Table Speech

Turbulent Era of Heisei Seen Through a Needle’s Eye

January 22, 2020

Mr. Tetsuo Hiramatsu

 I engaged myself in the financial industry for 35 years and am currently in the real estate business for 7 years. I recall an impressive and insightful speech “Turbulent Era of Heisei – Overcoming the Two Financial Crises” made by former Deputy Governor of the Bank of Japan (BOJ) Mr. Nakaso last February. He exerted strong leadership in BOJ when the economic bubble collapsed in the early Heisei Era and strove to “protect all depositors and to prevent Japan from triggering worldwide economic downturn”. Both of us started our career in the financial sector in 1978. While Mr. Nakaso spearheaded international collaboration among major economic powers and reinforced stability of the financial system from a heightened status, I worked on an operational level. As such, my speech today is based on my experiences and perspective seen through “a needle’s eye gazing up to the sky”.

 The Heisei Era started in early 1989 when the economic bubble period was at its peak and major banks enjoyed AAA ratings. Lending by banks became overheated amidst soaring real-estate and stock prices. As a loan manager, I enjoyed an annual salary hike of 3-4% and got carried away by the financial craze. Then came the burst of the economic bubble. Stock prices plummeted to a downward trend right after the Nikkei Stock Average recorded its highest price of 38,957 yen at the end of 1989, which was surely an ominous sign of the deep-seated economic maladies. Total loss incurred by the Japanese financial institutions from the disposal of non-performing loans reached an astounding 100 trillion yen between 1992 and 2003. To ensure a stable and sound financial system, a number of new schemes were introduced including the minimum capital-asset ratio requirement set at 8% by the Bank of International Settlements (BIS). While financial market turbulence seemed to subside in the early 2000s, another financial crisis hit the world only in a few years. The bankruptcy of Lehman Brothers in 2008 took the world by surprise. Lending stopped abruptly and triggered massive economic turmoil, exacerbated by the development of information and communication technologies. Major central banks had to collaborate to overcome the crisis.

 Japan has been taking a quantitative easing policy over the past quarter-century and currently implements “negative interest rates,” which work to the advantage of the real estate industry. The office market enjoys high occupancy rate and the real estate market is booming as it attracts investors who seek high potential returns. I cannot give you a simple answer whether the property price will further rise or not, yet one thing is for sure. “Asset value should not deviate from economic realities and economic activities ought to be underpinned by a sound sense of ethics”.

The Latest Situation of the Paper Industry

January 22, 2020

Mr. Fumio Manoshiro
Chairman, Nippon Paper Industries CO., LTD.

 Today, let me focus on two topics of how the digital revolution has affected the demand for paper as well as how the paper industry embraces such a demand shift by transforming its business structure.

 I must emphasize digital development has reduced graphic papers demand especially for publishing and newsprint. Book sales volume has dropped by 24% in 10 years, not to mention a sharp decline by 59% for magazines. Interestingly enough, sales of electronic publications are also stagnating except for comic magazines. Today, there is an unfortunate downward trend in book reading, both in paper and electronic forms, as people spend more time on smartphone-based games and web-searches. As for newsprint, domestic demand peaked in 2005 but its tonnage has dropped by 37% to total 2.4 million metric tons today. Circulation has decreased by 1.9 million copies or 5% per annum and the future doesn’t look promising as Japan is an aging society with a declining birthrate.

 From ancient times, paper manufacturing is said to reflect the level of cultural advancement. As such, not a few paper manufacturers maintain to “contribute to the advancement of culture” in their corporate philosophy. To ensure responsible supply of paper amidst challenging times of declining demand, the paper industry today seeks to transform its business structure to evolve into a wood chemical industry by tapping into advanced bio-refinery technologies.

 Paper manufacturing procedure starts from removing cellulose, hemicellulose, and lignin from the plant fiber. By making extensive use of these three major polymers that compose wood, many paper businesses investigate potential utilization as feedstock for conversion to biofuels and chemicals.

 Amidst growing concern over marine pollution caused by plastic, new forms of paper straws, packages, food trays and containers prove to be sustainable alternatives to non-renewable materials. The latest technologies that provide high resistance to water, oil and grease, barrier properties against water vapor as well as thermal insulation ensure absolute safety for direct food contact. Cellulose nanofiber is another material with promising future, thanks to its superior heat-resistant, stiffness, strength and lightweight properties that allow diversified applications in various industries including automobile, as well as food, cosmetics and paints as a thickening agent.

 I am convinced that the paper industry can play an instrumental role in fulfilling its social responsibilities to achieve the Sustainable Development Goals (SDGs) with its course set towards making high-degree applications and recycling of wood which is the most renewable resource.