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C h a i r m a n ' sVol.36

2024.8.30

C o l u m n

Hiring from a Blue Ocean ofPotential Talent
As the hotly contested Paris Olympic Games haveconcluded, we hope you are doing well.
Japan, particularly Tokyo has had subtropical-liketemperatures. On my recent trip to Singapore, I heard areport on local TV that temperatures are rising in major
cities around the world. Tokyo’s highest temperature
this year was 37℃, with Dubai at 41℃ as one of the fewcities with temperature that was higher. I remember
when 30℃ was considered a hot day. I wonder why thishas happened. Other countries may mock that this isdue to Japan’s high use of fossil fuels.
Today, I will discuss the topic of recruiting. You may
be familiar that most companies are struggling withrecruiting because of the labor shortage. Our firm is noexception. We have also faced the challenge ofrecruiting before Covid. Other accounting firms haveeven begun TV commercials. Tokyo, the place of ourhead office has a population of 14 million, but eventhen, we have difficulty attracting new hires.
With HR’s suggestion, we began hiring foreign-born
employees (or in Japanese, “valuable humanresources”). Of course, making English the common
office language would not be practical, so weinterviewed foreign-born candidates that speak
Japanese. As a result, 10 new hires, mainly in their 20s
began working for us since last October. They are
primarily from Asian countries and speak Japanese,
English, and their native language.

Traditionally, each department separately provided
on-the-job training for individual hires. However, with a
big group of new hires, this would be inefficient. We
began highly focused 3-month group training sessions
with the cooperation of HR and other departments.
After the end of 3 months, our new hires were placed inseparate departments. Of course, most new hires do
not have prior accounting or fund administration
experience. But, since many of these employees cameto Japan with a strong intent to learn, I am impressed bytheir ambition to work and learn. They often ask a lot ofquestions.
Although their Japanese can be rather vague, which
presents some challenges in their work, theirenthusiasm is something that catches my eye. We haveemployed this new model for recruiting which hasresulted in 25 total foreign-born employees. We callthem “global hires”. The true results of this recruiting
model will be seen later, but with this new approach inrecruiting, we feel that we have tapped into a blueocean. To continue providing sustainable services, wewill take good care in nurturing the skills of these new
global hires.

by Kazuhiro Matsuzawa, Chairman

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J a p a nVol.36

2024.8.30

N e w sThe Dynamics of Population
Real estate market trends tend to be discussed in amacro perspective, but since real estate is fixed on aparticular land, the micro perspective is just asimportant.
It’s well-known that population is a big factor in
economic activities and impacts consumer demand,productivity, economic growth, and tax revenue. It also
directly and indirectly affects real estate sales andleasing.
From a macro perspective, Japan’s population
declined by 860,000 in 2023. It’s hard to find the silver
lining, since the equivalent of Fukui or Saga prefecture’s
entire population was eliminated in just one year.
However, the trends from a micro perspective are quite
intriguing.
Someprefecturesarenoticeablygrowing/declining in population for various reasons.
I have summarized some of the interesting analysis
reported by the Nisseki's Research Institute’s Kanako
Amano, entitled:【Regional revitalization and Population Data Report】
2023 Prefectural Ranking by Net Move-ins - “Availabilityof jobs in the area” determining winners and losers.
• Tokyo is the runaway leader in population influx
After Covid had temporarily halted the one-sided
concentration of people in Tokyo, 2023 resumed with asudden influx of 1.8 times the prior year. Coming in at a
distant second place is Kanagawa. Tokyo’s one-sided
concentration in population is expected to continue.
• The key to population inflow is the presence ofwomen
Net move-ins for number one ranked Tokyo had 1.2times the number of women versus men. #4 ranked
Osaka had 2.7 times, and #5 ranked Chiba had only

women that had a net move-in. There is a correlation
between the inflow of women and an increase inpopulation. Meanwhile, “Areas of Population decline”
such as the #1 ranked net move-out of Hiroshima and#2 ranked Aichi have succeeded in increasing men, but
not with women. Prefectures such as Miyagi, Ibaraki,
Yamanashi, and Nagano are among those areas ofpopulation decline that are pronounced in the small
number of move-ins by women.
• Job transfers are big factor in move-outs
Of those moving into net move-in areas, 60% are in
their early 20s, moving for a job. The number of women
moving-in outnumber men by 1.3 times. One of theprimary reasons for move-outs was thought to be 18year-olds attending university, but in fact work transfersfor 20-year-olds (post trade school), 22-year-olds (postuniversity), and 24-year-olds (post graduate program)are a bigger factor.
The conclusion is that the key to become a “winningarea” in terms of population may be to provide
attractive workplaces for women.
For those interested, I recommend that you read Ms.
Amano’s report (link in footer 1).

by Shigeru Hirai, Fund Services Division
1 Nisseki's Research Institute report (in Japanese)
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U . S .

Inflation is slowing down
July employment figures show a slowdown of non-farmjobs growth (+114,000) and average wages (overall+3.6% YOY) with an uptick in unemployment rate (4.3%).
Core CPI has been steadily falling (+3.2% YOY). The Core
PCE Price Index also is inching closer to the Fed’s targetof 2% (2.6% in June).
U.S. 10-year Treasury yields have been coming down,
as well, with the Fed expected to bring down theinterest rate by year end.
30-year fixed rate mortgage rates are slowly coming
down from historic highs (6.47% as of August 7), but still
very high.

Core PCE Price Index by month2024.8.30

N e w sInflation slows down further, butReal estate transaction volume isstill lowNon-farm payroll increase by month

Vol.36

Real Estate and Private Equity
Mortgage rates still highWith mortgage rates still being at high levels, manypotential homebuyers are priced out. Even with the ratecut(s), inventory levels are still low, and home prices are
not expected to come down quickly.
Real estate investments
Commercial real estate deal volume has significantly
slowed in 2024, due to high interest rates putting
downward pressure on property values. Even with an
expected rate cut, many office and other commercial
building owners aren’t expecting a strong rebound indemand, particularly for obsolete buildings. Distressed
properties are on the rise.
MSCI reported that foreclosures and seizures of offices,apartments, and other commercial property portfolios
rose 13% from the first quarter. The highest quarterly
figure since 2015.
Private Equity
Private equity deal volume thus far in 2024 hasremained low, due to factors including a valuation gap
between sellers and buyers. Sellers are continuing to
wait-and-see whether performance/valuation will
improve, as well as on the Fed’s expected rate cuts.
Some deals are taking place as carve-outs and takeprivates. Private equity-backed real estate deals globallyare down significantly compared to prior year.

With three remaining meetings for the year, the Fedcontinues to be cautious of prematurely lowering theinterest rate. For many investors, high financing costs
and changed market dynamics present significant
challenges in the short-term.

by Yuichi Totani, Fund Services Division

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T a xVol.36

2024.8.30

U p d a t e

Recognizing the Transfer Date of anAsset
In this volume, we examine the timing in recognizing
fixed asset transfers from a tax perspective. In general,the point of transfer of an asset is at the time of delivery.
However, many people may think that the effective
date of the sales agreement may be used.
There are in fact circulars (Income Tax Circular 36-12,
Corporation Tax Circular 2-1-14, Consumption Tax Basic
9-1-13) that allow the contract effective date to be thetransfer date of the asset. However, caution must beexercised since these are solely supplementaryprovisions.
Particularly for consumption tax, there is a precedentthat denied the contract effective date as the transfer
date of the fixed asset. On March 14, 2019, the Tokyo
District Court (No. 142 (line 3) of 2017) denied anannual tax refund filing for a company that purchased
property in a fiscal period and recognized the contracteffective date as the transfer date of the taxable asset(building), although the delivery of the building was
made in the subsequent fiscal period.
Let us take a closer look at the provision in theconsumption tax circular:

Excluding any other provisions, the transfer date of thefixed asset shall be the date of delivery. However, forfixed assets that are land, buildings, and similar assets, if
the business recognizes the contract effective date as
the transfer date, this is accepted.
The court interpretation with regards to the above
precedent was that the provision in the circular statesthat when the contract effective date is recognized as
the transfer date, if there is evidence that proves thatsame date is when rights are vested, that same datemerely confirms the allowance as the transfer date.
Additionally, rights are only vested after registration
procedures for the real estate sales transfer, and when
profits from use of the real estate become possible.
Ultimately, the delivery date is deemed as the transfer
date of the fixed asset.
As this example demonstrates, there are tax
provisions that may lead to misinterpretation. In
practice, it is important to accurately understandtransaction details and to carefully make decisions
based not only on basic understanding of tax law, but on
court precedents as well.

by Yasuhiro Ando, Knowledge Management Office

Copyright(c)2024 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

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F r o mt h eVol.36

2024.8.30

E d i t o r

The saying goes, “Management prepares for rainydays.” Another phrase commonly used is “For thoseprepared, there is no sadness.” This is especially
important for management.
On the afternoon of August 8, there was an intensity 6
level earthquake in Miyagi. We express our heartfelt
prayers to families affected. With this earthquake, theJapan Meteorological Agency issued a warning about apotential Nankai Trough earthquake. Many people
seemed to promptly make preparations in case of adisaster. A century ago, the Great Kanto earthquake wasa magnitude 7.9, while the Nankai Trough earthquake is
expected to be up to magnitude 9.1. In terms of energylevel, it is roughly 32 times.
At the time, Eiichi Shibusawa was a prominent figurein Tokyo’s recovery after the Great Kanto Earthquake
and now featured on the new 10,000-yen bill. Eiichi
Shibusawa’s biggest regret was not being aware toforesee that the earthquake would spark fire right afteras well. We too, should be aware of making thenecessary preparations in case of a natural disaster. It’stime we execute on the saying, “For those prepared,
there is no sadness.”by Jun Murata, Editor-in-chiefCopyright(c)2024 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.