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Local municipalities vie for your ‘hometown tax’

Monday, August 11th, 2014

Screen shot of web portal site for products being offered as gifts in exchange for "hometown tax" donations

Screen shot of web portal site for products being offered as gifts in exchange for “hometown tax” donations

The ruling Liberal Democratic Party is already thinking about next year’s local government elections and in order to help their candidates is studying a possible increase in the maximum tax deduction afforded to people who contribute “hometown taxes” (furusato nozei), a system that was implemented in 2008 to help regional municipalities struggling with budget shortfalls.

Because an increasing portion of the population is concentrated in large metropolitan areas, local government tax bases are eroding. The hometown tax diverts some of the money people pay to big city governments to these smaller municipalities in the form of donations. In order to make the system attractive to taxpayers, the central government offered deductions not only for national income taxes, but also for local income taxes.

Taxpayers can donate funds to a local government that is different from the one where they live, and despite the name of the system it doesn’t have to be their hometown. It can be any locality. Say you live in Tokyo but you want to help out a town in Fukushima devastated in the disaster of 2011, something that many people have used the furusato nozei to do. If you donate 20,000 to that town in Fukushima through the hometown tax system you can get a deduction off your national tax bill this year, and since local income taxes are based on national income taxes, this deduction, as well as a separate deduction for charitable donations, is reflected in your local tax bill the following year, which will be lower that it would have been otherwise as a result. So for the ¥20,000 donation, the taxpayer ends up with an ¥18,000 tax savings (¥20,000 minus a ¥2,000 handling fee).

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Inflation Watch: Food manufacturers offering less

Saturday, August 2nd, 2014

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Use your noodle: ¥198 regular price 5-pack of Aeon instant ramen vs. ¥198 sale price 3-pack of Sapporo Ichiban instant chanpon

Economists in Japan have been carefully scrutinizing buying trends since the consumption tax was raised in April. Everyone has noted that buying has dipped by at least 4 percent since the 3 percent tax hike went into effect, but many think that it will rebound later in the year since so many consumers bought a lot of stuff just before the hike. And it is also true that some prices of goods and services have gone up, as well, especially food, but for the most part makers have tried to keep them the same, despite the fact that the lower yen has resulted in higher prices for imported ingredients, not to mention increased demand for all food products in developing countries. In addition, the higher price of oil has boosted the cost for packaging.

There’s, of course, one tried-and-true solution to the problem of stabilizing resale prices when costs go up: reducing volume. Rather than raise prices, especially at a time when consumers are specially sensitive to any change, manufacturers trim the amount being sold, according to Asahi Shimbun. Nippon Ham, for instance, did not change prices on 82 items in its product line but did reduce the amount being sold by an average of 10 percent. The company’s European sausage used to come in bags of 7 weighing 140 grams. For the same price, it’s now 6 sausages, or 120 grams. The company’s main competitor, Ito Ham, however, has decided to take a chance and increased the price of its pork products, saying that it was inevitable because worldwide demand for pork has risen recently.

The confection industry has been affected as well. Lotte cut the volume and weight of 6 products. Meiji shrunk 10 of its chocolate items, citing a 20 percent increase in cocoa prices from two years ago: Its best-selling Almond Chocolate treat went from 23 pieces to 21.

Chain restaurants are also dealing with the environment. Ringer Hut has increased prices on a number of its chanpon dishes by 3 to 5 percent, mainly due to higher prices for shrimp grown in Thailand, as well as higher transportation costs.

CONTINUE READING about cost-cutting measures →

A modest proposal for alleviating the endangerment of Japanese eels

Sunday, July 27th, 2014

Fish fans: People waiting in line at a popular eel restaurant near Minami Senju Station in Tokyo

Fish fans: People waiting in line at a popular eel restaurant near Minami Senju Station in Tokyo

This year, doyo no ushi no hi, the “day of the ox,” falls on July 29 in accordance with the old Chinese calendar. Counterintuitively, Japanese people don’t celebrate the day by eating beef but rather eel, because, supposedly, eel, or unagi, helps maintain a person’s stamina during the hottest days of summer. But it should be noted that the custom of eating eel is commercial in origin. According to legend, the tradition started in the 18th century in Hino, Western Tokyo, where nobody ate eel because the fish was a kind of local deity. An inventor named Hiraga Gennai came up with a publicity campaign to get people to eat unagi on doyo no ushi no hi because both ushi and unagi start with the “u” sound. The campaign worked, and now everybody eats unagi on doyo no ushi no hi. Well, maybe not everybody, but enough to drive Japanese eel to the brink of extinction.

Japanese eel for consumption are caught in the wild as fry and transported to eel farms throughout Asia. Eel is now on the International Union for Conservation of Nature‘s endangered red list, and so the environment ministry made the same designation on its list of at-risk species. However, this information has been tempered somewhat lately by media reports saying that the eel catch was higher this past year, thus driving the price of imported eel, mainly from China and Taiwan, down considerably. Consequently, eel dishes on the 29th may be cheaper in some places than they were last year.

Unagi fans will see this as good news, but it isn’t. The reason eel is on the endangered list is that Japanese people catch and eat too much of the fish, which wasn’t the case before the mid-1980s, when eel was considered something of a delicacy eaten only on special occasions. In other words, the cheaper the eel, the more likely eel stocks will be decimated.

CONTINUE READING about the unagi shortage →

Japanese franchises cut loose by overseas brands after serving their purpose

Sunday, July 20th, 2014

Burberry outlet run by Sanyo Shokai in Matsuzakaya department store in Okachimachi.

Burberry outlet run by Sanyo Shokai in Matsuzakaya department store in Okachimachi.

According to Asahi Shimbun’s online magazine Webronza, the U.K. apparel maker Burberry has decided to end its long-standing licensing agreement with Japan’s Sanyo Shokai in order to develop its own retail outlets in Japan. Sanyo first signed the agreement in 1965, and since then has made Burberry one of the most consistently successful foreign brands in Japan by tailoring the company’s line to Japanese bodies and tastes. Though Burberry’s famous tartan check pattern is at the heart of Japan’s love for the brand — owning a Burberry scarf was, for a time, a rite of passage for Japanese high school girls— Sanyo’s main achievement was making the Burberry trench coat a timeless fashion favorite.

In 2006, an American, Angela Ahrendts, became the CEO of Burberry and worked to return the company to its roots as a high-end brand. She downplayed the tartan check pattern, reducing its use to only 10 percent of the product line, and concentrated more on new, original designs. From 2006 to 2013, when Ahrendts left to become senior vice president of retail and online at Apple, the company doubled its sales revenues and tripled its stock price. One of Ahrendts’ main concerns was doing away with all the licensing agreements the company had with regional companies. She bought out the Spanish franchise and opened directly owned stores in Spain that have become just as successful if not more so than the franchise business.

As it stands, of Burberry’s ¥349 billion annual sales, only ¥18.5 billion comes from franchises, or 3 percent, but after Spain was cut loose, Japan accounts for 60 percent of all franchise business. Burberry obviously thinks it can make more money dealing directly with Japanese consumers, specifically high-end Japanese consumers, since an imported Burberry trench coat costs as much as ¥230,000, while the trench coats that Sanyo makes under its Black (men) and Blue (women) Burberry labels only cost half as much.

Sanyo isn’t the first Japanese company that has worked hard and long to successfully popularize a foreign brand among domestic consumers only to be let go by the foreign licensor. Adidas did the same thing with Descente in 1998, and Mercedes Benz eventually took over Japanese sales of its cars from Yanase, who no longer has the import license for Mercedes, only a sales license. However, in Yanase’s case the situation was the opposite of Sanyo’s. Yanase cultivated Mercedes as a brand only for the well-to-do (leading to the old joke about the cars being the exclusive property of doctors and yakuza), but Mercedes wanted to cater more to middle class buyers and started opening their own showrooms in Japan.

The luxury Belgian chocolatier Godiva, now owned by a Turkish company, is also discontinuing its long-standing licensing arrangement with a Japanese company, the tea importer Kataoka Bussan. Starting in 2015, Godiva will start selling its chocolates at directly owned stores in Japan.

Some franchises suffer more than others. At least half of Sanyo’s ¥106 billion annual sales comes from Burberry products, which it sells in 300 dedicated department store outlets, so the loss of that business is a serious setback. The advantage of this model to the overseas brand is incalculable in that, for years, Sanyo took care of all promotion, building the brand to where it is now. For what it’s worth, Burberry by far sells more trench coats in Japan than any other apparel maker, domestic or foreign.

The reason these franchises can do this is Japanese consumers’ distinct identification with brands, which accounts for some unusual distribution deals, especially for brands that are considered exclusive. The problem for Japanese makers who also count on brand identification is that it seems to be a one-way street.

Japanese brands don’t have the traction overseas that they once did. Sanrio has made Hello Kitty famous worldwide, but mainly by giving the trademark to anyone who pays for it. If you buy the rights to Hello Kitty, you can do anything you want with the name and the image. That’s good for licensing, but now the company wants to make money from sales, and the transition has proved to be more difficult than Sanrio thought.

Will rice cookers save the Japanese home electronics industry?

Monday, July 14th, 2014

Pricey rice: High function rice cookers on display at a discount electronics store

Pricey rice: High function rice cookers on display at a discount electronics store

It’s been well documented that the Chinese are considered the saviors of the Japanese tourist trade, but there’s more to the story than just tour numbers and hotel bookings. An article in the July 10 Asahi Shimbun described an odd and recurring dilemma at Kansai International Airport. Chinese tourists are buying Japanese-made rice cookers at the airport’s souvenir shops in large numbers. Since the purchases are made after the travelers have gone through immigration processing, they don’t have to pay duty, but at that point they’ve already checked their luggage, and the rice cookers in their boxes won’t fit into overhead bins in airplane cabins.

Some of the rice cookers will fit if they’re removed from the boxes, but people on these flights are buying more and more of the home appliances so in some cases there is no room for any of them, which means flight attendants have to assist in having these patrons check the items so that they can put them in the cargo hold, and as a result more and more flights back to China are being delayed.

Rice cookers became a very popular item among Chinese tourists in 2010, when visa rules were relaxed to allow travelers who weren’t members of organized tours to come to Japan freely. One of the clerks in the Osaka airport souvenir store told Asahi that he once saw a Chinese tourist buy six of the devices at one time. One Chinese businessman who comes to Japan on a regular basis says he’s always getting requests from acquaintances to buy rice cookers for them. This souvenir store, in fact, sells an average of 10 cookers a day, most of them high-end models, which can cost as much as ¥90,000.

Last April, during cherry blossom viewing season, the store sold an average of 20 a day. A representative of Yodobashi Camera Multimedia Umeda in Osaka told the paper that whenever Chinese tour groups visit the discount electronics store they usually buy more rice cookers than they have members. Yodobashi has a duty-free system for tourists, but actually most Chinese prefer buying their rice cookers in the airport, since the price isn’t any different and they don’t have to lug the things around with them prior to departure. But there is the problem of carry-on.

Why rice cookers? There are few appliances that reflect Japan’s so-called Galapagos design mindset as thoroughly as rice cookers. They basically do one thing: Cook Japanese rice in a way that only Japanese people prefer. The rest of the world doesn’t eat much sticky, white, short-grained rice unless it’s combined with sauce or other prepared foods, and that includes the rest of Asia. Even China, from which Japan first imported rice-growing techniques, isn’t big on rice as a separate dish. It prefers long-grain rice, which is always prepared with something else in mind, and while it is considered a staple, at mealtime it isn’t as important as other dishes. In the northern part of China, many people don’t eat rice at all, since they grow more wheat there due to the colder climate.

But as more and more Chinese tourists have come to Japan, they have discovered the unique joys of sticky white rice.  As incomes rise in China, people are broadening their food choices, and one of those choices is short-grain rice. If it’s Japanese grown, it’s even better, despite the high price. And the best way to prepare it is with a Japanese-made rice cooker.

According to the Japan Electrical Manufacturers Association, more rice cookers are manufactured in China than in any other country in the world, but the vast majority are inexpensive models with few features. The first Japanese rice cooker was made by Toshiba in the mid-1950s, and since then they have become extremely sophisticated. Some even include porcelain containers and functions that allow the user to make rice that tasted as if it were made the old-fashioned way, in a kamado, the traditional, charcoal burning Japanese stove. Now, apparently, Japanese manufacturers are incorporating functions that will appeal to Chinese users, such as the ability to cook long-grain rice and different kinds of porridge.

In its own peculiar way, the Japanese rice cooker has done more to extend a specific Japanese sensibility than any electronic device since the Walkman. As any Japanese person over a certain age will tell you, the preparation of rice is the most important culinary consideration with regard to the Japanese menu. Cooking rice the proper way is difficult and time-consuming. You have to wash the rice throroughly until the runoff water is utterly transparent. Then the rice has to sit in that water for a certain length of time. The pot used for cooking rice, a kama, is only used for rice. First the rice in the water is boiled and the flame reduced — which, before gas stoves, meant removing pieces of charcoal from the kamado. And the person doing the cooking has to stay and monitor the flame for at least 15 minutes.

Consequently, the rice cooker was a huge boon for housewives. It not only freed up their time so that they could cook other dishes simultaneously, it freed up cooking space. Most Japanese kitchens with natural gas have only two burners. When makers added timing devices, rice cooking became exponentially easier because it cut the time needed for preparation, especially in the morning when housewives had to prepare breakfast and lunchboxes. Reheated cold rice is normally not acceptable. That’s why the next development was the “jar,” a special device for storing already made rice to keep it warm for later in the day without drying out. When the rice cookers themselves incorporated jar functions, the appliance had become perfect.

But only perfect to Japanese people. Most everyone else in the world didn’t eat rice this way, but apparently the Chinese are catching on. It’s too much to hope that their sudden affection for Japanese style rice will single-handedly save Japan’s home electronics industry — not to mention Japanese agriculture — but you never know. Look what the Walkman wrought.

What the government doesn’t pay in pensions it will have to make up for with welfare

Monday, July 7th, 2014

One of the biggest fiscal issues — if not the biggest fiscal issue — facing the government is the expected steep increase in the number of seniors who will require welfare benefits after retirement. Everyone assumes that the various national pension systems by themselves are not enough to sustain a minimum standard of living for the people who receive them, and so they will need additional income, either in terms of savings, returns from investments or wages.

Back to work?

Back to work?

In a recent survey conducted by the prime minister’s office and whose target respondents were people between the ages of 35 and 64, nearly 70 percent said that they are not now, nor do they think they will be, financially prepared for retirement. The government, anticipating this reality, several years ago passed a law to ensure that people who wish to work after their designated retirement age will be able to do so, though, as is often the case with socially-minded legislation, there is no compulsion toward employers to make this happen or any penalties if they don’t. It’s up to the employee and the employer working together.

In any case, when asked if they want to work after “retirement,” 31.4 percent of the respondents said they would after the age of 65, and 20.9 percent said they would want to do so after the age of 70. That means more than 52 percent want to work after the age of 60, which is still the standard retirement age at most companies. When asked why they want to work, 77 percent said “to make a living.”

As far as people who are trying to save money for their old age, only 1.6 percent admitted to having “more than enough,” with 21.7 percent saying they have saved or expect to have saved “the minimum necessary.” Of those who answered that they haven’t saved enough, half admit that their savings is “almost nothing,” with 74 percent in the 35-39 age bracket saying their savings is “insufficient,” which probably means nothing so far.

But perception of what they need is also an important consideration. In a survey conducted in June of 2013, the Ministry of Internal Affairs found that the average household whose head is between 60 and 69 spent ¥259,695 a month. This amount dropped to ¥196,500 for households whose head was over 70. According to another survey conducted by the Central Council for Financial Services Information, respondents who are currently working believe, on average, that a retired person needs ¥260,000 a month to live off of.

The government organ, Japan Pension Service, says that the monthly pension income of a retired “model household” is ¥230,000 a month, which comes down to ¥100,000 for a husband who was enrolled in the company sponsored koseinenkin system, ¥65,000 for the same husband’s basic pension (kiso nenkin), and his wife’s own basic pension of ¥65,000. The model assumes that the husband and his employer paid into both pension systems for a full 40 years, and since the dependent wife, as the spouse of a full-time regular employee, is categorized as a “number 3″ national pension subscriber, she is assumed to have paid her fair share, even though, in reality, she paid nothing.

This model household, however, represents a minority. Many other households have heads who are non-regular workers or who were not consistent in terms of payment schedules over the years. And there are other factors that can reduce what a household can expect. The JPS survey found in July 2013 that the average retired household of a former regular employee who paid into the koseinenkin system was ¥215,780. The monthly benefit for people who paid into the basic pension system for a full forty years is now ¥65,541 a month, but the average payout is ¥49,947. Households whose heads are between 60 and 69 said on average that their pension income was 44,000 less than what they needed.

This latter point is important because payments for the basic pension don’t start until age 65 for both spouses, so even for a model household, that means if the breadwinner retires at 60, their pension income is only ¥100,000 for five years. That means they would need another ¥160,000 to reach the level that most people now think you need when you retire. So for those five years, the couple will be short about ¥9 million in total.

In addition, the government is trying to extend the starting age for koseinenkin payments. Right now it starts at 61, but eventually the government wants it to start at 65, or even later, so that limit will rise gradually in the future, further reducing the pension amounts that people receive if they retire at 60. That’s why the government is trying to encourage employers to retain employees even after their mandatory retirement age. According to Asahi Shimbun, employees who are retained after retirement are essentially let go and then rehired at one-fourth to one-third their former salaries. There is nothing in the new law that guarantees a minimum wage for these workers.

And with boomer retirement increasing through to the middle of the next decade, it’s assumed that senior welfare rolls will just keep increasing as well. In 2011, 46.4 percent of the 2 million people on welfare were over 65. The majority of these people are seniors who only receive basic pensions and have no other income or property. The only bright spot is that many boomers already own their homes, so at least they won’t end up on the streets.

Japan tourism still suffers from a credit card gap

Monday, June 30th, 2014

So close, and yet so far: Shimosa Manzaki Station on the JR Narita Line

So close, and yet so far: Shimosa Manzaki Station on the JR Narita Line

In a letter to the editor published in the June 23 Tokyo Shimbun, the writer relates an anecdote about two American women who while waiting at Narita Airport for a connecting flight to the states after arriving in transit from a vacation in Southeast Asia, decided to kill time by taking in a local onsen (hot spring bath). After checking the Internet with whatever mobile devices they had with them, they found that the nearest one was at Shimosa Manzaki station, one stop away from the Narita city terminal on the JR Narita Line. Since they weren’t going to be in Japan long they didn’t bother getting yen, and were able to buy JR train tickets with their credit cards. They could also use their cards at the onsen itself.

However, when they went back to Shimosa Manzaki station to make the return trip to the airport after their bath they discovered that their credit cards were no good. Neither the ticket vending machine in the station nor the employee selling tickets at the window would accept them. The letter writer happened to be at the station at the time and understood English. She was kind enough to buy them tickets so that they could get back in time to catch their flight.

This incident highlights a major gap in the government’s plan to increase foreign tourism in Japan. Last year, for the first time ever, the number of foreign visitors exceeded 10 million, thus encouraging the Japan National Tourism Organization to aim for 20 million by 2020, the year Tokyo will host the summer Olympic Games. Significantly, 80 percent of the tourists who came to Japan last year were individual travelers, meaning they didn’t come as members of organized tours. Individual travelers book their own accommodations and arrange their own transportation with the idea of playing things by ear and enjoying their travels at their own pace.

Credit and debit cards make it easier since they allow for more flexibility than cash or travelers checks, which have to be purchased through foreign exchange outlets. As we’ve mentioned before, most Japanese bank ATMs don’t accept foreign credit cards, but even more vexing for individual tourists is that many Japanese businesses, including some who cater to tourists and especially those outside the large metropolitan areas don’t accept credit cards.

Hotels tend to be OK, but as the two American women who visited Shimosa Manzaki found out, a lot of transportation outlets aren’t. As far as JR goes, larger stations in the cities accept credit cards, but most others don’t. If you’re buying a shinkansen ticket, it’s usually OK to use a credit card, even with the special vending machines, but the Midori Kenbaiki, the special vending machines for long-distance travel, are complicated to use even for Japanese and don’t have English instructions.

Foreign tourists can buy Pasmo and Suica prepaid IC cards just like Japanese residents do, and they certainly make life easier, but both cards require a ¥500 deposit that may put some tourists off. Both cards can also be tied in with credit cards so that they recharge automatically when their value drops to almost nothing, but that option is not available to tourists. Mitsubishi Research has found that almost 90 percent of the travelers it surveyed from Taiwan, South Korea and the U.S. buy some sort of transportation pass, be it the JR rail pass or one-day Metro tickets, so obviously it is the sort of service that’s appreciated. But while these same people express a high level of satisfaction for the transportation service that’s offered, they also find it difficult to make sense of the network.

Specifically, they have difficulty figuring out how to get to specific destinations and how to buy tickets, especially from vending machines, even when English explanations are available. Moreover, while they appreciate the various passes on offer, they don’t often know which one is best for their needs. In Tokyo, should they buy one-day passes for both subway lines or just one?

The research arm of Mitsubishi UFJ found that 88 percent of foreign tourists use guidebooks, maps, smart phone apps or some combination of the three, but they would like to be able to do everything using their mobile devices. Some businesses have already said they plan to increase the number of free wi-fi hot spots by 2020, which is a good start. But making it easier to use credit cards more flexibly would also be a big incentive for visitors since it would save them time, trouble and maybe even money.

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