By JONATHAN KAJI
(First published in The Rafu Shimpo on Saturday, Nov. 13)
I was back in Tokyo in September and timed my visit with Gov. Schwarzenegger’s Asia tour. While the Governor only spent one day in Japan, sandwiched between stops in Shanghai and Seoul, he was able to call on Prime Minister Kan and take a short ride on the Shinkansen from Tokyo Station to Omiya in Saitama Prefecture.
I had the opportunity to speak before a group of business people in Tokyo. As many of you know, the Japanese economy has been dragging along the bottom for many years and faces the pressures of deflation, an aging society, a huge national debt and political uncertainty.
All have witnessed the effects of the strong yen (now trading at around 81 yen to the US dollar), which have made all Japanese exports expensive. For an economy that is still heavily-weighted in exports, the most impacted are the SME’s. “Endakka” uses the kanji of yen and “taka” meaning higher or elevated.
The business people were investors, wondering if America might offer any safe investments. Right now, with the Japanese prime rate at zero, bank savings are earning less than 1 percent in interest. “Tansu yokin” is the same as hiding your money under the mattress, but for many investors, there seem to be few worthwhile investment options.
In my speech, I decided to take a different approach. I addressed the crowd by opening with, “I love Endakka.” The response? A lot of quizzical stares which non-verbally communicated to me, “Is this guy crazy?”
I referenced back to 1995, when the yen hit 79 to $1. I remember that period very well, since I was based in Tokyo for the State of California, and had to try and explain to the bureaucrats in Sacramento that we needed more money to cover the office rent!
At that time, I had a number of visitors to the State office who were interested in investing in California. I was curious as to why they thought it was a good time. One of the individuals made a curious statement.
“America will always continue to grow. The entire world wants to be in America.”
Looking back, those Japanese investors who made the move did quite well. Remember how our economy was in the mid-1990’s? Unemployment was high, the State had a “budget problem.” Real estate was in the doldrums.
Eventually, the American economy turned around, the dollar strengthened against world economies, including the yen, real estate values recovered and “bubbled” and those investors made out on both the favorable currency exchange rate as well as the appreciation of the American assets.
The Japanese media tends to use the term ”endakka” in a purely negative connotation. I, however, being a contrarian investor, take another approach. Thus, “I love Endakka!” takes on a much different meaning for those Japanese investors willing to take advantage of a favorable exchange rate and lower assets costs in America.
So, get ready. Besides Japanese investors, Chinese continue to pour money into America. Foreign investors view the current state of affairs in America as a buy signal. As long as our political leadership in Sacramento and Washington can assert a better balance between taxation and spending, America will continue to be a safe haven for foreign investment.
Jonathan Kaji is president of Kaji & Associates. He was a member of the President’s Export Council under President George Bush (1990-1992) and served as the Director of the State of California Office of Trade and Investment. Opinions and ideas expressed are not necessarily those of the Rafu Shimpo.