Terrie's Take: Crowdfunding Kids' Education, Tokyo's Old Doggy Home, Exports, Real Estate, and Pilots!

Terrie's Take - AkihabaraNews.com

Terrie’s Take is a selection of Japan-centric news collected and collated by long-time resident and media business professional Terrie Lloyd. AkihabaraNews is pleased to present Terrie’s learned perspective; we all could use another take on the news - here’s Terrie’s:

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Terrie’s Take on June 16, 2014

Feature:

  • Crowdfunding Kids Through Foreign College

Briefs:

  • Interesting bifurcation of Tokyo real estate
  • Food export plan rachets up targets
  • It may be a cool, wet summer
  • Aeon starts nursing facility for aged dogs
  • Pilot shortage has another cause

Crowdfunding Kids Through Foreign College
Interesting article on the Wall Street Journal Friday about how to reduce the incidence of people defaulting on their student loans. http://on.wsj.com/SXtL57. Many thanks to the reader who sent it over. In a nutshell a professor at Vanderbilt University in Tennessee, has suggested that student loans be structured in a kind of crowdfunding approach, where investors "buy" a share of the students earnings for a specific time at a defined and mutually agreed rate of revenue share (the "upside"). After the loan and revenue share is repaid, the student goes on debt-free, and the investor goes on to fund another student.

Actually, this system reminds us a lot of the sharemilking system that is practiced in New Zealand. In a legal construct that could be unique to New Zealand, owners of farms and farmers who want to work those farms (but who are too young or poor to own one) come together in a profit-sharing contract. We think this system is a good model for the Vanderbilt prof. to look at, because it involves many of the same variables, such as the uncertain future performance of humans (and more extreme still, the weather and livestock), restrictions to prevent profiteering and servitude, and overall risk mitigation. If you have the time and interest, you can read about sharemilking here: http://on.wsj.com/SXtL57.

How is this relevant to Japan, where virtually anyone who wants to can go get a higher education?

Firstly, relatively free education is not equally available for the best jobs. You will quickly discover this if you want to help one of your kids become a doctor or dentist, or indeed, any one of a wide range of well-paid professions. Instead, access to these jobs is restricted to a brilliant few, who get admitted to national universities, and the richer masses, who with the payment of 4-5 times what the high-IQ kids' parents pay, can gain access to for-profit medical schools. If you are poor and not well connected, then forget it. Thus, if Japan wants to increase its number of doctors and other professionals, something it is probably going to have to do as the current crop start to age themselves out of the market, we think it needs to find a way to help its less fortunate youth make the financial leap necessary to gain the right training and credentials.

At the same time as offering a better future for kids willing to work for such as chance, there is also the fact that Japanese universities themselves have been hit hard financially and need a way to earn more revenue. Thus, while a funding system would naturally start with local Japanese kids getting financed into better courses and jobs, with a bit of imagination the same system could be expanded to foreign kids as well. There are plenty of Asian kids who think Japan and its education system is top rank, and so while there could be some flight risk for investors, one imagines that most of these kids would be from good families who could easily be monitored by their own governments while still under contract. At least having a risk-profit sharing arrangement would be infinitely better than the current abusive "intern" system that restricts Asian kids to factory work in the name of learning.

But the main reason why we think the Vanderbilt prof's idea can apply to Japan, is in relation to Japanese kids from poor families who have the gumption to go study abroad. These kids are a huge asset to a country which is faced with the reality of having to internationalize, and yet they get little to no help in covering expenses overseas. Yes, there are scholarships, but these are few and far between and certainly not enough to cover to the cost of a high-grade (or even mid-grade) university in the USA. Even generous government scholarships generally only cover basic tuition costs for a limited period (typically a year at a time) -- making it tough for bright kids to feel confident they can get through the 2-4 years they will need for sufficient foreign educational "polishing" to become tomorrow's Nobel prize candidates.

Without naming names, we were approached a few weeks ago with a request to help a young Japanese woman studying in the USA. She has an unfortunate family background that has meant she is all alone in pursuing her dream of a bilingual education in women's rights. After schooling here in Japan, she took a job in her early twenties and finally saved enough cash to get herself into a decent school in the U.S. From there she learned English, and started her studies. Unfortunately for her, the reality of the costs of schooling in the U.S. hit her in her second year and despite finding several partial scholarships, she has now almost run out of funds. Yes, her class results are good. So, she has resigned herself to having to come back to Japan and take up an office job again. Maybe in another 3-4 years, in her early 30's, she thinks she will give a U.S. schooling another shot. A dedicated lady...

In another even more extreme case, a Japanese friend, who now speaks perfect English and who did make it over the hurdles, got himself a high-grade university education by getting himself adopted at the ripe old age of 12 to a family in New York..! He did the research and made all the arrangements, some time back in the 1980s. It must have really taken some guts both on his behalf and that of his mother, to let him go. But with the family facing a difficult situation financially, adoption was the only solution he could think of. We know of other similar stories of self-sacrifice by disadvantaged Japanese kids so that they might get ahead with an international education and thus the chance of a blue-sky career. All we can say is, "What a waste of human capital!" The government really should try harder to make it possible for such kids to gain the skills and international experience that Japan so badly needs.

The whole idea of sponsors operating within a structured and monitored program to invest in people's futures is the same one behind the upcoming crowdfunding programs that the government is proposing for next year. Shared risk, participants making promises to behave a certain way and perform, and profit motive. These elements will all combine to make for a powerful force for change if they are allowed to exist. The problem that we see, though, is that not only are Japanese not used to making what effectively can be seen as donations for personal causes, but those that do are equally fixated on the outcome of those donations.

A good example of the possible backlash can be seen from a website specifically set up to help students pay for better education. We're talking of the www.studygift.net, a crowdfunding site which in 2012 got embroiled in controversy when its first university student recipient, a Google superblogger named Aya Sakaguchi, was found to have a dubious relationship to the company running the site. Whether she and the company cooked up the project to milk money from funders or not (the money was returned), the execution of the new service was a mess (not at all unusual with small, new start-up companies), and so it managed to blackened the whole crowdfunding industry. Whatever the government comes up with in its place is sure to involve lots of bureaucratic oversight as a response. We sure hope they don't throw the baby out with the bath water.

Rather, we hope that the architects of the crowdfunding aspects of Abe's Third Arrow realize that they have to build in an allowance for failure for tomorrow's entrepreneurs, without asking for a pound of flesh in return. If they don't, then we predict a high likelihood for failure for crowdfunding as funding hopefuls come to realize that they can't possibly satisfy the terms and conditions being requested.

Interesting bifurcation of Tokyo real estate
In a trend which echoes the nature of Abenomics itself, this report from FT shows the bifurcation of Tokyo real estate. Thanks to the massive stock purchases by the Bank of Japan and general liquidity in the market from unlimited cheap lending to the top-most slice of Japanese companies, the demand for Grade-A property in Tokyo is rising, and as a result, Sovereign Wealth Funds (SWFs) and other funds are joining the feeding frenzy. Attracted by high single digit annual returns on rents, the SWFs of Qatar and Singapore, a hedge fund from Germany, and even an oil fund from Azerbaijan were among the foreign investors to spend over US$10bn on city real estate in the first 3 months of this year. ***Ed: So where is the bifurcation? Well, while Grade-A properties saw supply sink to a 4.7% vacancy rate and companies like Mitsubishi Fudosan raise rents 5%-10%, the other 87% of properties, including mostly Grade-B property, still saw flat or sinking rents.** (Source: TT commentary from ft.com, Jun 11, 2014)

Food export plan rachets up targets
While it is difficult for us to see Japan as a major food exporter in the future, the gnomes in Kasumigaseki have come up with a strategy that has Japan's export of farm and marine products increase not by the previously advertised JPY1trn by 2020, but now by JPY5trn by 2030, a 500% increase. Current export levels run around JPY50bn a year. The government plans to set up a "Japan Brand" and use this to promote high value produce. ***Ed: We suppose that with the dramatically falling price of land in the hinterland of Japan, and with corporatization of farming, volumes could conceivably be increased by this level. But with only 450,000 or so farmers, one wonders where the labor is going to come from. More JPY400/hour interns from China and SE Asia?** (Source: TT commentary from globalpost.com, Jun 14, 2014)

It may be a cool, wet summer
The meteorological agencies of India, Australia, and Japan are forecasting the return of the El Nino weather cycle, possibly by August. If correct, this means while SE Asia will experience drier, hotter conditions, in Japan it is likely to be cooler and wetter than usual. While the cooler temperatures will be appreciated by those of us having to go outside for work (e.g., sales, maintenance, laborers, etc.), it also means that vegetable and particularly rice production may be disrupted, causing prices to increase. ***Ed: Luckily Japan has a huge stockpile of rice, so any effect is likely to be mild.** (Source: TT commentary from wsj.com, Jun 11, 2014)

Aeon starts nursing facility for aged dogs
Aeon has built a dog nursing home that will cost JPY100,000 per month per animal. The home includes a playground, swimming pool, hourly room temperature checks, and webcam sessions with owners. The nursing home is targeting owners of elderly dogs, presumably elderly people themselves, who are no longer able to care for their pets. The facility currently has capacity for 20 dogs, and Aeon says it is planning to expand this number. ***Ed: What seems strange to us is why Aeon would build this facility in Tokyo. Surely a countryside location would be better for the dogs, and owners wouldn't be traveling that much further to see their furry friends. Either way, this facility is another sign that Aeon is fast-becoming a major player in the pet industry.** (Source: TT commentary from dailycaller.com, Jun 12, 2014)

Pilot shortage has another cause
In TT-754 we commented on how Peach Airlines' cancellation of a bunch of flights due to pilot shortage is an avoidable problem. At the time we mentioned that foreign outsourcing companies are quite active in Japan, and now we hear from the Nikkei that the shortage has an avoidable cause as well -- over regulation. According to the Nikkei, there are only two training routes for Japanese pilots: to enter a state-run civil aviation college, which generates about 25 graduates a year, or get hired by either Japan Airlines or ANA and get trained by their internal organizations. The Nikkei reckons that the government has to either deregulate the civil aviation training business, or to allow SDF pilots an easier licence transition than the rigid system now in place, so that airforce flyers can take up the slack. ***Ed: Hopefully the PM's office has read this article.** (Source: TT commentary from asia.nikkei.com, Jun 12, 2014)

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