A prefecture in the south of the country treasures history and natural beauty. Its capital, known for the active volcano, Sakurajima, welcomes visitors interested in how Japan started modernization after the Meiji era.
Mr. Iwasaki, president & Ceo of Iwasaki Corporation, explains what Kagoshima has to offer to tourists and why he is so passionate about the region.
Could you tell us how you see the Japanese economy up to 2020 and what are the key challenges it will face? What are the specific challenges that the Kagoshima prefecture is facing? What can the private sector do to rejuvenate your prefecture economy?
From an economical and business point of view, boosting a “self-help” mentality is critical. Japanese people have been losing their sense of self-help. Seventy years ago, when we lost the war, we lost everything. Our grandparents had to start from scratch. The advantage is that Japan had a strong morality before World War II, due to the educational system and the traditional family values. This is why almost all Japanese were honest and diligent. I wonder whether they are the same now. In the last 20 years, in some sense, being honest and diligent was not the supreme value of human societies around the world. Being smart or sophisticated are considered way much more important values than being diligent. In my opinion we lost something along the way and something that made Japan a prosperous place.
Japan has strong manufacturing industry. However, from the point of view of production cost especially in terms of labor, we have to recognize that we are not as competitive as other Asian countries. We have to leverage on our comparative advantages and I believe that tourism is part of the answer for that question.
The strengths of Japan in the last 70 years come from big companies located in metropolitan areas such as Tokyo, Osaka or Nagoya, very sophisticated and bureaucratic places. Yet, we were only able to grow by trying to copy and follow advanced countries like the United States. Then we started to catch up and accomplished a deep transformation by becoming a well-managed country. It is true that we now have problems with the decreasing population and important gaps between local and urban areas or between big corporations and small local family managed companies. We have to address these problems. In order to win the competition in the global capitalism, it may be a good idea to make our strong segments even stronger in the short term. But when considering long term strategies, it is important to eliminate gaps and inequalities helping those companies and regions that are not competitive in the global market. But according to neo liberalist doctrine, this idea is not feasible. Neo liberalism is all about efficiency of the capital, which is considered to be the most important value. I believe that we should put capital again to be governed by human beings. Almost everyone is struggling with this dilemma.
Maybe Japan has to be challenged on how to make local areas more active. Fortunately, the local areas in Japan are still alive. In other places in the world, local areas are becoming empty little by little which a tragedy. We might as well say it is also a tragedy that Japan has started to sink, losing its power. We have to do something about it before it is gone completely. Other Asian countries are becoming more active and getting stronger, so we should try to establish partnerships with them. If we could succeed in collaborating with other nations, we will start growing again. Partnerships can be done by local areas with other local areas. Nation and nation relations should be more political. Conglomerates do not care about nation’s borders anymore as they are borderless. From now on, small companies and local areas are becoming borderless and we have to connect with local areas and local companies from other countries to establish networks that go beyond the borders of the nations.
Japan has seen an incredible growth of the tourism sector with total visitors last year almost breaking the 20 million barrier initially set to be achieved by 2020.The government doubled the target to 40 million expecting ¥8 trillion in spending by overseas visitors by 2020. What steps do you think both, the government and the private sector should take to attract more foreign visitors and reach these ambitious numbers? How is the Kagoshima prefecture, and specifically the Iwasaki Group working to capitalize on these numbers? What is the percentage of foreign visitors among your total number of guests?
In order to achieve the 40 million goal, each local area should make its own effort, otherwise 20 million might be the limit. It is essential to increase the number of travelers by incentivizing them not only to visit Tokyo, Kyoto, Hokkaido and Okinawa. To some extent, the real Japanese culture and other good things that foreigners would like to see, enjoy and feel, do exist only in other local areas of Japan. My grandfather used to say that the tourism industry is a ‘piece’ industry. Without each piece, we cannot expect it to be successful on its own. Visiting local areas is a unique experience for foreigners, as this is the way to really get to know the typical Japanese culture and people. I am not saying that people living in Tokyo are not typical Japanese, but the number of people that still live in local areas are much higher than in Tokyo. Moreover, each area has its own peculiar culture. For example, sake is booming right now as some brands rise in popularity. Here in Kagoshima, we have our own characteristic distilled liquor that is Shochu.
My prefecture has a big potential to attract inbound tourists. For that we have to emphasize that our history has been important to the general history of Japan. One example is the Meiji revolution. We have an amazing gastronomy, stunning landscapes and even a UNESCO World Heritage site on Yakushima Island. The only thing we lack is ease of access. Unfortunately, it is very difficult for foreigners to get to Kagoshima because the government centralizes the transport in Tokyo. The government and big companies’ management heads believe that in order to make Japan strong it is better for them to develop more Tokyo. But that might be the wrong strategy from a long-term point of view.
Japan has airports in various prefectures, but airlines with the exception of a few low cost ones, do not want to fly over here. This creates some kind of slots congestions in Tokyo airports. If we think of the Olympic Games in this context, it will be very challenging for Tokyo to be able to handle the massive inflow of visitors properly. In terms of the required infrastructures, we are not ready yet, and we only have 4 years left to solve this problem. The only way to solve this issue is by making local areas more famous, so we can attract many foreign visitors directly.
Iwasaki Group comprises more than 50 affiliated companies, from hotels to food manufacturers and distributors, and from transport companies to tour operators. Could you brief us about the main milestones in the Iwasaki Group history? What are your first and second most important businesses? Which businesses are your priorities right now in order to increase your revenue?
My grandfather started his business going from lumber to railway. After WWII, he entered the transportation business. At that time, almost all of the transport companies started tourism businesses, for example Seibu and Tokyu. He entered the tourism business 63 years ago. Each local area had that type of company. However, during Koizumi government’s globalization many companies went bankrupt as for instance in Miyazaki or Kumamoto. In this scenario, we were able to survive.
Our main two businesses are now transportation and tourism, with tourism being the priority. But my business model is not only about hotels, it is wider. My tourism is not only about providing accommodations and transportation. My tourism is providing these services combined with food and commodities of Kagoshima. So far, we have been only providing transportations and accommodations, but in 10 years, when inbound people will come to Kagoshima, we have to provide food, commodities and culture. The vision is to develop long term relationships with our visitors and raise awareness about what Kagoshima can offer, so that after they return to their hometowns, we will have customers that will be willing to buy our typical products, thereby we can increase our export. This is all part of tourism. A good example is Hokkaido. People go to Hokkaido to eat crab meat and then they buy more to send it to relatives and friends. After returning home, the Hokkaido agencies sends them a direct mail with greeting pamphlets and sometimes gifts according to the seasonal festivities. To me, this type of business is also part of tourism. Tourism requires huge investments. We cannot obtain enough returns only with accommodations and transport. So, we must follow Hokkaido´s model here in Kagoshima.
You mentioned that sake is very popular in the world right now, but we are seeing that some companies in Japan are putting efforts to promote other drinks like Umeshu and Shochu. What are your strategies to penetrate the US market with these two drinks?
So far, Shochu and Umeshu have a big handicap concerning the world market. Many foreigners, especially the Europeans and Americans drink wine or sake during meal times and they may not be accustomed to a hard liquor such as Shochu or the sweetness of Umeshu.
For Shochu, Japanese as well as people in Kagoshima drink it from the start until the end of a meal. Because Shochu goes well with some kinds of Japanese cuisine and has healthy benefits. On the other hand, Japanese whisky is booming. Though very expensive, we are registering record demand. From a quality standpoint Shochu’s is as high as whisky´s one. We should promote Shochu a lot more. I believe our drinking culture and products is an area where we are very competitive in the world market. Of course, from the point of view of power we cannot spend much money as the French government spends to promote their champagne or the Australian spends for their wine promotion. Nonetheless, we should take advantage of the booming Japanese food industry to get make foreigners used to drink Shouchu and Umeshu during the meals as they do now with wine and sake.
What is the importance of the US market inside your golf consultancy services?
The golf business is very important for us. In 2019 we will be hosting the Japan PGA Championship. Moreover, every year we host Japan PGA Senior Tour in Ibusuki. Prominent and rich Chinese are very interested in golf and skiing. Japanese, Americans and Europeans usually do business negotiations when playing golf. I understand Chinese businessmen are recording the similar trend too, Chinese tend to go to resorts with their relatives and friends during the New Year’s period, where they establish a relationship between families. It is a long-term strategy. I would like to make Kagoshima a high level resort where wealthy Chinese can buy a property and visit it once a year. In that sense we have to prepare high class golf courses and an airport capable of serving private jets.
The number of US tourists entering Japan passed 1 million last year. How would you define the US tourism market coming to Japan? How does Iwasaki Hotels position and market themselves to gain more of these US arrivals?
Maybe Ibusuki or Kirishima hotels with good hot springs are not enough to bring US tourists to Japan. But we have Yakushima and Tanegashima. Those places are famous worldwide. In our hotels, we can provide first class services. People can visit the Japanese Space Center, enjoy surfing on our private beaches and do other activities like golf and cycling. People can bathe in vital power of the supernatural island. We as a company are now focused in making the ‘green triangle’ that includes Yakushima, Tanegashima and Ibusuki as one of the most famous destination in the world where people can enjoy some nice holidays. This was also the dream of my grandfather.
Your family founded this group and you are now in front of it. What do you consider have been the main achievements of your presidency? What legacy would you like to leave to the Iwasaki Group?
I followed my grandfather and my father’s successes. As third generation, we are now able to thrive in the globalization world.
Our success must not be discontinuous in order for Kagoshima to become sustainable. Generally speaking, in order for each area to become sustainable, the most important philosophy is ‘self-help’.
I believe that Tourism should be a business where the private sector makes it happen on its own, which means that tourism is the “self-help” industry. It is an ideal that the public sector just supports us. In fact in Japan, the public sector is too much involved in the tourism business. They should step back and allow the private sector to think and do things by itself. We first should be responsible for our own grandchildren’s future instead of leaving it to the public sector.
I must evolve Iwasaki Group into the self-help company which will be able to become the driving force of Kagoshima.
What have been the values and philosophy that has been transmitted from our grandfather to you?
My grandfather used to love his hometown and always wanted to make it a prosperous place. He also used to say that in order to do so the most important things are human resources. That is why he founded Iwasaki Foundation 60 years ago as well as Iwasaki Group founded 93 years ago. I believe one of my responsibilities transmitted from my grandfather is the development of human resources for Kagoshima.
There was no manufacturing industry in this area, no natural resources and tourism and primary industries were our main sources of revenue. Just like the United States does to Hawaii, and Mexican to Cancun, my grandfather believed that tourism is the only industry capable of making Kagoshima prosper. Then he started to work on the sustainability concept. I inherited his will and philosophy. I will try as much as possible to be successful.