Are the expats back? - Relocations

Japan, Inc., Nov, 2003 by John Dodd

Tokyo has long had a reputation for being one of the most expensive cities on the planet. But with the substantial increase in available accommodation and the meltdown of the global tech economy after the 9/11 disaster, the available options for places to stay and the ways of moving in and out of them are starting to change. Because of the dearth of recent numbers from the relevant ministries, we did a straw poll of local companies specializing in the expat community to see what's happening right now, and whether the business volume of foreign customers entering Japan is really starting to recover.

Modest recovery

The downturn in the US stock market in 2000, the loss of confidence in the tech sector of the US economy in early 2001, and the after-effects of the World Trade Center disaster meant that for most of the OECD countries, there has been a substantial downturn in business activity--especially in the overheated technology markets. This translated into a general pull back of international expansion and investment--and certainly became noticeable here in Tokyo when many prestigious foreign securities firms such as Merrill Lynch decided to retrench a substantial number of staff.

The triple whammy of 2000-2001 was little felt by local Japanese companies other than the exporters, who were already mired in a decade-long recession and knew things were bad.

We focus on the small group of companies here in Japan chat specialize in servicing foreign executive customers in Japan. Many of these companies saw a devasting decrease in the volume of business during the last three years up to the start of this year. Now that the economy in the US has been picking up, since the middle of this year at least, it appears that the service sector here in Japan is also picking up as well.

Space Design's Ruth Shiraishi captures the general impression of improving foreigner inflow into Japan: "We're seeing a lot of smaller foreign venture and IT companies coming to Japan recently. As Japanese companies realize the need for immediate and grass-roots change, they are leaning more and more on outside sources. While it used to be the foreign firms trying to penetrate the Japanese market on their own, we are now seeing Japanese and foreign firms collaborating and commingling The whole world of business in this country is undergoing immense change. Indeed, walk in to almost any 'conservative' firm these days, and you will see people of all nationalities walking in and out of their doors."

Amongst the first of the local service companies to see an improvement of inflows of foreigners and expats was Phoenix Transport Japan, a full service moving company. Phoenix's general manager Martin Giles says, "We have seen a significant overall business increase in the last 12 mouths. In fact, we've had to increase our staff numbers and move to larger premises to accommodate the increase in business."

To verify that this wasn't just a trend limited to a single company or service sector, we also spoke to Hamish Ross, director for Occidental Cars, about the demand for vehicles by expats.

"As of now we are seeing an increase in both customers and activity," he told us. "It is fair to say that particularly as of June this year, there has been a turn around in expats coming into Japan, and companies are starting to feel more comfortable about sending foreign employees for temporary assignment into Japan." Ken Arbour of Century 21 Sky Realty agrees, saying that, "Things could not be much worse than they were last year after 9/11 in 2001. We're seeing an increase in the number of foreigners coming into Japan, although we still have a good ways to go before we get back to the pre-9/11 era."

Increase in young professionals

Just what segment of the expat community is hitting Japanese shores is interesting. It looks like the traditional young family unit is still there, however, this time around there is also a strong pickup in the number of short-term professionals coming in to help re-jig Japan's economy. Space Design's Shiraishi comments, "We are enjoying an almost constant number of foreign customers, however, the big change is the strong increase in IT engineers and short term project expats--particularly those from India and elsewhere in Asia." The Mansions' Director of Sales and Marketing, Jon Loeffelholz, confirms this by saying, "Our Roppongi property caters to the single, young engineer-type guest, and we are indeed seeing an increase in this segment at this property."

That doesn't mean that the traditional expat family is on the wane however. Occidental's Ross tells us: "Our 7-8 seater vehicle range is still the most popular vehicle configuration today. Companies are still shipping over families." Indeed, Sky Realty's Arbour confirms this point, elaborating that those families are typically ones with small children rather than teenagers.

Budget constraints

So the consensus is that the number of expats destined for Japan is recovering, but that their employers are also becoming obsessed with costs and cutting budgets. We asked our panel what they thought the trends are now. Space Design's Shiraishi says: "Compared to a few years ago, many companies are fixing a budget for their expats of just [yen] 200,000-[yen] 300,000 per month, whereas previously it was much higher. Therefore, individuals are usually left to pick up the rest of the tab if they want to spend more."