Japan’s extreme sensitivity over its royal family was laid bare yesterday when it reacted furiously to an unauthorised biography of its most famous – and controversial – princess, entitled “Princess Masako: Prisoner of the Chrysanthemum Throne; the Tragic True Story of Japan’s Crown Princess” (Click title to see the book on Amazon.co.jp).

Japan’s Imperial Family, the oldest royal dynasty with a 2600 year history has been somewhat in danger due to the fact that even after 13 years of marriage, Princess Masako, and Crown Prince Naruhito could not bear a boy to succeed the throne. They are both now well into their 40s, and after suffering a miscarriage in 1999 they have given birth to only one child, Aiko – a daughter (with the help of IVF treatment). Even the birth this year of a new son and heir to her sister-in-law Princess Kiko has done little to relieve Masako’s stress – and has only postponed for a generation the vexed issue of changing the law to allow a woman to inherit the throne. Royal protocol has denied the princess, who was educated at Oxford and Harvard, the kind of high profile role that she and her husband clearly intended. Instead, she has been allowed on only a few official visits overseas and has endured intense pressure to produce a son to secure the line of succession.

Let’s recap some background about the marriage of Masako and her husband, before focusing on the book. The Crown Prince of Japan Naruhito, and Masako Owada married in 1993 in a Shinto ritual deep in the woods of the Imperial Palace, igniting fanfare similar to that of the Prince Charles and Lady Diana wedding of July 1981. The wedding in Tokyo, making Masako a June bride, was undoubtedly the most talked-about royal event in decades. In earlier times Japanese royal brides came from the nobility, but Naruhito followed in the footsteps of his father, Emperor Akihito, by marrying a commoner. Unlike the 2 step (engagement and marriage) process of common people, marriages in the Japanese Imperial Family follow three distinct rituals with the first being prior approval of the Imperial House Council. Naruhito and Masako were locked in matrimony on the following schedule (in which the bride and groom had literally no say):

1. 19 January 1993 – Imperial House Council (皇室会議, koshitsu kaigi) Approval
2. 12 April 1993 – Engagement Ceremony (納采の儀, nosai no gi)
3. 9 June 1993 – Marriage (first child, Aiko born in 2001)

Now, 13 years after this somewhat speedy 4 month marriage procedure, a new book has been released by the Australian author Ben Hills. The book, “Princess Masako – Prisoner of the Chrysanthemum Throne”, is an unofficial (and unapproved) biography of Princess Masako, and it’s content has sparked outrage from the Japanese Kunaicho (Imperial Household Agency) and the Japanese Foreign Ministry, with diplomatic waves of strong dissent rolling as far as Canberra.

The Author describes the book as follows:

… a look behind the ‘Chrysanthemum Curtain’ to the arcane world of the Japanese royal family, where vestal virgins still preside at Shinto rites and the position of royal stool inspector was only recently abolished. Through Masako’s and Naruhito’s love affair, it opens a window on Japanese attitudes towards parenting, mental illness, the role of women, and the place of the monarchy. Princess Masako asks and answers many questions which can never be raised in Japan because of the reverence in which the Emperor and his family are held. What is the real reason Masako had to abandon her studies at Oxford? Why did the Kunaicho, the powerful bureaucrats of the Imperial Household Agency, oppose the marriage? Who are the shadowy figures that persuaded Masako to give up her career and marry the prince? Why is there such secrecy over the couple’s use of IVF, and Masako’s mental illness? What does the future hold for the star-crossed couple – and for the survival of the monarchy. But above all it is the story of a romance gone wrong, which neither will survive undamaged, but from which neither seems capable of escaping…

One must draw a comparison here with the Prince Charles and Lady Diana saga. You may recall that in 1992, 11 years after their marriage, they faced a very similar situation when a book by Andrew Morton titled “Diana: Her True Story in Her Own Words” was published. The controversial book about the Princess of Wales portrays her as a deeply depressed and unstable character with suicidal tendencies. Buckingham Palace would not comment on any specific claims, and said Princess Diana did not co-operate with the biography in any way whatsoever. The author Andrew Morton however, maintained the book’s accuracy, and when promoting the book just one week after an event where Diana was filmed breaking down in tears in Liverpool, he claimed that “The tears that she has shed in public in Liverpool are nothing compared to the tears she has shed over the last year. I can’t emphasise strongly enough the volatility of the situation inside Kensington Palace”. The unofficial biography alleges that Princess Diana tried to kill herself on as many as five occasions during the 1980s.

Well, I am not sure about the suicide attempts, but it seems that the social pressure and stress of being a royal princess knows no borders. One can not help but think that we are seeing the Oriental version of Lady Diana in Princess Masako’s unfolding story, especially in light of Ben Hills’ new book. Inevitably, the strain of it all has had a terrible impact on Masako, who has not been able to perform any of her royal duties for since December 2003. According to the book, she has been afflicted with painful shingles, and is suffering from deep depression – although the palace will not admit it. There has also apparently been talk of divorce, though no royal has ever divorced in Japan’s history. Also, although highly unlikely, some even say the Crown Prince is considering renouncing his claim to the throne for his wife, Masako – leaving the crown to his brother. With the Emperor himself ailing with cancer, the imperial system in Japan seems to be in deep crisis.

The book is not in stores in Japan yet. In November, the Japanese publisher Kodansha announced that it would publish the book (in Japanese) in Japan. However, after the bullying from the government they announced last Friday (Feb 16) that they would not be going ahead with publication.

Last Tuesday, (Feb 13) the Japanese Foreign Ministry called a press conference in Tokyo to denounce the book as “unfounded and highly contemptuous descriptions” of the imperial family. They made no specific claims of factual inaccuracy, and contented themselves with deeply inscrutable statements such as saying that the book contains “..disrespectful descriptions, distortions of facts, and judgmental assertions with audacious conjectures and coarse logic”. In protest letters sent to the author and the publisher in Australia, Random House, the ministry demanded an apology and “prompt measures to remedy the situation.”

“Under the Japanese Constitution, the emperor is a symbol of the state and of the unity of the people,” the letter said. “The government of Japan can by no means ignore contempt for his majesty the emperor who holds this constitutional status, nor contempt for other members of the imperial family as well as the people of Japan”, it went on to say. The rare intervention by the Japanese government was also delivered from their embassy in Canberra, directly aimed at the author, publisher, and calling for the Australian Government to take immediate action. Ben Hills, the Australian author and a former Tokyo based journalist, refused to apologise yesterday and accused Japan of attempting to censor his book.

The Kunaicho (Imperial Household Agency) itself has also written a letter (dated Feb 2007) to the author of the book, publishing it (HERE) on the Internet – not such a traditional form of communication for the Kunaicho I must say. The letter clearly expresses dissent and distaste for the book, but surprisingly does not seem to deny any of the facts presented about Masako or the Crown Prince at all, focusing rather on allegedly erroneous content surrounding the current Emperor and Empress:

I would like to focus on a passage in the book which is directly related to them and totally wrong from a factual point of view. In Chapter seven of this book, you write that, “The Emperor is said to have more than 1000 engagements a year, though all are undemanding formal appearances at uncontroversial events.”

The letter goes on to outline all the important engagements that the Emperor and Empress of Japan have been involved in, completely missing the chance to rebut and dismiss the main point of Hills’ book, i.e. Masako, and how she has been severely mistreated by the Agency, driving her into a recluse life of sickness, depression and it seems, infertility. If there were untruths in what Hills has written, surely the Kunaicho’s arguments could have been stronger, and more to the point than the waffling b/s they have presented to the world in this letter.

Japan has long covered its Imperial family in a protective veil, misconstruing it as the perfect family, a role model for all Japanese subjects, while hiding their personal problems and concerns under the carpet. Japanese journalists traditionally report the imperial family in a reverential way. Honorifics and especially polite terms are used whenever writing about them. Stippy.com however, is not Japanese journalism. The fact that our tax money is used to support the bureaucracy surrounding such a ancient form of keeping the country united bothers me greatly, and I certainly am uncomfortable with the unearned and blind respect that the Japanese media and people pay the pudgy Emperor and his family (the same goes for royals in any other country for that matter!). In this perspective at least, Ben Hills’ book is doing well to shake the foundations of the Kunaicho, asking what value (apart from an empty warm and fuzzy feeling) the Japanese Royals really are giving back to the people of Japan.

Leave your thoughts and comments on the book itself in the section below, or tell us what you think of the Japanese Imperial Family in general, including corrections to anything facts that I have wrong. (My opinion of the Royal Family as a bottomless hole for our tax money will not change though, so rather than slandering me for it, just let us know yours!)

The Japanese government has just released their crime statistics for 2006, which show crimes by non-permanent resident foreigners in Japan are down 16.2% from a record high logged the year before. Unfortunately not everyone was impressed with these figures. A few days ago word broke out on foreign activist and anti-racism campaigner Arudou Debito’s site of a new very racist, and particularly “anti-gaijin in Japan” magazine called 外人犯罪裏ファイル (gaijin hanzai ura fairu), which has been variously translated as “Shocking Foreigner Crime: The Undercover File” or “Secret Files of Foreigners’ Crimes”. The magazine was widely available in convenience stores, book stores and online.

The magazine is subtitled “The 2007 White Paper on Foreigner Crime” and the general theme is that foreigners in Japan are largely responsible for the crime rate. Throw in a bit of bad language and a bit of racist slang and you’ve got a pretty good idea of where this is going. The book is littered with crude caricatures of foreigners, photos of shattered glass (which may or may not have been caused by bullets,) and pixellated photos which purportedly show foreigners caught in the act.

Many of the stories seem to focus on Japanese girls wanting to be with gaijin guys – Jealousy?
While I get the impression the magazines goal is to stir up fear of a foreign crime wave, the editors seem to be easily distracted. Several stories, as pictured here, are focussed not on the foreigner crime wave, but instead on interracial dating, prostitution on and around US military bases (just the buying end), and Korean and other Asian prostitutes in Tokyo (just the selling end.) Outrage over the magazine has been widely vented, including in The Times and in Yahoo News.

However, the editorial director of Tokyo-based publishers Eichi, Shigeki Saka, has defended the magazine and insists that it is not racist, despite several references to black men in the magazine as “nigger (ニガー、niggaa).” He justified the publication by saying that “This is not a racist book, because it is based on established fact.” He continued that “if we wanted to be racist, we could write it in a much more racist way,” and then explained that the word “nigger” was not racist because it is not considered offensive in Japan. He refused to issue an apology, justifying himself by saying “If you read the magazine, you’ll see there’s no single discriminatory phrase, so I don’t know why should I apologise.”

According to an update posted by Debito the magazine has since been recalled by Family Mart, who has now issued an official apology on their website for stocking the “不愉快な (fuyukai,unpleasant)” magazine at all. Here at Stippy.com we had to make an emergency dash to the local WonderGoo to pick up the last copy before they were removed there as well.

A bit of research though indicates that it is still available on Amazon.co.jp, and they apparently have no intention of pulling it. Amazon said that they believe “… it is censorship not to offer for sale certain titles with repugnant or distasteful content” and insisting that “… [they] will continue to make controversial works available in the UK and everywhere else, except where they are prohibited by law.” Looking at the list of other recommended books at the Amazon.co.jp page though indicates that it isn’t necessarily Japanese buyers with a fondness for racism lapping them up. In the “Customers who bought this item also bought…” section it lists mainly Japanese language texts, including one for “Reading Comprehension for Level 1 Japanese Proficiency Exam”. It seems that it is largely foreigners who are searching for the books online, if not in the shops as well. Either that, or the young uyoku kiddies are working to brush up their Japanese a bit before they sit for their scooter licence exams.

Some of the comments by Amazon customers are comforting to see, basically slamming this magazine for the xenophobic and racist propaganda that it is:

Amazon.com Comment 1 – 日本人の恥: この本は海外の有力新聞で紹介され、日本人がいかに人種差別を容認しているかという証拠物件のように扱われています。ハッキリ言って日本人の恥です。戦前のナチスドイツで似たような内容の本がユダヤ人について出版されていたと指摘されています。実際、日本の犯罪のほとんどは日本人が行っているわけだし、世界的に見ても日本は外国人による犯罪が極端に少ない国であるわけだから、こういう本が出版される正当性はありません。しかも、外国人の犯罪を問題視するのなら、どうして日本人女性をナンパする外人まで同列に扱っているのでしょう？ナンパは犯罪ですか？単にダメな奴らのヒガミじゃないんですか？

Amazon.com Comment 2 – 人種差別本: 差別用語を頻繁に用い、内容が低レベル。著者には日本人として多大な劣等意識があると思われる。無知な日本人には外国人に対する偏見を植えつけてしまう。

Of course, it’s impressive to see that a strong campaign by foreign activists was able to get some stores in Japan to reconsider stocking this tract. Nevertheless, I’m curious about how many of those complaining had actually read it. The sites listed above do have links to pictures of a couple of pages scanned from the magazine, and of course the content looks terrible, but it is not easy to get a good idea for what the articles are actually advocating.

For this reason, the team here at Stippy.com has decided to perform a bit of a public service and fully translate some of the articles for those who either can’t get their hands on the mag, or for any non-Japanese speakers here who would like to know what all the fuss is about. We’ll start today with a rough outline of the contents, and if there’s any particular story you’d like to know more about leave us your vote in the comments.

“Gaijin Hanzai Ura File” – Table of Contents (Which would you like to see translated on Stippy??):

• p2, Tokyo Lawless Zone – Whether it’s Chinese and Black people in Shinjuku, Iranians in Shibuya, or multicultural carnage underway in Roppongi, foreign criminals are taking over all of Tokyo. What will happen next!?
• p10, The Kidnapping Incident of a Shibuya Women’s University Student – Foreign criminals are starting to co-operate, and someone is going to get abducted!
• p18, The Murder of a Brazilian Mother and Child in Yaizu – Murdered by a foreigner, of course.
• p30, The Heinousness of Robbery Gangs – A gang of lethal outlaws is targeting Japan!
• p32, Why is Japan Being Targeted? – An academic explains.
• p46, Interview With the National Police Agency : We are going to go after foreign crime with everything we’ve got! – Actually, it’s surprisingly restrained and politically correct. Someone should have done a better job of misquoting them.
• p49, The Top 10 Major Foreigner Crimes That Horrified Japan – Including a story about the “Chilean Geisha”, who seems to be guilty of receiving gifts bought with money embezzled by a Japanese Government Official!
• p60, The Crime Business of North Korea : An evil nation in a league of it’s own. – Perhaps it’s not quite relevant, but according the policeman at the local koban the North Koreans stole my last scooter.
• p65, The Murder of a Family of Four in Fukuoka – A gruesome story of murder by a gang of Chinese foreign students, expertly simplified into a six page manga story!
• p73, The Kidnapping Incident of a Women’s University Student in Shibuya – Another six page manga, but this time with a happy ending. A true tale of heroism. Possibly slightly exaggerated.
• p79, Interview with a Former Metropolitan Police Department Detective : “The age where everyone is a target” – Apparently a well-planned, well-organised, unbelievable incident beyond your wildest imagination will occur sometime after spring. What could this ambiguous incident possibly be!
• p82, Murder on a Pig Farm in Chiba – Another manga, this time four pages, documenting a murder, committed by a foreigner, on a pig farm… in rural Chiba Prefecture.
• p88, A History of Foreign Cults – You never know when a foreigner might force you to believe in a crazy religion against your own will!
• p96, What the CIA is Doing in Japan – Are they a friend or an enemy?
• p97, Shocking Photo Scoop! : A top secret facility for foreign sex workers in Kabukicho – Not very top secret anymore, I’m afraid.
• p108, Cracking Down on the Asian Prostitution Trade – Tales of forced prostitution in Kabukicho, an otherwise family friendly safe haven.
• p110, Korean Prostitution in Uguisudani – Including answers to eight questions you always wanted to ask about Korean prostitutes. Do they practice safe sex? Do they hate the Japanese? And what is that Kim-chi smell?
• p113, 2006 Foreigner Crime Database – 13 pages, with all you need to know about 187 evil deeds committed in 2006. Kind of what you would expect in a newsprint version of “America’s Most Wanted,” except perhaps not quite as intellectually stimulating.
• p126, Trends and Countermeasures for 2007 – Will you be able to protect yourself?

Let us know which you would like to see translated in the comments, and why! (You’ll have to convince us to get of our bums and translate..!)

Stippy.com Book Review: Tokyo Underworld: The Fast Times and Hard Life of an American Gangster in Japan

The good thing about the mob (or the Yakuza) in Japan is that they rarely involve innocent bystanders in their sometimes violent dealings, so it’s easy to forget the fact that they are still active on nearly every street corner of major cities of Japan. Incidents like the “Yakuza” killing the other day certainly bring home the reality of their existence and offer a rare insight into the power struggles that are going on everyday. Given the high gaijin population in Azabu/Roppongi, these most recent broad daylight killings are sure to invoke at least a little bit of anxiety in stippy.com readers. Are you afraid?

Even if the gang wars continue, it’s unlikely that your life will be disrupted as long as you keep to yourself. After all, what do gaijin have to do with Japanese organized crime and the Yakuza anyway?

Or, that’s what I thought until I read “Tokyo Underworld” – a book not only about the long history that Roppongi has had as a base for organized crime, but also an intriguing story about the “don” of gaijin Yakuza back in post war Tokyo. The shootings a day or two ago encouraged me to pull the book off my shelf again and have a re-read. I strongly recommend that you do, too.
“Tokyo Underworld” tells the story of Nick Zapetti, an Italian American who learnt “the trade” in the slums of Harlem and for some reason sets sail for Tokyo during WWII as a GI. Stationed in Tokyo at the start of the US occupation, Zapetti sees a business opportunity to manipulate the distressed streets of Roppongi and slowly starts to return to his old ways. Complete with photos of the streets at the time, you’ll be shocked to read about the key role that he and his GI friends played in supplying the black markets of the day. The book raises more than an eyelid about the motives of the US government at the time.

Small time success, a craving for real pizza, and some “liquidity problems” drive Zapetti into the restaurant business in the early 50s. Enter “Nicola’s” – Tokyo’s first authentic pizzeria. The more successful his pizza business becomes, the deeper he, his wife(s) and his lifestyle becomes interlinked with the Yakuza. In fact, the dearth of famous Japanese companies that still exist today illustrate how deeply seeded the mob is in even the Japanese business world of today.

By the mid 1950s, “Nicola’s” was “the” place to be. Artists, Sportsmen, Politicians, Businessmen and… you guessed it the dons of the Japanese mafia all frequented his pizzeria. Deals are done and promises are broken. Zapetti goes into detail about his relationship with Yamaguchi-gumi (still going strong today, obviously), Inagaki-kai, and his damning confessions stretch as far as famous politicians of the day.

While I was shocked at some of the revelations, I finished the book with a new found respect for the Japan of the 50s and 60s, and wish that I could have been around to taste some of the energy flooding through the nation at the time. I’m sure that any story showing a glimpse of the inner workings of the Yakuza is bound to be interesting, but what makes this story stand out is the personal saga behind Zapetti and his role in Japanese society. It’s rare for a gaijin to be accepted in Japan – period – let alone in the deepest darkest places of its underworld. This is a man who was called the Mafia Boss of Tokyo!

“Tokyo Underworld” is a true story and based on interviews with Zapetti before he died in 1992. The author, Robert Whiting, knew him personally and collected the data for the book over a series of years. Whiting is a Tokyo based journalist who is better known for his book “You gotta have wa” about the philosophical difference between baseball and yakyuu (野球). Whiting’s writing is intriguing and by the end of the book you will feel like you are an expert on Japanese nationalism and what makes the real Japan tick. For anybody who hasn’t read it yet, I definitely recommend that you drop by your local book store and pick up a copy – it’s never gonna be more topical than now.

If you want to know a little more about the background of Zapetti and his activities during his time in Japan, there is a nice story about him here. He just has to go down in the book of gaijin heroes in my opinion.

Again, here is a link to “Tokyo Underworld” on Amazon.co.jp if you are interested in reading.

If any readers can recommend any other interesting reads on Japan’s underworld we’d love to hear about them in the comments section below.

Target China’s “New Rich” With Your Net Shop (click here to view the book on amazon.co.jp)

The concept that Yang Mingyi (楊 鳴一) presents in this book is so amazingly simple that you’ll kick yourself for not thinking of it first. Everyone can think of a product that they’d like to sell to the Chinese, but very few of us have the linguistic ability, business acumen or experience (let alone the money) to set up shop in China. If Web 2.0 is all about targeting the long tail, then surely China must be the perfect candidate. Yang’s book is all about empowering the China-novice (you and me) to target it with minimum expense.

Yang is the CEO of United Cities Japan (UCJ, http://www.ucj.jp/) and recently took the time to explain his business model to stippy.com. He modestly refers to UCJ as a cross border mall but really it is a unique mixture of e-tailing, shosha-style international consulting and value-added translation services. UCJ seeks out online retailers who realize that language should not be a barrier in the world of Web 2.0 and helps them adapt their website and business model to one that fits well with the mainland Chinese. Everything is automated so that Japanese online 店長 (tencho, shop owners) can monitor orders and build their entire website in Japanese. The system even provides for simultaneous translation of queries from Chinese shoppers guaranteeing a seamless experience for both the operator and the client.

To be sure, the concept is popular. Except for the politicians, nearly everything “Japan” is popular these days in Asia, and China is no exception. Yang is adamant that China’s 65 million “new rich” are always trying to get one up on the Jones’ and so the concept of “original”, “niche”, “obscure”, “high-end” plays straight to their innermost desires. The ability to buy cutting edge Japanese technology, newly released designer brands or – heaven forbid – premium kitty-chan goods can be a powerful status symbol for a tech savvy Chinese shopper.

Many e-tailers who rush into the market blind, make the mistake of targeting too broadly. Unsurprisingly, the vast majority of internet users in China are either students or public servants – not exactly the kind of target audience that you would expect to spend up big. Remember that the 2,000 yen or so your customer will be paying for EMS postage is a much larger hit on the hip pocket nerve to a student at Beida (北大) than it would have been to you when you were a student. Yang walks you through a couple of smart ways of hunting down high-income users to ensure that find your target easily. I personally found the advice on webpage design to be both practical and interesting. (I’m over simplifying this a little but the short version is to make your page as はで as possible with lots of red and gold!!). UC Malls’ Chinese language page should give you an idea of what I mean.

As you might expect, Yang, has quite an interesting history. After growing up in Shanghai, he came to Japan as a teenager. Just like his sempai, Horie had done a few years earlier, Yang was a rare example of an entrepreneurial Todaisei who created his first company while still a student. Upon graduation from Tokyo University, Yang received a visa job offer from the top notch consulting company, McKinzie. It only took a day for Yang to decide that he now had a visa wanted to be his own boss and quickly parted company with McKinsey to engage full time in pursuing his dream: to unite the cities of the world (hence the company name). Yang also runs a business in China but that is not directly related to this book.

While this book is tailored toward Japanese SMEs, the concepts are just as applicable to budding gaijin entrepreneurs trying to work out how to get their foot in China’s door. Yang’s business model is all about destroying conventional communication barriers on a micro level. He promised stippy.com that he’d be more than happy to accommodate any “English-only Gaijin” wanting to use the UCJ system if there was interest. It feels as though UCJ will be only the beginning of his expansion plans. Currently a “One China Policy” friendly system is already in the pipeline where you will be able to automatically roll out your site to Hong-Kong and Taiwan, at the same time as the mainland.

• Advice for a Busy Gaijin: If you’re in a hurry, just read parts 4-5 which jumps straight to the nitty gritty of setting up a website. (Parts 1-3 are an introduction to the Chinese consumer and their needs.)

ネットショップで中国の富裕層(ニューリッチ)を狙え! (Click here to view the book on amazon.co.jp)

“Mao- The Unknown Story” (Click here to view the book on Amazon.co.jp)

We should be glad that the Chinese funded communist movements in Japan never gained momentum.

This book by Jung Chang (also know for Wild Swans), is apparently the first time anyone has taken a really deep look into Mao Tse-tung’s reign over China, from the inside, and published such a whopper of a biography.

The Daily Mail said “Few books are destined to change history, but this one will”.

I had never read a book on Chinese history that said anything like this. High-school history class told me that The Cultural Revlution took China from being a backward barbaric country, to a civilised modern country. Ms. Burrows neglected to mention the immense human carnage, and the fact that this was a small part of a much larger plan by one man to in fact take over the entire world, including Japan.

What intrigued me about this story, was how much the entire country of China, and many other parts of the Communist world, were controlled by the ideals and plans of one man, and how much he was able to succeed in his ambitions. Also how he was able to control the information coming in and out of China at the time so that the world saw a Mao that was very different to his image within China.

Of course this book is still banned in China, and Chang’s dream appears for it to be read by all the Chinese people, and thus changing China’s history somewhat. Her disdain for Mao comes through strong, punctualised by unneccesary personal comments right at the end of each chapter, but aside from that, it reads very smooth. All 750 pages.

It’s a doorstopper, but if you have the time, I highly recommend it.

“Barbarians at the Gate” (Click to view the book on Amazon.co.jp)

* Advice for a busy gaijin: If you are in a rush start reading from chapter seven.

When the Portuguese first approached Japan by sea in 1542, they were not at all welcome. As far as the Japanese were concerned, they were happy in their quiet world and called these unrefined intruders “nanbanjin” or “Southern Barbarians” because the ships came from the South. This book has nothing to do with our Portuguese friends, it is about the hostile takeover over RJR Nabisco in the late 1980s. The scene isn’t Japan, but I’m sure the people in the quiet town of Winston-Salem might have found solace in Japanese history as they combated the Northern barbarians who robbed them of their local icon. (I’ll let the reader decide who the real barbarians were.)

There are only a few finance books about the greed of the 80s which have stood the test of time. Stick with Liar’s Poker by Michael Lewis if you are interested in a quick and entertaining read about the eccentricities of traders and the other famous players of the day. If, on the other hand, you are looking for a slightly more detail oriented story explaining what happened behind the scenes in the less well understood world of leveraged buyouts, then this is the book for you. The RJR Nabisco transaction covers everything you could desire for in a corporate transaction: MBO, LBO, hostile takeover, junk bonds, white knights, stalking horses, you name it.

In 1988, the share price of RJR Nabisco had been depressed for several years. At the time, RJR Nabisco was a holding company for Reynolds (the father of the modern cigarette in the US, boasting brands such as Winston, Salem and Camel) and Nabisco (one of America’s largest food companies boasting the “Oreo” and other favorites from your family cookie barrel). An increase in anti-smoking sentiment in equity-land due to increased litigation risk had meant that even the food assets of RJR Nabisco were trading at a discount (i.e. investors were pricing the company as if the litigation risk was just as strong for Oreos as it was for Camels).

At the time leveraged buyouts (LBO) were all the rage and investment banks were constantly trying to convince management and other potential acquirers of the merits of an LBO. (Given the huge fees involved, the banks didn’t need much convincing.) Unlike a traditional takeover where you need a lot of (your own) money to buy a target company, the acquirer in an LBO borrows almost all of the money needed to buy the company. At the time, junk bonds (highly risky bonds which promise to pay the holders very high interest rates) were extremely popular amongst investors and so it was very easy to raise huge amounts of cash. Whereas a bank will often take property and other fixed assets as collateral for a conventional loan, in an LBO the acquirer uses the future cash flows of the company as the collateral for their debt – meaning they can stretch the boundaries of financing beyond traditional levels (a bit like you or I would do when we buy an investment property).

This book tells the story of how the CEO of RJR Nabisco, F. Ross Johnson, frustrated with a low stock price, decided to propose a management led LBO – the largest in history – of the firm. Given the stability of the cash flows that Reynolds churned out, the company was the perfect candidate for leverage but until then no-one had thought it would be possible to close an LBO of such scale ($20 bln USD). Unbeknownst to Johnson, his announcement made it clear to every LBO fund on The Street that it was possible. The flood gates now open, the supposed simple transaction soon turns into an aggressive bidding war amongst other potential acquirers. The authors (two ex wall-street journal reporters) amaze you with seemingly endless detail concerning the conversations and negotiations that went on behind closed doors between the various bidders. Anyone who is contemplating a career as an investment banker will enjoy reading about the high moral standards that the various bankers exhibit as they all try to romance management and steal “the deal” from the teeth of the original financer.

Barbarians is more than just a historical account of the largest LBO ever, it delves into numerous themes in its five hundred plus pages. Prior to the LBO, RJR Nabisco was the classic example of a cash-rich company that has ceased to innovate. Much of the book is a wakeup call to the average investor, showing you how little control shareholders have over their investments and how ego, politics, money and (broken) promises might often play the largest roll in determining shareholder returns. All in all it portrays an exciting world and it wouldn’t surprise me if a lot of young people have chosen to pursue a job in private equity after reading this book. At the very least, I’m sure there is a fifty-fifty chance you’ll be ringing your head hunter to ask if KKR is active in Japan (the answer is “Yes”).

If I could make one complaint about the book it would be the abrupt ending. The entire book is focused on the personalities involved in the lead up to the ultimate transaction. While there is a short reference to what happened after closing the deal, I found myself wondering what actually happened to RJR Nabisco in the following years. Did these guys end up making any money?? A quick Google search gives us a few clues. As one would expect, it appears that much of the company was broken up. Nabisco was ultimately sold to Kraft. The international tobacco business was sold to good old Japan Tobacco and the US tobacco business has been relisted under the ticker RAI. But that doesn’t really answer our question. Comments are welcome from any readers who can shed light on this.

While the book talks about an event from almost 20 years ago, it’s surprising how relevant the story is for the Japan of today. Years of low interest rates combined with hundreds of lazy companies with over capitalized balance sheets has meant that Japan is ripe for LBOs. Skylark got a lot of media attention when its management announced that it would follow follow Johnson’s footsteps. Ironically, there were no other bidders as it appears Skylark may not have been really that cheap. Japanese management seems to be happy buying their own companies just to relieve them from the pains of dealing with minority shareholders.

Softbank raised even more eyes with their LBO of Vodafone Japan. Usually the management of an LBO focuses on selling off non-core assets and cutting costs aggressively in order to pay back the debt as soon as possible. The strange thing about the Softbank transaction is that it was common knowledge that Vodafone plc had already cut all of the low hanging fruit. With no obvious room for cost cutting, the huge amount of debt (and the rumored covenants associated) could potentially restrict Softbank in their expansion of the business going forward.

The one thing that we don’t usually see in modern day Japan is the hubris and abuse of power that was evident in Nabisco. While I’m tempted to make some comparisons with some of the adventures that we’ve seen in Roppongi Hills over the last year or so, I’d prefer to champion those entrepreneurs as a slightly different breed. (right guys?)

The rebirth of the LBO is not a Japan specific phenomenon. Junk bond defaults were less than 2% last year (Moody’s tells us that the long run average should be about 5%). The number of LBOs recently completed in the US that seem to ignore EBITDA multiples suggests that the market for junk bonds is invincible once again. The rest of Asia is no exception. Imagine if Carl Icahn and Warren Lichtenstein (Steel Partners) had successfully pulled off their $US 10 bln attempt to buy Korean Tobacco & Ginseng (KT&G) back in March. I wonder how KT&G’s cash flow yields compared with Reynolds, or better yet, our own JT? How long until we see a hostile LBO on Japanese soil?

“Barbarians at the Gate” (Click here to view the book on Amazon.co.jp)