Foreign Investor Threatens Public Order

[Mulboyne]

Yomiuri: Govt to nix U.K. fund's bid to up J-Power stake
The government plans to reject a British investment fund's request to increase its stake in Electric Power Development Co., Japan's largest electricity wholesaler, known as J-Power, sources said...The Foreign Exchange and Foreign Trade Law mandates that a foreign investor must gain authorization to buy a stake of 10 percent or more in a Japanese company in government-designated business fields that are closely linked with national security and public order, such as electricity and gas. Accordingly, TCI has asked the government to approve its plan to increase its stake in J-Power. The government concluded, however, that TCI's increased stake in J-Power could adversely affect the company's capital investment plans, given the fact that the investment fund is demanding J-Power significantly boost dividend payments, according to the sources. Government officials also are concerned that TCI's increased presence in J-Power could shake the foundation of the country's energy plans, including its nuclear fuel cycle plans at nuclear power stations, and eventually make it difficult to maintain public order in the country, the sources said...more...

[Greji]

Yomiuri: Govt to nix U.K. fund's bid to up J-Power stake".....Government officials also are concerned that TCI's increased presence in J-Power could shake the foundation of the country's energy plans, including its nuclear fuel cycle plans at nuclear power stations, and eventually make it difficult to maintain public order in the country...."

That would make sence if they didn't have everything from Nuclear Power Plants to Yakitoriya's labeled as government sector.

BTW, where did you get the picture of me at work?

[Mulboyne]

Asahi: Curbing British investment in J-Power

For the first time ever, the government has blocked foreign investment in a Japanese company. On Wednesday, it rejected plans by the British-based Children's Investment Fund (TCI) to increase its stake in electricity wholesaler Electric Power Development Co. (J-Power) to 20 percent from the current 9.9 percent. The unprecedented move was made under the Foreign Exchange and Foreign Trade Control Law, which enables the government to recommend or order a change or suspension of a foreign investor's plan to acquire a 10 percent or larger stake in a Japanese company regarded as vital for "national security" or "public order."

In its relentless quest to secure hefty returns on its investments, the TCI has made various tough demands to the management of companies in which it has a stake. It can be characterized as an assertive activist fund willing to play hardball. Three years ago, the TCI foiled Deutsche Boerse AG's plan to acquire the London Stock Exchange by using its stake in the German stock exchange operator and support from other shareholders.

In considering its response to the TCI's investment plan, the government placed great importance on J-Power's project to build a nuclear power plant in Oma, Aomori Prefecture. The Oma plant will be the first to generate power solely from plutonium-uranium mixed-oxide fuel. Viewing the Oma plant as crucial for its policy of promoting nuclear fuel recycling, the government fears that the British fund, if it gains a higher stake in J-Power, could demand reconsideration of such long-term projects.

Indeed, electricity utilities are providers of public services and require management based on a long-term perspective. But it is not possible to ensure that these public utilities will remain loyal to their mission by restricting foreign investment in them. Restrictions on foreign investment don't stop a domestic fund from controlling a utility. Moreover, blocking the TCI's bid to increase its stake in J-Power won't prevent the fund from winning support from other shareholders to hold a meeting to pass its proposals.

To make sure that electric power companies meet their minimum public interest obligations, it is necessary to establish investment rules that are applied equally to both domestic and foreign players under the Electric Utilities Industry Law and other legislation. J-Power, a privatized enterprise, listed its stock in 2004. A listed company cannot choose its shareholders. At the time of its stock market debut, the company pledged to roll out the welcome mat for foreign investors. The shortcomings with the investment rules that have been just brought to the fore by the recent dispute over the TCI's bid obviously suggest the privatization plan was flawed.

The government should also define the "public interest" that should be protected. It is open to debate whether the government's policy to promote nuclear fuel recycling, including the construction of the Oma plant, will really do the nation a service. Isn't there any room for rethinking the policy? Isn't the Ministry of Economy, Trade and Industry, the champion of this policy, motivated by a desire to secure sources of cushy jobs for its retiring officials? The government must offer clear and convincing answers to these questions.

There is an even bigger public interest at stake. That concerns the policy goal of making Japan more open to the outside world. With its population set to keep contracting, Japan definitely needs foreign technologies, human resources and management expertise to revitalize its economy. Without continuous inflows of resources, Japan will not be able to overcome the huge challenges posed by the aging and contraction of its population. The government's decision to bar the TCI's investment in J-Power will reinforce the perception among overseas investors that Japan is actually closed to foreign capital. It is highly doubtful whether the government made the decision after carefully weighing the expected effects of such restrictions on foreign investment against the step's enormous cost for the nation.

Aversion to foreign investment could seriously harm the national interest over the long term. If it puts a curb on a foreign investment in Japan, the government should also send a strong message of its intention to open the nation's door further to foreign capital. The government bears a heavy responsibility for the consequences of its move.

[Mulboyne]

Bloomberg: EU's Mandelson Urges Japan to Allow More Investment

European Union Trade Commissioner Peter Mandelson said Japan is the developed world's "most closed" market and needs to allow more investment from abroad. "The difficulty we have is winning productive investment in the Japanese economy," Mandelson said in a speech in Tokyo today. Japan "remains the most closed investment market" even though it has been taking advantage of investment opportunities overseas for decades, he said. Mandelson's remarks came less than a week after Japan rejected a bid by a U.K. hedge fund to double its 9.9 percent stake in Electric Power Development Co., the nation's largest electricity wholesaler, on the grounds of national security. Japan ranked last as the destination of foreign direct investment among major economies from 1997 to 2006, according to the 30-member Organization for Economic Cooperation and Development. FDI in Japan amounts to 3 percent of its economy, compared with 20 percent in the EU, the European Commission says. Japan used a national-security law for the first time to advise Children's Investment Fund Management Ltd., or TCI, to withdraw its request to boost its share in the electricity wholesaler, also known as J-Power. The nation's only generator with plants nationwide is building its first nuclear power plant in the northern prefecture of Aomori. Mandelson said the European Union received a letter from TCI and will need to examine it before deciding whether actions need to be taken. He said Japan should clearly state its reasons for blocking the bid. The EU says its spending on facilities for production in Japan is 2.8 percent of its total outward foreign direct investment.

[Catoneinutica]

http://business.timesonline.co.uk/tol/business/markets/japan/article3792036.ece

Essentially the same article as Mulboyne's above, but with this money-quote goodness:

"Takao Kitabata, the top bureaucrat at Japan's Ministry for the Economy, Trade and Industry, recently described short-term stock investors as “greedy, irresponsible fools to whom voting rights should never be given”."

This from one of the top bureaucrats of a country that professes to have a market-based economy. Guess the mask is slipping - graying, threadbare Japan has more in common with East Germany before the Wall came down.

-catone
-Trabi anyone?

[Mulboyne]

[Catoneinutica]

Here's his thread.

And here are the repercussions of the mindset displayed in the quote that inspired the other thread, and why these present foreign complaints will be dismissed as Japan-bashing.

[Mulboyne]

Reuters: TCI fights on for larger stake in Japan's J-Power

British activist fund TCI rejected on Friday a Japanese government recommendation that it not to increase its stake in J-Power, setting the stage for a battle over the power wholesaler... "The recommendation has done Japan a major disservice," said John Ho, a TCI director, during a press conference in Tokyo. TCI said the reasons given by Japan not to double its stake in the company were based on "false premises", overlooking the fact that disrupting J-Power's stable supply of electricity is directly contrary to TCI's self-interest because it would harm the value of TCI's investment. It did not say how it would fight the government over J-Power but has said previously it could challenge the government stance in court...In rejecting TCI's request, the government said TCI planned to delay J-Power's new Oma nuclear power plant to boost investor returns, but TCI said it never made such a statement and backed the project. TCI on Thursday asked Britain to impose sanctions on Japan, after the activist fund's request to double its stake in J-Power..."It is worrying that this recommendation echoes the view that companies should choose their shareholders, this is tantamount to politicians choosing their voters," said Ho.

[Mulboyne]

Independent: J-Power thwarts TCI's ambitions

The UK Government should have no truck with Chris Hohn's ridiculous demand that trade sanctions be imposed on Japan in support of his so far thwarted bid to raise his stake in J-Power to 20 per cent. There are no doubt plenty of trade issues affecting Japan it is worth going to the barricades over, but Mr Hohn's unedifying attempt to asset-strip one of Japan's leading power utilities is not one of them. Peter Mandelson, the European Trade Commissioner, has already inexplicably stepped up to the plate to argue Mr Hohn's case – doesn't he have better things to do with his time? – but the UK should not be joining him.

It seems notionally indefensible for Japan to be blocking foreign investment in the way proposed, when Japan is allowed to shop in Britain for assets with impunity. Yet there is a world of difference between the sort of industrial investment which Japanese companies make in Britain, to the manifest benefit of British jobs and the economy, and the hijacking proposed by Mr Hohn's Children's Investment Fund (TCI).

TCI wants to force J-Power to pay a bigger dividend. The Japanese Government reasonably argues that, in the interests of energy security, the money could be better spent on nuclear power stations. One of the reasons the British power industry is in such a mess, with extreme underinvestment in new power generation, is the persistent pursuit of short-term value extraction to the detriment of long-term investment by the likes of Mr Hohn's TCI. Japan rightly takes one look at what's happened in Britain and says no thanks. Mr Hohn is said to be $150m down on his existing 9.9 per cent investment in J-Power. That's his hard luck. He misjudged his target.

Mr Hohn paints himself as a financial crusader who can magically lift the Japanese economy out of its malaise by applying the disciplines of shareholder value to stuffy old utility stocks such as J-Power. He's tried the same thing with the freight transport company CSX in the US, and has similarly been sent packing. Both in the US and Japan, the authorities have taken the view that utility companies are there to serve the interests of their customers, not Mr Hohn's investors. What a curiously sensible idea of things these foreigners seem to have.

[Mulboyne]

[Ganma]

[Ganma]