Terrie's Take: Japanese Agritourism, Citibank, Gambling, Japan Post, and Thai Babymaking!

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 August 25, 2014

Feature:

  • Japanese Agritourism, the Italian Mode

Briefs:

  • Citibank to sell and leave retail banking in JPN
  • Price guarantees for nuclear power?
  • Almost 5% of Japanese adults have gambling problem
  • Babies in Thailand to become Shigeta Party of future
  • Japan Post selling yen forces currency down

Japanese Agritourism, the Italian Mode
The Nikkei carried a news item on Friday stating that exports of sake hit a record high in value for the first half of this year, totaling JPY5.46bn. Unfortunately while the value increased, the unit volume actually decreased slightly, possibly indicating that while sake drinkers abroad are becoming more discriminating and going for more expensive brands, the increase in new drinkers is falling off. So is the sake market overseas already saturated? May be not. Another explanation for falling unit sales in export sake could simply be the rise in local competition, such as this outfit in Vancouver, Canada that a reader told us about. 

http://bit.ly/1p4YbAo

The recent success of the sake industry has given farmers and their minders in government hope for food exports, and for that matter agritourism -- because food brings tourists. Indeed, we have heard from various sources that recent surveys show the top reason for tourists coming to Japan is for the food. Of course they are also sightseeing and shopping, but apparently food is the biggest single final deciding factor. We haven't been able to find public versions of these studies, however, there are some interesting statistics taken from exit interviews showing that while tourists spend more by value on cameras and electricals, a greater percentage of them are buying food as souvenirs. Specifically in 2012, 50.9% of all tourists bought Japanese cakes and confectionary to take home, and 45.85% bought other foods and alcohol. In comparison, just 9.9% bought electricals and 9.7% bought cameras.

We are interested in agritourism because of its potential to change the economy in regional areas -- those areas currently experiencing depopulation and industrial hollowing. Tourists of course are happy to do the usual golden triangle of Tokyo-Osaka-Kyoto, and for most first-timers this is good enough. But now that Asians in particular are doing multiple trips a year to Japan, they are wanting to discover more of the country and enjoy the authentic experiences that the countryside can offer. This is where agritourism, in the form of farm stays and food-related activities (festivals, harvesting, processing, etc.) comes in.

In order to get these repeat tourists to move out of their comfort zone and try agritourism, operators need to create an experience which is both pleasant and memorable. Unfortunately, the current Japanese concept of agritourism is to experience farm living without any frills. This means relatively spartan facilities, very short stays, and short and often unappealing (to foreign tourists) activities like rice planting and "mushroom carrying". OK, such activities may appeal to Japanese city dwellers who are seldom in touch with the land, but probably won't get foreign tourists to travel thousands of kilometers to see/do. Especially when those tourists are Asian and who can already experience pulling apples off trees in Indonesia (in the highlands), picking mushrooms in Thailand (where they grow wild), and learning to plant and harvest rice.

In this respect, the Japanese need to learn from the Europeans, the Italians in particular, about what motivates travellers. The Italians have created an agritourism sector that combines authenticity, rustic environment, and yet luxury and variety as well. As a result, visitors flock to their farms and more importantly pay a premium to do so. As an example, an iconic 5-day stay at a working winery in Italy's Tuscany region, complete with castle, pool, gym, nature walks, and a cute township for shopping nearby, will set you back about JPY200,000 (JPY40,000/night) for a double bedroom with breakfast only. We think Japanese agritourism operators would be quite happy to be earning this kind of tariff, but to do so they need to make some big improvements.

Here is a good example of what Japanese agritourism looks like: http://bit.ly/1BRcEEi

Here's the Italian equivalent: http://bit.ly/1p4XWFE

As we can see, Japan badly needs a class in marketing from the Italians.

The Italians also experienced a very similar challenge to what the Japanese face now. Back in the 60's and 70's, as the country's population left the land and moved to the cities, many smaller rural towns experienced severe depopulation and there was significant concern about the survival of such communities. Sound familiar? Then, in 1996, Italy passed a law that considers agritourism an agricultural activity, and thus the subsidies and tax treatments available to farmers were extended to farm stay operators. Since then the sector has taken off. Rural economies are rebounding and people are returning to the countryside to settle. And why not? Families owning farm stays not only get to eat from their own newly planted gardens, they can also use the gym and other facilities when guest numbers are low, and generally life is good.

In terms of numbers, in 1998 in all of Italy there were only 8,905 farms (with 68,000 beds) offering accommodation and tourism experiences. Then, just 15 years later, there are now more than 20,000 farms with more than 200,000 beds (these numbers extrapolated from 2009/2010 data). Although agritourism facilities still only account for 2.4% of all farms in Italy, they nonetheless handle about 7% of all incoming tourists. They earn higher than normal annual incomes and that money trickles back down to the rest of the community.

Apart from the reclassification of agritourism as agriculture, the Italians added one other important ingredient. The new law meant that agriculture-related banks could lend to agritourism operators wanting to develop their infrastructure. In Japan, to "develop" infrastructure usually means knocking down the old buildings and replacing them with a concrete box. But as the Italians found, tourists don't travel far and wide to get more concrete. Instead, they want authentic experiences, and so most of the Italian loans are used to restore ancient farm buildings and reinstate traditional arts and crafts, as well as beautifying the surrounding countryside. This has been incredibly successful and is helping Italy to preserve its history and culture.

We think that Japan's rural sector could use a double dose of this recipe, before the farmers and everything else that is old and authentic has disappeared.

Citibank to sell and leave retail banking in JPN
The Nikkei has published a story that Citigroup Japan will cut its Japan-based retail operations, selling them to the highest local bidder. The bank is apparently losing money on retail, mostly because of the low margins caused by global quantitative easing hurting interest rate spreads. In addition, Citi seems to have been singled out for rough treatment by the Japanese authorities and has decided the market is not worth all the extra effort and negative publicity each time it is challenged by the FSA. ***Ed: If Shinsei doesn't buy the business, and there are doubts as to whether they can afford it, then foreigners in Japan may well wonder if there will be anyone left here who can handle their banking in a language other than Japanese -- another setback to Japan's hopes of attracting foreign firms wanting to headquarter here.** (Source: TT commentary from ft.com, Aug 20, 2014) - http://on.ft.com/1t3cuqZ

Price guarantees for nuclear power?
A panel in METI is recommending that the government pay nuclear power operators a guaranteed price for electricity, as a means of helping out struggling utilities. The panel says it will model the scheme on Britain's Contracts of Difference program, and would involve the government subsidizing electricity through top-ups after consumer receipts. ***Ed: One wonders about the ethics of this proposal. The majority of Japanese don't even want nuclear let alone moving public cash to these operators to make them profitable again.** (Source: TT commentary from reuters.com, Aug 21, 2014) - http://bit.ly/1prSzzC

Almost 5% of Japanese adults have gambling problem
Conservatives in Japan are fighting hard to keep casinos out of Japan, and the Ministry of Health, Labor and Welfare has released figures estimating that about 4.8% of the nation's adult population, around 5.36m people, have gambling addictions. The ministry came up with the numbers from a survey of 4,153 people, and says that Japan has about 5 times more addictive gamblers than countries such as Canada, France, and South Korea. ***Ed: The irony is, that even as the conservatives fight this rearguard action, the horse has already bolted. The survey appears to simply capture the fact that many adult men (in particular) already spend excessive time playing pachinko. How casinos will make this worse is hard to say, although we suppose you can lose a lot more cash a lot more quickly on the roulette table.** (Source: TT commentary from wsj.com, Aug 22, 2014) - http://on.wsj.com/1noepPQ

Babies in Thailand to become Shigeta Party of future
There are probably few weirder stories than the one about Mitsukoki Shigeta, the son of wealthy Hikari Tsushin founder, Yasumitsu Shigeta. Apparently the 24-year old has been breeding babies, somewhat illegally but probably not enough so to land him in jail, so that he could populate the senior ranks of his own political party in the future. Shigeta paid a number of Thai surrogate mothers to carry his children, whom he then had raised in a Bangkok condominium, each with their own nanny. ***Ed: The children have been taken into protective custody, but our guess is that Shigeta won't be charged, because: a) the kids really are his, and b) he wasn't planning to sell or otherwise part with them. Indeed, Shigeta is now apparently trying to get his kids back.** (Source: TT commentary from Aug 22, 2014) - http://bit.ly/1prSqMo

Japan Post selling yen forces currency down
Wondering why with all the turmoil going on in the Middle East and Eastern Europe, the yen is actually sinking in value, not going up? It seems that Japan Post's insurance unit is selling yen to buy foreign securities. The company is likely to have bought up to JPY7.5trn in stocks and bonds over the last couple of months (although the figures in the Nikkei are theoretically for the whole of the last 12 months). On top of this, the GPIF is getting ready to buy some trillions of yen of international assets as well. ***Ed: We won't be betting against a weak yen for a little while, unless of course Ukraine or Iraq drag the West into a new war -- then all bets are off.** (Source: TT commentary from asia.nikkei.com, Aug 21, 2014) - http://s.nikkei.com/1mC1rOi

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That was Terrie's Take.

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