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Sunday, Aug. 5, 2012

CLOSE-UP: David Atkinson

Ancient Japan captures money man's interest

A former financial high-flyer forsakes the realm of Mammon for an exciting no-growth challenge

David Atkinson was still in his 20s when he rose to fame as a Japan-based banking analyst with the U.S. investment bank Salomon Brothers, prior to him moving to Goldman Sachs.

News photo
Man of many talents: David Atkinson, a former analyst with investment banks who now runs a firm that restores old buildings, is seen during his JT interview. SATOKO KAWASAKI

Having graduated from Oxford University with an M.A. in Japanese studies in 1987, and following a few years' stint in London and New York at major consulting and outsourcing firm Andersen Consulting (now known as Accenture), he arrived in Japan in 1990 and soon became embroiled in the most dramatic and turbulent chapter in the country's peacetime banking history.

Throughout the 1990s and the first half of the 2000s, Atkinson, thanks to his objective and cool-headed analyses, was one of the most influential observers of the sector. And what a time it was to be in such a key position, with several banks going to the wall, the nationalization of two long-term credit banks and mega-mergers that saw the nation's 10 major banks consolidate into just three.

The cause of all this unprecedented turbulence was, of course, the bursting of Japan's asset-inflated bubble in the early 1990s, which triggered a sudden dramatic fall in the value of real estate — real estate that banks held in vast amounts as collateral for loans they had extended to both individuals and businesses.

With collateral values plummeting, banks were suddenly awash with problem loans as the number of borrowers unable to meet their repayments spiraled. Then, as banks were forced to allocate more capital to cover their losses on loans, their lending capacity weakened and triggered a massive credit crunch. In a vicious downward spiral, that crunch in turn sparked a chain reaction of corporate bankruptcies, rising unemployment — and a surge in the number of suicides.

In what was an astonishing span for such a crisis, this bad-loan mess took some 15 years— until around 2005 — to sort out, largely because Japan's banks and regulators were woefully slow to address its root causes.

Not so Atkinson. The English native recalled in a 2011 interview in the business daily Nihon Keizai Shimbun that, as early as 1991, he wrote a report to investors warning that Japanese banks were saddled with ¥20 trillion of nonperforming loans. That single report sent shock waves through the financial sector and triggered a massive selloff of the banks' shares in the Tokyo stock market.

Following that report in 1991, Atkinson told the Nikkei how he was bombarded with angry calls from bank executives and regulators in Japan, and also received fax messages threatening him in person. Nonetheless, based on his "bottom-up" analyses of banks' assets in the '90s, he continued to publish his incisive reports.

Then in 2007, Atkinson quit Goldman Sachs where, as the chief banking analyst, he had been promoted to the lofty position of partner. For a while after that, he stayed out of corporate life — "doing nothing," as he says. Fate dictated, though, that he would soon join the management of a company in a completely different field: Konishi Decorative Arts and Crafts Co., a 300-year-old Tokyo-based restorer of traditional architecture.

Consequently, Atkinson's financial expertise and his ability to see things as they are, devoid of illusions or bias, are very much alive today as he fills the roles of both chairman and CEO of the 70-employee company of lacquer workers, coloring craftsmen and metalworkers.

Now 47, Atkinson, who is single and hails from a tiny village outside Nottingham in the Midlands of England, recently spoke to The Japan Times at his office in Konishi's Minato Ward, Tokyo, headquarters, where he recounted his high-flying days as an analyst and the remarkable how and why he came to be in his current position running a "no-growth" heritage company so far from his homeland. In an interview conducted entirely in Japanese, he also offered no-holds-barred comments on what he sees as Japan's haphazard approach to preserving its wealth of cultural properties — and much, much more.

What are some of the projects your company is working on at the moment?

We are commissioned to restore shrines and temples across the nation. For example, we are reapplying lacquer to the big Black Gate right in front of Kaneiji Temple in Ueno (central Tokyo). That job will be completed around this fall. As for shrines, we're currently working on Osaki Hachimangu Shrine, a National Treasure, in Sendai, Miyagi Prefecture.

Does each repair job take a number of years to complete?

It depends. Some shrines have a "shikinen sengu" approach, which means parts of their properties are rebuilt every 20 years.

Our company originally started with work on the two shrines and one temple (comprising the UNESCO World Heritage Site) at Nikko in Tochigi Prefecture, including Toshogu Shrine and Futarasan Shrine, and we have undertaken the restoration work there ever since. So we are constantly working on Toshogu, which has about nearly 50 designated National Treasures and Important Cultural Properties. By the time we finish work on one of them, something else from the rest is ready for repair.

The restoration industry sounds to be quite unique. What's the contract structure like?

Well, Konishi Arts itself is a very unique company, and almost all its work is related to National Treasures or Important Cultural Properties. So the property owners typically get subsidies for restorations and/or repairs from the government, and they give us orders. And just like the tendering for construction work, we must enter bids.

You yourself are also quite unique, being a foreigner heading such a traditional company.

I'm the only one. I haven't met anyone like me.

How did you enter this business?

This company has always been owned by the Konishi family. They were long looking for successors but couldn't find them.

I happened to have my cottage in Karuizawa (Nagano Prefecture) next to the owner, so we were social as neighbors. When I retired (from Goldman Sachs), or even before that, knowing that I had done some consulting work and was familiar with Japanese culture, she asked me whether I could give the company some advice. So it wasn't like I had special interest in the company or I went looking for the job myself.

Why did you decide to accept the offer?

Because I was asked, I visited the company to see what it was like. I had also always casually hoped that Japan was taking care of its cultural assets properly — but I learned otherwise and found that there were many problems (with the industry).

I never expected myself to be the president. But when the president before me fell ill and was hospitalized, there was nobody else to run the company.

How were you received?

I would admit that, in a traditional industry like this, there has been some opposition (to a person like me taking the helm). But my position is, well, I'm not the one who pushed myself in. So what I say to people is, "If you don't like me, find someone who can do both culture and business."

What kinds of problems did you find?

News photo
Wooden wonder: The main building of Kangiin Shodenzan Temple in Kumagaya, Saitama Prefecture, which was designated as a National Treasure in July. SATOKO KAWASAKI

You might think companies in this industry must be all be old, but that's not the case. There are only a few long-standing ones, and the rest are new — like one or two generations old. So companies with a history of 10 years or 50 years comprise the majority. There are many reasons for this, but the fact is, sadly, there are very few old companies left.

While many companies boast "traditional techniques," their know-how is often acquired in college or from somewhere they can't even name. However, ours and one named Kishino Arts have both passed down their traditional techniques through the workers over a long long time. New companies tend to boast of using the "greatest" traditional techniques, while really traditional companies don't boast, because they take their work for granted.

It's okay to have new entrants, but in a country like Japan where anything new is popular, and in this particular market with no growth, many old companies have gone under.

Another thing is that, right now, the bidding for restorations of cultural properties is based solely on prices. A company that enters the lowest bid for a restoration project wins the contract — regardless of its ability or track record. So it's possible for some small company with annual sales of ¥100 million to win a ¥300 million contract.

What happens then is that, because they don't have enough skilled manpower within the company, they round up people with little experience from the outside — like students or arubaito (part-time workers) or some low-level craftsmen who have only painted bowls, for example. At Konishi Arts, we made all of our craftsmen seishain (regular full-time employees) two years ago.

Does that mean you changed the pay system?

Yes. We pay the craftsmen monthly salaries, so their livelihood is more stable.

Before that, were they paid daily wages?

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