As the world's second largest economy and home of the longest running period of deflation, Japan is always worth keeping an eye on and things seem to be improving. Two recent US exports to Japan: buyouts and credit cards.
In Culture Shift, Japan Managers Warm to Buyouts
MBOs Rise as Vocal Shareholders, Hostile Takeovers Force Companies To Rethink Merits of Being Public
October 25, 2006
Japan, long known for legions of low-profile corporate executives, has become one of the world's fastest-growing markets for management buyouts, a strategy used by executives to retool their companies out of the glare of public shareholders.
Typically, the partners of these managers are the same large buyout firms that have engineered a takeover boom in the U.S. that has turned some iconic American companies -- such as Toys "R" Us, Dunkin' Donuts and Neiman Marcus -- from publicly traded companies into privately held ones.
Japan, where white-collar workers are known as salarymen, is ripe for management buyouts, known as MBOs. It is filled with companies trying to refocus after more than a decade of economic stagnation and amid lingering worries about overseas competition and an aging population.
Low interest rates are helping fuel the boomlet, because buyouts often involve lots of borrowed money. A wave of hostile takeover battles is also helping drive the action, as many managers want to move first before their companies are eaten.
So far this year in Japan, 53 management buyout deals valued at a total $3.2 billion have been announced, according to data tracker Thomson Financial. That number, which doesn't count the debt taken on from target companies, is 33% more than the $2.4 billion posted during all of 2005, and more than six times the $522.5 million racked up in 2001.
Those figures pale in comparison to the U.S., where 112 MBOs valued at $63 billion have been announced this year. But Japan's management-buyout market is much larger than those in other large countries, like Germany, where there have been 33 announced MBO deals totaling $59 million this year.
Management buyouts have been part of the U.S. financial scene for years, but they are relatively new to Japan, where companies long have coveted the status of being publicly traded. As hostile takeovers and more vocal shareholders emerge here, executives are reassessing the merits of being public.
In Japan, Banks And Consumers Turn to Plastic
Lenders Seek New Growth Areas As Traditional Business Declines; Swapping Cash for Credit Cards
Wall Street Journal
November 6, 2006
TOKYO -- Japanese consumers, who long have preferred to pay with cash instead of credit cards, are finally embracing plastic, amid a push by the nation's banks to expand into a business they previously neglected.
For years, many Japanese shunned the notion of going into debt, opting instead to carry around thick wads of cash to buy big-ticket items like television sets. Credit-card payments account for just 8% of Japan's consumer spending, compared with about 25% in the U.S., according to American Express Co.
Now, the card business is taking off.
The growth is occurring in part because of changing consumer habits. The popularity of online shopping is encouraging young Japanese to flip out their cards. Also, as Japan's low crime rate has risen in recent years, there is a bigger risk to carrying around cash.
Another reason behind the card boom: Big Japanese banks like Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. have cleaned up bad debt that plagued them for years and are looking for new sources of growth. Their traditional business, lending to big corporations, is declining as companies shift away from borrowing from banks and instead raise funds by issuing stocks and bonds.
The banks are focusing on individual customers, many who used to have only deposit accounts at banks, and are showering them with a new selection of mortgages, mutual funds and credit cards. Credit cards account for just a small part of Japanese banks' earnings.
Customers who pay off their balance in full each month don't generate much revenue for card companies because the companies usually don't start charging interest until a balance is two months old. Card-industry executives say revolving credit accounts for a majority of card spending in the U.S. and some other countries, but well below 10% in Japan.
