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No. 27 — July 17, 1998

 

Feature Article

FOREIGN RETAILERS FIND OPPORTUNITIES IN JAPAN DESPITE SLUMP

an Interview with Seth Sulkin, President, Pacifica Corp.

 

Summary

For years, American and other foreign retailers tended to shy away from the Japanese market because of regulatory barriers and huge up-front capital requirements. While the success of companies like Toys "R" Us Inc. proved that market-savvy U.S. retailers can win over Japanese customers, some potential foreign entrants now worry that the slump in consumer spending has doomed their chances.

Not necessarily, says Seth Sulkin of Washington, D.C.-based Pacifica Corp., who remains bullish about Japanese consumer spending, particularly on imported products. Mr. Sulkin advises developers of American-style malls in Japan and helps non-Japanese retailers secure space in these and other shopping centers. In the following interview, he discusses with JEI Senior Political Analyst Barbara Wanner the experiences of foreign retailers in Japan, American success stories and retail trends from which U.S. companies could benefit.

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Weekly Review

LDP GETS TROUNCED IN UPPER HOUSE POLLS; HASHIMOTO RESIGNS by Barbara Wanner

Bully for Japanese voters. They proved the political pundits wrong by exercising their constitutional right to express via the ballot box their dissatisfaction with the government in power. Stunning both domestic and foreign observers, the electorate delivered a devastating defeat to candidates from the ruling Liberal Democratic Party in the July 12 upper house elections. Apparently fed up with the LDP's inability to take effective measures to jump-start the long-stagnant economy, roughly 59 percent of eligible voters returned to the 252-member House of Councillors only 44 Liberal Democratic candidates — representing a devastating 17-seat loss. Half, or 126, of the upper chamber's seats were in contention.

 

ELECTION RESULTS RAISE QUESTIONS ABOUT ECONOMIC POLICY by Douglas Ostrom

Analysts agree that the devastating defeat of the Liberal Democratic Party in the July 12 elections for the upper house was rooted largely in economic issues. They are divided sharply, however, as to what message the electorate was sending or how the LDP, which still remains in charge, will respond. The views of the new prime minister as well as the strategies of the Democratic Party of Japan and the Japan Communist Party, each of which emerged with increased stature, are likely to play a large role in any policy shifts.

 

MARKETS SCATTERED BY WHIRLWIND OF JAPAN EVENTS by Jon Choy

Until Prime Minister Ryutaro Hashimoto resigned July 13 in the wake of his party's embarrassing losses in elections for the upper house of the Diet, domestic and global financial markets generally had reacted unanimously to recent economic and political developments in Japan. Mr. Hashimoto's pending departure, however, has obscured the future course of politics and economic policy so much that currency and equity traders no longer agree on Japan's prospects. As a result, stock market indices in Japan and around the Asian region and the yen/dollar exchange rate have gyrated under the influence of rumors and (mis)perceptions. They likely will continue to do so until Japan's political leadership picture clears.

 

UNITED STATES, ASIA MULL ELECTION IMPACT by Eric Altbach---

The stunning defeat of the ruling Liberal Democratic Party in the July 12 upper house elections has raised concerns both in Washington and among Japan's neighbors about the emergence of a political vacuum following the resignation of Prime Minister Ryutaro Hashimoto. Such a development, it is feared, might slow implementation of necessary economic reform measures in Asia's biggest economy. Analysts have warned that international currency markets will respond with renewed attacks on the yen if LDP mandarins do not quickly select a party leader who is perceived as being willing to tackle Japan's myriad economic problems. Neighboring Asian capitals worry that further weakening of the yen could lead to another wave of currency devaluations, exacerbating the region's already serious economic woes.

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