Thinking of starting up your own company in Japan?  Why not, Japan is the home of the small enterprise.  The tax system is set up to promote large tax holidays for owners of small businesses and there doesn’t seem to be much of an expectation from the tax office that you even need to break a profit.  I was surprised at how simple it was to start up a company when I inked the papers at the local government offices last year here in Japan.  There are plenty of under-worked book keepers willing to weave through the bureaucracy and just tell you where to sign.  The only two things that you really need to give thought to is the name of your new baby and which town you would like to establish her in.

Even if you were starting up a company back home you would probably mull over the brand value of your name.  Let’s face it, do you really have any idea about how effective your new company name will be in nihongo (日本語) and what message it will convey to the average Japanese?  Well I have some good news for you.  It seems that katakana company names are all the rage these days.  An interesting piece of (albeit trivial) research published the other day by Tokyo Shoko Research (東京商工リサーチ) pointed out that of the ten most popular company names in Japan, seven solely use Katakana.

Hold on a sec, what do you mean ten most popular company names?  How can there be more than one company of the same name? So much for copyrite.  Japanese corporate law surprisingly allows more than one company to have the same name.  Technically, as long as your company has a different registered address then you can even call yourself Sony!  You could even be in the same street as long as both companies specified different street numbers in the official address.  (You can choose how detailed your official address will be.  If you are choosing an original name then you probably want to keep it as broad as possible (eg. Tokyo, Minato, Roppongi (東京都港区六本木) without mentioning which chome (丁目) or banchi (番地) you are.  That way even if you move offices down the street you don’t have to waste 10,000 yen updating your official company register with the tax offices.)  If you want to be really cute you can also distinguish yourself from another company by placing the KK (株式会社) either before or after your business name.

So what, you may ask, are the most popular company names in Japan?  A Whopping 429 companies (out of 2.6 million surveyed) were called “Assist” (アシスト).  This was followed by “Rise” (ライズ) and “Suntech” (サンテック) with 382 each and Sato Komuten (佐藤工務店) with 380 on number four.  While it might be good for a laugh down at the local pub, I doubt you or I are going to be calling ourselves Sato Komuten. Then again, I’m not totally sure it would be a great idea copying any of the top 10 names either.  As far as I can tell there are at least two other reasonably active companies that come in a google search for the company name that I chose.  Frankly, it is a pain in the arse.  In less than a year I have already been asked what I have to do with one of them.  Speaking of which, in this day and age you probably want to go for a company name that you can buy a .com or .co.jp or .jp URL for (as this was the major reason why potential customers confused me with another company).  Don’t worry too much if you can’t register the kanji domain name (read more here).

While we are at it with the company name bean knowledge here is a bit more.  The most common character used at the start of accompany name was 大 (meaning large eg. Yamato, Osaka, Taisei, etc.) with over 70,000 companies.  The most common katakana words at the start of company names were office (オフィス, 5124), green (グリーン, 3611) and Japan (ジャパン, 3608).  To be honest, I don’t think I’d be overly keen about chosing any of those katakana names.  Maybe I will borrow Yamato for my next company’s name though.

So what about ending your company name?  While we’d often put “inc” or “co” or “and partners” etc at the end of English names, in Japan it seems the standard is “Industries” (工業, kogyo).  Over 132,000 companies use that in their official name.  Skipping over the other typical Kanji names (建設、工務店、商事、商店) the most common katakana options (hey, as gaijin we’ve gotta use the katakana) the most popular words are service (サービス37,541) , center (センター, 22,139), tech (テック, 17,514), japan (ジャパン, 16,161).

Have I helped you come up with an interesting name or just made matters worse?  How many people out there actually run their own companies?  I would love to see the stats for companies in Japan run by gaijin.  There are so many opportunities in such a big economy like Japan that it should be ripe for the opportunity.  Does anyone know of any organizations for gaijin entrepreneurs?  If you have an interesting stories about setting up a company in Japan then share it with us in the comments section below.

Nozoe Kuniaki (野副州旦) ousted former President of Fujitsu

Over the weekend it has emerged that Nozoe Kuniaki (野副州旦), the financially savvy president of Fujitsu, who “resigned due to health reasons” (病気療養 byoki ryoyo) back in Sep ’09 was actually blackmailed into resigning by Akikusa Naoyuki (秋草直之), another former president of the company.  note: Akikusa is famous for destroying 91% of shareholder value during his five year reign at the top of Fujitsu and blaming it on his employees who “don’t work hard enough”.

Perhaps it is more fitting to use the word “coup.”  At 8:30AM on Sep 25, 2009, Thirty minutes before their regular directors meeting was scheduled to start, Nozoe was summoned into a small room by Akikusa and Mazuka Michiyoshi (間塚道義), the man to be elected as his replacement ninety minutes later.  Nozoe was told that they had dirt on a company that he had close dealings with and so he must retire immediately.  In the press conference later that day, the new president told the press that Nozoe had asked permission to focus on his health (取締役会の前に直接、治療に専念したいため社長の職をまっとうできない) but that he couldn’t discuss the details as they were private.  The financial world watched as Fujitsu’s share price lost over 12% in the following two weeks as they waited for a better explanation.  None came.  Nozoe wasn’t seen again at the company again (despite remaining an “advisor to the board”) nor did ever hold a press conference.  All a bit of a surprise for a man who promised to deliver Fujitsu’s highest historical profit only three months earlier and was deemed to have a perfect bill of health at his regular check-up at St. Luke’s Hospital.

The stock plummeted for good reason.  For the first time in over a decade, the market had liked what it was hearing from Fujitsu’s president.   Even though Nozoe was only at the helm of Fujitsu for 15 months, the stock outperformed NEC, their closest competitor by 25% because he was willing to make courageous decisions to make Fujitsu a viable company in the 21st Century.  But as is quite often the case, what is loved by the share-market is not always popular amongst staff. His smarter (but internally despised) moves include:

• Selling Fujitsu’s perpetually loss making HDD business to Toshiba and it’s HD media business to Showa Denko (Feb 17, 2009).
• Trying to merge Fujitsu’s semi-conductor business with NEC Electronics.  (NEC Electronics shunned them to chose Renesas to partner with instead).  Instead Nozoe chose to outsource production to Taiwan’s TSMC (April 30, 2009).  This made over 2,000 Fujitsu jobs redundant.

Both of these businesses have been a drag on the bottom line for almost a decade that neither Akikusa (president 1998-2003) nor Hiroaki Kurokawa (黒川博昭, his direct predecessor: president 2003-2008) had the courage to pull the plug on.  In fact both former presidents were famous for being soft on the management in these two divisions who knew that if they bowed their heads deeply and asked politely for one more chance that they would never be turned down.  By contrast, Nozoe was economically rational, quick to move and wasn’t shy about it.  Apparently on the day of the sale of the HDD business he was walking around saying that the head of the division had “gracefully committed suicide” (潔く腹をかっさばいたな) by refusing to focus on profit.

While the sale of these two huge divisions were the most controversial, during his short time he also managed to merge several other problematic subsidiaries (which had become popular havens for “retired” Fujitsu managers) and came close to selling Nifty (their internet provider subsidiary).   While he’d be praised for his decisiveness in the States, this doesn’t win you any friends in Japan.  Low and behold, it turns out that Nozoe spent a significant time in America when he personally took charge of a significant patent case that the company was fighting against IBM.

Unfortunately, the concept that a company is solely owned by its shareholders just does not fly in Japan.  Corporate law states that a company is to be run for all of its stakeholders (including employees, customers, etc etc) and that is often interpreted to mean everyone but shareholders.  Clearly this guy has been stabbed in the back by unhappy employees after he made some difficult decisions in the interest of the company that jeopardised a few fat pay checks.  If that had happened at the mid-management level then it would be slightly more understandable, but the fact that such crass politics can be allowed to impact the choice of CEO of a listed company is worrying.  Surely the board has fiduciary duties to protect the long-term interests of the company (for both share holders and employees) and not the short term interests of a few disgruntled senior citizens?

The questions that this drama has brought up do not stop there.  What sort of corporate governance exists in a company where a failed former CEO can remain on the board for seven years after he supposedly retired?  It wouldn’t surprise me if this was a family run company and the Don of the family was lingering behind the scenes but Akikusa certainly is not that.  In fact Akikusa – who has been sitting on the Fujitsu board for an amazing 22 years! – only owns 15,000 shares in Fujitsu (not even US$100,000 worth!).  Surely that in itself states pretty clearly that Fujitsu doesn’t believe in aligning senior management’s incentives with shareholders.  While there isn’t a huge difference between 21 and 22 years, it is probably also worth mentioning here that when Akikusa “stood down” as Chairman in 2008 he did so claiming that he would only remain on the board for a year to assist the “transition”.  Not only has he assisted in firing a talented CEO, he has also somehow managed to continue to control the company for seven years after he stepped down as President.  (Please refer to second paragraph for reference to Akikusa’s management ability).  Apparently it was Akikusa who “suggested” who the new CEO should be to replace Nozoe in the board meeting that followed the negotiated dismissal.

Of course, this has been all over the news in Japan. While not telling the full story, this news clip gives a brief overview of what happened:

Click here to view the embedded video.

Feel free to add your comments below, but other particular questions that cross my mind regarding the incident are:

• Don’t shareholders have the right to understand the real reasons behind changes in senior management? Shouldn’t the new CEO be punished for blatantly lying to the public post the Coup?  (The TSE in fact does have a rule requiring listed companies to explain the reasons behind changes in company representatives (代表権のある役員の移動に関する適切な公表の義務))
• Shouldn’t the entire board be involved in decisions regarding the appointment of the CEO/President of a company?  Why wasn’t the issue discussed thirty minutes later in the board room?  Fujitsu has four “independent” directors but what monitoring role did they play in this situation?  Surely this just supports the theory that “independent” directors in Japan are merely there as a favour to the senior management and have no intention to actually act on behalf of shareholders.  (It is even more depressing when you realise that one of Fujitsu’s independent directors is a representative of Fuji Electric who owns a 10% stake in Fujitsu).
• The allegations were that Nozoe had direct links with a company that was a front for the Yakuza.  Nozoe claims that there are no links between the company that he had dealings with and the Yakuza and that he was never shown any proof suggesting so of the links.  Better yet, it appears that the assumption of guilt was based on a rumour heard from a stock broker.  As anyone who has read Tokyo Vice will realise, it is extremely difficult to find reliable information in Japan about which companies really are fronts for the Yakuza but that still doesn’t suggest that acting on hearsay is a way to manage a multi-billion dollar company.  Nozoe (through his lawyer) has since requested (Feb 26) that the company give him the opportunity to state his case to the board and also conduct a detailed investigation into the corporate governance standards in the firm.  Regardless of the truth, it sounds like a great idea.  Surely if the current management was confident in their decision then they should not be afraid of such an inquiry.  He also requested that they reinstate him as President of the company.  Good luck to him.
• Let us for a moment assume that Nozoe really was connected to the Yakuza.  Wow.  TSE listing rules clearly state clearly that companies with links to the underworld will be de-listed.  That should be an even bigger headline.  Could we even go as far as to say that current Fujitsu management was aiding and abetting the links to the Yakuza by not exposing the association?

While Fujitsu has been careful not to go into too much detail in its official announcement regarding the decision (link to English statement here) it seems as though the allegations went something like this:

• Nozoe was pushing the company to sell its stake in Nifty (www.nifty.com – their internet provider subsidiary).
• The favored buyer, was a company run by a close acquaintance of Nozoe (this itself is a huge conflict of interest if you ask me but perhaps that is a little more acceptable in Japan Inc.)
• A broker that Fujitsu had dealings with suggested that there may be some “reputational risk” involved with a fund that may have invested money in the potential buyer.  (Reading between the lines this means that the buyer was a front for the Yakuza and was channelling black market cash into the acquisition via an investment fund.
• The first time this situation was explained to Nozoe he agreed to cease negotiations with that party, but for some reason allowed the same close acquaintance to continue to be involved in the transaction.
• The board members who staged the coup felt that this was not in the spirit of the “Fujitsu Way” and hence demanded his resignation at the same time as insinuating that if he did not resign immediately, Fujitsu would definitely be de-listed.
• Five senior managers who were staffed on the Nifty case were immediately fired or demoted following the coup.

To be clear, even the company’s official explanation (the new one) states that Nozoe did not do anything illegal.  So far the stock price has failed to react very much to this news (-3% the day after the announcement).  What does this mean for Fujitsu shareholders?  If the company is really only -3% worse off then does that mean that investors never really did expect that corporate governance standards were being met even at such a large company?

E-Commerce in Japan is a growing trend - and becoming accessible in English too

This increase in attention of online retail is happening for a number of reasons. Firstly, it (actually the internet in general) is a growth industry. People are moving online to shop at a rapid rate, and in the midst of the global recession, traditional concerns regarding security and privacy are taking a back-seat to convenience and price. In addition to this, the turmoil that has been brought about by the recession has brought strong attention to old and antiquated business models that are no longer going to work. Online retail offers cheaper overheads, cheaper marketing costs, and a growing global customer base, and therefore is emerging as one of the new beacons of hope in an otherwise fairly depressing global economy.

Online shopping has been firmly established in Japan thanks to the likes of early adopters such as Yahoo Japan and Rakuten, and also equally in part to the development of Japan’s lightning fast internet and amazingly reliable logistics industry (think Sagawa and Kuroneko Takkubin etc). It always amazes me how quickly these guys can get things to your door, even in the pouring rain! In fact, this infrastructure has allowed Amazon Japan to offer same-day delivery for some items ordered online over the Christmas season. Considering the actual time it takes to take an item from a shelf, throw it in a truck, and actually drive it to your door, there must be almost zero down-time, especially if you live in the sticks! Again, pretty amazing. Walmart in the US is offered a new drive-through service during Christmas, where shoppers could buy products online, and they were ready at the next drive-through window for shoppers to pick up. Close, but no cigar compared to Amazon Japan. Another area which has contributed to establishing online retail in Japan is Japanese companies’ focus on creating a reliable site and credibility with their customers, making the experience as safe and anshin (安心) as possible.

As global online retail sales increase, there are a growing number of small and innovative companies to carve out a piece for themselves and take on the likes of Amazon, Ebay, and Yahoo Japan. However, while the barriers of entry are low, the costs of running an online retail business relatively low, and marketing costs (email and viral etc) can also be very low, the profit margins can also be low and therefore require a high turnover to stay in the game. It’s a typical snowball pattern, where it’s very difficult at the beginning, but if you can start gathering some pace, then the company can grow fast and it can be difficult to take down. First-mover advantage is also vital, especially in Japan. Due to these factors, it is hard to imagine anyone replacing Yahoo Japan or Rakuten in Japan in the near future.

However, giving the potential prize for the biggest snowball, and the global nature of the business, there are some fascinating innovations in the industry at the moment, providing ways to market more items to more people.

Recently many English Language sites are emerging - they offer the latest in Japanese fashion to the world, a market that more traditional Japanese language sites have so far failed to exploit

We also think that the market for supplying Japanese products to the rest of the world is increasing, and there are a bunch of new sites doing so in both English and Chinese.

Over 6 years old, Rinkya.com is possibly the oldest (and largest) company in this market, and has built a nice niche for itself. Rinkya is an English language online auction and shopping site based in Tokyo, which allows foreigners to bid for and buy items in English from Japan’s e-commerce sites such as Yahoo Japan and Rakuten. Rinkya layers a translation engine on top of the sites, so users can browse and buy in English. As this can be used on any online retail site in Japan, it gives users access to a huge selection of Japan’s products sold online. While those naysayers in the translation industry or those who have been in Japan for a while will say that machine translations are still too primitive and will never be perfect, Rinkya has proved that they are in fact sufficient for an effective level of interaction, and that form indeed follows function. Interestingly, Rakuten, Nissen (through jshoppers.com) and others are now trying to do the same thing with limited success. We put this down to their lack of understanding of how to market to and how to handle a foreign client base.

Following Rinkya’s lead, the number of companies trying to bridge the gap between Japan and overseas, is growing. Netprice (again), began last year providing a Japanese language service Tenso.com to post items from Japan overseas for Japanese who had bought things online from Yahoo or Rakuten, who didn’t post directly at that time. Based on this success, they then took the next step and early in 2009, launched into China, through cooperation with Alibaba, to sell their wealth of Japanese goods into China in Chinese through Alibaba’s online retail site Taobao.com.

In addition, sites such as HanbuyJapan.com, Flutterscape.com, and Japantrendshop.com care of trend consultants CScout, are trying various approaches to promote Japanese good overseas. Despite the state of the economy, the mind-set of Japanese is likely to remain the same in terms of a focus on making quality products. And with the growth rates of global online retail and the further expansion of the internet itself, we expect to see more innovative sites and ideas in the near future. Take a look at a few of the sites above, they offer an excellent range of quality Japanese goods, at competitive prices, and best of all – in English!

If you haven’t already heard, news broke a week or two that a small firm based in Kawasaki, Teramento (テラメント) Corporation falsely reported to have acquired a 51% stake in six large (giant) Japanese companies: Sony Corporation; Toyota Motor Corporation; Nippon Telegraph & Telephone Corporation (NTT); Fuji Television Network Inc.; Mitsubishi Heavy Industries Ltd.; and, Astellas Pharma Inc. (ソニー、トヨタ、ＮＴＴ、フジテレビ、三菱重工、アステラス製薬). The reports were made through the Finance Service Agency’s online electronic database, EDINET, on January 25th, totaling a whopping 20 Trillion yen (20兆円, US$190 billion) of securities filings.

Between the falling Nikkei, rapidly fluctuating foreign exchange rates, French rogue traders, and not to mention the rest of the world suffering due to the subprime mortgage crisis, perhaps Teramento’s head and only employee, Shigeru Yamaguchi, thought no one would notice.　　Obviously the six companies who have apparently had their majority stake seized by some small, random company in Kawasaki were going to, and no doubt have been puzzled by Teramento’s filings. Teramoto it seemed grew an impressive portfolio overnight!

It has been reported that Yamaguchi executed the orders through Lehman Brothers Holdings Inc., though no one from Lehman’s has said to have received such instructions.

So, the question on everyone’s lips is, why? No matter which way you look at it, it appears to be an amateurish scheme to draw attention, and one cannot help but think that Yamaguchi will end up as nothing more than a laughing stock. The FSA (金融庁, “kinyucho”) ordered Teramento to submit correction reports by January 28th given that there is no evidence of share certificates issued of the alleged acquisitions, but still nothing has been given. Making false shareholding filings can bring a maximum 5-year prison sentence or fine of 5 million yen, perhaps a bit much for a company with capital of only 1000 yen, but then again, has apparently 100 trillion yen worth of “oil money” at their disposal. While the FSA has not decided whether to treat the incident as a criminal matter, given reports that Yamaguchi has apparently refused to submit corrected reports, the FSA may have no option to pursue such a course of action.

Here is the news clip trying to explain what happened. They interview the owner of Teramento and he denies that his report to the FSA is false. It is quite amusing, although doesn’t shed much light on his bizarre claim:
[MEDIA=2]

But will the FSA do so? In what appears to be a very obvious stunt, performed by a man who seems to be in need of mental therapy, it’s the FSA that may end up with more egg on their face than Yamaguchi.

It is Yamaguchi’s actions that have certainly brought forward the issue as to whether the self-reporting system could be used to manipulate the market. While in this instance, the filings appeared online after the market closed, one must wonder what could have happened had the filings been made public during market hours, considering that EDINET filings are scanned regularly for evidence that hedge funds or other buyers are targeting a company, and investors often trade off the information such filings contain.

Given the stigma associated with the aggressive nature of some foreign hedge funds and other private equity groups whom have up until now been foiled in their attempts to acquire large stakes in Japanese companies, it makes for a different perspective on what could happen to the market if local investors decided to go hostile.

The FSA now must go back to the drawing board and review their filing procedures, examining how to control and regulate the self-reporting system. Though in their own admission, they did not have the staff to check every report, which makes you wonder what could happen if companies and individuals wanted to willfully abuse the system, publishing false reports, even far less blatant than Teramento’s, to achieve their own ends.

So while we can all agree that Teramento, involved in the automobile industry, telecommunications, electronics, nuclear power, broadcasting, pharmaceuticals and aerospace, is just a smoldering pile of BS, they have at least taken the wind out of the FSA and their not-so-trusty self-reporting EDINET system. The effect has been somewhat similar to the effect of “Telament” (perhaps the source of inspiration for the company’s name???), a drug which helps prevent cramping in new born babies by breaking down bubbles and taking the wind out of them (a bit of advice for all those that are pregnant in Japan!

Who is Japan’s little known rice growin’
financial hotshot?

The UK has it’s first bank run in 150 years. Citibank fired it’s CEO. The whole financial world is reeling from the financial mess called subprime (see here for our easy to understand footnote on subprime).

Even GM (last I checked they made cars and not houses!) has been forced to book a multi-billion dollar loss due to subprime. While hedge fund managers are collapsing left, right and centre, could there possibly be a Saviour? What’s that I see on the horizon? Is it a bird? Is it a plane? No… it’s a Japanese farmer!???

This sort of turmoil in the international financial market is unusual. In July Ben Bernanke, head of the US Fed, saw subprime losses reaching $100 billion US dollars. By early October, most market watchers had increased this figure to $400 billion US dollars. And with yet another collapse in asset backed securities (ABS) prices in the last few weeks, the growth in the turmoil seems to be growing again.

Perhaps what has been scarier has been the vast number of “respectable” financial institutions who have been hit. I’m still amazed that Bear Stearns was forced to go crying to the Chinese government for a bail out after its two hedge funds blew up over subprime. First Merrill Lynch and now Citibank announce huge multi-billion dollar write-offs for losses in the subprime investments that they claimed they never had. While we haven’t seen that many losses amongst Japanese financial institutions, the share prices of Japanese banks have collapsed on the assumption that they inevitably have lost a lot of money on subprime, but they probably just haven’t realized it themselves yet. (Three cheers for Japanese corporate governance standards!)

So why, you ask, is stippy.com boring you with a commentary on the subtleties of losses by US investment banks in exotic derivatives crafted around the hopes and dreams of rural Americans who thought that their home prices would continue to rise for ever? Well there is one Japanese organization who has been taking an active roll in this financial ponzi scheme and they are not taking the losses sitting down. In stark contract to the Yanks who are all too keen to take samurai style responsibility and resign after such losses (think Chuck Prince at Citibank), you won’t see a single person at this mysterious Japanese organization do anything like that. In fact they are standing up, and taking the losses in the stomach like Asashoryu (朝青龍） when he’s playing soccer back in Korea (bad example maybe?). Who am I talking about? I’m talking about the proverbial Mr. Watanabe from the inaka, our friendly neighbourhood farmer. A little confused? It’s a little known secret, that Japan’s farmers control one of the largest banks in the world. With 68 trillion yen of assets, the Norinchukin Bank (農林中金) has been one of the biggest Asian players in the bank rolling of credit to subprime lenders. You don’t regularly borrow money from your local rice growers, you say?

Relative Size of Japanese Banks(Unit:Trillions of Yen)
Norin Chukin is the second largest bank in Japan in order of deposits.
Even larger than the Mizuho and only smaller than MUFG who cheats
a little by including an American bank in its figures.

Norinchukin often hides behind the better known face of its sister bank, JA bank, the official window to the farmers of Japan. While it plasters its homepage with the word agrifinance (担い手金融、ninaite kin’yu） pretending to be the financier to the farmer, in reality it dedicates only a tiny portion of its time (and less than 20% of its assets!) to lending money at all. In reality it (and the fishery bank and the forestry bank) channels the vast majority of it’s assets to the Norinchukin to manage. Why lend to a local farmer yen for 1~2% interest when the Norinchukin will help you earn double digit returns lending dollars to un-creditworthy American workers? Given that the JA bank has about 80 trillion yen ($750 billion US dollars!) of farmers deposits, it’s no surprise that they need a dedicated body to work out how to manage these funds.

When I first read that the Norinchukin Bank had lost about 500 million US dollars in the first half of this year in subprime related investment, I have to confess that I was a little condescending. After all, What more could you expect from a bunch of imokusai country bumpkins dabbling in the financial matters of American blue collar workers? What stopped me in my tracks was this thread on 2 channel, Japan’s leading BBS site. At first I thought I’d misread it (after all it is in Japanese). But no, even after a second appraisal it seems that the guys at Norinchukin are potentially the ballsiest farmers in the world. Not only did they admit that they have invested over 4 trillion yen in various securitized derivatives to date, the head of bond trading has signalled to the market that the bank is going to invest another 3 trillion yen into this troubled market before the end of the year! When every single Western bank is racing to hedge their exposure to subprime by purchasing vast quantities of credit default swaps, it seems that the only investor with enough confidence to stick up for himself, fight back, protect his position and buy more (a true example of 逆張り, gyakubari) is this odd collection of Japanese farmers. That man – a 3 trillion yen big swinging dick – I take my hat off to.

The ability to take risk is the best definition of a professional investor. Think back to the famous Chandler brothers from New Zealand who had the guts to buy 5% of UFJ Bank back in February ‘04 (full story here). UFJ’s share price had fallen 90% in two years and it was market consensus that it and almost all other Japanese banks would go belly up. The people who best knew Japan – the local investors – called them crazy but low and behold (despite the stock falling 30% in the month after they bought it), UFJ bank’s share price then rallied 6 fold within the following 12 months. Does something sound familiar? Domestic investors (read Citibank, Merrill Lynch) are panicking and selling/hedging out their exposure to sub prime. As you can see from the chart below prices in all but the safest sub prime portfolios have fallen off a cliff steeper than the Mino waterfall (箕面滝)!

Unless you’re a shareholder of Livedoor, I’m sure you’ll agree that losing 80% of market value in such a short time is not common. Remember, each of these lines represents a diversified portfolio of loans. If the market thinks that all of those loans will be repaid without a problem then it should never trade below 100 (which means 100 cents in the dollar or 100% of the loan will be returned to the lender on maturity). In other words, the market is trying to tell you (and the Japanese farmers) that 8/10 owners of houses whose mortgages make up the BBB-tranche will not be able to repay their loans. They’ll go bankrupt when they finally realise why they should have read the “fine print” before they signed off on the loan. That’s pretty extreme. You can see why Norinchukin are getting excited. If US housing prices pick up, enabling America’s low income workers to escape bankruptcy then that red line should trend back to 100. Buy at 20. Sell at 100. Five times your money. Very nice. (Obviously the risk is that if you’re wrong you lose everything, but let’s not focus on the downside just yet).

Taking huge and controversial risks is nothing new to Norinchukin. Not only do they have the biggest non-JGB (Japanese Govt. Bond) portfolio of all banks, they are also by far and away the largest Japanese player in the “alternative investment” market (otherwise known as hedge funds). Although it is quite normal for Western banks and insurance companies to invest in a wide range of investment funds, the world of exotic finance (read “positive returns”) has been taboo in the deep, low backed, 1970s style leather seats that deck the boardrooms of Japanese banks. Not so for our rice growing friends. While Japanese banks spent the last five years trying to squeeze half a percent of interest out of their troubled borrowers, Norinchukin cut it’s loan balance by a third and instead increased its investments in derivatives and funds by 50% (source). In addition to a handy 15 trillion of investments in foreign debt related investments (aka subprime), they also have another 15 trillion yen of “alternative” investments. Between these two asset groups that accounts for almost half of their entire asset base. I don’t know about you but that makes my 401k pale in insignificance. Norinchukin has been funnelling cash by the barrel load into hedge funds, private equity funds, subprime loans, etc for years. I wonder how much longer they will get away with calling themselves a bank. The “real” banks in Japan are too scared to take on these risks due to the high BIS penalty associated when calculating their regulatory capital (in laymans terms, they don’t have the financial strength to withstand the potential losses from anything riskier than a Japanese government bond). It was these same “real” bankers that thought the shift to Basel II would be enough to scare even Norinchukin from continuing its investment strategy but this gutsy proclamation to double up (難平買い, nannpinngai) on subprime will prove them wrong. It’s rare that I take a step back and say “wow” with respect for the risk taking of Japanese management, but this is one of those times. Farmers 1. “Real” bankers 0.

~☆~☆~☆~☆~☆~

Footnote: what is “subprime” (低所得者向け住宅ローン、いわゆるサブプライム問題とは？)

So what is subprime and why is what Norinchukin doing so amazingly risky? Let me try to describe the current problem with subprime (and why it is given the nickname “toxic waste”).

Although we’re used to low interest rates here in Japan, the low interest rates in the US for the past 10 years were unusual and triggered a perception that money was almost free. Even people who had low incomes could afford to buy a house because the monthly repayments necessary were a very small part of their disposable income. Land prices continued to rise (did someone say bubble? not me!), so it was unlikely that these borrowers would have any trouble repaying their loans. Worst case scenario, you could sell your house for a profit to repay the loan. Couldn’t be simpler! The concept was so popular that a bunch of cunning businessmen (who had never worked at banks) decided that they’d make these loans available to even the lowest of income earners in America. Because they didn’t know much about the business, they focused on the marketing of the loans. I’m sure you’ve seen those annoying ads on the web:

• No down payment required!
• No proof of income required!
• No repayment of principal needed!
• Special discount interest rates!

Too good to be true? Of course it was. But nobody even bothered to read the small print. The “special discount interest rates” had a life-span of only 2 years. Most of the loans had “resets” at the start of the third year that rocketed the interest rate up to over 10%. Even on these reduced “special” interest rates, these low income borrowers were on average paying away about 1/3 of their pre-tax incomes (assuming of course they didn’t lie about their salary on the application form). It should be no surprise to you now that most of the blue collar workers are going to struggling to foot the interest bill at the higher rates (let alone the principal). Oh and by the way, housing prices have been falling for the past year so their house isn’t even worth as much as it was when they bought it. The vast majority of these loans were done in the three years between 2004-2006. As anyone who can do simple addition has probably already worked out, the “special” interest rates on those loans are going to be rest to “normal” rates, one by one between 2007-2009. It’s no coincidence that the first of these reset periods coincided with the huge losses that American banks have been announcing since July.

But hold on a sec, just because a couple of home owners go bankrupt, the law of large numbers should mean that the losses are limited, right? This is where the magic of investment banks comes in. American Investment banks aggressively bought all of these loans from the cunning marketers and created “diversified” funds that consisted of the loans to hundreds and hundreds of home buyers. Better yet, in order to make these funds more attractive to their clients (naive US banks, General Motors, Norinchukin etc) they split the funds up into several tranches. Each trance had it’s own credit rating and you can see the price of each of those tranches on the chart (with the coloured lines) above in this article. The pink AAA tranche (the one that is only down a little bit) is structured in such a way that you only lose money as an investor (ie get less than 100 at maturity) after 20% or more of all of the home owners have gone bankrupt. The green AA tranche is structured in such a way that you only lose money (ie don’t get your original 100 back) after 15% or more of all of the home owners have gone bankrupt (but you lose all of your money if 20% or more of the home owners have gone bankrupt). The blue A tranche is structured in such a way that you only lose money after 9% or more of all of the home owners have gone bankrupt (but lose every dime if more than 15% of home owners file for bankruptcy). I think you are starting to get the picture. Pretty much everything below A is known as toxic waste. We then skip a few tranches, but the red BBB-tranche is structured in such a way that if more than 7% of home owners go bankrupt then you will lose every grain of rice you invested in the fund. (Check this website for more up to date prices on each of these tranches)

So why is it so risky investing in subprime now? Put simply, those friendly “resets” will continue at the same pace for at least the next 12 months if not more. If we are already seeing huge numbers of personal bankruptcies after 2-3 months of resets, how will this be after we see the ”resets” hit tens times as many home owners. Things are going to get a lot uglier before they get better.

Finally, let me leave you with my favourite subprime quote out there. It’s from an Aussie called Nick Parsons (from NAB), who was commenting on US treasury secretary, Hank Paulson’s (an ex-Goldman Sachs investment banker) plan to bail out a bunch of these funds:
“By insulating the junk from the sellers of junk, the holders of junk should be spared the problems of junk. The one flaw in this cunning plan, however, would be if investors took fright at being reminded just how much junk is still in the system.” I guess that is what we have Japanese farmers for.

Japanese Corporate Governance – Slowly Changing?

Maybe it is because I’m a closet fan of Koizumi and Takenaka, but I haven’t thrown in the towel on Japanese corporate governance yet. After the spectacular failure of Steel Partners to stop the Bulldog Sauce poison pill, most foreign investors seem to have given up hope completely. (Have you seen the Bulldog Sauce share price recently?) It’s simple to jump to the conclusion that corporate Japan hasn’t changed at all – but although you can only call them baby steps at best, I think that things are slowly changing.

Sure, an arrogant gaijin was a failure when he tried to pick a fight in true Western style, but we are slowly starting to see the emergence of a proactive Japanese corporate governance, too. Sparx has been the best example over the past twelve months or so, playing a key role in broking ground breaking mergers between Kenwood/JVC and Hoya/Pentax. While they don’t win every battle they fight, they seem to be slowly working towards finding a Japanese way of maximizing shareholder returns. But this is all old news. What most recently caught my attention was not from a pension fund, but from a real company. Are you on top of the fuss that the CEO of ジャスコ (Jusco, Japan’s largest super market) has started to kick up?

Motoya Okada – CEO of Aeon

The CEO of Aeon (イオン, Jusco’s holding company) is Motoya Okada (岡田元也). Okada is a young 56 years old, and has been running the show at Aeon since 1997 when he took over from his Charismatic father, Tatsuya (岡田卓也). (You might also recall that his brother is Katsuya Okada (岡田克也), a politician in the DPJ). Young Okada has a lot of pressure weighing on his shoulders. It’s not easier to better your father when he created Japan’s largest retail chain out of a dinky Mie-Prefecture vegie shop. While Okada is well known for being aggressive with his suppliers, this month we saw a new face, that of Motoya Okada – the shareholder ombudsman. Could this be the first sign of Japanese management making a stand on behalf of shareholders, instead of their usual friends (you know, culture, tradition, Tonkatsu sauce, employees, suppliers, etc etc)?

On October 5, 2007, two drug stores announced their intent to merge. CFS and Ain Pharmaciez. Never heard of either? Interestingly they are both within the top 10 drug store chains in Japan and if the merger is successful their combined sales will be about 250 billion JPY and rocket them into #2 in the industry (マツモトキヨシ, Matsukiyo being #1). Unless you live in Hokkaido, or have a fetish for strangely spelt pharmacies, you probably haven’t even seen an Ain store before. You might more luck recognizing CFS by its more common brand name, Hac (ハック). Yes, no better place to buy drugs from than a local Hack. But wait, there’s more! Hac has an in-house shopping card called “comes”, and a magazine to go with it (pic below). Hmmm… Maybe these two companies chose each other for their mutual sense of English naming skills??

The deal seemed signed and sealed for about 90 minutes, until Aeon’s Okada came out to publicly slam the deal in a press conference of his own. Aeon, it turns out, owns 15% of CFS. As the single largest shareholder of CFS, Okada sits on the board and isn’t shy about venting his opinions. (Did I mention that this man has an American MBA?) Okada’s argument is simple. CFS, he points out, has enough problems right now that it can’t afford the distraction of a merger. He’s worried that management are trying to merge with the more profitable Ainz as a method of hiding their poor job at running the business. He’s probably right. Even though CFS has almost double the sales of Ainz, their average profit over the last three years was less than half of what Ain achieved in the same period. CFS is symbolic of the saturation of the drug industry. Sales have been shrinking for five years in a row and the only way they can stay competitive is to bite into their margin with never ending discounts. So much so that CFS lost a whopping 3 bln JPY last year. Things aren’t getting any better. As the government is trying to lower the cost of drugs to the aging populace, legislation is set to change in the next two years to allow supermarkets and convenience stores to sell OTC drugs. Why would you buy your cough medicine from a Hack, when you can buy it from your local Lawson Station or Jusco? To be clear, CFS are losing money even before this legislation change. How will they ever get on after it?

On the other hand, Ainz is a reasonably profitable and well run business. Because they have a higher number of specially trained pharmacists they can sell higher margin drugs (real ones, not just OTC drugs) and don’t have to rely on discounting shampoo as a loss-leader in order to attract customers. A merger with Ainz is clearly the easy way out. Why deal with the problem of a loss making business when you can hide it behind a profitable one and delay the pain for a few years. Better yet there is almost zero geographical overlap between the two companies so there is no layoff staff. After all, who would want synergies from a Japanese-style merger? That’s why Okada’s stand is so symbolic. Can you remember any other time when a Japanese manager of a real company (because we all know that hedge funds aren’t real companies!) has protested against a defensive merger with zero synergies? I can’t. Japan needs more managers like Okada.

So where to from now? The good news is that the drama has only just begun. Okada has promised to come up with his own plan for reviving the company before the end of the month. It shouldn’t be too hard. You can see the hack’s official plan for the new company on their web page. You’d be forgiven for questioning your eyes after reading some of their targets. How on earth can a company that made less than 3 bln JPY in Operating profit last year (pro-forma for the merger) expect to increase profits to 10 bln JPY by 2010?

The HAC “Comes” Magazine
The perfect compliment to your “Comes point card”

What are they smoking? And which one of their drug stores can I buy it at? If they can achieve this they are probably the cheapest drug store in the world (5x earnings!) but lets stop sipping the Lipovitan D (リボピタンD) for a few moments and think carefully about this. Increasing profits by almost 4 times is no easy job. Especially in an industry that is about to be raped and pillaged by Japan’s retail Goliaths from the convenience store and supermarket industries. I’ll be very interested to see what plan Okada himself comes up with. Let’s not forget the catch-22 he finds himself in as there is almost no doubt that his supermarket, Jusco, will be leading the battle – in true Wal-mart style – against the drugstore industry by selling cheap OTC drugs once the new legislation is passed.

While I’m elated to see Okada standing up and making a point and wish him the best of luck with his restructuring, I have one more question that remains unanswered. What in jigokudani is Ainz doing? I can understand why the deal might seem attractive to the inexperienced management team from CFS (Okada is quick to point out that Yoneda (the CEO at CFS) is nothing more than a new rice that came from Itochu with no retail experience at all!) but what’s in it for Ainz? Ainz’s has been one of the few winners in this industry. Sales have been growing for seven years in a row and they make decent margins despite being located in the two most economically challenged regions in Japan, Hokkaido and Tohoku. Ainz’s average pre-tax profit per employee over the last 5 years was 1.2 mln JPY versus a miserly 0.4 mln JPY at CFS which explains why Ains has a higher market cap than CFS (200 bln vs. 135 bln). But hold on a second, taking a closer look at the material CFS is getting the prized seat of CEO at the new company! Who is taking over who here? The merger ratio (4.17 : 1) favors CFS by 15%. What on earth are Ainz shareholders doing paying a premium to buy a loss making company with negative growth? If I was Marubeni (who owns 13% of Ainz and is their second largest shareholder), I’d be lining up to sign Okada’s petition, too.

As much as I love what Okada appears to be doing, my biggest worry is that the real rationale might be somewhere else. CFS seems to be getting a pretty good deal (at least in terms of the merger ratio) and increasing scale will help their purchasing power. As it turns out, the only company who might really suffer from the merger (besides Ain!) is Aeon. Aeon runs a co-purchasing group called Welcia where a dozen or so sub-scale drugstores pool their purchasing together in order to assert more pressure on their suppliers (the pharmaceutical industry). In CFS felt after the merger they were large enough to go it alone, Aeon’s Welcia group would lose a significant portion of its bargaining power. Is Okada really only doing this because Aeon benefits from each of its “partners” remaining sub-scale? After all, Aeon’s own drug store subsidiary depends on the co-purchasing group to meet its own needs for cheap drugs (where can I sign up, I hear you say?)

Okada needs CFS to ensure his buying group doesn’t lose its bargaining power and his ego was probably pretty bruised after clearly being ignored in the board meeting that signed off on the merger. Perhaps even worse, he feels that he has to do something to prove himself after his own share price (Aeon) has fallen by 50% in the last two years. I’m sure he must hate the comparisons with his successful Father and must be feeling the warmth of the coals being lit beneath him by his own shareholders. If Japan were a real country, he’d probably focus on lifting his own share price. But let’s not get too carried away. Let’s just be grateful that at least someone is focusing on the concept of shareholder value. That has got to be a move in the right direction.

The famous “Bulldog” brand of Japanese
Tonkatsu Sauce

Facing a potential takeover by the foreign investment firm Steel Partners, Japanese tonkatsu sauce maker Bull-Dog was saved last week in a disturbing effort by the Japanese courts to prevent foreign money and ownership permeating into an important aspect of the Japanese cultural dinner table.

Steel Partners has made investments in over 30 companies in Japan over the past couple of years, with a number in the “washoku” industry, including the holy grail of the Japanese sauce portfolio, Kikkoman soy sauce. Since Steel Partners announced they owned over 5% back in 2005, the stock price has increased over 50%. But enough is enough, apparently.

The number of M&A and takeovers in Japan, both domestic and from abroad has grown drastically in recent years on the back of a reviving Japanese economy. And a hot topic of deliberation in financial circles has been the introduction of so-called “poison pills” to prevent takeover by undesirable suitors. A culture of arranged marriage is much more appropriate than a shotgun approach it would seem. Activating a poison pill assures that a target company can be protected against the unwanted advances of a hostile investor to take control of the company. When a company begins buying up shares and launches a takeover bid, the target company activates the poison pill, which in effect stops the takeover company in their tracks.

Casting my mind back to ECON101, although it was a while ago, wasn’t the idea of a free market just that, it was free, and equal rules and fair competition by all ultimately drives up the value of the economy and the companies which are a part of it? The legality of this method has been hotly debated, but the courts have now quashed this debate, allowing the use of poison pills in Japan. Depending on the suitor. Maybe.

The process went as such; Steel Partners offered a premium on the current share price in an open takeover bid. They were told this was not welcomed by the tough characters at Bull-Dog, but proceeded anyway with a hostile bid. Garnishing 80% of votes at the Shareholder’s Meeting, the pill was activated, and Bull-Dog diluted the value of shares held by Steel Partners, from just over 10% to 2.5%. They did this by issuing free equity warrants to all shareholders, including Steel Partners. 3 new shares for each 1 held. However when it came to exchanging these warrants for newly issued shares, Steel Partners only was excluded. This increased the number of shares four-fold, but Steel Partner’s share numbers didn’t increase, dropping their percentage to a quarter of what they had, and dropping them out of the take-over bid.

Bull-Dog was also required to buy back the useless warrants off Steel Partners, at a cost of approx. 2.3 billion yen. Add to this the approx. 700 million yen in legal and advisory fees, and that is a loss of 3 billion yen, or almost 15% of the companies total assets of 18 billion yen. Theoretically this actually decreased the value of the investments of those 80% shareholders who voted for it.

This is not only a travesty of value-destruction for and by the shareholders of Bull-Dog, but it has also signaled to foreign investors that Japan is still not a fair and transparent market to invest in, that the establishment is still more than happy to jump in to block actions from foreigners which they don’t like, and it also shows that Japanese investors are still more happy to receive their box of tonkatsu sauce during dividend season than support that company to make higher profits and increase the value of their investments. This is a strong blow for those who hoped the recovery in the Japanese economy would be accompanied by a new level of sophistication of the public after experiencing the crash of the bubble.

Poison pills are illegal in the UK, and rare on continental Europe. They are allowed in the US, but their legality was debated for over 5 years in the early 80′s. The first pill was approved at Board level in Japan only 2 years ago, and the high court has now set a disturbing semi-precedent by allowing their use. Their reasoning? Steel Partners is an “abusive investor”, an unsettlingly subjective judgment.

In other words, the magistrate has decreed that the Gaijin kid is not suitable for his daughter, and will heed her cries of help. However another young local kid from down the road were to ask for his daughters hand, maybe he would agree. That is his role as a paternal figure, to protect his daughters and do what is in there interest. Not to uphold a rule of law or free market economics. Another bleak sign on the already stunted path of globalization for Japan.

Ever since reading a recent article on stippy.com about the under-representation of female CEOs in Japan, I’ve been racking my brains to find one. My first thoughts were of Tomoyo Nonaka of Sanyo Electric or Fumiko Hayashi of Daiei, but as Chairwomen, they both strike me more as figure heads than actual active, managing CEOs. During my search, I stumbled across the intriguing story of Emura Rika (江村林香), the 38 year old President of Air Transse, a small regional airline in Hokkaido. It did not take me long to discover that it is not the fact that Emura is a female that makes her a fascinating entrepreneur.

Emura’s talent as a manager flowered at a very young age. As the eldest daughter among 5 children, she was often left in charge of her siblings when her parents were out of the house. She learnt quickly that rather than shunning talent, the more she educated her younger brothers and sisters, she more she could outsource chores and responsibilities to them. After seeing her Mother run off with a younger man when her Father’s company went bankrupt in the early 80s, Emura decided that in order to be happy, she wanted to become rich.

You’d be forgiven for thinking that she was a hedge-fund manager when you hear that while at Junior College (yes, 短大), she managed to earn over 7 million yen a year as a private tutor by negotiating lucrative contracts with her pupil’s parents that ensured her a hefty “success fee” paid only if the pupil gained entry into their desired high-school. (Needless to say, Emura took a pay cut when she started working in the “real world.”)

It only took Emura six years to become a director (at the age of 26) of the company that she joined straight out of College. Over the next few years she helped the company expand into everything from child-care run by musicians, to online auctions of second-hand taxis and by the age of 32 she had fired the rest of the board and become CEO. The one common theme among her cunning business ideas is clear: “Target a niche market, and be happy doing so.”
Since 2004, Emura has been taking her pursuit of niche-markets to a new echelon. She was approached by the then owner of failed regional Hokkaido airline “Air Shenpex”. After three years of operations he had run the business into the ground and all routes had been scrapped. Running an airline is not an easy business, but Emura put up 60 million yen of her own money and with the help of a 300 million yen bank loan got the business up and running again in less than six months. Renamed, Air Transse, she started small, flying an 18 seater jet with a single niche route (Hakodate-Obihiro) but now flies to Chitose and Memanbetsu as well. Keeping true to her promise of forever targeting the obscure, she even offers the politically correct equivalent of the “mile high club” that literally lets you get married in the clouds. (Emura must have “a thing” about weddings; She held hers at “Tokyo Dome”. Apparently to convince the conservative Yomiuri lot at the Dome, she had to force all of her guests to play a game of baseball during the ceremony!!)

Needless to say, if you are ever traveling to Hokkaido, you should check out the fares as they are the cheapest in the “dõ”. If you can’t make it up North any time soon, then the next best thing is to take a regular peak at her blog, hoping that a bit of that entrepreneurial magic will rub off.

There remains this enormous and wicked sociocultural myth. It is this: Hard work is all there is.

Work hard and the world respects you. Work hard and you can have anything you want. Work really extra super hard and do nothing else but work and ignore your family and spend 14 hours a day at the office and make 300 grand a year that you never have time to spend, sublimate your soul to the corporate machine and enjoy a profound drinking problem and sporadic impotence and a nice 8BR mini-mansion you never spend any time in, and you and your shiny BMW 740i will get into heaven.

This is the Japanese Puritan work ethos (much like that in America of course), still alive and screaming and sucking the world dry. Work is the answer. Work is also the question. Work is the one thing really worth doing and if you’re not working you’re either a slacker or a leech, unless you’re a victim of Koizumi/Abe Co’s budget-reamed Japan and you’ve been laid off, and therefore it’s OK because that means you’re out there every day pounding the pavement looking for work and honing your resume and if you’re not, well, what the hell is wrong with you?

Call it “the cafe question.” Any given weekday you can stroll by any given coffee shop in the city and see dozens of people milling about, casually sipping and eating and reading and it’s freakin’ noon on a Tuesday and you’re like, wait, don’t these people work? Don’t they have jobs? They can’t all be students and trust-fund babies and cocktail waitresses and drummers in struggling rock bands who live at home with their mums.

Of course, they’re not. Not all of them, anyway. Some are creative types. Some are corporate rejects. Some are recovering cube slaves now dedicated full time to working on their paintings. Some are world travelers who left their well-paying gigs months ago to cruise around Vietnam on a motorcycle before returning to start an import-export business in rare hookahs. And we look at them and go, What is wrong with these people?

It’s a bitter duality: We scowl at those who decide to chuck it all and who choose to explore something radical and new and independent, something more attuned with their passions, even as we secretly envy them and even as our inner voices scream and applaud and throw confetti.

Japanese city culture allows almost no room for creative breaks. There is little tolerance for seeking out a different kind of “work” that doesn’t somehow involve cubicles and widening butts and sour middle managers monitoring your e-mail and checking your Web site logs to see if you’ve wasted a precious 37 seconds of company time browsing mixi.jp or reading up on the gay marriage apocalypse.

We are at once infuriated by and enamored with the idea that some people can just up and quit their jobs or take a leave of absence or take out a loan to go back to school, how they can give up certain “mandatory” lifestyle accoutrements in order to dive back into some seemingly random creative/emotional/spiritual endeavor that has nothing to do with paying taxes or the buying of products or the boosting of the GNP. It just seems so … un-Japanese. But it is so, so needed.

Case in point No. 1: A Woman. She is deep in medical school right now, studying to be a naturopathic doctor at Bastyr University just outside Seattle, the toughest school of its kind in the nation, and the most difficult to get into, especially if you’ve had no formal medical training beforehand, as this particular lady hadn’t.

She got in. She bucked all expectation and thwarted the temptation to quit and take a well-paying corporate job and she endured the incredibly brutal first year and rose to the top of her class. Oh and by the way, she did it all when she was over 40. With almost no money. While going through an ugly, debt-ridden divorce.

Oh you’re so lucky that you have the means to do that, we think. I’d love to do that but I can’t because I have too many a) bills b) babies c) doubts, we insist. We always think such lives are for others and never for ourselves, something people with huge chunks of cash reserves or huge hunks of time or huge gobs of wildly ambitious talent can do. It is never for us.

And truly, this mind-set is the Japanese plague, a fate worse than death.

And while it must be acknowledged that there are plenty who are in such dire financial or emotional circumstances that they simply cannot bring change, no matter how much they might wish it, you still always gotta ask: How much is legit, and how much is an excuse born of fear?

The powers that be absolutely rely on our lethargy, our rampant doubts, the attitude that says that it’s just too difficult or too impracticable to break away. After all, to quit a bland but stable job, to follow your own path implies breaking the rules and asking hard questions and dissing the status quo. And they absolutely cannot have that.

Case in point No. 2: Another lady, a specialist in goddesses and mystics and world religions, who is right now working on a book, a raw funky spirituality “anti-guide” for younger women. She took a six-month leave of absence from a very decent, reliable, friendly administrative job so as to focus on the creation of this project.

And while she has no trust fund, she does have the “luxury” of small parental loans to help her through, though it hardly matters: Giving up her respectable gig was insanely stressful and wracked with doubt. Leave a honest job? Give up paid health care? Have no reliable source of income for months on end? Trade calm stability for risk and random chance? No way, most people say. And of course, it was the absolute best choice she could’ve made. Time instantly became more fluid and meaningful. Mental clutter vanished. Possibility grinned.

Case in point No. 3: Not long ago, the CEO of one of the largest and most powerful international real estate firms in the country quit his job. Stepped down. Not, as you might imagine, for retirement and not to play more golf and not to travel the world staying only in Four Seasons suites, but to work on rebuilding his relationship with his estranged wife.

A friend working there, told me that it was one of the most touching, and unexpected, and incredibly rare corporate memos she had ever seen. No one — I mean no one in this culture is supposed to quit a job like that just for, what again? Love? Relationship? It’s simply not done. But of course, it absolutely should be.

We are designed, weaned, trained from Day 1 to be productive members of society. And we are heavily guilted into believing that must involve some sort of droning repetitive pod-like dress-coded work for a larger corporate cause, a consumerist mechanism, a nice happy conglomerate. Is this really how you want your life to turn out? (see video)

[MEDIA=1]

But the truth is, God (or whoever it is up above that looks over us…) loves nothing more than to see you unhinge and take risk and invite regular, messy, dangerous upheaval. This is exactly the energy that thwarts the demons of stagnation and conservative rot and violent sanctimonious bloody Mel Gibson-y religion, one that would have all our work be aimed at continuously patching up our incessant potholes of ugly congenital guilt, as opposed to contributing to the ongoing orgiastic evolution of spirit.

It is not for everyone. It implies incredibly difficult choices and arranging your life in certain ways and giving up certain luxuries and many, many people seemed locked down and immovable and all done with exploring new options in life, far too deeply entrenched in debts and family obligations and work to ever see such unique light again. Maybe you know such people. Maybe you are such people.

But then again, maybe not. This is the other huge truism we so easily forget: There is always room. There are always choices we can begin to make, changes we can begin to invite, rules we can work to upset, angles of penetration we can try to explore. And if that’s not worth trying, well, what is?