On March 22, The Asia Leaders Series hosted Dr. Sachio Semmoto (founder of $60bn KDDI Corporation – Japan’s second-largest telecom company) and H.E. Etsuro Honda (Japan’s Ambassador to Switzerland), to outline some of the future areas of focus for investing in Japan.
Japan’s economy has been suffering from ‘the lost 20 years’ since the asset price bubble collapse in the early 1990’s. Arbitrarily high lending rates dictated by Japan’s central Bank saw Japanese commercial banks handing out loans to less than capable borrowers over the course of the 1980’s. In an attempt to keep inflation at the time in check, the Bank of Japan sharply raised inter-bank lending rates in late 1989, which caused the bursting of the bubble and the Japanese stock market to crash.
Fast forward 20 years and the Japanese economy is on track to become one of Asia’s main contenders in a number of key industries. Both Etsuro Honda and Sachio Semmoto have good things to say about Japan’s future, but not without hesitancy. Two decades of deflation has indeed left its mark on Japan; the decline in wage rates and the falling price level have not only halted growth, but have stood in the way of allowing a competitive entrepreneurial ecosystem to emerge within Japan’s economy. However, despite these circumstances, any discussions on the future of Japan’s economy can be met with some optimism.
“What would you rather protect, money or people?”
If you vie for the protection of a nation's citizens over material wealth, you stand in the same boat as the rest of us, including the Japanese ambassador in Switzerland, Etsuro Honda, who was the first speaker at this conference. Honda explains that if you think that people are more important than money, then a steady inflation rate is the safest way to go about securing people’s futures.
Honda, a trusted advisor to Japanese Prime Minister Shinzō Abe, was at the forefront of helping to establish Abenomics, which refers to the economic policies advocated by Shinzō Abe - primarily focusing on monetary easing, fiscal stimulus and structural reforms. Honda explains that, “the reason we started Abenomics is that we had suffered from deflation for two decades” and this new set of policy reforms was targeted directly at pushing the economy out of the deflationary trap that has held Japan captive for over two decades.
Five years into these reforms, and Abenomics has proven to be effective in some areas but has yet to hit a home-run where it matters most. On one side of the coin, Abe’s economic reforms have resulted in seven consecutive quarters of GDP growth, its longest spell of uninterrupted growth for 16 years. Employment has also increased by more than 2.7 million, despite a challenging demographic trend.
Yet, inflation — which is the focal point of Japanese economic reform — has not picked up enough. Honda proposes that, “not only monetary policy but also fiscal policy should be utilized as Prime Minister Abe’s decision at the G7 summit.” This combination will involve a steady monetary policy, which will see the central bank of Japan maintain the short-term policy rate at negative 0.1 percent and keep the 10-year yield target at around zero percent. Whilst their fiscal policy will take a “growth-oriented” approach in hopes of working alongside the central bank’s quantitative easing measures.
Japan’s main goal at this point is to push inflation up to 2 percent, which will ideally raise wages and prices enough to slice into Japan’s deficit by raising consumption. “As a pre-condition, we have to achieve the stabilized 2 percent inflation rate, which should work as an anchor of the mindset and expectation of consumers and entrepreneurship and corporate managers,” says Honda.
From His point of view, Japan needs to accomplish this as quickly as possible because the Cabinet of Ministers claims to raise the consumption tax rate to 10 percent in October 2019, and if consumer income has not caught up by that point, this policy will only cause more harm than good. Despite the policy measures taken by Shinzo Abe, the 2 percent inflation goal is still far away. However, a growth of 0.5 percent in inflation last year sheds some light on the situation; regardless of whether Japan meets the 2 percent inflation target, their economy is growing, jobs are being created, and they are making the right moves to eradicate deflation. But, Japan must keep in mind that the 2% inflation expectation of the Japanese people is essential for sustainable economic growth in Japan.
“Entrepreneurialism will shape the future of Japan”
One of the primary shortcomings of Japan’s economy during the previous two decades has been its unquestionable stability. Although this may not seem like a glaring fault, Sachio Semmoto, Founder of eAccess and special guest speaker at this Asia Leaders Series conference, argues that the stability of Japan’s economy hindered entrepreneurial efforts and healthy business competition even before the major downturn of the 90’s.
Of all the burdens brought to Japan following the asset price bubble collapse, Semmoto explains how the absence of entrepreneurialism in Japan created a monopolistic environment, structured by the government, and stretched across all industries. Although this did allow for large companies to pave the way for Japan’s modern economy and subsequently, allow for a stable career for many citizens, it also caused Japan to fall behind other developed nations in various industries.
Semmoto, a man of humble upbringings, presents his life story with a rigorous detail as to how he attained such success. He graduated from Kyoto University with a Bachelor's degree in electrical engineering and began working for Japanese Telecom giant NTT in 1966. He won the Fulbright scholarship to study in the United States, where he would go on to earn his PhD in electrical engineering from the University of Florida in 1971. Aside from his education, however, Semmoto learned a great deal about himself, and the kinds of values he wanted to bring back home.
“The United States was an entirely new atmosphere; one that thrived off competition and innovation — something that Japan at the time severely lacked” says Semmoto. He explains that, “the days he spent in the US opened his eyes completely to a whole new world; a world where competition is valued, where fairness is equal to none, and taking risks is the most important thing. The US was where innovation and rejecting the norm is supreme.” Semmoto came back to Japan with a “new paradigm, and a new resolve,” and would end up co-founding KDDI, a telecommunications company that would challenge the once invincible NTT and rise to become the second-largest telecom company in Japan, today employing 35,000 people.
Semmoto’s story says much more than his ability to persevere and rise up against the establishment; his focus on entrepreneurship and how its effects are far-reaching can help to challenge the current status quo in Japan and hopefully add the necessary spark needed to boost the economy.
Thus, Semmoto takes Honda’s comments on Japan’s economy one-step further by providing a firsthand account as to how Japan needs talented entrepreneurs in order to maintain a competitive economic position. For without his courage to challenge the dominant NTT, Japan’s Telecom industry would have functioned under a monopoly for much longer, and Japan would have only fallen further behind other developed countries in that industry. Furthermore, without entrepreneurs in today’s world, Japan — and Switzerland alike — can only be spectators in the race for economic hegemony in Eurasia.
Aside from Semmoto’s captivating story from rags to riches, he offers invaluable insight as to how anyone can become a successful entrepreneur.
Sachio’s Guideline For Entrepreneurial Success
1. “Identifying the next big thing is the key to entrepreneurial success.”
The internet has provided us with instant access to global knowledge; finding the next big thing has never been easier — and more difficult at the same time. There is more competition now than ever to hop on the next trend, but Semmoto reminds us that, “we need both inspiration and perseverance” if we are to discover the next mega trend.
Sachio made it a goal to work harder than everyone else because he knew that’s what it would take to become a success. “While others only created 100 pages of business plans, I created 700 pages.” But without the right perspective, perseverance can easily be wasted.
Semmoto is heavily engaged in the global economy and is at the forefront of leading Japan into a new era of economic growth. His insight into emerging trends in Asia is unparalleled, and in terms of the next big opportunities, he explains that there are three at the forefront:
3. Green energy
2. “Look for innovations that will benefit society.”
Discovering the next big trend can only take you so far if it doesn’t benefit society as a whole. Semmoto explains how, “99 percent of startups fail,” but that, “all successful startups have one thing in common: they produce something that society really needs. Doing something good only right for society will lead you to personal success. So search your inner soul and with a pure mind, try to be a positive force to all.”
When Semmoto took a chance on himself and left his stable life with Telecom giant NTT, he did not do so on a whim. He explains how the government-regulated Telecom industry in Japan in the 1980’s was highly inefficient; “a phone call in the United States was about 100 times cheaper than in Japan,” and he knew that this realization was due to a lack of competition and innovation within the Japanese Telecom industry.
3. “Dream big.”
“When we dream big, and aim high, we achieve more than we ever could have expected.”
When Semmoto founded KDDI in 1984, he gave a speech in front of 5 employees that he would make it a €10 billion company — nobody believed him. Now, it is a company worth €60 billion and continues to hold the spot as one of Japan’s top telecommunications companies.
4. “Take a leap of faith.”
According to Goldman Sachs, there are three kinds of people in the world.
When faced with a challenge, about 50 percent of people panic; they become frozen in fear and do not know what step to take next.
There are the other 40 percent of people who are smart, can think for themselves, analyze the data, are very sharp, but unfortunately, they don’t have the courage to act, to stand up.
The remaining 10 percent are the do-ers. The people who get the job done even in the face of adversity. This 10 percent will only think for themselves, but also make decisions, and act on their thoughts. These are the people who change and innovate the world.
However, taking a leap of faith is only a small fraction of what it takes to really be a successful entrepreneur. “Before taking the leap of faith,” Semmoto explains, “you must be prepared, do your homework, only then are you ready to take risks.”
5. “After you take the leap of faith, be nimble and flexible; don’t give up.”
Adaptability in any business will lead to long term success.
Semmoto is a chairman at Renova, and independent renewable energy developer and power producer in Japan. He explains how this company did not start up as a renewable energy company, but rather was founded with the intention of being in the recycling business.
Renova’s strategy evolved accordingly with the changing nature of Japan’s economy, and due to their adaptability, is on pace to become one of Japan’s largest renewable energy companies. If Renova did not change their business strategy following this unlikely event, they would unquestionably be struggling to cling to their original business plan.
6. “When you are taking a leap of faith, make sure you are not alone.”
“No matter how good you are, how good your idea is, no matter how much you are prepared, no matter how smart you are, you can’t accomplish anything by yourself. To be successful, you have to surround yourself with people who share the same vision and passion. And build a management team that is flexible and able to execute your vision.”
This sounds easy and logical but is a trap many entrepreneurs and innovators fall in to. These almost successful innovators ask only for peoples money, but unfortunately, a great idea backed up by money alone doesn’t equal success: you also need a great management team full of passion and loyalty in order to execute your dream. This is why KDDI which started with only a few employees was able to grow into a €60 billion company with over 30,000 employees.
Q&A SessionvAfter Dr. Sachio Semmoto’s passionate speech came a Q&A period where members from the audience asked a series of captivating questions to Semmoto. Nico Luchsinger, director of Asian society in Switzerland, is the first to open up the discussions.
Semmoto is first asked why he thinks there is still a lack of entrepreneurial spirit within Japan.
He explains how life in Japan today is stable and organized. Yet, this safety net is inhibiting the younger members of society to “take a leap of faith” and challenge the status quo. The youngest in Japan are accustomed to their lives and don’t have a strong initiative to venture out into the unknown and take risks — Semmoto believes this is a key step towards recapturing Japanese economic hegemony.
When asked what his advice to Prime Minister Abe will be regarding how to best encourage entrepreneurship in Japan, Semmoto notes that Abe could work to expand his global influence and take more risks. Indeed, in order to make a significant change in society, it helps when it comes from the top, and Prime Minister Abe is in a position to push for greater entrepreneurial competition within Japan’s economy.
Semmoto also touches on a very crucial question for Japan, one that regards their shrinking population. He explains that in order for Japan to curb their demographic problem, they must turn to a more inclusive immigration policy. “Japan has to be more open, more accommodative. That’s the only way we can grow our population,” Semmoto explains. But how should Japan go about making this change happen? A change in immigration policy will have a large impact on not only the demography of Japan, but also their culture. In order for their borders to become more open, Semmoto vyes for educating the youth on the importance of global inclusivity in the hopes that when they grow older and comprise the majority of Japan’s society, they will be more open to immigrants.
The audience at this conference also asked Semmoto a number of thought-provoking questions regarding his rise to entrepreneurial success as well as the future of Japan’s economy. He touches on a variety of different topics with a focus on three main points:
1. Increase the presence of entrepreneurship in Japan in order to spur competitiveness and innovation.
2. Work alongside China and European powers in order to bridge the technological and economic gap.
3. Focus on developing their private renewable energy sector.
The Asia Leaders Series is about more than sharing knowledge, it’s about building relationships that can stand the test of time.
The first Asia Leaders Series conference of 2018 featured two of Japan’s most recognizable business advocates. They shared not only their life stories, but a plethora of valuable entrepreneurial knowledge to go along with it.
The main goal of this series is to bring Asia closer to Europe. Japan’s renewed commitment to renewable energies combined with a sound monetary policy is bringing Japan back onto the radar.
As Dr. Semmoto explained in his presentation, “if you want to find the next big opportunity, you need to go out and find it yourself”. The insights and connections forged through the Asia Leaders Series are unquestionably more valuable than anything which can be read on the Internet.
Semmoto: "To truly become a successful entrepreneur or investor, you must fully immerse yourself in the area closest to your heart; for without passion, perseverance, and unique, first-hand experience, you will be left in the same boat as every other aspiring business mogul."