JOURNAL
THE AMERICAN CHAMBER OF COMMERCE IN JAPAN

Volume 58 • Number 8 • ¥1,000

THE VOICE OF GLOBAL BUSINESS IN JAPANForeign Direct
Investment
POLICY

FDI

M&A

How entry restrictions have impacted
business and education

Japan FDI set to pick up pace after Covid-19,
despite major challenges

The true nature of inward FDI and how
to improve it

Lost Chance

Steps to Recovery

Japan as 196th

EMBASSYECONOMYHEALTHCARE

New embassy role focuses on technology
leadership and collaboration

Jesper Koll on why national security muststrengthen, not close, Japan Inc.

Covid-19, mRNA, and government andprivate sector roles in healthcare

RTO Diplomacy

Misplaced Pressure

The Power to Innovate

PRESIDENT

Jenifer Rogers

5

Asurion Japan Holdings G.K.
CHAIR

Stepping Backinto Reality

6

At last, one foot on the other side of
the pandemic

Eriko Asai
GE Japan
TREASURER

PUBLISHER

11

Ryann Thomas
PwC Tax JapanMEMBER

Spectrumof Benefits

2021 State of
the Chamber

A look back at a year of challenges aswell as great progress and success
12

Former AIG chief Robert Noddin shares
what the ACCJ has meant to him

VICE PRESIDENTSPRESIDENT

EVENT

From HR Leader toBusiness Leader

Stryker Japan chief explains why passion
is key to a fulfilling career

Yoko Furuyama (Kansai) P&G Japan G.K.
Deborah Hayden Finsbury Glover Hering
Amy Jackson Johnson & Johnson Family of Companies
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.
Victor Osumi Delta Air Lines, Inc.
Frank Packard Synnovate Capital Partners
William J. Swinton Temple University, Japan Campus

24

Simone Thomsen (Kansai) Eli Lilly Japan K.K.

Steps to Recovery

Megumi Tsukamoto Caterpillar Japan LLC
SPECIAL ADVISOR

Japan FDI set to pick up pace after Covid-19,
despite major challenges

Christopher J. LaFleur
McLarty Associates
PRESIDENTS EMERITI

Debbie Howard (2004–05)
Charles D. Lake II (2006–07)

16

Allan D. Smith (2008)
Thomas W. Whitson (2009–10)

CHAIRMAN EMERITUS

20

Cosmo Public Relations Corporation
ACCJ EXECUTIVE STAFF

22

Christopher Bryan Jones
Publisher and Editor-in-Chief

Masonic 39 MT Bldg. 10F, 2-4-5 Azabudai

IN MEMORIAM

Unsung Hero:Dr. Tatsuya Kondo
ECONOMYMisplaced
Pressure

34

Minato-ku, Tokyo, Japan 106-0041
Tel: 03-3433-5381 n Fax: 03-3433-8454 n www.accj.or.jp

M&A

Japan
as 196th

The true nature of inward FDI and how to
improve it
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.

45

M&A

CPA
and 4IR

What accountants need to know to thrive
during the Fourth Industrial Revolution

EMBASSY

RTO
Diplomacy

New embassy role focuses on technology
leadership and collaboration
21

HEALTHCAREThe Power
to Innovate

Covid-19, mRNA, and government andprivate sector roles in healthcare
30

POLICY

Lost
ChanceHow entry restrictions have impacted
business and education

National security must strengthen, notclose, Japan Inc.

To advertise or subscribe: comms@accj.or.jp
The American Chamber of Commerce in Japan

18

Remembering the former PMDA chiefand how he changed medicine in Japan

Laura Younger
Executive Director
THE ACCJ JOURNAL

No-Show
Charity Ball

Annual ACCJ gala offers a chance to givethrough virtual raffle and auction

Michael J. Alfant (2011–12)

Kumi Sato

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It’s a New World
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PUBLISHER

By C Bryan Jones

Stepping Backinto Reality

5

At last, one foot on the other side of the pandemicM

ost members of the American Chamber ofCommerce in Japan (ACCJ) will agree thata greatly missed part of business life overthe past two years has been meeting fellow professionals in person. I know that, as a writer and editor,and successful online event that, having raised ¥7.4
million, actually exceeded the funds raised at 2019’s
traditional evening.
This year, the Charity Ball will take the form ofan online auction and raffle, running December 1–11.

covering the chamber’s events is a highlight of putting together each issue of The ACCJ Journal. It’s beena long road through the pandemic but, thankfully,
the ACCJ is once again hosting in-person sessions.
The number of these events is limited, but it iswonderful to see that opportunities for networking
in the physical world are returning.
What’s even more exciting to me is that these
events include a virtual component—and one that
goes beyond the typical online meeting. The hybrid
experience will allow the flexibility that we have enjoyed during the pandemic to remain. This will make

Many wonderful items will be up for grabs, including
a large collection of artwork by ACCJ-Kansai member
Royi Akavia and six other artists, as well as private
musical performances by Rambling Steve Gardnerand Felix Sonnyboy.
Many companies have stepped up to back thisvery important fundraising event, which supports the
ACCJ Community Service Fund. And one thing thatthe past two years have shown us is that keeping thatfund healthy is a must, because you never know when
the community is going to need our help to overcome
unexpected circumstances.
We have a preview of the Charity Ball starting on
page 16, so please take a look and find out how you canhelp the chamber continue to take care of the community that supports our businesses.

It’s been a long road throughthe pandemic but, thankfully,
the ACCJ is once again hostingin-person sessions.
attending events much easier for busy professionals,
as well as those based far from the ACCJ hubs of Tokyo,
Osaka, and Nagoya.
One such major event in Tokyo took place on
November 1, when economist Jesper Koll presented alook at the road ahead and opportunities for Japan in
2022–23. Koll’s events are among my personal favorites,and sharing his engaging energy and deep knowledge isa wonderful way to take a big step back into “normal.”Speaking of Koll, he has once again written an
insightful column for us, which you will find on page 22.
More on that later.

Charity Ball
One event that, unfortunately, won’t be returning toan in-person format this year is the ACCJ Charity Ball.
Organizing the annual gala is a major undertaking witha long lead time, and the uncertainty that has defined
life in Tokyo throughout 2021—with a near-continuous state of emergency—means a virtual format isonce again the best option. Last year, the Charity Ball
Committee did a phenomenal job of staging a fun

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

Eyes on Japan
Last but certainly not least, a few words about theoverarching theme of this issue: foreign direct investment (FDI). It’s a great topic to look at as we startto emerge from the pandemic and Japan begins toreopen its borders. I don’t want to put the cart before
the horse, as Covid-19 remains—and probably forsome time will continue to be—a threat. But as vaccination numbers rise and the risk of transmission
drops, the business world can focus more attention on
the long term. FDI is a critical part of Japan’s road map
to a prosperous future, so, we hope, more companies
from abroad will choose to invest here.
Doing so is, of course, not always easy—even
without a pandemic. While attractive, Japan can bedifficult to navigate. We wanted to explore the FDI
landscape, and you’ll find extensive coverage in thisissue. Starting with Koll’s column on page 22, four indepth stories focus on the current state of affairs, theobstacles that must be overcome, promising businessventures now underway, government efforts to boost
FDI, and more.
I hope you’ll enjoy reading this issue of The ACCJ
Journal and look forward to seeing you at a future
in-person event. n

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

THE ACCJ JOURNAL • VOL. 58 • NO. 8

PRESIDENT

By Jenifer Rogers

2021 State of
the Chamber

6

A look back at a year of challenges as well as great progress and successO
Jenifer Rogers
ACCJ president

n October 26, at the American Chamber ofCommerce in Japan (ACCJ) Ordinary General
Meeting, I had the honor of sharing with thechamber membership an update on the progress
the ACCJ has made over the course of 2021—a year
still marked by the challenges brought forth by thecoronavirus pandemic.
At the start of the year, when I took on the role ofpresident, I set out three main strategic priorities:
 Help member companies to be agile and recover
more quickly from the challenges of Covid-19
 Transform the membership experience throughdigitalization
 Create a more resilient and sustainable chamber
I’m proud to say that not only have we madesignificant progress toward these goals, but our members have gone above and beyond over the past year
to help fellow members seize new opportunities, givebusiness in Japan. Here are some highlights of the
progress we have made.
Goal 1: Help member companies to be agile andrecover more quickly
To help members emerge stronger from the pandemic
and to reinvigorate the Japanese economy, the chamber’s proactive advocacy efforts have focused on easing
entry to Japan, post-Covid economic recovery, digitaltransformation, healthcare policy, and reforms tohelp build a more sustainable society.
During 2021, the ACCJ published more than 50
advocacy documents, including those aimed at:
 Improving corporate governance Promoting uniform reporting requirements forenvironmental, social, and corporate governance Introducing regulatory changes to make Japan
more attractive to foreign investors

The pandemic has challenged the ACCJ, but we have cometogether to help our member organizations chart a path
to recovery.
back to the community, and stay true to our missionof improving the international business environment
in Japan.
The pandemic has challenged the ACCJ, but we

In February, the chamber issued the Japan Digital
Agenda 2030, a monumental report produced incollaboration with McKinsey Japan which lays out a 10year road map for the country’s digital transformation.

have come together to help our member organizations
chart a path to recovery. One way we have done thisis by advocating for an easing of restrictions on entry
into Japan—something that is finally becoming a reality as this issue of The ACCJ Journal goes to print—aswell as facilitating an unprecedented and successful
vaccination rollout to members and their families.

The Financial Services Forum issued a white paper
entitled Reimagining Japan as a Global Financial Center,
which outlined recommended actions for Japan to
become a globally relevant financial center. This wasfollowed by a miniature Diet Doorknock during which
ACCJ leaders engaged with Japanese lawmakers.
Our relationships with the Japanese and US
governments have remained strong through the transitions to a new administration in the United States
as well as two prime ministers in Japan. Our steadyengagement has allowed us to offer real-time feedback
on behalf of our members. This summer, we completed a very impactful Diet Doorknock and held 37
meetings—the most ever. Twelve were at the ministerlevel and included audiences with now-Prime Minister
Fumio Kishida and several members of his cabinet.

Catalyst for Change

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

These challenges have brought about exciting changes
at greater speed, such as the acceleration of the chamber’s digital transformation.
I’m grateful to each member for their contributions, which have had a positive impact on the
US–Japan Economic Dialogue and further reinforced
the ACCJ as the preeminent voice of international

THE ACCJ JOURNAL • VOL. 58 • NO. 8

7

ACCJ leaders held 37 meetings during this summer’s Diet Doorknock, including an audience with now-Prime Minister Fumio Kishida.

We have also advocated directly with senior officials from
the Ministry of Economy, Trade and Industry and the Immigration Services Agency on both easing entry restrictions related to
Covid-19, and recognizing international vaccination certificates.
In May, we formed the Special Digital Task Force to assist
the Government of Japan in achieving its digitalization goals.
We continue to build on our relationship with the US Embassy
through meetings with Chargé d'Affaires Ray Greene and MinisterCounselor for Commercial Affairs Alan Turley. These were in
addition to our regularly hosted embassy conferences.
The chamber has also been at the forefront of helping
members navigate the evolving vaccine and reentry information
through the Vaccine Information Hub and Reentry Resources
pages on the ACCJ website.
To provide immediate and concrete avenues to vaccination
for members, the ACCJ secured 1,000 vaccinations for members and their guests. Of these, we provided 300 ourselves, withthe recipients including many of our small and medium-sizedenterprise members. A further 700 vaccinations were provided
in partnership with our member companies, private entities, andother foreign chambers of commerce.
Goal 2: Transform the membership experience
Our second strategic goal is to transform the membership experience, including through digitalization, to provide the greatest
value possible to the ACCJ network, which comprises 3,000 members and 550 commercial memberships.
We have had strong growth in the Corporate Sustaining
Member (CSM) category, which has increased by six percent since
January to 83 CSMs. The Small Company package has been very
successful; the category has nearly tripled in size since its creationin 2019. And we have 50 new commercial memberships, an eightpercent increase from this time last year.
We continue to see strong engagement by members througha varied and informative lineup of virtual events and meetings.

We hosted nearly 380 sessions in 2021, garnering 9,500 member
and guest registrations. These figures are on par with those ofprevious years, indicating that our virtual events continue toprovide valuable information and interaction for members.
These events have enabled the ACCJ to become truly borderlessand expand our reach through even more world-class speakers andtopics. An example is the ACCJ/NAJAS Leadership Speaker Series,
which provided global networking opportunities with the National
Association of Japan–America Societies in the United States.
Members have participated in virtual networking opportunities
through breakout rooms, workshops, and mentorship programs.
Now, with the lifting of the most recent state of emergency
and a lower risk of Covid-19 transmission, the ACCJ is making
plans to resume in-person aspects of our events. The planningincludes guidelines and safety protocols to protect attendees,
as well as technology to deliver seamless event experiences tothose attending virtually.
Goal 3: Create a more resilient and sustainable chamber
In terms of our third strategic goal, I established the Governance
Task Force to assess areas of governance about which members
have expressed concern and to ensure that we continue to evolveas an organization that reflects contemporary business practices.
Specific areas on which the Governance Task Force is focusedinclude the role and authority of the Executive Committee, therole of presidents emeriti, succession planning, and document
management, as well as guidelines for the Nominations andElection Supervisory Committees.
To coordinate crosscutting, multiyear advocacy initiatives,
the Board of Governors introduced the new Advocacy Coordination Groups, which work with committees and councils to guidethe chamber’s advocacy strategy.
These groups will ensure inclusive and transparent communication within the chamber on important issues in order to attain
more impactful and sustainable change.

THE ACCJ JOURNAL • VOL. 58 • NO. 8

NEW FROM THE AMERICAN CHAMBER OF COMMERCE IN JAPAN

MAKE YOUROWN MEETINGS
Visit waigaya.app to start a new conversation andconnect with members who share your interests.

ACCJ Wai Gaya (ワイガヤ) is a new platform for open, informal
discussion among ACCJ members.
Looking for advice, connections to your peer group, or want to dive
deeper into a particular subject? Wai Gaya is your opportunity toconnect with like-minded fellow members who share your interests
and want to have an open discussion around ideas and challenges.
Set your own agenda or join a conversation today at:
waigaya.app.

2021 Major
Advocacy Papers
Literature title

As a voice for championing women and diverse
leaders in the workforce, the ACCJ is a positive driverfor growth and innovation, both in Japan and thechamber. The quality and range of our white papers,
statements, and events are a direct result of the diversity—as well as the depth of knowledge and experience—of our membership.
We continue to promote diverse leaders on allcommittees and, this year, 40 percent of our Boardof Governors and 31 percent of committee leadership
positions are held by women—a goal we achieved at
the end of 2020.
On International Women’s Day, the chamber
launched the Women in Business Reading List, an online
library of critical resources for women in the workforce.
In April, we issued the 2021 edition of the Womenin Business Toolkit, which highlights actions thatmember companies are taking to increase the participation of women and diverse leaders at all levels.
In March, we issued comments supporting the
Sapporo District Court ruling that it is unconstitutional
not to recognize same-sex marriage. Our marriage
equality viewpoint was cited in multiple national andinternational news outlets.
One of our four core pillars is Community, and weare committed to responsible corporate citizenshipand supporting the recovery of our local community.
To that end, we donated ¥1.25 million to local charities facing challenges due to Covid-19, including thenon-profit organizations Save Food, Mirai no Mori,and Hands On Tokyo. We will support more organizations through the virtual Charity Ball auction which
will run December 1–11 (page 16). Last year, the event
raised ¥7.4 million.
This year, the ACCJ Community Service Advisory
Council offered new opportunities to support andpromote local charities through a new listing anddonation request form available directly on the ACCJ
website.
The Chubu chapter has provided strong support
for the community and member businesses. This
year marks an important milestone for the Chubu
Walkathon, which celebrates its 30th year and raised
nearly ¥5.6 million for 18 charity organizations.
Since 2019, the chapter has seen a 30-percent
increase in the number of committee meetings since2019, and a 31-percent rise in event attendees fromacross all three chapters since 2020.
The Kansai chapter continues to drive exciting
and impactful initiatives, including the 7th Annual
Kansai Diversity & Inclusion Summit Series; 2nd
Annual Healthcare x Digital Pitch Event and Ideas
Day; and the Kansai Leadership Series, which had arecord 102 participants in this—its 10th—year.
We should all be proud of what we have accomplished as a chamber.
One motto that I personally like is: Be the change
you want to see in the world. The ACCJ is an embodiment of that message and the power of what can beachieved when we work together. n

Japan Digital
Agenda 2030
Big moves to restore digital competitiveness and productivity

February 2021

Untapping Potential:
Second Case Studies
Building on the 2019 First Edition of the Women in Business“Untapping Potential” Case Studies, this survey provides
examples of concrete business initiatives to increase thenumber of women in management and leadership roles
in Japan.

THE ACCJ JOURNAL • VOL. 58 • NO. 8

9

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MEMBER

By C Bryan Jones

Spectrum of Benefits
Former AIG chief Robert Noddin shares what the ACCJ has meant to him

After nearly a decade as president and chief executive
officer of AIG Japan Holdings KK, American Chamberof Commerce in Japan (ACCJ) member Robert Noddin
retired this year. Among his numerous contributions as an ACCJ
leader, he served as co-chair of the Education Committee, inspired
many as a speaker at the ACCJ-Kansai Women in Business Leadership Series, and played a key role in the formation of the F500 CEO
Advisory Council, which he served alongside Jonathan Kindred
as one of the first co-chairs. As Noddin retires, The ACCJ Journal
talked to him about his experiences with the chamber and why
he encourages professionals to get involved.
How did you come to be part of the ACCJ?
During my second assignment to Japan with AIG (2002–06), I was
initially introduced to the ACCJ via the annual fundraising gala,as a guest. I wasn’t in a senior position at the time, and folks suchas Don Karnak were at the helm of AIG—so there really wasn’t aplace for me. When I returned in 2009, to take on a larger role—
first as chief operating officer of the American International Insurance Company, followed shortly afterwards as CEO—it made a lot
more sense for me to engage. I started attending informational andexchange events, the Ordinary General Meeting, and things likethat. Then in 2012, I moved into the AIG Japan CEO role, and thatmeant a chance to engage more visibly as the AIG representative
to the ACCJ. That’s when things started to get interesting.
Why do you feel the ACCJ is important?
Why should professionals become involved?
It doesn’t matter whether you’re the head of a small business inJapan or the CEO of a Fortune 500 company, the ACCJ vigorously
tries to be of value to all its members in Japan. Whether issues
are industry specific or cut across industries, the chamber isconstantly striving to bring value to its members and to enhancethe overall competitive environment for US companies—and,frankly, any foreign companies—in Japan.
The ACCJ continuously strives to bring value, working bothinternally with members as well as externally with local, prefectural, or national governments on issues in Japan, with state,embassy, and federal leadership in the United States, and withexternal advisors. That’s always been powerfully evident to me.
Why was the formation of the F500 CEO Advisory Council
important? What was it like to play a role?
The F500 CEO Advisory Council was created in 2018, and several
years before that I was approached at an ACCJ event by then-CEOof IBM Japan Paul Yonamine and Jon Kindred, who at the time was
CEO of Morgan Stanley. They wanted to get my views on how tohelp the chamber persuade the large-company CEOs to become
more actively engaged. They were of the view that those CEOs had
gradually stepped away from direct engagement while folks such as
their corporate or government affairs leaders became more active.

Right after that, I was approached about joining a CEO-led
DC Doorknock, the annual visit by ACCJ leaders to Washington.
I was intrigued and joined. It really impacted me and, to be
perfectly honest, was one of the more interesting and fulfilling
things I did during my entire 12-plus years as an AIG leader inJapan. That solidified, in my mind, what Paul and Jon had firstmentioned to me, so Jon and I agreed to see if we could get the
F500 Advisory Council started. The intent was to ensure that thelarge-company CEOs help bring support and substance to issues
bigger than those of concern to any one company or industry.
We felt it would help the ACCJ project a powerful leadershippresence in advancing strategic agendas from which all members could benefit.
How have you benefited from the ACCJ?
My personal benefit was having the chance to exchange ideas
and experiences with leaders from many industries and of several nationalities. It was incredibly helpful for me to understandchallenges and opportunities across the spectrum of foreignbusinesses in Japan. I was also quite heartened during the
Doorknocks to see how much support and interest US government leaders have for US interests in Japan. And, truth be told,
I developed some fantastic relationships and friendships that,
personally and professionally, really made my life and career inJapan so much more fulfilling.
Anything else you would like to share?
I would encourage members to be active on committees andmaximize the chances to learn from, and provide assistanceto, other members. I can’t imagine where else you could engage
and benefit so richly from people who, on a daily basis, comethrough the ACCJ doors with the depth of experience and lessons they can share—whether virtually, at a function such as
those held at Tokyo American Club, or at the ACCJ office. n

THE ACCJ JOURNAL • VOL. 58 • NO. 8

11

EVENT

12

By Malcolm Foster

YPF NEXT GENERATION:FROMHR LEADERTO BUSINESSLEADERSTRYKER JAPAN CHIEF EXPLAINS WHYPASSION IS KEY TO A FULFILLING CAREER

THE ACCJ JOURNAL • VOL. 58 • NO. 8

Being self-aware—cognizant of your unique strengths andwhat sort of work brings you joy—and not just climbing
the corporate ladder because that’s what everyone else
seems to be doing is critical to building a satisfying career.
That was one piece of advice shared by Satoshi Mizusawa,president and representative director of Stryker Japan K.K.,
when he spoke on September 16 at the latest installment of the
Next Generation Leader Series, hosted by the American Chamberof Commerce in Japan (ACCJ) Young Professionals Forum (YPF).
Seeking out honest feedback from people around you—including from your subordinates—is also important, said the
43-year-old human resources (HR) leader turned healthcare executive. During his presentation, Mizusawa talked about his life
journey and the path that led him to becoming president of one of
the leading medical device makers in Japan.

Find Your Passion“There are actually a lot of people who haven’t thought throughwhat it is they want to achieve in life,” said Mizusawa, urging his
listeners to think about what they want to have accomplished byage 60.
“What’s most important is identifying which moments bringyou joy and making sure your career aspirations really alignwith those,” he said. “When that’s clear, then you need to work
backward to plan the steps to get there.”
Born and raised in Saitama Prefecture, Mizusawa has followeda career path that, in Japan, is somewhat unusual. In 2002, right after college, he started out at a Japanese electronics company before

Language (TOEFL) scores to qualify. So instead, he enrolled
independently for a year at the University of Alabama, thanks
to the influence of his American female pen pal, who he madeduring his middle school homestay.

First Steps
When Mizusawa joined a Japanese electronic company after college,
he desperately wanted to work in international sales. But a grinningpersonnel staffer told him that he should first get some experiencein HR before moving on to other departments—a typical practicein Japan meant to give new employees a breadth of experience.
Mizusawa’s daunting first task was to overhaul the company’s pension system. “I had no interest in this, but I decided togive it my best and hoped that would lead me closer to my career
ambitions,” he said.
After that, he was sent to business units in Malaysia andThailand, where he gained a measure of international experience before returning to corporate headquarters.
Three years later, he decided to move to a leading global
electronics and energy company and was immediately throwninto an intense, two-year HR training program in Milwaukee,
Wisconsin. The program comprised three six-month assignments during which he was expected to build strong working
relationships and deliver results—entirely in English.
Functioning in a fast-paced, rigorous environment full of
ambitious young Americans who loved to debate and argue,
Mizusawa found the program grueling and worlds apart fromhis Japanese corporate experience.

FUNCTIONING IN A FAST - PACED, RIGOROUS ENVIRONMENT FULL OF
AMBITIOUS YOUNG AMERICANS WHO LOVED TO DEBATE AND ARGUE,MIZUSAWA FOUND THE PROGRAM GRUELING AND WORLDS APARTFROM HIS JAPANESE CORPORATE EXPERIENCE.
joining a series of US-based companies. He’s also a rare example
of someone who has moved from HR to heading up a business.
Mizusawa spoke frankly about the ups and downs of his lifeand career, using a graph to chart his career trajectory, with ameandering line that indicated the emotional and professional

At one point, he experienced a crisis of sorts when he discovered that he had been left off a group email from a team leader,making him fear that he was viewed as a non-contributing
member. “In Japan, if you worked all night, you could somehow
solve the problem,” he said. “But in a totally different context,

highs and lows he experienced along the way.
His most difficult experience came when he was just 11, amid
tension and conflict between his parents. He was the second of
three sons, and his elder brother was drawn toward a rebellious
lifestyle. “I wondered why only my family was like this. It seemed
like other families were so happy. As I look back now, this wasprobably the toughest time in my life.”
In middle school, his perspective of the world suddenly expanded thanks to a two-week homestay in Alabama—an experience thatwould shape the rest of his life. It was the first time he went abroad
and first time he rode in an airplane. Everyone around him seemedcheerful, and he even fell in love with an American girl with whom
he remained pen pals for seven years. “I began to think that I wanted
to get a job that had some international aspect,” he said.
Later, while at Aoyama Gakuin University, he explored study
abroad programs, but he didn’t have the Test of English as a Foreign

where culture and language were major issues, I really didn’tknow what to do.”Mizusawa approached a Chinese American colleague, hoping they would fix the problem by talking with the team leader.
Instead, his colleague said Mizusawa needed to go directly to theteam leader himself and tell her that, unless she added him to
the group email, he couldn’t do his job. “America isn’t like Japan,
where someone might try to help you,” he explained. “You haveto take the initiative yourself.”
Being raised in a rough-and-tumble environment with two
brothers, Mizusawa wasn’t about to shrink from a confrontation.
So, he mustered the courage to go talk with his team leader, who
told him it was all an oversight and added him back to the groupemail chain. “This doesn’t sound like such a big deal as I describe
it but, at the time, it was a real crisis for me,” he said. Soon after,
he was put in charge of his own team.

THE ACCJ JOURNAL • VOL. 58 • NO. 8

13

Attend online!
December 1–11, 2021
Charity auction ends at noon
on Saturday, December 11.
More details: www.accj.or.jp/charityballMizusawa‘s Key Advice for Young Professionals
15

Be selfaware

Find yourpassionDeveloptrust

Seek
feedback

Proving Yourself
In 2009, Mizusawa joined a US-based medical devicecompany as senior manager of HR and was later
promoted to director. There he gained experience inmergers and acquisitions, as well as staff integration
and working with diverse colleagues—his first boss
was Argentine and his second was Indian.
When he joined Stryker in 2014 as senior HR director, the company “didn’t have that good a reputationin Japan,” Mizusawa said. They were known for low
pay, hard work, and a constantly changing management. “The head office asked me to change that.”
Mizusawa explained that he implemented numerous changes, including moving personnel who had
been doing the same job for 10–15 years, creating atalent development program, fostering motivation
within teams, and even contributing to the overallbusiness strategy.

that, if they feel they have leadership gifts and focus
on using them, they, too, may be given opportunities
as he has.

More Advice
During the Q&A session, Mizusawa was asked whatmakes for effective communication. He explainedthat developing trust is vital. “If you give feedback tosomeone with whom you don’t have a relationshipof trust, they most likely won’t take it very well,” henoted. “But if you do have that kind of relationship,
you can have those tough conversations.”
Asked about key qualities for young, aspiring
leaders, Mizusawa stressed the importance of being
self-aware—something that he absorbed from histime in HR, which involved lots of self-assessments.
“I was fortunate that I had a lot of people who gave me“I WAS FORTUNATE THAT I HAD A LOT OF PEOPLE WHOGAVE ME FEEDBACK … AND I ALSO SOUGHT OUT FEEDBACK.
EVEN NOW, I SEEK OUT FEEDBACK FROM MY DIRECTREPORTS, AND THEIR FEEDBACK HAS HELPED ME GROW.”
Apparently, the bosses were pleased. Three years
later, Mizusawa was promoted to vice president, heading up Stryker Japan’s medical and surgical business.
This was his first leadership experience on the business side of a company, and he said he studied very
hard the first three months to get up to speed.
In 2020, he became general manager, leading
Stryker’s legacy business units and expanding his
responsibility into orthopedics and other areas. In
January 2021, he was promoted to deputy president,with responsibilities for the company’s overall business in Japan and driving growth. In April, he wasnamed president.
When asked how he made that transition fromHR to company leader, Mizusawa said his overarching goals have remained the same: set a direction andbuild the organizational capacity to reach those goals.
“It shouldn’t be just fireworks; the vision needs
to be realistic,” he said. “And just creating a new system isn’t enough, either. You have to inspire workers
and treat them as valuable.” He told participants

feedback,” he said. “And I also sought out feedback.
Even now, I seek out feedback from my direct reports,
and their feedback has helped me grow.”
Mizusawa was also asked about how to promote
diversity and inclusion in Japanese workplaces. He
said that when he joined Stryker Japan, there werevery few women in sales and senior management. Butthat has changed. “Women now account for more than
40 percent of directors,” he said, adding that theirpresence has “brought new perspectives, changed theatmosphere, and made discussions livelier.”
In closing, Mizusawa said that he feels comfortable and fulfilled when he’s leading people. And when
he sees that his staffers are motivated, that reinforces
his own motivation. But everyone has different talents, and it’s critical that you identify your gifts andthen use them, he said.
“Instead of just thinking, ‘I have to climb the
corporate ladder,’ try to think about what it is thatyou enjoy and how that might guide your career,” hesaid. “I’m 43, so I’m still learning a lot.” n

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

THE ACCJ JOURNAL • VOL. 58 • NO. 8

EVENT PREVIEWBy C Bryan Jones

No-Show
Charity Ball

16

Annual ACCJ gala offers a chance to give through virtual raffle and auction

L
Barbara Hancock
Chair
Charity Ball
Committee

Lori Hewlett
Vice-chair
Charity Ball
Committee

Kevin Naylor
Vice-chair
Charity Ball
Committee

ast year, the coronavirus pandemic made planning one of the biggest dates on the American
Chamber of Commerce in Japan (ACCJ) calendar difficult, and the Charity Ball Committee (CBC)rose to the challenge with a successful online event thatraised more than ¥7.4 million—topping the 2019 gala.
Despite the hope that 2021 would see a return to
the traditional format, it was once again impossible
to plan such an event. But as a cornerstone of thechamber’s fundraising for community support, theCharity Ball remains a top priority and the CBC hasorganized a fun and exciting online auction and raffle
which will run December 1–11.
“Though much has changed over the past year,
what remains consistent is ACCJ members’ passion
for supporting and contributing to the communities in which we live and work,” said ACCJ President
Jenifer Rogers. “Each year, we are grateful for ACCJ
members’ enthusiastic and generous participation in
the Charity Ball. This year is no exception.”

Charities
The CBC and the Community Service Advisory Council select several charities to promote, publicize, andsupport each year with the funds raised through theCharity Ball. Favored are smaller non-profit organizations (NPOs) with specific needs that work to help
the homeless and support women’s issues, children,
education, and US–Japan relations.
Three NPOs to which the ACCJ donated in 2021
through the Community Service Fund are:
 Hands On Tokyo, which focuses on children’s
homes, disaster relief, and those with special needs Mirai no Mori, which creates life-changing
outdoor programs for abused, neglected, andorphaned children in Japan Save Food, which provides cooked food throughCommune, a cafeteria where people can havemeals together and connect
This year, the chosen charities focus on thehomeless through the long-established Mike Makino
Fund, which supports the Sanyukai homeless shelter

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

Marilyn by DAAS, print signed and numbered
100% of the sale price goes to the ACCJ

THE ACCJ JOURNAL • VOL. 58 • NO. 8

as well as the Franciscan Chapel Center and Tokyo
Union Church rice programs.
Money raised through this year’s Charity Ball will
also support the ACCJ Community Service Funds
for Tokyo and Kansai, which traditionally help ourcommunities through food banks, local children’s
homes, and programs that assist these shelters for
at-risk children and women. For the first time, the
ACCJ Kansai chapter is collaborating with the Tokyo
chapter on fundraising through the Charity Ball.
“The Community Service Fund is an importantpart of our charitable giving as it enables us to respond quickly to urgent needs and emergencies thatcome up,” explained Barbara Hancock, who chairs
the CBC and works each year with vice-chairs Lori
Hewlett and Kevin Naylor to plan the big event.

Community
Many great entertainers have lent their talents to theCharity Ball over the years, including: Steve Gardner
 Felix Sonnyboy
 Kevin McHugh Erika Abe And more to come!
Due to restrictions on public gatherings, many
have lost the opportunities to perform and make aliving during the past two years. The CBC would likeYou could have Felix Sonnyboy and Rambling Steve Gardner performa private acoustic concern at your office event or home party.

17

The ACCJ supports Mirai no Mori, which creates life-changing outdoor
programs for abused, neglected, and orphaned children in Japan.
Photo: LIFE.14

to highlight them this year and hope that you will
support them as they recover from the pandemic.
Likewise, restaurants that have supported theCharity Ball, including Soul Food House and Devil
Craft, have also faced businesses challenges, and the
CBC encourages you to help these beloved membersof our culinary community.

AuctionSinger-songwriter Felix Sonnyboy, in collaboration
with artist Erika Abe, is auctioning off a one-of-a-kind,
hand-painted sunflower-themed ukulele. The price forthis item will include a one-hour ukulele lesson with
Sonnyboy and a one-hour painting demo with Abe.
Together with Rambling Steve Gardner—a Charity
Ball favorite—Sonnyboy is also presenting a private
acoustic concert. The duo is offering either a performance at your office event or home party or a work­shop/
concert for your service organization, club, or school.
Gardner is also making available some of his
amazing photographs from the Old South that are in
his book Rambling Mind, which traces the blues acrossMississippi in stunning black-and-white imagery.
Art lovers will be thrilled by a major offering organized by 2018 ACCJ Volunteer of the Year (Kansai)

President’s Circle Sponsors

Royi Akavia, who is a long-term supporter of ACCJ
featured charity Food Bank Kansai. For this year’s
auction, Akavia and his companies—Double Bounce
Productions, Inc. and KOA Production, Inc.—havearranged a donation which includes art by both himself and six other artists: DAAS, Eamon Harrington,
Clifford Land, Roberto Mitrotti, Dorit Schwartz, andShlomo Tuvia. A curated selection will be available
for bid.
More enticing auction items are expected between publication of this issue of The ACCJ Journal
and the start of the event.

Join us!
While the No-Show format is a departure from thetraditional year-end gala, it builds on the great success of last year’s virtual event and offers even more
opportunities for ACCJ members and their guests to
support the chamber’s mission of helping the community and those in need.
“We look forward to your support for our charities and those who continue to struggle through theprolonged pandemic,” said Hancock. “Please watch
our website for updates. We look forward to yourparticipation!” nPrize Sponsors
Diamond

Platinum Sponsor

Gold Sponsors

Learn more:
accj.or.jp/charityball

Ruby
Tiffany & Co.
Sapphire
Amway Japan G.K.
Andaz Tokyo Toranomon Hills
Conrad Tokyo
Delta Air Lines
ELC Japan K.K.

Iwanai Resort
Mondelēz Japan
Park Hyatt Tokyo
Riedel Japan

Sponsorships:
Donations areappreciated in cash or
products/services to be
auctioned as prizes.
To support theCharity Ball, visit:accj.or.jp/cb2021sponsors-application

THE ACCJ JOURNAL • VOL. 58 • NO. 8

EMBASSY

By C Bryan Jones

RTO Diplomacy

18

New embassy role focuses on technology leadership and collaboration

A
Matt Chessen
RTO
Embassy of theUnited States, Tokyos the pace of digitalization quickens and technology plays an increasingly important rolein our lives, maintaining global leadership inscience, technology, and innovation is critical. To doso, the United States Foreign Service has created a newposition—regional technology officer (RTO)—which
will focus on enabling the United States to maintainits leadership through transnational approaches totechnology policy and development initiatives.
RTOs will focus on: Promoting US leadership in technology
 Ensuring that technology ecosystems support
democratic values
 Securing US economic assets
 Enhancing US competitiveness with strategiccompetitors
The RTO program will place foreign service officers (FSOs) at key global innovation hubs, where theycan engage with the local technology community,
promote regional cooperation and public outreach,and energize global technology hubs to accomplish
US policy objectives.

I was recently introduced to the Business Software Alliance’s Framework to Build Trust in AI. I see
this kind of work as a positive evolution in the concept
of corporate responsibility, where businesses recognize that there are risks inherent in new tools and areproactively taking steps to mitigate those risks.
The US government welcomes the participationof the private sector, encouraging it to play a strongrole in the development and adoption of principles
and norms for technologies. In fact, governments
can’t and shouldn’t develop these frameworks without working hand in hand with the private sector andother stakeholder groups.
RTOs will focus on some of the same topic areas
as their corporate counterparts, such as promoting
an environment conducive to US business. RTOs havean outreach role which is analogous to private-sector
public relations. This could involve working with our
public diplomacy colleagues to enhance messaging
around technology issues, or speaking on behalf of the
US government. Because RTOs have deeper expertisein technology policy, they will serve as panelists andspeakers at regional events, both governmental andnon-governmental.

ENSURING US AND JAPANESE LEADERSHIP WILL REQUIREENHANCED COOPERATION ACROSS THE TECHNOLOGY SPECTRUM.

Listen to this story:
accj.or.jp/soundThis year, the US Department of State is deploying
three RTOs. Matt Chessen (RTO Tokyo) and Jim Cerven(RTO Sydney) have arrived at their posts, and Charlette
Betts is due to begin her RTO role in São Paulo, Brazil,
in November. There are plans to deploy three more
RTOs in 2022, with additional officers rolling out in the

There are also some differences between RTOs
and our corporate counterparts. We are focused on abroader range of critical and emerging technologies
than are most private-sector representatives. Even
within the technology sphere, we are generalists compared with our private-sector colleagues. RTOs havecoming years.
To learn more about the RTO role, The ACCJ Journal
spoke with Chessen about the overall goals as well as
his mission in Japan.

an internal capacity-building role in which we aretasked with raising the level of technology awarenessand expertise among our diplomats in the region. We
also have a strategic foresight function, where we’re
expected to analyze emerging-technology markets
and report on trends that generate opportunities andrisks for economic and national security.

How does an RTO in a diplomatic capacity differ
from one in a corporate capacity?
This is a great question, as there are some similarities and analogues, but also important differences in
our work.
One interesting observation from the diplomatic
perspective is how we’re increasingly seeing corporate
representatives playing a more proactive role in areasthat traditionally were the domain of governments,
such as the creation of normative value frameworks
for particular areas of technology.

THE ACCJ JOURNAL • VOL. 58 • NO. 8

Why has the US government created this role?
The decision to establish the RTO positions waswell supported by evidence from outside and inside
government. The National Academies of Sciences,
Engineering, and Medicine first proposed the ideaof regional technology diplomats in their 2015
report Diplomacy for the 21st Century: Embedding
a Culture of Science and Technology Throughout

19

the Department of State. The National Security Commission on
Artificial Intelligence made similar recommendations in their
final report, where they recommend that the Department ofState “establish a cadre of dedicated technology officers at US
embassies and consulates to strengthen diplomatic advocacy,
improve technology scouting, and inform policy and foreignassistance choices.”
Concurrent with these analyses, the Department of State noted
four trends that made the case for RTOs.
First, as we’ve seen with 5G communications technologies
and trusted infrastructure, technology issues are closely connected with many US core geopolitical interests.
Second, technology issues—such as semiconductor supply
chains—are increasingly transnational in nature.
Third, there is a proliferation of international forums where
technology issues are discussed, and we need officers withdeeper expertise and focus on technology issues who can represent the United States in these forums.
And fourth, there is a recognition that, to maintain global
leadership in technology, we have to build networks of regional
partners that include the private sector, non-governmental organizations, and academia—in addition to governments.
Most of our FSOs are generalists who could be issuing visas
in one assignment and coordinating climate policy in theirnext. The RTO initiative is a means of placing greater focus ontechnology issues and has a side benefit of cultivating a cadre of
FSOs with deeper technological knowledge.
How will you liaise with the Japanese government?
In addition to their regional responsibilities, each RTO has abilateral portfolio focused on their host country. For myself, I’ll befocusing on building additional cooperation with Japan on artificial intelligence (AI) and enhancing our partnership on standards
for emerging technologies. I will also be focusing on how we canpartner with Japan on broader regional technological issues suchas regional data governance or promoting trusted infrastructure
in ASEAN member states.

Will you be supporting Japan’s digitalization efforts?
I wouldn’t want to give the impression that the RTO becomes the
focal point for all bilateral technology issues. We have officers
that cover everything from digital economy issues to emerging
energy technologies to fintech. We also have a large team here
at the embassy focused on digitalization, both in the Trade andEconomic Policy Unit and the Foreign Commer­cial Service Office. The RTO will serve to support their efforts.
Somewhat related, one of my goals is to improve collaboration between the United States and Japan on basic research in
AI. Japan has tremendous capabilities in hardware and robotics,
while the United States is strong in software and data. Enhancing our basic research cooperation will allow us to capitalize oneach other’s strengths.
What are the biggest technological threats and challenges
facing the United States and Japan?
I believe that the United States and Japan must work together,and with other democratic partners, to ensure we remain the
global leaders in technology, and that technological ecosystems
reflect our shared values. We are facing a new geotechnologicalenvironment, where the People’s Republic of China aspires tolead the world in technology and is using technology to undermine democratic values, the rule of law, and human rights.
Ensuring US and Japanese leadership will require enhanced
cooperation across the technology spectrum, from research anddevelopment to principles and governance.
We also need to make certain that markets are fair and that
our economic assets are protected. The key will be enhancing
our shared economic security without veering into policies that
become protectionist or, worse, undermine the very industries
we are trying to cultivate. We believe we can strike this balance
and we look forward to working with Japan and other regional
partners—especially our friends in the private sector—to promote our mutual economic and national security through global
technology leadership. n

THE ACCJ JOURNAL • VOL. 58 • NO. 8

IN MEMORIAM

20

By C Bryan Jones

Unsung Hero:Dr. Tatsuya Kondo
Remembering the former PMDA chief executive and how he changed medicine in JapanO

ne year ago, we featured Dr. Tatsuya Kondo on the cover of
The ACCJ Journal. The American Chamber of Commercein Japan (ACCJ) had recognized him for his contributions to the healthcare industry with the 2020 ACCJ Outstanding
Achievement Award. Dr. Kondo played a key role in Japan’s healthcare efforts as chief executive of the Pharmaceuticals and Medical
Devices Agency (PMDA) from 2008 to 2019. Sadly, he passed away
on September 26 after a battle with prostate cancer. ACCJ members shared thoughts and memories with The ACCJ Journal about
what Dr. Kondo meant to them and the industry.

Strong Supporter“We are all deeply shocked and saddened to hear the news of Dr.
Kondo’s passing and would like to extend our deepest condolences to his family,” said Zimmer Biomet G.K. Executive Officer
and Chairman Kazuya Ogawa, who is also
Premium
real estatechairperson of the American
Medical
Devicesfor Tokyo living
and Diagnostics Manufacturers’ Association(AMDD), adding that the AMDD Executive
Committee offered a silent prayer for his soulat its October meeting.
“Dr. Kondo was respected as a strong supporter of the need to resolve the medical device lag issues. His thoughtful, sharply focusedactions, always led to a quick resolution of serious lag problems. I personally recall intense
discussions with him about more than 300 filesof outstanding orthopedic reviews on hand at
the PMDA, just as some 100 new applications
were coming in. He promptly organized a task
force to tackle the issues and cleaned them up in a very shorttime frame. He demonstrated great leadership during his time at
the PMDA, and we feel very honored to have had opportunities
to work with him.”

lifesaving and life-changing innovative pharmaceutical medicine.
Kondo-san is the unsung hero for so many patients in Japan.”

Leader of Change
Simone Thomsen, president and general manager of Eli Lilly
Japan K.K. and ACCJ governor–Kansai, praised his leadership.
“We would like to express our deepest sympathy on the passing of Dr. Tatsuya Kondo, chief executive emeritus of the PMDA.
He was truly a great leader for Japan who advanced our efforts toeliminate the drug lag for Japanese patients,” she said.
“Under Dr. Kondo’s leadership, regulatory science was truly
developed and incorporated into the PMDA’s review, whichyielded greater transparency for the industry. We appreciate theopportunity to have had the chance to work with him.”

Warm and Supportive
ACCJ Vice President and former PhRMA Japan
Representative Amy Jackson, who is APAC senior director of government affairs and policy
at Janssen Pharmaceutical K.K., said: “Dr.
Kondo had a powerful and long-term impact
on the Japanese healthcare system. Countless
Japanese patients got early access to needed,
lifesaving medicines thanks to his vision andefforts to make the PMDA a truly world-class
regulatory system. Not only was Dr. Kondo agreat leader, he was also an excellent ambassador between the PMDA and international
stakeholders. I so fondly remember the manytimes PhRMA had meetings with him and his

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Man of Results
ACCJ Governor James Feliciano, who serves as chair of the Japanbased Executive Committee of the Pharmaceutical Research andManufacturers of America, highlighted some of the results.
“Dr. Kondo was nothing short of a Japanese hero. Throughhis untiring efforts over so many years, he transformed the PMDA
into a premier regulatory review and approval body,” he said.
“We can look at the results in terms of months of review, numberof new products approved, or the elimination of the drug lag compared with Western countries. However, the real measurement
should be the number of Japanese patients who received access to

THE ACCJ JOURNAL • VOL. 58 • NO. 8

team. Dr. Kondo would always walk into the PMDA conference
room with a big smile on his face. He would greet his international visitors with great warmth and would earnestly urge them toshare, without reservation, any comments or concerns they had
about the Japanese regulatory system. He will be greatly missed.”Thank YouACCJ Healthcare Committee Co-chair John Carlson summed up
Dr. Kondo’s support of the chamber. “He was no stranger at the
ACCJ. During the course of his career at the PMDA, he visitedthe chamber on numerous occasions to share his thoughts on
the future of the agency and exchange opinions with membersof the Healthcare Committee," he recalled. “His commitment topublic–private partnership was compelling. The ACCJ extends
its deepest gratitude to Dr. Kondo and condolences to his family.
He was a transformational healthcare leader.” nHEALTHCARE

By Mikiro Suga

The Power
to Innovate

21

Covid-19, mRNA, and government and private sector roles in healthcareT

he Japanese public is concerned that domestic
pharmaceutical companies have yet to launch asingle Covid-19 vaccine. Some may argue that
this is due to a low rate of vaccine confidence, as is seenin the national tendency to avoid the human papillomavirus (HPV) vaccine, which has, in turn, caused
a problem for vaccine development.
Although there may, indeed, be such a factor, thiswould not be the primary reason—especially not forthe delay in the domestic development of a messenger
ribonucleic acid (mRNA) vaccine.
It should be noted that Moderna, Inc., the USphar­ma­­ceutical and biotechnology company that has
produced an mRNA vaccine to combat Covid-19, hadbeen advancing cancer therapeutic vaccine development since well before the pandemic.
In Japan, however, initiation of development
was delayed compared with other advanced countries,and efforts to develop products based on mRNA tech­
nology have failed to make significant progress. This is
not because the environment surrounding a prophylactic vaccine is unfavorable but, rather, it is due to thelack of an environment in which companies can takerisks and consider new modalities.

The Role of Government
The coronavirus pandemic has made me reconsider
what the government should do to promote the development of innovative healthcare products. Amongthe various ideas I have come up with, I would like toconclude—even though this may be obvious—that
the primary responsibility of the government is tocreate an environment in which innovative products
are highly valued and the private sector can invest ina broad range of research and development (R&D).
I see that Operation Warp Speed—the public–private partnership backed by the US government tosupport rapid development of a Covid-19 vaccine—
has had a huge impact. This underlines the fact that
the Japanese government needs to invest directlyin companies that can provide clinical research andmanufacturing facilities, especially during a publichealth emergency.
Yet, under normal circumstances, it is fair to saythat the private sector in Japan can make more efficient investments than can the government. It is ex-tremely challenging for the government to pinpoint andinvest in a promising company and product. Further, amassive direct investment by the Japanese governmentis unlikely, given the current budgetary issues.
By evaluating the history of mRNA technology,
we can see how difficult it is to identify rising stars.
Thanks to its wide use around the world to prevent
Covid-19 infections, mRNA technology is now wellknown. Before the pandemic, however, only a few ofus predicted such a quick, practical application. A
researcher from Hungary, according to media reports,
even struggled to have the merits of her research results
recognized, despite years of studies.

Mikiro Suga
Head of healthand welfare
JETRO New YorkThe coronavirus pandemic
has made me reconsider what
the government should do topromote the development ofinnovative healthcare products.
Private Sector Stands ReadyI believe that Japanese and US companies in the private
sector are willing to take risks and engage in R&D if theyrecognize innovative product candidates and can appropriately evaluate them under the right conditions.
But how can Japan create such an environment?
I will be committed to accomplishing this once I complete my current assignment in the United States,and policymaking becomes my direct responsibility
in the government.
US corporations are involved in the two mRNA
vaccines currently in use, a fact that highlights US
power to pursue innovation. The collaboration
between Pfizer Inc. and BioNTech SE in Germany
brought us a Covid-19 vaccine, thanks to the US
pharmaceutical company’s attitude of aggressively
seeking cooperation among companies beyond theborders that might restrain activity under normal
circumstances. It has made me realize, once again,
the importance of open innovation.
During the rest of my stay in the United States,
I look forward to gaining further insight into what
drives the US power to innovate. n

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

THE ACCJ JOURNAL • VOL. 58 • NO. 8

ECONOMY

By Jesper Koll

Misplaced
Pressure

22

National security must strengthen, not close, Japan Inc.

T
Jesper Koll
Global ambassador
Monex Group Inc.

he government of newly elected JapanesePrime Minister Fumio Kishida deserves to becongratulated for having elevated national security to a top priority by establishing the new positionof economic security minister, filled by former Ministryof Finance bureaucrat Takayuki Kobayashi. Global
investors and business leaders will certainly welcome
the creation of a “control tower” to coordinate, focus,
and, hopefully, streamline the increasingly complex
trade and investment rules and directives now governing global engagement with Japan Inc.
Unfortunately, there is significant risk in thisundertaking. More bureaucracy can easily backfire.
Instead of streamlining and centralizing procedures,
there is a great danger of duplication and increased
bureaucratic red tape, given the vested interests andinstitutional pride of the incumbent ministries.
Kishida’s new ministry could end up making it moredifficult and cumbersome for global investors to buy
Japanese companies and trade with Japanese suppliers.
In the name of national security, the new Ministry of
Economic Security could actually bring on a new trendof insularity and ossification in corporate Japan.

In fact, the empirical reality of Japan’s market verifies this point with great clarity. Almost all successful
corporate turnarounds in past decades originated in either substantial foreign direct investment (FDI) or global
investors’ lobbying for change. Nissan, Sharp, Sony,
Fanuc, and Shiseido are just some of the highlights.
Make no mistake: for global relevance and futurecompetitiveness, the more interaction with global
investors, the better it will be for Japan’s national competitiveness and, thus, her national security.

Poison Pill?
Leveraging global investor knowledge and insight is
an existential imperative for Japan. For all the talkabout self-sufficiency, let us remember that slightly
more than 60 percent of listed companies’ profits
come from global sales. From here, Japan’s domestic
economy probably will see lower growth than otherglobal markets, so the need for more global and open
perspectives—as well as challenges to the status quo—are poised to grow in importance.
Unfortunately, some Japanese leaders appear
ready to use the powers of the new ministry to shut

WHAT JAPAN REALLY NEEDS ARE MORE ACTIVE AND
ENGAGED DOMESTIC INVESTORS AND FUND MANAGERS
WHO AREN’T AFRAID TO ENGAGE AND CHALLENGESENIOR CORPORATE LEADERS.
Path to Security

Listen to this story:
accj.or.jp/soundOf course, it is easy to understand the reason Japanese leaders feel pressured to follow the lead of theUnited States in seeking to raise bureaucratic andpolitical oversight over global investment flows.
However, the fact that all this happens in the nameof supposedly protecting national security is, in my view,the real red flag. Why? Because the best way to ensure
economic security is to ensure that your nation’s corporate sector is strong, innovative, and globally competitive.
If corporate Japan is to have a bright future, itcertainly needs more active debate with the stewardsof global finance. And yes, sometimes the investors’
threats to challenge board members and existing
corporate structures are absolutely key to the midand long-term competitiveness and sustainability ofall stakeholders.

THE ACCJ JOURNAL • VOL. 58 • NO. 8

out global challengers and justify business as usual
behind the excuse of national security.
Clear speak: Kobayashi could easily find himself
leading a “poison pill” ministry, preventing necessary renewal and innovation. Domestic corporate
leaders will get busy and, in the name of national
security, lobby the new ministry for protection. The
new ministry could easily become a creeping liability
for the future dynamism and global competitivenessof corporate Japan. Clearly, corporate ossification
and a retreat from globalization cannot be in Japan’snational interest.
Specifically, new and tighter rules are poised to, in
effect, shut out Japanese companies from the forces of
the global competition for risk capital. Under the mantleof national security, this could also feed complacency
and stagnation. Already, Japanese conglomerates

23

have fallen behind in many new leading-edge areas, such as cybersecurity, quantum computing, and drone technology.
Whether we like it or not, global finance is the most efficientand effective tool to force senior management to stay on top of
their game. Therefore, there is a great risk that the new rules will
merely protect already outdated technologies, feeding a new breedof so-called zombie companies in Japan. This is particularly truesince, unlike the United States, where the move toward tighter
restrictions began, Japanese companies no longer have a naturalcompetitive strength in cutting-edge technology.

FDI
What about global investors? Technically, tightening national security supervision will raise both the cost of investing here as well as
the risks. Internal compliance and controls will have to be tightened
to ensure that new potential criminal liabilities are minimized.
Here, transparency is key. Right now, we know that rules
will be tightened, but we don’t know how and where, nor onwhat basis. Kishida would be well advised to be more proactive
and engage with foreign investors and business leaders on how
to best balance national security with technology transfer, innovation, and transformation.
However, no matter how smooth the procedures may become, the net result is a higher compliance–cost base for investing in Japan. For large, established players, this should not be a
problem. But smaller startups that are trying to explore opportunities in the Japanese market are poised to suffer disproportionately from the higher compliance and legal costs resulting fromnew rules. Tokyo’s reputation as the global finance-compliancecenter will grow.
From a Japan equity strategist’s perspective, much of thebull case for Japan depends on unlocking the deep value offeredby Japanese businesses that is well documented in the historically low valuation metrics and high cash balances of listedcompanies.
We need a catalyst to unlock this value. Unfortunately, making
it more difficult for non-Japanese to buy into and trade with Japan
does not make it easier for Japanese to buy into Japan.

Real Needs
To truly strengthen security, the government should step up
public incentives for technology companies to: Stretch and sweat their engineers harder by exposing themto more, not less, global exchange and interaction
 Raise R&D spending for university and corporate researchers Stimulate commercialization of new technologies deemed
to be in the national interest by offering tax breaks toresearchers, to startup entrepreneurs, and for in-housedevelopment
Protection is typically backward-looking, and what Japanneeds is forward-looking incentives to unlock next-generation
innovation and commercialization. To get there, Japan requires
more, not less, pressure from global financial investors.
What Japan really needs are more active and engaged domestic investors and fund managers who aren’t afraid to engage andchallenge senior corporate leaders. Policies designed to help domestic asset owners unlock corporate value are not just welcome,but essential to allowing a new catalyst for corporate revival.
This is where policy action is needed, to promote Japan for
the Japanese. National security is based on homegrown strengthand policies to unlock domestic aspirations, not on restricting
global capital from becoming partners in this process. n

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24

FDI

STEPS TORECOVERY
By John Amari

JAPAN FDI SET TO PICK UP PACE AFTER COVID-19,
DESPITE MAJOR CHALLENGES
THE ACCJ JOURNAL • VOL. 58 • NO. 8

S

ince the start of the Covid-19 pandemic in early
2020, inbound and outbound foreign direct investment (FDI) has been on the decline aroundthe world.
A reflection of foreign ownership of companies
via investment, acquisition, or joint venture, in 2020
FDI decreased globally. It was down 37 percent on theyear to $998.9 billion.
Calculated on a balance of payments basis—net
and flow—this was the lowest level since 2005, according to the United Nations Conference on Trade andDevelopment (UNCTAD), a 194-member intergovernmental organization that promotes the interests ofdeveloping nations in trade.
According to UNCTAD’s World Investment Report
2021, “this is a major concern, because international
investment flows are vital for sustainable developmentin the poorer regions of the world.”“But now, Japanese companies have more cash on
hand than they did at the beginning [of the pandemic].
They’ve done a lot of equity offerings and debt issuances, so they have lots of cash. As travel becomeseasier, I suspect they will go shopping soon.”

In and Out
In Japan, inbound and outbound FDI in 2020 declined
overall, although there is data for specific industries
in which that was not the case.
Here, inbound FDI in 2020 increased 65.2 percent
on the year to $66 billion—mostly in the form of debt
issuance—according to data from the Japan External
Trade Organization (JETRO) and other national groups.
But that’s only if you discount equity capital andreinvestment of earnings, which were down year overyear. M&As and new investments in Japanese markets were also slow, according to JETRO and others.

DIGITIZATION — INCLUDING LEVERAGING
E - COMMERCE, FINANCIAL TECHNOLOGY, AND
CROSS - BORDER DATA TRANSFERS — HAS BECOMEA PRIORITY FOR BUSINESSES AND GOVERNMENTS
IN THE POST - COVID - 19 WORLD.
Local Impact
While UNCTAD’s report sheds light on the effect of Covid-19 on FDI in developing nations, major economies—
including Japan—also have been affected adversely.
In 2020, Japan experienced a significant inbound
FDI decline, in the wake of what had been a steadyincrease over several years prior to the pandemic insectors such as retail and e-commerce. Outbound FDI
by Japanese companies looking to collaborate with, or
acquire, overseas enterprises had also been on the rise.
Which leads one to ask: What’s the outlook for
inbound FDI here—and the rest of the world, for thatmatter—post-Covid-19?
As “economic and geopolitical uncertainty looks set
to dominate the investment landscape in the midterm,”the UNCTAD report notes, the outlook beyond 2021
remains unclear.
At their most optimistic, projections of expertssuggest that a rebound to pre-Covid-19 FDI trend lines
may occur before 2022. But there are looming geopolitical and economic challenges that lead to caution, if
optimistically so.
Kenneth Lebrun—a partner at international law
firm Davis Polk and Wardwell LLP, and co-chair of theAmerican Chamber of Commerce in Japan (ACCJ) FDI
and Global Economic Cooperation Committee—spoke
to The ACCJ Journal about outbound mergers andacquisitions (M&As). He noted: “As we exit Covid-19,
there will be a rebound in outbound M&A activity,
which basically stopped due to travel restrictions.

25

Japan’s inbound FDI was led by Asia, even as
it declined sharply from China (-29.9 percent) andHong Kong (-44.7). Next was North America—inparticular the United States, where the Japan FDI
growth rate remained positive (+23 percent)—andLatin America. Oceania, Europe, and the rest of theworld followed.
Japan’s outbound FDI during the same period,
meanwhile, was $171.1 billion, marking a decreaseof 33.8 percent on the previous year, led by a drop inlarge-scale M&A activities, outflows in equity capitaland debt issuances, and reinvestment of earnings,
JETRO reported.
Outbound FDI targets mirrored the inbound, led
by Asia (China, Hong Kong, Singapore, and Thailand),North America (the United States), and Latin America.
This was followed by Oceania, Europe, and the rest of
the world.
However, the growth rate of outward FDI was
negative in all countries and regions, with the exception of Thailand (+2.2 percent), Latin America (+3.6
percent), and Oceania (+54.3 percent).
What’s more, JETRO notes that, in 2020, there
was a 1.7-percent decrease to $134.5 million in Japan’s
FDI return (receipts) and rate of return—a measureof dividends from overseas subsidiaries of Japanesecompanies and reinvestment income equivalent toretained earnings on local companies.
According to reports, there had been a seven percent decline for two consecutive years in the return

Mits Minowa
Marketing director
Allbirds Japan

Makoto Tahara
Country manager
and director
Shopify Japan

Kenneth Lebrun
Partner
Davis Polk &Wardwell LLP
Co-chair, ACCJFDI and Global Economic
Cooperation Committee

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

THE ACCJ JOURNAL • VOL. 58 • NO. 8

26

on investment, calculated via revenue (receipts) divided by theaverage FDI balance at the beginning and end of the period.

Revised Strategies
As noted by UNCTAD, the Covid-19 pandemic has exacerbatednational and geopolitical fault lines, with US–China relations
among other national, regional, and global events posing continuing risks to global FDI.
As a result, companies in Japan and abroad are revising theirbusiness strategies for the post-pandemic period, according to
the 2020 JETRO Survey on Business Conditions of Japanese Companies Operating Overseas.
According to the survey, more than half the Japanese companies with operations overseas are planning to renew their overseas
business strategies and models across the board, from sales toprocurement to production. For instance, 38.1 percent of respondents said they planned a review of sales destinations, while 20.6
percent said they planned cancellations or postponement of new
investments and capital investment.
With regard to sales, companies mentioned plans to review
their promotion of virtual exhibitions (30.4 percent) and digitalization, including utilization of artificial intelligence (27.8 percent),
as well as to review sales products (24.8 percent).
A small but significant number (12.5 percent) referred to plansto sell their products on e-commerce sites.
As for procurement and production, a fifth of the respondents
said they planned to change their procurement sources (20.5
percent), while others shared that they intended to scale up thepromotion of automation and labor saving (15.7 percent), as wellas to implement multiple procurements (15.5 percent).
Interestingly, a significant minority stated that they planned
to use e-commerce sites—a sign that more companies in Japanare embracing digital platforms.
What’s more, companies in the hotel and travel industry(86 percent), employment agency and temporary staffing sector(85 percent), and food services industries (82 percent) are among

those that said they had revised, or were planning to revise, theirbusiness strategies and models in response to shifting trends inglobal trade.
Educational and research institutions, organizations in thehealthcare and welfare sectors, as well as companies in advertising, marketing, and research expressed similar sentiments.

New Rules
In addition to hastening public health countermeasures, suchas social distancing and restrictions on cross-border travel, thepandemic has laid bare global challenges, including those involving trade agreements, national security, and climate change.
In response, many of the world’s leading economies areseeking to update trade agreements, relocate certain industries
within national borders, or add restrictions to FDI—especiallywhere there are national security concerns, such as in the semiconductor industry.
As a key pillar of the post-Covid-19 economic recovery plan,
the United States, for instance, has taken steps to ensure supply
chains are “flexible, diverse, and secure,” JETRO noted.
To that end, the administration of US President Joe Biden
has tightened export control systems and revised the list ofcontrolled items, technologies, and entities that are subject toimport restriction.
Since May 2020, the United States has imposed export
restrictions in industries that include telecommunications andtextiles, infrastructure and semiconductor manufacturing, as
well as supercomputing.
But this trend goes beyond the United States. Indeed, amongmajor economies, rules are being tightened for screening of
FDI investment mechanisms. This is especially true in high-techfields that require cross-border data transfers.

Sustainability
Despite posing challenges, the Covid-19 pandemic also has created or accelerated business opportunities, not least of which

San Francisco-based sustainable lifestyle brand Allbirds
opened its second retail shop in Japan on June 3, in Tokyo‘s
Marunouchi district. The first, in Harajuku, opened in January.

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is a renewed drive to develop sustainable business models that“will all have far-reaching consequences for the configurationof international production in the decade to 2030,” UNCTAD’s
report notes.
And those trend lines have reached Japan. Indeed, even before the pandemic, companies from abroad with sustainability
at their core had identified this market as ripe for investment.
That was the case when New Zealand–American footwear andapparel brand Allbirds entered Japan in 2020. They took advantage
of Tokyo’s position as a global trendsetter in fashion, while seeing
Japan as being ready to support sustainable businesses.
“Japan is a very important market for Allbirds. As you know,
Tokyo is the destination for any fashion brand if they want to be
global,” explained Mits Minowa, marketing director at Allbirds
Japan. “And, as history shows, fashion and street culture trends
often come from Japan, and have spread to the world. Thus, having Allbirds stores here was a priority for the company when we
decided to go global.”
Allbirds was established in 2016 by co-founders Tim Brown,
a former soccer player, and Joey Zwillinger, an engineer. The company is certified by non-profit organization B Lab as a B Corporation—an entity that has environmental and social concerns at
the core of its business strategy.
A relatively new concept in Japan, B Corporations prioritize
sustainable sourcing of materials in a bid to help tackle environmental challenges: “We believe that we can ‘reverse climate change
through better business,’” said Minowa.
“That’s why we measure the carbon footprint of all our products, label the score on the product, and open source the calculationof the carbon footprint. Without measuring the carbon footprint,
we cannot reduce it.
“Allbirds provides a life cycle assessment of materials, production, transportation, use, and end-of-life of each product,”he added.
While Covid-19 countermeasures led to the temporary suspension of business, Allbirds in Japan has returned to regular
hours, and the company feels confident that the country’s postCovid-19 mindset will be in line with Allbirds’ core values.
“On the positive side, the mindset and lifestyle of people living in Japan has changed since the coronavirus hit. Many people
here, especially Japanese aged between 30 and 40, realize that27

Sustainability is at the heart of Allbirds, and the New Zealand–American
brand sees Japan as being ready to support sustainable businesses.

Key Inbound
FDI to Japan(2006–21)
atmosJapanese apparel and footwear maker founded inTokyo in 2000; acquired by Foot Locker in 2021.

Farfetch
British–Portuguese fashion brand founded in 2007;
entered Japan in 2014.

Warby Parker
US eyewear brand founded in 2010; began Japansales in 2016.

Shopify

we need to change and to treat the planet well to maintain it forthemselves and the next generations.”

Canadian e-commerce company founded in 2006;
entered Japan in 2017.

Digitization

Paidy

In addition to sustainability, UNCTAD’s report notes that digitization—including leveraging e-commerce, financial technology,
and cross-border data transfers—has become a priority for businesses and governments in the post-Covid-19 world.
Japan, long considered a laggard in digital transformation,
is now among those countries that have fully embraced it as
an imperative. Thus, in September, the Japanese government
launched the country’s first digital agency.
Yet even before digital transformation became front and center in Japan, foreign companies with digital solutions, including
Canada-based e-commerce provider Shopify Inc., had alreadymade this market a priority.

Japan-based fintech company founded in 2008;
acquired by PayPal in 2020.

Allbirds
New Zealand–American footwear and apparelbrand founded in 2016; entered Japan in 2020.

DoorDashUS-based delivery platform founded in 2013;
entered Japan in 2021.

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Still out there making surepeople have enough food.

Thank you.
SECOND HARVEST JAPANwww.2hj.org

29

Although adoption of online shopping by Japanese consumers lags the United States and other countries, the pandemic has pushed things forward andShopify sees tremendous room for growth in Japan’s e-commerce sector.

“Despite being a top-five global e-commerce market in termsof size, having grown 9.1 percent in 2017, there was tremendous
room for growth in Japan’s e-commerce sector when comparedwith the United States and China, at 16 and 32 percent growth,
respectively,” explained Shopify Japan Country Manager andDirector Makoto Tahara.
Has the pandemic accelerated digital adoption in Japan? It
has, particularly among young consumers.
“The pandemic has brought forward the future of retail bya decade, prompting lasting changes to consumer habits andaccelerating the shift to online shopping. However, consumers
have not only been shopping online, but also in stores, as well ason their smartphones, social media, and PCs,” explained Tahara.
“Businesses have suddenly been forced to quickly pivot and start

RecoveryAs the world emerges from the pandemic, is there a silver
lining? According to industry experts, there is: global vaccine
rollouts. And that ties directly into kickstarting FDI.
By the first quarter of this calendar year, 33 of the world’s
major economies and regions had exported vaccines worth $13
billion around the world.
In Japan, the percentage of the population that had been
fully vaccinated—at the time of writing—stood at more than 68
percent, compared with 57 per­cent in the United States.
Globally and by country, Portugal led the way for the numberof individuals fully vaccinated per 100 population. Japan was
ninth, just behind France, the United Kingdom, and Italy, while
the United States was 13th, the Nikkei reported in October.

DESPITE THE DASH TO DIGITAL, ABOUT 40 PERCENT OF
CONSUMERS HERE ARE SHOPPING ONLINE, THE SECOND - LOWEST
ADOPTION RATE AMONG THE ADVANCED ECONOMIES.
selling online, or to upgrade their e-commerce offerings to reachthose customers who shop anytime and wherever they prefer.”
Despite the dash to digital—about 40 percent of consumers here are shopping online, the second-lowest adoption rate
among the advanced economies—many still choose to shop
locally in physical stores, making Japan an outlier among surveyed nations.
However, they are prioritizing sustainability in their purchasing choices.
“Japanese consumers are very supportive of local brands,
choosing to buy from local independent businesses even as they
still make purchases on digital marketplaces for convenience,”
Tahara added. “They also are expected to vote with their wallets
by choosing to support sustainable and green brands that demonstrate authenticity, transparency, and accountability.”In the wake of global vaccination programs, at the time ofwriting international trade (on a customs clearance basis) was
heading toward recovery, including in Japan.
While exports had declined 9.3 percent in 2020 from theprevious year’s total of $640 billion, and imports had decreased
12 percent to $634.1 billion, exports had recovered by mid-2021.
Japan’s exports grew 26.2 percent year on year to ¥6.6 trillion in August 2021, the sixth straight month of double-digit
sales growth, according to reports. This has led some experts tobe optimistic in areas such as outbound M&As.
“If you look through the mid-term plans of Japanese companies, almost all will say, ‘We are going to allocate additional capitalto outbound M&A activity to change the percentage of our overseas sales from 10 to 30 percent of our group sales over x numberof years,’” Tokyo-based lawyer Lebrun notes. Other experts who
spoke to The ACCJ Journal share similar sentiments. n

THE ACCJ JOURNAL • VOL. 58 • NO. 8

POLICY

By Julian Ryall

30

LOST
CHANCEHOW ENTRY RESTRICTIONS HAVE IMPACTED
BUSINESS AND EDUCATIONTHE ACCJ JOURNAL • VOL. 58 • NO. 8

Over the past 18 months, the vast majority offoreign and domestic companies that havereceived assistance from the Japanese government—to get through a period widely regarded as themost challenging for businesses in living memory—
have been deeply appreciative of that support. Companies across the spectrum have struggled to keep theirheads above water as the coronavirus pandemic has
raged around the world, ravaging their operations andforcing too many to pull down the shutters.
Yet there is one key area to which the policies of theJapanese authorities arguably have proved damaging.
Anyone in business knows that, by far, their mostvaluable assets are their people. But the government’s
decision to impose stringent restrictions on anyone
seeking to enter Japan—whether to return to a job,take up a new position, or begin a course of study—hasadded an extra layer of difficulty for many.
It was particularly galling for companies struggling
with personnel issues to see those same restrictions
relaxed for thousands of athletes, support staff, media,
and VIPs arriving for the Tokyo 2020 Olympic andParalympic Games.
According to the Japanese government, a mere
17,700 foreign nationals entered the country in Sep-

service firms to provide services to Japanese clientsconcerning their overseas operations.”
Mergers and acquisitions (M&As) as well as foreign direct investment (FDI) have also been affected.
“In addition, the blanket ban on foreign businesstravelers coming to Japan—and the quarantine requirements for Japanese residents traveling abroad,and then returning to Japan—has negatively affected
the level of cross-border investment and M&A activity, which is a significant portion of our business,”said Lebrun, who also serves as co-chair of theAmerican Chamber of Commerce in Japan (ACCJ)FDI and Global Economic Cooperation Committee.

Brain Drain
The entry restrictions have also caused headaches
for staff and students at the Tokyo campus of Temple
University, the Philadelphia-based institution which
will be marking 40 years in Japan next year.
“At present, we have individuals in four key positions who are unable to make it into the country basedon current restrictions,” said Matt Wilson, president
and dean of the Japan campus.
“Not being able to have our chief academic officer,
head of libraries and online learning, director of

THE FAILURE TO OPEN TO BUSINESS TRAVELERS —WITH ALL THE NECESSARY PRECAUTIONS ANDCAVEATS IN PLACE — HAS DAMAGED COMPANIES’OPERATIONS, AND IT WILL TAKE TIME FOR MOSTTO FULLY RECOVER.
tember, a figure that includes anyone arriving for any
reason. That total is down 99.2 percent from the samemonth in 2019, the year before the pandemic gripped
the global community.

Road to Recovery?
With infection rates falling and the number of people
fully vaccinated rising steeply, the authorities in Japan
have begun to ease restrictions on people being out
and about, while the Go To Travel scheme is expected
to be relaunched to encourage domestic trips. The
hope is that the gradual loosening of restrictions willsoon be carried over to the international sector andborders will once again be open.
For many in business here, that cannot come soon
enough. The failure to open to business travelers—with
all the necessary precautions and caveats in place—has
damaged companies’ operations, and it will take time
for most to fully recover.
“The government restrictions on entry into thecountry have impacted my business in two ways,” said
Kenneth Lebrun, a partner with the law firm Davis
Polk & Wardwell LLP in Tokyo. “First, we have been
unable to bring new employees to Japan, whether internal rotations from our US offices or external hires,
because the government is not issuing new long-termwork visas. This has impacted the ability of professional

31

academic advising, and financial aid coordinator onsite in Tokyo has been less than ideal,” Wilson told
The ACCJ Journal. “Although they are working remotely from the United States and doing their best to
actively engage and work with students, it is especiallychallenging as we have continued to offer in-person
courses throughout the pandemic.”
The impact on the student body has been evenmore damaging, with the university forced to cancel
four short-term study abroad programs in Japan, meaning that 500 students have missed out on opportunities
to study here. There are concerns that the next intake
of more than 150 students for short-term courses,
which are due to start in January, may also be affected
if Japan does not announce in November its willingness to reopen its borders to students.
Wilson explained that not only has the financial
impact on the university been substantial, but they
may lose students if the restrictions are not eased soon.
“If we have to cancel another short-term cohort,
Temple and non-Temple students interested in the
program may end up at another destination, such as at
our Rome campus or one of our partner destinations
in Europe or Asia,” Wilson said. “Or—more likely than
not—they will simply abandon their plans to study
abroad. I have spoken with many students who havebeen waiting and waiting, and now they are running

Kenneth Lebrun
Partner
Davis Polk &Wardwell LLP
Co-chair, ACCJFDI and Global Economic
Cooperation Committee

Matt Wilson
President and dean
Temple University
Japan Campus

Katheryn Gronauer
Founder
Thrive Tokyo
Vice-chair, ACCJ
Sales Development
Committee

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

THE ACCJ JOURNAL • VOL. 58 • NO. 8

32

The Class of 2020 has many great memories of their time at Temple University Japan Campus, but entry restrictions haveforced many students who had applied to study in Japan to switch to Temple facilities elsewhere.

out of time academically to study abroad as they
prepare to graduate.”
In addition, more than 200 undergraduates aretaking courses remotely, often at odd hours of thenight, while waiting for the borders to reopen so thatthey can either resume their courses here or start
their studies. “Our overseas students want to be inJapan, not attending classes remotely from their homecountries,” Wilson emphasized. “Our concern is thatthe patience of our current students who are unable
to enter Japan will run thin, and they will burn out
on online education at strange hours in their hometo date and nearly 132,000 deaths. Japan, in comparison, has seen 1.72 million cases and just over
18,000 deaths, despite having more than double thepopulation of Italy. Yet the Italian authorities choseto continue to host short-term study abroad courses
throughout the pandemic. Similarly, while the UnitedStates kept borders open to foreign students—including those from Japan—the Japanese government
refused to reciprocate.
“The 14-day quarantine imposed by Japan wasmuch stricter than [the quarantine of] other nations
and, personally, I believe this quarantine period“BECAUSE OF THE BORDERS BEING CLOSED, WE HAVEACTUALLY HAD SOME LONG - TERM, DEGREE - SEEKING
STUDENTS WHO DECIDED THEY WERE GOING TO
ATTEND OTHER INSTITUTIONS, TAKE AN INDEFINITELEAVE OF ABSENCE, OR SIMPLY ABANDON THEIR PLANS.”

Get full details of thelatest policies and rules:
ACCJ (Re)Entry
Resources & Advocacy
accj.or.jp/reentryresources

countries. They could decide to take a leave of absence,drop out, or pursue other opportunities.
“Because of the borders being closed, we have actually had some long-term, degree-seeking students
who decided they were going to attend other institutions, take an indefinite leave of absence, or simply
abandon their plans to study here in Japan.”
And it did not have to be this way, he pointed out.
Many students who had applied to study in Japanswitched to Temple facilities elsewhere, such as theschool’s Rome campus.
Italy reported some of the worst coronavirus
outbreaks in Europe, with close to 4.75 million cases

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would have eliminated any potential problems of
new students bringing Covid-19 into Japan,” Wilson
said. He added that another tactic would have been
to require all inbound students to demonstrate thatthey had received both doses of an approved vaccine
as a precondition for receiving a student visa.

Forced Change
Businesses and other organizations with operations inJapan have had little choice but to adapt to the vastly
changed circumstances, said Katheryn Gronauer,
founder of cross-cultural training and coachingcompany Thrive Tokyo.

“For business-to-business clients, what impacted my work wasn’t necessarily the government’s
entry restrictions themselves, but the attitudes of thecompanies I have been working with in response to
the entry restrictions,” she said. “On the one hand, I
have been able to do more work with companies thatvalue online training and have trained not only thosecurrently stuck overseas who will be moving to Japan,
but also employees who will continue to be based
overseas and communicate with Japanese colleagues.
“On the other hand, some companies have chosen
to wait until their employees move to Japan before
starting the training process in person, so work withthose companies has been significantly delayed.”
Gronauer, who is a vice-chair of the ACCJ Sales
Development Committee, has worked through thechallenges by moving much of her operations online
and increasing her wellness-related coaching to meetdemand from companies that have staff working fromhome. She is optimistic that the changes that havebeen forced on businesses—such as the growing
acceptance of online training sessions—will hasten
digital awareness.

Lesson Learned?
Both Lebrun and Wilson said that their staff adapted
quickly and efficiently to new ways of working in theearly weeks and months of the pandemic. Lebrun
called the efforts of his company’s current Japanbased workforce heroic, but said they hope that, ingovernment, lessons have been learned which mightenable the business community to avoid such problems should a similar crisis occur again.
“The Japanese government has clearly prioritized certain categories of travelers, such as visitors
connected to the Olympics,” said Lebrun. “We thinkthat issuing new work visas for long-term stays
should have a higher priority, as such
employees are critical to Japan’s competitiveness and economy.
“The longer the restrictions

impact will be,” he added. “I am encouraged to hearthat the Japanese government is looking for a gradualrelaxation of restrictions beginning in November, andI hope they focus on restarting the issuance of longterm work visas for professionals.”
Temple University’s Wilson echoed this, addingthat while Japan “has no higher priority than theprotection, safety, and health of its citizens,” there
was a need to better balance the different priorities
and needs of society, which include education.
“Through the promotion and advancement ofeducation, a country has the opportunity to elevate
its citizens, improve society, enhance communication, and better prepare to tackle present and futurechallenges on a domestic and global scale,” he said.
“In today’s interconnected world, the pandemic
has made it clear that many of our biggest challenges
are global in nature. International education is vital.
It builds lasting relationships, facilitates greater
cross-cultural understanding, prepares future leaders, fosters innovation, improves competitiveness,
strengthens economies, and ensures sustainable
development,” he continued.
“Academic exchanges and study abroad are two
important keys to international education. And I worry
that the loss of study abroad students due to closed
borders will have an impact for decades to come. International education opportunities have been lost.”
And the same goes for business. ncontinue, the greater the long-term

Katheryn Gronauer‘s
Thrive Tokyo consulting,coaching, and training,which helps people adjust
to living in Japan, has had
to shift focus due to theentry restrictions.

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33

M&A

34

By Richard Katz

JAPAN
AS 196 TH
THE TRUE NATURE OF INWARD FDI AND
HOW TO IMPROVE IT

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35O

ne hundred ninety-sixth out of 196 countries.
Just behind North Korea. That’s how Japanranked in 2019 when the United Nations
Conference on Trade and Development (UNCTAD)
measured the cumulative stock of inward foreign direct
investment (FDI) as a share of gross domestic product(GDP).1 FDI ranges from foreign companies setting up
new facilities to them buying domestic companies.
What a shocking result considering the 20 years Tokyo
has spent trying to increase its cumulative stock of FDI.
Unless policymakers understand why past efforts
have failed, Tokyo is unlikely to realize the new goal itannounced in June: to hike inward FDI to 12 percent
of GDP by 2030. That would triple today’s ratio. The
main hurdle is Japan’s impediments to carrying out
the primary form of FDI, namely, foreign companies
buying healthy ones to gain a built-in labor force,
customer base, brand name, suppliers, and so forth.
Typically, in a rich country, 80 percent of inward FDI
takes the form of mergers and acquisitions (M&As).
In Japan, it’s only 14 percent.

(ACCJ) governor. Many ACCJ leaders believe that, as
listed corporations face increased pressure to focus on
profitability rather than just sales, they will increasingly focus on core competencies. Consequently, they will
hive off lackluster divisions as well as hosts of affiliatesthat some other company could operate more productively. If so, this will not only boost Japan’s growth rate,
but also greatly increase the number of companies
available for foreign purchase.
To assess these potential drivers, let’s examine
the lay of the land.

Richard Katz
New York City
correspondent for
Toyo Keizai

Sine Qua Non of Successful Reform
Increasing FDI was incorporated into Japan’s growthstrategy by Junichiro Koizumi during his time as
prime minister (2001–06). That was a welcome reversal of attitude. Hardly any country has succeededin economic reform without embracing inward FDI.
Success stories range from the developing countries
of Asia to the Eastern European transition states tomature economies. A study of 19 rich countries—

TYPICALLY, IN A RICH COUNTRY, 80 PERCENT OF INWARD FDI
TAKES THE FORM OF MERGERS AND ACQUISITIONS (M&As).
IN JAPAN, IT’S ONLY 14 PERCENT.
While the government has yet to see the light, two
new conditions may drive substantial change anyway.
One of these is a succession crisis at small andmedium-sized enterprises (SMEs). Over the coming
years, according to the Ministry of Economy, Tradeand Industry (METI), 600,000 profitable SMEs may
have to close because their owners are over age 70 andhave no successor. Up to six million jobs are at risk.
To prevent this, a 2020 interim report of thecabinet-level FDI Promotion Council advocateswhere cumulative FDI had risen from six percent of
GDP in 1980 to 44 percent by 2019—shows that inward FDI mainly lifted growth by improving output
per worker.
It is not the higher efficiency of foreign-owned
enterprises that provides the main fillip to the hostcountry. Rather, it’s the spillover effects as their
new ideas boost the performance of local suppliers,
business customers and, sometimes, even competitors. For example, when Japanese automakers took

helping these SMEs find suitable foreign partners by“facilitat[ing] business transfers between third parties,”;in other words, M&As. Unfortunately, the final report,
published in June, has purged all talk of inward M&A.
Clearly, some powerful forces feared foreign purchases
more than the closure of hundreds of thousands ofhealthy companies. Still, the fact that the proposal evenmade it to the interim report is an encouraging sign.
A second potential driver is the push for corporate
reform, as exemplified by the 2014 Stewardship Codeand the 2015 Corporate Governance Code. The latter
was proposed to the government by Nicholas Benes,
a former American Chamber of Commerce in Japan“transplant” factories to North America, Detroit
learned that it cost less to prevent defects in the firstplace than to fix them afterwards. Japanese economists, such as Yasuyuki Todo, Toshihiro Okubo, andKyoji Fukao, have found that foreign firms bringsimilar spillover benefits to Japan.
When Koizumi came to power in 2001, the stock of
inward FDI was a minuscule 1.2 percent of GDP. In 2003,
Koizumi vowed to double FDI. In 2006, he set a goal of
five percent of GDP by 2011. At first, there was marked
progress; by 2008, FDI had risen to four percent.
Then momentum stalled. Despite Prime Minister Shinzo Abe’s 2013 pledge to double FDI, as of 2019

1. UNCTAD Foreign Direct Investment: Inward and Outward Flows and Stock, Annual
https://unctadstat.unctad.org/wds/TableViewer/tableView.aspx?ReportId=96740

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

THE ACCJ JOURNAL • VOL. 58 • NO. 8

36

HOW MANY 70 - YEAR - OLD OWNERS OF SMEs WOULD REFUSETO SELL TO A FOREIGNER … IF THE GOVERNMENT OR A
BIG TRADING COMPANY MADE THE INTRODUCTION AND
VOUCHED FOR THE BUYER’S INTENTION TO HELP THEM GROWRATHER THAN ENGAGE IN MASS LAYOFFS?

the ratio had barely risen to 4.4 percent. That figure is dwarfed
by the 44 percent median ratio in other rich countries.
To make matters worse, the government glosses over how
badly it has failed. The Ministry of Finance (MOF) reported thatinward FDI climbed to ¥40 trillion in 2020, thereby ostensibly
achieving Abe’s goal. In reality, however, the 2020 figure was just
¥24 trillion, according to the International Monetary Fund (IMF),
the Organisation for Economic Co-operation and Development(OECD), and UNCTAD.
How is such a huge discrepancy possible? Two sets of numbers are approved by the IMF, but only one—called the directional
principle—is authorized for looking at a country’s FDI over time

Why Did Japan Come in Last?
FDI has soared in other countries that switched from resisting FDI
to welcoming it. In South Korea, inward FDI has leaped from two
percent of GDP before reformer Prime Minister Kim Dae-Jungcame to power in 1998 to 14 percent today. In India, the share has
jumped from 0.5 percent in 1990 to 14 percent now. In post-Communist Eastern Europe, the ratio has mushroomed from seven to
55 percent. Why, then, have Japan’s efforts failed?
In its June policy statement, the FDI Promotion Council
wrote as if Japan didn’t appeal to foreign companies. Hence, mostof its focus was on creating an “attractive business environment.”
But the premise is inaccurate.

MOST ATTRACTIVE SME TARGETS ARE OUT OF REACH BECAUSE
THEY BELONG TO CORPORATE GROUPS — THE VERTICAL
KEIRETSU (COMPANY NETWORKS).
or for comparing countries. MOF, by contrast, highlights the otherset, called the asset/liability principle. The latter has its uses, but
it also includes items having nothing to do with real FDI (e.g., loans
from overseas affiliates back to their parents in Japan). A spokesperson for MOF confirmed that such loans accounted for mostof the discrepancy. Asked about MOF’s choice of numbers, anOECD official replied: “The directional principle is better suited
to analyze the economic impact of FDI. It is the recommended
presentation for FDI statistics by country and industry.” If solving
a problem requires recognizing that you have one—in this case
low levels of inward FDI—then Tokyo is in trouble.

THE ACCJ JOURNAL • VOL. 58 • NO. 8

In survey after survey, multinational companies list Japanas a top target due to its large, affluent market, well-educatedworkforce and customer base, high technological levels, and soforth. In fact, Japan came in fourth out of 27 rich countries in
the 2020 Kearney Foreign Direct Investment Confidence Index,
an annual, global survey of senior executives conducted by the
US-based global consultancy Kearney. Scholars Takeo Hoshi andKozo Kiyota calculated that, if Japan performed like other countries with similar characteristics, the ratio of inward FDI to GDP
would have already reached a very impactful 35 percent by 2015.
In the 2021 survey, Japan slipped to fifth overall, but topped thelist for economic outlook in net terms. Business leaders were most
optimistic about Japan, Germany, Canada, and Switzerland, with
the United Arab Emirates and Australia tied for fifth.
The real problem is that Japan’s most attractive companies
are largely off limits to foreign purchasers. The press covers the
spectacular exceptions where foreign enterprises rescue failing
giants such as Nissan Motor Corporation, Sharp Corporation, andToshiba Corporation. But the data shows that most foreign investors seek good companies that can not only help their sales in Japan,
but offer resources that enhance the parent’s global expansion.
By contrast, most domestic purchases are largely rescue operations.
The foreign firms are not pursuing companies that need downsizing. In fact, the usual Japanese target for foreign acquisition has
higher profits, better technical capacity, and a greater willingness
to adopt new practices than the typical organization in its industry.
Foreign companies also select fairly sizeable targets. From 1996
to 2020, non-Japanese paid $112 million for nongroup companies
on the stock market and $60 million for unlisted ones. Domestic
buyers bought much smaller companies: group members worth
just $11 million and nongroup companies worth $30 million.
Unfortunately, the most attractive SME targets are out ofreach because they belong to corporate groups—the verticalkeiretsu (company networks). Japan’s 26,000 parents and their
56,000 affiliate companies employ 18 million people, a third ofJapan’s employees.
This does not count other attractive companies among unaffiliated subcontractors and closely allied suppliers where theparent holds no company stock. The Toyota Group, for example,
has 1,000 affiliates plus 40,000 suppliers, of which the majority
are subcontractors. From 1996 to 2000, non-Japanese were only
able to buy a trifling 57 member companies of corporate groups,
whereas they bought about 3,000 unaffiliated companies.

This obstacle is a legacy of the early postwar era, when Tokyo
restricted FDI out of fear of foreign domination. In the 1960s,
when Japan had to liberalize to join the OECD, the government
devised what it called liberalization countermeasures to create
structural impediments. These ranged from reviving crossshareholding among corporate giants and their financiers, toshoring up the horizontal and vertical keiretsu.
Under Koizumi, with input from ACCJ leaders such as Benesand despite the resistance of the Keidanren (the Japanese Business
Federation), Tokyo reformed the company law in 2007 to makeinward M&A easier. For the first time, foreign companies were allowed to use cash in so-called triangular mergers to buy 100 percent
of a Japanese company’s stock and, for the first time, they could use
their own stock to pay for a company using a triangular merger. In
both cases, they could squeeze out small holders of stock.
In a triangular merger, the foreign buyer sets up a Japanesesubsidiary as a vehicle for the purchase, and that subsidiarymust meet certain conditions. Would-be buyers still face someunwieldy rules and unfavorable tax treatment, including the way
capital gains are counted and taxed in stock swaps.
The good news is that, over time, many of these formal hurdles
in the M&A rules have been ameliorated, or companies have founda way to outflank them, according to Benes, ACCJ FDI and Global
Economic Cooperation Committee Chair Kenneth Lebrun, andformer committee co-chair Bryan Norton.
Both Lebrun and Benes have, in their professional careers,
represented companies involved in inward M&A. The reported
intention of Western Digital Corporation to use a stock swap to
pay about $20 billion for Kioxia Corporation (the chip company
spun off from Toshiba), will be a test case for the ease and cost ofusing an option that is more common and less tax-burdensome
in other countries.

Total Number of M&A Cases
1996–2020

Foreign buyers

Domestic buyers
30,98230,00025,00020,000
16,29515,00010,000

7,135

5,000
0

31

1,996

1,351

Group Member
Listed Companies

Unaffiliated

1,806

26
Group Member

UnaffiliatedUnlisted Companies
Source: RECOF M&A database: https://madb.recofdata.co.jp

THE ACCJ JOURNAL • VOL. 58 • NO. 8

37

Inward FDI: Japan vs. Others

38

Stock of inward FDI percent of GDP (1992–2019)

Japan

South Korea

India

Median OECD

50%
45%
40%
35%
30%
25%
20%
15%
10%
15%
0

1992

1996

2000

2004

2008

2012

2016

Source: UNCTAD Foreign Direct Investment: Inward and Outward Flows and Stock, Annual

Despite the remaining legal and regulatory hurdles in rules,
the biggest impediment these days, said Benes, is the reluctanceof companies to sell off divisions or affiliates to foreign strategic
buyers. Yet he added that, largely due to governance reforms, evenhere the ice is beginning to crack.
“The difference now compared with 2005 is like night andday. Domestic M&A is common and, in some cases, shareholders
have forced management’s takeover defenses to be dismantled.
This new atmosphere may be the biggest reason to expect more
FDI via M&As in the future. Still, the floodgates will open more
slowly than is optimal for Japan.”Despite this progress, many legacies of the past—from thevertical keiretsu to obsolete attitudes among some policymakers—
still curb inbound M&As. One prominent US business executive
noted how Toshiba’s management and METI used the pretextof “national security concerns” in a failed attempt to block ashareholder vote against management. He feared that the samething might occur in other cases.
Officials sometimes claim they are simply acquiescing to
the public’s fear of foreign takeovers. The reality is that the
government lags a big change in the public mood. As early as themid-2000s, 47 percent of respondents in surveys said the impactof foreign companies on the Japanese economy was positive,
whereas only eight percent thought it was negative. Just four
percent held the once-common view that foreign companies andfinanciers were “vultures” who wanted to buy Japanese companies on the cheap and then sell them to make a quick buck.
Twenty percent of respondents said that they wanted to work for
a foreign business while another 20 percent said that they did
not want to. The rest offered no opinion.
Business leaders are divided. While the Keidanren has often
been obstructionist, the more progressive Keizai Doyukai, theJapan Association of Corporate Executives, has welcomed FDI.

THE ACCJ JOURNAL • VOL. 58 • NO. 8

In 2005, during the debate over Koizumi’s Commercial Codereforms, it called for increasing inward FDI to 10 percent of GDP,
twice Koizumi’s goal. It advocated revising the tax code to allow
deferment of capital gains taxes on M&As financed via stock
swaps while warning against proposals that would impose a moredifficult capital gains tax environment. In a 2015 document, it
once again advocated better tax treatment of inbound M&As.
Keidanren, by contrast, recalled Benes, successfully lobbied
METI to make the tax treatment for cross-border stock swaps as“burdensome and difficult as possible.” At the very last minute,a senior METI official reversed the agreement that its own teamin charge had already agreed on with MOF for convenient tax
treatment. Unfortunately, the Keidanren continues to have much
more sway with the government on these matters than does the
Keizai Doyukai.

Three Drivers
Could inward FDI take a leap forward despite the government’s resistance to inward FDI? Yes, it’s possible because of three drivers.
First, as detailed above, is the sea change in attitudes among
the general public as well as parts of the business communityand some officials.
Second is the succession crisis at SMEs, also noted above.
If necessity truly does give birth to invention, this could be theentrance ramp to making inward M&A a standard tool. How many
70-year-old owners of SMEs would refuse to sell to a foreigner, lettheir business die, and leave the employees jobless if the government or a big trading company made the introduction and vouched
for the buyer’s intention to help them grow rather than engage
in mass layoffs?
Japan already has a number of companies, such as Nihon
M&A Center Inc., which arrange domestic M&As for healthy
SMEs with no successor. That has made M&As more acceptable.

So far, however, almost none of these cases have involved
foreign buyers. There is also Japan Invest, a program of
the Japan External Trade Organization (JETRO), which
actively courts foreign companies to set up greenfield
operations in Japan; but it makes no effort to recruit foreign companies to buy Japanese ones. Inbound M&A
should be added to JETRO’s mandate. Japan’s giant sogo
shosha (general trading companies) and megabanks,with their skill sets and extensive networks inside Japanand overseas, are very well suited to act as matchmakers
for inbound M&As for these SMEs. It could be a very
lucrative business for them.
Studies show that SMEs are more likely to sell toa foreign company if they see that other SMEs havedone so successfully. Hence, as foreigners buy andimprove SMEs, the process is likely to snowball.
Will better corporate governance become a driver? Many US executives expect that it will. Speakingof return on equity (ROE), one noted: “Ten years ago,
when I used the term ROE, many Japanese executives
asked me what I was talking about. Not these days.”Some analysts point to companies such as Hitachi, Ltd.
and Shiseido Japan, Co., Ltd. that sold healthy divisions
to foreign private equity (PE) firms to focus on theirmost lucrative activities. Lebrun noted that, “the stock
market has certainly rewarded companies that are
taking these steps.”
This logic may eventually bear fruit, but it willtake years to see how much impact these reforms
will have. Hitachi and Shiseido are the kind of
globally active corporations that are most likely to
improve efficiency for their own strategic reasons,not because of new governance rules. In fact, Hitachi
began divesting before the change in the two codes.
While “select and focus” has been a big buzz phrase
in boardrooms during the past decade, it’s hard tofind data measuring how much the typical corporate
giant has really implemented it, either by narrowing
the range of products or shedding affiliates. In any
case, the total number of subsidiaries and affiliates
in 2017 was more or less the same as in 2007.
In anticipation of a boom in carve-outs, KKR,
Bain Capital, LP, CVC Capital Partners, and about
80 other domestic and foreign PE firms are building
up their war chests. So far, however, the anticipatedupsurge has yet to emerge. Since 2004, there have only
been 10–20 domestic divestitures above ¥10 billion($100 million) to PE firms per year, a figure that has
not increased over time.
The typical sale has been priced at about ¥50 billion ($500 million), with the notable exception of 2017,
when a group led by Bain Capital paid $18 million for 40
percent of Toshiba’s memory unit. There has so far been
no trend increase in the total value of deals. The delay,commented consultancy Bain & Company, Inc. in a 2018
report, is due to the fact that there is still “insufficientpressure on corporates to sell quality assets” and that

FDI
Confidence
Rankings

39

2021

2020

United States

1

1

Canada22Germany33

United Kingdom

4

6

Japan

5

4

France65Australia

7

7

Italy

8

9

Spain

9

11

Switzerland

10

10

The Netherlands

11

14

China

12

8

New Zealand13

13

Sweden14

15

United Arab Emirates

15

19

Source: 2021 Kearney FDI Confidence Index®

THE ACCJ JOURNAL • VOL. 58 • NO. 8

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41

Cases and total value (2004–20)

Cases

Total Value (in trillions of Japanese yen)

24

¥3.2
¥2.8

20

¥2.4
16

¥2.0

12

¥1.6
¥1.2

8

¥0.8
4
0

¥0.4

2004

2006

2008

2010

2012

2014

2016

2018

2020

¥0

Source: Bain & Company analysis using AVCJ data. 2019–20 author’s rough estimate.

“boards and shareholders do not yet push for strategic divestitures,”i.e., selling profitable but lackluster units that don’t enhance corecompetencies. Instead, Bain & Company added, corporations aretaking easier routes to show better ROE numbers, such as stock buybacks and selling low-quality assets, namely, those that are unprofitable or suffer declining sales and a worsening competitive position.
Regardless of any rules on paper, shareholders’ power overmanagement is limited by a simple financial fact: Japan’s 5,000
biggest corporations have little need to raise money on theequity markets to fund new investments, since their internallygenerated cash flow regularly surpasses their investments in

At the 5,000 biggest corporations during 1996–2012, ROA
averaged just 3.5 percent. It rose only a smidgeon to 3.8 percent from 2013 to 2019. Worse yet, these companies increased
their profits primarily by cutting wages rather than improving
efficiency. In 2019, operating profit per worker was 70 percent
higher than in 1996, even though sales per worker were only
three percent higher.
How did companies pull that off? By cutting wages three
percent per staffer and thereby shifting a big chunk of valueadded from wages to profits. However, for an economy to behealthy, it is necessary for productivity, profits, and wages to

AS EARLY AS THE MID - 2000s, 47 PERCENT OF RESPONDENTS INSURVEYS SAID THE IMPACT OF FOREIGN COMPANIES ON THE
JAPANESE ECONOMY WAS POSITIVE, WHEREAS ONLY EIGHTPERCENT THOUGHT IT WAS NEGATIVE.
new plant and equipment. The overall decline in stable shareholders (i.e., cross-shareholders plus other management allies)
should be a force for improving shareholder power. However,as Benes points out, the Financial Services Agency (FSA) has
issued rules that make it hard for minority shareholders to act
collectively to make suggestions to management, as they can in
the United States and the UK.
Beyond that, companies can make financial measures lookbetter without any improvement in real efficiency. For example,
if companies use current profits to measure ROE or return on
assets (ROA), then the Bank of Japan’s continual lowering of interest rates will make the measures look better. However, when
ROA is measured in terms of operating profits—profits before
interest—it’s hard to find much improvement so far.

grow in tandem. Unless shareholders care how better profit
numbers are achieved, it’s not clear how increased shareholder
power would lead to more productive corporate strategies.
Perhaps changes in corporate governance rules, the succession crisis, and other drivers will eventually add up to a force
powerful enough to alter deep-seated mindsets regarding product diversification, vertical keiretsu, and sales to foreign strategic investors. Still, the likelihood is that the magnitude of change
required in inward FDI will require a concerted policy effort by
the government and business leaders. Otherwise, when 2030 arrives, Japan might still be little better than in 196th place. n
This article was adapted from Katz’s forthcoming book on reviving entrepreneurship in Japan.

THE ACCJ JOURNAL • VOL. 58 • NO. 8

TAXATION

It’s aNew World
for JCT42

How will changes to Japan’s consumption tax rules affect your business?

Presented inpartnership withB

eginning in October 2023, major changes to thelaws governing Japan’s consumption tax system
will likely impact a wide variety of businesses.
Consumers need not worry—there is no rate hikeincluded in these changes—but companies doing business in or with Japan will have more to consider.
Japanese consumption tax (JCT) is Japan’s version
of a value-added tax (VAT) or sales tax. The current rateof 10 percent (up from eight percent as of October 2019)is generally applied to goods and services provided inJapan. There are some major differences between JCT
and other VAT systems around the world, however,particularly concerning a company’s ability to claim
input JCT credits on purchases or expenses.
In a nutshell, the current system: Allows purchasers to claim an input JCT credit
even if the credit relates to goods or services
from companies not registered for JCT purposes

www.pwc.com/jp/en Permits companies, not registered for JCT purposes, technically not to be required to pay theoutput JCT they collect to the tax authorities
 Has no strict invoicing requirements, and businesses can rely on their accounting records insome circumstances
In 2023, all the above will change. Companies will
have to register, pay any output JCT collected to the tax
authorities, and issue a qualified invoice (with certain
required items stated correctly) in order for their customers to claim input JCT credits on their purchases.

Real-world Impact
What does this mean for companies doing businessin Japan?
First, it is important to note that these changes
will impact not only businesses with a physical presence in Japan but also those providing certain digital
services to Japanese customers. (In some cases, digital Determination of invoice format
 Modification of invoicing system
 Review of special cases

Actions to Take before Day 1
Identify
impactedtransactions
and processes

Internal teamalignment
1

2

Alignmenton output side3

 Including examination of
EDI/cloud transactions andmanual operations
Listen to this story:
accj.or.jp/sound

THE ACCJ JOURNAL • VOL. 58 • NO. 8

services may be taxable for JCT purposes in Japan,
even if the provider is located overseas.)
While at a high level many of the changes may be
operational in nature, there are some more nuanced
impacts that should be considered. As a first step,
companies should begin to think about whether they
are going to apply for the new registration.
While the application itself is not overly complex,
the decision to register may be a difficult one for thosebusinesses that are not otherwise obliged to remit theoutput JCT they collect to the tax authorities.
If businesses choose not to register, they will needto consider the resulting impact on their relationshipwith customers, who will lose the ability to claim an
input JCT credit.
Next, companies may need to reexamine certain
administrative processes to ensure that they canaccommodate the changes. The new rules will bring
additional bookkeeping and record-keeping require-and maintaining appropriate invoices will be mandatory to claim input JCT credits.
Under the new system, companies will need toreconsider the adequacy of their internal procedures—including those for employee expense reimbursements—as the system will require invoices
to be maintained in cases where there was no suchrequirement previously.
In addition, businesses will also have to check the
invoices actually received from vendors, registeredor non-registered, to confirm all necessary content isincluded, e.g., the vendor’s registration number. This
review process may already be a regular procedurein other VAT jurisdictions, but it is not currently soin Japan.
Further, the legal changes may impact the preparation of JCT returns, as the new system will require
some decision-making around how the final JCT liability will be calculated.

IF BUSINESSES CHOOSE NOT TO REGISTER, THEY WILL
NEED TO CONSIDER THE RESULTING IMPACT ON THEIRRELATIONSHIP WITH CUSTOMERS.
ments, so companies should make sure their enterprise resource planning systems are set up to handle
them. The needs may include alignment of accounting systems with invoicing systems, alteration ofelectronic data interchange systems, and more. This
may also be a good time for companies to consider
whether their systems and processes are compliant
with Japanese e-storage rules if accounting records
are being maintained in soft, rather than hard, copy.

More Things to Consider
Apart from the need for registration and to makechanges to the content of a qualified invoice, complying with the new invoicing system is likely to be easierfor sellers than purchasers. More changes will be
required on the purchase/expense side, as receiving

While the qualified invoice system itself will
go live in October 2023, the tax authorities began
accepting applications for registration by vendors
on October 1 of this year. As the tax authorities will
also begin to publish information about registeredcompanies on a dedicated website, the expectationis that many will opt for this early registration. For
companies that wish to be compliant with the new
system by October 2023, the application should besubmitted by the end of March 2023 at the latest.
The new rules will have a pervasive influence over
operations and systems. Given that businesses arelikely to need professional support to prepare for all thechanges, and with the application window for vendor
registration having opened on October 1, now would bea good time to begin preparation. n

43

Learn more
Join us for a special
event on December 20
with Tsuyoshi Mizoguchi
and James Subin of
PwC Tax Japan
Hosted by the ACCJ
Taxation Committee
and the Independent
Business Committee

Register:accj.or.jp/accj-events

 Selection of JCT calculation method
 Align with accounting/invoicing systems

Alignment
on input side
4

Registration
as qualified
invoice issuer

Preparation
for tax filing5 Internal process/systems forvalidation of invoices
 E-archiving compliance6 To become a registrant by Day 1,
the application should be filed byMarch 31, 2023

THE ACCJ JOURNAL • VOL. 58 • NO. 8

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SKILLS

By Hoang Thi Lien

CPA and 4IR

45

What accountants need to know to thrive during the Fourth Industrial RevolutionT

he term Fourth Industrial Revolution (4IR)
was first used in English in 2016 by Klaus Schwab,
the founder of the World Economic Forum,
inspired by the German “Industrie 4.0,” coined in 2011at Hannover Messe by Professor Wolfgang Wahlster,
director and CEO of the German Research Center
for Artificial Intelligence (AI). In his book of the same
name, Schwab describes how the 4IR is being ushered
in by shifts and trends. These include AI, Big Data,
the Internet of Things, blockchain, and machinelearning—all of which allow us to automate and gain
greater insight from many traditional processes.
The 4IR is bringing great opportunities and challenges to many business sectors, including accounting and auditing. This requires employees to be more
knowledgeable about their area of expertise and proficient in languages, as well as to develop soft skills. Hereare some key things that certified public accountants(CPAs) need to know to thrive in the years to come.

To become a future-proof professional, we need to be flexible
and embrace innovation.
How is 4IR changing accounting and auditing?
Instead of manually dealing with traditional bookkeeping and auditing tasks, CPAs are learning touse new software and technologies. The benefits
are numerous and could improve relationships withclients by:
 Reducing repetitive tasks, leaving more time forother work and interaction with clients
 Allowing files to be accessed, edited, and controlled from anywhere via cloud-based systems
 Providing greater ease, speed, and accuracy whenmanaging client data
 Greatly enhancing security and compliance Equipping CPAs to answer client questions,provide feedback, or give advice instantly
 Bringing greater transparency to a client’s financial insights
How might the professions change?
Accountants may leave bookkeeping and stewardshipto become strategic business partners. As automation
increases, CPAs will need the ability to analyze, interpret, and use the output generated by these technologies to make strategic and operational decisions.

Auditors won’t be left behind in the 4IR. Instead,technology will not only assist in improving the quality of audit performance and data analysis, but also
in giving clients better value-added feedback andsuperior recommendations.
How can CPAs adapt to the change?
1. Keep learning
Rapid changes in accounting and auditing practices,
as well as in technology, require that individuals
continuously learn. As a result, they can achieve theircareer goals, contribute to the organization, andprovide value to clients.
As an international auditing firm, Grant Thornton
is taking the lead in utilizing new technology toenhance audit quality and efficiency. Grant Thornton
also annually provides training programs to help
employees update their knowledge of tax regulations,financial reporting standards, auditing best practices,
relevant laws and regulations, and technology.
In my opinion, the 4IR will bring more opportunities for accountants and auditors with international
qualifications. Certificates such as those from the
Association of Chartered Certified Accountants, CPA
Australia, and the American Institute of Certified
Public Accountants allow accountants and auditors
to maximize their abilities and improve the competitiveness of human resources in the field of accounting and auditing.
2. Think radically
As professionals, we need to be open to profoundchanges. Research shows that humans and computers working together produce better results thancomputers alone. Moreover, we need to think about

Presented inpartnership with

Hoang Thi Lienis an audit seniorassociate at Grant
Thornton Vietnam anda secondee to the International Departmentin the Osaka office ofGrant Thornton Japanwww.grantthornton.jp/en
For more information,please contact Grant Thornton
Japan at info@jp.gt.com.

how we are going to take advantage of technology
to maximize traits such as skepticism, leadership,
teamwork, personal relations, and creativity that are
beneficial to auditing and accounting careers.
3. Be adaptable
To remain relevant in an ever-evolving digital world,
we must embrace these changes. Therefore, adaptability and agility are considered the most important
soft skills for accountants and auditors. These skills
play a vital role in ensuring that accountants andauditors can adapt to a changing working environment and to the challenges emerging from evolving
business models.
To become a future-proof professional, we need
to be flexible and embrace innovation. n

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

THE ACCJ JOURNAL • VOL. 58 • NO. 8

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 November 9, 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

Novartis

Aflac

GE JapanNTT

AIG Companies in Japan

Gensler and Associates/International, Ltd.

Oak Lawn Marketing, Inc.

Amazon Japan G.K.

Gilead Sciences K.K.

Oshidori-MGA Japan K.K.

Amway Japan G.K.

Goldman Sachs Japan Co., Ltd.

P&G Japan G.K.

AstraZeneca K.K.

GR Japan K.K.

Pattern Energy Group LP

Asurion Japan Holdings G.K.

Hard Rock Japan LLC

Pfizer Japan Inc.

Bank of America

HiltonPrudential Financial, Inc.

Bayer Yakuhin, Ltd.

IBM Japan, Ltd.

PwC Japan

Bloomberg L.P.

IHG ANA Hotels Group Japan

Qualcomm Japan LLC

Boeing Japan K.K.

IQVIA

Randstad K.K.

Bristol-Myers Squibb K.K.

Johnson & Johnson Family of Companies

Robert Walters Japan K.K.

Brookfield Asset Management

KPMG

salesforce.com Co., Ltd.

Carlyle Japan LLC

Kraft Heinz Japan

Squire Patton Boggs

Caterpillar

Lenovo Japan Ltd.

State Street

Chevron International Gas Inc. Japan Branch

Lockheed Martin

Stryker Japan K.K.

Citigroup

Mastercard Japan K.K.

Uber Japan Co., Ltd.

Coca-Cola (Japan) Co., Ltd.

McKinsey & Company, Inc. Japan

Visa Worldwide (Japan) Co., Ltd.

Cummins Japan Ltd.

MetLifeWalmart Japan/Seiyu

Deloitte Touche Tohmatsu LLC

Microsoft Japan Co., Ltd.

The Walt Disney Company (Japan) Ltd.

Delta Air Lines, Inc.

Mitsuuroko Group Holdings Co., Ltd.

Western Digital Japan

Discovery Japan, Inc.

Morgan, Lewis, & Bockius LLPWhite & Case LLP

ELC Japan K.K.

Morgan Stanley Japan Holdings Co., Ltd.

Zimmer Biomet G.K.

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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