Slide1: 1 Diverse Opportunities in the Japanese Market March 4, 2008 Yuji Muranaga Chief Executive Director JETRO San Francisco


Slide2: 2 Current Situation of Japanese Economy Japanese Economy from Now Some Examples of Expanding Sector Topics


Slide3: 3 Current Situation of Japanese Economy 2 Continued Economic Growth Economic Integration with East Asia Declining Birthrate and Aging Population


Slide4: 4 Continued Economic Growth 3 － Real GDP YoY Change Real GDP Trend Year %


Slide5: 5 Note: Figures based on PPP (Purchasing Power Parity) valuation of country GDP Source： IMF: “World Economic Outlook Database” (April, 2006) 1990 EU 26.2% Other 30.2% U.S 21.4% EU 22.5% Other 30.9% U.S 20.1% EU 20.3% Other 28.2% U.S 23.2% 2000 2005 East Asia: 28.7% (including Japan) Growth in GDP Share ‘East Asia’ in this Graph: Japan, China, Taiwan, Hong Kong, Korea, Singapore, Thailand, Philippines, Malaysia, Indonesia Economic Integration with East Asia


Slide6: 6 East Asia EU 25 EU 15 NAFTA Intra-Regional Trade Ratio East Asia (%) 50 30 40 60 70 1980 1990 2000 Source: White Paper on International Economy and Trade 2006 (METI, Japan) Economic Integration with East Asia


Slide7: 7 Note: Total trade value is exports plus imports Source： Ministry of Finance and JETRO Japanese Trade in 1990 vs. 2005 ($ billion) up 240% EU JAPAN U.S. East Asia 2005 498.7 1990 147.4 2005 147.1 up 70% up 40% 1990 88.5 1990 142.7 2005 199.4 26 Economic Integration with East Asia


Slide8: 8 Economic Integration with East Asia East Asia Overseas Subsidiaries of Japanese Manufacturers China ASEAN4 NIEs North America Europe Others Total in Asia Source: White Paper on International Economy and Trade 2007 (METI, Japan) Notes: Europe includes Russia. Asia consists of China, ASEAN4 and NIEs. Sourse: Kaigai Shinshutu Kigyo Soran (Toyo Keizai)


Slide9: 9 Manufacturing Network in East Asia 　　 - Manufacture high value-added parts and components in Japan and NIEs 　　 - Assemble finished products (PCs, TVs, etc.) in China and ASEAN 　　 - Export them to US, EU and Japan Economic Integration with East Asia Europe US China ASEAN Japan NIEs


Slide10: 10 Japanese Firms - In East Asia: Vigorous Investment for Optimal Manufacturing and Procurement Practices - In Japan: R&D Activities for Value-Added / New Business Fields Production of High Value-Added Products, Parts and Components Economic Integration with East Asia


Slide11: 11 Note: Population figures are average estimates. Sources: National Institute of Population and Social Security Research Declining Birthrate and Aging Population Population Projections for Japan


Slide12: 12 Source: Annual Report on the Aging Society 2006 (Cabinet Office, Japan) Trends in Life Expectancy 0 10 20 30 40 20 40 60 80 100 0 Average life expectancy at the age of 65 (Years) Life expectancy at birth (Years) Average life expectancy at the age of 65 (Male) Average life expectancy at the age of 65 (Female) Life expectancy at birth (Male) Life expectancy at birth (Female) Declining Birthrate and Aging Population Year


Slide13: 13 　１／５ of Population = age 65+ 2055　 １／2.5 of Population = age 65+ １／４　of Population = age 75+ Life Expectancy at Birth 2005 2055 Male 78.56 → 83.67 Female 85.52 → 90.34 Declining Birthrate and Aging Population


Slide14: 14 Estimates for Aged Population Ratio in Asian Countries ( ‘Aged Population’ : Population of Age 65+ ) Japan (%) Declining Birthrate and Aging Population Source: White Paper on International Economy and Trade 2006 (METI, Japan)


Slide15: 15 Japanese Economy from Now 2 Corporate Activities Changes under “Declining Birthrate and Aging Population”


Slide16: 16 What Japanese Corporate Activities will be? 　　 ・ Pursuit of Innovation - Cutting-edge, value-added R&D in Japan - World’s Center for Technological Innovation and Product Development ・ Growth with East Asia - Contribution to the growth of East Asian Economy through Enhanced Manufacturing & Business Network in East Asia Innovation


Slide17: 17 R&D Investment in Japan Source： Ministry of Education, Culture, Sports, Science and Technology: “White Paper on Science and Technology 2006” (trillion yen) 16 Japan 3.55% (17.8 trillion yen) France 2.16% (5.0 trillion yen) U.K. 1.73% (4.0 trillion yen) China 1.34% ( 3.3 trillion yen) Germany 2.51% (7.1 trillion yen) U.S. 2.68% (33.8 trillion yen) Japan’s R&D Investment R&D/GDP Ratio in Leading Industrialized Nations (%) Source： Ministry of Education, Culture, Sports, Science and Technology (R&D/GDP ratio) Innovation


Slide18: 18 Innovative Activities in Japan 18 Innovation


Slide19: 19 Views from Foreign-affiliated Companies in Japan 15 “If the products can serve the Japanese market, then we believe they would prove themselves robust enough to handle any other market in the world. Japan has been an innovator in broadband services. Building an R&D center in Japan is a continuation of our stated strategy of allocating research and development resources where there is talent and market opportunity.” ー IT Service Provider ー “Japanese firms are not concerned about the fame of a company or its brands. They are genuinely interested in seeing a sample, making it easy to get right down to business. ー Software developer ー Innovation


Slide20: 20 “Population Decline” “Fewer Children & Aging Population” What impact will it have on Japan? - Workforce Decline? - Market Change? New Opportunities


Slide21: 21 Workforce Decline? - Utilization of Active Older Workers - Increase of the Workforce Participation of Women in their 30s & 40s 　　　　　　　　　↓ ○ Examples of Related Sectors / Services 　　　　　 ・Human Resource Development Business ・Reemployment Support Business 　　　　　 ・Supporting Business for “Working Mothers” (Childcare, etc.) 　　　　　 ・Service Robots for Housework etc. New Opportunities


Slide22: 22 Workforce Decline? - Improvements in Productivity ↓ ○ Examples of Related Sectors / Services 　　　　　 ・ Industrial Robots 　　　　　 ・ IT Investment for More Productive Corporate Management 　　　　　 ・ Business Support Services (Legal, Accounting, PR/Marketing, etc.) etc. New Opportunities


Slide23: 23 Market Change 　 - Greater Market for Medical & Healthcare Business - Consumers who pursue “Sense of Fulfillment”, “Spiritual Satisfaction”, “Better Quality of Life” 　　　　 ○ Elderly People (Age 60+) 64% “Healthy” 85% ”No need of any support from others” (Survey by Cabinet Office, 2007) 　→ Willingness to Pay for Foods, Hobbies, Travel, etc. New Opportunities


Slide24: 24 Source: Family Income and Expenditure Survey 2006 (Ministry of Internal Affairs and Communications, Japan) 0 10 20 Million Yen ～29 30～39 40～49 50～59 60～ Amounts of Savings per Household Amounts of Liabilities per Household Annual Income Age of Household Head Amounts of Savings and Liabilities per Household (By Age Group of Household Head) New Opportunities


Slide25: 25 20～29 30～39 40～49 50～59 60～ Willingness to Consume by Age Group Source: Annual Report on the Japanese Economy and Public Finance 2005 (Cabinet Office, Japan) Food Products Health & Medical Care Nursing Care Hobbies Travel ( Multiple Answers, ％ ) 0 10 20 30 40 50 60 70 New Opportunities


Slide26: 26 Some Examples of Expanding Sectors 2


Slide27: 27 Market Scale 71.0 Trillion Yen (1995) → 119.7 Trillion Yen (2005) Areas of Interest - Mobile Phone Services - IC Card / RFID - Online Gaming - Network & Network Security - IT Use in Public Sector etc. (Source: Ministry of Internal Affairs and Communications, 2007) ICT


Slide28: 28 Market Scale 59 Trillion Yen (2005) → 83 Trillion Yen (2015) Business Relating: - Global warming countermeasures (Clean Technology, etc.) - 3R : Reduce, Reuse, Recycle (Waste Treatment, Recycling, etc.) - Environmental preservation, pollution Prevention (Source: Ministry of Economy, Trade and Industry, 2008) Environmental Business


Slide29: 29 Market Scale 56 Trillion Yen (2002) → 75 Trillion Yen (2010) Business Relating: - Medical (Medical Equipment, Drugs, Medical Systems, etc.) - Health Promotion (Health Equipment, Health Foods, etc.) - Nursing Care / Welfare (Welfare Equipment, Nursing Care Services, etc.) etc. (Source: “New Industry Creation Strategy”, Ministry of Economy, Trade and Industry, 2004) Medical & Healthcare


Slide30: 30 Market Scale 76 Trillion Yen (2000) → 107 Trillion Yen (2010) Examples - Management Consulting - Finance & Accounting - Legal Support - Human Capital Management, Career Training - Executive Search - Supply Chain Management etc. Business Support Services (Source: “New Industry Creation Strategy”, Ministry of Economy, Trade and Industry, 2004)


Slide31: 31 Views from Foreign-affiliated Companies in Japan “The U.S. has twice the population of Japan but its luxury goods market size is half of Japan’s (defined as high end fashion, accessories and gifts).” ー Tableware maker ー “Everything is always changing in Japan. The customer wants new things all the time.” ー Fashion accessories retailer ー Market of Emerging Mass Affluent


Slide32: 32 Luxury Hotels 12 Source： Nikkei newspaper article, September 1, 2007, Toyo Keizai magazine article, September 15, 2007 2002 Four Seasons Tokyo Ontario, Canada Opened Hotel Name City Headquarters The world’s top hotels continue to target Japan 2003 Grand Hyatt Tokyo Illinois, U.S. 2005 Conrad Tokyo California, U.S. 2005 Mandarin Oriental Tokyo Bermuda 2007 The Ritz-Carlton Tokyo Maryland, U.S. 2007 The Peninsula Tokyo Hong Kong 2008 (planned) Amanresorts Kyoto Singapore 2010 (planned) St. Regis Osaka New York 2011 (planned) Jumeirah International Tokyo Dubai, UAE JETRO’s Online Magazine "Invest Japan" “Japan an Attractive Market for Foreign-capital Hotels” URL: http://www.investjapan.org Market of Emerging Mass Affluent


Slide33: 33 Private Banking Services 13 Source： Nikkei Kinyu newspaper article, April 11, 2007 and September 7, 2007 2008 (planned) HSBC Launches private banking service London 2007 Citigroup Announced plans to double number of retail outlets in coming years New York 2007 Société Générale Deposit assets double to nearly 400 billion yen in two years. Paris 2007 UBS Increased personnel 2.5 fold to 350 people Switzerland 2006 UBS Opened new branch in Osaka Switzerland Year Bank Name Business activity Headquarters Roughly 6.5 million “mass affluent” consumers reside in the Tokyo and Kansai metropolitan areas, according to HSBC. 2005 Standard Chartered Opened new branch in Tokyo London Market of Emerging Mass Affluent


Slide34: 34 “Declining birthrate & Aging Society” which No Other Country has Experienced → Most Matured, Most Advanced, Frontier Market Strengthened Economic Ties with East Asia 　　 → Continuing Dynamism Other Advantages of Japan’s Market - World’s Second Largest Market - World-class Companies and SMEs (Small and Medium- sized Enterprises) with Unique Technologies - Sophisticated Consumers with High Purchasing Power etc. Japan as “Treasure Island”


Slide35: 35 Source： Ministry of Finance and Bank of Japan:“Regional Direct Investment Position and Regional Portfolio Investment Position” Japan’s FDI Stock Continues to Increase ($ million) Japan as “Treasure Island”


Slide36: 36 M&A Deals on the Rise Sources： RECOF, THOMSON Examples of M&A (Out-In) Merck Colony Capital AIU, others Volvo 2003 2004 2005 2006 Banyu Pharmaceutical Fukuoka Daiei Real Estate Royal Sun Alliance Nissan Diesel 8 (Number of cases) Japan as “Treasure Island”


Slide37: 37 JETRO 19 How can JETRO help your business?


Slide38: 38 JETRO’s FDI Promotion Activities 20


Slide39: 39 JETRO IBSCs Facilities Consulting Services ● Market advice ● Laws and regulations ● National and local government incentives ● Cost simulation ● Incorporation procedures ● Employment and labor issues ● Free temporary office spaces (Tokyo IBSC has 35 spaces) ● Well-stocked library ● Exhibition space and auditorium Every Year, over 1,000 firms utilize JETRO’s support & services More than 100 actually set-up base in Japan 22 Locations: Tokyo, Osaka, Yokohama, Nagoya, Fukuoka, Kobe


Clients of JETRO San Francisco who successfully entered into the Japanese Market : 40 Clients of JETRO San Francisco who successfully entered into the Japanese Market


Slide41: 41 Please Feel Free to Contact : Linda Salomon Seattle Office 206.256.6131 lindas@cted.wa.gov Daisaku Yukita San Francisco Office 415.392.2514 Daisaku_Yukita@jetro.go.jp Sign up for newsletters, programs, and events on the web www.jetro.org JETRO Contact


Slide42: Thank You Please visit our website: www.jetro.org