The “Mercury Food Chain” - From the ocean to your baby

Everyone knows that pregnant women should avoid fish and definitely shouldn’t eat raw fish… right? Or at least I thought that was “a given” until I started discussing what my wife and I might eat on our next date in the big smoke. Well, it turned out that we were to have sushi and that I had no say in the matter.

There is no better topic than pregnancy for old wives tales to prevail and the list of different foods that you can and can’t eat seems to be not only the longest, but the most contentious when it comes to the cross-border battle of who’s “common sense” was to prevail. While it is hard to prove most wives tales either right or wrong, but I assumed that something as important as food must have a “right” answer.

This is the fifth installment in a series about my personal experience of being pregnant in Japan. Although I hope that the observations have value for gaijin of both sexes, I’m intentionally writing this series from my own perspective - a Gaijin Father / Japanese Mother. (You might like to read the first, second, third, and fourth installments before reading on. And sorry to those expecting Father’s who were wondering what had happened to the series - you’ll know what caused the sudden blackout for me, right after your child is born!)

As I mentioned in part part two, my wife and I have tried to do our research about pregnancy in both English and Japanese in order to avoid bias toward one culture versus the other. Perhaps the biggest contradiction I noticed between the two banks of knowledge was how fish is treated. While every English book (and website) has numerous warnings peppered across at least 2-3 different chapters of the book telling you that you must reduce your intake of oily fish (example), Japanese books as a rule actively encourage pregnant Mum’s to eat as much fish as they can. To make matters worse, neither side of the debate writes anything that isn’t true. It’s just that the rationale employed by each culture is so different, that a Martian would be forgiven for thinking that perhaps they were referring to entirely different species.

So how can there not be misinformation if both sides are arguing opposing points, you ask? Rather than lying, it seems that most authors take the approach that “simple is best” and (almost always) fails to mention some key facts about fish/seafood when describing what it’s readers should unilaterally do. The typical English book talks about the high mercury levels found in many fish, especially tuna, which can affect the neural development of your fetus severely if ingested in excess. On the other hand, Japanese books focus on the healthy properties of fish, especially blue fish and recommend that you should eat fish regularly in order to increase your intake of DHA and other Omega 3 & 6 fatty acids. In reality - although contradictory - they are both correct.

So that brings me to my next question. Why don’t we ever hear both sides of the story? I guess in the English books, authors are just leaning on the conservative side and recommending against something that isn’t easy to measure. Who wants to take the risk of being sued by a pregnant Mother who misinterpreted your recommendations? Surely there is a limit to how far they should be allowed to play on our fear though? On the other hand, it’s no surprise that the Japanese, who are amongst the longest living, biggest consumers of fish in the world aren’t too worried about the side-effects of over consumption of fish. Or are they? Well it turns out that the Japanese government is (good on ‘em!). Even though it is rarely mentioned in Japanese books about pregnancy, the MHLW (厚生労働省) actually announced recommendations for pregnant women to reduce their intake of various types fish for fear of mercury poisoning. How many times have you been shocked to hear from well educated Japanese friends that they had no idea that tuna consumption could be unsafe for their unborn baby?

It boils down to the fact that too many books on pregnancy in Japanese are designed to sell. They are supposed to be fun, easy to read and almost always “edited” by a magazine publisher as opposed to being “authored” by a medical professional. Given that being a pregnant mother in Japan is stressful enough with your hubby doing overtime until the middle of the night, the last thing a pregnant Mum wants is to read that she can’t even eat fish. Half of the mags out there will focus pages upon pages on fish recipes.

It’s worth showing your Japanese spouse the MHLW’s “水銀を含有する魚介類等の摂食に関する注意事項” (Translation: Warning on Intake of Seafood Containing Mercury) as she probably won’t discover it herself unless she is reading a University level textbook on nutrition. It was announced first in 2003 and updated again at the end of 2005 to double the number of fish that could potentially have high levels of ethyl-mercury. The ministry regularly updates their official site and has a pretty good FAQ about the guidelines titled:魚介類等に含まれる水銀について (Translation: Memo on Mercury Levels in Seafood). Their most recent effort in publicizing the guidelines is in this PDF called 「これからママになるあなたへ　お魚について知っておいてほしいこと」 (Translation: A message for all expectant mothers - A few things you must know about fish (found on MHLW’s page here).

Before I go into the details, you’ve got to forgive me for reproducing the first paragraph here:

魚介類（クジラ、イルカを含む）は、良質なたんぱく質や、血管障害の予防やアレルギー反応を抑制する作用があるDHA(ドコサヘキサエン酸)、EPA(エイコサペンタエン酸)を多く含み、またカルシウムなど栄養素の摂取源で、健康的な食生活を営む上で重要な食材です。
Translation: Seafood (including whales and dolphins) is a good source of good protein, DHA (which is known to reduce allergies and vascular damage) and EPA. It is rich in calcium and other nutrients and so is an essential item of any healthy lifestyle.

Sure. I hear you. What is written is totally correct and English books should remind their readers about it more often. But did they really have to make that reference to whales and dolphins in the very first sentence? Anyway, after that strong fish advocating opening, the document goes on to recommend a reduced intake of various fish during pregnancy. It’s worth scanning the list below as the kind of fish you see in a Japanese supermarket are totally different to what you’ll see in other parts of the world. The biggest drawback of ordering an English book on amazon.com is that all of its examples will be about fish that you find in US supermarkets. I’m pretty sure you’ll agree that there are at least a few items on the Japanese list that aren’t on the US list and vice-versa:

The bigger the Tuna are, the more likely they are to have high mercury
levels in their fat (Photo: Tsukiji Fish Market, Tokyo Japan)

Not more than two 80g servings per week:

• キダイ (Yellowback Sea Bream)
• マカジキ (Striped Marlin)
• ユメカサゴ (Rockfish)
• ミナミマグロ（インドマグロ） (Southern Bluefin Tuna)
• ヨシキリザメ (Blue Shark)
• イシイルカ (Dall’s Porpoise)

Not more than one 80g serving per week while pregnant:

• キンメダイ (Splendid Alfonsino)
• ツチクジラ (Baird’s Beaked Whale)
• メカジキ (Swordfish)
• クロマグロ(本マグロ） (Bluefin Tuna)
• メバチ（メバチマグロ） (Bigeye Tuna)
• エッチュウバイガイ (Finely-striate Buccinum) - better known as 白梅貝（シロバイガイ)
• マッコウクジラ (Sperm Whale)

Not more than one 80g serving per fortnight:

• コビレゴンドウ (Short Finned Pilot Whale)

Not more than one 80g serving every two months:

• バンドウイルカ (Bottlenose Dolphin)

Large side of Tuna showing the oily toro underbelly
(lighter colour, on right) - Tuna was not included
in the original guidelines for pregnant women, but
was added later on

Interestingly, when the first version of these guidelines were released back in 2003, the list was only half as long and didn’t refer to any kinds of Tuna. As the general rule of thumb, in the West people are encouraged not to eat large pelagic fish like tuna, shark and swordfish. I guess the new Japanese list is matches reasonably well with Western recommendations, but I would love to hear the real story as to why tuna wasn’t in the original version, and how it came to be included). As the focus on this article is on health and pregnancy in Japan, please direct any comments about Whale and Dolphin eating to our dedicated thread here. For or against whaling, the Japanese guidelines are a fascinating look into Japanese society when you consider that the MHLW have actually gone out of their way to point out that Minke Whales (the ones that the Japanese do the most “research” on) are safe to eat during pregnancy as they have low ethyl-mercury levels. (You can see the government list of official mercury levels by fish here for more details).

While I’m at it, let me briefly list the other risks that most tin foil hat wearing English books (and no Japanese books) will have you worrying about every time you see fish on your wife’s plate. Most of the references to poisoning will at the very least lead to gastroenteritis which is dangerous as it can cause dehydration from vomiting and diarrhea (Source: “What to Eat When You’re Expecting”).

● Some fish caught in lakes and rivers are high in Dioxins and PCBs (e.g. blue fish, lake trout). This, once again, seems to be a US-specific issue based on research into US lakes and rivers. I don’t know enough about Japanese estuaries, but if you happen to live near either Yokkaichi (四日市) or Minamata (水俣), I’d probably avoid as much of the local catch as possible as a precaution.

● Raw shellfish (if contaminated) can cause hepatitis-A, cholera or gastroenteritis.

● Some fish found in warm tropical waters (eg. Sea Bass, Grouper (yum!) and Red Snapper) can be a cause of Ciguatera poisoning. The risk is particularly high when there is a “red tide” (a rapid increase in the amount of blooming algae in the Ocean). (more details). Don’t think that just because you live in Japan that this isn’t related. Because Japan imports a lot of its fish, it’s worth trying to find out where your fish was caught.

● If you don’t refrigerate (or freeze) your fish immediately after catching it, normal bacteria can create large amounts of a toxin that will cause Scombroid poisoning. Tuna and Mahi-Mahi are two examples of common culprits.

● If I haven’t written enough to make you totally paranoid… While we’re on the topic: raw meat (especially pork, lamb and venison) may contain “Toxoplasma Gondii” which can blind the fetus or damage its nervous system and may cause schizophrenia (more details). And soft cheeses may have Listeria and raw eggs might have salmonella. (This must be the record for the most Wikipedia links in one paragraph!)

A lot of these worries center around the consumption of raw seafood. Japanese pregnant women have been eating raw fish for centuries without any problems (Just like you’d never hear a Doctor in Thailand or India advising pregnant mothers not to eat spicy foods!). Why? I can think of at least two good reasons. (1) They’re used to it. Anything that you eat on a regular basis, is unlikely to be a shock to your system if you consume it while you’re pregnant. Perhaps more importantly, (2) the Japanese food distribution network is designed specifically to cater for raw fish. Because there isn’t that much consumption of raw fish in the West, fish are generally treated more roughly by supermarkets and distributors.

Whale on Sale - Most whale and dolphin meat contain high
levels of Mercury (Photo: Tsukiji Fish Market, Tokyo Japan
Note the “whales of the world” poster in the background)

At the end of the day, if the customer is going to deep fry the fish then who really cares how long it has been sitting out, thawing under the sun. You’d never get away with that at a supermarket in Japan. In fact eggs are a great example. Have you ever compared the length of egg used by dates in Japan with those in the West? Eggs in the West are generally “good for consumption” for at least one month longer than Japanese eggs. Why? Because a lot of Japanese eggs will be eaten raw and supermarkets can’t take the risk of salmonella and other creepies having their way. If you have any friends in the Japanese supermarket trade, it is a very interesting dinner conversation topic to ask them about how they treat their eggs (compared to say Walmart in the West).

To be very clear, if your wife is Japanese and living in the West, you should definitely discourage her from eating raw fish, eggs, meat etc while she is pregnant as the quality just isn’t the same as back home. But if you’re living in Japan, then you are probably doing your unborn baby a disservice by not eating fish. If you take the Western approach of not eating any fish because its all too complicated and overwhelming then you miss out on a valuable source of DHA which in recent studies has been linked with a lower rate of premature births (source: “Your Pregnancy Week by Week”). Common Japanese fish like Sardines (イワシ)、Mackerel (サバ)、Herring (ニシン)、Salmon (サケ)、Pacific Saury (サンマ) are all good sources. Omega-3 fatty acids are thought to promote neural development and so are particularly important in the 2nd and 3rd trimesters when the brain is growing at its fastest. (By the way, the best vegetarian source of Omega-3 fatty acids is from flax seed (linseed). We used flax seed oil in our cooking and ate eggs from hens which were fed flax seed. They’re pretty hard to find but available in some large International Supermarkets). Perhaps, even more important for Gaijin Daddy’s out there, recent research suggests that a high DHA intake can help reduce the chance of post-partum depression (reference) so make sure you keep eating fish after bubs joins you at thedinner table too!

Pregnant women (and their paranoid husbands) should be presented with both sides of the story and given enough information to chose themselves. Unfortunately there are very few books or websites that do so (in either language). The best that I have found so far is the Environmental Defense Fund. Make sure you download their pocket seafood selector (here) which has a brilliant chart that tells you which fish are high in fatty acids, which are likely to be high in mercury, and hence which are the most sensible items for your dinner table. Print out a copy and keep it in your wallet so you have it handy when you go shopping. Good luck!

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Awajishima Burger: Possibly the best in Japan

I don’t take my burgers lightly. As a big fan of hardcore burgers and an unforgiving critic of cheap imitations, I am on a seemingly endless search for Japan’s perfect burger for more than a decade. While I’m always hesitant to claim that I have found the Emperor of all burgers (because then I wouldn’t have an excuse to go out eating burgers every weekend!!), I think I have come pretty damn close.

My chance discovery was on the way home from Shikoku the other day. As we were driving over the whirlpools of Naruto (鳴門の渦潮) the road sign to Awajishima (淡路島) triggered a memory buried deep in the back of my mind which had nothing to do with the actual island (which forms a bridge from Shikoku to Honshu) that I was about to drive over. I’d been waiting months for an excuse to try out the cult-like 淡路島バーガー (”Awajishima Burger”) but without a car at home (Awajishima burger is – for some unknown reason – not in Awajishima, but in the heart of Nishinomiya, Kobe) this was the first day I was going to come anywhere near it.

You’d be forgiven for never having heard of Awajishima Burger. There is only one restaurant in the whole of Japan. It is nothing more than a sub 20 square meter hole in the wall of the wholesale market in Nishinomiya. It might be a small restaurant, but they certainly make one colossal hamburger.

The philosophy of the owner, Motoi Koshie (越栄基), is simple: To transform the hamburger from being “just another fast food” in to something remotely healthy. He only uses fresh organic vegetables (picture) from farmers that he has met over the years while traveling in Awaji Island. The concept seems to be working, as there was a semi-permanent queue outside during lunch time. What surprised me even more was that over 2/3 of the clientele that visited his restaurant while I was there were females in their 20s or 30s (here is the photographic evidence: Yes, I did count, because I didn’t believe my eyes!). I have to admit though, that I went there because the sheer volume of their infamous (in some circles) burger appealed to me, but why shouldn’t it - an organic hamburger - be a chic health food???

There are two items on the menu at Awajishima. A large (650 yen) and a regular (500 yen). If you’re anything like me and you grew up in the “it takes two hands to handle a whopper” era then you are gonna want to order the large. It comes with tomato, lettuce and sauteed onions and of course a burger smothered in Koshie’s secret sauce. The hamburger patty is pure beef and Koshie claims that the beef (from his friend’s farm in Awaji) is so soft and juicy that you can eat it raw. While I had my burger “medium”, I can testify that the patty melted in my mouth. For an extra 100 yen per item, you can add any of the following four toppings:

• Smoked bacon (home made)
• Fried egg (free range – damn! I didn’t know they even existed in Japan!)
• Cheese (fresh from the dairy farm)
• Onion Rings (The sweetest onions in Awajishima)

I went for the first three and was more than satisfied. If you add in Onion rings, the burger ends up being 15+ cm tall and even if you can hold the thing, you’re gonna struggle fitting it in your mouth. That said, under no circumstances should you miss out on ordering the Onion Rings. (You can buy a side order for 150 yen.) Order a couple before you leave to nibble on the way home as they are hard to beat. I’m not 100% sure but maybe he sautés the onion rings before he fries them. Let me know if you think you can work out the secret to their flavour.

I can hear you asking… what about the drink menu. Yes. A hamburger wouldn’t be quite the same without an ice cold beer to wash it down with. Although it has absolutely nothing to do with Awaji Island, I was pretty pleased with their stash of Hawaiian Beer. Longboard Island Larger, from Kona Beer is so smooth that you don’t even feel guilty drinking it after a heavy hamburger meal. Most of the locals around me were drinking coke but I definitely recommend the Larger (500 yen) with yours.

So this leaves me asking the question: Is this the best hamburger in Japan? To me it scored high in all categories. The burger was soft and juicy and you could tell that there was no cheap tsunagi (bread crumbs etc) holding it together like most excuses for hamburgers. The buns were soft and bouncy yet they were strong enough to withstand the onslaught from Koshie’s special sauce until the end of my meal. (Apparently he spent three months perfecting the buns with a local bakery.) To me having bacon and egg in a burger is a must and so doesn’t score any extra brownie points, but I really enjoyed biting into that home-made bacon though. Yummm. Despite being cooked after you order, the burgers come out fast and service is efficient. Given the volume, I don’t think I can argue that the price is too steep (especially when you think of the inflation at all of the other hamburger chains these days.) A little birdie tells me that Koshie had some advice from a Kiwi burger enthusiast when he was designing the contents of his burgers. What extras could I have asked for? Maybe pineapple? or beet-root? But that’s about it. The secret sauce on the patty is pretty good but it probably isn’t essential. If anything, it might taste more “organic” without it.

How to get there?: If you’re driving from Kyoto/Osaka down Route, take a left at 札場筋 (Fudabasuji) onto Route. Drive past the Nishinomiya City Office (西宮市役所) then hang a left before the Esso Service Station directly after the second set of traffic lights on the far side of the Higashi River (東川). Awajishima is then about 15m on your right hand side next to a dim coffee shop called Hikari (喫茶ひかり) and just before the entrance to the Nishinomiya Eastern Wholesale market (西宮東地方卸売市場). If you reach the Mos Burger on Route 2 then you have gone too far (in more than one respect).

If you’re walking from the station then you can get their from either Hanshin or JR (both Nishinomiya Station – 西宮駅) but it’s a little bit closer to JR if you have the choice and can afford the premium. If you live on the Hankyu line then Hanshin Kokudo (阪神国道駅) is the closest station but it’s the furthest of the three. It’s a little bit hard to find so it’s probably better to study the Google Map (below) in depth before leaving home.

Awajishima Burger (淡路島バーガー) - Some more details:
Address: 4-1 Ikedacho, Nishinomiya, Hyogo (西宮市池田町4-1 西宮東地方卸売市場内)
Phone: 080-3036-4373
Business hours: 11AM~8PM (except Wednesdays which are holidays)
Official homepage: http://www.web-joho.com/awaji/
Map for Dummies:

Google Map:

View Larger Map

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Have you found an equally tantalizing burger in the land of the Rising Sun? In particular, I’d love to hear about any of the cult burger shops in Sasebo (Here is the Sasebo Burger Guide Mapif you are keen!). Should I plan my next Golden Week to visit Nagaski? If anyone has tasted a hamburger that might rival the Awajishima, then I’m waiting with a long neck to hear about it. Please write about it in the comments section below, or even better, send us some pictures and your story!

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To make the most of the good weather that we’re enjoying this Spring, my family and I decided to tip toe amongst the Tulips that are in blossom at the moment at Expo Park (万博公園, banpaku koen). As we were walking around the Western side of the park, we decided to take a few photos outside the chikurin (竹林, bamboo forest). It was then that for the first time, I noticed a couple of Takenoko (たけのこ, baby bamboo shoots) sneaking up through the floor of the forest. Sure, I’ve seen fully grown bamboo trees many times and I’ve even enjoyed some noodles washed down the inner side of a bamboo trunk (流しそうめん, nagashisomen) before, but for some reason, I guess I’ve never walked by a bamboo forest in the Spring before. Being a big fan of bamboo shoots on the dinner table, I joked to my wife that we should sneak into the chikurin and take a few home. As you can guess, the idea didn’t get very much air time.

You’ll appreciate my surprise when I discovered that the baiten (売店, kiosk) next to the front gate was selling them! I guess that the managers of the park pull up the unnecessary shoots as part of their kanbatsu (間伐, optimizing the thickness of the forest) and sell them to raise a little extra cash. (Just in case they didn’t already make enough money from the relatively high entrance fee.) Evidently, I’d seen bamboo shoots for sale in the Supermarket before but had never twigged to what they actually were so always walk straight past them like I do at the Natto (納豆, rotted beans) section. Unlike that Takenoko salada that you buy at your local 7-11, a fresh bamboo shoot isn’t beige (it’s a deep, dark brown) and it is still covered in several layers of overlapping sheaths. To state the obvious, that is why I hadn’t realized up until today. I can’t say that I ever thought that stippy.com would ever turn into a cooking site, but this is the story of how I lost my bamboo virginity. If it took me over a decade of living in this country to learn how to skin a bamboo shoot, so I figured that it was worth sharing the story. (Oh, and you can click on all of the photos to see bigger versions!)

When you’re out on your first shoot shopping trip, it’s probably safest to buy a bigger takenoko than you think you need. By the time you remove all of the outer sheath layers, you won’t be left with much. A medium sized shoot (about 500 yen) will only be enough for one meal for a family of four. Look for a freshly cut shoot by looking at the colour of the dots at the foot (wide end) of the shoot. Freshly cut shoots will have spots which are a reddish purple colour (like mine in the photo) whereas the dots will have turned brown in an old shoot. Strong, pointy blades on the outer sheath is also a good sign of being fresh. The other trick you can try out is to hold a few shoots in your hands of similar sizes. The heavier the shoot, the more moist it is, hence the fresher it is. Old shoots that have been lying around for a while will dry up and hence weigh less.

While you can boil up your takenoko as it is, unless you’ve got a huge pot then you’ll probably want to tear off the inedible outer sheaths. According to the old lady who sold me the shoots, it tastes better if you boil the whole lot (without pealing back the sheaths) but I can assure it is pretty impractical. You’ll probably find that there were an awful lot more layers of sheaths on your shoot than you’d expected. As can be seen in these rudimentary before/after photos:

I think that my shoot shrunk by at least 50% by the time I’d removed all the layers. You know you’ve reached the edible part of the shoot when there is no more hair at the top (my photo of the “peeled” shoot wasn’t quite finished peeling, although I couldn’t bring myself to peel away anymore of the hard earned shoot).

With a bit of luck you will have been given some nuka (ぬか, rice bran) when you bought your takenoko (see photo):

Apparently the calcium in the bran helps to reduce the bitterness and soften the taste of your shoot when you boil it together (see photo):

Just like you would with any other root veggie, make sure that you bring to boil with the takenoko in the saucepan from the beginning (ie. While the water is still cold). After bringing it to the boil, you then want to slowly cook the shoot for another 45 minutes or so. The whole thing looks pretty disgusting with the bran floating in the saucepan but you wont notice it after you’ve washed it all off at the end.

Before you rush to rinse your bamboo shoot, allow it to cool naturally in the same saucepan (yes, with all of the gunk) that you boiled it in. If you rinse the takenoko before it’s cooled it will often split into pieces. It’s easiest to just leave it in the pot over night and rinse it in the morning. A cooked shoot will last a fair while in the fridge if you store it in water and remember to change the water once a day. Takenoko goes pretty well in any kind of stir fry that you can think of. If you’re stuck for a recipe, try simmering your takenoko with a touch of mirin and a healthy handful of wakame seaweed in some dashi (だし, soup stock) for a couple of minutes. This time I made my dashi from konbu (昆布, kelp) and threw in a bit of goya (ゴーヤ, bitter gourd) and katsuobushi (かつお節, dried bonita flakes) for a bit of Hattori Hanzo style Okinawan punch. If anyone else has some other good recipes for takenoko then I’d love to hear about them in the comments section - after all, there is still an entire month of fresh takenoko season to go this year!

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Kamiosawa: Murdered and Chopped Up in Tokyo

How many of you have been following the attempted suicide of Hiroshi Nozaki (野崎浩) on April 6? I’m guessing not that many of you, because for some reason it’s not really receiving that much air time on Japanese TV. Nozaki’s suicide is particularly controversial because after calling an ambulance he gave instructions to the doctor to search in a coin locker at the Hamamatsucho Station (浜松町駅) next to the World Trade Center Building. Inside the locker was a suitcase filled with 10 chopped up body parts of a 22 year old Filipina woman, Honiefaith Ratilla Kamiosawa (上大澤・ハニーフィット・ラティリア). As foreigners in Japan, there is more to this story than the Japanese media make out. How much different would this situation be if she were say, American? Or perhaps if she was a Japanese national, and the killer was an African American?

In case you haven’t seen the news let me give you a very brief rundown on what appears to have happened:

Hiroshi Nozaki - Cut up Pinay into Pieces
• Nozaki shared an apartment in Odaiba with the woman and 2 of her cousins. It seems that the 3 women all worked at the same hostess club in Roppongi.
• Nozaki was a regular patron of Kamiosawa’s establishment, and he was hooked on Filipino women. He offered to pay half of Kamiosawa’s rent, on the condition that he could move in with her. She accepted.
• Kamiosawa and Nozaki got in to a fight after Nozaki failed to pay his share of the rent. The police believe that Nozaki murdered Kamiosawa on April 3.
• After killing Kamiosawa, Nozaki carved her body up in their bath and tried to hide the cause of death by washing her in their washing machine.
• Three days later, Nozaki supposedly attempted to commit suicide by slitting his wrists (hmmm) but then called an ambulance for help (hmmm) . That’s a sure fire way of ensuring that you don’t die.

This video is a sample nonchalant media coverage that this case got on Japanese TV (Japanese language). The last line in the story regarding the washing machine trick is particularly interesting. Translation: “It is thought that Nozaki washed the parts of the body in a washing machine before putting them in a suitcase. The police are thinking about whether to charge him with Murder also”.

This alone is a pretty horrific story. But I ask you, Why isn’t this a bigger issue? Why isn’t it getting more press? Why is it that the life of a Filipino is deemed to be so worthless? Would it have been any different if she was an American? Of course it would have. It would be a high profile international crime case. President Bush would be knocking on Fukuda’s door. I know that Japan is an important country for the Philippines but come on? Where is the power of your politicians? Why aren’t they making a bigger issue of this? The future of the Philippines rides on the success of its overseas workers, it can’t afford to allow Japan to get away with something like this? Has anybody seen any comments from the Embassy?

Coin Lockers at the Tokyo Monorail
Hamamatsucho Station where the body was found

What makes it even worse, is that it is not the first time that this has happened. In fact it is not even the first time that this man has carved up a pinay! I can hear your jaw dropping and hitting the floor right now. Nozaki was arrested and sentenced in 2000 for three and a half years jail for carving up the body of another 27 year old Filipina girl, Longakit Alda Yoneda (米田・ロンガキット・エルダ) that he was living with at the time. After hacking up her body, and boiling it in a pasta pot, he flushed it down the toilet of a park in Yokohama!

This raises a few more questions. Why on earth was he only given a 3.5 year jail sentence? You’re never going to believe this, but apparently he wasn’t found guilty of murder at all. He was “only” found guilty of “mutilating and abandoning of a dead body” (死体損壊・遺棄). At the time he claimed that when he woke up she was lying dead beside him. Well, I guess that explains why he then cut her up into pieces doesn’t it. The investigation into the death of the 27 year old is still unsolved. This is wrong in so many ways (unless of course, Nozaki genuinely couldn’t pay for the funeral of the sexy young lady who died of natural causes in bed next to him - in which case chopping her up and disposing of her in a more unorthodox, though frugal way would have of course been the only option…)

• How do you decide that three and a half years is an appropriate term for the “mutilating and abandoning of a dead body”?
• Why isn’t it obvious that a man who was overheard fighting with a Filipina dancer and then caught flushing her body down a park toilet killed her, too?
• Why does Japan allow such sickos to go back out into society?
• Why would this story have been so different if either of the girls were American?
• Perhaps even more provoking yet, why would this story have been so different if the murderer was an American? (Or even if the girl was British!)

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HIV Awareness in Japan:
Has anything changed?

Thus far, we have two articles about HIV and AIDS in Japan on stippy.com (the first and the second). Another year has passed since we last touched on this issue, but a recent episode in my own life drove home that things still are really not changing fast enough with regard to the blurry awareness of HIV/AIDS in Japan, and the studied nonchalance of the Japanese people whenever the topic arises.

In Japan, everyone knows the word AIDS, but still very little is known *about* HIV or AIDS by the general public. This giant disparity of awareness was brought clearly to my attention one day after overhearing the following conversation between a physical education teacher and a young math teacher in her early twenties in my office (I work in a Japanese School):
Ms. Math: So wait, I don’t understand; what is the difference between HIV and AIDS?
Mr. PE: If you are infected with the HIV virus, it will eventually lead to AIDS and if you catch another less serious illness you can die because the virus weakens your body. If you have HIV, it doesn’t mean you have AIDS, but that you will eventually get AIDS. As long as you don’t catch the virus, you don’t need to worry.
Ms. Math: I don’t understand. What is HIV?
Mr. PE: It’s the virus that causes AIDS. If you have HIV, you will get AIDS.
Ms. Math: I still don’t understand.

The fact that this conversation could occur between two adults in a First World country nearly 12 years after I can recall asking the same questions of my teachers in America is absolutely baffling to me. Japan is slow to catch the news because the virus has only just recently started to increase within the population despite its low numbers; here is an article explaining the situation, including the country’s reaction to its .02% prevalence rate of the virus reported. However recent statistics are showing that the virus is on the rise in the country, due mainly to increased contact with foreigners abroad and within the country, and the government is scrambling to inform and educate the public about HIV.

This year my junior school has become one of presumably many which are currently including information about the disease in its annual curriculum. In early December 2007, they distributed red ribbons at the weekly student body meeting and included information about it both spoken and in print.

The following is a translation of a PTA Bulletin from November that is sent out to students of our school and their guardians each month:

December 1st is World AIDS Day. We ask for the student body cooperation in accepting a red ribbon. The red ribbon is a symbol of support and understanding for people who are suffering from AIDS. We are distributing the ribbons to promote the message that we will not discriminate against or have a narrow-minded view of AIDS.

AIDS is a sickness that leads to death. However, the infection rate is very low, and there are three main ways of contracting the virus:

1. Sexual transmission
2. Transmission during birth from mother to child
3. Shared intravenous needles

You cannot contract it from touching the body or sweat of an infected person. It is very important that each of you have understanding about this disease.

By the way, do you know the difference between AIDS and HIV? AIDS stands for “acquired immune deficiency syndrome” and HIV stands for “human immunodeficiency virus.” In other words, if you contract HIV, the resulting disease is called AIDS. We would like you to understand and have proper knowledge about the people in the world infected by this virus. Please wear these ribbons on your school uniform during this period of time.

This information is new for the children at my school, as well as for the adults who are teaching them. How it can be new so late in this age is an indicator of extreme isolation. I am always curious just how this isolation still exists.

Even when Japanese people enter into adulthood, awareness about AIDS and its prevention never seems to be high on anyone’s agenda. Women Japan is a popular site amongst “around 30″ girls in Japan. It features several 相談室 (consulting rooms) where girls can ask doctors, and several prominent personalities questions about almost anything they like. One of the rooms is a セックス相談室 (sex consultation room) where people can ask “Dr. Seiko先生” their deepest and darkest questions about their sex lives that they could never share with their friends or colleagues.

Dr. Seiko self-professes herself as, 性に関して日夜研究。研究結果をみなさんの悩み解決のために役立てたいと願っています。 (Translation: “I am researching sexuality day-and-night. I hope the fruit of my research can help you solve your sexual hang-ups and problems”). It is a semi-serious, “Ask the Doctor” type site, generally keeping a down-to earth approach on proposed solutions - except however for some of the condom usage advice given to the girls (who assuming from their questions, had the math teacher above for sex-ed class) where it is inappropriate and dangerous.

Here where a 22 year old girl asks for advice about her コンドームをつけてくれない彼 (Boyfriend who wont ever wear condoms), Dr. Seiko answers with three not very well thought out solutions. 1. Don’t have sex, 2. Get on the pill, and 3 Ask another guy to tell him to wear condoms. There is not one mention of STDs in her response, or any of the other reader’s comments. The Doc even goes so far as to say, 私の場合は医者にピルを処方してもらった (”One time when I had a boyfriend like yours, I just got my Doctor to give me the pill”). Hmmm.

As the answer to another 35 year old (!!) reader’s consultation entitled コンドームをつけるタイミングは？ (”At what stage should I put a condom on him?”, Dr. Seiko gives this advice:
1　口でフェラチオ
(First, give him fellatio)
2　一度挿入　※性病が怖い人は挿入する前から
(Put him into you without a condom first - unless you are afraid that he looks at risk of having an STD)
3　プレイとして、口で女性がつけてあげる。　※これはテクニックが必要となりますのでバナナで練習しましょう。
(Then before he comes, roll a condom onto him with your mouth - This takes technique, so practice with a banana first)

Well, advice for champions. This is the state of condom usage and STD prevention awareness in Japan.

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The three star symbol of a Master Taxi Driver - 優良タクシードライバー

Have you ever noticed Tokyo taxis with these three stars atop? They are a type of certification of the level of the driver inside the taxi - they are designated “Master Taxi Drivers” (優良タクシードライバー). Look out for them next time you grab a cab in Tokyo!

The Kanto Bureau of the Ministry of Land, Infrastructure and Transport has announced a proposal to designate space at taxi ranks for these master drivers. They have chosen Shimbashi station, near the Yurikamome line, as the first location. Some taxi stands already offered passengers the chance to queue for no-smoking cars but since most Tokyo companies no longer allow smoking, the Ministry has been considering other premium services which might draw passengers and reward those drivers who offer them. A master taxi driver is designated by the Tokyo Taxi Centre as someone with no traffic violations and an unblemished record in dealing with customers. Around 10% of the city’s 90,000 drivers qualify for the “three star designation” which can be seen on the roof of the car.

Hmmm. So what does our friend George think of all this I wonder? I asked him. The first thing he asked me was where the information came from. I told him it was from here, and assured him that it was from a reliable source. He then went on to say he was not surprised by the fact that only 10% of Tokyo’s taxi drivers qualify for the 3-star “Master” designation. That is actually quite an amazing statistic, if in fact correct: only 1 in 10 of the taxi’s that come past you are driven by someone deemed professional enough to qualify. The logic of the designation effectively stating that 9 in 10 of those drivers are not worthy, having at some point infringed on traffic laws or having dealt with their customers in a poor manner, so much so that they were reported.

The last eight or nine months have seen a lot of taxi travel for me, in and around Kanto, as well as other areas of Japan. I have found myself in taxis almost every day, and have wished that there was some way that I could reward outstanding drivers who “delighted me”, and somehow demerit those drivers that enraged me. And yes, there are more of the latter than the former, even in Japan - or maybe my “en” (luck) with taxi drivers is just thin. In any case, the new initiative where taxi drivers are ranked and given preference is a move forward. We choose whom we give money too and whom we don’t in any other industry, so why not taxis!

We all know Japan as the land of wonderful (environmentally unfriendly) product packaging, outstanding customer service and absolute politeness - just a generally good feeling when we are standing on the customers’ side of the counter. I am sure it is one of the elements that keeps many people here. Comparing with the average rude clerk back home in my country, I am addicted to being treated with kindness and a nice smile when I am paying someone money. I don’t care if they mean it from their heart or not - I deserve it. That said, I don’t seem to get the same endorphin rush when riding in Japanese taxis, even at shiharai time, when it is time to hand over the cash (despite the recent hike in taxi fares that has swept over us).

However, just the other day (in Yamagata of all places) I came across the model taxi driver. I just spent the whole ride wishing there was some way I could convert the rest of the arrogant punch-perm sunglass-wearing taxi driver population of Tokyo into this guy. Or at least find out a way to reward him so that he would get more of my money than the punchies.

It was snowing heavily, and I had 2 large cases, and a cardboard box (long story). I flagged a taxi that was driving in the other direction (expecting to be ignored of course) and to my delight, he quickly U-turned and stopped as close as possible. He quite literally flung himself out of the taxi, and helped me settle my bags in the boot, and then opened the door for me (with his real hands, not with the impersonal auto-door standard in Japanese taxis). Now dont get me wrong, I am not from a wonderland where I expect taxi drivers to be chauffeurs, but this was only the beginning of my pleasant surprise.

I got in the car, and watch the guy slipping and sliding on the icy road around to his door as fast as he could. I told him my destination, but his reply was not the standard silent grunt (which Tokyo drivers would so often use when a simple “wakarimashita” is too much trouble for them), but a question. He asked, “there are two pretty fast ways to get where you want, do you have any preference of route?”. Wow! I have hardly ever been asked this question in Tokyo, and never in Osaka. In the big cities, the taxi would leap into action without any dialogue, and I would be 100% at the whim of the driver.

This driver was making an effort to determine the process of our transaction - albeit a simple taxi ride - together. Even though I was exhausted from a long day, and extremely annoyed at the blizzarding snow, this gesture of the driver asking me if I have a preferred route is, in effect, avoiding me having the feeling that I am being taken for a ride. Choice. Customer service is all about choice, and doing what is not only most reasonable, but what is most comfortable for the customer.

After telling the driver my preferred route (yes, I did have one), we set off. The journey to my destination was then filled with some pleasant conversation, and after I received a phone call, some even more pleasant silence. It was a 30 minute ride. There were no steering wheel grip changes (causing jerks), no intermittent and unnecessary taps on the brakes (this really gets to me), and I even was able to doze off to a half sleep by the time I arrived. He was actually a professional driver. In Tokyo, my taxi rides often entail thoughts that I am a better driver than the person behind the wheel. I don’t even have a car, but I can’t help but thinking that the drivers are playing with my head with their constant sudden brake movements, causing mini-whiplash jerks in my neck and back. If anyone deserves the three stars of a Master Taxi Driver atop their vehicle, it was my Yamagata taxi driver hands down.

I hope this new system of giving preference at taxi stands to real professional taxi drivers expands. It should help to raise the bar, and rid the city of the types of drivers that anger me. Specifically, they are:

• Drivers who despite having a passenger in their car, drive with one hand, often at the bottom of the steering wheel and steer with small jerky thumb movements.
• Drivers who open the door of the taxi as if to say, “hurry up and pay, and get the hell out of my taxi. Gaijin”.
• Drivers who’s taxi that smells like a kitsuenshitsu (smoking room).
• Drivers who think they are driving alone, and toggle with the accelerator and brakes like they are in a dodgem car.
• Drivers who constantly complain about the deregulation of the industry (which happened back in 2002!) and how it is hurting them in the current times of fukeiki (不景気, recession).
• Drivers with no manners. Drivers who do not understand their customer’s needs.
• Divers who are selfish, and just plain punch-perm arseholes. I’m sure you’ve met one or two. If not, you will.

When you are next in Shimbashi looking for a taxi, for sure try out one of the certified master taxi drivers. The special rank where only those taxis can wait will start on the 6th March this year. Even if you are not around Shimbashi, look out for a three star
優良タクシードライバー taxi. Take it over the ones without it.

We realise feelings about taxi drivers differ from person to person, and so we’d love to hear your thoughts on taxi drivers, especially if you are first of the rank to try out the new Shimbashi system! How can we reward good drivers and avoid bad ones?

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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:

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!

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おみやげがいこう (omiyage gaiko)

* “J-WOTD” = “Japanese Word of the Day”

The beauty of the term Omiyage Gaiko is in its simplicity. Rather than being a complicated “4 character word” (四字熟語) it’s a neat little phrase that I saw for the first time being used on the television earlier this week. Yukio Hatoyama (鳩山 由紀夫) of the Democrats (not to be confused with his younger brother Kunio “a friend in my butterfly collecting club is from Al-Qaeda” Hatoyama (鳩山 邦夫) who is in the LDP coined this phrase a couple of weeks ago.

The two words that make up this phrase お土産 (omiyage, souvenir) and 外交 (gaiko, foreign policy) make an unusual combination. Hatoyama was using them to refer to Prime Minister Fukuda’s recent decision to force the refueling bill through the lower house without debate before his scheduled trip to America later this week. Hatoyama was implying that Fukuda didn’t have a decent souvenir from Japan to give to President Bush and so forced through the policy in order to give him something to talk to Bush with. As I’m sure you can guess, Hatoyama wasn’t too pleased that such an important policy for Japan was being dictated by Fukuda’s desire to come up with a topic of conversation in his upcoming conversation with Bush. I’m always a fan of smart politicians with the gift of the gab but this phrase tickled me enough to write it up as a J-WOTD.

Usage:
独立国・日本としての気概を持つべきで、属国のような扱いを甘んじて受け入れることに繋がる「お土産外交」はやめるべきであると釘を刺した。
“Hatoyama made it clear that as an independent country, Japan should show some balls and stop passing legislation just to please the United States or the world will begin to treat it like a vassal state of America.”

Oh, and just for fun, here is the video of 鳩山 邦夫 (Kunio Hatoyama) that we mentioned above, where he said, “A friend of a friend is a member of Al-Qaeda”:

See more about this J-WOTD here.

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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.

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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 mor