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From the Editorial Board |
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This week's edition of Diamond features a special
on information technology and the character business. Numerous animated
characters created in Japan, such as Pokemon, enjoy tremendous popularity
abroad, and the most popular characters are said to be riding the IT wave to
new heights of profitability. Japan Economic Update provides a summary of
the introduction to this special.
 The
Economist focuses on the effort to rehabilitate Kumagai Gumi, the
general contractor that has been in a prolonged business slump. The
Economist depicts the effort to save Kumagai Gumi as a sign that the
cleanup of at-risk companies by banks has entered the final stages. JEU has
chosen instead to summarize an article from this magazine that asserts that
conditions for a self-sustaining recovery of consumer spending have fallen
into place as incomes have crept upward.
Toyo
Keizai puts the spotlight on the proliferation of crises and mishaps at
corporations, but two other articles are summarized here--one that deals
with the U.S. perspective on the Bank of Japan's decision to end its
zero-interest-rate policy and another analyzing the rapid decline in Japan's
net external assets in 1999. |
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The Skinny on the Character Business (Kyarakuta
bijinesu no zenbo).Diamond,
September 9, 2000. |
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Shintaro Tsuji, president of Sanrio, the creator of the
Hello Kitty line of animated characters, has revealed that Microsoft
Chairman Bill Gates had tried to purchase the rights to the character line
for 600 billion yen. This is only one example of the intense global interest
in Japanese animated characters. Over the past two years, in addition to
Hello Kitty, the Pocket Monsters (Pokemon), Digimon, and other Japanese
characters have penetrated consumer markets in North America and around the
world.
Pokemon:
The Movie 2000, the sequel to Pokemon: The First Movie, has been
shown at around 3,000 theaters in the United States. To put the immense
popularity of the Pokemon characters in perspective, we might mention that
the megahit Star Wars was shown at 4,000 theaters. The total
character business market, which includes sales of merchandise and box
office receipts, is estimated to be around 5 trillion yen.
The rapid
growth of the information technology business forms the backdrop to the
surging market for animated characters. More of these characters are
originating from video games instead of from comic books, and characters are
now being created from scratch to target a multimedia mix that includes the
Internet. Outstanding talent has flocked to the character business, helping
to improve content quality and make the characters even more appealing to
consumers.
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Consumer Spending Headed for a Self-Sustaining
Recovery (Kojin shohi no jiritsu kaifuku ga hajimaru joken wa sorotta).
Hiroshi Sawayama, chief economist, Sumitomo Life Investment.Economist, September 12,
2000. |
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The hot summer has spurred rapid growth in sales of air
conditioners--sending energy consumption levels to historic highs at the end
of August--and pushed up sales of beer and other cold beverages. As consumer
spending has steadily rebounded, it is becoming increasingly difficult to
deny that an economic recovery is continuing.
Granted,
consumer spending in the latter half of 1999 did not grow as rapidly as it
did in the first half and was only up slightly on a year-on-year basis.
However, this temporary lull can be attributed to salary cuts--mostly from
bonuses--that began around 1998, aberrations that have not persisted beyond
the end of 1999. Corporate earnings have been rising since spring 1999, or
for more than a year, making it harder for companies to implement additional
rounds of salary reductions.
If profits
continue to climb, year-end bonuses will inevitably rise, leading to
increased sales of passenger cars and other goods and making it more likely
that consumer spending will be put back on a sound footing. With robust
consumer spending working in concert with rising plant and equipment
investment, it is quite conceivable that gross domestic product could grow
at an annual rate of more than 2 percent. |
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Japan's Shrinking Net External Assets (Keijo
kuroji wa doko e ittanoka: Meberi suru taigai
junsaiken). Teruhiko Shinno, advisor to the president, Tokyo Research
International. Toyo Keizai,
September 9, 2000. |
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Trends in the balance of payments of Japan and the
United States have changed dramatically between 1998 and 1999. Even with its
massive current account deficit, U.S. net external liabilities fell 29
billion dollars, while Japan's net external credits declined sharply even
though Japan continued to rack up massive current account surpluses. Japan
managed to lose assets as it strove to save, while the U.S., which is in the
midst of an excessive consumption binge funded with borrowed money, reduced
its external liabilities.
This ironic
situation makes us question the importance of capital stock in the economy;
suggests that a decline in net external assets is not necessarily a bad
thing; and raises the possibility that Japan's current account surplus could
in fact be a deficit if viewed in terms of profit flows.
The changes
in the balance of payments situation of the Japanese and U.S. economies
force us to take a closer look at the details. The decline in Japan's
external assets could be blamed on unsophisticated asset management and
shortcomings in statistical measurement. And one could argue that the
massive U.S. current account deficit was partly offset by revenues from
asset management and investment profits. The lag between the time of
investment and the time of redemption also makes it harder to acquire a firm
grasp of asset flows. And there is also the possibility that U.S. investment
earnings are not properly figured into current account statistics.
On the other
hand, there are positive aspects to a decline in net external assets. Rising
liabilities may trigger a decline in net external assets, but the surplus
funds could be used for infrastructure investment at home, which is the goal
of structural reform. And such investment is indispensable for achieving an
affluent lifestyle. |
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The U.S. View on the Lifting of the
Zero-Interest-Rate Policy (Beikoku kara mita Nichigin no zero kinri
kaijo). Peter Ennis, Toyo Keizai New York Bureau, and Richard Katz,
contributing reporter.Toyo
Keizai, September 9, 2000. |
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More than two weeks have passed since the Bank of Japan
decided to abandon its zero-interest-rate policy, but many Americans condemn
this decision. The most critical view, which is shared by the U.S. Treasury
Department, is that higher interest rates will jeopardize Japan's economic
recovery.
On the other
hand, the zero-rate policy delayed the restructuring of Japan's corporate
sector. Peter Tasker, the strategic director of Arcus Investment, has
pointed out that when banks can borrow money for free, they have no
incentive to distinguish between good and bad loans. The BOJ contends that
its departure from its zero-rate policy will not necessarily lead to
monetary tightening and insists that it will reintroduce the principle of
market risk back into finance to promote structural reform.
The BOJ's
decision means that loans no longer come with a guarantee, and financial
markets will begin to discriminate between banks on the basis of their
credit risk. While the BOJ cannot impose structural reform on the Japanese
economy, it has shown that by returning monetary policy to normalcy, it has
resolved to no longer provide interest-free funds, which only serve to throw
gasoline on the fires sparked by problematic government stimulus programs.
Over the long run, the BOJ's decision and assertion of its independence will
have positive consequences for Japan.
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