March 11th, 2010
10:35 AM GMT
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Tokyo, Japan – There's a scene in Steven Spielberg's 2002 movie "Minority Report" that’s stuck with me, even many years after I initially saw the film. As Tom Cruise walks through a mall, cameras lining the ceilings and walls scan his retinas and advertisements custom-made for him pop up. He enjoys beer, so up pops a Guinness ad. But the electronic tracking becomes problematic when Cruise is trying to hide from the authorities, realizing that it’s impossible in his futuristic world.

Well, that future has arrived in Tokyo. NEC has developed an advertisement that follows a similar idea to what was imagined in "Minority Report," with a camera installed inside an electronic billboard that reads your face.

Using facial recognition technology, an internal computer determines your gender and your age. The billboard then pulls up an ad based on your demographic, targeting your best possible interest. The billboard I tried out saw that I was indeed a woman in her thirties and... lo and behold, pulled up a very appealing lunch advertisement.

To be clear, it didn’t read my retina and didn’t talk to me. But the billboard did capture my image, store my demographic data and will send that information on to the company.

How can this work so quickly and so accurately, I asked NEC's engineer Junko Amagai. She started waxing engineer-like and lost me fairly quickly, talking about numbers, logarithms and data storage. But the bottom line is that facial-recognition technology has just gotten much more pedestrian - down to the pedestrians walking by these digital ads.

"This is a new age of advertising," Amagai said. "We can learn something we never knew for marketing." Amagai explained how currently street advertising is a one-way game and companies never get real-time data from passers-by. This system changes that.

The NEC technology estimates your age to within 10 years. The technology is even more accurate for a new system it is testing and had on display at a recent fair in Tokyo. I was surprised to see it nail my age nearly every time.

Does it make one feel a little, say, overly-observed? Art Frickus, a consultant from the Netherlands, certainly didn’t feel that way. "I believe in one-on-one communication," said Frickus. “All your messages must be relevant. So that’s why I believe in this kind of thing. As long as the content is not objectionable, I don't see any problem with it."

NEC, aware of some potential unease as it launches the product for testing in the United States, says signs will clearly state to observers that a camera is installed in the billboard. Images will not be saved, stressed NEC. The company then made a bold statement about the global prospects for such electronic advertising.

"Ten percent of digital signage will be like this," said NEC spokesman Kosuke Yamauchi. How soon? In two to three years, he explained. That’s not within tech-loving Japan, he said. That's a global prediction, from the United States to the EU to China.

So, naturally, one must wonder what will happen in say, 10 years. Will we see electronic tracking as sophisticated as what was imagined in "Minority Report?"

I dare not even try and guess.

February 16th, 2010
11:40 AM GMT
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Toshiro Era doesn’t look like a radical. Dressed in his conservative blue blazer and tie, he looks like your average businessman in Japan.

But when he starts talking about his plans for corporate Japan, “radical” is among the words that leap to the minds of Japan, Inc. watchers.

Don’t lie. Move quickly. Be transparent. Allow in the media. Get your CEO out front early, even if there’s no consensus.

That’s Era’s message as he lectures two dozen senior managers at a food manufacturing plant two hours outside of Tokyo. It’s the opposite message most of the graying men in this room have heard their entire lives in corporate Japan. They need to change when crisis hits, argues Era.

“Japan is a homogenous and monolingual society. We assume we can gain understanding if we explain well later, even if we don’t talk about it immediately. Unlike Western companies, Japanese companies tend to specify the cause of the problem and fact-find internally first, before coping with the crisis. This move looks very slow and it is the worst move you can make when it comes to crisis management. Japanese companies, especially a conservative company like Toyota, will misstep,” said Era.

Temple University Professor and Japan scholar Jeffrey Kingston says Toyota followed the secretive rules of corporate Japan, a culture that closes off amid challenges instead of opening up.

“In Japan, there has been a greater movement towards more transparency, more accountability, better communication, but it’s a slow movement. This case highlights how much farther it has to go,” said Kingston.

Former National Highway Traffic Safety Administration administrator Joan Claybrook says when safety problems with Toyota’s cars began to emerge, Toyota as a corporation closed ranks.

The NHTSA was also not on the ball and that led to the ongoing safety issues, says Claybrook. “There’s too much secrecy that Toyota was allowed to get away with– withholding information, with not being transparent and forthcoming with the Department of Transportation. And as a result, we’ve had people die, and be injured, and I’m sure there are going to be more.”

Preventing further problems will require a culture change within Toyota, says Kingston. It’s something that appears to be happening, as Toyota’s President, Akio Toyoda, makes more public appearances and reassurances to his consumers.

He has yet to confirm that he will testify before US lawmakers in Washington February 24 and 25, something that Kingston says will be the marker of a true turning point for Toyota’s internal culture.

Back at Era’s seminar at the food manufacturing plant, he’s running through various examples of failures within corporate Japan. With his power point presentation and laser pointer, Era pushed the senior managers to go against the corporate grain. Change is never easy, he says, especially in Japan. But Toyota is proving that sometimes it needs to happen.

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February 1st, 2010
11:48 AM GMT
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Tokyo, Japan - It’s been a rough start to 2010 for some of Japan’s top executives.

Toyota Motor Corp’s management has been in damage control mode, out to protect its now-tarnished brand. The global recall for its sticking accelerator pedals has meant hundreds of millions in lost revenue but more importantly, battered the automaker’s reputation for reliability and quality.

But Toyota is just the latest Japanese corporate icon to lose its way.

A few weeks ago, Japan Airlines executives were feeling similarly uncomfortable, though for a different reason. Japan Airlines filed for bankruptcy, one of Japan’s largest ever corporate failures. The airline collapsed under a mountain of debt, accumulated by ballooning pensions and unprofitable flights.

They’re two very different companies struggling with two very different problems. But analysts agree what they do share is getting too big, too quick, and losing focus of the basics.

Tokyo based financial advisor Timothy Kirkwood says it’s a path that Japanese companies have taken as they’ve expanded globally. In Toyota’s case, it was so focused on cost cutting while becoming the world’s #1 automaker that it lost focus, like making sure the accelerator wouldn’t stick.

“There has been some outward looking management that’s enjoyed the global consumer spending boom in the good times. But they were overexposed to the downside. That’s what’s causing the problems in Japan right now,” said Kirkwood.

But he follows that up with the strong belief that if there will be a company that can recover from being overexposed, it’s Toyota, a well-run company with years of a proven brand.

It will only happen, though, as long as Toyota’s boardroom takes a hard look at itself and gets back to basics.

January 19th, 2010
04:36 AM GMT
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I boarded Japan Airlines flight 1381 at Tokyo’s Haneda Airport. My destination: a small town in western Japan called Shirahama.

I slid into my seat towards the rear of the plane. I didn’t have to compete for a spot to toss my overhead baggage, because there wasn’t anyone in my row. In fact, there wasn’t anyone in the seats next to me, the row behind me or in the ten rows in front of me.

Flight 1381 took off from Tokyo more than half empty. The flight appeared about 70 percent empty. That’s a lot of empty seats for this plane, an MD-81 which, according to Japan Airlines, seats approximately 160 people.

Shirahama is near a world heritage site. It’s a gorgeous, remote area of Japan where the ocean meets cliffs of spectacular beauty. It’s not a highly populated area of the country. Yet Japan Airlines flies flights in and out of the small airport in Shirahama twice a day.

Japan Airlines, or JAL, in its November 2009 report, shows the Shirahama-Tokyo flights had an occupancy rate of 54.3 percent.. In October 2009, the airline says occupancy for that route was 39.5 percent. You see a bigger problem for the airline when you look at passenger loads for all of its domestic routes: In November 2009, 95 routes - more than two-thirds of JAL’s domestic flights – had occupancy rates less than 60 percent. Industry analysts say that, generally, 60 percent capacity means that a route isn’t profitable.

Aviation specialist Kotaro Toriumi says all these empty planes symbolize many of JAL’s problems. “JAL was originally a government-controlled company, although it was privatized,” says Toriumi. “What we see today is the legacy of its bureaucratic roots.”

Toriumi says the company’s inflexibility to cut unprofitable routes, downsize aircraft, and adjust to economic downturns has been an ongoing problem for the last twenty years.

As the nation’s flagship carrier, Japan Airlines has been subject to political pressure, both from the national and local governments. Air travel has been traditionally seen as a source of vital transportation and income into communities.

“You can’t just blame JAL. The airline hasn’t been able to eliminate non-profitable routes if they’re popular destinations for Japanese, such as resort locations, because there’s a strong resistance by the government.”

Japan Airlines would not speak to CNN on camera, citing its upcoming bankruptcy proceedings. The airline did respond to CNN questions via a statement. “It is important to note that the profitability of a route cannot be determined by the seat factor alone. Past reports have claimed that the break even seat factor is 75%, but this is wrong to say. It would vary from route to route. Since January 28 of last year, JAL has announced that it will suspend 20 domestic routes, with the closure of four domestic offices. JAL has been progressively switching to the use of smaller, more efficient aircraft on both its international and domestic network.”

I boarded my return flight to Tokyo from Shirahama. Again, I had plenty of elbow room: no one was in my row. There were a few more passengers on the return, but the plane was still mostly empty.

A woman on my flight said that without this flight, Shirahama would be “cut off” from the rest of Japan. She hoped that the route wouldn’t be eliminated. Japan Airlines will have to balance the needs of its customers with its own financial survival. The choices will not be easy, but vital to the airline’s post-bankruptcy future.

January 11th, 2010
10:16 AM GMT
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Tokyo, Japan - Today is a joyous national holiday in Japan known as the Coming of Age Day. The day marks the time when girls and boys become women and men.

Young people celebrate Coming of Age Day in Tokyo.
Young people celebrate Coming of Age Day in Tokyo.

All over Tokyo, young women who are turning 20 this fiscal year are decked out in the fanciest, brightest, and most expensive kimonos you’ll ever see. Young men show up in the sharpest (and likely their first) black suit. The women are adorned with all the stylings of youth: huge hair, flowers, furs and silk. You have to forgive them if they’ve gone a bit over the top — you only become an adult once in Japan.

At the Shibuya ward office, 1450 people arrived at the important Coming of Age Day this January 11, 2010. Compare that number to years past, and you get a glimpse into one of Japan’s most pressing economic problems.

Five years ago, Shibuya ward had 1,917 people turn 20. Ten years ago, that number was 2,462. Twenty years ago, it was 4,380. That’s a steady decline in 20 years, down almost 70 percent. The number of young people is declining, not just in Shibuya, but all over Japan.

The birth rate in Japan is 1.37, among the lowest in the world. Japanese women, in survey after survey, report they’re holding back from having children because of the lack of daycare, inequity of domestic duties in marriage, career concerns and the high cost of living in Japan.

At the same time, the number of elderly is growing. By 2050, Japan’s government predicts 40 percent of its population will be over the age of 65. It’s a crippling population problem which analysts say will make this current recession and recovery look like a brief hiccup.

Japan celebrates its young today. But the joy diminishes every year.

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October 19th, 2009
08:48 AM GMT
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SEOUL, South Korea - There are a few reasons why Kim Han-Chal calls his supercar the “Tiger.”

The first is apparent when you get behind the wheel of the Spirra. Zero to 100 kilometers per hour (0-62 mph) in 3.8 seconds with 500 horsepower, your throat hits the back of your neck as the gas pedal hits the floor. The Spirra is the definition of supercar: fast, sporty, sleep, and a six-figure U.S.-dollar price tag.

But the more important reason Kim, the creator of the car, calls it the “Tiger,” is that the animal is a powerful symbol of Korea. That’s apropos for Korea’s first venture into the supercar market, made with all Korean parts, built with Korean hands. “We were the only country that didn't have a supercar,” Kim says. Neighbor Japan has a Toyota and Honda supercar, and Germany and Italy has Porsche and Lamborghini.

The car enthusiast, who pledges if you check carefully he has gas running in his veins, dreamed of building a car on his home soil. He believed in his countrymen’s ability to produce a high-end car, not just the reliable, eco-friendly Hyundai or Kia.

For 10 years, he tinkered with designs and poured his money into concept car after concept car. But it wasn't until he partnered with Oullim motors, backed by the wealth of a high tech company, that he began production. Now Europe is his first major customer. A dealer in the Netherlands purchased 145 orders of his handmade cars over the next three years, marking the first commercial entrée of his supercar into the global market.

CLSA auto analyst Christopher J. Richter says supercars are often losing business ventures and are built to send a message. “These guys, I think the message they want say is 'Hey, we can make a super car too, high performance car too, and we can do it with all Korean components. It stirs the pot a little bit and shows that auto-making is not just about Germany or Japan, but Korean auto-makers have a valuable contribution to make.”

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Filed under: Auto industryBusinessSouth Korea

September 28th, 2009
12:20 PM GMT
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TOKYO, Japan - Imagine if your paycheck dropped 15 to 20 percent, without cause. You continue showing up for work at the same time, your job performance doesn't change, you don't change anything - but on Friday, your paycheck is 15 to 20 percent less.

Who would be happy?

Well, that's what sort of happened to Japan's biggest companies, thanks to the strong yen.

Now before your eyes glaze over at another currency story, consider this figure, cited by Toyota in a quarterly earnings report: A movement of one yen equals approximately U.S. $400 million for the company.

Before the global economic slowdown, one dollar was routinely worth 110 or 120 yen.  Today, the yen hit a new eight month-high (and the dollar a big low) of just under 89 - that equals about $12 billion in loss.

Without looking at how companies are managed or how the global economy is moving, these companies have already lost billions of dollars, thanks to the currency market.

Companies like Toyota, Honda and Sony are global companies that export to consumer-hungry America, the land of the dollar. Not only do they have to cope with a slowdown in demand, the yen is hammering their bottom line. Not an enviable business position.

Japan's new government came in on a wave of consumer outrage, saying it would get more money into the hands of the consumer.

Japanese Finance Minister Hirohisa Fujii told reporters that the government was not considering jumping into the market to sell the yen and help exporters. No more trickle down like the old government, pledged the incoming Democratic Party of Japan. The mantra of the day is trickle up. Economists wait to see if the new government is right.

Meanwhile, consumers in Japan cheer the news and enjoy the power of their currency at home. But in the boardrooms across Tokyo, there must be quite a different sentiment. They're probably wondering when that 20 percent will come back.

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April 1st, 2009
09:05 AM GMT
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You don't really notice Haruka Nishimatsu when he passes you in the hall. A middle-aged man in a suit, he blends into the working crowd at Japan Airline's headquarters in Tokyo.

JAL President Haruka Nishimatsu, center, shares a light moment in front of a jet engine.
JAL President Haruka Nishimatsu, center, shares a light moment in front of a jet engine.

"Why should I stick out?" Nishimatsu says out loud to me.

"Well, you are the CEO and Chairman of this multi-billion dollar international airline," I replied.

"So?" says Nishimatsu. "That doesn't make me special."

That philosophy, that he's just like everyone else trying to make it through Japan's recession, is why he takes the city bus to work, eats in the cafeteria with his employees and strolls through the operations room at the airport. When the company looked to cut costs, he eliminated every single expensive perk of his job. He took away the corner office and chauffeur. Then he slashed his pay dramatically, so that in 2007 he made less than his pilots.

JAL can use every penny it saves. This fiscal year, the airline expects to lose $34 million dollars after passenger traffic fell 20 percent and cargo loads fell 40 percent. It's a global company that lives and dies by the direction of the global consumer and economy.

"I understand there are different conditions in terms of the economy for each country, but I think these economic issues need to be solved globally, rather than solved country by country," says Nishimatsu. "I hope the G20 will give a clear direction to the global economy."

Nishimatsu also believes the solution must begin with the financial institutions and continue to tighter regulations.

But he points to corporate culture as the long-term solution. Like the AIG bonuses, Nishimatsu says, "shocked" him. "It's like they're from another planet," he says.

A lesson of this recession, he hopes, will be that corporations don't solely pursue profit and instead focus on the long-term financial health of the company and employ people and help society. Together with shared sacrifice, he believes, the global economy will recover - but only if everyone from the CEO to the entry-level employee works together.

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Filed under: Financial crisisJapan

March 25th, 2009
12:38 PM GMT
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Toyota has unveiled the much-anticipated third generation of it's best-selling Prius hybrid car, promising greener credentials, better performance and a smoother ride - but with cheaper rides competing for its slice of the dwindling car market, can it deliver?

Similar in appearance to the previous two generations, the Prius 2010 stands out, say engineers, when you drive it.

"This time, we have both engine and motor strength. A balance between performance and fuel efficiency," says the Prius' chief engineer, Akihiko Otsuka.

The new version of the Prius, the world's best-selling hybrid vehicle, boasts 10 percent increased fuel efficiency, its makers say. Engineers claim their success with this version comes with increasing performance,  jumping engine size from 1.5 liters to 1.8 liters and boosting horsepower from 110 to 160. Engineers say the increased performance was met by keeping the weight of the car down and improving aerodynamics.

CNN was invited to test drive the prototype, due to release worldwide this year. The new Prius has three driving modes to give the driver options to increase fuel efficiency, from an "eco" to "EV" to "power" mode. The power mode focuses on performance, so the vehicle drives like a sporty sedan. The EV and eco mode will remind Prius fans of the first and second generation models.

Driving it on the Fuji Speedway, it seemed to deliver on the engineers' promise of performance, hitting 70 kilometers per hour in seconds. But that was in power mode. In eco-mode, the Prius matched the familiar, quiet (and much slower) pick up of the second generation. The engineers say to get the 10 percent fuel efficiency improvement, you can't exactly drive that sporty power mode all the time.

The Prius also continues to forge ahead with eco-friendly touches, like a new solar panel on the roof that runs vents in the summer to keep the car cooler when idle.

Toyota is banking on the popularity of the hybrid as a bright spot in what's been a sagging portfolio since the credit crisis began. But analysts say that expected profit could be smaller, thanks to a challenge from Honda.

Honda re-introduced its Insight, an updated model of Honda's first stab at the hybrid race. The Insight is priced lower than the Prius, approximately US $3,000 less. Toyota says despite media speculation that it would lower the price of its 2010 Prius, the current price won't waver. Analysts say the success of the new Prius depends on what the car buyer is willing to pay for in this recession.

"No doubt the Insight is a lot cheaper than the Prius," says Credit Suisse auto analyst Koji Endo. "But at the same time, the Prius is supposed to be a little higher quality and little bit more luxury segment. The Prius should have low emission, better fuel mileage and higher quality standards. So the question is, are you going to pay for price or are you chasing the performance?"

The Prius goes on sale in the US in late spring, mid-May in Japan, and early summer in Europe.

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Filed under: AsiaRetail

March 12th, 2009
02:40 AM GMT
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TOKYO, Japan - "Hey, that's not so bad!" That's what news bulletins reported across Japan this morning as Japan's government released its fourth quarter gross domestic product (GDP) figures. The economy still shrank at the worst rate since the 1970s oil crisis - but again, not at the rate initially estimated. When "not so bad" sounds like good news, you know times are tough.

But this is one report, and one that will surely be followed up with another next week, maybe showing more gloom than silver lining.

As far as today's report, Japan's cabinet office says the annualized GDP shrank 12.1 percent versus the initial 12.7 percent estimate. Quarter to quarter, the economy shrank 3.2 percent, a little better than the expected 3.3 percent.

Japan's export-driven economy has been particularly hard hit in the global economic slowdown, as consumers in the United States and Europe lose their taste for Japan's cars and electronics. Companies such as Toyota and Sony have dramatically slashed production, trying to bring inventories in line with demand. That inventory build, according to economist John Vail of Nikko Asset Management, is one reason the GDP revision is a little better than initially estimated, and that the next quarter may show a deeper contraction when the inventory build falls.

"I wouldn't get too excited about the difference between 12 (percent) or 13 percent," says Vail, who points out GDP numbers are highly subject to revision. "Right now we're in a unique situation: falling demand and destocking. It's a double whammy. As soon as destocking is over, we'll have some stabilization or improvement in production in manufactured goods. We're probably in the period of maximum decline and things will improve going forward once the destocking is completed."

Bottom line: don't get too worried about every single report. Economists urge you to look at the bigger picture, which currently in Japan shows a mixed bag of possible recovery or deepening recession, depending on how world leaders move forward with stimulus packages and reform. This global crisis isn't as simple as one cause, one quick fix or one single GDP report.

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Filed under: AsiaBusinessFinancial marketsJapan

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