The End Is Near

The latest Japan Top 30 rankings show that a number of battered Japan-based companies are making the turn in Hawaii.

July, 2000

Hawaii has long held a special allure for Japanese business executives. In the run-up to the Bubble Economy of the 1980s and early 1990s, Hawaii attracted yen like sand to sun-tanning oil. But even in the post-Bubble Era, a time of caution rather than consumption, Hawaii’s appeal remains steady.

What has changed is the ease with which Isle-based executives can make the margins that corporate executives back home demand. There are still profits to be made, as this year’s Japan Top 30 results show. But nearly every Japan-based company in Hawaii still finds itself weighed down by the continuing uncertainties about the economic recovery at home.

For Takashi Kitamura, the president and CEO of JTB Hawaii, Inc., 1999 was “the year we want to forget as soon as possible.” That’s because Hawaii’s largest Japan-market tour operator was hurt by economic problems at home. “For the past couple of years, companies were struggling. That affected group (tour) movement (to Hawaii). But we feel it’s picking up. Traditional big industry such as banks and construction are still affected. But other industries, especially related to the computer industry are very strong,” says Kitamura.

That mixed-bag message comes even after JTB Hawaii saw its 1999 sales reach $354 million, up from $310 million the year before. Indeed, only 16 of the Top 30 companies posted sales gains this year. Twelve incurred losses, while two (Jalpak International Hawaii Inc. and House Foods Hawaii Corp.) remained flat.

A number of companies posted losses or simply dropped from the Japan Top 30 because they were sold or they had to make significant divestments. Again, the troubles stem from Japan. “Frankly speaking, 80 percent of these companies, I think the parent company one way or another is having some problems,” says Stanley Sawai, a partner in KPMG, LLP.

Parent company problems have been at the root of local icon Shirokiya’s recent turbulence. A report leaked from Japan this year indicated that parent company Tokyu Department Stores planned to sell its three Shirokiya stores in Hawaii. Shirokiya Inc.’s Vice President and Treasurer Shuzo Ishikawa admits the stores have not been profitable lately, but says they’ve reduced losses. “It’s getting better now,” says Ishikawa.

“It’s like a chess game,” observes Walter Watanabe, assistant manager of Shirokiya’s Ala Moana store. “The next move is going to be made by the Tokyu Department Stores in Japan.” As this issue went to press, company officials were awaiting a response from their Japan-based parent. Customers and Hawaii government officials had written to Tokyu, beseeching them to keep Shirokiya open in Hawaii.

“Japanese companies are quite related to their headquarters in Japan,” observes Central Pacific Bank CEO Joichi Saito, who also serves as the chairman of the Honolulu Japanese Chamber of Commerce. “Daiei had to sell the Ala Moana Shopping Center (in 1999 for $840 million) even though they did a very good job here.”

But if the picture is grim for many Japan-based companies in Hawaii, there are examples of firms that are riding a new wave of prosperity. That’s the case at Sony Hawaii Co., which is based in the Mapunapuna industrial heartland. Sony Hawaii Co. posted a whopping 71 percent increase in sales between 1998 and 1999, from $56 million to $96 million. Getting the approval to sell to U.S. military base personnel in Asia and Europe didn’t hurt. Sony Hawaii actually picked up the bases in Asia in 1998 from Tokyo-based Sony Corp., but didn’t have a full year of sales then.

“It was a remarkable year, a very important year,” says Sony Hawaii President Ryozo Sakai of 1999. He wants at least a $40 million dollar increase in sales in 2000. Not out of the question since Sony’s hot PlayStation 2, which is already available in Japan, will be launched in the U.S. this fall.

And some firms involved in tourism actually did well. The tony Ritz-Carlton Kapalua, which is Japanese owned, saw its sales rise by 28.3 percent in 1999 over 1998. And then there’s Kyo-Ya, one of the oldest players among Japan-based companies here. This year, as was the case last year, Kyo-Ya tops the Japan Top 30 rankings with 1999 sales of $544.8 million, up slightly from the year before.

Will 2000 be a better year? As University of Hawaii researcher Carl Bonham indicates in this issue’s economic forecast by the University of Hawaii Economic Research Organization, “Recent news about industrial orders and consumer spending are very heartening, but for Japan’s see-saw economy, the jury is still out.”

KPMG’s Sawai is more optimistic about the Hawaii home front. “I expect further shrinkage in 2000, hopefully things will settle down in 2001. But I think we’re sort of getting to the tail end and hopefully those Japanese companies that are still here will be the ones that remain here.”

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Kelli Abe Trifonovitch