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No. 16 — April 23, 1999

 

Feature Article

THE INTERNET USER AND ON-LINE COMMERCE IN JAPAN

Interview with Rachel S. Howe, Managing Partner, DSA Analytics, LC, and
Russell A. Hayward, Vice President and Chief Technology Officer, Dynamic Strategies Asia, LC

Summary

"Internet" is more than just a global buzzword. It is a phenomenon that is having a significant impact on many aspects of business and everyday life in the United States and, increasingly, in Japan. Rachel S. Howe, managing partner at DSA Analytics, LC, and Russell A. Hayward, vice president and chief technology officer of Dynamic Strategies Asia, LC, both based in Leesburg, Virginia, recently discussed their new analysis of Internet usage and on-line commerce in Japan with JEI Senior Economist Jon Choy.

The main finding of the study, perhaps not surprisingly, is that Internet usage in Japan is growing rapidly. The value of electronic commerce, however, will expand even faster. The characteristics of Internet usage also are changing as women log on more frequently. These developments aside, Japan's Internet and on-line commerce markets are in their formative stages, presenting foreign companies interested in winning a piece of these potentially lucrative businesses with a historic opportunity. E-commerce aspirants, however, must plan their strategies carefully.

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Weekly Review

OECD REPORT CALLS FOR REGULATORY REFORM IN JAPAN by Douglas Ostrom

As Japan, for more than 30 years the industrialized world's economic superstar, has struggled in the 1990s, economists have labored to understand why. One leading explanation stresses the stifling extent of government involvement in the economy; another emphasizes misguided macroeconomic policies that have left Japan with a deficiency of aggregate demand. In an April 14 report, the Paris-based Organization for Economic Cooperation and Development came down firmly on the side of the first proposition. And, in doing so, the OECD made a number of observations that run counter to the thrust of current conventional wisdom as articulated by Tokyo.

 

BIDDING WAR FOR INTERNATIONAL PHONE CARRIER SPOTLIGHTS JAPAN MERGERS AND ACQUISITIONS by Jon Choy

Competing bids from a major foreign telecommunications company and the nation's top domestic telecommunications carrier for control of an overseas services provider, International Digital Communications, Inc., have put Japan's mergers and acquisitions market in the spotlight. Not only have both suitors made offers that represent a significant premium over IDC's estimated worth, but each brings other strengths to the table. The bidding war apparently will not be decided purely on economic and business factors, however; international trade and politics have seeped into the process. The pending megadeal signals that the wave of mergers and tie-ups sweeping the global telecommunications industry has arrived on Japan's shores. It also is evidence that Japanese managers, investors and regulators are changing their opinions about corporate takeovers and mergers.

 

ISHIHARA'S ANTIBASE PLEDGE WIDELY CRITICIZED by Barbara Wanner

Shintaro Ishihara may have won the April 11 Tokyo gubernatorial election in a rout, but the rest of Japan does not necessarily agree with some of the policy prescriptions that evidently appealed to many of the city's voters. In particular, quite a few members of the Tokyo Metropolitan Assembly and the Diet — and even other governors — have voiced concerns about Mr. Ishihara's campaign pledge to strip U.S. forces of their exclusive right to use Yokota Air Base in western Tokyo. Criticism erupted nationwide and was so immediate and sharp following the election that Tokyo's new prefectural chief was forced to backpedal only two days later. Mr. Ishihara told The Japan Times April 13 that he deliberately went over the top in demanding a total return of the Yokota facility to Japan, hoping to win a compromise on the joint use of the base by the U.S. military and commercial airlines.

 

UNITED STATES AND JAPAN ADVANCE ASIA GROWTH AND RECOVERY INITIATIVE by Marc Castellano

The United States and Japan cosponsored the first meeting of the Asia Growth and Recovery Initiative, a $10 billion fund announced by Vice President Al Gore last November to aid economic recovery efforts in Asia (see JEI Report No. 44B, November 20, 1998). The April 12 meeting, hosted by the Monetary Authority of Singapore, brought together finance officials from Asia and the United States and representatives from the International Monetary Fund, the World Bank and the Asian Development Bank. Observers from the European Union and a contingent of private-sector executives also attended the one-day session. Delegates reviewed the progress of economic and financial reform in various countries of the region, identified key policy challenges for the future and discussed possible uses for AGRI funds. Thailand, the only Asian nation to submit a proposal to the committee, was identified as the first recipient of country-specific funding, the next step in the implementation process.

 

NOTES

Tokyo's interest in ensuring that trade issues do not dominate Prime Minister Keizo Obuchi's May 3 summit with President Clinton apparently has limits (see JEI Report No. 15B, April 16, 1999). Case in point: insurance.

The White House's Japan trade policy team believes that the Ministry of Finance did an end run July 1, 1998 on its commitments under the December 1996 transpacific insurance agreement. A fix for U.S.-alleged implementation problems with an October 1994 bilateral insurance pact, this arrangement specified the scope and the timing of competition-enhancing changes that MOF must make in Japan's heavily regulated life and property and casualty insurance sectors before it began a 30-month countdown toward the end of safeguards on the operations of American and other foreign insurers in the roughly 5 percent of the market known as the third sector.

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