Question

Even as the Japanese government pledged to clean up its ravaged banking industry, Japanese regulators pressured Shinsei Bank Ltd. – the first Japanese bank bought by foreigners – to continue lending to some of its shakiest customers. In meetings with Shinsei executives, top officials of Japan’s Financial Services Agency directed Shinsei to loosen its credit policy and be more lenient to ailing borrowers. Shinsei was formed in March 2000 when a U.S. investor group, Ripplewood Holdings, acquired the failed Long-Term Credit Bank of Japan Ltd. (LTCB).

LTCB failed because it was unable – and unwilling – to follow the basic prescription for revitalizing a collapsing bank: Write off bad loans and cut credit to hopeless companies. That failure - as competitive, rational American one and Japan’s longstanding system of entangled preferences and noneconomic motives. These conflicting visions are best expressed by the former head of LTCB, who said, “Perhaps the American way might be more efficient in a narrow economic sense, but it risked sacrificing the values that were most precious in Japan; ideas of harmony, respect and consensus.” As Japan’s property and stock markets collapsed during the 1990s, and bad loans proliferated, the Ministry of Finance quietly told banks to understate their bad debts and keep their borrowers on financial life support. LTCB followed this advice and kept growing, even showing profits by adopting ever more lenient loan classifications, Eventually, after several rescue plans fell through, LTCB was sold to Ripplewood.

Shinsei has stirred controversy since it opened under new management because it told its corporate borrowers that if loans did not meet new standards for profitability, the borrowers had to repay them, pay higher interest, or offer collateral. Even more shocking to Japanese sensibilities, Shensei refused to help finance bailouts of delinquent borrowers and cut off credit to risky customers. Such practices, standard among Western banks, are a novelty in Japan and have resulted in a spate of newspaper and magazine articles criticizing Shensei for being tight fisted. Foreign investors are closely watching Shensei as a test of whether Japan will allow modern lending practices in its clubby banking world. Arm-twisting of bankers by politicians and regulators to support deadbeat borrowers is a major reason why Japan’s banks have been crippled by bad loans for over a decade. Although Shinsei agrees to some of the Financial Supervisory Agency’s changes to its lending policy, the bank said it would not make concessions that compromise its financial health.

The prospect of investing in Japan scares many foreign companies. Real estate is prohibitively expensive. Customers are extraordinarily demanding. The government bureaucracy can seem impenetrable at times, and Japanese competitors fiercely protect their home market.

An investment in Japanese operations provides a variety of intangible benefits, however. More companies are realizing that to compete effectively elsewhere, they must first compete in the toughest market of all: Japan. What they learn in the process – from meeting the stringent standards of Japanese customers and battling a dozen relentless Japanese rivals – is invaluable and will possibly make the difference between survival and extinction. At the same time, operating in Japan helps a company such as IBM keep up the pressure on some its most potent global competitors in their home market. A position in the Japanese market also gives a company an early look at new products and technologies originating in Japan, enabling it to pick up and quickly transfer back to the United States information on Japanese advances in manufacturing technology and product development. And monitoring changes in the Japanese market helps boost sales there as well.

Required:

How might foreign investors respond to the Japanese challenges?

As a foreigner, how you analyse the country risk of Japan? Outline each of factors and you may support with any data or figures to proof your explanations. You also need to include the country risk rating based on your assumption information.

Answer 1

Japan inspite of third largest economy in the world there is not a ease of doing a business there is no smoothness of trading it consist of many challenges for a foriegner like culture differences,problem to initiate a business,several layer of buerocracy and many other.A foreigner can approach such challenges by following way:

1.Japanese customers demand may vary than the demand of western countries customers thereofore foreigner myst analyse the demand of japanese people .He must understand what kind product japanese uses.

2.Analyse the need of japanese people than accordingly offer product to them. Thier needs might be completely different from western countries and asian countries need.It must be understand what exactly Japanese want.

3.sometime many companies redesign or reshape their structure to keep japanese customers in mind to get success in japan.

4.Japan consist many local companies that doing thier business in very well manner thereofore Foriegnner must understand their competition properly otherwise foriegner will find himself lost in the local companies.

5.Develop a strong strategies to win competitve advantage .strategies can be developed once you are clear who all are your competitors with whom you have compete. You must understand what strategies your  competitors are following to win the competition.

6.Keep your eyes to grab the opportunites that is available in the market.you must understand the weakness of your competitor as well and act as your strength.you can prepare yourself by doing market research,market analysis.

7.Deeply understand the japanese culture because something that is not a point of objection in western economies may not percieve as good in japanese culture.