan is a Global Leader in Mobile Telephony and the Wireless Internet

With approximately 109 million Japanese citizens over 15 years of age, it is estimated there were 74.4 million cellular and 61 million mobile Internet subscribers in Japan as of February 2003. The advent of i-Mode and rapid transmission rates are driving many new innovations in this sector.

• Japan Catching-up and Surpassing the U.S. in Many Broadband Applications

Japan lagged many countries in terms of Internet penetration, yet is rapidly closing the gap through low-cost broadband service. At approximately $20 a month, the cost is significantly less than the U.S. and the speed is faster as well. With a sevenfold increase over the last two years, Japan now enjoys a penetration rate similar to the U.S. and is at the forefront of many new applications and innovations.

The potential is huge. Japan's Ministry of Posts and Telecommunications forecasts demand for broadband-related goods and services could be as high as $90 billion by 2007.

• Japan Also Remains a Strong Contender in Other Emerging Information
  Technologies

Japanese firms have been very active in the development of LAN technology. To enable the operation of multiple appliances via a single remote control, more than 100 electronics and telecom firms - including Matsushita, Sharp and Sanyo as well as Microsoft and IBM Japan - recently announced plans to devise a uniform standard.

Japan has also demonstrated real leadership in the development of RF tags and RFID (Radio Frequency Identification) microchips and the standards that will allow everyday objects to be embedded with computer intelligence.

• Biotechnology Constitutes Another Source of Potential Growth

Biotechnology research in Japan is built on a broader base than the U.S. and Europe. A far greater number of patent filings relate to chemicals, agriculture and food, machinery and other sectors as opposed to pharmaceuticals, which dominate in the U.S. and Europe.

Over 300 University start-ups have been established, as well as 32 technology-licensing organizations (TLO) and incubators to enhance the application of academic research.

• These Growth Areas Constitute the New Frontier for Achieving Success in
  Japan

Some observers point to the preponderance of value-oriented deals and maintain it is not possible to initiate transactions that focus on new technologies and growth in Japan. It is important to recognize that foreign direct investment is a relatively new phenomenon in Japan. It should therefore be no surprise that initial movement has been in the value area
where there is a greater need for immediate solutions. As these transactions succeed, however, it is only a matter of time before similar movement is seen in the growth areas highlighted above.

Data and statistics have been compiled by JETRO from publicly-released media accounts. JETRO does not guarantee their accuracy, and any such information should be checked by the reader before they are used to make any business or investment decision.

Contact: Satoshi Miyamoto
Executive Director, JETRO NY
Tel: 212-997-0416
Fax: 212-997-0464
E-mail: Satoshi_Miyamoto@jetro.go.jp.