In the long run, only an end to the pandemic will help. That was the message that remained a year ago from the conversation with Frank Oberndorff, the Japan boss of the Hamburg trading company Illies. At the time, he was sitting in front of the computer in his office in Tokyo’s Meguro district. Online interview, as it should be in the pandemic that never ended. He was relaxed. Japan’s government had relaxed the entry ban for foreigners, so that technicians and engineers were allowed into the country under certain conditions. Oberndorff quickly got cheap loans. And he didn’t have to lay off any employees. However, Frank Oberndorff did not fully trust the near future. If 2021 were to be a virus year with tight customer budgets and entry restrictions, he said – “then it will be difficult for everyone”.
And now? It is autumn in the second year of the pandemic. How are Illies and his manager Oberndorff doing in the Far East almost a year after looking ahead anxiously?
Japan is a good place for German companies. The state takes particular care of the economy here. Commerce is not a dirty word like in some parts of Europe. The German Chamber of Commerce and Industry in Japan (AHK Japan) explains: “With a trade volume of 38.6 billion euros, Germany is Japan’s most important trading partner in Europe and vice versa.” And the pandemic has shown that the Japanese way of dealing with money cannot fix corona problems – but it does bring a lot of time to combat these problems.
At least that is what the Illies company experienced, which is a symbol of the flourishing German business in the island nation. It is Japan’s oldest foreign company, founded in 1859 on Dejima Island, Nagasaki Prefecture. Your business model of selling machines and high-tech systems to Japan is profitable – after the many months of Corona you can almost say: indestructible. In any case, Frank Oberndorff still seems relaxed, he describes his state of mind as “completely relaxed”.
The year 2020 was “excellent” – thanks to the high order backlog
He receives in a conference room at the company headquarters. Transparent protective walls divide the long table. Outside the tireless Tokyo S-Bahn rushes by, and beyond the railway line, construction work on the next skyscrapers is in progress. Japan has just ended the coronavirus emergency. Around 60 percent of the island nation’s 126 million people are fully vaccinated. And this Monday a new Prime Minister will be sworn in; Fumio Kishida succeeds the resigned Yoshihide Suga. Nevertheless, there is no mood of optimism, the fear of corona is too deep for that. And the matter-of-fact conservative Kishida is not a man for storms of enthusiasm.
But Oberndorff is optimistic. His prognosis was correct. The longer the pandemic lasted, the more difficult the situation became. When Illies has large orders, it takes time for the income from them to show up in the income statement. “In the end, the 2020 financial year was excellent,” says Oberndorff, “but that was the result of sales from business transactions that were several months back.” The revenue dip will be there in 2021. “On the one hand, because the Japanese customers understandably didn’t want to see us out of fear of infection. On the other hand, because they didn’t meet so much in their own company either.” No decisions were made. Projects stood still.
And the projects that were going on were more complicated because of the entry restrictions. In the meantime, the Japanese government only requires ten, not 14, days of quarantine after arrival. But the conditions are still difficult for the technicians and engineers Illies has to bring in to install the machines. They are only allowed to move from their hotel to work. You are not allowed to stay for further projects.
Cheap loans are an important pillar of the growth strategy
“That will result in a significant loss.” Oberndorff does not name numbers. But that he wouldn’t be so relaxed without the cheap loans – he says that clearly. “The lack of business is now being plastered with money that bridges this lack of business for the time being.” Oberndorff still hasn’t fired any people. He kept the company going, even though almost nothing was going on.
Cheap loans are an important pillar of the Japanese growth strategy. No central bank relies on low interest rates as consistently as the Japanese one. It is doing this in concert with the Japanese government, and while Japan’s banks are groaning, it doesn’t look like much is going to change in monetary policy. German companies benefit from this. Oberndorff is happy that he expanded the credit line without false pride. “We took everything that came up,” he says, “when it was all there, we had incredible liquidity. We never need that for our business.” He doesn’t have to worry about that in times of loss. Illies is prepared for the time when things start again.
Overall, German companies are not doing badly in pandemic Japan. The AHK Japan found in a survey that 71 percent of them had “growing or stable business in the last twelve months”. That doesn’t mean that everything should stay as it is. “One of the main demands on the new government is the relaxation of entry requirements and recognition of international vaccination passports,” says AHK Japan managing director Marcus Schürmann.
Frank Oberndorff agrees. For him it is only a matter of time before normality returns. But this normalcy is also needed. When asked how long Illies can hold out the Corona crisis, even the relaxed Oberndorff says: “Of course not endlessly.” In the long run, cheap credit will not help. It’s just an end to the pandemic.