Japan’s lost three decades – what are the causes?

The 1990s were called the Lost Decade in Japan, and then as the economy seemed to stagnate in the 2000s, it became the Lost Two Decades. Now the Nikkei Business in a recent special series seems to be saying it has been a lost three decades. Turnover and profitability were growing through to around 1990 when the economic bubble burst. Then profits fell – although since 2010 they have been growing again. The total revenues of Japanese companies (excluding financial services) has been static, with only a small bump upwards around 2005-2008.

Nikkei Business says the lack of growth in turnover is the key problem. Even sales overseas, which were meant to be the growth driver, have not shown much of an upward trend. According to Nikkei Business the root causes of this lack of growth are:

low investment (1991 capital investment as a percentage of cashflow was 133%, compared to 82.2% in 2018)
low wages (106.5 in 1990 indexed against 100 in 2015, down to 99.6 in 2019)
low efficiency (return on assets was 4.3% in 1990, down to 3.8% in 2018)

It cites Panasonic as an example of #1. Every time profits rose, Panasonic increased its investment, but every time profits shrank, it cut investment back, since 2001. As for #2, Nikkei Business lists all the major restructurings since 1999 with major Japanese companies, which makes for sobering reading for a country famed for lifetime employment:

1999 – Nissan plan to cut 21,000 from its workforce, closing 5 factories
2008 – Sony announced it would reduced its electronics workforce by 16,000
2009 – Panasonic announced it would cut 15,000 people and 27 factories. Pioneer axed 10,000 jobs.
2010 – All Nippon Airways proposed reducing its workforce by 16,000 as part of its revival plan
2011 – Ricoh announced a mid term plan aiming at reducing its workforce by 10,000
2012 – NEC announced a workforce reduction programme of 10,000 job cuts
2013 – Fujitsu announced it that by axing its semi-conductor business, it would remove 5,000 jobs.
2015 – Toshiba announce it would erduce its workforce by 15,0000
2017 – Mizuho Financial Group announced an administrative work reduction programme targetting 19,000 roles.
2019 – Nissan restructuring to impact 12,500 personnel

The low efficiency seems to be in the service sector, where there has been a lack of economies of scale. The number of Japanese companies with turnover of over Y100bn/$1bn doubled from around 40 to 80 from 1980 to 1991, but has not risen much since – apart from a blip in 2008 – after the birth of Japan Post, and is still heavily manufacturing oriented.

I will cover the analysis and suggestions from the rest of series for how Japan can “wake up” in my next blog posts.

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Acquire or be acquired – predictions on the future of Japanese mergers and acquisitions

Japanese companies used to be seen as very reluctant to acquire and merge with other companies, but the record breaking £46bn acquisition, finalised in January 2019, of Irish pharmaceuticals company Shire by Japan’s Takeda may not even be the peak of what has been at least 10 years’ of an overseas spending spree by Japanese companies. Faced with a declining, ageing domestic market, Nikkei Business magazine expects Japanese companies to continue their spending spree in 2019, even if there is not a big ticket purchase like Takeda/Shire.

Autonomous vehicles, Internet of Things and other new technologies are likely to be the focus of future M&A. For example Japan’s tyre maker Bridgestone has acquired the telematics business of Dutch company TomTom. “Tyre companies are also entering the era of CASE (Connected, Autonomous, Sharing Electric)” says Bridgestone’s CEO Masaaki Tsuya. Sensors can be placed in tyres to understand driving conditions, for example.

In the IT sector, NEC has acquired the UK company Northgate Public Services in January 2019 and in December of the previous year acquired Denmark’s KMD Holding and is looking to acquire a stake in India’s Mindtree.

Food and drink companies are also active – Mizkan, Ajinomoto and Asahi Beer have all made acquisitions recently in Europe.

In the financial sector, Nikkei Business speculates that a Japanese company like SMFG or Orix might be interested in acquiring GE’s aircraft leasing business GECAS, headquartered in Ireland – although GE has since denied GECAS is for sale. MUFG might be interested in the US Bank of the West.

Most of the acquisitions of Japanese companies have been by Chinese companies, but Nikkei Business also wonders whether some of the big Western automotive suppliers such as Bosch, Continental, ZF, or Magna might not be interested in acquiring Japanese automotive suppliers.

Declutter and dispose

M&A is also an opportunity for Japan’s keiretsus (conglomerates and company groupings) to do a bit of tidying up. The trendsetter in this has been Hitachi, who have been pursuing a rigorous policy of “selection and focus” in rearranging their business portfolio. Over the past 10 years or so they have sold off Hitachi Global Storage Technologies to Western Digital, Hitachi Logistics to SG Holdings, sold a 27% share in Hitachi Capital to MUFG, sold Hitachi Power Tools and Hitachi Kokusai Electric to KKR and Clarion to Faurecia.

Japanese investors and banks are keeping a watch on Hitachi High Technologies, Hitachi Chemical, Hitachi Automotive Systems, Hitachi Construction Machinery and Hitachi Metals as the next possible candidates. Hitachi Chemical and Hitachi Metals were supposed to be two of the “Three Branches” of Hitachi along with Hitachi Cable, so the idea that they could be sold off would be heresy to some Hitachi old timers. As the Nikkei Business magazine says, Hitachi is trying to compete as a global company, so any business that has no synergy with its “social innovation” vision is likely to be dropped.

Panasonic already sold off its security camera business and foreign funds are eyeing up Panasonic Avionics – an inflight entertainment company – as a likely next candidate. “It has nothing to do with Panasonic’s main business”, one investor commented.

Takeda seems to be preparing to dispose of its consumer healthcare business to help fund its acquisition of Shire, as it has spun off its vitamin drinks and other products into a separate company.

Fujitsu has also been disposing of its hardware businesses – mobile phones, car electronics and PCs and Sony‘s mobile phone business is still struggling, and rumours that it could be sold continue.

Spark surprise

Nikkei Business concludes with some surprise predictions from the experts it spoke to:

Astellas and Daiichi Sankyo merging
Pioneer and JVCKenwood merging
SoftBank acquiring NEC
Fast Retailing acquiring Gap
Google acquiring Recruit
Amazon acquiring 7&i (7-11 convenience store chain)

Unsettling though it may be for the employees concerned, if clarity in the focus and business of Japan’s iconic companies results from these M&As, ultimately it should make for a more confident Japan Inc.

Lessons from the decline of Japanese electronics manufacturing in the UK for the automotive industry

Although around 10,000 manufacturing jobs in Japanese electronics companies in the UK were lost in the 1990s-2000s, about the same number have been added, either created by Hitachi Rail or in the automotive or air conditioning sectors. Japanese electronics companies such as Sony, Fujitsu, Panasonic, NEC, Mitsubishi Electric and Hitachi still all employ thousands of people in the UK.

It is a story of how industrial policy cannot ultimately stop product obsolescence, shifts of manufacturing to cheaper locations or the transformation from mass manufacturing of products to supply chain ecosystems providing solutions and services. Recent investment from Japan in the UK is in services and infrastructure, for the domestic UK market, and at least for now, the EU. But this has meant fewer jobs in the areas that voted Brexit.

Bunging £10s of millions at Nissan to compensate for tariffs was not going to stop these shifts. Over 10% of the 7,000 Nissan employ in the UK are working in design centres, not on the factory floor. Being a gateway to the EU now, even in manufacturing, needs regulatory alignment and free movement of people so suppliers can visit and base themselves at client sites and provide services and ship prototypes around the region.

The shift to electric vehicles means the car companies have to cooperate more than ever with ICT and electronics companies. Many of these ICT and electronics companies have joint European HQs spread across the UK, Netherlands or Germany, with senior management and teams scattered across the region, working virtually or at customer and partner sites. They have also integrated back office and technical support into cheaper locations such as Portugal or Poland.

Some examples of the history of Japanese electronics companies in the UK over the past 30 years:

Fujitsu

Fujitsu is the biggest Japanese employer in the UK with over 8,000 employees, 2,000 down on a few years ago, as it grows delivery and support centres in Portugal, South Africa and India and downsizes in the UK. It acquired 80% of UK’s ICL in 1990 (increasing to 100% 1998). ICL had 2,000 UK employees, 26,000 worldwide, with mainframe and PC factories in Letchworth, Manchester and the Midlands. ICL was born out of 1960s industrial policy – the British government had a 10% stake in it for a while. To this day, Fujitsu provides a lot of government IT infrastructure and services. Its last computer factory in Europe, in Augsburg in Germany, will shut down in 2019, retaining manufacturing in Japan only.

Hitachi

Hitachi used to employ around 1,000 people in its factory in Aberdare, Wales, making cathode ray TVs, video recorders and microwave ovens. It was shut in 2001, blaming low price competition from Asia. Hitachi has since shifted away from consumer products to infrastructure. In the UK it acquired the now stalled Horizon Nuclear Power projects in Wylfa and Oldbury and set up Hitachi Rail in the UK as the global headquarters with a new factory in Newton Aycliffe, employing nearly 2,000 people.

Hitachi employs another 4,000 people in the UK services sector – for example credit and loans company Hitachi Capital, IT consultants Hitachi Vantara and Hitachi Consulting and Vantec, providing logistics for Nissan.

Sony

Sony came to the UK in 1973, and had 2 plants in Pencoed making cathode ray TVs, employing 1,800 by the 1990s. As these started to shut down, Pencoed transformed itself into an innovation centre, developing and producing broadcast and professional equipment, employing 500-600 people.

Sony has been restructuring across Europe recently, consolidating back office functions into cheaper regions. It was still manufacturing DVDs in Enfield in the UK but this was shifted to Austria in 2017/8, reducing capital in UK by over £250m. It still employs nearly 2,000 in its music, home entertainment and interactive businesses in the UK.

Ricoh

Ricoh still has a factory in Telford (and two other plants in UK), employing the same number of people in 2018 as in 1991 – around 700 – but the product range has shifted from faxes to printers and consumables.

Mitsubishi Electric

Mitsubishi Electric acquired Apricot Computers in 1990, with a plant in Glenrothes and R&D in Birmingham, employing 442 in 1991. Glenrothes was shut in 1999, blaming cheap competition in Asia. It still has manufacturing in the UK, employing nearly 1,000 people (many of whom are non-UK EU citizens) in Livingston, at its airconditioning plant.

Panasonic

Panasonic, formerly known as Matsushita, had many plants in UK from 1970s to 1990s, employing 1,621 in Cardiff (TVs, microwaves), 469 in Gwent (electric typewriters, carphones), 160 in Port Talbot (components for TVs, video recorders, microwaves) and 63 in Reading (fax machines). Most Matsushita/Panasonic plants in UK shut down in early 2000s, with production shifting to Eastern Europe. 1 plant remains in Wales, employing 400 people, manufacturing microwave ovens but also conducting R&D into fuel cell technology. Panasonic has acquired Belgian IT company Zetes and Spanish automotive supplier Ficosa recently.

NEC

NEC is also shifting into IT services via European acquisitions. It used to have a semiconductor plant in Livingston (Silicon Glen, remember that?) which employed 1200 by 2001, when it shut down. NEC UK employees now number over 1000 again thanks to the acquisition of Northgate Public Services, in 2018.

Others

Oki Electric were relatively late in shutting down their Cumbernauld printer plant in 2018 – and now all production is in Asia. JVCKenwood shut down their East Kilbride TV/CD player factory in 2008 and shifted production to Poland. Pioneer closed its CD player/TV factory in Wakefield in 2009. Toshiba had a factory in Plymouth, which used to make TVs, video recorders, but is now owned by a US company and makes air conditioners. Sharp (now owned by a Taiwanese company) still has a factory in Wrexham as does Brother.

NEC aiming to be safe and secure in Europe through acquisitions

Japanese IT company NEC seemed to have given up on Europe these past few years, preferring to focus on developing countries, but it has come back with a bang, acquiring UK’s Northgate Public Services and Denmark’s KMD Holdings in 2018. This total spend of Y200bn ($1.8bn) is the largest investment NEC has made since it acquired Packard Bell in the 1990s.

On the face of it, NEC’s focus on what it calls “safety” businesses seems a good strategy: “creating safer and more secure urban communities” as they put it. It sounds better in Japanese: 安心安全な町 (anshin anzen na machi) but as is so often the case, it’s rather difficult to translate into snappy English. “Anshin” means a sense of being able to relax or relief, so “secure” is near enough and is also alliterative with “safe”. “Machi” can mean town as well as city, hence “urban communities” as the translation.

NEC’s safety businesses are already 5% of its turnover and reaching an EBITDA of over 20%. KMD will add to this business as it provides IT solutions for the Danish government, central bank and local authorities for security, tax etc. Northgate Public Services also has customers such as the London Metropolitan Police for crime prevention IT systems.

Up until now NEC’s overseas businesses have been loss making. As the Nikkei points out, NEC stands for Nippon Denki (Japan Electric) (NOT the National Exhibition Centre in Birmingham, stop sniggering at the back there, Brits) underlining its very domestic focus, and the domestic Japanese market is where most of its profits are made.

It was not able to expand upon its acquisition of Packard Bell. It made some other large acquisitions like the Netcracker of the US but nothing replaced the dent that the loss of the semiconductor business made on earnings and instead NEC found itself shrinking down.

The problem it now faces is that KMD itself has been making losses. NEC executives claim they can return to profit and would not have acquired KMD if that was not the case.

NEC is cash rich and was able to buy both companies without borrowing. Toyo Keizai says KMD was relatively cheap, and there was no bidding war either. KMD was owned by the public sector, privatized in 2009 and by 2012 was owned by an American private equity company Advent, loaded down with debt. Advent had acquired 7 further companies in order to revitalize KMD and move away from legacy business. It was expecting to IPO but a series of law suits were brought against KMD’s subsidiaries.

NEC had listed up 50,000 companies in the safety business globally, started negotiations with KMD in September 2018, asked the Dutch operations of KPMG to conduct due diligence and after only a month announced they would acquire it. NEC says the losses in the past 5 years were due to the law suits and that the first phase of restructuring is finished and phase 2 60% complete.

There is a similar picture at Northgate Public Services – a lot of debt and losses. The world undoubtedly increasingly needs IT security solutions, but this does not automatically lead to profits it would seem. NEC executives say they want to become a “normal” company, by which they mean it can grow, slowly if necessary, and be sure of a reasonable profit. Large overseas acquisitions were “traumatic” but show that NEC has a sense of crisis, says the Nikkei, and an imperative to change. NEC might know how to make money out of public sector clients in Japan, but I wonder if this will translate well into Europe.

Dramatic headcount reductions in Japan and Europe for Japanese electronics companies

Over 300,000 permanent staff worldwide, representing around 20% of total headcount have been “let go” at Panasonic, Sony, Sharp, Toshiba and other Japanese electronics companies over the past five years, according to analysis by Toyo Keizai.

Panasonic, Sony, Hitachi, NEC, Fujitsu, Toshiba and Sharp are all represented in the 10 companies who lost the most employees globally and the only company that isn’t electronics related amongst those 10 is Daiichi Sankyo – because of acquiring and then selling off Ranbaxy, the Indian generics drug manufacturer. The other companies making up the 10 are Renesas and Mabuchi Motors – both B2B electronics companies.

Panasonic lost nearly a third of its employees -117,417. Their turnover also shrank (but not by a third) over the same period and they reduced the number of consolidated companies (subsidiaries) from 633 to 474. Only around 4% (10,000 – of which around 700 in UK, 3000 in Germany) of its employees are based in Europe anyway, so it’s clear the bulk of the reduction happened in Japan and China.

Sony was second, with a reduction of 42,900 employees, representing around 26% of employees in 2010/11. This was largely through restructuring its electronics business in Japan and North America, with the film, music and finance segments remaining stable. Sony has also restructured its electronics business in Europe, losing around 40% (2,000) of its headcount (UK & Ireland = 22% reduction from 1,386 to 1,061, Western Europe 50% reduction from 3,271 to 1,635 and Eastern Europe only 11% down, from 423 to 376) The total of Sony’s employees in Europe including film, music and computer entertainment represents around 10% of the global total of 125,300.

Renesas – the semi-conductor manufacturer which was formed out of bits of NEC, Hitachi and Mitsubishi Electric has lost over half its employees – 27,470. Headcount is now 19,160 with the bulk of its European employees being located in the UK (805 employees in 2012, now down to 633) and Germany (831 employees).

Hitachi‘s headcount reduction was only 7%, but as it was 7% of over 350,000 people, this still put it in the top 10. In the UK and Europe by contrast, Hitachi has grown due to acquisitions and expansion of their rail, consulting, finance and nuclear power businesses.

NEC cut its employees by 15% (17,114) and Fujitsu by 9% (15,821). Fujitsu’s employee numbers in the UK (where it remains the largest Japanese employer) over the past 5 years rose from 10,030 in 2012 to 11,765 in 2015, but a further restructuring has led to headcount dipping below 10,000 in 2016. The pattern across Fujitsu’s EMEA (or now EMEIA) region is similar – having been 31,000 five years’ ago, then reduced, then expanded again, and now another restructuring since 2015/6 to the current total of 28,707.

Toshiba has only cut 7% (14,829) of its headcount so far but this will change with the spin off of Toshiba Medical Systems to Canon and household appliances to Midea as well as the controversial sale of its chip business. There have been cuts to other businesses in Europe, with employee numbers dropping around 10% 2015/6.

Sharp, owned by Taiwanese company Foxconn/Hon Hai as of last year, cut 22% of its employees (12,069) over the five year period. Much of its consumer electronics business has been licensed to other manufacturers, resulting in the closure of Sharp Electronics UK and a new company, Sharp Business Systems being set up with its headquarters in the UK and business units headquartered in London (information systems), Hamburg (energy solutions) and Munich (visual solutions).

Brexit looks to accelerate these trends – companies such as Sharp, which were restructuring anyway, are using Brexit as a further stimulus. To ensure “maximum supply chain efficiency” Sharp has already transferred its European stock and logistics operations from the UK to its subsidiary in France (to be managed by its German subsidiary) in September 2016. At the same time it sold its energy solutions business in the UK to its German subsidiary and closed down Sharp Telecommunications UK (22 employees). Overall Sharp’s employees in the UK look to drop from 617 in 2015 to 553 in 2017, plus the factory in Wales which manufactures microwave ovens – licensed to Turkish company Vestel.

LGBT and Japanese companies

Kanako Otsuji, who was Japan’s first openly LGBT member of Japan’s Diet (parliament) spoke at the Daiwa Anglo-Japanese Foundation last week. Her term in office expired this July – she had replaced a party member who had resigned, and she now runs the Policy Informatics Center of LGBT, based in Osaka. One of her main campaigns is to try to get Japan’s first ever diversity law passed by 2020, in time for the Tokyo Olympics. There is already an Equal Opportunities Law in Japan, in effect since 1986 and prohibiting gender discrimination. Presumably the proposed diversity law would be to prohibit discrimination on the grounds of sexuality – and maybe other characteristics as such laws do in Europe, such as ethnicity/race, age and religion?

Homosexuality is not illegal in Japan, although I was surprised to hear that it is illegal in nearly half of the countries of the world. My understanding was that Japan’s attitude to homosexuality, whilst not openly hostile, was one of viewing homosexuality as just a phase people go through and certainly not something to bring into the workplace.

Nikkei Business magazine had a special feature on LGBT earlier this summer, titled “LGBT – your company cannot ignore it”. It cited the Dentsu Diversity Lab’s findings that around 7.6% of Japan’s population are LGBT in terms of gender identity/sexual preference, and of the LGBT people surveyed, 43% said they had come out of their own accord, but only 2.4% had come out to their boss and 4.8% to their colleagues. Consequently, 60% have changed their jobs, compared to 50% of the heterosexual employees surveyed. Some of the case studies included:

A person who turned down a job offer because the President said in the interview that being gay was a lifestyle choice so if it caused stress in the work place, that was their own responsibility.
Someone who had been at a major trading company for 7 years, and the next step of their career was to transfer overseas, but there was an unwritten rule that you had to be married first. The person was also worried that even if they were sent on their own, it might be to a country unfriendly to gay people. So the employee has registered with a recruitment agency to change jobs.
Another person who was transgender – male body but a woman at heart – was working in a major electronics company R&D lab, where almost everyone is male. The employee was having to put up with daily conversations that would be considered sexual harassment if a woman was present, and had to go to hostess bars at night with colleagues.

The feature then goes on to describe Japanese companies undertaking some kind of LGBT focused initiative including:

Kao started a study group on LGBT issues in 2014.
Suntory Holdings has also started seminars on LGBT for employees
Hitachi has started training centred on the HR departments of each of its group companies.
NEC is considering training on LGBT issues for the staff of its internal hotline.
Dentsu already surveys its employees on LGBT and has internal training – its Diversity Lab has noticed a big increase in people wanting the training.
Microsoft Japan has changed its benefits to include LGBT relationships in its definition of dependents. GLEAM started in the US HQ and has now come to Japan.
Nomura has “I am an LGBT Ally” stickers up in its offices. Since acquiring Lehman Bros which had its on LGBT community, it realised it had to respond.
Shiseido participated in Tokyo Rainbow Pride in April 2015

So there is not much political pressure on Japanese companies to consider LGBT in any diversity initiatives, as there is with gender. Japanese consumers are fairly supportive, with over half saying that they would view positively a company which was supportive of LGBT people. In terms of shareholder pressure, Daniel Loeb of Third Point, an activist investor in Fanuc and Sony is a supporter of LGBT rights, and foreign shareholdings in many Japanese companies is creeping up. Indeed the Nikkei feature points out that “LGBT Is the latest management issue outside of Japan”.

Toshiba – when did it all go wrong?

Toshiba’s profit inflation scandal only really hit the Western media headlines when President Hisao Tanaka resigned on July 21st, but the Japanese media have been covering this story since April of 2015, when the accounting irregularities first surfaced and an independent committee was set up. Signs of trouble ahead were flagged up by me two years before that, when it was announced that Tanaka was the compromise candidate to become President, resulting from the fight going on between the outgoing President Norio Sasaki and his predecessor and chairman Atsutoshi Nishida.

Tanaka was the first Toshiba president not to come from one of the main business units, having spent most of his career in procurement. Sasaki was from the nuclear power side and Nishida from the PC business – both areas were traditionally profit generators for Toshiba but since 2008 at least, as has become apparent recently, more dogs than cash cows. Presumably the hope was that Tanaka, as an outsider to both businesses, would not be beholden to the factions and vested interests, and would somehow quietly restructure and clean it all up. But of course, without his own factional support, and the old guard still in place, he was in too weak a position to do that. It makes me even more admiring of Takashi Kawamura at Hitachi – similarly from outside the main businesses of Hitachi, but able to turn it around from its largest loss in Japanese manufacturing history.

Which actually makes it even more obvious that Toshiba must have been having problems from way back. When I was at Fujitsu (2010-20013) we used Toshiba, Hitachi, NEC and Mitsubishi Electric as comparables in terms of financial metrics. Fujitsu was suffering by the comparison, the only source of light relief being that NEC often did worse. Toshiba gave the impression of somehow muddling through, without really trying anything very drastic, which given the pain everyone else was going through, does in retrospect strike me as suspicious.

Do we need to be worried about other Japanese companies?

This was the angle taken by the two UK journalists who managed to track me down while I was on holiday in Croatia last week.

Much has been made in both the Japanese and Western media of the perils of putting profit targets above all else (something which Sasaki started but Tanaka had to take the blame for) and juniors not being able to fight against senior executive pressure. But this is not unique to Japan – look at Enron, Fifa and RBS for example. The person to first blow the whistle on Toshiba turns out to be an internal auditor, whose warnings about the PC business were ignored by the former CFO and head of the internal audit committee. Questions also need to be raised about what the external auditor was up to all these years.

There are some European angles to the story. For example, one of the businesses named as having inflated profits is the smart meter business. Toshiba won an order from TEPCO (yes, of Fukushima fame) for a smart meter telecommunications system, beating Hitachi and Mitsubishi Electric. Toshiba had acquired the Swiss smart metering company Landis & Gyr in 2011, but many doubted, given Toshiba’s history, that they really had the expertise to execute such a complex networking project. According to Japanese telecomms experts, Toshiba ignored some key risks and costs in its low bid. The Hitachi consortium was seen as a much better bid technically, but was 4 times the cost of the Toshiba offer.

Where then were the internal business assurance checks to prevent such a loss generating deal? According to a Toshiba executive, the internal company system had become so strong, the headquarters functions no longer had much control over them. Some form of an internal company system was introduced by many Japanese companies (including Mitsubishi Corp when I was there in the 1990s) as a way of making lead executives from each business more accountable for profit and loss. Again, the Hitachi restructuring under Kawamura is instructive on how to do this so that governance is strong enough to prevent each internal company from covering up its problems and cooking the books. Toshiba may have on the surface looked like a pioneer in corporate governance, but as Nicholas Benes, Japanese corporate governance expert says “Just because you were the ambassador to Brazil, does not mean you are fit for the audit committee.” Good corporate governance has to come from within as much from without.

“White hands, yellow hands” – the early days of IBM Japan

Takeo Shiina became president of IBM Japan in 1974, at the age of 45. He joined IBM Japan just after studying in the US in 1953. “In those days, gaishi (foreign owned companies) were seen as bad. A major newspaper wrote a series called “White hands, yellow hands” basically saying white handed gaishi were “dirty” and that they would disrupt the markets in Japan, make lots of money and take it all back to the US.

“The Ministry of International Trade & Industry also did all they could to support domestic computer manufacturers. They passed a special law so that the amount of tax that IBM Japan paid every year was recycled into supporting Fujitsu, NEC and Hitachi.”

Shiina took the brave decision to study in the US, after graduating from Keio University because his father had also studied abroad, in Germany, and so he was not afraid of becoming a foreign student. As for joining IBM, the auditor of his father’s company knew the President of IBM Japan and suggested it to him, He trained at the IBM plant in Canada and was shocked when he returned to Japan, to find that IBM Japan’s main office was in the middle of a bomb site. The factory was also just an old Japanese house, with a strong smell of a cesspit toilet as you walked through the door.

Shiina became head of the factory at the age of 32 and started a new site up as well as inadvertently offering the first ever online system to a steel factory. He assumed that IBM must be doing that sort of thing in Europe and the USA, but actually it turned out there was nothing to copy.

The contract was also tricky, in terms of persuading IBM HQ in the USA to accept it. Due to a mistranslation of “this is no problem in Japan” as “in Japanese this is no problem” IBM HQ finally accepted it, as noone could read the original Japanese anyway.

Shiina is proud that IBM Japan is now seen as a desirable company to work for, particularly in terms of opportunities for women, and having performance based pay. His interview with the Nikkei Online, the basis of this precis, is illustrated by his calligraphy which reads “Building a new country – young people, women, regions, foreigners”.

Last updated by Pernille Rudlin at 2021-10-13.

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