Where have all our drinking buddies gone?

By Terrie Lloyd

The problems in the international banking sector are obviously hitting the Tokyo expat community hard. Although there are no statistics, it is not difficult to see evidence of the escalating departure of foreigners as the recession (or is it already a depression?) gathers pace. Restaurants serving expats are more than half empty on Friday nights, Roppongi streets are less crowded, and bars and entertainment establishments are offering generous incentives to get people in.

Other evidence of the emptying of Tokyo’s expats can be found at the various foreign business and social clubs. Most clubs have had unprecedented decreases in membership and one particular major foreign social club is said to have lost hundreds of members, about 2.5% of its membership, in a single month at the end of 2008 alone.

Of all the vendors supplying the foreign market, perhaps none is taking the drop in expats harder than the real estate business. Looking at expat real estate websites, there is a much larger inventory of listings than normal, and prices for older apartments and houses have dropped 30% or more over the last 6 months.

Of course, if the recession continues much longer, today’s bargains may be tomorrow’s over-priced non-negotiable contracts—such is the nature of deflation. In any case, the number of listings show both that people are leaving the country in droves and also that there is an active opportunity for those people remaining to at very least “upshift” for better conditions as their contracts come up for renewal.

A sector of the community that is conversely making hay out of the current turmoil is that of relocation firms who handle the movement of expats back to their home countries. An article in the Straits Times in Singapore at the end of November last year highlights the increased volume of business being experienced by these firms. Since the Singapore expat scene reflects the trends here in Tokyo as well, I found it interesting that the article reports relocation companies there are experiencing double their normal level of business.

Crown Relocations, which is here in Tokyo as well, had a 25% increase in business through to November and was experiencing one of its best years ever. Sante Fe, also here in Tokyo, reported a big increase in moves, with a further increase expected for the first quarter this year.

The biggest reason why the expat population is declining is because foreign companies are reassessing their cost structures here. It’s hard to justify keeping an expat in Tokyo when you are cutting senior staff back at headquarters—and now that the U.S. government is going to impose wage caps for the heads of major banks, I can imagine that expat banker salaries and those of employees downstream of them will be equally affected. Perhaps we’ll see foreign companies follow the lead of Japanese ones by offering across-the-board pay cuts rather than simple slashing of staff.

However, slashing staff is a lot easier conceptually and in execution—to hell with the fall-out, and some head offices are going after the entire operation, not just a few expats. This seems to have been the case with Bloomberg, which last week for the first time in its 28-year history laid off a large number of staff. The layoffs were in the foreign-language (non-English) TV service around the world. Here in Tokyo, that means that up to 30 people involved in the Japanese-language TV service probably got their pink slips.

Rumors in London newspapers are that Bloomberg will cut about 300 people around its global operations. Bloomberg tried to put a good face on the action by saying that it is “shifting focus” and that it is likely start hiring again at the end of the year. I think this is more a case of positive thinking than reality. Bloomberg terminals are expensive, up to $50,000/year, and I’m sure that there have been plenty of cancellations of late. Indeed, Bloomberg reportedly lost 4,000 terminal accounts overnight when Lehman Brothers went under, wiping out at least 1% of the company’s user base.

This “operations pruning” is not just restricted to foreign companies of course. Readers may be aware of a leading edge Search Engine Optimization (SEO) company called Sozon. SEO is important for websites wanting to rank highly on Yahoo Japan and Google Japan when people search for particular services and products. Sozon was acquired by ValueCommerce in 2005 so as to help ValueCommerce provide SEO services to its massive customer base. Unfortunately, Sozon has just become the latest casualty of the business downturn, and ValueCommerce has announced that it will be shutting the company down. The good news is that this and other cost cutting efforts have pushed ValueCommerce’s stock up around 50% in the last four weeks.

The bad news is that Sozon staff will be looking for jobs.

Terrie Lloyd writes a weekly newsletter for entrepreneurs and business people about business and political opportunities in Japan.

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Latest 15 of 23 Total Comments Show All

JackDorff at 11:21 PM JST - 21st February

Cos - Youre right on the money with the contrast in reporting expats problems and english teachers` problems

Restaurants serving expats are more than half empty on Friday nights, Roppongi streets are less crowded, and bars and entertainment establishments are offering generous incentives to get people in.

Ummm...I know a couple of suburban izakaya which suffered a dramatic loss of revenue when Nova went to the wall. But it was always easier to treat the english teachers with contempt rather than to acknowledge the contribution they made to businesses throughout Japan.
shouganaika at 03:45 AM JST - 22nd February

I hear Roppongi is lovely at this time of year, especially at this time of recession
Badsey at 08:19 AM JST - 22nd February

Temporary "bank" workers are good for the economy, business and Terrie -but make lousy dinner partners.

At least with ex-Nova you get a few good stories and laughs for a few cheap drinks that you can afford.
Triumvere at 12:38 PM JST - 22nd February

Heh. Now, maybe something can be done to thin out the gaijin population of Osaka, and I can get some "incentives".
Samuraiiki at 12:52 PM JST - 22nd February

Business people, real estate agents, and bankers, what a trio!
memyselfI at 02:34 PM JST - 22nd February

I'm not sad for these people. Happy Trails to you, I hope I never see you again. These brilliant people brought down the WORLD. Greedy brats, greed corrupts. I hope they become middle class. That would really drive them crazy. Hahaha !!!! I am really sad for the real estate companies and their high priced mansions too. Ohh, i am so sorry for these people. Very sad !!!! I will stop writing and cry in a corner.
wibble at 05:30 PM JST - 22nd February

Oh come on. Really - everything is all the fault of those working in the banking industry? Even the IT, HCM, Operations groups right? And legislation/regulators had no guilt here? Oh, and quite frankly the public didn't seem so upset as their house prices grew, their pensions grew fatter etc.

I'm certainly not saying there is no blame at bankers doorsteps here but please don't be so naive as to think no-one else here is to blame as well.
blue_monday at 05:56 PM JST - 22nd February

their pensions grew fatter etc.

My pension never really got that fat, and it is very skinny now. They didn't really spread the love but they sure spread the pain.

I don't really care either way if they are here or gone, but it does seem to confirm what the j-gov & companies said about foreign shareholders & shareholder activists, they skipped town when the going got tough. I wonder if that guy from Steel Partners is still around telling the Japanese how to run their businesses.
JackDorff at 11:33 PM JST - 22nd February

Im just an bloke who has been breaking his back whilst digging up his sweet potato and then setting up his truck outside the local train station. For years Ive made a reasonable sum until it all fell in a big hole late last year. For years Ive been getting up at the crack of dawn and working until sunrise to maintain my modest market garden. I had my contracts to fill at the market, but I was always grateful for the extra cash I could pull in after dark outside the station. Lately, however, not so many people have been buying from me. I put it down to the downturn in the economy, but after reading wibbles nigh-shrill explanation, I realise I have only myself to blame for the mess that Im in. I knew that I was getting greedy when I started selling for over 150 yen per sweet-potato. As the Japanese too often say, now Im reaping what I sowed. I humbly place my neck at the mercy of your sword.
SefcoNYCUSA at 03:34 AM JST - 23rd February

Even in the US, there continues to be a tangible uptic in re-patriations. Our company may be running a worldwide "special" of the month for expats, our ad going - "abandon the roppongi bars, forgo that singapore sling, try sunny paraguay, the land of iguazu falls, bekons!" cheers, and see you there.
Faderkinta at 09:33 AM JST - 23rd February

Still diversity doesn't hurt. I am sad to see them go as every once in a while it is nice to hear something outside of the English teaching world. It is not like there are so many foreigners in Japan anyway.
wibble at 01:19 PM JST - 23rd February

JackDorff - I understand the need to appoint blame, but would ask people to look to direct that blame as appropriate. I did not say the industry was not to blame, but did suggest that many have their share in it.

Now, is Mr 150 yen sweet potato impatcted - very possibly, I don't know, likely not given his position relative in the market - ironically fast food and vedor/kisok food does better (less worse?) in a down turn than other eateries due to low cost and overheads.

However maybe Mr sweet potato should blame global consumers for over extending their debt, or for their govenments for allowing them to, or for the banks who gave it to them. The issue is never that straight forward and I think a lot of people, both in banking and in regulators have behaved shamelessly - but there are a good many people who also rode that train, and few feel so justified to complain as a cheater cheated.

The value of my post may, like the markets, go down as well as up. Previous quality of my postings are no guarentee of future or current quality. This is not a solicitation to read, the author is long on empty beer bottles.
wibble at 01:20 PM JST - 23rd February

I guess I meant shamefully, not shamelessly btw...
Cos at 01:53 PM JST - 23rd February

Faderkinta,

** it is nice to hear something outside of the English teaching world.**

Learn Japanese.

It is not like there are so many foreigners in Japan anyway.

In Osaka, I see thousands of foreign residents, very few of them teach English. They are not going home because of a crisis, home is here and crisis occur everywhere.

I (and many other resident's business) miss the tourists and foreign students more than the bankers. They are fewer since last Autumn, a consequence of the yen going up, among other things. Well, after the rain, the sun. Let's work as usual, the best we can.
Nessie at 04:36 PM JST - 23rd February

My thoughts and prayers go with Mr. Dorff.