Sun rises again in Japan

Business Asia, August 2, 1999 by Greg Story

In retreat from Japan? Ignore the bad press and plough back in. There are many new opportunities, explains GREG STORY(*) in the first of a two-part feature on Japan.

Remember when you were growing up and your parents told you: "Don't believe everything you read!"

Never a truer word was spoken about how Japan is currently being reported in the Australian media. We hear plenty about bad bank loans, sagging real estate markets, plunging stocks, etc. Well let me ask, so what? What does it mean to Australian exporters?

The answer is not much, and the reason is simple.

I look after the Kansai region in Japan. This 14-prefecture market is an economy four times larger than Australia.

The per capita earning rate is twice that of Australia and if Kansai was isolated out separately from the rest of Japan, it would be our fifth-largest export market.

Given the sheer size of the Kansai economy, does it actually matter if it is growing as an economy or not? How many Australian companies at full capacity could ever hope to supply this powerhouse? Probably none, so it is not a question of growth but of access.

By access I don't mean trade barriers, I mean mental barriers.

There are two sets of substantial mental barriers that have to be overcome. One is the mindset in elements of the Australian business community, who believe that what they read in the media about Japan is actually relevant.

They are incorrectly concluding that things are so bad in Japan that they should not bother with that market for the time being.

It is so ironic for me that while the mental barriers in Japan against Australian products and services are breaking down, the Australian side is in full retreat.

In my native Queensland, we are pretty keen on rugby. Taking the game of rugby as my analogy, I feel as if I have made a break through the Japanese defensive line, I can see the tryline in sight, I look to pass the ball to the Australian exporters to score a big try, but disaster!

The Aussie export team has given up on Japan, busily snatching defeat from the jaws of victory, and they are all heading for the showers.

Shall I push the analogy a bit further and say they are going to miss out and take a bath!

I have been wandering around Japan for the past 10 years trying to sell stuff, and in the past the biggest barrier has been a well-established concept in Japan that all Australia is good for is minerals, golf and beaches: "Story San, why are you here trying to sell me manufactured, value-added goods from a country of layabouts, who are not even smart enough to process their own raw resources?"

I think you can see the problem we have had in the past.

Now the good news: this is finally changing.

The recession in Japan has really put a red hot flame under a lot of structures and processes that were never going to be competitive -- if the economy ever opened up.

And guess what?

It has opened up and it's "game over" for all those who were locked into these inefficient structures. They are going broke at a rate of knots and the survivors are wide eyed and interested in what we have to offer. Why?

They are looking for two things -- new products and services and differentiated products and services.

Competing solely on the basis of price is a formula for bankruptcy.

Rather, they are all busily looking for something that no one else can offer, where they can control the pricing structure and the marketing.

Enter Australia, with so many products that are different to what has been seen in Japan before. Furniture for example, uses timbers which are native down under. But these same colours and materials are unique in Japan.

This is a market where the Italians are fighting it out with the Americans and the Scandinavians. What about us? We are using quite different fabric designs from what has been seen in Japan before. And we have sold more into the Japan market in the past few years than in the past 30 years.

There is also the whole question of Australian building materials and imported housing.

Australian bricks and pavers have seized a 90 per cent-plus market share for the imported product. This is because of the greater variety of colours and the quality of the product, offered at a highly competitive price.

Australian imported housing is blazing a new trail in Japan, offering unique brick exteriors, and design ideas which are totally different from the dominant Canadian and American models.

Australian Cyprus pine is naturally termite resistant, and here is a product for the times. Japanese mothers are not interested in buying products that give off chemical residues around their children and they are carefully examining what is going into the family home. Therefore, treated timbers, commonly used in the foundations, are definitely on the endangered list.

Organic food products are also gaining an upswing on the back of the consumer revolt against residues of pesticides and herbicides.

Japan itself has plenty of locally produced products gaily labelled as organic, but these fall into the "rub a spud in the mud" pseudo variety.