Find More Like Thiswhaling And Gnashing Of Teeth

EMOTION, according to the Japanese government, should play no part in decisions about commercial whaling. Yet when the International Whaling Commission (IWC), which regulates the industry, approved a motion to consider a return to hunting at its annual meeting held between June 16th and 19th, the response was jubilation and anguish.

The practical significance of the vote is nil. Japan and its allies must win the support of three-quarters of the IWC's members to overturn the moratorium on whaling adopted back in 1982. The pro-whaling screed was approved by a much thinner margin: 33 votes to 32. More importantly, perhaps, a motion to hold secret ballots in future (thought to favour the would-be whalers) failed.

Nonetheless, conservationists worry that the harpoon lobby is gaining ground. More whale-friendly nations must be recruited to the IWC, they say, to counteract poor countries only too happy to do down whales in exchange for Japanese aid money. (Any country can join, whether or not it boasts a single whaling boat, or even a coast from which to launch one: Luxembourg, for example, sides with the whales; Mongolia backs the whalers.) There is also talk of tourist boycotts of countries that dare to vote in favour of whaling.

In fact, the IWC's own scientists have, in effect, endorsed a return to whaling. Back in 1994 they devised an algorithm to determine a sustainable catch of the most common whale species despite continuing uncertainty about how abundant they are. In theory, whaling will resume as soon as the IWC can agree on a monitoring system to ensure that its members keep to the quotas set. In practice, opponents of whaling have dragged out talks on such a system in order to delay a resumption indefinitely. That tactic, needless to say, leads to endless acrimony at the IWC's meetings. With whaling, politics and cash are more important than science.

Economist, 6/24/2006

Economic Interests

By: Stokes, Bruce, National Journal, 6/24/2006

In Japanese tradition, visitors bring omiyage, or presents, for their hosts. When outgoing Japanese Prime Minister Junichiro Koizumi arrives in Washington this month, the figurative gift he will bring President Bush is a double-edged samurai sword that symbolizes the prime minister's five-year tenure.

One side of that blade has cut sharply in favor of the United States. During Koizumi's time, U.S.-Japan security ties have never been closer, delivering unprecedented Japanese cooperation in the American-led war on terrorism. Koizumi presided over a Japanese economic revival, long a U.S. objective. But the other side of the sword has cut the wrong way. Koizumi bequeaths Bush ominously deteriorated Japanese relations with China. Most important, despite his image as a political and economic reformer, it is not clear that the changes Koizumi has wrought in Japan society are sustainable or will work to American advantage in the long run.

In the end, said Kevin Nealer, a principal in the Scowcroft Group, an international business advisory firm, "Koizumi's legacy itself is evanescent. It is not obvious how the next iteration of Japanese leadership enshrines or deepens it."

Because Koizumi came to power after Japan had run through seven prime ministers in a decade, his "longevity was both good for Japan and for U.S.-Japan relations," said Edward Lincoln, a senior fellow at the Council on Foreign Relations. "It gave us both more time to do things."

Possibly the most significant bilateral accomplishment was Japan's shouldering of unprecedented international security responsibilities, symbolized by, but not limited to, Tokyo's dispatch of 550 troops to Iraq.

But on June 20, Koizumi announced he was withdrawing those troops. Furthermore, through his repeated visits to Tokyo's Yasukuni Shrine, a memorial that honors, among others, convicted Japanese war criminals, "Koizumi has put his finger deep into a sore" and has antagonized China, said Mindy Kotler, director of Asia Policy Point, a Washington research center. "Any prime minister would have had a difficult time with China," because of inherent Chinese-Japanese economic and diplomatic competition in the region, argues Michael Green, the Japan chair at the Center for Strategic and International Studies in Washington. But Koizumi's actions afforded Beijing an excuse to whip up anti-Japanese sentiment, and so complicated U.S. efforts to manage events in Asia.

The recent emergence of the Japanese economy from more than a decade of stagnation has been a godsend for a United States weary of being the sole global economic engine. Japan could grow by 3.2 percent this year, faster than Europe, according to a recent Morgan Stanley projection. "How much of this Koizumi deserves credit for is uncertain; his reform efforts were overrated," said Lincoln, who credits much of Japan's revival to commercial banks finally shedding their nonperforming loans and private industry trimming payrolls.

Koizumi's likely successors are not expected to backtrack on his reforms, such as a phased-in privatization of the Japanese postal savings system. But none of them is personally identified with his changes. And, with Koizumi offstage, Tokyo's powerful bureaucracy can be expected to reassert itself.

The broader issue in U.S.-Japan relations, speculated Steve Clemons, director of the American strategy program at the New America Foundation, "is, what will Japanese society look like in the future?" Koizumi's political legacy may be his demonstrating that a prime minister could build a successful political base on young, urban voters, Nealer said. This group formed an exalted sense of Japan's place in the world during the heady "bubble economy" of the 1980s, and then they were personally battered by hard times in the 1990s. These 30- and 40-somethings are not saddled with their parents' inferiority complex vis-à-vis the United States. And they support Japan's hard-nosed international pursuit of its economic and strategic self-interest.

This new-style nationalism threatens to cause the United States heartburn, most immediately over dealing with Iran. Japan is heavily dependent on Iranian oil and thus leery of the looming international confrontation with Tehran. It is hard to see Japan's pivotal new political class falling in line behind U.S.-led economic sanctions against Iran that promise only pain for the Japanese.

Junichiro Koizumi has been a prime minister like none other in Japan's postwar history. And his tenure has been good for the United States. But whether history will treat his legacy as all beneficial is in doubt.

Japan Offers China a Cold One

By: Rowley, Ian, Business Week Online, 6/21/2006

With beer sales losing fizz at home, Japan's brewers have tried futilely in recent years to reignite sales. Relentless TV advertising hasn't done the trick nor, on the whole, has the introduction of new hybrid drinks, such as cheaper low- or no-malt varieties of beer [see BusinessWeek.com, 4/25/06, "Kirin Out-Chugs the Competition on Taste Tax"]. And the sales stall looks likely to continue. Nikko Citigroup reckons total beer sales will dip 2.8% from current levels by 2008.

Small wonder then that like so many other consumer product segments, Japanese brewers are looking to China as their salvation. The beer market is booming on the mainland. And Suntory, Asahi Breweries, and Kirin Brewery (KNBWY)three of Japan's biggest brewersare all placing major bets in an effort to catch up with international beer giants such as Anheuser-Busch (BUD), InBev, and SABMiller.

Demand for beer in China has never been stronger. Last year, brewers made 30 million kiloliters of beer in China, an increase of 5% over the year-earlier period. That is more than any other country including the U.S., which China toppled as the world's biggest beer-consuming nation in 2004. What's more, unlike Japan, China's thirst for beer is far from quenched.

CHINESE FOR BEER.

"China is now the largest beer-consuming country in the world, [but] you will likely see a strong potential for growth," says Yasushiro Matsumoto, an analyst at Shinsei Securities in Tokyo. Indeed, if the average Chinese were to drink as much as the average Japanese or Korean, the market would more than double in size overnight.

Among Japan's brewers, Suntory leads the way. Having entered China in the 1980s, a string of investments has made Suntory the eighth biggest beer maker in China. Most recently, on June 15, privately owned Suntory struck a deal to acquire Australian brewer Foster's Shanghai subsidiary for about $20 million. The deal will increase Suntory's capacity in China by 100,000 kiloliters a year, raising the total to about 800,000 kiloliters.

The move also adds to Suntory's dominance in Shanghai, where its market share has grown from 33% to 54% of the city's beer market in the last two years. The Foster's deal will increase Suntory's share to 60%. Further investment is expected. Company president Nobutada Saji has stated that he wants Suntory "to expand operations to all of China."

NEW BREWERIES.

Kirin and Asahi are also raising the stakes. Asahi aims to raise production at its four Chinese breweries by 11% this year to 650,000 kilolitersequal to about 25% of its production in Japan. In May, Asahi, which already has four Chinese brewing partners, said it would build a fifth brewery in Zhejiang province. Asahi CEO Hitoshi Ogita has made it clear that new investments, including those in China, are a priority.

Kirin, while less aggressive than Suntory and Asahi, has bought out its Chinese subsidiary and is building a new 200,000 kiloliter factory in Zhuhai, a southern coastal city in Guangdong Province, in 2007. In February, Kirin's incoming chief Kazuyasu Kato made it clear international investment is one means of improving the company's long-term growth prospects. "I'm taking the baton at a time when the company has laid solid foundations for internationalization and diversification," Kato told reporters.

Still, brewing in China is unlikely to be a panacea for Japanese beer makers' problems any time soon. For one thing, despite a long history in China, Japanese breweries are dwarfed by global rivals. Anheuser-Busch has a 27% stake in Tsingtao, China's biggest brewer, and owns 100% of Harbin Brewery, which ranks fifth.

HIGH-PRICED PARTNERS.

British-listed SABMiller has a 49% stake in CR Snow Breweries, China's number two brewer, and Belgium giant InBev has stakes in Guangzhou Zhujiang Brewery, Fujian Sedrin Brewery, and Hubei Jinlongquan Breweryranked sixth, seventh and tenth by sales. Suntory, ranked eighth, is the only Japanese brewer in the top 10 and, in 2005, had a market share of just 1.8%, according to ABN Amro. [Outside of Shanghai, Suntory isn't much of a factor.]

Catching up won't be easyor cheap. Most big Chinese brewers already have foreign partners and those that don't will prove expensive buys. Earlier this year, InBev paid $750 million for 100% stake in Sedrin, the biggest beer maker in East China's Fujian Province.

But perhaps of most concern is the difficulty of turning growing Chinese demand into profits. Foster's decision to sell its remaining Chinese arm to Suntory came after 13 straight years of red ink in China. Lion Nathan, another Australian brewer, 46% owned by Kirin, also pulled out of China in 2004, selling a trio of breweries in the Yangtze River delta region for $219 million to a joint venture run by SABMiller.

LOYAL TO LOCAL BREW.

In April, Merrill Lynch (MER) maintained a "sell" rating on Anheuser-Busch partner Tsingtao, noting that 30% of its 50 breweries in China are loss making. Anheuser-Busch, which brews and sells Budweiser in China, reported profits "declined slightly" in China during the first quarter.

One problem is Chinese drinkers still prefer cheap, local brews to the more profitable, higher-priced foreign-branded beers. Masao Fujimori, a spokesman for Asahi admits in terms of sales Asahi Super Dry, the best- selling beer in Japan, is small beer in China. So Asahi is focused on using its beer know-how to improve local beers brewed in collaboration with partners on the ground. "With the technology we've cultivated in the Japanese market, we'd like to improve the quality of each local brand in each region," says Fujimori.

Small wonder, then, that analysts say brewers looking for short-term gains should go elsewhere. "If you want to make money [quickly], it's not smart to move into China at this stage," says Shinsei's Matsumoto. But with sales slumping at home, Japanese brewers have little choice but to expand their horizons somehow.

Find More Like ThisToyota's Old School Ties

By: Rowley, Ian, Business Week Online, 6/13/2006

Toyota Motor (TM) and Britain's superelite Eton College have little in common at first glance. Etonor King's College of Our Lady of Eton beside Windsor, to use its full namewas founded in 1440 by King Henry VI and is one of Britain's most renowned educational establishments. Among its alumni are 19 former British prime ministers and second-in-line to the royal throne, Prince William.

Toyota is an auto industry giant and global profit machine. It's on track to make history later in the decade when it is expected to overtake General Motors (GM) as the world's biggest auto maker.

Yet take a three hour train journey from Tokyo to Gamagori, a city of 80,000 along the Pacific coastal line of Japan's Aichi prefecture, and these two proud institutions unmistakably cross paths. There you will find Kaiyo Academy, a $175 million school founded by former Toyota President Shoichiro Toyoda and heavily influenced by Eton.

GREAT EXPECTATIONS.

Primarily funded by three companiesToyota, Central Japan Railway, and Chubu Electric PowerKaiyo is Japan Inc.'s answer to what some maintain is an alarming decline in Japanese academic standards in recent years. Japan's school system has been criticized for dumbing down its curriculum and turning out uninspired high school graduates and incoming university students at a time the Japan needs more innovation and creative spark from its corporate leaders to bolster the country's economic competitiveness.

The Toyota-backed school clearly aspires to produce the Japanese business and political elite to lead the country in the decades ahead. "Kaiyo Academy aims to produce wonderful people who can lead the Japan of tomorrow," Toyoda said in a speech at the school's opening ceremony in April. Yoshiyuki Kasai, vice-chairman of Central Japan Railways, echoing Toyoda's remarks, says that the minimum expectation for pupils graduating from Kaiyo will be to enter an elite university in Japan or overseas.

While the school plays down suggestions that it will be "Japan's Eton," there are obvious parallels with the fabled British school. For one, Eton's headmaster has proffered advice to Kaiyo officials and a teacher from Eton will be on loan to Kaiyo starting from September. Like Eton, Kaiyo is also boys only, educates the same 12 to 18 age group, and requires all pupils to boarda rarity in Japan.

HIGH PRINCIPALS.

Also in line with the British boarding school tradition, residential quarters are divided into "houses," each home to 60 students and overseen by "housemasters" who live on the premises with their families. Three "floor masters" are also provided, by sponsor companies like Toyota or Chubu Electric Power, to each house to help supervise pupils and provide insights into the business world.

School officials are confident that high quality teaching and first-rate educational resources will create an atmosphere conducive to passing exams, instilling leadership skills, and producing high school graduates of the highest caliber. Kaiyo's first headmaster, Takeo Izuyama, is professor emeritus at Tokyo University and has been a principal of junior and senior high schools "We want you to receive a fundamental education that will enable you to be active overseas, as well as in Japan," Toyoda, son of Toyota founder Kiichiro Toyoda, told pupils at the opening ceremony.

Of course that kind of talk instantly clicks with many of Japan's education-obsessed parents. Despite annual fees of $26,000 a year far more than a typical Japanese private school over 900 pupils took an entrance exam to be one of the lucky 120 chosen as first-year students at Kaiyo in February. One attraction is the focus on developing kids who can do more than just pass exams a long-held criticism of Japan's top private schools.

Another is attending a school backed by Japan's corporate superstar. "The school is reliable since it is backed by Toyota, the world's leading company," one mother whose son passed the entrance exam told Japan's Asahi Shimbun daily.

OPPORTUNITY GAP.

Looking round the campus, it's easy to see the attraction. Being so new, the school has a slightly eerie feel and it will take five more years for the number of pupils to reach capacity. But the facilities are first rate. From grand pianos in the music room to wireless-enabled classrooms where pupils can surf the net using laptops while sitting at their desks, there's the kind of detail you'd expect from a Toyota-led project. Even the classrooms are designed so the boys always sit with their backs to windows. The reason: to stop the leaders of tomorrow gazing out towards over the Pacific when they should be learning.

Still, Kaiyo has plenty of critics. One concern is that the school exemplifies a growing opportunities gap between Japan's rich and poor. A government decision four years ago to ease the workload for elementary and junior high school children by 30% has already led to a huge rise in demand for cram schools, with wealthier parents spending as much as $500 a month to give their children a head start and better chances of entering top universities [see BW Online, 4/18/05, "Japan: Crazy for Cramming"].

A Kaiyo spokesperson points out that because its pupils won't attend cram schools during term time, families will save thousands of dollars a year and that the school offers an undisclosed number of scholarships. Kaiyo is also cheap compared to the original Eton which charges a princely $43,500 a year.

LIMITED DOWNTIME.

Others question the regimented educational environment at Kaiyo. Students study far more content each year than regular school pupils for example, they'll begin studying Japanese classics at an earlier age than mostand are required to study two and a half hours every night in their houses and attend additional classes on Saturdays. Privileges are also limited. Pupils aren't allowed to leave the premises unattended and carrying cash is forbidden.

Instead, pupils are given handheld electronic devices which can be used to borrow books from the library or pay for snacks. The same devices also emit a signal which allows the school to keep track of pupils' whereabouts. Radios and TVsother than those in specially designated areas are also banned, although pupils may have up to five CDs which they can play on their laptops.

"The school is isolated and students have little contact with outside world," says Naoki Ogi, a professor at Hosei University in Tokyo. "I seriously question if they can foster real elites in such circumstances."

INVESTOR FEEDBACK.

Some critics also complain that Kaiyo sends a depressing message to Japan's girls. Men-only boardrooms may still be the norm in Japan, but Toyota and partners' backing for a boys-only school hardly makes them look progressive. There are no immediate plans to build an equivalent school for females. "Why only boys?" asks Hirohito Komiyama, an education specialist and author. "Go-ahead companies are good at getting the most from women employees. This seems old fashioned."

Investors may also wonder why companies like Toyota, Central Japan Railways, and Chubu Electric Power are getting into the education business. After all, the synergies between their core businesses and elite education are nonexistent. Of course, with annual profits of $12.5 billion through March this year, Toyota can certainly afford the expense.

What's more, if Kaiyo can educate half as many future prime ministers as Eton or raise more Japanese companies to Toyota's global position, few in Japan will complain.

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