JOURNAL
THE AMERICAN CHAMBER OF COMMERCE IN JAPAN

Volume 58 • Number 6 • ¥1,000

THE VOICE OF GLOBAL BUSINESS IN JAPANFINANCE

Attracting Global Investment
Ideas for making Japan a top financial center
INVESTING

Outside Options

Ways to invest as an expat in JapanAGM SEASON

Third Annual Shareholder Forum
Focusing on active engagement and stewardship
REAL ESTATEAre Minpaku a New Asset Class?

Short-term rentals bring financial and cultural rewards

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PRESIDENT

Jenifer Rogers

5

Asurion Japan Holdings G.K.
CHAIR

Invest in Your Business—and in Yourself

7

Finding the many paths to personal andfinancial success in Japan

Eriko Asai
GE Japan
TREASURER

PUBLISHER

9Ryann Thomas
PwC Tax Japan

FOURTH OF JULY

Wishing You a Happy
Independence Day

Yoko Furuyama (Kansai) P&G Japan G.K.

Going Long on
the ACCJ

Investing yourself in the chamber isa great investment in Japan
10

Greetings to readers of The ACCJ Journal
from the US Embassy Tokyo

VICE PRESIDENTSPRESIDENT

EVENT

Third Annual ACCJ
Shareholder Forum

Focusing on active engagement andstewardship during the AGM season

Deborah Hayden Finsbury Glover Hering
Amy Jackson Pharmaceutical Research and Manufacturersof America (PhRMA)
Robert W. Roche (Chubu) Oak Lawn Marketing, Inc.
Eric W. Sedlak K&L Gates Gaikokuho Joint Enterprise
Yoshitaka Sugihara Netflix G.K.
Dave West Cisco Systems G.K.
GOVERNORS

Andrew J. Conrad Aflac
James C. Feliciano AbbVie
Harry A. Hill Better-U, Inc.
Mark Hosang (Chubu) Randstad K.K.
Douglas L. Hymas Fusion Systems Group
Tad Johnson Pratt & Whitney Aftermarket Japan KK
Saori Kanno REVLON K.K.
Mari Matthews The Bank of New York Mellon
Nancy L. Ngou EY Strategy & Consulting Co., Ltd.

34

Victor Osumi Delta Air Lines, Inc.

Attracting Global Investment

Frank Packard Synnovate Capital Partners
William J. Swinton Temple University, Japan Campus

Ideas for making Japan a top financial center

Simone Thomsen (Kansai) Eli Lilly Japan K.K.
Megumi Tsukamoto Caterpillar Japan LLC
SPECIAL ADVISOR

Christopher J. LaFleur
McLarty Associates

16

PRESIDENTS EMERITI

Debbie Howard (2004–05)

Thomas W. Whitson (2009–10)

24

Michael J. Alfant (2011–12)
CHAIRMAN EMERITUS

Cosmo Public Relations Corporation
29

Laura Younger
Executive Director

Christopher Bryan Jones32

To advertise or subscribe: comms@accj.or.jp
The American Chamber of Commerce in Japan
Minato-ku, Tokyo, Japan 106-0041

The ACCJ is an independent membership organization not affiliated with any
government or other chamber of commerce. The ACCJ is a member of the Asia–
Pacific Council of American Chambers and values its relationships with Japanese,
American, and other nations’ business organizations.
Disclaimer: The ACCJ will not accept liability for any damages caused by thecontents of The ACCJ Journal, including, but not limited to, any omissions, errors,
facts, or false statements. Opinions or advice expressed in the The ACCJ Journal
are not necessarily those of the ACCJ.

28

CHUBU

Digital Transformationof Committees
INVESTMENTS

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INVESTING

OutsideOptions

Ways to invest as an expat
in JapanInvesting in
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TECH

Investing in
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Japan startup Sagri is transforming
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Digital health can guide the way
for Japan’s post-virus evolution

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The keys to successful investment
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Are Minpaku a
New Asset Class?

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THE ACCJ JOURNAL

Publisher and Editor-in-Chief

EVENT

COMMUNITY

How three expat families are making
a difference in rural Japan

How short-term rentals can bring personal, financial, and cultural rewards

Kumi Sato

ACCJ EXECUTIVE STAFF

My Leadership
Journey

22

GE’s Eriko Asai shares how to stayresilient during uncertain times

Charles D. Lake II (2006–07)
Allan D. Smith (2008)

EVENT

TAXATION

Covid-related
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What tax liabilities come withcoronavirus help?
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PUBLISHER

By C Bryan Jones

Invest in Your Business—and in Yourself
Finding the many paths to personal and financial success in JapanAs we continue building entire issues of The
ACCJ Journal around singular themes, thistime we take a look at investment—specifically, investing in Japan. From individual entrepreneurs to large organizations, there are many opportunities to be had. There are also many needs to beaddressed as the world continues to battle Covid-19
and look beyond the pandemic.
While we were putting together this issue, corporate
Japan was in the midst of the 2021 annual general meeting season, and the American Chamber of Commerce inJapan (ACCJ) Alternative Investment Committee hosted
its third annual Shareholder Forum on June 16. Last
year, the focus was on facing new challenges amid the
pandemic. This year, with an eye beyond the crisis,
the speakers talked about active engagement andstewardship, sharing how corporate governance andboard diversity are changing as the Financial Services
Agency’s reforms—launched in 2015—continue toreshape the landscape. Our coverage of the forum
begins on page 10.

Expat Expertise
I had the pleasure of penning two tales of interest
to individuals for this issue. Both involve real estate
investments but one casts a wider net. A perk of
my role as editor-in-chief of The ACCJ Journal is the
chance to learn about a wide range of topics fromexperts. On July 1, I attended a presentation by Tokyo
Family Stays Chief Executive Officer Tracey Northcott
about minpaku (short-term rentals)—something many
people instantly associate with Airbnb. The turmoil
surrounding the market in Japan is well known, but,with rules now in place, there are great opportunities
for investment. Northcott delivered a wonderful bitof insight into the business, and I recap it all startingon page 24.
For the second piece, I talked to experts from threecompanies about possible paths for expat investors inJapan, as well as some of the pitfalls which they mustnavigate. You’ll find their advice beginning on page 40.

Global Investment
One of the Japanese government’s goals is to position
the country as a destination for companies looking to
relocate their Asia–Pacific headquarters. But there
are some obstacles to achieving this.

The ACCJ Financial Services Forum and Investment Management Committee have both recently
released papers that recommend changes that could
make Japan more attractive. Starting on page 34,
we talk to the authors and committee leaders tolearn more about these ideas for making Japan a top
financial center.
Additional thoughts in this issue come from renowned economist Jesper Koll, who has again written
an insightful column for us about the keys to successful investment in Japan. He notes that keeping those
bits of headline-grabbing advice in perspective andstaying focused on the fundamentals is a must. Findout what else he recommends on page 32.

C Bryan Jones
Publisher andeditor-in-chief
cjones@accj.or.jp

It is important to remember thatthe word “investment” does notalways have to be tied to money.
It’s also important to invest in
ourselves—through learning,taking on new experiences, andchallenging our notions.
Invest in Yourself
Lastly, I think it is important to remember that theword “investment” does not always have to be tied
to money. It’s also important to invest in ourselves—
through learning, taking on new experiences, andchallenging our notions. To that end, it was a realpleasure to chronicle the leadership journey of ACCJ
Chair and GE Japan President Eriko Asai. Her phenomenal and inspiring story that spans five countries andmultiple industries provides a wonderful roadmap
for those looking to build a career and reach the highest levels of success. She presented the journey aspart of the ACCJ-Kansai CEO Series, and clearly outlined many actionable points that can make anyone abetter leader. The story starts on page 16.
As we head into the heat of summer, watch thelong-delayed Tokyo 2020 Olympic and Paralympic
Games take place, and continue to be encouraged by
Japan’s vaccination campaign, I hope you will find aspringboard in this issue from which to launch into aprosperous post-pandemic future. n

Listen to this story:
accj.or.jp/sound

THE ACCJ JOURNAL • VOL. 58 • NO. 6

5

PRESIDENT

By Jenifer Rogers

Going Longon the ACCJ

7

Investing yourself in the chamber is a great investment in JapanI

n keeping with this issue’s theme, I’d like to highlight an alternative form of investing in Japan thatis uniquely available to members of the American
Chamber of Commerce in Japan (ACCJ): taking on aleadership role at the chamber.
As Japan’s most active and influential international
business community, the ACCJ plays a vital role in
improving the country’s business environment. As an
ACCJ leader, you can put your experience to work tocreate lasting benefits that extend far beyond the scopeof your present role.
With more than 60 active committees and a broad,best-in-class advocacy program, the ACCJ’s true
strength is the expertise and engagement of its members. Serving as a leader in an organization with suchbench strength and influence is an investment thatcan pay meaningful dividends.

Serving as a leader in an
organization with such benchstrength and influence … canpay meaningful dividends.
For younger executives, it is a way to develop
leadership skills and networks to help build yourcareer. For mid-career executives, it can be a great
stepping-stone toward future board engagements,
career advancement, and professional fulfillment.
For senior executives, it’s a chance to give back to thecommunities in which you’ve flourished, leverage
your skills in a more diverse environment, and help
mentor the next generation of leaders.

Continuity
This year, the ACCJ board and I have launched a new
focus on the resilience and sustainability of the chamber. We appreciate our active leadership and want tostrengthen it by encouraging development opportunities in which others—including new members—get
involved as leaders. We’ve asked committee chairs andvice-chairs to develop succession plans and to create
openings for more members to take on leadership roles.
We believe that having a pipeline of leaders andencouraging rotation will lead to a more dynamic andvibrant chamber. The ACCJ has long been a leader on
the diversity front, and we’re challenging ourselves toenergize our organization with even greater diversity
at all levels. Both these initiatives create tremendous
opportunities for interested members to invest theirtime and expertise in the future of business in Japan.

PayoffHaving a leadership role in the chamber can provide a
different experience compared with one in the private
sector, as well as opportunities to hone your skills ordevelop new ones. The ACCJ is much less hierarchical,
and more consensus-driven, than many private-sector
organizations. As a volunteer body, the chamber can
provide a refreshing change of environment as the use of
persuasion more than authority is key when navigating
the diverse opinions and priorities of the membership.
For many, the ACCJ represents a great opportunity
to fine-tune the type of management skills required tomeet the needs of today’s workforce. For others, it offers
a “mental gymnasium” in which to focus on somethingoutside the usual routine. And for all, it’s a great way
to expand your network, get involved in meaningfulchange, and broaden your professional experience.

Jenifer Rogers
ACCJ president

Get Started
How do you get involved? A great first step is to speak tomembers who are in leadership roles today. Ask them
about their experience and seek their input on areas
where your skills might be put to best use.
For committee roles, speak to the ACCJ programs
team or the current leaders of the committees in which
you are interested. For Board positions, the Nominations Committee launched their self-nomination
campaign in July and is seeking members who would
like to put forward their name. We highly encourage
self-nominations and welcome anyone who would liketo contribute their time and energy.
I have been involved with the ACCJ in various
capacities for the past six years, was a member once
before—when previously living in Japan—while myparents were both governors in the 1980s. I can tell
you that it has been a very rewarding and productive
relationship for me, and I know that my parents were
proud to be part of the positive changes the chamber
has helped to foster in Japan. I want more members
to have that experience, and I invite you to take on aleadership role. It’s an investment with a guaranteedhigh rate of return. n

THE ACCJ JOURNAL • VOL. 58 • NO. 6

The ACCJ
Is Working for You
During these challenging times, it’s more important

ACCJ members benefit from a virtual ecosystemthan ever to make sure you and your employeesthat helps member companies stay informed andstay connected, informed, and engaged, especiallyconnected, at a fraction of the cost of travel andwhen other professional development activities areconference fees. This invaluable resource includes

less accessible.

the following beneﬁts:
 Connect with more than 70 special interest committees
 Engage with over 30 virtual meetings and Webinars in an
average month Access subject matter experts, government representatives,
industry colleagues, and a variety of guest speakers
 Influence advocacy efforts that reach regulators andlawmakers with the voices of more than 3,000 members

If you would like to explore membership opportunities, including extending
these beneﬁts to an unlimited number of employees, contact join@accj.or.jp
for more details or call your ACCJ membership representative.

FOURTH OF JULY

By Nicholas M. Hill

Wishing You a Happy
Independence Day
Greetings to readers of The ACCJ Journal from the US Embassy TokyoH

appy Independence Day to our partners andfriends at the American Chamber of Commercein Japan (ACCJ). On the 245th anniversaryof the adoption of the Declaration of Independence,the democratic values that underpin the US–Japan
alliance continue to bear fruit. Reflecting on the year
thus far, we have much to celebrate as our bilateral ties
with Japan remain strong. Just as the Declaration of
Independence symbolizes peace and prosperity for theAmerican people, the US–Japan Alliance promotes thesesame values in the Indo–Pacific and across the world.

Steadfast Friendship
The United States and Japan ushered in the year withstrong symbols of our steadfast friendship, exhibited
through several firsts. In March, Secretary of State
Antony J. Blinken and Secretary of Defense Lloyd J.
Austin III visited Tokyo on their first trips overseas
as Cabinet officials, participating in the Japan–US
Security Consultative Committee (2+2). Their visit
reaffirmed the enduring strength of our security partnership and its contributions to peace, security, andprosperity in the region and beyond.
We solidified our close bond with Japan when
President Joe Biden welcomed Prime Minister Yoshihide
Suga as the first world leader to visit Washington.
During the visit, the two leaders launched the Competitiveness and Resilience (CoRe) Partnership—as wellas the US–Japan Climate Partnership—and pledged towork together to address the global threats posed by
Covid-19 and climate change, while resisting challenges
to the free and open rules-based international order.
We will need your help in implementing these
initiatives and realizing their success in areas that range
from boosting innovation and cooperating on researchand development to securing critical supply chains.
Finally, we celebrated US–Japan cooperation in
space. We witnessed the simultaneous presence of two
Japanese astronauts aboard the International Space
Station for the first time since 2010. One of the Japanese
together with three other astronauts were then ferried
from the space station by a commercial SpaceX ship.

One of the Strongest Relationships
The United States and Japan continue to be top tradeand investment partners. Our close economic cooperation supports open and competitive energy markets,

the digital economy, secure 5G networks, space exploration, and a wide range of emerging technologies.
Of course, we are still grappling with Covid-19,
but vaccinations are helping our economies and societies recover. Throughout the pandemic, the United States
and Japan have demonstrated that close cooperationin tackling global issues is emblematic of our strong
relationship. As we have worked to vaccinate the peoplein our countries, we have also partnered to ensure therest of the world has access to vaccines through the
COVAX Advance Market Commitment.

Nicholas M. Hill
Chargé d’Affaires
Embassy of theUnited States, Tokyo

The ACCJ has played a criticalrole in strengthening thebonds between our countries,
deepening our economic ties
with Japan, and advocating
for the US business community.
I continue to be impressed by the ACCJ’s contributions to our strong economic ties, and your efforts
to mitigate the impact of Covid-19. Your leadership—particularly in the areas of digital transformation andpharmaceuticals—has been invaluable in helping topromote hope and prosperity amid this crisis.

Shared Values Tie Us Together
As the two largest market economies in the world, ourcommitments to defending freedom, championing
free and fair trade, promoting diversity and inclusion,and upholding human rights are rooted deeply in ourshared values. The ACCJ has played a critical role instrengthening the bonds between our countries, deepening our economic ties with Japan, and advocating
for the US business community.
As President Biden and Prime Minister Suga
recently affirmed, “an ocean separates our countries,
but commitments to universal values and common
principles—including freedom, democracy, humanrights, the rule of law, international law, multilateralism, and a free and fair economic order—unite us.”
Let us take this Independence Day to celebrate
what unites us. n

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THE ACCJ JOURNAL • VOL. 58 • NO. 6

9

10

EVENT

By Malcolm Foster

Third Annual ACCJ
Shareholder Forum

Focusing on active engagement and stewardship during the AGM season

THE ACCJ JOURNAL • VOL. 58 • NO. 6

11

After more than a year of operating during thecoronavirus pandemic—and adapting to thechanges it has brought forth—companies
are facing another season of shareholder meetings.
With vaccinations signaling that we may soon emerge
from the crisis into a more familiar, although changed,
world, leaders are able to focus on other critical areas,such as the environment and sustainability, as well as
diversity and inclusion.
On June 16, the American Chamber of Commercein Japan (ACCJ) Alternative Investment Committee(AIC) hosted the third annual ACCJ Shareholder Forum.
Held virtually once again this year, the event brought
together six speakers with expert knowledge of thefiduciary and regulatory landscape: Satoshi Ikeda, chief sustainable finance officer
at Japan’s Financial Services Agency (FSA) Nicholas Smith, strategist at CLSA Securities
Japan Co., Ltd.
 Paras Anand, chief investment officer for Asia–
Pacific at Fidelity International Ltd. (FIL) David Baran, chief executive officer of SymphonyFinancial Partners (Singapore) Pte. Ltd.
 Alicia Ogawa, director of the Project on JapaneseCorporate Governance at Columbia University
 Seth Fischer, chief investment officer at Oasis
Management Company, Ltd.

The mission of the forum is to address the lack ofpublic information about the existence of shareholder
initiatives among listed companies in Japan. This
year’s discussion included timely issues for active
investors, such as environmental, social, and corporate governance (ESG), climate-change disclosures,the growing emphasis on diversity of boards, and thediffering styles of engagement used to achieve successful outcomes.
“These days, lots of attention is focused on boardsof directors and corporate governance,” AIC Chair
Frank Packard said during his opening remarks. “Lessattention is focused on active engagement and stewardship. It is this attention gap that the ACCJ seeks toaddress with this forum.”“Active investor engagement can lead to constructive results, and we see that with the Toshiba investigative report. This increased transparency only happened

because an actively engaged investor requested an
extraordinary general meeting of shareholders,” headded, referring to the revelations in June that the
manufacturing giant allegedly colluded with government officials to influence the outcome of votes at its
2020 annual general meeting (AGM).
ACCJ President Jenifer Rogers, who serves asa non-executive director on the boards of three
Japanese companies—Mitsui & Co., Ltd., Kawasaki
Heavy Industries, Ltd., and Nissan Motor Co., Ltd.—welcomed attendees and shared how the chamber ismodeling best practices in terms of governance andmember shareholder engagement.
“For almost 10 years, the ACCJ and its members
have advocated constructively with the governmentof Japan to improve corporate governance and investor behavior, to increase corporate value for all investors and stakeholders,” she said. “This event is part ofa long-standing interest of our chamber members inthese important issues.”
Rogers noted that the coronavirus pandemic hashelped hasten the adoption of ESG principles atmany companies and prompted more attention to befocused on climate change. “Changed attitudes aboutsustainability are also—and, should I say, finally—
emerging in Japan.”

Satoshi Ikeda
Chief sustainablefinance officer
Financial Services
Agency (FSA)

Frank Packard
ACCJ governor
Chair
ACCJ Alternative
Investment Committee

Response to Reform
Satoshi Ikeda provided perspectives on corporate governance reforms on behalf of the FSA, where he is chiefsustainable finance officer. The agency’s reforms werelaunched in 2015 and recently finalized in time for June’sbusy AGM season—despite resistance from Japan’s
corporate chieftains.
“To put it bluntly, the corporate governance reform in Japan was really hated by Japanese corporate
executives, and it continues to be largely so even today,” Ikeda said, adding that this is no surprise becausesuch moves are intended to strengthen oversight ofcorporate executives. “It is human tendency to resist
being deprived of entitlements,” he noted.
The reforms came after the persistently low
profitability and low returns on equity at Japanese
corporations came into the spotlight in the early 2010s,
Ikeda explained. “It was perceived that Japanese corporate management was maybe too prudent. So, we
thought it would be necessary to change the balance.”

Jenifer Rogers
ACCJ president
Non-executive director
Mitsui & Co., Ltd.
Kawasaki Heavy Industries
Nissan Motor Co., Ltd.

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THE ACCJ JOURNAL • VOL. 58 • NO. 6

12

Chris Wells
PartnerMorgan, Lewis &Brockius LLP
Vice-chair
ACCJ Alternative
Investment Committee

Nicholas Smith
Strategist
CLSA Securities
Japan Co., Ltd.

Long-term equity investors are in the best position to help realize the “right vision-based finance”
in Japan, Ikeda added, despite the negative image that many Japanese have of them as short-term
speculators who descend like “a swarm of locusts”
and demand an immediate payout through dividends
or stock buybacks, and then disappear. But by aligning
their interests with those of the company, long-term
investors can encourage value creation for shareholders by engaging in stewardship activities, he said.
Reforms to the corporate governance code are also
aimed at changing the traditional mindset at Japanesecompanies that prioritized clients and employees morethan shareholders. That way of thinking also was notsuitable for responding to civil society organizations
pushing agendas, such as greater respect for humanrights and addressing climate change.

Expanding Scope
Chris Wells, AIC vice-chair and a partner at law firm
Morgan, Lewis & Brockius LLP, explained that, overthe past year or so, the thinking about stewardship
responsibilities has expanded beyond just improving
corporate governance to embracing environmental
and social responsibilities. But, he added, the adoptionof a stewardship code by investors appears to have hadvery limited impact on advancing ESG objectives.
The framework for the ESG goals envisioned in the
stewardship code is “just not working” he explained.
One problem, he stated, is that some companies
are criticized for greenwashing—conveying a misleading or false impression about how their products orservices are environmentally sound.

What’s needed is the development of a consensus listof ESG metrics—relevant not just to shareholders, but toemployees, suppliers, and service providers—that canbe used to measure progress toward those goals, Wells
said. “We cannot expect Japanese corporate managers,
investment managers, or financial intermediaries
to take action on ESG objectives if no agreed metrics
exist whereby to measure their success.”
Government leadership is needed to help achievethis, Wells added. “Only government action can ensurethat investors will receive this information in a consistent format—one in which they can compare apples
to apples when making their investment decisions.”

What If?
Nicholas Smith, the Japan strategist for CLSA Securities,
used a series of charts to talk about what could happen
were Japan to take corporate governance seriously.
He said the recently released Toshiba investigation
report “totally changed” the governance landscapein Japan. “Activists have been handed a powerful new
weapon. A lawyer-mandated investigation is clearly
every bit as powerful as US discovery.”A major reason the Japanese government has
focused attention on corporate governance in recent
years is that Japan’s ¥1.6 trillion Government Pension
Investment Fund has shifted out of low-yielding bonds
into stocks, Smith said. This move required three things:
 Investors trusting company numbers
 Companies generating an economic rate of return
 Companies sharing those returns with investors

Value of Diversity
Five-year returns on invested capital for companies with and without non-Japanese board memberswith non-Japanese

without non-Japanese

9%
8%
7%
6%
5%
4%
3%
2%
1%
0%

Core-30

Large-70

Mid-400
Source: CLSA, Bloomberg

THE ACCJ JOURNAL • VOL. 58 • NO. 6

The pandemic had helped hasten the adoption of ESG principles at many
companies and prompted more attention to be focused on climate change.

According to Smith, “This is what corporate
governance is about. It’s not about being a goody twoshoes. It’s about not pillaging granny’s pension pot.”
Next, he highlighted how 2021 is shaping up to
be a big year for share buybacks, which have alreadyreached three-quarters of last year’s total. Still, halfof Japanese stocks are trading below book value, hesaid, suggesting “real potential in activism as governance issues are ironed out.”
Back in 1995, some 96 percent of companies held
their annual meetings on the same day. While that figure has fallen to about a quarter, 82 percent of meetings
continue to be held during the same week. This is still“unacceptably atrocious—a deliberate and transparent
attempt to make it hard for the owners of these companies to attend the AGM,” Smith noted. And despite thepandemic, most companies are not permitting virtual
attendance. Fifty-eight percent don’t permit electronic
voting platforms and 55 percent don’t give English
documentation, he added. “You couldn’t make this up.
It’s almost as if they don’t want their investors to vote.”
The number of activist events in Japan had “exploded”
in recent years, Smith stated, with Japan last year being
the second-largest global market for activism after theUnited States.

Thematic Engagements
The forum then heard from three actively engaged managers, beginning with Paras Anand, chief investment
officer for Asia–Pacific at FIL, who talked about how
active managers are reshaping Japan’s corporate sector.
Anand, who spoke from Singapore, said that one key
indicator of change is that five years ago, whenever his
team would meet with company leaders, discussions
about financial performance would have been separate
from any talk of climate or social issues—or those
topics would have been squeezed in at the very end.
Now, “those two meetings are becoming much more
integrated,” he said.
FIL has also held more “thematic engagements”
with companies on single issues, Anand explained, suchas trying to help address the plight of 400,000 strandedseafarers who operate the huge shipping vessels thatcarry much of the world’s cargo. These crew members
are usually not allowed to disembark for a break or
to see their families, meaning they are kind of stuckonboard “floating prisons.”
FIL has worked with shipping companies, airlines,
and non-governmental organizations to spotlight theissue and, together with a coalition of investors, wrote
a letter to the United Nations outlining measures theyfelt would alleviate this problem.
Anand said a smart way to amplify your voting
rights as an active investor is to lay out your voting
policy ahead of time—including what might be some
red line issues—to show people how you’re going tovote. FIL has, for example, adopted new policies on
climate change and gender-balanced boards that lookat how companies are doing on those scores.
In Japan, FIL has adopted a new campaign for gender diversity which ask all investee companies to achievea level of 30 percent by 2030 for three indicators:

Paras Anand
Chief investment officer
for Asia–PacificFidelity International Ltd.

 Percentage of women on the board of directors
 Ratio of women in management positions
 Percentage of all employees who are female

Long View
The second active investor, Symphony Financial
Partners founder and CEO David Baran, was interviewed by Alicia Ogawa, director of the Project on
Japanese Corporate Governance and Stewardshipat Columbia University’s Business School, in a video
shot just prior to the forum.
Asked about how he engages Japanese companies,
Baran said there are plenty of very good Japanesecompanies trading at depressed prices. So, rather thangetting confrontational with poorly run business, hetries to take a constructive approach. “Isn’t it easier tobuy good companies that are trading at deep discounts
and help the share price go up?”Japanese companies aren’t broken, Baran noted,
it’s the market that’s broken. “The function of themarket as a battleground for discovering value [isbroken] and the pricing doesn’t work,” he explained.
Changes that activist investors and corporate
governance reforms seek will take time, and habitual
practices are hard to break. Japanese companies areoften faulted for sitting on too much cash, but Baran
pointed out that this is the result of the administrative
guidance the enterprises received from the government after the asset bubble of the 1980s burst.
Changing business culture takes time—particularly
in Japan. “I think the fuse was lit, it’s just a very longfuse for a lot of these things,” Baran said. “You’re notjust dumping a set of rules on the table. You’re saying,‘Here’s the change in culture. Now you’ve got to learn
to adapt to it; decide how you’re going to adopt it.’”

Alicia Ogawa
Director
Project on JapaneseCorporate GovernanceColumbia University

David Baran
Chief executive officer
Symphony Financial
Partners (Singapore)
Pte. Ltd.

Seth Fischer
Chief investment officer
Oasis Management
Company, Ltd.

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13

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Growth of Activist Funds
Over a five-year period, Japan has seen a five-fold increase.
US and European

Asian

15

Domestic

45
40
35
30
25
20
15
10
5
0

2014

2015

2016

2017

2018

2019

2020

Source: CLSA, IR JapanThe number of activist events in Japan had “exploded” in recent years …
with Japan last year being the second-largest global market for activism
after the United States.
“Companies are living things,” Baran reminded attendees.
His team meets with company leadership seven to 10 times a year,
and often they are talking about the same topics. “When you
leave, they’re like, ‘OK, now I need to absorb that.’ Your conversation does not stop when you walk out of the room.”
You need to take the long view in Japan, but change can accelerate once consensus is reached. “Nothing happens quickly—
until it does,” Baran said. “You’re waiting and waiting and waiting… and then the next day you go from zero to 100 miles per hourin execution.”

Positive Response
The third active investor was Seth Fischer, founder and chief
investment officer at Hong Kong-based Oasis Capital Management.
He highlighted how shareholder activism during last year’s AGM
season reached new heights as measured by the number of companies receiving shareholder proposals and the number of proposals
submitted by funds, as well as the number of candidates proposedby directors.
In a whirlwind of slides, Fischer gave numerous specific examples of his fund’s engagement with several companies. At last year’s
Mitsubishi Logistics AGM, Oasis urged the company to implementa buyback of five percent of its shares, and the company respondedwith a 5.8-percent buyback.

Oasis also proposed electing outside directors and abolishing
the komon system—under which former presidents, chairs, and top
executives stay on as senior advisors—a practice seen by many as ahindrance to innovation. The company abolished two komon posts.
Oasis has also been active in Tokyo Dome Corporation, whichowns the home stadium of the Yomiuri Giants baseball team. A
year-and-a-half ago, Oasis came forward with an asset-improvement
plan that went through a “long and quite public engagement with thecompany,” Fischer explained. At an extraordinary general meeting,Oasis proposed removing three board members, two of whom had
held their posts for at least 15 years. Tokyo Dome was taken privateby Mitsui Fudosan Co., Ltd. and Yomiuri for a 45-percent premium,and Fischer said, “Our business plans are being fully implemented.”
This year, Oasis plans to submit proposals at the AGM ofTenma Corporation, a plastics manufacturer that has struggledwith governance issues following a bribery scandal at one of its
Vietnam subsidiaries. The incident has spurred a battle for control
between two of the founding families, distracting the company
from its main business operations. Fischer’s firm is proposing thatthree directors be elected to help unify the business “and improvegovernance at the company.”
Wrapping up the forum, Packard said a key takeaway from thediverse views shared was that, if “activism is viewed constructively
and done properly, it can receive the support of management.” n

THE ACCJ JOURNAL • VOL. 58 • NO. 6

EVENT

By C Bryan JonesMY
LEADERSHIP
JOURNEY

ACCJ -KANSAI CEO SERIES:GE’S ERIKO ASAI SHARES HOW TO STAYRESILIENT DURING UNCERTAIN TIMES

17

S

ince 2015, the American Chamber of Commerce in Japan(ACCJ) Kansai chapter has hosted the CEO Series, an annual
collection of speaker events featuring top executives fromleading companies. The sessions are very popular due totheir intimate and insightful nature, and the glimpses they
offer into the lives of successful leaders. Attendees leave inspired andwith actionable advice to help them improve their work lives, while
the candid discussion is especially valuable for young professionals
starting to build their careers.
On May 19, Eriko Asai, president of GE Japan and ACCJ chair, spokeat an event co-hosted by the ACCJ-Kansai Business Programs Committee and Diversity & Inclusion Committee. She revealed what she hadlearned on her way to becoming GE Japan’s first female president.
“Today, I’m going to share with you my leadership journey and someof the challenges I’ve experienced over the years that helped me develop my leadership skills and keep myself resilient during uncertain
times,” she said.
The landscape has changed significantly since Asai took the helm of
GE Japan in January 2018, and the company currently is undergoingits biggest business transformation of the past 128 years. “One of themost important jobs, as a leader, is to drive the cultural transformation and make a difference,” she noted.

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18

ENERGY TRANSITIONPRECISION HEALTH

FUTURE OF FLIGHT

GE is working with governments around the world toimplement rules and regulations that harness innovation
while ensuring a sustainable future.
Milestones
Asai opened her presentation with a slide labeled “Leadership
Journey” on which she charted the major events in her life andcareer, beginning with her birth in the UK.
More than just a visual representation of education andjob changes, the chart tells a story that Asai believes has greatvalue. “I highly recommend that you write your journey like this,because it helps you reflect on who you are, your strengths andweaknesses, why you think about something a certain way, what
you care about, what has been consistent in your career journey,
and where you want to be in the future,” she explained.
One thing that this writing exercise brings to the forefront isself-awareness which, Asai said, is such an important part of theleadership journey. Noting that her rise to company president
was a zigzag, not linear, she outlined her career progression andthe skills she learned along the way—a particularly valuable wayof looking at professional development and staying the course.
“It’s very important to be intentional about your journey,according to your life stage,” she explained, breaking down thephases of career progression by age: Twenties: challenge yourself
 Thirties: work–life balance and expertise Forties: leadership Fifties: investing in the next generation

THE ACCJ JOURNAL • VOL. 58 • NO. 6

When she moved to Japan at age three, to Australia at age
nine, and then returned to Japan two years later—all due to herfather’s work with a trading company—Asai learned three key
skills that would help her become a leader: Survival
 Listening Adapting to change
Two more skills were added when she chose to study at a UK
university, before going to work for Sony Europe in Germany—
despite speaking no German: Being the minority
 Communication
When she began a series of transitions in her thirties—shifting first to government affairs with Microsoft Corporation, then to
healthcare with GE Healthcare, during which time she also served
as director of the American Medical Devices and Diagnostics
Manufacturers’ Association, later expanding her role to energy
and finally becoming president of GE Japan in her late forties—
she added two more key traits:
 Self-confidence ResilienceNow that she is president, she has taken on roles
that help her invest in the next generation. This includes
serving as chair of the ACCJ. And, while she leverages
her experience to help others grow, she finds herself
also refining skills such as: Developing people Building teams
 Crisis management“I have lived in many places, in five countries, andhave always been a minority in those societies—so I
know how it feels when your voice is not heard, howpainful it is to be left out with no means to respond,”
she said. “Although I didn’t know the word ‘inclusive’
when I was very young, I came to understand what
inclusive leadership looks like through my experiencesin the early part of life. I’m sure many of you have had
similar experiences. It’s very good to reflect on thoseand think about how you can apply what you learned
earlier in life to your workplace today.”As she noted, her path has zigzagged, so it isimportant to remember that you can learn at any
time. “Leadership is all about acquiring skills at
any point in your life. If you didn’t have a particularexperience—for example, a chance to live abroad—earlier in your life, you can always do something
different in your current life and practice adapting
to the change.”

Once everyone had become accustomed to thenew procedures and workstyle, she handed overrelated responsibilities to the business leaders, whothen managed their units and teams on their own.

19

Strategy and Policy
Expanding on GE’s business transformation, Asai
highlighted the importance of focus.
“GE has a 128-year history, but we have reallychanged our portfolio over the past couple of years,”
she explained. “We used to have businesses such as
capital, plastics, and even media. But we have divested
ourselves of most of the non-core businesses and now
are focusing on infrastructure. The three areas of thestrategy are:
 Energy transition
 Precision health Future of flight
In terms of policy, GE is working with governments
around the world to implement rules and regulations
that harness innovation while ensuring a sustainable
future. Three key policy areas are:
 Decarbonization
 Decoupling Digital transformation

Pandemic Leadership
Next, Asai talked about the current situation and the need for leaders and teams towork together when dealing with a crisis
such as the coronavirus pandemic.
“This is a moment when leadership really matters,” she said. “We need to prepare
for the worst-case scenario and make surethat people understand the guidelines wehave put in place. This takes self-awarenessand imagination.”
She said that, in such situations, it isimportant to follow up with employees
who may be feeling left out, or who find it
difficult to talk with a manager. “We need
to be creative about supporting them inmaking the work-from-home experience
comfortable.”At the start of the pandemic, Asai setup the national crisis management teamfor GE Japan, to help it cope with Covid-19
and the potential disruptions to business operations.
By working together, helping everyone understandthe risks and importance of establishing and following
safety guidelines, and listening to employee concerns
so that they might feel comfortable and adapt, GE Japan
was able to continue being productive and secure.

Asai (front center) at the 2019 ACCJ-Kansai Leadership Series. She closed thefive-part series on April 18 with a presentation about inclusive leadership.

Listen to this story:
accj.or.jp/sound

THE ACCJ JOURNAL • VOL. 58 • NO. 6

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GE’s three leadership behaviors for successact withlead withdeliver

humilitytransparency

with focus

Highlighting the last of these, she reminded attendees that“the ACCJ just released the Japan Digital Agenda 2030 report,
which provides comprehensive guidance as to how Japan should
leap from here, given that the government is focusing on establishing a digital ministry and there are a lot of changes to come.
It’s an important time for the ACCJ to be putting forth a positionon this, and we are also doing so at GE.”

Building a Culture of Success“To make this business transformation, one of the most important jobs as a leader is to drive the cultural change,” Asai said,
explaining that, at GE, 50 percent of a team member’s review
score is based on performance and 50 percent on leadershipbehaviors, of which the company has three: Act with humility Lead with transparency
 Deliver with focus“When we talk about acting with humility, it sounds obvious. But it’s also surprising that we are talking about it at thispoint in GE’s long history,” she said. “We are very proud of ourtechnology, but because we are so proud, we have become a little
bit arrogant. So, the questions are: How can we become more
humble? How do we behave with humility? What does humility
look like? We need to discuss and debate this as a team.”
She added that humility is a very important starting point
for leadership behavior. “If you think something is wrong, you
should say so. We have to be open to this. It has to be a culture of
welcoming feedback and acknowledging mistakes.”
Transparency, she explained, goes hand in hand with humility,
because without transparency, people will not raise issues and you
cannot solve problems. The worst-case scenario for a company is
not having the bad things reported up to management level.
“Trust is the base of this transparency,” she said. “And thisalso goes for leaders sharing bad news with the team in a timely
fashion, because, without leaders exercising transparency, theteam will not have the courage to share bad news themselves. It
goes both ways.”

Delivering with focus relates to our ability to manage thedemands of modern life, where it is easy to become distracted or
be drawn into doing a task that is not the highest priority.
“In a world where we have so much work to do, we reallyneed focus and speed. And being able to focus on the mostimportant thing is a continuous challenge,” she said. “It is about
ruthless prioritization and practice, and I am continually struggling to do that myself. Priorities are so important.”

Takeaways
In closing, Asai recapped five points that she believes can lead toa successful and rewarding career—one in which you might also
zigzag your way to the top: Leadership is about continuous learning Focus on building trust
 Embrace awareness and imagination
 Be mindful of how you use time
 Take control of your life and have fun!
“We live in an uncertain world, so constant change is thenorm,” she said. “We are never going to be perfect, so we need
to be humble and learn from others. The good news is that you
don’t have to be perfect, and you don’t have to know everything,because there’s no way to know everything.”
Building trust, Asai noted, takes time. But “speed of trust,”
as she calls it, is very important because when there is trust you
can get work done faster.
Being mindful of how you use time also is critical, she said.
“In my case, I need to spend about 20 percent of my time reflecting and really thinking deeply, without meetings, and 10 percent
or more on people development, talking to people—especially
young talent who have points of view to share—and spendingtime with them outside my work.
“And, obviously, sleep and exercise—all the things that keep
you healthy—must be tended to, so it’s very important to carveout time in your schedule for that,” she added in closing. “Making sure you are healthy is, in the end, bringing a healthy spirit
to work every day.” n

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21

COMMUNITY

Investing in
Kochi Prefecture

22

How three expat families are making a difference in rural JapanF

or most, investing brings to mind index funds,
real estate investment trusts, or property. But
what about investing in the growth of your local
community via beer, tourism, or fitness? In Kochi, on
the island of Shikoku, three families are looking beyond
plain profit as they seek to revitalize and secure thefuture of their communities in unexpected ways.

Presented inpartnership withFitness Fans
Violet and Carlo Pacileo decided to move to Otoyo tohelp Violet’s mother restore the family’s land. But theenterprising duo decided they could do more.
“Aging populations, businesses dying out, houses
being abandoned … these are issues all of Japan’s ruralcommunities are facing. But
seeing the impact firsthandin Otoyo was heartbreaking,”
Violet explained.
Having spent her career
analyzing businesses andinvestment potential, Violet
quickly understood that thecommunity needed an injection of private capital. “After
years working for large
financial institutions, thisis my chance to give back to
the community.”

THE ACCJ JOURNAL • VOL. 58 • NO. 6

The Pacileos recently received approval to startbuilding a CrossFit box, in other words a barebones
gym. While the idea is unconventional, they have done
their research. “Shikoku doesn’t have a box yet andthe weightlifting association in Kochi told us there are
only two facilities where they can drop weights—andboth are in public high schools,” Violet said. “I knew
then that there would be a market, and that we had
to get in while the fitness industry here is still in its
infancy.” She expects their new business not only tobring fitness-loving visitors to Otoyo, but also to help
improve health issues in the community.

Beer Brewers
Former California residents Kenneth and Masako Mukai
moved to Niyodogawa-cho to start a brewery, which
opened in November 2020. Although this may seeman odd thing to do in a village of 5,000 people, theBlue Brew Taproom is already a hit.
Kenneth explained that the brewery is having
multiple positive effects on the local economy. “Ourlocal post office gets more business from us shipping
our products, and the local government receives
tax funds from people buying our beer through thefurusato nozei program. Sales at restaurants and hotels
around us have gotten a boost, as our customers often
stay nearby.”23

Learn more about Kochi:
visitkochijapan.com/en

The Mukais buy locally produced items such as tea,ginger, and Satsuma-imo (sweet potatoes), which they
use as flavoring, and collaborate with six farmers togrow hops, creating a new market in the community.
They have many supporters among the owners of
established businesses in the area, and their positive
example has also brought about changes in the village
government’s perception of investment from outside.
“The chiiki-okoshi kyoryoku-tai program used to beclosed to non-Japanese applicants, but, in April, thefirst American member was accepted and moved
here with his family!” Kenneth said.

Hospitality Queen and Organic Farmer
Australian Rosie Moloney and her husband, Tsuyoshi,
live in the 1,481-person village of Mihara. They know
well the importance of leading by example and engaging with the community.
“When I first presented my plan to start a guesthouse, many locals asked, ‘Who would want to comehere?!’” Rosie explained. “People can’t see the valueof what they have, and it can take someone from outside to open their eyes and show them the opportunities outside the infamous box.”

Clearly, her guests agree. Rosie now runs twohighly rated guesthouses in the Shimanto area, while
also engaging in perma­culture and helping with Tsuyoshi’s organic rice fields.
“I see such beauty, value, and potential here,”
she said. “I started guesthouses to encourage thetourism industry and create new job opportunities.”
Many of Rosie’s guests—Japanese and those fromabroad—stay for several days and contribute to the village economy through visits to restaurants and shops,
as well as by booking outdoor activities. According
to her, “Guests often say that the fondest memories of
their trip are [those of] interacting with locals.” nListen to this story:
accj.or.jp/sound

THE ACCJ JOURNAL • VOL. 58 • NO. 6

24

EVENT

By C Bryan Jones

Are Minpaku a
New Asset Class?

How short-term rentals can bring personal, financial, and cultural rewards

THE ACCJ JOURNAL • VOL. 58 • NO. 6

25

Although inbound tourism has been put on holdas the world grapples with Covid-19, Japan was
a top destination prior to the pandemic and no
doubt will be again. While there long have been plentyof places for visitors to stay—Yamanashi Prefecture ishome to the world’s oldest operational hotel, Nishiyama
Onsen Keiunkan, which was founded in 705 ad—a newmarket has been emerging in recent years. Driven by
the Japanese government’s focus on tourism as part ofits recovery efforts following the global financial crisisof 2008, minpaku (short-term rentals) have become abig opportunity for investors and real estate owners.
On July 1, the American Chamber of Commerce inJapan Alternative Investment Committee welcomed
Tracey Northcott, chief executive officer of Tokyo Family
Stays G.K. and Tracey Northcott Consulting, to talkabout her experience as one of Tokyo’s most successful
minpaku hosts and how she grew Tokyo Family Stays
into a seven-figure business. She also discussed theecosystem of services and operating models that provide
business opportunities, as well as how hosts can makethemselves a valued part of the community by collaborating with neighbors and local business.

Starting Point
While there are plenty of midrange business hotels inJapan, these are not ideal for many leisure travelers as
they are neither family nor tourist friendly. They canalso be difficult to book if you do not speak Japanese.
Minpaku, in contrast, are family friendly, budget
friendly, and can easily be booked online in English.
Northcott, an Australia native who has lived inJapan for 21 years, began her minpaku journey in 2011
with a single unit. Four years later, she had 25. She
was able to take advantage of a surge in visitors toJapan that followed the easing of visa restrictions in
2013—a development to which major hotels were slow
to respond, because of the planning and construction
required for such large-scale facilities and the need tomaximize their return on investment (ROI).
“The tourists were going to places where thecost of land is very high, such as Tokyo and Osaka,”
she said. “When a hotel is built, the company reallywants to maximize their ROI, which means theywant to put a five-star hotel on the land. So, youdidn’t really see a lot of the smaller chains then thatyou might see now.”
As an example, she noted how companies such as
Best Western operate a range of brands and hotel types,
from luxury to economy, thus serving the needs not
only of executives traveling on business, but also families on vacation. This is common in the United States,
but not in Japan.

“There was a massive hole in the infrastructure. But
for minpaku hosts, because they use existing buildings,
there is a very low barrier to entry, and there was an
absolute boom in minpaku growth from 2013 onwards,”
she explained.
During her presentation, Northcott highlighted
three points that helped that quick growth:
Tracey Northcott
Chief executive officer
Tokyo Family Stays G.K.
and Tracey Northcott
Consulting Lack of regulations
 Plenty of available real estate Decades of flat rental prices“It was a no-brainer for people to do exactly what
I was doing—to set up a second or third apartment
for rental and then list them on the [online lodging]
platforms,” she added.

Backlash and Legal Turns
As more people seized this seemingly easy way tomake money, the popularity of Airbnb in Japan tookoff. In fact, the country became the platform’s secondlargest and fastest-growing market after the UnitedStates. But as Airbnb grew—particularly between
2015 and 2018—there was a backlash from local communities and businesses. Northcott highlighted six
reasons for this:Learn more about
Northcott’s businesses:
tracey-northcott.com

 Big increase in tourism, but with little improvement to infrastructure Popular tourist locations becoming saturated by
non-Japanese Disruptions to neighborhoods and residents’
usual lifestyles
 Some Airbnb hosts and their guests acting
poorly or unprofessionally Press reports and TV shows doing gotcha pieces
 Airbnb’s failure to educate the domestic market
These and other concerns led to a poor image ofthe minpaku industry among the general public andresulted in a push for regulation.
“It was hard when you were a professional host,and you really were proud of what you were doing,but there were some people out there who were giving
us all a bad name,” she recalled.
Perhaps in a majority of cases, minpaku listings
were in violation of local statutes. But this doesn’tmean they were illegal, as rules for this form of lodging had not been defined. There were a lot of grayareas. Public sentiment against hosts, however, wasdefinitely building.
Initially, minpaku fell under the rules and regulations of the Inns and Hotel Business Act, which was

Listen to this story:
accj.or.jp/sound

THE ACCJ JOURNAL • VOL. 58 • NO. 6

26

Dining at home is an experience travelers simply cannot have in traditional
hotel settings. Shown here is Northcott’s “Pencil House” property in Shinjuku.

enacted in 1948 to govern the operation of hotels andthree other forms of lodging: minshuku (Japanese-style
bed and breakfasts), ryokan (traditional Japanese inns),
and youth hostels. Minpaku, Northcott explained, is amodern evolution of the minshuku tradition. Changes
were needed to keep up with the evolving market,
and in March 2016 the Diet passed the minpaku law,formally known as the Private Lodging Business Act.
A big drop in the number of listings accompanied
the implementation of the law on June 15, 2018, with
Airbnb removing about 80 percent of listings on June
4. In the blink of an eye, the number of available options dropped from 62,000 to 13,800. But this purge,
and the clearer rules introduced by the government,
led to an increase in the quality of hospitality andallowed the market to mature. Professional hosts andproperty managers were better able to take advantage
of opportunities to build their businesses.
“The people who were just trying to make a buckdecided they were going to move on to something alittle bit easier,” Northcott said. “That allowed themarket to mature, and for professional hosts to reallydig into their hospitality style, and to do some market
segmentation and outside marketing—all the things
that go into a professional business.”“A hotel is really an accommodation product; it’s a bed, it’s where you stay,and then all your experience is outside the house. A minpaku is a really ahospitality and experience product.”With the Wild West days of minpaku gone, owners
must now get a license to rent out a property for shortterm stays. The terms and conditions for approvals
are strict, while additional fire and safety certification is required. Information about guests must also
be reported to the local hokenjo (public health center)every two months. This includes nationalities, dates
and length of stay, and the tracking of guests’ movement around the city or country. This health requirement is not specifically tied to Covid-19. It was alreadyin place for hotels as part of the 1948 law.
While the Private Lodging Business Act provides
a framework for the operation of short-term rentals,
the regulations vary by location. Bookings are limited
to stays of 28 days or less—for a total of 180 days per
year per facility—but what days are allowed depends
on the city or neighborhood. In Tokyo’s Minato Ward,for example, you can only rent on weekends or school
holidays. Toshima Ward, in contrast, is rather flexible.
And areas that have strong hotel lobbies mostly havebeen able to keep minpaku out.
Kitchens such as the one in Tokyo Family Stays’ Honmachi Cottage allow
guests to truly experience what everyday cooking is like for a local.

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Building SuccessOnce you have your license, what comes next? How do
you create a successful business? Some people worry
that they might be seen as a pariah in the community.
A lot of animosity was shown toward hosts in the years
leading up to the minpaku law, and the memory is still
fresh for many. But by creating alliances with neighbors
and local small businesses, minpaku operators canbecome valued partners in the community.
The key, Northcott said, is to be transparent inwhat you are doing from Day 1. Especially in rural areas,
if you get to know the officials and explain what you aredoing, they are generally ready to help, as they see thebenefits to the area. They understand that minpaku can
inject significant revenue into the community.
This is related to a minpaku myth that Northcottdispelled during her presentation.
“People, when they start up their business, seemto think that the nightly rate is the only opportunity
they have to make money, and discounting is the only
marketing strategy they’ve got,” she explained. “But discounting is a bit of a blunt instrument. People who are
new to the industry try to use it as a marketing tool, but
that’s a race to the bottom. You’re going to get bad guests
and you’re not going to have a successful business.”
The better choice is identifying the pain points ofyour ideal guest to create additional revenue streams.
Northcott said she can earn 20–30 percent more overher nightly rate by addressing the needs of guests during their stay. This personal touch includes arranging
packages for events such as micro-weddings, anniversaries, honeymoons, and birthdays. Helping create amemorable and special stay is a great way to increase
revenue while maintaining a high-quality experiencefor guests.
And affiliate agreements with third-party service
providers, such as restaurants and cafés, private chefs,
cultural classes, tour companies, and ticket vendors
are another great way to boost your profits while also
providing benefit to the local business community.
This approach also allows you to provide guests
with an authentic local experience. Many people whobook minpaku accommodations want to know what
it is like to live in another country. This is an area inwhich the more personal nature of minpaku excels
compared with hotel offerings.
“A hotel is really an accommodation product; it’sa bed, it’s where you stay, and then all your experienceis outside the house,” Northcott said. “A minpaku isa really a hospitality and experience product. I don’t
offer cheap accommodation—that’s not my product.
I’m very clear about this in all my marketing. I offer
inbound tourists a local experience, and with thatthey get a whole bunch of information about what it’s
like to live in another country, and all the community
responsibilities that come along with it.”
Of course, this all takes time and hard work.
Northcott noted that minpaku is a full-service hospital-

ity business, so if you’re looking for passive income, it
may not be for you. Success requires:27

 Having great communication systems and logistics
 Educating guests on community responsibility
 Handholding throughout the guest experience Having a 24/7 response system, with redundancies

Beyond the Pandemic
While no one can predict when we will emerge of theongoing states of emergency, and when Japan will
reopen its borders to inbound travelers, Northcott isbullish on a strong recovery.
“Beyond 2021, revenge travel is going to be athing, there’s going to be an exceptional amount ofpent up-demand,” she said. “I know a lot of people inother countries who’ve got their credit card in hand
and their fingers hovering over the keyboard. As soon as
they can book a flight and the borders are open, they arecoming. I don’t think demand is going to be a problem.
The tourist marketing machine has already started.”

The Honmachi Cottage living space. Northcott rents the property for ¥11,000–18,500
per night, or ¥34,500 for special events.

If you’ve got an entrepreneurial spirit and are looking to invest in something that can be both financiallyand culturally rewarding, the road ahead looks brightfor minpaku.
“It’s a modern evolution of the minshuku tradition,”
Northcott reiterated in conclusion. “If you do it right,
you have complete control over your profitability andthe sustainability of your business.”
While Airbnb may be a name that most people
recognize in connection with short-term rentals,
Northcott sees them merely as one possible marketing channel, not the only one—and certainly notyour identity. You get to build your own brand andyou set the course.
“Minpaku allows you to create a unique local
experience that lets you have a business of your own
that can bring in additional monetization options.” nLearn more about
Tokyo Family Stays:
tokyofamilystays.com

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TECH

By Tim Romero

Investing in
Smart Agriculture

28

Japan startup Sagri is transforming family farming with AIA
Tim Romero
Head of Google
Startups Japan
Host of the podcast
Disrupting Japan

rtificial intelligence (AI) gets a lot of attention
these days, but its application to farming is
not often in the spotlight.
Recently, I had the opportunity to talk with Shunsuke
Tsuboi, chief executive officer of Sagri Co., Ltd., whichuses AI, machine learning, and mapping technologies
to solve social problems.
On my podcast, Disrupting Japan, Tsuboi and I
discussed the challenges that agricultural technology(agtech) startups in Japan face when it comes to funding, as well as the benefits of their technology.

Taking Root

Listen to this episodeof Disrupting Japan:
disruptingjapan.com

Sagri was founded in June 2018 and uses satellite imaging and data to analyze farmland. The technology scans
areas of up to 10 hectares in size, making it particularly
suited to Japan, where farms are generally small. The
data can be accessed using a smartphone app, and thegoal is to help farmers better understand the conditionof their soil and identify the best time for harvesting.
The idea for the company took shape in a laboratory
at Yokohama National University, where Tsuboi is a mechanical engineering graduate student. His lab is using
space-based technology to examine soil, and he and hisbusiness partners have been able to apply some of thisto their platform, which shares the name of the company.

Applications

Listen to this story:
accj.or.jp/soundIf you’ve walked around the Japanese countryside,
you’ve probably seen small plots of abandoned farmland. Sometimes these even intermingle with residences in neighborhoods not far outside the capital.
Whether farmland is in use or abandoned makesa difference from a tax perspective, so the government
manually checks the status of land each year. The AI
behind Sagri’s analysis can determine with 90-percent
accuracy whether a field is abandoned, drastically reducing the amount of work required of government staff.
Apart from taxation, the government is also interested in identifying farmland that can be revitalized.
Satellite data that provides soil analysis can makethat process easier.
Tsuboi noted that a big reason for the abandonmentis that the farmers are getting older and are unable tomaintain the land. One benefit of the Sagri platform isthat machines can receive the data analysis and automatically perform tasks such as applying fertilizer.

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Beyond Japan
Agtech is an area in which Japan has a great opportunity
to be a world leader, and Sagri is putting its technology
to work in India, where there are also many small farms.
But getting the financing needed to keep operations going can be difficult. Sagri believes it has a solution.
“Many Indian farmers need loans, but they don’t
have the chance to get them,” Tsuboi said. Because there
are so many farmers, it is difficult for banks to spreadenough money around. To have a better chance of funding, farmers want to show banks that they are a goodinvestment, he explained. Banks cannot get that sortof information using present methods, but the satellite
data analysis provided by Sagri can allow them to checkthe farmland’s condition and potential yields.
Tsuboi sees Africa as the company’s next market,
noting potential in countries such as Kenya and Rwanda.
Areas of Southeast Asia are also within Sagri’s sights.

Funding
There are not many agtech startups in Japan, but it
seems that there should be. With lots of small farms,
lots of creative people working on agtech at universities,
and venture capitalists (VCs) with money to invest,
why don’t we see more?
Tsuboi feels one reason is that VCs and the government both see farmland as low-growth opportunities.
And attracting money from abroad, such as from
Silicon Valley VCs, is not easy because they are focusedon large-scale industrial farming. The farms on which
Sagri is focused in Japan and India are too small to
attract their interest.
But Sagri has had some success inside Japan, andannounced in June that they have secured ¥155 million($1.4 billion) in funding from a group led by Real
Tech Holdings Co., Ltd., who was joined by Minato
Capital Co., Ltd., Senshu Ikeda Capital Co., Ltd., andHiroshima Venture Capital Co., Ltd. Also participating is Bonds Investment Group Co., Ltd., whose
Hyogo Kobe Startup Fund, established in March, ismaking its first investment.
Sagri is a great example of a Japanese startup
that can assist people at home and also have a muchbigger impact—and earn a much bigger profit—
abroad. Globally, the company can help millions ofsmall family farms thrive, and they can bring great
returns for investors in the process. n

CHUBU

By Mark Hosang

Digital Transformationof Committees
Removing barriers and ensuring continuity through centralized techW

hen the American Chamber of Commercein Japan (ACCJ) kicked off the transformation of its website platform early lastyear, the process sparked a conversation among members of the Chubu chapter about what digital tools ourcommittee leaders need to succeed in bringing value
to members and address pain points.
Following ACCJ President Jenifer Rogers’s directive
to improve succession planning, the Chubu chapter reviewed the impediments that committees were facing.
The takeaway was that the committee chair usually
has all the documents, templates, and contact lists on
their computer, and no one else has access.
As Chubu Programs Committee Chair Ray Proper
explained, “I have years’ worth of information about
my committee activities on my own shared drive—for
my current and past committees—that I think would
be much more useful were it accessible to others aspart of a formal arrangement.”

Sudden Shift
Often in the past, without warning a committee member
may have had to move out of Japan for work. This madeit difficult for the remaining members to continue withthe committee’s activities. Similarly, if the chair had

Getting new committee members
up to speed becomes easier when
you can point them to a cloud
drive and they can review all thematerials and meeting minutes.
a sudden medical event or accident, the committee
would tread water until they could get back on track.
This meant that the bus factor—the minimum numberof people who can be hit by a bus before a project
comes to a stop—effectively has been one.
Lastly, for committee leaders, an ongoing issue has
been new member retention. Sometimes, a person joinsa committee, attends a meeting, then never attends
another. The feedback we have received from suchmembers to date is that it’s hard to get up to speed,
because they don’t know what has been discussed inprevious meetings, are unsure how they can contribute, and don’t know what tasks need to be carried out.

Centralizing
To address these issues, the Chubu chapter began piloting the use of cloud storage for the Chubu Walkathon.
This was then rolled out to the other committees.
Chubu Community Service Committee Chair Erin
Sakakibara shared how the move made a difference thisyear: “Thanks to cloud storage, we were able to organize
all our content and collaborate. It was particularly
valuable in providing a base and continuity to build
on in subsequent years of the Walkathon,” she said.
“But to be honest,” she added, “though technology
is the tool, it also takes human management. You needsomeone who is organizing files and providing guidance
for the team to get the full benefit of the technology.
We couldn’t have pulled off the Walkathon without
the cloud capability or our captain, who kept us organized and honest in our tasks.”
Having a cloud drive reduced the amount of management required on the part of the chair, as individual
members could update and share documents on which
they were working. This also eliminated the question ofwhether a document was the latest version—a crucial
timesaver for an event with 220 files, scattered among
more than 45 folders, being worked on by 20 people
over the course of six months.

Mark Hosang
ACCJ governor-Chubu

Ray Proper
Chair, ACCJ-Chubu
Programs Committee

Onboarding
Getting new committee members up to speed becomeseasier when you can point them to a cloud drive
and they can review all the materials and meeting
minutes. This helps them quickly get an idea of thecommittee’s activities, as well as how the group isorganized and managed.
The Chubu chapter has also created LINE groups
for each committee, allowing speedier communication while also making things more accessible to newmembers, increasing engagement by adding more
touch points.
For successor planning, cloud storage moves thebreadth of knowledge from the chair into a repositorythat all can reference. This can remove the barrier toentry for members and allow current chairs to step
down with minimum disruption.
The Chubu chapter will continue to look into othertechnologies to address issues as well as assist leadersand members, so that the chamber can provide morevalue to everyone involved. n

Erin Sakakibara
Chair, ACCJ-Chubu
Community Service
Committee

Listen to this story:
accj.or.jp/sound

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29

There are people living with illness,
people fighting pain.
And then there are people
who walk beside them, offering care.
Each with their own anxieties and worries,
they’ re feeling their way through the dark.
At AbbVie, we aspire to lighta beacon of hope in these lives.
Our diverse team has always been,
and continues to beunited in creating new medicinesand healthcare approaches
through world-class science,
working to seek new solutions for patients.
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AbbVie will work hand in hand with people
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Doing our part to serveand support our communities
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So that everyone in society
can live true to themselveswith a smile on their face.

Raising a smile
for tomorrow,
together.
AbbVie GK
3-1-21 Shibaura, Minato-ku
Tokyo 108-0023, Japan
https://www.abbvie.co.jp/

HEALTHCARE

By C Bryan Jones

Beyond the Pandemic
Digital health can guide the way for Japan’s post-virus evolution

As the ACCJ is dedicated to ensuring a vibrantenvironment for global business in Japan,
advocacy for improved health policy and initiatives is an important part of the chamber’s mission.
One reason that foreign companies choose to invest inJapan is the nation’s high-quality manufacturing andservices sectors, as well as its technological prowess
and innovative workforce. Maintaining the health ofthe population—beyond the immediate challenges of
Covid-19—is, therefore, critical to the future prosperity of
the country and the viability of its business environment.
Recognizing this, the ACCJ has worked with theInstitute for New Era Strategy (INES) to bring together
key leaders in business, government, and academia
to discuss the future shape of social security in Japan.
The results can be found in the Healthcare Committee
white paper Post Covid-19 Recommendations to Realizea Social Security System for All Generations.

Stronger Foundation
Our evolution as a data-based society has allowed us
to grasp the impact of Covid-19 in real time, and digital
tools have enabled the active cooperation of civil society
as the government works to mitigate the threat andlimit its damage. While this is an encouraging signthat bodes well for the future of Japanese society, thestate of Japan’s infrastructure has been inadequate
compared with other countries.
The ACCJ and INES provide ideas on how to build
a stronger infrastructure through post-Covid-19
recommendations on how to realize a social security
system for all generations, and to promote continued
innovation and application of technology that canhelp Japan provide for the needs of its people in a waythat is effective and fiscally sustainable.
The white paper discusses utilizing data technology, shifting financial resources to healthcare andretirement, and raising the health and financial literacyof society.
In terms of digital health and utilizing data technology, areas of focus include: Information usage rights
 Data collection
 Database integration
 Public–private collaboration
 Telehealth and virtual care
In the case of the last item, the Covid-19 pandemic
has thrust this need to the forefront. As most people

have been forced to stay home for extended periods,
quarantine, or limit visits to clinics and hospitals,
healthcare services at a distance has been the only
way for many patients and doctors to interact. Particularly those in high-risk categories due to preexisting conditions, and those living in rural areas, haverelied on telehealth services to minimize the risk ofinfection during the pandemic.

Stay the Course
One concern is that, once the coronavirus vaccine
rollout is complete and a majority of the population
has been inoculated, some digital initiatives thathave been embraced might fall by the wayside asJapan fully returns to normal routines.
One recommendation from the joint ACCJ–INES
team states: “It is essential to couple the support for
telehealth with support for digital prescriptions, andto enable pharmacies to offer home delivery of important medications, all while expanding the overall

C Bryan Jones
Publisher andeditor-in-chief

With Japan’s fiscal strains
exacerbated by thecoronavirus pandemic, now
is the time for the government
to tackle these challenges.
role of digital technologies in delivering care. These
measures will help support the aging population longafter Covid-19, and enable new approaches to triaging,screening, and following up, customizing the patient
experience, and improving the ability of doctors tomonitor and communicate with their patients.”
Doing this will require a change in mindset andpolicy. While many forms of digital data exist in Japan,
the individual’s consent is often not obtained at thetime of collection, making it impossible to utilize theinformation. Even if the data is in the government’s
possession, it is still difficult for it to be leveraged due
to privacy considerations.
But with Japan’s fiscal strains exacerbated by
the coronavirus, now is the time for the government
to tackle these challenges. Strong political will andleadership are required to face reality, make theright choices, and share with the public a vision for abetter future. And today’s digital tools and the powerof data are making this possible and opening a door
to a healthier, sustainable tomorrow. n

Listen to this story:
accj.or.jp/sound

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31

INVESTMENTS

By Jesper Koll

Staying Focused on
the Fundamentals

32

The keys to successful investment in Japan“I
Jesper Koll
Global ambassador
Monex Group Inc.

f you get the earnings right, you’ll get theinvestment right.” This was the advice given
to me by one of the greatest investors of alltime, Julian Robertson. He is the founder of thefamous Tiger Fund, which, throughout the 1990s,
battled with investment shark turned philanthropist
George Soros for the top position as the world’s biggest
and best-performing hedge fund manager. To be a
successful investor, cut out the noise and don’t get
distracted by smart-sounding stories or headlinegrabbing advice. Stay focused on the fundamentals.

Local Success
Applying this rule to Japan, the first questions wemust answer are:
 How does Japan, Inc. make money?
 Where do its earnings come from?
Importantly, the answer is “not from Japan.” Forcompanies listed on the Japanese stock markets, about
64 percent of corporate profits are created from global
sales and operations (i.e., exports or offshore production and sales). From a top-down macro perspective, a
successful investment in the Japanese stock market isfar more dependent on global economic fortunes thanon what goes on at home, in Japan.

In fact, Japan’s dependency on the world has goneup since the start of Abenomics in 2012. Ten years ago,
about 50 percent of profits came from global markets.
The rise from 50 to more than 60 percent is primarily
due to Japanese banks and financial firms. Over the
past decade, they have become more active overseas—
particularly in Asia.
It is a little-known fact that Japanese banks havebeen the largest provider of credit in non-China Asia
for three years running. At the same time, banks’domestic profit margins are being squeezed by the cap
on bond yields forced by the central bank. If interest
rates are not allowed to rise, banks cannot grow theirprofit margins. To get bullish on Japanese financials
in general—and banks in particular—we need to see
an end to the Bank of Japan’s current policy of yieldcurve control (i.e., allowing 10-year bond yields to rise).

Currency Sensitivity
and the Hedge Imperative
Further, Japan’s major dependence on the ups anddowns of the global economy makes Japanese profits
highly sensitive to the currency. When the yen rises,
overseas earnings translate into lower yen-based profits.
When the yen drops, the yen profits get a nice windfall.
Statistically, for every ¥10 of depreciation, Japanese
corporate earnings get a boost of about eight percent

Japan’s Dependency on the World
Since the start of Abenomics in 2012, the percentage of profits from global markets has grown.

50%

globalmarkets

50%

domestic
market2012

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60%

globalmarkets

40%

domestic
market2021

33

In my view, hedging thecurrency is imperative forbest performance if, like
Buffet, you measure yourreturns in US dollars.

(if the depreciation is sustained for six or more months).
In other words, the weaker the yen, the better Japan’s
corporate profits; and the better Japan’s corporate
earnings, the higher the stock market.
For global investors who calculate their returns in
US dollars, the combination of Japan’s high dependence
on global growth, and the inverse relationship between
the currency and Japanese earnings, dictates one veryclear piece of investment advice: always currency
hedge your yen equity positions. Chances are high that
yen-denominated Nikkei gains will translate into much
lower US-dollar gains because, basically, the Nikkei
only goes up during periods of yen depreciation anddollar strength.
Here we can learn from another master investor:
Warren Buffet. Last fall, when he famously initiatedhis first significant investment in Japanese stocks
in more than a decade, he did so on a fully currencyhedged basis. And it has paid off handsomely so far.
The yen value of his position is up 20–25 percent,despite the yen being down five to six percent. Without
the currency hedge, his performance would be onequarter to one-fifth less than it is with the currency
hedge. In my view, hedging the currency is imperative
for best performance if, like Buffet, you measure yourreturns in US dollars.

Leadership Matters
Of course, this is just the big-picture macro lesson
for anyone considering an equity investment in Japan.
From here, we’ll have to enter the exciting world ofstock-picking, of selecting companies that display
high potential for generating rising profits and superior returns.
I am not allowed to go into details and offer
advice, but I can leave you with one suggestion:
focus on the leader, the CEO. In the end, Japanese
corporate performance is dictated primarily by thequality, vision, and aggressiveness of the top-level
executives. After decades of misery, Sony Corporation turned itself around when the charismatic
Kazuo Hirai took over, and Hitachi Ltd. did so whensuperstar manager Hiroaki Nakanishi stepped in.
These are just two such success stories. While
Japan may well despise and not tolerate the superstar
CEO cult so essential to US corporate culture, thereality is that Japan’s consistent top performers andturnarounds can be traced back to an individual star
CEO and their leadership style. You won’t find theirnames in bright lights, in the papers and magazines, orat Davos, but they do exist. Finding them is half the
fun and a rewarding part of investing in Japan. n

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FINANCE

34

By Julian Ryall

ATTRACTING
GLOBALINVESTMENTIDEAS FOR MAKING JAPAN A TOP FINANCIAL CENTER

IDEAS FOR MAKING JAPANA TOP FINANCIAL CENTER

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35

Two recent papers produced by committees of
the American Chamber of Commerce in Japan(ACCJ) have highlighted the considerable
opportunities that would result from changes to regulations that currently hinder Japan’s financial sector
from attaining its full potential. And with the Japanese
government committed to raising Tokyo’s profile as
one of the world’s top financial centers, the committees are hopeful that regulatory authorities here mightembrace some of the proposals.
The Investment Management Committee publisheda viewpoint entitled Relax or Eliminate Unrelated andOnerous Regulatory Requirements for Marketing of
Offshore Funds to Professional Investors Conductedby Global Investment Managers, while the Financial
Services Forum released a white paper headlined
Reimagining Japan as a Global Financial Center, thelatter proposing changes that would drive the nation’s
long-term economic growth.

impacted by the health of that balance sheet, Nichols
pointed out.
“So, the reason the regulations are in force is that offshore funds have been classified as a security but do nothold the same dependency on the distributor’s balance
sheet as a normal security does, since the fund assets
are held by an independent custodian,” he explained,
describing the situation as “an unintended consequenceof regulations intended to protect investors.”
To correct the situation would require a root-andbranch revision of the 2006 Financial Instruments
and Exchange Act, which would be a major undertaking and would require an amendment approved by
the national Diet. Instead, the ACCJ is proposing someadministrative changes that the Financial Services
Agency can enact and “that would get us to materiallythe same place,” Nichols said.
Norihiko Tsukada, managing director and headof compliance at BlackRock Japan Co., Ltd. and vice-

David Nichols
Executive advisor
EY Strategy andConsulting Co., Ltd.
Chair
ACCJ Investment
Management
Committee

FAILURE TO SEIZE THIS OPPORTUNITY … COULD HAVE LASTINGNEGATIVE IMPLICATIONS — PARTICULARLY WITH TOKYO ANDSINGAPORE COMPETING TO ATTRACT COMPANIES THAT MIGHT
BE CONSIDERING LEAVING HONG KONG.
License to Sell
Japan’s financial regulations are designed to protect
investors, both retail and institutional, which is a“worthwhile goal” according to David Nichols, executive
advisor at EY Strategy and Consulting Co., Ltd. The typeof investment is determined by the definition of theinvestment and the sales license held by the distributor.
“The licenses entail certain responsibilities—some fiduciary and some customer best-interest,”
said Nichols, who also chairs the Investment Management Committee.
“While distributors do not have a fiduciary duty totheir clients, they are holding their customers’ security
purchases in firm accounts,” he added. “As such, thestate of the distributors’ balance sheets can impact theclient holdings. If the distributor goes bankrupt, clients
may have difficulty accessing their investments.” As aresult, the Type 1 license required by a distributor has
capital adequacy requirements to safeguard investors.
While offshore funds fall under the definitionof securities that can only be sold by distributors
with a Type 1 license, the fund assets are not part ofa distributor’s balance sheet and, therefore, are notchair of the Investment Management Committee,
identified “certain off-site monitoring items, including
daily calculations of capital ratios” as one regulationthat is unnecessarily obstructive, although he points
out that regulations in Japan are broadly equivalent tothose of other jurisdictions. In the United States, however, limitations are less of a concern, as the market
there is sufficiently large to make it economically feasible to package investments in US onshore vehicles.

Lost in Translation
Distributors in Japan also face administrative hurdles
and language requirements that make it more complicated to set up and run an asset management business.
That should be a concern since Tokyo has designs ona larger role in the global financial services market.
The committee has recommended that regulations
surrounding the offsite monitoring of investment
management companies (IMCs) should be relaxed, as
certain reporting items are not relevant to the activities of global IMCs, along with the initial registration
process for distributors of standard Type 1 Financial
Instruments Business (FIB).

Listen to this story:
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36

Tokyo must make itself more attractive than other regional centers such as Singapore and Hong Kong.

WITH THE COSTS OF MAINTAINING AN INVESTMENTMANAGEMENT BUSINESS HIGH IN JAPAN, IT WOULD BE A
BOON TO THE INDUSTRY IF OVERBURDENING REGULATORYREQUIREMENTS WERE REDUCED.
Aaron Lloyd
Director
Sompo JapanDC Securities
Vice-chair
ACCJ Investment
Management
Committee“Tailoring regulatory requirements to address relevant business risks will not impact client protection,”the paper emphasizes, adding that “such relaxationof regulatory requirements would improve the appealof Japan to foreign investment managers interested
in establishing a presence in Japan, and would beconsistent with the [government of Japan’s] objectives
to promote Tokyo as a global financial city.”
The solution, the committee suggests, would be
the creation of a new type of FIB, that might be calleda “solicitation-only” Type 1 FIB.

Seize the Moment
Derek Young
President & representative
director for JapanFIL Investments(Japan) Limited
Vice-chair
ACCJ Financial
Services Forum

Aaron Lloyd, director of Sompo Japan DC Securities
Inc., said the regulations are not new, “but you could
say that dissatisfaction has reached a tipping point,
as many foreign investment management companies
would like this regulation changed.”
Failure to seize this opportunity, he believes, may
have lasting negative implications—particularly with
Tokyo and Singapore competing to attract companies
that might be considering leaving Hong Kong as a resultof the Chinese government’s recent crackdowns in acity that, until now, has been the Asia–Pacific region’s
preeminent financial center.
“Japan should introduce changes,” Lloyd told
The ACCJ Journal. “The government should be making it easier for foreign asset managers to solicit theirfunds, not more difficult. With the costs of maintaining an investment management business high in Japan,
it would be a boon to the industry if overburdening
regulatory requirements were reduced.”

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Driving Disruptive Innovation
The Investment Management Committee’s aims have agood degree of crossover with those of the ACCJ Financial Services Forum, which is confident that Japan can
position itself as one of the leading financial gateways
for Asia, and prosper were the region to become theleader in global economic growth.
“Financial services firms ultimately help growcapital markets and the economy, which creates jobs
and a higher standard of living. They also help solve
the financial wellness challenges of institutional andretail investors’ clients in a way that creates confidence
and [encourages] participation in capital markets,”
said Derek Young, a Chartered Financial Analyst charterholder who is president and representative director
for Japan at FIL Investments (Japan) Limited.
Relative to its size and the diversity of its economy, at present Japan’s finance industry “punches far
below its weight,” according to Young, who also serves
as vice-chair of the ACCJ Financial Services Forumand is a member of Fidelity International’s Global
Operating Committee.
Introducing more competition in this sector also
helps to drive disruptive innovation in the pursuitof expanding Japan’s capital markets and helping
Japanese investors solve the challenges that they face,
Young added.
“Japan is the third-wealthiest country in the world,
and is a super-aging society,” he pointed out. “The needfor assets to last for longer and to provide income makes
Japan a prime target for financial services firms thatwant to help solve that challenge.”

37

Further
Reading
Roadmap
The Financial Services Forum has drawn up an extensive list of recommendations for the Japanese government that can be distilled into six main areas:

Download the white paper to learn more about
the FSF’s recommendations:accj.or.jp/financial-services-white-paper-access Make it easier to live and work in Japan, as well as toenter and return Improve governance, transparency, and stewardship Address the need for more specialized professionals
 Broaden market participation for individual investors Address shortcomings in selected financial regulations
 Facilitate development of key financial infrastructure functions
In conclusion, the report states that, “Japan possesses the necessary attributes to achieve this goal: a highly
educated and motivated population, a diverse and large
economy and corporate base to support it, high levels oftechnological development and adoption, and a stable
political environment underpinned by commitment to
the rule of law.”
Critically, however, what has been missing to dateis a coordinated commitment, across the governmentand corporate sectors, to address legacy structural
shortcomings that are impeding the development of afinancial center that leads rather than follows. On its
current trajectory, Japan is likely to fall further behindnimbler centers.
“Many of the issues needing attention are challenging to address,” the report concludes. “Nevertheless,developing a more robust financial ecosystem in Japandemands that policymakers take up this challenge witha sense of urgency and determination. Doing so not only
would establish Japanese leadership in global finance,
but also make a vital contribution to Japan’s long-term
economic growth.”
And Young is optimistic that change is in the air.
“One of the most encouraging facets of this white
paper exercise was meeting with prominent Japanese
government officials about the findings,” he said. “It’sclear that there is existing momentum to change thebusiness environment in Japan, [and] to make it morefriendly to foreign investors.
“Change is not easy—especially in a tradition-richcountry such as Japan—but we met with very little
resistance in a general sense and, instead, were greetedwith a friendly acknowledgment that Japan is thinking about ways to improve its positioning as a global
financial center.” n

Download the Investment Management Committee’s
viewpoint to learn more about Type 1 FIBs:
accj.or.jp/s/210610-Type-1-FIB-v3.pdf

THE ACCJ JOURNAL • VOL. 58 • NO. 6

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TAXATION

By Takehiko Hara

Covid-related
Financial Relief

39

What tax liabilities come with coronavirus help?

As relief from economic and financial distresscaused by the coronavirus pandemic, you may
have received subsidies or grants from thenational and/or their local government. You may bewondering if you must declare this assistance on yourincome tax return. Here is a summary of tax treatment
and revenue recognition timing published by the
National Tax Agency of Japan.

Non-Taxable
 Payments received from the support fund set
up in response to the new coronavirus (article 7of the temporary special provisions of employment insurance
 Funds received from the allowance set up to support leave taken in response to the new coronavirus(article 7 of the temporary special provisions of
the employment insurance law) Special Fixed Amount Cash Payout (tentative name)of ¥100,000 per household member (article 4,paragraph 1 of the special measures concerning
taxation regarding the coronavirus)
 Special Cash Payout for Families with Children inYear 2020 (article 4, paragraph 2 of the act regarding coronavirus-related special taxation measures) Emergency handouts to help support students(Article 9, Paragraph 1, Item 15 of the Income Tax Act

TaxablePresented inpartnership with

Treated as business revenue. Based on: Payment decisions
Covid-19 subsidies (for those who are selfemployed and sole proprietors)
Tokyo Metropolis Infection Spread Prevention
Support Fund
 Payment decision or expense incurment regarding:
Employment adjustment subsidies
Elementary school closure support
Rent support
Sustaining subsidies for small businesses
Business continuity subsidies for agriculture,
forestry, and fishing enterprises
Subsidies for medical institutions and pharmacies helping to prevent coronavirus spread Expenses incurred in connection with:
Relief provided under the coronavirus-related
supplementary aid to offset interest payments

Here is a summary of tax
treatment and revenue
recognition timing.
www.grantthornton.jp/en

Treated as Occasional Income
Occasional income (revenue–expenses, maximum¥500,000 special deduction). Based on revenue
recognition timing.

 Temporary Special Cash Payout for Low Income,Single-Parent Households (Article 9, Paragraph 1,
Item 17 of the Income Tax Act) Covid-19 subsidies (for employment income earners)

 Provider Relief Fund related to the coronavirus(Article 9, Paragraph 1, Item 17 of the Income Tax Act)At end of travel or on use of coupon tickets
 Go To Eat Campaign

 Discount coupons provided as Support for Usersof Company-Sponsored Babysitters (Article 9,
Paragraph 1, Item 17 of the Income Tax Act) Subsidy under the Babysitter Support Projectof Tokyo (Article 9, Paragraph 1, Item 17 of the
Income Tax Act)

Takehiko Hara
is a director at
Grant Thornton Japan’s
Global Mobility Service,providing tax solutions to
global mobile employees,
global businesses, andhigh-net-worth individuals with overseas assets.

For more information,please contact Grant Thornton
Japan at info@jp.gt.com.

Payment decision
 Go To Travel Campaign

On use of meal tickets
 Go To Event Campaign
On use of event tickets

Treated as Miscellaneous Income
Based on revenue recognition timing.
 Covid-19 subsidy (for miscellaneous income earners)
Payment decision n

Listen to this story:
accj.or.jp/sound

THE ACCJ JOURNAL • VOL. 58 • NO. 6

40

INVESTING

By C Bryan JonesOUTSIDEOPTIONS
WAYS TO INVEST AS AN EXPAT IN JAPANTHE ACCJ JOURNAL • VOL. 58 • NO. 6

41

O

ver the course of their career, many professionals will live and work in multiple countries.
And as expats, they will find financial opportunities and face challenges that those who stay put
in their home country may not. Making and managing
investments can be complex, but experts interviewed
by The ACCJ Journal shared ways to maximize resources, grow wealth, and navigate potentially higher taxes,
investment restrictions, and language issues.

Alternatives to Consider“The world of product opportunity for Asian alternatives has dramatically expanded over the past 10 years,
and investors can now make lump-sum investments
across a variety of single-purpose venture, hedge, andprivate-equity vehicles,” explained Edward Rogers,
chief executive and chief investment officer at Rogers
Investment Advisors.

There are a number of possible paths to follow for
expat investors. “Many expats are investing in both
onshore and offshore structures—in places such as the
Cayman Islands and British Virgin Islands—that provide access to a full range of hedge-fund, private-equity,
real-estate, and long-only options,” he said.
Argentum Wealth Management’s Martin Zotta,
who shares the title of managing director and CEO
with co-founder Lloyd Danon, said that many expats“tend to invest in a combination of monthly automatedand ad-hoc lump-sum investments.” Monthly options,
he noted, put excess savings from each paycheck towork, while lump sums are suitable for investing existing cash holdings and performance bonuses.
And Timothy Gregersen, head of cross-bordertransactions, investment sales for Japan at Cushman& Wakefield K.K. cited multiple options in real estatethat can help expats build their portfolio.

Onshore/Offshore
One of the biggest concerns when choosing to invest
is the tax burden that may be incurred. “Historically,
the single biggest investment was probably offshore
wooden housing structures that provided dramaticJapanese tax relief, but this option has been closed out
by the Japanese government,” said Rogers, who founded
his firm, in part, out of a desire to implement the Yale
Model of endowment for his personal family investments. His first focus was to provide retail access toJapanese—and then broadly Asian—alternative investments, with an entry point of $100,000 per investment.
Often, the required minimum would be $1 million.

VOL. 58
58 • NO. 6
THE
THEACCJACCJJOURNAL
JOURNAL •• VOL.

While offshore was once a top choice, it is getting
harder and harder, he said, with the new approach toanti-money laundering (AML) and know-your-customer (KYC) processes making basic retail banking—forindividuals as well as small and medium-sized enterprises—very difficult. “Banks make less and less money
serving these clients, and are offering them commensurately fewer and fewer services, with the excuse thatAML and KYC have created barriers to relationships,”
he explained.
With offshore being less attractive, Rogers identified two onshore options that can bring significant
tax benefits:

42

 Buying or leasing aircraft Angel zeisei

Lloyd DanonManaging director
and CEO
Argentum WealthManagement

Martin Zotta
Managing director
and CEO
Argentum WealthManagement

The latter is an incentivized Japanese investment
tax system, mainly aimed at individuals, that allows investors to deduct the higher of ¥10 million or 20 percentof their income.
Taking advantage of newer financial institutions
can also be beneficial.
“Online banking is most likely the single mostimportant concept for expats on an individual basis,”
Rogers explained. “And as small business owners, it
is easier to understand and to do so quickly. Large,
traditional brick-and-mortar banks charge absurdsums to execute electronic transfers.” These costs
should be understood and compared versus online
options, he said. “Online wins pretty much every time.”

Property Profits
For those looking to invest in real estate, Cushman &Wakefield’s Gregersen said there are a few ways an
expat can access real estate investments, dependingon their overall financial objectives and level of risk
tolerance. “The easiest option, executionwise, would
be to access real estate via listed real estate investment trusts, or REITs” he explained. “This can beaccomplished with a relatively small amount to start,
and can easily be added to or divested.”
Investment in direct assets, such as a condo unit
or an apartment building, is an alternative path that
Gregersen suggested. “This typically involves a larger
ticket price, the use of leverage, and transaction costs.
Real assets are lumpy—and generally less liquid thanlisted options—so they should be carefully considered.”Another possibility that has recently taken shape
via crowdfunding platforms is a hybrid of these two.
“This could work for those who are looking for investments that aren’t correlated with the stock market
and which don’t require as much capital as direct
investments,” he said.
If one decides to go the direct investment route,a major obstacle for an expat will be securing financing, according to Gregersen. “Unless the expat haspermanent residency, it can be very difficult to source
financing at good terms,” he said. “It’s not impossible,
but it will be quite challenging.”
He cited two matters that are likely to be moredifficult for expats than for Japanese nationals:
 Transferring funds to close the deal Property, income, and withholding taxes“Closing a real estate transaction involves transferring large sums of money, so it is important to confirm
your bank’s policies and procedures in advance,” hesaid. “Further, if the expat intends to use funds fromoverseas, it is even more important to confirm withthe bank to which the funds are being transferredTHERE ARE A FEW WAYS AN
EXPAT CAN ACCESS REAL ESTATEINVESTMENTS, DEPENDING ON
THEIR OVERALL FINANCIALOBJECTIVES AND LEVELOF RISK TOLERANCE.

what policies and procedures they have with respect
to international remittances. Funds can get stuck intransit, and figuring out where they are and why thishas happened is not a fun experience.”
Property owners whose primary residence is nolonger in Japan will face logistical challenges, he added.
“They will need to appoint a tax administrator to handle
the payment of annual property taxes and to file income
tax documents, in the case of investment property. Further, where owners live overseas and rental income is tobe remitted, the funds will be subject to withholding tax
at the source. This is also true in the case of a sale.”Portability Is Vital
Some expats have settled in Japan and have made thecountry their permanent home. But for most, theirtime here will be limited, and the decision to pick up
and move is outside their control. A promotion or shift
in corporate priorities can lead to a sudden relocation.
“In general, expats are looking for portable,
flexible solutions as regards access to capital and tax
efficiency,” explained Argentum’s Zotta, noting that
there is a wide range of international options available
to expats, depending on their nationality and financial requirements. “Portability is vital, as most clients
will not remain in Japan long term. A good solution
for one client may not be suitable for another, so it
is essential to clearly understand a client’s financial
goals and objectives before presenting the most appropriate solution.”
Argentum specializes in international investment
solutions and, for US nationals, US onshore solutions.
“We take a holistic approach to financial advice
and our clients’ needs, and prepare recommendations
to suit their individual situations,” explained Danon.
“During a first meeting, we go through a general Q&A
to understand. in detail, what will be the most appropriate choice. We have a broad range of solutions to meetthe needs of all clients, and being locally licensed inJapan to offer advice gives us a comprehensive range
of options.”

43

Language Barrier
Japan is well known for its paperwork, and more
often than not documents are only in Japanese. Even
if an English translation is available, ultimately theJapanese version will need to be completed and filed.
Doing so can be challenging even for expats who are
fluent in Japanese, as the language of such transactions is complex.
“One key way for expats to deal with the language
barrier is to work with a bilingual agent on the purchase, and a bilingual property manager on an ongoingbasis,” said Gregersen.
Rogers gave the same advice, saying that investors
should learn Japanese, but also noting that simply
speaking and reading the language is not enough. “Thereality is that investors should be prepared—and willing to pay for—high-quality translations of documents
to make sure they know what they are investing in.”

Edward Rogers
Chief executive officer
Chief investment officer
Rogers Investment
Advisors

Long View
Danon noted that those who intend to live in Japanfor the long term should take special precautions.
“You should prepare for your parents’ and your own
estate planning needs, as Japan has an unusual wayof treating and taxing estates between heirs,” heexplained. “Estate planning is something our clients
have reached out to us a lot more about recently, given
Covid-19 concerns and restrictions on movement. Unfortunately, many expats are underprepared—or are
generally unaware—of how Japanese inheritance tax
laws will affect them and their immediate families.”
Rogers was more blunt. When asked what advice hehas for expats planning to retire in Japan, he answeredwith one word: don’t. “There is no way you want to deal
with Japanese inheritance taxes if you don’t have to.”But for those who do want to settle down in Japan,
and wish to put their money to work, there are many
investment opportunities to be had. Leveraging theexpertise of the foreign community through legal,financial, and advisory services, however, is a key partof successfully investing as an expat. n

Timothy Gregersen
Head of cross-bordertransactions, investment
sales for Japan
Cushman & Wakefield K.K.

Listen to this story:
accj.or.jp/sound

THE ACCJ JOURNAL • VOL. 58 • NO. 6

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BOOK REVIEW

By Keith Kirkham

Of One Blood
All Nations

45

John Bingham: Ohio Congressman’s Diplomatic Career in Meiji Japan (1873–1885)

I

often pass by a wall on which hang portraits of
the US Ambassadors to Japan in chronologicalorder. I am drawn to it because I have known a few
of them. By comparing the portraits, one can trace
the evolution of photography and fashion through thecenturies. As the calendar rolls back into the 19th century, the image quality declines until it becomes clearthat the portrait is a grainy copy. One of the earliest
and most recognizable portraits is of John Bingham,
US minister to Japan from 1873 to 1885, the subject of
Sam Kidder’s latest book Of One Blood All Nations.

Diplomatic Difference
There is ample scholarship around
Meiji-period Japan and the UnitedStates, and Kidder’s biography ofBingham contributes significantly tothat body. But it also goes further. He
makes a persuasive case that “John
Bingham did more to shape America’s
initial diplomatic relationship withJapan than any other American.”A leading figure in post-Civil War
Reconstruction, Bingham was an
Ohio Congressman and one of theprosecutors in the Lincoln assassination case. He was author of the
14th Amendment to the Constitution, which provides equal protection under the law.
Without question, Bingham had an accomplishedlife before coming ashore in Yokohama. As Kidder’sbook details, Bingham’s innate decency, sense of duty,
and energy led him to build the framework of the twonations’ diplomatic relationship while overcoming
obstacles in nearly every direction.
The author shows the perplexing diplomatic andpolitical knots that bound key issues surrounding thebilateral relationship, and how Bingham untied them.
His hard-won success elevated the United States’ rela­tion­ship with Japan from among its ties to other nations.
Bingham inherited a poorly housed and staffed US
mission, with far-flung and nearly frontier consulates
and incoherent administration. By management talentand diplomatic skill, he left behind an effective missionthat was well networked with Japanese officials, influential, and trusted. His personal integrity and example
played a key role in the rise of US prestige in Japan.

Context Matters
Diplomacy is sometimes more a prism than a window,
and Bingham’s experience in Congress helped him
measure what he could do to advance the bilateralrelationship against the United States’ political realities and mood of the time.
To this part of the biography, Kidder brings truly
impressive work tracing Bingham’s family, faith, andpolitical connections to provide the context for, andlimits of, Bingham’s personal political power. Bingham
drew on his contacts for trusted advice, to staff key
positions with competence, and for
personal support.
Distinct from biographies byothers, Of One Blood All Nations
displays the author’s understanding of Bingham’s faith as the compassof his behavior and decisions. This
is insightful and important. Other
historians sometimes default to religious caricatures or shorthand about“beliefs of that period.” Kidder accepts
Bingham as he was: an industrious
but reserved man whose abundant
intellect was yoked with an equal
weight of modesty. Bingham’s personal diligence, dislike of ostentation,and his integrity distinguished himfrom other foreign diplomats of the time.
This diplomatic biography is an entertaining read.
Bingham contends with many of the same issues—andcharacter types—encountered in modern diplomacy
and expatriate life: managing, or suffering as a resultof, lags in communication with the capital; judging
between when an immediate decision is required andwhen to wait; and bridging misperceptions as the only
person with a foot in each world.
Bingham is not an unknown historical figure but,until now, rarely has his period in Japan been explored.
As the book’s conclusion explains, Bingham’s papers
and family were scattered, which makes Kidder’s work
even more impressive. Faced with these challenges,
another writer might have filled in the blanks with
speculation. But Kidder set himself the more difficult
task of understanding the subject in context. He does
not embellish Bingham’s portrait, but restores it so thatits long-lost detail and color emerge. n

Keith Kirkham
former seniorcommercial officer
Embassy of theUnited States, TokyoSam Kidder
former ACCJ
executive director(2006–14)

Get a print or digital copyof the book from Amazon.

Listen to this story:
accj.or.jp/sound

THE ACCJ JOURNAL • VOL. 58 • NO. 6

Corporate Sustaining
Member Companies
The ACCJ thanks these organizations for their extensive participation, which provides a cornerstone in the chamber’s efforts topromote a better business climate in Japan. Information as of July 14, 2021.

PRESIDENT’S CIRCLE

3M Japan Limited

EY Japan

Naigai Industries, Inc.

Abbott Laboratories/Abbott Japan LLC

Facebook Japan

Nippon Boehringer Ingelheim Co., Ltd.

AbbVieFederal Express Japan Godo Kaisha

Northrop Grumman Japan

Adobe KK

Freshfields Bruckhaus Deringer Tokyo

NTT

Aflac

GE Japan

Oak Lawn Marketing, Inc.

AIG Companies in Japan

Gensler and Associates/International, Ltd.

Oshidori-MGA Japan K.K.

Amazon Japan G.K.

Gilead Sciences K.K.

P&G Japan G.K.

Amway Japan G.K.

Goldman Sachs Japan Co., Ltd.

Pattern Energy Group Inc.

AstraZeneca K.K.

GR Japan K.K.

Pfizer Japan Inc.

Asurion Japan Holdings G.K.

Hard Rock Japan LLC

Prudential Financial, Inc.

Bank of America

HiltonPwC Japan

Bayer Yakuhin, Ltd.

IBM Japan, Ltd.

Qualcomm Japan LLC

Bloomberg L.P.

IHG ANA Hotels Group Japan

Randstad K.K.

Boeing Japan K.K.

IQVIA

Robert Walters Japan K.K.

Bristol-Myers Squibb K.K.

Johnson & Johnson Family of Companies

salesforce.com Co., Ltd.

Brookfield Asset Management

KPMG

Squire Patton Boggs

Carlyle Japan LLC

Kraft Heinz Japan

State Street

Caterpillar

Lenovo Japan Ltd.

Stryker Japan K.K.

Chevron International Gas Inc. Japan Branch

Lockheed Martin

Uber Japan Co., Ltd.

Citigroup

Mastercard Japan K.K.

Visa Worldwide (Japan) Co., Ltd.

Coca-Cola (Japan) Co., Ltd.

McKinsey & Company, Inc. Japan

Walmart Japan/Seiyu

Cummins Japan Ltd.

MetLife

The Walt Disney Company (Japan) Ltd.

Deloitte Touche Tohmatsu LLC

Microsoft Japan Co., Ltd.

Western Digital Japan

Delta Air Lines, Inc.

Mitsuuroko Group Holdings Co., Ltd.

White & Case LLP

Discovery Japan, Inc.

Morgan, Lewis, & Bockius LLP

Zimmer Biomet G.K.

ELC Japan K.K.

Morgan Stanley Japan Holdings Co., Ltd.

en world JapanMSD K.K.

Want to join the American Chamber of Commerce in Japan?
We offer membership programs for entrepreneurs, executives, individuals, and companies of all sizes—
from small and medium-sized enterprise to multinational companies.
For details, visit accj.or.jp/join-us.

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