1
Japan Market Brief March–April 2007
John E. PetersMinister Counselor for Commercial Affairs
U.S. Embassy, Tokyo
2
What’s Different? Performance ThenThen NowNow
Net Margins 0.2% (FY01) 4.8% (FY06e) Free Cashflow Y8.2trn (FY01) Y25.1trn (FY06e)
Non-Performing Loans Y86trn (FY01) Y4.2trn (FY06e)
Valuations Price to Earnings 68 times(1990s avg) 17 times (FY06e) Price to Cashflow 15 times(1990s avg) 5.4 times (FY06e)
Price to Book 2 times(1990s avg) 1.4 times (FY06e)
Ownership Crossholdings Ratio 51% (FY90) 20% (FY06e) M&A Cases 470 (per year, 1990s) 1,700 (2002-2006 avg.)
Courtesy of: Jesper Koll – Merrill Lynch Japan SecuritiesU.S. Commercial Service - Japan
3 Domestic Structural Up-Cycle: Capital Investment
Capital Stock Vintage in Years – All Sectors
Source: Cabinet Office ; Merrill Lynch
6.0
7.08.0
9.0
10.0
11.012.0
13.0
14.0
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08
Years
Courtesy of: Jesper Koll – Merrill Lynch Japan SecuritiesU.S. Commercial Service - Japan
4
No Lost Decade Here
Source: National Institute of Population and Social Security Research
Relentless Focus on Research & Development Spending(total R&D spending by public and private sector as % of GDP)
Source: NIPSSR
2.0
2.2
2.4
2.6
2.8
3.0
3.2
3.4
85 87 89 91 93 95 97 99 01 03 05
Japan
US
Germany
France
Courtesy of: Jesper Koll – Merrill Lynch Japan SecuritiesU.S. Commercial Service - Japan
5Japan: Highest Patent Filings by National/Regional Offices
CY 2005
14,43627,98831,19232,253
60,222128713
160,921
173,327
390,733427,078
0
50
100
150
200
250
300
350
400
450
Japa
n
USA
Chi
na
Rep
ublic
of
Kore
a
Euro
pean
Pate
nt O
ffice
Ger
man
y
Rus
sia
Aust
ralia
UK
Mex
ico
Thou
sand
s
NonResident
Resident
U.S. Commercial Service - JapanSource: World Intellectual Property Organization
*These statistics are based on information provided by national and regional patent offices.
6
International Patent Filings
Source: World Intellectual Property OrganizationU.S. Commercial Service - Japan
1 USA 34.2% 6 UK 3.7%2 Japan 18.2% 7 Netherlands 3.3%3 Germany 11.7% 8 China 1.8%4 S. Korea 3.4% 9 Switzerland 2.4%5 France 4.2% 10 Sweden 2.1%
Top 10 International Patent Filings
International Patent Applications
01020304050
USA
Japa
n
Ger
man
y
S Ko
rea
Fran
ce UK
Net
herla
nds
Chi
na
Switz
erla
nd
Swed
en Italy
Can
ada
Aust
ralia
Finl
and
Isra
el
All O
ther
s
Thou
sand
s
2004
2005
7
Yes, A Trade Surplus with China
Japan Trade Balance With China (Peoples’ Republic + Hong Kong)
Source: Cabinet Office
-120-90-60-30
0306090
120150180210
00 01 02 03 04 05 06 07-20-15-10-505101520253035
Bn US$
Japan
US
Surplus
Deficit
6mmaBn ¥
Courtesy of: Jesper Koll – Merrill Lynch Japan SecuritiesU.S. Commercial Service - Japan
8
Japan is Back on Global Scene
Source: Thomson Financial, Merrill Lynch
Strong Balance Sheets and Profits Trigger A New Global Investment Cycle:Outward M&A Accelerating Sharply
05
1015202530354045
83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
Japan M&A$BnOut
In
Courtesy of: Jesper Koll – Merrill Lynch Japan SecuritiesU.S. Commercial Service - Japan
9
Toyota Expects to Build PlantsToyota Motor Corp. is studying its projected 10-year
growth in the U.S. to build plants.“All I know is compared to today it will be more,” said
Jim Lentz, Executive Vice President of Toyota’s U.S. sales arms.
Toyota could build as many as five new North American assembly plants in the next 10 years.
Toyota’s U.S. Sales• 12.5% increase to $2.54 million• 5.5% increase to $2.68 million (projected)• New Tundra and Hybrids will drive the growth
Source: Detroit Free Press, January 17, 2007U.S. Commercial Service - Japan
10
One of the Largest ODA Contributors
• Ranked as the world’s top ODA provider from 1991 ~ 2000 (net disbursement basis)
• Assisted 185 countries and regions• Total amount disbursed until 2003: US$221 billion
J apan's ODA Spending
$13B
$9B$9B$9B$10B
$14B$12B$11B
$9B$9B
$14B
0
5
10
15
2019
95
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
(CY)
billi
on U
S$
Source: Ministry of Foreign Affairs, JapanU.S. Commercial Service - Japan
11
Cool NipponDo You Think This Country’s Products Are “Cool”?
Response By Consumers In Different Cities
0%10%20%30%40%
50%60%70%80%
JapanUSKorea
Source: NikkeiNote: China=Beijin, Shanghai, Guangzhou
Courtesy of: Jesper Koll – Merrill Lynch Japan SecuritiesU.S. Commercial Service - Japan
12
Declining Population J apanese Population (2005~ projected)
100
110
120
130
140
1995 2000 2005 2010 2020 2030 (CY)
U.S. Commercial Service - Japan
Population:2006: 127.7 million (2006) 2030: 117.6 million (2030)Source: Ministry of Public Management, Home Affairs, Posts and Telecommunications, Japan
Ministry of Health, Labor and Welfare, Japan
13
The Most Aged Society Japanese Population Composite (%)
0
20
40
60
80
Year
%
0~14
15~64
65 andover
(2005 ~Projected)
U.S. Commercial Service - Japan
65 yrs old and over 2005 26.82 million (21%) 2040 35.0 million (35%)
Total Population 2005: 126 million2040: 100 million
Source: Japan Aging Research Center
14
Consumer Confidence Index(excluding one-person households, original series)
Source: Economic and Social Research Institute, Cabinet Office, Japan
U.S. Commercial Service - Japan
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
55.020
00 M
ar
2000
Sep
2001
Mar
2001
Sep
2002
Mar
2002
Sep
2003
Mar
2003
Sep
2004
Mar
2004
Sep
2005
Mar
2005
Sep
Consumerconfidence index
Overall livelihood
Income growth
Employment
Willingness to buydurable goods
15
U.S. Top Trading Partners
Canada
United Kingdom
China
Mexico
Japan
S Korea
Germany
Netherlands
Singapore
FranceOthers
CY2006 Exports (Goods) CY006 Imports (Goods)Germany
United kingdom
China
MexicoJapan
S Korea
Taiwan
Venezuela
FranceCanada
Others
Total U.S. Exports: $1,037.3 billionU.S. Exports to: Canada: $230.6 billion (22.2%) Mexico: $134.2 billion (12.9%) Japan: $59.6 billion (5.8%)Japan: $59.6 billion (5.8%) China: $55.2 billion (5.3%) UK: $45.4 billion (4.4%)
Total U.S. Imports: $1,855.4 billionU.S. Imports from: Canada: $303.4 billion (16.4%) China: $287.8 billion (15.5%) Mexico: $198.3 billion (10.7%) Japan: $148.1 billion (8.0%)Japan: $148.1 billion (8.0%) Germany: $89.1 billion (4.8%)
U.S. Commercial Service - JapanSource: U.S. Census Bureau
16 Japan’s Economy
• World’s 2nd largest economy• 2006 GDP: $4,712 billion • Longest boom in postwar period: - 60 months ~ (Feb. 2002 ~ current) - 57 months (Nov. 1965 ~ July 1970)
U.S.A.28%
Others41%
J apan10%
Germany6%
U.K.5%
France5%
China5%
-3-2-101234
%
U.S. Commercial Service - Japan
Source: World Bank Source: Japanese Cabinet Office
World GDP (CY2005) Real GDP Growth Rate
17
Japan’s Top Trading Partners
(December 2006 Data - Provisional)Source: Japan External Trade Organization
Total Japanese Exports: $647.4 billion
Total Japanese Imports: $ 577.8 billion
U.S. Commercial Service - Japan
J apanese Exports (CY2006)
0 50 100 150 200 U.S.A. China
S Korea Taiwan
Hong Kong Thailand Germany
Singapore UK
(billion US$)
2.4%
2.3%3%3.2%3.5%
5.6%6.8%7.8%
14.4%22.5%
J apanese Imports (CY2006)
0 20 40 60 80 100 120 140
China U.S.A.
Saudi Arabia UAE
Australia S Korea
Indonesia Taiwan
Germany Thailand
(billion US$)
2.9%3.2%3.5%4.2%
20.5%11.8%
6.4%5.5%
4.8%4.7%
18U.S. Trade in Goods with JapanU.S. Imports from Japan
100
110
120
130
140
150
160
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006(CY)
(in billion US$)
U.S. Exports to J apan
40.00
50.00
60.00
70.00
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006(CY)
(in billion US$)
Number of U.S. exporters to Japan (2005): 26,933Source: U.S. Census Bureau
U.S. Commercial Service - Japan
19
Top 10 U.S. Exports to Japan
U.S. Commercial Service - JapanSource: U.S. Census Bureau
CY 2006
0 1000 2000 3000 4000 5000 6000 7000 8000 9000
Machinery
Optical, Medical, Surgical Instrument
Electrical Machinery
Aircraft, Spacecraft and Parts
Cereals
Vehicles and Parts
Inorganic Chemicals
Organic Chemicals
Plastic
Precious Stones, Metals
million US$
2.9%
2.9%
2.9%
2.9%
4.9%
13.8%11.1%
10.5%
9.8%
2.8%
20
CY2005 Service Exports Surplus$19.5 Billion
01020304050
(C Y )
billion
US$
Service Exports from U.S. to J apan Service Imports from J apan to U.S.
U.S. Commercial Service - JapanSource: Bureau of Economic Analysis, U.S. Department of Commerce
Imports Up 14.4% 2005: $22.3 billion2004: $19.5 billion
Exports Up 17.6% 2005: $41.8 billion2004: $35.6 billion
2005 Surplus:$19.5 billion
21
Major U.S. Service Exportsto Japan
Source: Bureau of Economic Analysis, U.S. Department of CommerceU.S. Commercial Service - Japan
0
2
4
6
8
10
12
14
2000 2001 2002 2003 2004 2005
(CY)
Billi
on U
S$Travel
Passenger fares
Freight
Port services
Royalties and licensefeesEducation
Financial services
Business
22
U.S. Private Services Trade Balance with Japan
0
5
10
15
20
25
(CY)
billion
US$
U.S. Commercial Service - JapanSource: Bureau of Economic Analysis, U.S. Department of Commerce
23Japan's Inward FDI*Cumulative (from end of 1996 through end of 2005)
Source: Japan External Trade Organization
*net international investment position
U.S. Commercial Service - Japan
US leads at 251,676 million US$, followed by France and the Netherlands at 61,225 million US$ and 57,635 million US$, respectively.
Netherlands11.6%
UK4.5%
Sw itzerland3.9%
Hong Kong2.6%
Taiw an2.4%
Cayman Is.2.1%
Others8.8%
Germany6.3%
France12.3%
USA42.0%
USA
France
Netherlands
Germany
UK
Switzerland
Canada
Hong Kong
Taiwan
Cayman Is.
Others
24
U.S. Firms in Japan
1,554 U.S. affiliated firms in Japan
U.S. Commercial Service - Japan
Foreign Affiliated Firms in J apan(49% or more equity)
European42%
Asian11%Other
2%
U.S.45%
1,5541,451390
83
(As of December 2005)
Source: “Foreign Affiliated Companies in Japan 2006” published in May 2006 by Toyo Keizai
25
U.S. Firms in Japan by Industry
Chemical21%
Electric Equip/ Parts
20%
Machinery15%
Pharmaceutical6%
Food5%
Other33%
Software14%
Other52%
Wholesale, Machinery
6%
Info Service9%
Wholesale, Electric
Equipment/Parts
9%
Service 10%
Source: “Foreign Affiliated Companies in Japan 2006” published in May 2006 by Toyo Keizai
U.S. Commercial Service - Japan
Manufacturing Total 381 U.S. firms
Non-Manufacturing Total 1,173 firms
80
77
57
126
2219
169 118107102
70608
(As of December 2005)(As of December 2005)
26
Regulatory Reform: Steady and On-track with Significant Progress
• U.S.-Japan Regulatory Reform Initiative (RRI) established in 2001 as key component of U.S.-Japan Economic Partnership for Growth
• The 5th RRI report (June 2006) noted 85 points of significant Japanese progress in the ten areas under discussion: Telecom, IT, Med/Pharm, Financial Services, Competition Policy, Transparency, Privatization, Legal Systems Reform, Commercial Law, and Distribution
But there are still some lingering bilateral issues • The 5th RRI report underscores the need for continued efforts and
progress in all areas • Extreme concern about postal privatization, and triangular mergers
• U.S. beef imports: a major bilateral issue
• Some of Japan's acknowledged critical challenges are:- huge public debt - low birth rate; rapidly aging population; and projected labor shortages - income disparities; protracted lack of income growth and weak consumer spending - agricultural reform
U.S. Commercial Service - Japan
27
Major Obstacles Faced by Foreign Firms in Japan
Source: Invest Japan Department, Japan External Trade Organization
U.S. Commercial Service - Japan
28Insurance Market in JapanChanges in Japan’s Insurance Market
1. Japan’s financial “Big Bang”: Removal of “convoy system” (maximum control, industry protection, administrative guidance, and before-the-fact adjustment); U.S.-Japan insurance agreements.
2. Establishment of Financial Service Agency: Rules-based regulatory approach, self-responsibility principle and ex-post checking.
3. Changes in consumer purchasing trend: Emerging focus on living-benefit products vs. death-coverage due to demographic changes in Japan.
4. Increasing sales of variable annuities and third-sector products, led by U.S. insurance companies.
5. Partial liberalization of bank sales - fueled variable annuity market.
6. Growth of the U.S. share through purchases of Japanese life insurance companies in the late 1990s.
0.0%2.0%4.0%6.0%8.0%
10.0%12.0%14.0%16.0%18.0%20.0%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Japanese Fiscal Year
U.S. Share in Life Insurance Market (premium income)
US Companies Non-US Foreign Companies
Japan is the second largest market for insurance in the world after the United States.
• $340 billion in JFY 2005 – direct net premiums
• U.S. insurance companies earned over $40 billion in life and $2 billion in non-life premium income – a major portion of revenues outside U.S.
Major U.S. Players in Japan
Aflac, AIG, Hartford, Prudential
Sources: USTR National Trade Estimate, Life Insurance Association of Japan, Insurance Research Institute, industry sources
U.S. Commercial Service - Japan
29
Japan’s Environmental Market to Reach $560 billion by 2010 (METI forecast)
• Current Market: $500 billion• Outstanding commercial opportunities in:
- Asbestos abatement equipment and services:40 million tons in older building; 40 million tons in older building; Japan plans removing a million tons/yearJapan plans removing a million tons/year
- Soil remediation equipment and services - Industrial wastewater treatment technology - Renewable energy, including biomass technologies
• US passed the “Superfund Act” in 1980• Japan enacted a similar act:
“Soil Contamination Countermeasures Law” in 2002
Source: Ministry of Economy Trade and Industry (METI), Japan Environment Information & Communication Network, Japan
U.S. Commercial Service - Japan
30
Major Projects in Japan In a horizon that stretches from the spring of 2007 over the next ten years, U.S. companies will have an opportunity to bid on construction projects with an aggregate value approximating $5.4 billion and on the supply of goods, equipment, or services in response to non-construction procurements valued at an aggregate of $18.16 billion. The following summary highlights this $23.56 billon in aggregate opportunities for U.S. firms.
U.S. Commercial Service - Japan
Project Name Approx. ValueSecond Runway Central Japan International Airport $3 billionNaha International Airport (expansion) NAKansai International Airport NATokyo International Airport (Haneda Airport) expansion $810 million Okinawa Institute of Science and Technology $75 million Osaka Station North District NAMetropolitan main ring roads construction $780 millionMetropolitan Highway Project $310 millionThe Fish Wholesale Market relocation $430 millione-Japan Project: Biometrics Immigration System $33 millionSocial Insurance Agency (Pension) IT system $4.2 billionNational Police Agency (NPA): Fingerprint systems $3 millionOhma Nuclear Power Station $3.9 billionHigashi Dori No.1 Nuclear Reactor $3.3 billionTsuruga No. 3 and No.4 Reactors $6.4 billion
31
Major Projects – recent news
Employ competitive bidding for some 60% of its discretionary contracts, or about 2.1 trillion yen (approx. $18 billion)
To raise the percentage of contested public contracts to about 80% in terms of value
With plans to fully implement the change in fiscal 2007
For transparency of the process, the government is requiring ministries to disclose all contracts on their respective Web sites, as well as provide explanations for retaining discretionary contracts.
-Nikkei NewsJanuary 27, 2007
U.S. Commercial Service - Japan
Govt To Seek Competitive Bids On 60% Of Discretionary Contracts
32
World’s 2nd Largest Medical Device Market
• The most important export destination for American medical devices
• The sector has consistently enjoyed a sizable (approximately $4 billion) trade surplus with Japan
• Approximately $5 billion worth of U.S. medical devices and supplies are sold in this market
• American products have approximately 60% share of the total imports
• The market for medical equipment in Japan remains strong, but
• American companies will continue facing severe challenges in both pricing and regulatory matters
70
18 146 5 2
0
10
20
30
40
50
60
70
USA Japan Germany UK France Korea
World's Medical Device Market in 2004
$ billion
Source: Country Commercial Guide
Market Share of Imported Medical Devices in 2004
58%
7%4%
10%
21%
United States Germany China Ireland Others
Source: Ministry of Health, Labor and Welfare
U.S. Commercial Service Japan
33World’s 2nd Largest Pharmaceutical Market
• The most important export destination for American pharmaceuticals
• The value of Japanese pharmaceutical market is approximately $60 billion
• The market share of American companies is estimated to be 15-20%
• Of the 99 leading global medicines, only 60 are available in Japan
• GOJ intends to accelerate the drug approval process and to offer incentives to develop innovative drugs
• Japanese market is increasingly promising for innovative pharmaceuticals, although American companies will continue facing severe challenges in both pricing and regulatory matters
182.7
60.326.7 22.4 15 14.5
0
50
100
150
200
USA Japan Germany France UK Italy
Leading Pharma Markets in 2005
$ billion
Source: IMH Health
Source:PhRMA
Availability of global 100 top-selling drugs in Japan in 2004
16
53
22
9 Launched within 2 years afterglobal launch
Lacunched with delay of morethan 2 years
Still under development orregistration
Not under development
31% still not available in Japan
Average 5.2 years of delay
U.S. Commercial Service - Japan
34U.S. Machine Tools Forge Ahead of Swiss Products, Reclaiming Lost Ground
020406080
100120140160180200
(million $) 2004 2005 2006
USAGermanySwitzerland
U.S. exports jump 61% from $88 million in 2005 to $142 million in 2006.
Source: Ministry of Finance, Japan
U.S. Commercial Service - Japan
35
Strong Exports of U.S. Aircraft and Aerospace Components
(in million $) 2003 2004 2005 2006
TotalImports 7,573 7,637 8,618 9,652
(% CHG) 1% 13% 12%
USA: 6,629 6,696 7,416 8,226
(% CHG) 1% 11% 11%
U.S. 88% 88% 86% 85%MarketShare:
0100020003000400050006000700080009000
10000
'03 '04 '05 '06
ImportsUSA$million
Overwhelming U.S. presence attests to long-term partnerships
Source: The Society of Japanese Aerospace Companies (SJAC), Ministry of Finance, Japan U.S. Commercial Service - Japan
36Boeing Country• 80% civil aircraft orders for
the past 10 years went to Boeing.
• ANA & JAL, first customers for Boeing 787s. 50 and 30 each beginning in 2008 (approx. $9.6 billion in total).
• Boeing forecasts Japanese demand at 1,176 aircraft (approx. $147 billion) for the next 20 years.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Airframes Egn Parts
USAEUASEAN$million
Airframes ($3,459 mil): USA, 90%; EU, 3%Afrm Parts ($1,427 mil): USA, 82%, EU, 13%Engines ($1,201 mil): USA, 92%; EU, 5%Egn Parts ($1,964 mil): USA, 90%; EU, 9%Source: The Society of Japanese Aerospace Companies (SJAC), 2005
Source: Boeing JapanU.S. Commercial Service - Japan
37
Biotechnology
Key Market Segments in Japan•Pharmaceuticals (antibody therapeutics) and Diagnostics•Functional Food•Agriculture•Bio-informatics•Equipment for Biotech Research (DNA chips; reagents, etc.)
15,500
16,000
16,500
17,000
17,500
2004 2005 2006(estimated)
Total Market Size(Million US$)
Source: Nikkei Bio Nenkan 2007
(+3.1%)(+3.1%)(+3.0%)(+3.0%)
U.S. Commercial Service - Japan
38
Opportunity in Japan
Event: USA Pavilion at BioJapan 2007 Dates: September 19-21, 2007 Venue: Pacifico Yokohama (Kanagawa) http://expo.nikkeibp.co.jp/biojapan/eng/CS Contact: Tamami Honda, Commercial Specialist
U.S. Embassy, TokyoPhone: 81-3-3224-5876Fax: 81-3-3589-4235E-mail: [email protected]
U.S. Commercial Service - Japan
39
20022003 2004
2005
Dow Chemical Japan
Dupont Japan 0
20000
40000
60000
80000
100000
120000
Value in million yen
Year
Dow Chemical Japan
Dupont Japan
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Inorganic Chemicals (HS 28)Organic Chemicals (HS 28)
Plastics and Rubber (HS 39-40)0
500
1,000
1,500
2,000
2,500
Value in USD million
Year
Inorganic Chemicals (HS 28)Organic Chemicals (HS 28)Plastics and Rubber (HS 39-40)
• U.S. chemical exports to Japan recovering
USD 5.3 billion in 2006
U.S. Commercial Service Japan
• Sales of Japan-based U.S. firms show underlying strength
USD 1.5 billion in 2005
Source: Japan Tariff AssociationSource: Dow Chemical Japan, Dupont Japan
U.S. Chemical Business in Japan
40
U.S. University Fair (IIE Fair in Japan ) for regionally-accredited U.S. colleges and universities:2006 Fairs Tokyo: Nagoya: 76 schools 32 schools 1,328 visitors 308 visitors2007 Fairs October 21 October 20For details and on-line registration: http://www.iiehongkong.org/fair/ufair/index.htm
Contribution of internationalstudents to US economy: $13.5 billion or $24K per student
Total International Students in USA
300,000
350,000
400,000
450,000
500,000
550,000
600,000
650,000
700,000
94/9
5
95/9
6
96/9
7
97/9
8
98/9
9
99/0
0
00/0
1
01/0
2
02/0
3
03/0
4
04/0
5
# of
stu
dent
sEducation: International Students
in the United States
(Source: Institute of International Education http://opendoors.iienetwork.org)
U.S. Commercial Service - Japan
41Education: Japanese Higher Education Abroad
Source: Institute of International Education (http://opendoors.iienetwork.org)
2005/06 Total Int’l students
564,766
= 100%
1 India 76,503 13.5%2 China 62,582 11.13 Korea 58,847 10.4 4 Japan 38,712 6.95 Canada 28,202 5.0 6 Taiwan 27,876 4.9 7 Mexico 13,931 2.5
International students in USATop 7 sending countries
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
Japan
India
China
Korea
Canada
Taiw an
Mexico
Note: US – F-visa, Australia-new enrollments on student visa, Canada-study permits for college/university/ESL (no permit required if duration is 6 mos or shorter)
Japanese students destinations
05000
1000015000200002500030000
year
USA
Australia
Canada
(Source: Diplomatic Missions in Japan)
U.S. Commercial Service - Japan
42Education: American Students at Japanese Universities
Source: Institute of International Education, Open Doors (http://opendoors.iienetwork.org)
US Students in Japan
1,500
2,000
2,500
3,000
3,500
4,000
4,500
1995/ 96 1996/ 97 1997/ 98 1998/ 99 1999/ 00 2000/ 01 2001/ 02 2002/ 03 2003/ 04 2004/ 05
Year US Students in Japan
Yearly Change (%)
Year US Students in Japan
Yearly Change (%)
1995/96 2,010 - 2001/02 3,168 21.011996/97 2,018 0.40 2002/03 3,457 9.121997/98 2,285 13.23 2003/04 3,707 7.231998/99 2,485 8.75 2004/05 4,101 10.631999/00 2,679 7.81 2005/06 n.a.2000/01 2,618 -2.28
1995/96-2004/05 +104.0%
U.S. Commercial Service - Japan
43
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006 (CY)
Num
ber
(in T
hous
and)
Japanese travels to the U.S. Japanese travel abroad
Source: Office of Travel and Tourism Industries, U.S. Department of Commerce Japan National Tourist Organization
Japanese Outbound Travel
U.S. Commercial Service - Japan
17,535(+0.8%)
3,672(-5.4%)
5,368
17,819
44
Japanese Travel to the U.S.
1,000
2,000
3,000
4,000
5,000
6,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
(CY)
Num
ber o
f Tra
vele
rs
(in T
hous
ands
)J apanesetravel tothe U.S.J apanesetravel toHawaii
3,672 (-5.4%)
1,374 (-9%)
Source: Office of Travel and Tourism Industries, U.S. Department of Commerce State of Hawaii
U.S. Commercial Service - Japan
5,368
2,217
45
0
1,000
2,000
3,000
4,000
5,000
6,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006 (CY)
Num
ber
of T
rave
llers
(in T
hous
and)
Japanesetravels to theU.S.
US residentstravel to Japan
Source: Office of Travel and Tourism Industries, U.S. Department of Commerce
Japan & U.S. Outbound Travel5,368
3,672(-5.4%)
1,497(+40%)
1,287
U.S. Commercial Service - Japan
46U.S. – Japan Telecommunications Equipment Mutual
Recognition Agreement (MRA) Signed on Feb. 16, 2007
Scope: Telecommunications terminal equipment and radio equipment subject to certification in Japan regardless of location of the supplier or country of origin of the equipmentTelecom MRA will lower costs and speed up the marketing in Japan of innovative U.S. telecom products, which is the fifth largest export market for the U.S.
Country 2005 2006Actual (billion USD)
Mexico 1.672 2.139Canada 1.683 1.596Netherlands 1.793 1.480United Kingdom 0.838 0.936Japan 1.035 0.833China 0.703 0.825Germany 0.522 0.583Hong Kong 0.442 0.564Venezuela 0.289 0.479Australia 0.437 0.442
Country 2005 2006Actual (billion USD)
China 14.056 17.848Mexico 5.507 6.518Korea 6.377 5.691Malaysia 4.485 4.165Canada 2.290 2.445Taiwan 1.311 2.413Japan 1.574 1.398Thailand 1.889 1.390Singapore 0.54 0.622Sweden 1.164 0.563
U.S. Export U.S. Import
Source: U.S. Department of Commerce, U.S. International Trade CommissionU.S. Commercial Service - Japan
47
Market Growth:•Strong at 4% and projected to reach US$173 billion by 2010•The amount of imported software was US$3.2 billion in 2005. Within imported software, the share of U.S. products is 90.3% and the amount has reached US$2.9 billionMarket Trends:•Enactment of Japanese SOX (Sarbanes‐Oxley act)•Growing corporate IT-related budgets *46% of Japanese firms will increase IT spending *34.5% will increase their spending by more than 20%
Security Software Market:•Rising awareness of the importance of IT security and related software•Tremendous growth at 21.9%•Current market size is $1.2 billion•Projected to reach $2 billion by 2010 at 11.2% growth
(Source: MIC Research Institute and Japan Information Technology Services Industry Association)
130
135
140
145
150
155
160
165
170
175
180
Software Market in Japan
(Billion US$)
US$ 147
US$ 173
Includes customized software, packaged software, game software, data services, etc.
74%
Packaged Software 8%
Game Software
Data ServicesOthers 2%
Customized Software
8%
8%
Percentage of Software sales in Japan
(Source: METI/ Ministry of Economy, Trade and Industry)
2005 2010
Software Market in Japan
U.S. Commercial Service - Japan
48
Electronic Devices Market in Japan•U.S. plays a leading role in the Japanese semiconductor industry.
•Market share of U.S. electronic devices in Japan has grown to 26% and reached US$ 5.4 billion in 2005, compared to 17% and $1.7 billion in 1995.
•Total amount of imported electronic devices is US$23 billion.
•Demand for electronic devices in wireless applications, such as WiMAX, UWB/Wireless USB, WiFi and ZigBee is growing rapidly.
•WiMAX, in particular, is projected to reach US$827 million by 2010 from less than US$1 million in 2006.
Source: JEITA/ Japan Electronics and Information, Technology Industries Association
0
10000
20000
30000
40000
50000
60000
70000
80000
2000 2001 2002 2003 2004 2005 2006 2007
(million US$)
Total Local Production
Total Import
Total Export
U.S. Commercial Service - Japan
49
Current Status
Future Prospect
2008 Projection for sub-markets by equipment type: Image/monitoring market US$ 1.2 billion (35% up from 2005) Sensor 1.36 billion (71%up) Home security (equip.& service) 755 million (17%up) Access control 920 million (11%up) Residential security service 464 million (19%up)
Sub-sectors expected to grow and 2008 projections: Home Security Unit US$ 78.6 million
(50% up from 2005) Home Security Service 418 million (20%up) School Commuting Service 25.6 million (160%up) Community Security Service 4.3 million (600%up) Biometrics by Vein 132 million (300%up) on-Vehicle DVR 38 million (200%up)
Number of Home Security Service Contracts (two major security service companies)
0100200300400500
year
Uni
t:10
00
SECOM
ALSOC
Source: Mainichi Economist
Chart 2
• Emerging new sub-sectors demonstrating drastic growth: *School security US$ 57 million (350% increase since 2005) *Town security 18 million (125% increase since 2005) **Regional safety 22 million (5% increase since 2005 )
(*Emergency alert system; ** Mass notification system)
The market size of the Japanese security industry has been increasing over the years. The overall market (Chart 1) includes the sales and installation of security equipment and security services, such as guards. The total sales figures do not show a sharp increase as unit prices in general have decreased over the past few years due to stronger competition in the market. In security service contracts, there has been a tremendous increase (Chart 2). According to the National Police Agency the total sales of security service alone amounts to US $27 billion.
According to a May 2006 Fuji Keizai survey, trends in the security industry are: • A projected market size of US $ 4.8 billion for security equipment by 2008 - a 34% increase since 2005.
Chart 1Market Size of Security Equipment
9.18 9.1310.16 10.98 10.41 10.89
02468
1012
2000 2001 2002 2003 2004 2005year
billi
on U
S $
Source: Japan Security Systems Association$1=110.11 (ex.rate as of 2005)
U.S. Commercial Service - Japan
Japan Market – Safety & Security
50
Market Growth
Chart 6
Security Cameras at Train Stations
20
2730
-5
101520253035
Mar, 2004 July, 2005 Feb, 2006month, year
Uni
t:100
0
Source: Ministry of Land, Infrastructure and Transport
Chart 3
Crime Rate
-
500
1,000
1,500
2,000
2,500
3,000
75 80 85 90 95 00 04
yearC
ase:
100
0
Source: National Police Agency
Chart 4
Recent Major Crimes and Security Camera Shipment
0
0.5
1
1.5
2
2.5
95 00 04year
billi
on U
S $
$1=108.15 (ex.rate as of 2004)
Sharp rise in break-ins by lock picking
Setagaya family slayings
Ikeda Elementary School slayings
Kidnapping, killing of a girl in Nara Prefecture
Source: Asahi News Paper(June 8th, 2006)
Places Where Citizens Think Terrorism Might Happen
0 20 40 60 80
BusPower Plants
Large Event HallsRailroad
US Facilities Downtown
AirplaneBullet TrainOffice Area
Subway 68.5%59.5%
53.6%43.4%
42.0%35.3%
34.4%31.3%
25.7%16.5%
Source: Nihon Keizai Shimbun, Research conducted by Macromill(July 18th, 2005)
Chart 5
Recent market growth is attributed to increased public concern for security: Crime related• Sky-rocketing crime rate including burglaries, arson, and child murders (Chart 3).• New types of crime such as credit card and e-mail scams, and identity theft.There is a direct relation between major crimes and the number of security cameras installed (Chart 4).Terror related• Fear of terrorist attacks is pervasive (Chart 5) while Mass Transportation Authorities respond by installing more cameras (Chart 6).
-Safety and security has become an important factor in selecting products or services; -Central and local governments are making full efforts towards a safer society in response to public concerns.
U.S. Commercial Service - Japan
Japan Market – Safety & Security
51
Japan’s Food Service Market: Opportunities Remain for Innovative Themes and Superior Know-How
Sales Growth
9698
100102104106108110112
2001 2002 2003 2004 2005
%T otal
Fas t f ood r es taur ants
Fami l y r es taur ants
P ubs and tr adi ti onal J pnr es t .
Ful l tabl e s er v i c er es taur ants
C af es , c off ee s hops
Other s
Growth of Location Numbers
98
100
102
104
106
108
110
112
114
2001 2002 2003 2004 2005
% Total
Fast foodrestaurants
Familyrestaurants
Pubs andtraditionalJpn rest.Full tableservicerestaurantsCafes, coffeeshops
Others
Food service viewed as time-saving and a leisure activity Demand for value-added service and unique concepts Consolidation and diversification Orientation toward healthy and safe food
Best Prospects Fast casual Alternate meal solutions (deli, takeout, etc)
$270.6 bil220.550.1
737.54,050.3
Alt food solution
Employees (000s)Locations (000s)
Total Sales Restaurants etc.
Market Data
Market Composition
41.3 45.3 49.2 50.1
203.2 211.8 226.3 220.5
0.0
50.0
100.0
150.0
200.0
250.0
300.0
2002 2003 2004 2005
Bils of Dollars
Prepared Food Solution Food Service Subtotal
Source: Food Service Industry Research Center
Market Trends
U.S. Commercial Service - Japan
"Dinning-out" Market - Still Large
224.4151.7 149.5
101.5 106.0
0.0
50.0
100.0
150.0
200.0
250.0
Food service Department,GMC
Automobile,bicycle
Clothing,accessories
Furniture,houseware,
etc.
Billions of Dollars
52 Opportunities in Japan's Cosmetics MarketU.S. As the 2nd Largest Exporter- 2006
Others19.6%
China9.0%
Belgium0.9%
Germany3.9%
United Staes21.9%
$312 million
Switzerland1.2%
Italy5.5% France
33.4%
UK3.6%
Taiwan1.0%
Cosmetics Market in Japan(In Million Dollars)
15,918 15,33914,23412,996 Total
13,200
11,753 89.04%
11,454 88.13%
12,39687.09%
13,14785.71%
13,67385.89%
1,485 9.33%
1,4829.66%
1,264 8.88%
1,025 7.89%
958 7.26%
7614.78%
709 4.63%
573 4.03%
517 3.98%
4883.90%
0
2,000
4,0006,000
8,000
10,000
12,000
14,000
16,00018,000
2001 2002 2003 2004 2005
TotalExportImportShipment
Gold Share Silver SharePerfm & toilet water 242,178 France 57.4% U.S.A. 10.5%Lip-make-up prep 91,151 France 48.2% China 17.8%Eye-make-up prep 105,964 France 48.5% U.S.A. 17.2%Manicure or pedic 30,637 U.S.A. 33.8% France 24.5%Toilet powders 14,656 France 46.1% U.S.A. 19.8%Beauty/make-up 42,500 France 45.3% China 13.8%Foundation cream 44,217 France 49.6% U.S.A. 23.4%Creams liquid form 55,458 U.S.A. 40.1% France 27.8%Beauty/make-up 167,512 France 32.0% U.S.A. 30.2%Beauty/make-up 248,735 France 40.3% U.S.A. 25.7%Shampoos 77,678 U.S.A. 0.0% China 3.4%Prep for perms 6 France 100.0% - -Hair lacquers 1,439 U.S.A. 44.8% Germany 4.4%Perfumed hair oil 10,254 China 25.0% Germany 15.2%Prep for use (others) 119,227 U.S.A. 15.8% China 11.0%Pre-/after-shave 6,602 U.S.A. 16.2% U.K. 15.6%Deodrants/antipersp 7,030 U.S.A. 16.7% Germany 13.0%Perf bath salts etc 24,820 China 42.6% France 17.4%Depilatories etc. *1 3,777 Germany 63.7% France 19.2%Depilatories etc. *2 128,205 U.S.A. 41.3% China 35.0%
Total 1,422,044 -- -- -- --
2006 Top 2 Import Country by Item (Millions of Dollars)
Item Total Import Top 2 Countries & Share
Source: Shukan Shogyo Co., Ltd., Fuji Keizai Co., Ltd, Cosmetics Importers Association of JapanNotes: *1: Depilatories and other perfumery, cosmetic or toilet preparations (with a basis of oil, fat or wax) *2: Depilatories and other perfumery, cosmetic or toilet preparations, n.e.s.
Domestic Shipment by Product Category-2005
Skin care43.8%
Make-up25.1%
Fragrance0.4% Hair care
27.0%
Special purpose
3.8%
U.S. Commercial Service - Japan
53
Growth of 2x4 Housing Starts in Japan Annual (1997 – 2006)
50,000
60,000
70,000
80,000
90,000
100,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Houses based on North American 2x4 construction methods were first introduced into Japan in 1974. Over the past 10 years, 2x4 housing starts have shown significant growth and exceeded 100,000 units for the first time in 2006. Exports of U.S. building construction materials to Japan have supported this growth, exceeding USD $1 billion in 2005.
(105,390 units)
U.S. Commercial Service - Japan
54
• Jewelry retail market was $11.3 billion in 2005.
• Japan is the 2nd largest overall jewelry retail market after the United States.
• 1/3 of retail sales are brand jewelry.
• Import brand Jewelry share:• 1995 7.9% ($1.7
bill)• 2004 21.4%
($2.4 bill)• US is the top supplier of precious
metal jewelry with a 24.3% share in 2006.– 1995 12.5% ($137 mill)– 2005 21.7% ($320 mill)– 2006 24.3% ($385 mill)
Top imports of Gold, Platinum, and Silver Jewelry in 2005:
Country Share % Country Share % Country Share %1 FRANCE 26.2 USA 51.01 USA 32.682 ITALY 26.13 FRANCE 19.18 ITALY 16.43 SWITZLD 9.1 HG KONG 6.73 THAILND 14.724 HG KONG 7.86 SWITZLD 5.92 CHINA 7.195 THAILND 6.25 ITALY 4.65 FRANCE 7.886 USA 5.37
Platinum SilverGold
Precious Metal Jewelry Imports
$0$100$200
$300$400$500
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Year
Impo
rt V
alue
(in
Mill
ions
)
USAFRANCEITALYHG KONGTHAILNDSWITZLDCHINASPAIN
Jewelry Market
(Source: Japan Tariff Association)Source: Retail market size – Yano Research Institute;Brand retail sales – Japan Precious magazine;US imports – Japan Tariff Association
U.S. Commercial Service - Japan
55Six Commercial Offices in Japan -- well-positioned to assist American exporters
• Over 40 professional staff and industry specialists in six locations
• From FY 2005 until present [30 months] the Commercial Service in Japan has:
- logged 3,700 consulting sessions with 2,300 clients
- provided successful
regulatory, policy, and bid advocacy on behalf of U.S. trade and investment interests
- and facilitated over 800 transactions worth $230 million for American firms from 42 states
Naha
Fukuoka
Osaka Nagoya
Tokyo
Sapporo
U.S. Commercial Service - Japan
56
How the Commercial Service in Japan can help U.S. Companies
• Market Research & Due Diligence• Product Launches & Distribution Strategy• Partner Match Making• Trade Events• Trade Policy Advice• Web Postings• Government Procurement Advocacy• Industry Expertise/Business Counseling• Intellectual Property Protection Advice• Market Access Issues
U.S. Commercial Service - Japan
57
Osaka-Kansai, Shikoku and Surrounding Prefectures
• GDP $980 billion, larger than Brazil, Korea, India, Mexico, Russia, or Australia
• 9-prefecture Kansai region is Japan's 2nd largest industrial, financial, and commercial area
• Also the 2nd largest population center with over 24 million people
• Home to firms like Panasonic, Nintendo, Kyocera, and some of the world's largest banks
• U.S. exports to the region up about 15% over 2005
• Much expansion and production abroad with over 5,600 firms having overseas subsidiaries
Commercial Service Osaka covers 14 prefectures:Osaka, Hyogo, Kyoto, Shiga, Nara, Wakayama, Tokushima, Kagawa, Ehime, Kochi, Hiroshima, Shimane, Tottori and Okayama.
U.S. Commercial Service Japan
58
Nagoya-Chubu • At over 8.7 million people, Japan's
third largest metropolis • Nagoya (population 2.2 million) is
Japan's fourth largest city • GDP $770 billion, over 25% of Japan's
GDP - about the size of Brazil, Korea, India, Mexico, Russia, or Australia
• 18% of GDP: has ranked number one in shipments from Japan for 28 consecutive years
• Manufacturing heartland; center for aerospace, automotive, ceramics, and machine tool industries
• Massive plant expansion and new investment
• MHI, FHI, KHI key players in Boeing 787 Dream-liner production
• Toyota recently moved 3000 international sales staff from Tokyo to Nagoya
• Projected to soon exceed Kansai in industrial production
The Commercial Service Nagoya covers 9 prefectures: Aichi, Gifu, Mie, Shizuoka, Yamanashi, Nagano, Toyama, Ishikawa, and Fukui
U.S. Commercial Service Japan
59
Fukuoka-Kyushu and Yamaguchi • Fukuoka City – population 1.3 million,
economic, educational and cultural center of Kyushu
• Traditionally known as the "Gateway to Asia"
• $410 billion economy; 10% of Japan's GDP
• Japan's fourth largest economic center; greater GDP than Switzerland, Belgium, or Sweden
• "Silicon Island" with 30% of Japanese semiconductor production
• Japan's most advanced automotive production; 10% of national output
• "Solar Island" as focus of Japanese solar cell activity
• Numerous R&D facilities in biotech, nuclear fusion, robotics, ceramics, high-speed ocean transport
• Southern Kyushu hosts Japan's two space launch centers at Uchinoura and Tanegashima
• Two key U.S. military facilities: Sasebo Navy base in Nagasaki, and the Marine Corps Air Station in Iwakuni
U.S. Commercial Service Japan
The Commercial Service Fukuoka covers 7 Kyushu prefectures: Fukuoka, Oita, Saga, Nagasaki, Kumamoto, Miyazaki, Kagoshima, and Yamaguchi prefecture
60
Sapporo-Hokkaido and Tohoku• Population 5.7 million • GDP $ 383 billion; about same size as
Belgium, Switzerland, or Sweden • Toyota and components firms
expanding high-tech production in Hokkaido
• Booming domestic and international tourism; 5.5 million tourists in 1988: now about 19 million tourists
• Strong resort investment and tourism from Taiwan and Korea
• The 90-minute intercity flight between Tokyo and Sapporo is one of the world’s busiest domestic route in terms of capacity, with more than 9 million annual passengers. Sapporo has 123 fights daily to 18 cities outside of Hokkaido, and 48 flights to and from Tokyo
• Growing ties with the Russian Far East and Sakhalin Island
• Tohoku regional trade with China has increased 300% since 2001
Commercial Service Sapporo covers:Aomori, Miyagi, Iwate and Akita
U.S. Commercial Service Japan
61
Naha, Okinawa Prefecture• GDP $31 billion; population 1.37
million • Busy tourism destination with a
record 5.64 million tourists in 2006 • Active construction sector:
opportunities for American know-how • Okinawa Institute of Science &
Technology Project • A front-runner as a gaming industry
destination? • Software development and call
centers growing: employ 9,000 at 37 centers, and 2,000 at 73 IT firms
• 25,000 American marines and airforce based on Okinawa; provide security to the region; U.S. bases are Okinawa's 2nd largest employer, contributing $3 billion annually to the economy
U.S. Commercial Service Japan
62
Top Ten Tips to Successfully Marketing in Japan
To Maximize your potential in the market, adhere to these Top Ten Tips.• Recognize the strategic importance of Japan, and be willing to invest the
necessary resources to capture some of the market• Plan, prepare and execute an effective, long term strategy• Investing in professionally translated marketing material is with every "yen."• Visit Japan Often.....Personal contact remains key even in the age of Webinars• Get "on the ground" advice from professionals already engaged in the market.• Dedicate a "Japan Champion" in the home office. (Compassion more important
that language ability.)• Take time to structure the deal and remember due diligence, including IPR
protection• Networking is key. Use contacts, including CS/Japan to help you meet
prospective partners/customers.• Cut-throat competition is a way of life in Japan. Listen to you clients for
greater success here and internationally• Your Agent is only as good as you are to your Agent. It's a partnership. Help
them help you.
U.S. Commercial Service - Japan
63Useful Links• Web Japan (Information on Japan)
http://web-japan.org• U.S. Embassy Tokyo, Japan
http://japan.usembassy.gov• Japan External Trade Organization (JETRO)
http://www.jetro.go.jp• Japan Statistics Bureau & Statistics Center
http://www.stat.go.jp/english • American Chamber of Commerce in Japan (ACCJ)
http://www.accj.or.jp• American State Offices Association (ASOA)
http://www.asoajapan.org• Japan Federation of Economic Organizations (Keidanren)
http://www.keidanren.or.jp• Japanese Chamber of Commerce and Industry
http://www.jcci.or.jp/home-e.html• Trade Fair in Japan (by JETRO)
http://www.jetro.go.jp/en/matching/j-messe• The Japan Times
http://www.japantimes.co.jp
U.S. Commercial Service - Japan
64
U.S. Commercial Service Japan
Website:
http://www.buyusa.gov/japan/en
Email:
U.S. Commercial Service - Japan