Shock! The Japanese corporations are holding the government to ransom! (Video)

http://www.japantoday.com/category/national/view/japan-to-set-energy-policy-next-week-but-no-stance-on-nuclear-power-yet?utm_campaign=jt_newsletter&utm_medium=email&utm_source=jt_newsletter_2012-09-05_AM

[…]

Most experts have expected Prime Minister Yoshihiko Noda to opt for a policy that would put nuclear power’s share at about 15% of electricity production by 2030.

But anti-nuclear protests and strong support for the zero option had forced a rethink, experts and politicians said.

Business lobbies have warned that an aggressive program to end nuclear power would force up electricity rates and could push companies and jobs overseas.

Furukawa acknowledged that while a majority of people wanted to be rid of nuclear power, there were different points of view on whether that was achievable and how soon it could be done.

Furukawa said he and some other ministers had raised the possibility that “basic energy policy” would be reviewed later.

[…]

Cash-Rich Japanese Firms Go on Global Buying Spree (Video)

May 29, 2012, 11:12 p.m. ET

WSJ assistant managing editor John Bussey stops by Mean Street to discuss cash-rich Japanese companies going on a worldwide buying spree and lessons the companies might have learned from the 1980s. Photo: Bloomberg News.

 

http://online.wsj.com/article/SB10001424052702303505504577403743150818820.html

And the article with that here, I have highlighted the points that show the corporations are already leaving Japan and the REAL reasons why..

By KANA INAGAKI And ATSUKO FUKASE

Flush with cash and bolstered by a strong currency, Japanese companies are in the midst of the biggest boom in overseas investment the country has ever seen.

On Tuesday, Japanese trading houseMarubeni Corp.  said it agreed to buy U.S. grain handler Gavilon Group LLC in a deal that could be worth as much as $5.6 billion, including $2 billion in assumed debt. That would make the Gavilon purchase the biggest foreign acquisition for a Japanese company this year and the seventh-biggest globally, according to deal tracker Dealogic.

In the past week alone, Japan Tobacco Inc offered to buy Belgian loose-leaf tobacco maker Gryson NV for $600 million, and Takeda Pharmaceutical Co. said it would acquire a Brazilian drug maker for $246 million.

While previous Japanese mergers-and-acquisitions booms sometimes focused on trophy properties with little regard to value, this one is powered by fear, as a shrinking home market and stagnant economy threaten earnings, bankers and corporate executives say. Companies also were forced to look outside Japan after the March 11, 2011, earthquake and tsunami disrupted supply chains and caused power shortages.

“Japanese companies feel they have no choice but to battle it out overseas,” says Yasuhiro Sato, chief executive of banking giant Mizuho Financial Group Inc., a major financier of M&A deals for its corporate clients. “It’s a question of survival.”

With more than $34 billion in foreign investments so far this year, Japan is on pace to equal last year’s record $84 billion, which had propelled the country to No. 3 in global deal rankings, from No. 9 in 2010, according to Dealogic. Last year’s deal volume was nearly triple that of the peak during the go-go 1980s and early ’90s, when the purchases of trophy assets like Rockefeller Center and Universal Studios rattled the U.S., figures from Thomson Reuters show.

The rush in overseas acquisitions bolsters Japan’s current account surplus, which counts money earned from foreign investments abroad as income, though it can take as long as five years for that income to show up on corporate books.

Piles of cash have helped the acquisition drive. Decades of frugality and debt-slashing following the crash of the 1980s asset bubble left Japanese companies sitting on $2.6 trillion in cash, according to central bank figures. That tops the $2.2 trillion held by U.S. firms. Japanese buyers also benefit from an exchange rate hovering around ¥80 to the dollar, meaning their yen buys nearly 10% more dollars now than it did two years ago.

The rush of cash abroad has made Japanese companies a bigger supplier of capital to the world than deal-making heavyweights like the U.K. and China, and a key pillar of global M&A at a time when financial woes have pushed world-wide volume down 21% so far this year.

This year, economists see economic growth of around 1%, an anemic level that may last for a while. A strong yen and high costs of labor and electricity in Japan have eroded the international competitiveness of manufacturers like Sony Corp. and Honda Motor Co. Japanese companies are boosting acquisitions of gas, oil and mining projects overseas, amid an intensifying struggle over resources as well as a sudden appetite for fossil fuels following last year’s nuclear accident and the subsequent shutdown of the country’s reactors. At home, Japan’s aging and dwindling population means less demand for everything from shrimp crackers to new cars.

The country’s shrinking market is pushing a whole new class of traditionally domestic and smaller-size companies overseas, from beer makers like Asahi Group Holdings Ltd. to toy maker Tomy Co., which last year spent $640 million—equivalent to a third of its annual revenue—to buy the U.S. maker of Thomas the Tank Engine railroad sets.

“We had little room for growth,” says Tomy president, Kantaro Tomiyama.

Even companies with a long history of international dealings are showing a new aggressiveness overseas.

Giant trading firm Mitsubishi Corp. says it is starting to explore controlling stakes in big energy or mining projects, so it can get more control over operations. The company announced its first such investment last year—a 45% stake in an Indonesian natural-gas processing plant with a price tag of $2.8 billion.

Marubeni, the trading house, has made 28 overseas deals worth around $16 billion since the beginning of last year—so many deals that credit-rating firm Standard & Poor’s recently warned that buying Gavilon would raise concern about the company’s debt levels.

Bankers say the new assertiveness is part of more a mature, savvy style of Japanese deal making.

In previous M&A surges, many Japanese companies didn’t think carefully about what they were buying, bankers say. They overpaid for their assets, then sold at a loss after failing to bridge cultural gaps or turn profits.

Between 1989 and 1991 Mitsubishi Estate Co.  paid ¥220 billion ($1.4 billion at the time) for an 80% stake in New York City’s Rockefeller Center, only to take a ¥151 billion loss on the investment in 1996.

“There was so much funding around that executives would want to buy stuff, whether or not it was related to their core business,” recalls Nobuo Sayama, a managing director of M&A advisory boutique GCA Savvian Corp., 2174.TO -3.49% who was working in the M&A department of one of Japan’s biggest banks during the late 1980s and early 1990s. “Executives would decide to buy without really understanding what M&A was, or what an investment target was.”

This time, companies are bargaining harder and many come armed with lists of target firms, deal makers say. Japanese executives are making decisions faster and are more willing to go hostile—as drug maker Astellas Pharma Inc. did in its $4 billion purchase of the U.S.’s OSI Pharmaceuticals Inc. in 2010.

“In the 1980s, 1990s, Japanese companies couldn’t get into auction deals because they were too slow,” says Kenneth Siegel, a managing partner at law firm Morrison & Foerster LLP in Tokyo who specializes in M&A. Now “they’re very good at executing quickly, efficiently and effectively.”

Bankers and M&A lawyers say some Japanese companies still have trouble walking away from pricey deals, and they still struggle to manage the foreign firms they have bought.

But Japanese buyers are starting to tackle such problems head-on, bankers say, considering retention packages and management teams before deals close—something they had often neglected to do in the past.

“The Japanese have learned a lot from past failures in acquisitions,” says Yuji Nomoto, chairman of investment banking at Deutsche Bank Group in Tokyo. “In some cases, we are asked by our clients to start looking for new senior management (for the companies to be acquired) even while we’re negotiating.”

In a golden glass skyscraper designed to look like a foaming mug of beer, the president of Asahi, Japan’s largest brewery by market share, says he spends more time these days thinking about overseas strategy than domestic.

Sales of Asahi beer—more than 90% of which comes from Japan—have dropped in line with a seven-year industrywide slide. Asahi’s beer shipments last year were down 23% from their peak in 2001.

“We can’t grow enough with the Japanese market alone,” says Naoki Izumiya, 63 years old, who engineered two acquisitions at home in the mid-2000s. “We’re going to seek new growth through a global business structure. M&A is going to be our tool.”

The 123-year-old Asahi isn’t new to overseas investments. Like many Japanese companies, it went on a buying spree in the late 1980s and early 1990s, snapping up a resort in Guam, golf courses in Britain and France and even a Michelin three-star restaurant in Paris. Asahi has since sold nearly all of those assets; it declined to say whether it made a profit.

Asahi’s overseas beer investments didn’t fare any better. In 1990, the company spent ¥80 billion to buy a 20% stake in what was later known as Foster’s Brewing Group Ltd. of Australia. Foster’s shares plummeted amid dismal earnings, and Asahi sold its stake seven years later at a 25% discount.

The brewer then ventured into the South Korean market, acquiring a 20% stake in Haitai Beverage Co. for around ¥2 billion in 2000. Despite annual losses at Haitai from 2005, Asahi raised its stake to 58% in 2009 before deciding a year later to sell its holding for just $9 and the hand-over of $110 million in interest-bearing debt.

Mr. Izumiya says the company is doing things differently these days. In the past, he says, globalization just meant forming loose partnerships—often through minority stakes—to sell the company’s popular Super Dry beer in other countries. Now, Asahi is trying to turn itself into a true global player by buying whole businesses abroad and running them.

During the past three years, the company has spent nearly $4 billion on seven purchases abroad, including the acquisition in 2011 of New Zealand’s Independent Liquor for $1.3 billion as well as three soft-drink makers in Australia, New Zealand and Malaysia for a combined $582 million.

Asahi is prepared to spend up to ¥800 billion more through 2015 in a quest to boost total sales to as much as ¥2.5 trillion, of which as much as 30% would come from overseas.

Toy maker Tomy is shopping abroad for acquisitions for the first time, after decades as a domestic player. President Tomiyama, 58, vividly remembers the time in the late 1980s when most of the company’s overseas business stopped. Japan had just said it would let its currency trade freely against the dollar, and the yen strengthened so fast that Tomy’s games were priced out of foreign markets. Mr. Tomiyama, a third-generation founding family member, laid off staff, closed down factories overseas and slashed exports, which had once generated more than half of Tomy’s sales.

Like Asahi, Tomy, the world’s No. 5 ranked toy maker with $2 billion in revenue, is facing a shrinking domestic market. Market research firm Yano Research Institute estimates the Japanese toy market shrank around 11% for the fiscal year ended in March compared with a decade ago.

The number of children in Japan has been shrinking for 31 straight years, and the National Institute of Population and Social Security Research predicts the country’s 14-and-under population will fall by a third by 2035. To bolster sales, Tomy merged with a domestic rival in 2006, but its revenue still declined 14% over the five years ended March 2011.

Mr. Tomiyama says a few years ago he decided Tomy would have to go global, in a big way. “In order to survive global competition, we need to at least become the world’s third-largest,” he says.

On March 11 last year, the day of the devastating earthquake and tsunami, Mr. Tomiyama announced the purchase of U.S. toy maker RC2, the Thomas railroad set maker, its first-ever foreign acquisition. Tomy funded the acquisition with ¥50 billion in bank loans, more than tripling its interest-bearing debt.

Mr. Tomiyama says he knows Japanese companies have historically been bad at managing the foreign companies they have bought. For help, he turned to Tomy investor and private-equity fund, TPG Capital, which gave the company step-by-step guidance through the acquisition process, from target selection and due diligence, to valuation.

The purchase of RC2 has boosted Tomy’s sales to $2.3 billion. But it is still No. 5, and about $1 billion short of the revenue of the current No. 3—Denmark’s Lego Group. So Mr. Tomiyama says Tomy has to keep looking for more M&A opportunities.

Meanwhile, Tomy is working to digest its current acquisition. Lately, Mr. Tomiyama says, Tomy and RC2 staff have been arguing over the design of a new doll, with Tokyo pushing for simple, black-colored eyes and the U.S. fighting to add sparkles.

“We clash all the time, but what’s important is whether our product will succeed or fail when we bring it out to the world,” Mr. Tomiyama says. “In the longer-term, this is just the first step.”

Write to Kana Inagaki at kana.inagaki@dowjones.com and Atsuko Fukase atatsuko.fukase@dowjones.com

But the recent deals are taking place against a backdrop that is starkly different from the late 1980s, when Japan’s economy was growing between 4% and 7% annually, and the stock and property markets were soaring.

September 5, 2012 - Posted by arclight2011 | Uncategorized