Archive for June, 2010

How cheap is your love? Diamond appraiser hit

Monday, June 28th, 2010

The prices of love

The prices of love

In May, the Mainichi Shimbun reported that the Gemmological Association of All Japan Co. Ltd., Japan’s largest diamond appraisal outfit, had been accused of purposely overappraising gems. Within the jewelry industry, the news caused quite a stir, since prices are based on appraisals. GAAJ immediately blasted the report as being “not based on true facts,” and said the criticism stemmed from the company’s attempt to readjust its standards with regard to color variations. According to a press release, the GAAJ had been criticized earlier for tending to downgrade diamonds whose color “sat very close to the borders” between grades, and so endeavored to correct the problem, presumably by adjusting the appraisal criteria upward.

Nevertheless, the Association of Gemmological Laboratories Japan has said it will reappraise for free any diamonds that were appraised by GAAJ, in case the owners of those diamonds suspect they may not be worth as much as they thought. Though the monetary value of a diamond is based on “the four C’s” — carat, cut, color and clarity — its intrinsic value is less easy to determine since, for the most part, diamonds are given as tokens of the giver’s love. To a woman who receives a diamond engagement ring from a man, is the love she derives from the stone itself any less intense if she learns that the grade of the color is below what is indicated on the accompanying appraisal certificate? Apparently, the Japanese gem industry thinks so. As one insider told the Asahi Shimbun, “We must work more sincerely so as not to betray the love of the person who gives a diamond.”

Japan is the second biggest diamond market in the world, after the United States, and the bulk of sales are diamond engagement rings. Ninety percent of the engagement rings purchased in Japan have diamond settings. Though diamonds are forever, the diamond engagement ring business has only been around since the beginning of the 20th century, when De Beers, the largest diamond mining and trading company in the world, spun off Forevermark, the company’s retail branch, which not only came up with the “a diamond is forever” motto in 1947, but single-handedly connected diamonds with the idea of everlasting love and commitment. However, it wasn’t until the late ’60s that the idea came to Japan. In 1966, only 6 percent of Japanese men gave diamond engagement rings to their fiancées, and in 1967 De Beers started advertising in magazines, but the most effective promotional tool was advertisements in movie theaters, starting in 1973. The commercials always featured a young Western couple with the man giving the woman a diamond ring. At the time, movies, especially Hollywood movies, were the standard “date course” for young Japanese couples, and the idea caught on quickly. Central to the ad’s purposes was the advice that the appropriate cost of a ring should be about three times the giver’s monthly salary. This number was arbitrary. In the U.S., the advised cost was pegged at twice a person’s monthly salary, but in Japan odd numbers are considered auspicious, and five months’ salary was thought to be too much.

Diamond appraisers started to be trained in Japan in the early ’70s to provide certificates guaranteeing quality with every diamond sold. By the height of the late ’80s bubble era, diamond sales were close to ¥2 trillion annually, but now it’s only about ¥930 billion. In the meantime, the number of diamond appraisal companies has increased, and the competition among them has become desperate in a shrinking market. Whether or not this competition is behind the accusations of overestimating quality on the part of GAAJ, it isn’t clear. According to Mainichi, AGL checked 1,052 diamonds certified by GAAJ and found 139 of them to be over-valued, 27 in the category of color by as much as two grades. The overevaluations occurred between February 2007 and October 2008, and if you think you have a suspect gem (check your certificate), you can go to the AGL home page and find out.

What does it mean to the average consumer? A drop in grade usually translates as decrease in price of ¥20,000 to ¥40,000, but as one jewelry blogger mentioned, what you pay for a diamond engagement ring has more to do with where you buy it than with the appraisal. The thing is, diamonds appraised by GAAJ tend to sell for less than diamonds of the exact same grade appraised by other companies. Also, many people bargain with jewelry stores for engagement rings, so there’s no “set value” for a diamond of a particular grade. In any case, if you think the false appraisal of your diamond engagement ring devalues your relationship with your significant other, you probably need your relationship reappraised as well.

New government bonds attempt to play it safe

Friday, June 25th, 2010

Investing can be a beach

Investing is a beach

For the first time in four years, the Ministry of Finance is issuing a new government bond product. Starting this month you can buy fixed-rate, 3-year bonds starting at denominations of ¥10,000. The product is specifically aimed at average consumers, so they are “easy to buy” at banks and brokerage houses. The annual interest rate is 0.19 percent, compounded semiannually, which, after the 20 percent tax, comes to 0.152 percent. New bonds are issued monthly, and can be canceled without penalty after one year.

Compared to bank time deposits, it may not seem like much of a deal to the average saver. A three-year savings plan, albeit for a minimum deposit of ¥1 million, is running about 0.43 percent right now, but the MOF seems to think the new bond will be a popular product. (The MOF also offers its usual 5-year, fixed rate bond at 0.42 percent, and its 10-year, variable rate bond at 0.48 percent. These are issued four times a year.) After the so-called Lehman Brothers shock, securities companies surprisingly sold a lot of government bonds at about the same interest rate, apparently because consumers thought it was a safe investment in the midst of all that financial uncertainty. The MOF hopes this feeling is still at large, because it needs a more stable investment base.

As of the end of 2009, the Bank of Japan estimates that ¥830 trillion of Japan’s national debt is in government bonds, of which ¥340 trillion is held by financial institutions; ¥170 trillion by insurance companies and pension funds; ¥90 trillion by various government entities, central and local; and ¥35 trillion by individuals, accounting for only 4 percent of the total, which is even less than the percentage held by foreign investors (about ¥50 trillion). The MOF wants to increase the amount of bonds held by individuals because bonds for individuals are non-marketable securities. Their value is fixed, since they cannot be traded on the bond market.

According to experts, the MOF is trying to avoid a Greece-like meltdown. If interest rates go up, the value of government bonds drops and everybody rushes to sell theirs, as foreign investors did in Greece. It’s thought that Japan is sort of safe since more than 90 percent of its government bonds are held domestically. Not so, says outspoken economist Noriko Hama in the Asahi Shimbun, since the vast majority of these bondholders answer to stockholders, so they are just as likely to sell if interest rates go up. Also, banks right now buy a lot of bonds because they don’t have any loan business, but if the economy recovers, lending will increase and their purchase of bonds will drop.

The idea is that the more non-marketable bonds the government sells, the more stable the debt situation becomes, but that’s assuming the economy will remain in the doldrums. The money that financial institutions, including Japan Post, are using to buy bonds and not giving out as loans are taken from people’s savings and other investments, so it’s all the same cash circulating in one enormous self-perpetuating loop that doesn’t really get the economy moving.

Who pays for sumo?

Sunday, June 20th, 2010

Show me the money!

Show me the money!

The ongoing gambling and gangster scandals in the world of professional sumo has drawn attention to the sport’s rather shady relationship to money. Though sumo is often called Japan’s “national sport” there is no actual law that says it is, and most people probably think it’s the national sport because the main venue for grand sumo tournaments is the Kokugikan (National Sports Hall) in Ryogoku, Tokyo. However, the Japan Sumo Association is a non-profit organization and thus the money it makes is not taxed. In addition, rikishi (sumo wrestlers) are exempt from paying taxes on cash gifts if they receive them from individual supporters (gifts from corporate supporters are taxed). And there are special tax rules for rikishi that mean they pay slightly less in income tax than what the average person who makes the same amount of money would pay.

Still, rikishi earn less than other professional athletes on average. The highest rank of yokozuna (grand champion) receives a salary of ¥2,820,000 a month, which is a lot, but as one sports blogger put it, even a “benchwarmer” on a professional baseball team in Japan makes about ¥300 million a year. Top rikishi can earn about ¥100 million a year, what with gifts and endorsements and performance bonuses. And of course they win cash prizes if they do well in a tournament.

They can also win kenshokin, prize money offered by companies to winners of specified bouts. If you’ve ever been to a sumo tournament, you’ve seen the parade of kenshomaku (sashes) around the edge of the dohyo (ring) before select matches. The sashes carry advertisements for companies, and each one represents a prize of ¥60,000. The more topical the bout, the more banners there are and thus the higher the kenshokin that the winner takes home; that is, after the JSA takes ¥5,000 from each kenshokin for itself and the tax man takes about half of what’s left. The reason you don’t see these on TV, at least not clearly, is because NHK, which has the exclusive right to broadcast sumo tournaments, is a public broadcaster and thus cannot show advertising. They tend to pull back the cameras or superimpose something over the scene when the sashes are being paraded.

According to Wikipedia, the record number of kenshokin for one match is 51, which was at last year’s September grand sumo tournament and was won by recently retired yokozuna Asashoryu, who defeated another yokozuna, Hakuho. The record number of kenshokin for a single tournament was 1,021 at the September Basho of 2006. Asashoryu also holds the record for the most kenshokin won by a single rikishi in a single tournament, 290 at the New Year’s Basho of 2006.

These prizes may take a hit, as the food maker Nagatanien, which has been one of the largest providers of kenshokin since 2000, announced that it is reducing its contributions for the Summer Basho, which starts July 11. The company may even withdraw, according to an article in the Asahi Shimbun, if it determines that the JSA is not handling the gambling and gangster scandals appropriately. In recent years Nagatanien has offered 200 kenshokin at each tournament, which means it spends a total of ¥72 million a year on them. McDonald’s and Morinaga are also big kenshokin contributors, and they may follow Nagatanien’s lead.

In the scheme of things this money seems like a drop in the bucket but it’s significant. Sumo may be the “national sport” but it doesn’t receive money directly from the government, and sumo heya (stables) don’t accept sponsorship, only individual rikishi do. JSA gets its money from NHK, about ¥2 billion a year for the rights, and ticket sales. And maybe from somewhere else, but that’s what the scandal is about.

Matsuzakaya finds a reason to have a sale

Friday, June 18th, 2010

A reason to stand in line

A reason to stand in line

The neologism “wakeari” has entered the Japanese vocabulary in a big way, and for a specific purpose. It means “there’s a reason,” and has come to be used in retail for items that, for some reason, cannot be sold at normal prices. In terms of food it might refer to slightly damaged canned goods, or perishables that are coming close to their expiration dates (or even past their expiration dates), or vegetables that are not regulation size or shape. The word has become so popular among consumers that there are actually websites and special retailers who only sell wakeari items, with the implication that maybe they are damaged or irregular on purpose. And if you think carefully about it, anything can be used as a “reason,” including the notion that something was probably overpriced in the first place. (That’s why you occasionally see wakeari condominiums.)

Keeping this last thought in mind, department stores, which are quickly going the way of the dinosaurs, have finally succumbed to the wakeari craze. From June 16 to 22, Matsuzakaya in Ueno is having a wakeari sale, mostly of food items. Though department stores do have occasional sales, they tend to be limited fashion items that have to be sold before the next season starts, which means sale items are synonymous with unpopular items. In principle, the bargain sale as a marketing tool runs counter to the image of a Japanese department store. Department stores tend to sell higher-end merchandise at prices suggested by the manufacturer, and the more bargain sales you have the more your base customers will come to expect them, and thus they wait for them.

Matsuzakaya’s wakeari sale is being closely watched by other department stores because of the scale: Some 400,000 items comprising 1,000 different product types, from expensive canned crab, to canned exotic juices and expensive rice crackers. There are some T-shirts, kitchenware and jewelry, but overwhelmingly the items on sale are food, and they are not really leftover items that have to go. They are mostly merchandise that Matsuzakaya has purchased expressly for this sale. According to the Asahi Shimbun, there are even some items that were returned to wholesalers because they weren’t sold and Matsuzakaya bought them back just for this sale, presumably at lower prices. The savings range from 30 to 70 percent off the suggested retail prices. Some of the items are slightly damaged and some are approaching their sell-by dates, but the main “reason” all this stuff is on sale is to get people into the store. If the sale is a success they will do it again, and every other department store will probably follow suit.

So far, it seems to be a success. We visited the 6th floor of the Ueno Matsuzakaya store, where the sale is being carried out, and a line of people snaked all the way to the other end of the floor. They were only letting in about two dozen people at a time.

Tap water gains for economic not environmental reasons

Monday, June 14th, 2010

Despite a worldwide environmental movement to wean people off of bottled water, which depletes natural water reserves that localities depend on and requires unneeded amounts of energy to package and distribute, Japanese consumer preference for “mineral water” in PET bottle continues unabated, according the web version of the Nihon Keizai Shimbun. Surveys indicate that the majority of people think that bottled water is “safer and healthier” than tap water, despite the fact that local utilities have vastly improved their filtering technologies. Several years ago, in fact, Tokyo’s own waterworks started bottling tap water and selling it at train kiosks and convenient stores under the name Tokyo Sui (Tokyo Water) to promote the idea that the city’s tap water is not only perfectly safe to drink, but good-tasting as well.

For here or to go?

For here or to go?

The whole issue of “oishii mizu” (delicious water) is one that Westerners may find difficult to understand. Most people disliked pre-filtration tap water because it had a taste, usually due to chemicals introduced to kill dangerous bacteria when the water is transported long distances. That’s why the tap water in Los Angeles, which was built on a desert, traditionally tasted awful and the water in San Franciso, which comes from nearby mountains, had no taste.

Over the past two decades Tokyo has gone to great lengths to improve its water supply by cleaning up reservoirs and watersheds, devising new filtering methods, replacing pipes and reducing the use of chlorine and other disinfectants. The more difficult problem is getting people to change their outlook, which is why the city bottled its own water and sold it. Apparently, it didn’t work as well as hoped. In the Nikkei survey, more than half of the respondents, who ranged in age from 20 to 69, said they drink bottled water “often” or “sometimes.” Among the most common reasons for drinking bottled water was that it either “tastes better” or is “healthier.” Among those who said they “don’t like tap water,” the highest percentage were people in their 20s, about 57 percent.

However, the statistics become more interesting when money is involved. Sixty percent of the respondents say they spend “less than ¥500 a week” on bottled water, while 26 percent say they spend “between ¥500 and ¥1,000.” The most popular brands, in order, were Suntory Tennensui, Asahi’s Rokko no Oishii Mizu and Coca Cola’s I Lohas, which topped the list of people under 50 when asked which brand they intended to drink more of. The term “lohas” has become associated with environmentally friendly products, thus indicating that many people who drink bottled water are conscious of conservation issues.

Such people, of course, should be the natural market for tap water, but apparently they still have their prejudices. In fact, consumption of tap water seems to be increasing, though it’s difficult to measure such things. The Japan Purifier Association, which represents companies that manufacture home water filtering devices, said that sales of “container-type” purifiers more than doubled between 2007 and 2008 and has continued to rise.

The most popular brand is Brita, a pitcher with a filter inside that you just fill with tap water. A recent article in the Asahi Shimbun included comments from Brita users who say they bought the device because they were spending too much money on bottled water. The retail cost of the pitcher starts at about ¥3,500, and one filter cartridge, which starts at about ¥900, lasts two months.

If they want to save money they don’t need to buy something to make their tap water potable, because it’s already potable. In the same Asahi article a representative of the Japan Waterworks Association said that for most regions in Japan home or portable purifiers are redundant, because the water is already about as pure as can be. He wants his own association to carry out more effective public relations to make people aware of this fact, but it’s difficult to compete with large beverage companies who have convinced the public that bottled water is automatically superior. (Suntory is currently running a TV commercial in which a housewife advocates using bottled water to make “more delicious rice”)

Of course, all it should take to convince someone to switch to tap water is a simple taste test, but prejudices can be powerful things. People don’t always believe what’s right there in front of their eyes, or on their tongues.

Annals of cheap: UR apartments to die for

Thursday, June 10th, 2010

Who ya gonna call?

Who ya gonna call?

Not to keep dwelling on the morbid, but one of the inevitable consequences of a rapidly aging society is that people dying alone in their homes is becoming more of a conspicuous phenomenon. There’s a word for it in Japanese — kodokushi — and it carries a particularly depressing idea, since it’s usually used when someone dies and no one discovers the body right away.

As Japan became a more atomized society following the economic growth period of the ’60s and ’70s, more and more old people have been living in urban apartments by themselves, cut off from their communities and even from relatives. Isolated neighborhood groups often form patrols that keep an eye on elderly people living alone, checking up on them regularly to make sure they’re all right. One firm that works with UR, the nation’s public housing corporation, helps older tenants who find it difficult to move about. For ¥500 a month they take out their garbage for them, a service that doubles as a kind of patrol for obvious reasons.

UR, which reported 613 cases of kodokushi in its 750,000 nationwide units in 2008, has a stake in the issue because many of the people who moved into their residences decades ago are still living there, which means the number of kodukushi cases will only increase. The problem for UR is that Japanese people are very averse to living in places where people have died. In fact, there’s a law that says if you are selling your house and someone died there either by foul play or suicide, you have to mention it to perspective buyers. (If it was natural causes you’re off the hook.) UR, or at least the part of UR that covers Tokyo and the surrounding prefectures, has taken the bull by the horns, as it were, and is actually offering “special rental apartments” where the previous tenant died on the premises, called tokubetsu boshu jutaku, at half price for one or two years. So if you don’t believe in ghosts or aren’t otherwise superstitious, there are bargains to be had.

Most of these available units are older, less appealing places, but, for instance, a 2DK in Koto Ward in Tokyo, which would normally rent for ¥80,000 a month, is now available for ¥40,000 a month for at least a year. If you go further out to Machida, you can get a 2DK for as little as ¥30,450. And keep in mind that the security deposit (there is no key money or agent fees for UR), which is usually three months rent’s worth, is also based on this half-price. You can browse these units on the UR home page, but you have to apply for them in person at a UR sales office.

Beyond belief: Graveyard business expands

Sunday, June 6th, 2010

Dying to get in: The new graveyard at Ishihama Shrine

People are dying to get into the new graveyard at Ishihama Shrine

Several years ago the Ishihama Shrine, located in Arakawa Ward along the Sumida River, announced it would expand its graveyard, prompting protests from local residents that reflects the usual cultural queasiness about anything associated with death. In this case it was manifested in a straightforward economic concern: The local homeowners and small businesses were afraid that the cemetery might bring down their property values.

It may be a valid complaint given that the expansion was carried out for economic purposes. According to the man in charge of selling plots, his company saw a business opportunity and suggested the expansion to the shrine. The company, Nichiryoku, would develop the small adjoining plot of land and sell squares of it along with monuments to people who needed family graveyards.

We asked if only people who followed the Shinto religion are allowed to buy plots, and he said that Buddhists and even Christians were welcome as well, meaning that, while the land was owned by a Shinto organization, the graveyard was, in effect, nondenominational. That might sound mercenary or even hypocritical, since Shinto burial practices (no incense, no memorial) are different from Buddhist practices, but religion has always been fluid in Japan. Spiritual activities have more to do with circumstances than with belief systems.

Public cemeteries in Japan are nonaffiliated, of course, but an increasing number of private and religion-associated ones are opening their graves, so to speak, to anyone with cash. In fact, terms of ownership seem to be based more on financial considerations than on spiritual ones. For instance, family graves, regardless of religion, are in principle reserved only for the immediate family, meaning the head of household, his wife and his eldest male heir, who “takes over” the grave. The heir’s wife and first-born male child then can have their ashes interred in the grave, but other children have to start family graves of their own. This lineage system guarantees that the grave is maintained.

The plot is “bought” for a sum, but it is more like a charge for usage in perpetuity (eidan shiyoryo). In addition, the heir pays a yearly fee to the shrine or temple or public/private organization administering the cemetery and takes care of it himself. If fees are not paid for a set number of years and the heir cannot be contacted, the cemetery can dismantle the memorial, remove the remains to a common grave and sell the plot to someone else. That’s why so many heirs move their family graves when they themselves move to a new city.

Prices for plots in Ishihama’s new graveyard range from ¥740,000 to ¥950,000, and sizes start at .55 sq. meters. The cost includes the memorial, which explains why the cemetery, half full at the moment, looks more like a storage area for memorials than a graveyard. The yearly kanri-hi (management fee) is ¥12,000, which seems to be the going price in central Tokyo. The annual charges at a private, nonaffiliated cemetery in Machida start at ¥3,600, but that cemetery also offers a wider variety of grave options, from the tiny (.425 sq. meters: ¥770,000) to the turf-embroidered (1.25 sq. meters: ¥1,290,000).

This stamp's for you

This stamp’s for you

Public graveyards can get expensive as well. As with residential and commercial properties it’s all about location. The famous Aoyama Cemetery charges between ¥4.8 and ¥10 million per plot and the average price of a spot at Yanaka Cemetery, where the dead include some of Japan’s most famous historical figures, is about ¥3 million. Unlike a lot of new graveyards, these two have trees and flowers and benches, which is probably why there’s a waiting list.

Most for-profit cemeteries make up for this lack of pastoral filigree by offering big parking lots and facilities where visitors can have lunch and take a rest. And, of course, the farther you get from the center of town, the cheaper it gets, but you have to keep in mind that since Japanese people are cremated, regardless of religion, postage-stamp graves are the norm. If you want something to accomodate a coffin you’ll pay accordingly and probably have to look around a bit.

Of course, Ishihama Shrine gets a substantial tax-free piece of the action when Nichiryoku sells a plot. And it isn’t just Shintoism that makes a killing from the grave business. When Buddhist remains are interred, the associated temple gives the deceased a special sacred name, and the more you pay, the “better” the name. So while you still can’t take it with you, at least you can show other souls in the afterlife that you once had it.

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