NIDEC (6594)

Perhaps the businessman most closely associated to the “Japan Revival” theme is President Nagamori. In August he announced the firm’s capital investment into Sankyo Seiki (7757), a classic case of a Japanese company with good technology but lacking a strong sales force and an effective business strategy. Also in August MEI and Minebea announced plans to merge their small motor business units into a single company for producing brushless, stepping, fan, and mobile phone vibration motors. This development changes the landscape of the small motor industry because it means there will now be two large market leaders. The company’s transition from standard ball bearing technology to FDB technology is now nearly complete and they continue to enjoy market dominance. The next challenge for them is to penetrate the power steering market of the auto industry.

Hirose Electric (6806)

In a 2003 survey institutional investors ranked Hirose Electric number one together with Canon. A medium sized firm, Chairman Sakai aims to make it more profitable than larger firms by continuing to add value to its products, pushing new product development, and outsourcing most of their production needs. Management is a proponent of the traditional seniority system of job promotion and has no plans to join the popular shift by other companies to a merit system. To their credit they have already nearly achieved their consolidated pretax profit margin target of 30% and new product sales ratio target of 30%. Moreover, they were one of the first Japanese companies to employ outsourcing as a key feature of their business model.

East Japan Railway (9020)

Last year, following the final sale of government held shares, JR East became a fully private company. Management has established new management reform goals in its “New Frontier 21” mid-term plan ending March 2006. President Otsuka has made a commitment to strengthening the firm’s competitiveness in its railway business, particularly the commuter lines in the greater Tokyo region and to improving the operating profit of the parent company as a means of raising the enterprise value of the firm. The Nomura Investment Forum will serve as a stage for him to provide a progress report on the “New Frontier 21” mid-term plan and discuss his capital strategy for the post “New Frontier 21” era.

Bandai (7967)

The name Bandai is synonymous with toys. Worldwide hit products such as Power Rangers and Gandum reflect the strength of its product development capabilities. In April 2003 management announced a new and vigorous Three-Year Plan. The new plan, like the old plan, continues to place emphasis on profits, and strives to expand the business through character development and effective merchandising of those characters. In addition, management is setting up a holding company with the aim of granting management more management flexibility. At this year’s Nomura Investment Forum top management will give us a progress report on the new mid-term plan and also discuss their vision for taking Bandai to the next level.

Ajinomoto (2802)

At Ajinomoto management innovation is designed around the firm’s resolve to become a global leader in foods and amino acid. The current mid-term plan to March 2005 is in progress. The main features of this plan are to expand the health and nutrition business, expand the overseas retail business, grow their global materials business, attach greater importance to their pharmaceuticals business, and be more aggressive in their M&A and alliance activities. The question remains, however, exactly how will Ajinomoto become a world class company? There are still many unknown elements to this question and we look forward to uncovering and examining some of these elements at the Nomura Investment Forum.

Komatsu (6301)

Komatsu is often looked upon as a classic example of an old economy recovery story. There are three factors underlying Komatsu’s earnings recovery. The first factor is the tremendous market growth in China. The second factor is the direct effect of restructuring which has led to a significant reduction in fixed costs, and the third factor is their ability to maintain their competitive strength in the global market. They remain, after Caterpillar of the US, the world’s second largest construction equipment manufacturer. Looking forward there are three important checkpoints for us to watch. First is continuing growth of emerging market areas, especially in China but also in the Middle East and Russia which can both ultimately affect the earnings of Komatsu. Another checkpoint is the cyclical recovery of the US market and the degree of that recovery. Finally, the last checkpoint is the amount of profit they can secure from the Japanese market which appears to have at last bottomed out.

NTT Docomo (9437)

The single greatest point of concern regarding Docomo is the share buy-back program. During the first half of this fiscal year the company repurchased 195 billion yen worth of shares and it is expected to repurchase shares again in the second half. In June and July of this year the company launched three new models of its third generation FOMA mobile phone handsets and reports indicate that they are selling well. Given these positive reports there is more optimism surrounding preparations for the launch of 5 or 6 new FOMA models to be launched in the January to March quarter which could lead to a growth in subscribers for Docomo. In order to promote subscriber migration to FOMA models, which enjoy higher ARPU levels, the company is working hard to develop new and improved contents for users. Management is aiming to both increase the volume of contents as well as enrich the quality of contents. We look forward to hearing more about the new contents at the Nomura Investment Forum.

Oji Paper (3801)

Oji Paper has been changing under the strong leadership of President Suzuki. In terms of cost reduction the firm has achieved the best results of any other firm in the industry. Not only did the firm reduce headcount through early retirement incentive plans, but it also has made great progress in changing attitudes regarding cost issues within its plants. On top of that, Oji Paper is investing over 200 billion yen in China over the next 6 years in a policy move showing the first serious intention to invest resources in that country and indicating the high priority that management is placing on that market. In Japan the paper industry is shifting focus from industry restructuring to overseas expansion and among the Japanese paper companies Oji Paper appears to have developed the clearest vision in terms of their medium-tem sales growth. As a reflection of their determination to expand overseas, management says it aims to become an Asian paper company based in Japan.

JFE Holdings (5411)

A holding company structure was established in September 2002, and in April 2003 the merger was completed creating one of the world’s top class steel companies. Management has consolidated production capacity to four competitive plants and has formed an alliance with an overseas back end processing company as part of its cost reduction plan. Management has adopted a business model that promotes exports to expanding overseas markets. In the first year of the new company, already the effects of the restructuring efforts are starting to kick in. In fact earnings this year are ahead of expectations. The current Mid-term Plan for fiscal year 2005 calling for pretax profit of 250 billion will probably be achieved one year ahead of schedule. Management attributes this to the extraordinary smoothness of the merger that has not been achieved at other steel company mergers in Japan.

Denso (6902)

Despite the ever increasing competitive automobile industry, Denso is expected to take another major step forward under the leadership of its new president. Today there are 3 major growth areas for this automobile parts manufacturer: automobile airconditioners, diesel fuel injection systems, and next generation car navigation systems. In each of these three product areas Denso boasts the tools to secure top market share position with the world’s car assembly companies. Management is also targeting potential new markets within the Japanese electronics industry. While Denso remains an important key player in Toyota’s future strategy, management is intent on expanding its business to all the world’s automobile manufacturers.

Kansai Electric Power (9503)

Breadth of liberalization in the electric power industry is scheduled to be expanded further in April 2004. One year later in April 2005, the opening of the electric power exchange is scheduled as the industry enters the final preparatory stages for direct competition. With this in mind, power companies have moved on from not only traditional cost cutting measures, but to battle preparations via strengthening of the balance sheet through the sale and/or disposal of unprofitable operations. Above all, Kansai Electric has, even among the electric power companies, been the earliest to introduce EVA management techniques. Put another way, the company that took the initiative toward creation of shareholder value was Kansai Electric Power. The presenter for Kansai Electric this year will be the president Mr. Xxx Fuji. Given that Mr. Fuji is also the chairman of the Electric Power Association, we think this is an opportune occasion to look at the overall trends and implications under liberalization as well as to gain understanding of individual corporate strategies.

Nippon Yusen (9101)

Under the current three-year plan, the Company identifies three major strategies: 1) expansion of the comprehensive logistics business, 2) global expansion of the bulk energy transport business, and 3) stabilization of the container transport business. The ultimate aim of these strategies is while expanding the overall business portfolio, to eliminate the current volatile earnings structure of the Company which is vulnerable to swings in container rates. The Company aims to expand its business base beyond overseas transport to land, air, and warehousing services and offer comprehensive logistics services. Elsewhere, the Company aims to expand globally its tesseki and oil transport shipping businesses which offer stable earnings streams. Looking at current trends, reflecting very strong volume among containers originating from Asia, rates have remained stuck at high levels and earnings now appear to be approaching record high levels for the current fiscal year. The Company, however, has not allowed any room for complacency and has continued to push such items as multi-year contracts with customers to allow for stabilization of the Company’s earnings. In this seminar, rather than focus on short-term ups and downs, we think it provides a valuable opportunity to confirm management thinking behind the medium-term plans to stabilize earnings.

Mitsubishi Estate (8802)

No matter what happens, the competitive advantage of Marunouchi will never fall: Perhaps as a result of such thoughts, the Company had tended to lack a sense of speed. Under the leadership of the new president, Mr. Shigeru Takagi (June 2001), however, there is no mistaking that the Company clock has quickened. The rebuilding of the Marunouchi Building, completed in September 2002, marked also the commencement of the redevelopment of whole of Marunouchi. This past August, the Company announced the development of the Ohashi Icchome Building as part of the Company’s asset solutions business via lease of land from Dics. In September, the Company announced the sale of the Hamamatsu Act Tower (total development cost Y50bn). In the seminar, expect from Mr. Takagi a clear and logical discussion of his two main points, 1) the focusing of management resources in Marunouchi, and 2) progress in the Company’s non-asset businesses.

Nintendo (7974)

Under the leadership of the new president Mr. Satoru Iwata who took office in June last year, Nintendo, having been transformed into “the Giant of Games”, has begun to move in earnest. Pursuing “games with both breath and depth meaning games anyone can play easily”, the Company has been reinforcing both software development and marketing. The Company launched the iQue Player in China this month and next spring, anticipates on announcing a brand new game different from anything seen before. By the way, “Finding the Right Balance of Existing and New” is the title of a report we issued on 1 August. It has been 20-years since the launch of the Famicon. Where is the Company that is responsible for the creation and the history of the business going? The seminar is likely to provide an ideal opportunity to hear in person the Company’s medium-term strategy as well as the probability of success of the Company’s “rebound scenario”.

Mitsui & Co. (8031)

Management at Mitsui & Co. is now seriously addressing the restructuring issues facing a number of its unprofitable subsidiaries and this should lead to improved consolidated earnings next year. In order to secure future earnings growth the company is investing in areas of strength such as the Sakalin II project and an equity stake in one of the world's largest iron ore producers. However, to maintain earnings growth management will also have to find and invest in new sources of revenue. Of course, they must do so under a structure that will not produce anymore loss making operations. The president, Mr. Utsuda, will be announcing the firm's new mid-term plan sometime during 2004, but at the Nomura Investment Forum we look forward to hearing him discuss the underlying concepts behind the his strategy.

Nitto Denko (6988)

Last year in this introductory column we wrote “the scenario – ’Price Declines in LCDs > Replacement of CRTs’ – was no longer some empty forecast, but was in fact on the verge of becoming reality.” Since then, over the past year, the replacement of CRTs by LCDs has indeed progressed with dramatic speed allowing Nitto Denko’s earnings to benefit fully. But in no way has the story for Nitto Denko ended here as 2004 is looking to be year in which LCD TVs finally take-off. Indeed, for Nitto Denko which is strongest in the high-end area, LCD TVs probably represents a perfect growth opportunity. Furthermore, as part of the Company’s next growth area following LCD films, Nitto Denko has made clear its commitment to nurture such products as trans-dermal absorption drugs and membranes. The current seminar should provide a prime opportunity to confirm the Company’s strategies in the above areas.

Shin-Etsu Chemical (4063)

Making his appearance for the fourth consecutive year, the president of Shin-Etsu Chemical Mr. Kanagawa has become the “face” of Nomura’s Investment Forum. “If leaders of Japanese companies like myself raise sufficient courage and fight hard enough, I guarantee you that the sun will shine again and Japan will experience richness. I encourage you to bring the sunshine back into our companies and into Japan. As for myself, I aim to grow, make our Company still stronger, and to deliver a bright future to the shareholders that have entrusted me with the management of this Company”. Theses are the closing remarks of Mr. Kanagawa in his book. To the extent many Japanese corporate managers responded to Mr. Kanagawa’s challenge, one could argue that the current recovery in the Japanese economy is the result of not so much macro-economic policy, but the efforts individual companies. Indeed, for those who heard Mr. Kanagawa’s speech at last year’s seminar and were also able to feel first-hand the efforts of Japanese companies, the recovery of the Japanese economy and the stock market must have not been a surprise. Devoting himself to the pursuit of the Company’s goal of “Advancing People’s Livelihood” under strong leadership, the purpose of this year’s seminar is to provide the grounds for a “meeting of the spirits”.

Lawson (2651)

Under new leadership of Mr. Niinami, the Company has in rapid succession come up with new management strategies. Last year we saw changes in the product development side with the introduction of such concepts as “Onigiri-Ya”. This year, the Company has been making in progress in infrastructure for the future which includes 1) the creation of mega-vendors and the renewal of production facilities via consolidation under the Company’s mega-vendor policy, 2) advancement of systemic problem solving via the introduction of a branch system and the creation of the Lawson University, and 3) the search for a new convenience store concept through alliances. Indeed, Lawson represents a good example of a retailer turn-around strategy as it endeavors to reach OP of Y50bn.

Takeda Chemical (4502)

Takeda Chemical will be talking about how it plans to tackle the global market going forward. The first point of interest is how the Company plans to strengthen its diabetes treatment drug business with the existing Actos given that the Company has now abandoned TK-677 for which much was anticipated. Other points of interest are how the Company plans to use its cash stockpile and plentiful cash flows as well as reinforcement of the new drug pipeline. We feel it will be well worth the effort to listen to Mr. Hasegawa, the new president of Takeda Chemical.

Funai Electric (6839)

Among the consumer electronics companies, Funai Electric is the only company that has successfully secured an operating profit margin of over 10%. The Company is the largest producer of VTRs globally with an especially unique business in the North American market. Under the Funai Production System, the Company has not only applied the Toyota Just-in-Time model to the consumer electronics industry, but has done so in China where wage levels are low and competitive strength is high. Recently, combination sets such as DVD–VTR players, have emerged as a representative example of the Company’s highly profitable products. At one point, there was concern that with the market moving to digital, the Company’s profitability would be impacted. As it turned out, however, with the introduction of combination analog-digital products, the Company has in fact secured higher profitability than when it was involved in analog alone. Moreover, the Company has in place a strategy to create still new businesses via entry into the digital still camera and DVD recorder business in 2004. The competitive strength of Funai Electric reflects the clairvoyance and perception of Mr. Funai, the president, as well as the Company’s ability to secure OEM businesses. Indeed, with anticipated business expansion from new businesses selected by Mr. Funai, we expect the Company to once again enter into a high growth phase beginning in FY3/06.