FT SPECIAL REPORT Japan Technology & Innovation

Tuesday December 3 2013 www.ft.com/reports | @ftreports

Asia’s testbed strives to adapt Inside Stem cell first Scientist hopes to restore patients’ The imperative to pharmacies’ hold over more than two vision but profits dozen popular medicines, in some may be elusive cases permanently. “If Mr Abe cannot modernise presents decide on this, he cannot decide on Page 2 anything,” he said. dilemmas, writes Another eternal complaint about Japanese industry is that too many Robots hit by Jennifer Thompson companies make the same things. Their executives complain of profit- hard times squeezing competition yet are loathe Automatons need he outlook for Japan’s engi- to leave money-losing businesses or neers and entrepreneurs is merge their companies with rivals. to earn keep with the brightest for 20 years – There has been progress this year. serious engineering on the face of it. Panasonic, for instance, has said it Prime minister Shinzo will abandon smartphones, while tele- Page 2 TAbe’s three-pronged strategy to revive vision makers across the board have the economy – known as Abenomics – trimmed production. But experts aims to help both ventures starting agree more consolidation is needed. out and conglomerates that have Part of the government’s grand plan existed for decades. to haul the economy out of more than Tokyo kicked off the year with fis- a decade of low growth and 15 years cal stimulus followed by an unprece- of deflation is to encourage businesses dented monetary loosening from the to collaborate in the hope that reduc- Bank of Japan. Following that was ing the number of players in a single the promise of additional reform sector will relieve downward pressure Beyond bullets measures, such as special zones in on profits, wages and prices. urban commercial centres where Excess capacity plagues virtually New high­speed deregulation will go further than at every industry, particularly food, trains will ‘levitate’ the national level. To add to all that retail, chemicals and construction came the apparent removal of funding where the top five businesses have as – but can they barriers for entrepreneurs. little as a 30-40 per cent share between boost growth? For those budding enterprises that them. do make the grade, a stock market Changing corporate law is one part Page 3 rally instigated by a new flush of of the solution. Mr Abe’s administra- investor optimism about the world’s tion is pushing for tax breaks to third-largest economy is boosting the reward companies that carve out over- Merger shy chances of successful initial public lapping operations and combine them offerings, should the enterprises wish in a new entity. Companies pushed to raise further capital. Some areas are already witnessing to join forces to Japanese companies compete hard growing innovation. to remain technological frontrunners Japanese engineers at Toyota and trim bloated in traditional areas of strengths such Tokyo university this year created a sectors as the automotive industry. Nissan robot capable of holding a conversa- and Toyota want vehicles with self- tion about everyday events. Not an Page 3 driving technology to start rolling off answer to mankind’s most pressing their mass production lines by the needs, perhaps, but certainly a useful end of the decade. addition to the International Space Making a splash But businesses in other traditional Station, where the robot, Kirobo, acts areas, notably consumer electronics, as a companion and instructor to a Manufacturers of continue to struggle. Japanese astronaut. high­tech toilets Last month Sony slashed its full- Robot dreams: Kirobo travels to the manufacturers in Japan, focusing on the ear of the prime minister as a “I believe robots will be the next year net profit forecast by 40 per cent International Space Station to support restructuring rather than novelty. member of a council advising on legis- smartphone, just like Google believes hope to increase as the consumer electronics company a Japanese astronaut “The electronics industry is changing lation to boost Japan’s growth, threat- Google Glass will be the next smart- sales abroad fell back into the red for its second drastically and it has become vital to ened to quit after questioning the gov- phone,” predicts the robot’s designer, quarter. build systems to provide high value- ernment’s commitment to reviving Tomotaka Takahashi. Page 4 Much rides on whether the group added products as quickly and as effi- the economy through deregulation. Other breakthroughs will reach will make good on a promise that its ciently as possible,” says Yoshihiro Mr Mikitani was acting in response wider audiences. Xperia smartphone range and Play- Nishida, a manager at Murata Manu- to a draft pharmaceuticals bill, one of Japan’s prototype levitating train, Station 4 game console, for which it facturing, a Kyoto-based supplier of the first reforms promised by Mr Abe in development for years, broke the On FT.com » has set an initial sales target of 5m, components to Apple and Samsung. after his election late last year. 500kph barrier in testing this summer. will help Sony return to profitability. The challenges of introducing struc- Bricks-and-mortar pharmacies JR Central is aiming to start a Sharp, which this time last year Companies complain of tural reforms and fostering entrepre- oppose the bill’s removal of a ban on Maglev service on a line between Self­driving cars warned of doubt about its survival, is neurship remain. internet sales of non-prescription Tokyo and Nagoya in 2027. Some have Automakers keen fighting back after two years of multi- competition yet are loath One recent row is a case in point. drugs. called for construction plans to be billion-dollar losses. Last month Hiroshi Mikitani, the Yet Mr Mikitani was dismayed to speeded up so the service can start to stress safety It is making a $1.4bn share offering to merge with rivals chief executive of Rakuten, Japan’s discover that the planned legislation and various equity agreements with largest e-commerce company, who has contained caveats that would prolong Continued on Page 2 over excitement

Start­up seeks to profit from ageing population

to plan. The venture was an for people caring for elderly Entrepreneurship agency that specialised in relatives recently dis- finding accommodation for charged from hospital; an Those ventures that elderly people, complete online community for care succeed can expect with suitable facilities and workers and managers, and available care. However, another site promoting pro- to reap rewards, when Japan’s long-term fessional qualifications for care insurance system came those employed in the sec- writes Gavin Blair into operation in 2000, com- tor, collecting commissions petition increased and fees from schools when its mem- As an undergraduate in the dropped, rendering the busi- bers sign up for courses. late 1990s, Shuhei Morofuji ness unprofitable. With 80 per cent of was facing the traditional Fear of this type of failure Japan’s numerous elderly- Potential: elderly Japanese people take exercise Getty and laborious process of partly explains the lack of care companies consisting applying for jobs at leading entrepreneurs in Japan in of independent, often fami- Japanese corporations. recent decades, according to ly-run, concerns, SMS cre- Y10bn (£62m) for the first world. Japan has a 20-year With established compa- Mr Morofuji – something he ated a dedicated, computer- time in the year to March head start on this. nies at the time beginning believes must change if the ised management system, 2013, while net profits for “The person who figures to merge, lay off staff and economy is to grow. which is now used by more the quarter ending Septem- out how to address this even go bankrupt, however, Undaunted, Mr Morofuji than 15,000 of them. ber jumped 35.5 per cent on issue – and it’s going to be he concluded that life as then founded SMS in 2003, The overlapping nature of the previous year to through ideas and technol- a white-collar salaryman with the aim of providing the various services mean Y1.08bn. ogy – is going to do very was no longer a stable “information infrastruc- many of the businesses feed As the populations of well. That is going to be option. ture” for the elderly care into each other, while big Japan’s Asian neighbours exportable to many coun- “I thought that it would market and its associated data analysis has helped are expected to age rapidly tries very soon.” be better to take charge of industries. His first step identify needs and develop in the future, SMS is posi- Having run SMS for a my career and form a com- was to take the advertising new offerings, according to tioning itself to take advan- decade, Mr Morofuji, who pany at my own risk,” says related to elderly care, Mr Morofuji. tage. The first generation of still owns 31 per cent of the Mr Morofuji. After a couple including personnel recruit- parents from China’s one company, has decided the of years spent working in ment, and shift it from leaf- child policy will retire over time has come to step aside sales, he set his sights on lets and newspapers to an the next few decades, skew- and let another chief execu- one of the few parts of the online model. With revenue ‘This will soon be ing the demographics of its tive take the reins. He domestic economy that was from the success of this a problem for vast population even more believes that companies almost guaranteed to see venture, SMS was able to than that of Japan. SMS has that continue to be run by future growth. expand its offerings. countries all around subsidiaries in China, as their founders tend to “The ageing of Japanese “A lot of people don’t well as in the greying underperform, often becom- society was beginning to be understand what we do as a the world – Japan nations of South Korea and ing vehicles to implement featured on the news regu- company, and think we’re has a head start’ Taiwan. This is in addition the boss’s will. larly at that time; how the just an employment agency to operations in countries “In order to develop an percentage of older people for elderly healthcare. In with younger demographic organisation that can con- in the population would fact, that is only a part of “Our overarching strat- profiles, including Malaysia, tinue for 50 or 100 years, it’s keep on rising and how our operations,” he says. egy is to be ahead of the India, the Philippines, Thai- important to nurture talent they held the most of the SMS now operates more curve in creating the full land and Indonesia. properly in the company country’s assets,” he than 20 web-based services range of information infra- “If there is any one area and have a career route for recalls. “But I realised that to meet the needs of the eld- structure services,” he says. where Japan leads, it’s the them through to chief exec- going into the actual medi- erly healthcare and medical SMS listed on the Tokyo shrinking, ageing popula- utive,” he says. cal or healthcare business industries, companies sup- Stock Exchange’s so-called tion,” says William H Saito, Mr Morofuji says he plans required a lot of invest- plying it, those working in mothers section for high- a serial entrepreneur, ven- to provide support to the ment, and there were a lot it and the elderly them- growth start-up companies ture capitalist and govern- development of SMS’s busi- of barriers.” selves. These include a web- in 2008, and was promoted ment adviser. “And this ness overseas from April His first foray into the site that provides advice to the first section in 2011. will soon be a problem for 2014 – while thinking about market did not go according from industry professionals Annual revenue topped countries all around the his next move. 2 ★ FINANCIAL TIMES TUESDAY DECEMBER 3 2013 Japan Technology & Innovation

Japan’s history of robotics Asia’s Robots must Sixth century and earlier Japan's 1981 Professor testbed relationship with robots Hirose creates may have its origins in the Titan III, a the Shinto belief quadruped earn their keep system. A component is robot that can strives animism - the notion climb stairs that objects have spirits to adapt 1989 AquaRobot, a with serious hexapod that walks under the sea, created by the Continued from Page 1 robotics arm of the 1932 Robot transport ministry Lilliput, probably before the 2020 Tokyo engineering the first toy Olympic Games. mechanical On a smaller scale, one robot, produced Japanese company is exam- in Japan by an ining ways to reinvent that unknown most basic and quintessen- manufacturer. It tial Japanese staple: rice. 1973 Androids Humanoid models may help can walk and WABOT 1 created by Waseda 2013 Kirobo, developed by Tokyo University, Keiji Saikahas spent swing its arms University. It can communicate, accompanies a Japanese astronaut into space. years perfecting alternative measure distances and work out The government allocates Y2.39bn to develop ways to polish the grains in promote manufacturers’ abilities but they need directions robots to care for elderly people order to remove the outer a practical purpose, writes Jennifer Thompson bran and leave a thin, nutri- 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 tious membrane intact. “I feel I have a duty to t was not quite as memorable as level of Japanese robotics expertise, help protect Japan’s rice “That’s one small step for man, other manufacturers are unlikely to culture,” he says. After he one giant leap for mankind,” as follow suit, say those working in the worked on the idea for more 1999 uttered by Neil Armstrong in 1969. industry. Aibo, a robotic dog, than a decade, musenmai – 1945 Japan embraces created by Sony. It can learn But the matter-of-fact statement “They don’t recognise space robot- technology in an effort to wash-free rice – was Iwas thrilling for the creators of a new ics as a big area for the business,” and communicate. A robot fish launched. turn imported raw breed of astronaut sent into space this says Hiroki Kato, an engineer at the is created by Mitsubishi to By 2011 about 460,000 materials into high-tech replicate an extinct species summer: “On August 21 2013, a robot Japan Aerospace Exploration Agency goods for export after the tonnes were being made, took one small step toward a brighter (Jaxa). He says projects such as second world war equal to 6 per cent of future for all.” Kirobo make great PR – the little Japan’s total rice produc- Kirobo – a combination of the Japa- space companion generated headlines tion. nese words for “hope” and “robot” – is worldwide – but are not the basis for Such ventures indicate Edo period (17th to 19th century) a machine with a difference: not only a sustained commercial programme that the particularities of Japanese craftsmen build complex does it provide technical assistance, it unless they could earn their keep by automatons for theatre performances Japan make the country a is also designed to provide compan- performing a wide range of tasks. and for sale as domestic toys vital testing ground for new ionship to human astronauts who Jaxa has created prototype robots technology. spend months working in space. sent into orbit on several missions for Some developments will “I believe robots will be the next tasks such as refuelling and mainte- potentially be slowed, at smartphone just like Google believes nance but is not currently working on least in terms of their com- Google Glass will be the next smart- a humanoid robot, although it has not mercial availability, by reg- phone,” says Kirobo’s creator, Tomo- ruled that prospect out. The US ulation and the need to cre- taka Takahashi, referring to the regards itself as leading the field. ate the infrastructure in efforts made to enable the machine to “Japan has significant experience which they can operate, hold basic conversations. with its advanced robotics but only 1978 The ACMVI (Oblix) 1984 WABOT 2 unveiled by most notably in the case of Kirobo was last month joined by Robonaut [the first humanoid robot in created by the Tokyo Institute Waseda University, a robot self-driving cars. Koichi Wakata, a Japanese astronaut, space] has worked side by side with of Technology, later adapted that can talk, read musical But there are strong having travelled ahead to the Interna- astronauts performing tasks that cur- with others for use in scores with its eyes and play imperatives for many more tional Space Station in an unmanned rently only humans perform,” says businesses in Japan to Source: FT research manufacturing and industry an electronic organ rocket which blasted off from a Japa- Ron Diftler, manager of the Robonaut FT graphic work more closely together nese island this year. project at Nasa. in order to combat rising Mr Takahashi, a robotics engineer Japanese roboticists have some- roboticists to show what their tech- to machines created with space mis- energy costs, serve an at Tokyo university, was inspired by times come under fire for making nology could do, given the dangers for sions in mind, says Mr Kato. But for ageing population and the Manga character Astro Boy, a machines that entertain rather than humans during the clean-up operation those that decide to go down this path develop cutting-edge tech- classic cartoon robot, and worked on pursuing serious engineering projects. at the stricken power plant. profits may not materialise for 50 nologies. the project in collaboration with Toy- Honda’s Asimo robot, the “world’s But few robots were capable of years, he predicts. The country also needs to ota and Dentsu, an advertising firm. most advanced humanoid robot” responding to the nuclear accident, a “Interest in space robots is growing foster an environment Kirobo has been programmed to according to the carmaker, can walk situation that has since encouraged more quickly now than 10 years ago,” which enables entrepre- communicate in Japanese and recog- like a human and is the size of a small many to focus on developing robots says Mr Diftler. “The space station is nise voices and faces. He is capable of adult. But it has usually made head- In 2011, few robots that can perform rescue operations. a very busy place and having an extra holding a conversation and improvis- lines for conducting’ symphony were capable After Fukushima, space is no longer set of hands, in this case robot hands ing basic responses. On the more orchestras, performing dances and regarded as a priority for Japanese that can handle maintenance tasks, There are strong practical side, he is there to act as an greeting royalty. of responding to roboticists – but some believe robot frees up the crew for more science.” imperatives for observer and recorder, and can relay The March 2011 tsunami and subse- astronauts will eventually come into Mr Takahashi argues the good pub- instructions verbally to Mr Wakata quent Fukushima nuclear disaster the Fukushima their own. licity is enough at this stage. “A lot of businesses to sent from earth. But despite the atten- was a wake-up call. The event ought nuclear accident Technology used in Honda’s Asimo people are interested in this project, tion the project received and the high to have been an opportunity for and other robots can easily be applied and that’s the important thing.” work more closely together

neurs to keep trying even if a first venture fails. Shuhei Morofuji’s first business did not survive Stem cell scientist warns on profits but his second, operating web-based services to meet the needs of healthcare and medical services for elderly Regenerative medicine years ago, I thought, I will using iPSCs to study how erative therapies, she is university every depart- people, saw annual revenue develop cell transplantation diseases progress and to wary of the high expecta- ment is supposed to be surpass Y10bn ($98m) for Pioneer is wary of therapy,” she says. “Gene develop treatments: scien- tions building up around treated equally. I think a lot the first time this year. therapy and stem cells were tists imagine creating eve- their economic potential. of universities will be As a fellow Japanese high expectations for completely new to ophthal- rything from brain cells for “Start-up companies are watching us.” entrepreneur describing the mology then, but I saw the Parkinson’s patients to already involved and the Dr Takahashi did not battle to adapt products and making money, says importance.” insulin-making cells for dia- road to commercialisation always have ambitions to services to suit changing Jonathan Soble Dr Takahashi’s work is betics. is there, but to assume that run a cutting-edge clinical demographics puts it: “The the first clinical trial in the But Dr Takahashi and her the concept of iPSCs and laboratory. She says she person who figures out how world involving iPSCs – team at Riken will be first regenerative medicine will drifted into medicine at the to address [demographic-re- Masayo Takahashi is induced pluripotent stem to try an iPSC treatment on yield a lot of money is urging of her parents, and lated business challenges] – Japan’s latest medical cells – a type of stem cell a human subject. naive,” she says. “Only chose ophthalmology and it’s going to be through celebrity. Next summer, the derived from adult tissue. It Despite the novelty of the parts of the field will because she wanted chil- ideas and technology – is 52-year-old ophthalmologist is backed by a high-profile technology, Japan’s govern- become industries. It’s dan- dren, and the field offered going to do very well. That will extract skin cells from national effort to capitalise ment is already betting that gerous to think that all of stable working hours. Her is going to be exportable to a volunteer whose vision on a Japanese scientific dis- it can become the basis of a regenerative medicine will.” husband, a neurosurgeon, many countries very soon.” has been impaired by age- covery: last year, Shinya major new industry. Still, she believes moving was the more illustrious Restoring sight: Masayo Takahashi As Japan has proved time related macular degenera- Yamanaka, a professor at Shinzo Abe, the prime quickly to find applications doctor. “I saw it as my job and again, lessons learned tion, a common retinal con- Kyoto University, shared minister, has given regener- for stem cells is a positive to support him,” she says. by the Japanese will inevi- dition that makes it diffi- the Nobel Prize in medicine ative medicine a central turn for Japan’s scientific It was in 1995, when she glass-ceiling sexism and dis- half-jokes. “Luckily, she tably be transferred else- cult for those affected to see for working out how to place in his “Abenomics” establishment. The country followed her husband to the dain for applied science dropped out.” where. straight ahead, but leaves “trick” mature cells into growth strategy, and he is has an impressive record in Salk Institute in California, worked in her favour. “I The bigger barrier is a peripheral vision intact. becoming iPSCs. backing revisions to basic research – Dr that she started on her own could do what I wanted psychological one imposed Dr Takahashi, who works Stem cells have enormous Japan’s pharmaceutical law Yamanaka was its 11th path to prominence. She because I was a woman,” by traditional culture, she at the Riken Centre for potential in treating dis- that are intended to shorten Nobel laureate since 2000 – was introduced to the field she says. “I didn’t think argues. “Japanese women Developmental Biology in eases because of their abil- approval times for new but when it comes to com- of stem cell science and saw about career advancement.” don’t want to stand out, Contributors » Kobe, plans to transform ity to grow into any sort of research and treatments. mercialising its discoveries, that no one was exploring Today, she believes, barri- they don’t want to be lead- those cells into retinal tis- tissue. Until now, most The changes are expected to she acknowledges that the its use in ophthalmology, so ers to women in science ers. They don’t think, ‘I sue using an experimental have been cultivated from be approved by parliament country has been “weak”. she began her own research have largely disappeared in want to have my own lab stem-cell technique, then the cells of human embryos, before the end of the year. “In Japanese academia project. “I was the only per- Japan. Although the coun- and reach the top in my Jonathan Soble implant them into one of but iPSCs offer two distinct “Regulation is the biggest there is this idea that poor son in the world who under- try has mostly resisted quo- field’. I certainly didn’t Tokyo bureau chief the patient’s damaged eyes. advantages: they are free of hurdle in this field, but equals pure,” she says. stood it,” she says. “That tas and other formal anti- until Salk.” But Dr Taka- Because the tissue will be the ethical objections that Japan will be the best place She draws a contrast with was an exciting feeling.” discrimination measures, hashi believes things are Jennifer Thompson extracted from the patient’s surround the use of embry- in the world to pursue Riken, which has partner- On returning to Japan, Dr qualified women are often changing, in part because of Tokyo correspondent body, Dr Takahashi hopes it onic tissue and they can be regenerative medicine,” Dr ships with universities and Takahashi continued her given priority for jobs. the growing number of role will be integrated easily by genetically matched by Takahashi says. the government but was work at Kyoto University. “At Riken, the other can- models such as herself. Ben McLannahan the eye, regenerating it and making them out of Yet for all her confidence founded as a private institu- Paradoxically, because didate for my job was a “Sometimes,” she says, “I Tokyo correspondent restoring at least some of patients’ own cells. Labora- in the health benefits of tion. “Our project is seen as she had chosen clinical woman and a foreigner, so I meet young women who tell the lost vision. “Fifteen tories around the world are stem cells and other regen- special, but at a Japanese research, academia’s mix of was pretty worried,” she me, ‘You’re cool’.” Amie Tsang World desk researcher

Gavin Blair, David A McNeill Freelance journalists

Benjamin Lazarus Patent protection has helped drugs industry to modernise Research Helen Barrett Commissioning editor were granted for processes second or third generation second-largest in the world. approve patent new drugs today are most Comment rather than products, so products that were not a Japan no longer had to applications. often large molecule Andy Mears P REED MAURER researchers in Japanese threat to first-in-class rely on foreign partners, The result was a gradual biopharmaceuticals rather Picture editor companies focused on drugs. However, the and researchers worked to decrease from between a than small molecule While governments finding innovative or approach was rational in discover first-generation five and eight-year wait for chemicals. Steven Bird elsewhere wrestle with cost unpatented processes to Japan because higher drugs that would establish approval in 1998 to an Innovation is changing Designer control and austerity cuts make drugs that had been prices were awarded for a presence in international average of 18 months but Japan still lacks a to research, healthcare in discovered elsewhere. small innovations. The markets. In the 1990s some today. Another, in 2007, bridge between new drug For advertising details Japan is a growth All this changed in 1975 goal was to launch any Japanese-origin drugs gave new drugs eight years ideas and marketed contact: Michiko Hayashi, industry. But that was not when a product patent new version of a drug became international of exclusivity regardless of products. +813 358 12097 and always the case. system replaced the rather than a new and blockbusters. patent status. The next steps must be [email protected], or From the end of the process patent system, and unique drug. Regulators were New drug ideas spring venture capital, ease of your usual FT representative. second world war until the foreign companies could Consequently in the convinced that stronger from laboratories, and in public listing on stock All FT Reports are available mid-1970s, Japan’s establish 100 per cent 1980s Japan approved and intellectual property Japan most are in large exchanges and a central on FT.com at ft.com/reports intellectual property owned affiliates in Japan. launched more new – or at protection yielded positive national universities. agency to optimise the Follow us on Twitter at: protection policy fostered Researchers were forced to least new versions – of outcomes as Japan took a Researchers were allocation of government @ftreports imitation rather than discover new substances ‘Japan still lacks a drugs than either the US position alongside the US government employees money for research. innovation. In the instead of new processes. or Europe. Many of these and Europe in new drugs unable to profit from their All editorial content in this pharmaceutical industry, Western critics bridge between were not sold outside discovered rather than discoveries. P Reed Maurer is president supplement is produced by foreign companies could considered Japanese Japan, but they did solidify copied. Further policies But once that restriction of International Alliances the FT. Our advertisers have enter Japan only as joint research inferior because it new drug ideas and a dominant position for supported innovation. One was removed in 2004 there Limited and author of no influence over or prior ventures with 50 per cent produced small-step marketed products’ Japanese companies in was to shorten the time was an explosion in new “They Do Well Who Do sight of the articles or online or less ownership. Patents innovations, such as their home market, the required to review and bio-venture companies and Good” material. FINANCIAL TIMES TUESDAY DECEMBER 3 2013 ★ 3 Japan Technology & Innovation ‘Levitating’ train boosts hopes for growth and Olympic glory

Maglev World’s fastest service will be among the most expensive but the rewards could be considerable, writes Gavin Blair Attractive proposition: the SCMaglev is propelled along a walled track by powerful supercooled magnets Bloomberg

n October 1 1964, nine days September, the L-zero SCMaglev The cost of the project, to be borne eration for every domestic business. and Osaka are linked, a giant popula- and the combined income from the before the last Tokyo equalled the world train speed record wholly by JR Central, is forecast to The population is expected to drop by tion centre of about 65m will emerge. existing Tokaido Shinkansen and the Olympics, the Tokaido of 581kph set by an earlier JR Central run to Y9tn ($89bn) and concerns 8 per cent to 117m by 2027, according The development of technology for new service,” it says. Barclays’ Mr Shinkansen bullet train prototype. Shortly afterwards, JR Cen- have been raised about its viability. In to government projections. Tokyo will the SCMaglev could also boost local Himeno foresees some risks but began operating between tral announced plans to begin services addition to very large investment in keep growing until about the time the industry and create opportunities believes the huge investment, “should Othe capital and Osaka, completing the to Nagoya by 2027 and Osaka by 2045. research and development, the line line opens by drawing people in from overseas, it says. give an overall boost to Japan’s GDP” 500km journey in just four hours. It The SCMaglev is propelled by pow- will take a new and more direct route the provinces but its population is The existing Tokaido Shinkansen and “will have a positive effect on was the most potent symbol of the erful supercooled magnets along a between Tokyo and Osaka, a major likely to start falling from there. between Osaka and Tokyo presents Nagoya, where companies may relo- country’s rapid progress after the sec- walled track known as a “guideway”. civil engineering challenge. At such JR Central is undaunted. “Although another challenge. It carries nearly cate offices from Tokyo for cheaper ond world war. The train runs on rubber wheels until high speeds, the track needs to be as Japan is already facing an ageing soci- 400,000 passengers a day, making it rent and taxes”. As Tokyo prepares to host the 2020 it reaches 100kph, at which point it straight as possible, requiring 250km ety with a low birth rate, the Tokyo- the busiest and most lucrative high- If the technology is adopted over- Olympics, Japan hopes once again to floats to 10cm above the ground. The of tunnels, many through the moun- Nagoya-Osaka area will continue to speed rail service in the world. JR seas, JR Central is likely to act as a showcase the world’s fastest train, lack of friction allows it to reach its tains of the Japanese Alps. be the driving force of the Japanese Central’s intention to keep it running consultant. Representatives from this time the SCMaglev, a hover train record-breaking speeds. “It can’t be viable between Tokyo economy,” it says. “And its popula- after the new service is launched Northeast Maglev, a Washington- that will run at more than 500kph. JR Central says the fact that the and Nagoya, not with the amount tion is not expected to fall as much as means it will have to attract many based firm proposing a high-speed The SCMaglev (superconducting train hovers, combined with the they are investing, though it has the the country as a whole.” more passengers to rail travel in order link from the US capital to Baltimore magnetic levitation) will eventually guideway, makes it difficult for the potential to be once the line is The company suggests that once the to make the SCMaglev viable. and New York, have already ridden cut the journey between the cities of train to derail. The country’s bullet extended to reach Osaka,” says Ryota metropolitan areas of Tokyo, Nagoya Yusuke Aramaki, an analyst at Mit- on the L-zero SCMaglev at JR Cen- Osaka and Tokyo to 67 minutes; it trains have an exemplary safety Himeno, a transport analyst at Bar- subishi UFJ Morgan Stanley, has tral’s test track in Yamanashi. The takes around two and a half hours on record – not one serious injury among clays in Tokyo. “But linking the two doubts about the business model, say- 42.8km test track, which will form the current Shinkansen train. 7bn passengers carried since their biggest population centres, Tokyo and ing JR Central’s only option will be to part of the Tokyo-Nagoya line, is JR Central, the railway company inception. Earthquakes are a threat Osaka, with the potential for both lei- Linking metropolitan areas “take share from the airlines”. expected to open within a few years to behind the Maglev, is expected to but have been the cause of just one sure and business travel between could create a population But JR Central argues its projec- paying passengers at certain times. JR begin work next year on the derailment, in 2004. Bullet trains are them should allow it to eventually tions are sound. “Our plans are Central is hoping that both train and first 350km phase, to link Tokyo to fitted with early-warning systems that pay for itself.” centre of about 65 million based ...on the respective market track will be major attractions for vis- Nagoya with a 40-minute journey. In stop them during an earthquake. Japan’s demographics are a consid- shares for bullet trains and airlines itors to the Tokyo Olympic Games.

Abe employs more carrot than stick in drive to consolidation

steal market share from cent of the total value – the able to book investments M&A each other is a recipe for fourth year in a row where and loans in the joint sub- low profits, low wages and the share of “in-in” deals sidiary as losses, if they can Japanese companies low prices. has been below half the satisfy the relevant minis- are shy of takeovers The problem is not just in total. ter that the new company is the cars and electronics That is a far cry from aiming to develop overseas and mergers, writes sectors, where excess capac- 2005, when giant deals such markets and new business ity is most remarked upon. as the $7bn Daiichi/Sankyo fields. Ben McLannahan In machinery, food, retail, drugs merger pushed the Such laws “have the chemicals and construction, domestic share to 80 per potential to change the When Murata Manufactur- the top five companies have cent, raising hopes that structure of Japanese indus- ing, a Kyoto-based supplier as little as a 30-40 per cent more idle capacity would be try radically, if used effec- of components to Apple and share between them. shaken out. tively,” says Masatoshi Samsung, wanted to Beer is another bloated Mr Abe seems determined Kikuchi, a strategist at become closer to Toko Inc sector, with Asahi, Kirin, to restore some of that Mizuho Securities. north of the capital, it did Suntory and Sapporo More encouragement so in stages. jostling for space in super- could come via the Innova- First, in March 2012, the market aisles. tion Network Corporation rivals set up a “capital and “We have four big Too many rivals in of Japan (INCJ), a mostly business alliance”, which brewers, none of which is one sector is a state-backed institution set involved Murata subscrib- well known in the global up in 2009 under the gov- ing to new Toko shares and market,” says one M&A recipe for low ernment of Taro Aso, now convertible bonds. Almost a banker in Tokyo. “They are deputy finance minister. year later, Murata launched all competing for drinkers profits, low wages About two-thirds of the cor- an offer to raise its equity in this shrinking popula- and low prices poration’s Y600bn of invest- stake in Toko to 66.6 per tion, which is stupid.” ments to date have been cent, while leaving the It is not that Japanese directed towards corporate remainder listed. companies are shy of M&A. momentum, which was a restructurings and mergers. A similar phased deal It is that they would rather feature of the era of prime In its biggest deal in 2011, with Tokyo Denpa, acquired not do it with each other. minister Junichiro Koizumi INCJ plucked out three in August this year, took Data from Recof, the a decade or so ago. In the lossmaking businesses from about four times longer Japanese research house, current parliamentary ses- Sony, Toshiba and Hitachi than the Toko Inc deal. shows that domestic compa- sion the government is and mashed them together, This softly softly nies were involved in 1,457 pushing for tax breaks for injecting Y200bn of equity approach is not a matter of M&A deals worth Y6.5tn in carve outs, in which multi- capital in exchange for cost policy, says Yoshihiro the first nine months of the ple enterprises split off part cuts. The new creation – Nishida, Murata’s general year. But most had a cross- of their operations and Japan Display – could be manager in charge of border element. combine them in a new ready for an initial public accounting, finance and Purely domestic M&A company. offering within the next planning, noting that the accounted for just 20 per Parent companies will be couple of years. Y1.9tn ($19bn) company has The INCJ “can play a role bought other companies in Japan mergers and acquisitions deals as an agent of consolida- one go within the past cou- $bn tion”, says Kensaku Bessho, ple of years. head of M&A at Mitsubishi 300 Rather, he says, it is a UFJ Morgan Stanley Securi- pragmatic response to a Inbound M&A ties in Tokyo. strategic imperative: to Outbound M&A A new stock index to be build stronger ties with Domestic M&A launched in January repre- companies that can offer 250 sents another effort to sort “complementary” skills and winners from losers. The knowledge, in the constant JPX-Nikkei 400 will group pursuit of miniaturisation together the most profitable and digitalisation. 200 and most investor-friendly “The electronics industry companies in Japan, its is changing drastically and designers say, positioning it has become vital to build itself as a rival to the dec- systems to provide high val- 150 ades old Nikkei 225. ue-added products as If it takes off, analysts quickly and as efficiently as say companies not in the possible,” says Mr Nishida. index will want to get in it, The way Shinzo Abe sees while companies already in it, more companies should 100 will want to stay there. be thinking like this. If that requires a lot of Part of the prime minis- spinning off of duff busi- ter’s grand plan to haul the nesses, then so be it, says economy out of more than a 50 Masashi Oda, chief invest- decade of low growth and ment officer of equity deflation is to encourage investment at SuMi Trust, companies to join together Asia’s largest institutional so that capital can be allo- 0 asset manager. cated more productively. 2003 04 05 06 07 08 09 10 11 12 2013 Broad usage of the new Having too many rivals in Source: Dealogic YTD index is likely to be a “moti- one sector, all trying to vator for change”, he says. 4 ★ FINANCIAL TIMES TUESDAY DECEMBER 3 2013 Japan Technology & Innovation High­tech toilet makers contrive to make a splash

Household goods Manufacturers such as Toto hope to persuade the world to purchase what is regarded as a Japanese oddity, writes Amie Tsang

he walls outside the other- wise minimalist bathroom cubicles in Toto’s London Technology Game of thrones showroom are adorned with messy scraps of paper, each Twith the header: “My first Washlet Toto Neorest AC experience was...”. One reads: Washlet “I became a child again”. This self­cleaning Others range from fearful – “Very toilet has an scary” – to rhapsodic – “Orgasmic”, integrated UV light “Bangin!”, “The most exciting toilet to break down experience of my life!” organic substances. High-tech toilets have been common It also sprays the in Japan for 30 years. At least 70 per bowl before and after cent of households have one fitted. use with electrolysed They are more unusual outside the water, typically used to Japanese domestic market, but com- disinfect vegetables or as panies such as Toto are hoping to a mouthwash. make them popular worldwide. Toto, which sells them under the brand name Washlet, is growing steadily outside Japan. The company Inax Regio entered the European market with a The toilet has a sound base in Germany in 2008 and the Lon- system so that users don showroom opened in 2010. It fore- can listen to classical casts that by the end of 2013 overseas music or relaxing sales of all its equipment will have sounds. The bowl is risen 22 per cent year on year. fitted with lights that This is much higher than the 9 per turn on when someone cent rise in sales in Japan, but comes approaches, which is from a lower base. The company’s useful for stumbling, overseas sales of housing equipment night­time visits. rose 9 per cent year on year in the second quarter of 2013 in the Ameri- cas and 16 per cent in Europe. Hiroki Oizumi, global marketing Toto SG Washlet officer for Lixil, the group that owns The spray wand can be Inax, another Japanese high-tech toi- adjusted to wash front let maker, says the prices of such and back. Water products can be a barrier to new busi- pressure and ness within the UK and the US. temperature can be The “retail price of a shower toilet regulated. It has a is significantly higher than a normal heated seat and a lid toilet”, he explains. “And people have that closes no experience when they try to use automatically. it,” which makes it a harder sell. Mr Oizumi says that giving custom- ers the “real experience is the key to expanding the market”. However, running commentary as he presses customers, as it has done in China, Efficiency became a big deal and this Jet set: a high­tech “In Japan, we hear about how easy high-tech toilet manufacturers cannot buttons: “You can have an oscillating the Caribbean and the US. is when we jumped in,” he says. toilet on display in [the toilets are] to use or clean – that’s just rely on showroom visitors. movement or massage and there is a Entry into other markets has been The industry has been helped by the London Charlie Bibby what’s important. But here there is Sohei Nishida, Toto’s London man- drying system.” The nozzle recedes helped by technological developments. rapid development of technology. The more care for design. That’s some- ager, thinks it can expand only by and an avocado-shaped patch of water Other manufacturers are moving into pervasiveness of smart appliances has thing we’re still struggling with,” he establishing the same bathroom pref- on the glass shrinks as the dryer gets making high-tech toilets, and the made smart toilets seem less odd. says. erences in Europe as Japan. He recog- to work. quest for more environmentally Mr Krakoff is dismissive of the idea “We don’t have it yet, but I think nises talking about toilet habits can Showrooms are a crucial way to friendly products has given them a that people are worried about technol- that in the UK it is about classical, be unsociable, but Washlets certainly convert people to using these toilets foothold in other markets. ogy going wrong near their nether traditional design.” have enough features to discuss. because they provide a way to test the David Krakoff, president of sales for regions. “It’s not an issue any more. Despite the aesthetic challenge, he Floyd Case, a manager at the product. Since setting up in London, Toto in the Americas, says the push We have ultra-high manufacturing is ambitious. It took Toto 10 years to “concept store” in London’s Clerken- Toto has also targeted potential cus- for lower water consumption for toi- standards . . . we get almost no war- become established in China and “it well, demonstrates how the technol- tomers in places such as five-star lets in Canada and the US gave Toto ranty claims on Washlets,” he says. ‘Efficiency became a needs to happen quicker than that ogy works with a sheet of glass placed hotels to create awareness. It hopes an opportunity to get into the region. Back in the UK, Mr Nishida does big deal and this is when here”. over a showroom toilet seat. A nozzle that making the brand more recognis- “It wasn’t hard to create toilets that admit to one serious cultural barrier – “Once [consumers] experience it, appears and squirts a spray of water able will establish a bigger sales net- flushed 1.6 gallons – they just weren’t British consumers are not enamoured we jumped in’ they know how good they are,” Mr up at the glass. He keeps up a work and lead to more individual flushing what was in the bowl. with futuristic design. Nishida adds. “I am not worried.”

Rice shines as it Land of rising sun pins hopes passes chewing on increased use of solar power gum test twice the average price of down for maintenance. available space. “Wind is Electricity power in the UK. Today it has 50 commercial about two watts per square That solar rush, however, reactors and these are now metre; solar power 20 watts; Nuclear disaster is from a very small start. offline for safety checks with nuclear you get 1,000 polished rice that did not started race to find Power from renewable that are tougher and more watts per square metre.” Food need a rinse at home. sources made up approxi- politicised after Fukushima. In practice, this has alternatives, writes Most Japanese “I imagined myself as a mately 9 per cent of Japan’s The triple meltdown at the meant most new large-scale grain of rice bouncing David A McNeill total pre-Fukushima energy plant in 2011, combined solar projects have set up in prefer the grain around in the machine,” he supply, according to the with the weaker yen, will Japan’s less crowded north. says. After more than a ministry of economy, trade add an extra Y9.2tn to the Among the biggest reported buffed to its core, decade of tinkering, musen- Less than 20 miles north of and industry. Most of that nation’s fuel bill between investors is SoftBank, a tel- mai – wash-free rice – was the hulking corpse of the was hydroelectric. “Other 2011 and the end of this ecommunications company, says Jonathan Soble born; by 2011, roughly Fukushima Daiichi nuclear renewable energy is still year, say officials, as the which announced plans last 460,000 tonnes were being plant, Eiju Hangai, a busi- cost prohibitive,” says the nation’s nine big utilities year for three solar stations Keiji Saika’s first innova- made, 6 per cent of Japan’s nessman, is plotting his ministry. Even with the tar- scour the planet for gas, in Hokkaido, the northern tion in rice polishing was total rice production. own modest course toward iff system, independent coal and heavy oil. island, with a combined inspired by a product far Now at 79, Mr Saika is Japan’s energy future. power producers today Opponents of the nuclear capacity of more than removed from Japan’s cher- marketing a new innova- A native of Minamisoma – account for less than 3 per restarts are putting their 180MW. ished staple food: a piece of tion aimed at consumers’ the largest city in the cent of the nation’s electric- faith in power saving and Concentrating the solar chewing gum. health. It is the result of a plant’s immediate fallout ity market. renewables. Eventually boom in the north has cre- It was the 1970s and Mr further refinement of his zone – Mr Hangai says he is Nevertheless, renewable solar power could conserva- ated roadblocks, however. Saika was running his fam- rice-polishing machine that trying to help his devas- energy is being produced in tively supply more than Hokkaido Electric Power ily’s small manufacturing he says produces grains Off­white: Kinmemai rice is processed and packed tated home town make a European and US markets 10,000MW of electricity in has been overwhelmed by business near Osaka, which that are more nutritious comeback with a solar-pow- at prices competitive with Japan, equivalent to the applications for power sales specialised in making rice- than regular white rice. ered lettuce farm. “It’s my coal and gas, says Tom output of 10 nuclear reac- and is dragging its feet in polishing machinery. As most health fanatics times as much vegetable become increasingly vital. contribution to our recov- O’Sullivan, an independent tors, forecasts Mika Ohba- approving them. Most Japanese prefer rice know, genmai or brown rice fibre as fully polished rice. Japanese rice farming has ery,” he says. energy specialist. “There is yashi, director of the Japan Another problem is trans- buffed to its shiny white is healthier than the white His company, Toyo Rice, been insulated from foreign The farm, sheltering no reason why this cannot Renewable Energy Founda- ferring power across a core. The grain is milled kind: the bran that is is selling it under the brand competition by onerous tar- under two nylon domes on be achieved in Japan since tion, a think-tank. “There is country divided into 10 industrially to remove the sloughed off during polish- name Kinmemai, or “golden iffs on imports, but the cur- land leased from the city the technology is the no need to restart nuclear regional power fiefdoms, husk, then polished in ing contains micronutri- bud rice”. Although its rent level of protection may government, is powered by same,” says Mr O’Sullivan, reactors,” she insists. with different technical smaller batches by whole- ents. Yet in spite of its price can be 10-15 per cent not be sustainable. 2,000 Toshiba solar panels. adding that Japan needs But where is crowded, standards overseen by sepa- salers, retailers or even at advantages it remains a higher than that of regular Shinzo Abe, the prime Any surplus electricity is solar and other renewables mountainous Japan going rate local governments. Not home. Cooks usually give it niche product, particularly white rice, Mr Saika points minister, has pledged to sold to the local utility, to meet its newly revised to put all those solar pan- surprisingly, SoftBank has another wash in the sink to in Japan and other big rice- out each bag of Kinmemai defend rice farmers in nego- Tohoku Electric Power. climate change targets. els, asks Paul Scalise, an been forced to scale back on remove leftover traces of consuming Asian countries. stretches further – because tiations over the Trans-Pa- Katsunobu Sakurai, the Bridging Japan’s energy energy specialist at the Uni- the size of the solar project. bran, thought to taste bitter Mr Saika sought a com- it is slightly plumper than cific Partnership, a sweep- mayor, is an enthusiastic gap has become more press- versity of Tokyo. He says The slow growth of and to be difficult to digest. promise – rice that would normal rice, the same vol- ing trade pact that his gov- supporter and he hopes ing this year. Japan was supporters of alternative energy alternatives and Mr Saika was concerned be as nutritious as possible ume can be made with a ernment is seeking to join, small projects such as this previously nuclear free in energy must confront what opposition to nuclear drags that the starchy water, or while still being white. He tenth fewer grains. Mr but other parties to the will help make Minamisoma 1970, when its then two he calls the density problem on economic recovery. togijiru, discharged by mil- achieved it, he says, by talks – including big agri- self-sufficient in energy by working reactors were shut – power generated per Prime minister Shinzo lions of households in this adjusting his polishing cultural producers such as 2030. Abe’s position is clear. In process was contributing to machine’s design – specifi- the US and Australia – Even before the March Japan’s electricity generation March, he removed most of water pollution, a big prob- cally, the angle of the blade- ‘I wanted to find a want exemptions to be nar- 2011 disaster, Japan’s elec- % of total the anti-nuclear panellists lem in Japan after more like grain spreader attached way for people to row and temporary. tricity rates were among Renewable Gas Coal from an energy policy board than two decades of indus- to its central cylinder – to The small size of most the world’s most expensive. Nuclear Oil advising the state on post- trial expansion. make the grains collide eat rice without Japanese farms means they The impact of Fukushima 100 Fukushima alternatives. Mr “I wanted to find a way more gently and evenly. cannot hope to compete on and the eye-popping price Abe is acting true to form. for people to eat rice with- The result is the bran is hurting the price, so offering premium tag for cleaning up from the His Liberal Democratic out hurting the environ- removed but a delicate and environment’ products will be essential. disaster are extra incentives party brought nuclear ment,” he says. nutrition-rich membrane Mr Saika understands this, in the race to find alterna- 80 power to Japan in the 1950s The breakthrough came underneath is left intact as and wants to broaden his tives. One result has been a and will not let it go easily. when a piece of chewing is the kinme or germ. Saika says he hopes Kin- customer base by appealing tripling in the number of This month, parliament gum got stuck to his trou- Hiroyuki Inagawa, a pro- memai will re-energise to health-conscious foreign- independent power produc- 60 passed legislation aimed at sers. He removed it the way fessor at Kagawa University Japan’s rice farms, which ers. He recently organised a ers over the past two years, triggering what many say is he learnt as a child: dab- medical school, says that produce a third less rice “rice tasting” for journalists says Andrew DeWit, a pro- Japan’s most ambitious bing it with a second piece preserving the membrane, than they did 20 years ago – and diplomats at an expen- fessor of policy studies at reform of its electricity of gum and pulling both off which is just 1/100 of a mil- a result of changing eating sive restaurant in Tokyo’s Rikkyo University. 40 market since the US occu- together. “I suddenly limetre thick and is known habits, a shrinking rural Ginza district, where dishes Since a feed-in tariff sys- pation ended in 1951. thought, ‘I can do the same as the subaleurone layer, population and a govern- including plain Kinmemai tem for renewable energy Perhaps the most striking thing with rice’,” he says. may have benefits includ- ment policy of reducing served with a pinch of sea began last year, dozens of part of that reform is the Bran is slightly sticky, so ing boosting the immune acreage to support prices. salt, puffed Kinmemai and companies have applied to 20 establishment of a national he went about devising a system. “It’s better at sup- Last year, sales of bread grilled Kinmemai in dashi generate solar and wind grid company by 2015. That polishing machine that porting the body’s ability to in Japan overtook those of broth won rave reviews. power. The tariff system should help unify the would force the rice grains self-regenerate than the rice rice for the first time. “I was happy to see for- means that small, renewa- 0 divided transmission and to jostle together. They we normally eat,” he says. “I feel I have a duty to eigners have basically the ble energy producers such distribution systems and would pull the hada nuka, Mr Saika says his rice help protect Japan’s rice same taste in rice as Japa- as Mr Hangai are paid gen- 1990 2011 2020 2025 2030 2035 allow solar power producers or bran, off one another contains nine times as culture,” Mr Saika says. nese do,” Mr Saika says. erously for their electricity: Source: OECD like Mr. Hangai easier resulting in more cleanly much vitamin B1 and 1.5 Innovations like his may “This is a good first step.” Y42 (26p) per kWh, or about access to the network.