 Good afternoon. My name is Ray Tsuchiyama, your host for another great conversation for business in Hawaii, a series that delves into issues, problems, and hopefully successes by small, medium, big business in Hawaii, trying to really bring products that are high quality services and to succeed in this economy. Today we have a guest, Andrew Daisuke Stewart, the Shoah Law Office in Honolulu. And I chose him today to really have a conversation about something in reverse. What I mean is that for several shows I've been talking about exports from Hawaii to Japan, and there's many people who want to succeed in that business. Today, however, I want to talk about issues and challenges by Japanese investors in business in the Hawaii economy. And Andrew brings insights since he has a background in Japan. Welcome to the show, Andrew. Oh, thank you, Ray. Thanks for having me. Glad to be here. Go to school, guys. So your background in Japan, tell me about your childhood and growing up in Japan. Where did you grow up? Sure. So briefly, my dad's originally from Tennessee. My mother is from Tokyo, and they met in France, and then they settled in Japan. And I was born there. I went to international school until I was about 11 and then spent two years by myself in Nashville and then came back to Yokohama for high school. And then after that, I graduated and went to university on the US mainland. And then where did you go for law school? I met my wife in college. She's a local girl, so we both came to Hawaii to William S. Richardson School of Law. So you've been in law and you're a sole practitioner. Am I correct? Right. I've been on my own for about six or seven years now. And Showa Law Office, what's the background of that name? Of course, it reflects the Showa jidai or that reign of the emperor, but why Showa? People ask me that all the time. Well, so because of my cultural and language background, I'd say about 98% of my clients are from Japan or Japanese speaking. And Andrew Stewart doesn't sound very Japanese, so I needed to find a name for the office that if somebody was looking for a Japanese attorney, it could immediately see and recognize that it has some kind of Japanese connection. And I also happened to be born in the Showa era and that's when the economy was good. That was the good old days in Japan before the bubble burst. So I think there's some emotional attachment people from Japan feel kind of sentimental about Showa. We use that term Natsukashi or nostalgic about that golden age and Japanese economy. So speaking of the Japanese economy and Japanese interest in Hawaii, one of the driving forces behind nearly two million tourists of Hawaii is that great affection for Japanese that they bring to coming here as tourists, as visitors. And then what happens at a certain point? Entrepreneurs want to open a business in Hawaii and you must have met many, many of these very creative individuals in Japan. Is there a unique profile that you can tell me or the audience? What makes a person, a business person from Japan explore investing or opening a business in Hawaii? Sure. So my practice consists, I'd say, about maybe 60% litigation and the remainder, business formation or labor issues, employment issues, assisting businesses and purchasing another business, leasing issues. So yeah, almost on a weekly basis, I have contact with Japanese entrepreneurs or potential entrepreneurs. I guess there are probably several profiles. Like you said, Japanese people have a huge affection for Hawaii and they don't want to just come here a couple times a year. A lot of people want to stay here or retire here. The big impediment obviously is immigration status. And one way around that or solution to that is the investment visa. So I would say a great majority of Japanese entrepreneurs coming into Hawaii, their primary goal is to get the visa. And oftentimes the business itself might be a secondary concern. On the other hand, there are also larger companies, chain restaurants or stores that want a flagship store in Hawaii and they open. So the two visa investors are usually smaller business owners. And then so that's one type. And then there's the other where there may be public companies that you don't want to start in Hawaii. So there's a range. Well, you're right. It's a wide range because I can just pick on my mother's island of Hokkaido. And there's at least four or five businesses like Kamofuji, the Tonkatsu place on Kapa Hulu. There's a brook, a Hokkaido brook, the bakery with German roots, but through Hokkaido. There's Santoka, the ramen place at Don Kiyote and others at the Jinbo Udon on King Street. So just in one area of Hokkaido, there's half a dozen smaller ones. And then you go to the extreme of Uniclo that's opening their store first time in Hawaii after their flagship in New York, but they see a market in Hawaii. Right. Yeah. So yeah, I encounter various types of investors. Sometimes, somebody who's still in their 20s has been very successful or sometimes it's people who are near in retirement or sometimes it's people who have young children who want to educate their You're saying this is not one reason, but it could be a combination, but drawn by Hawaii, attracted by Hawaii. The definition or the profile, do they come all from Tokyo or do they come from smaller cities or the countryside? Where do they come from? The investors? Yeah, that's a good question. I think maybe 10 years ago, Tokyo, Osaka were the main, but these days I see investors from relatively regional cities like Sendai or Fukuoka, Hiroshima, Kobe and so forth. And the products and services, Hawaii is not going to be the Google Software Development Center or Sony, they must come from some retail or some restaurant or hospitality background. Am I correct? Most of them coming from those backgrounds? These days, yes. As you probably well know, pre-bubble, there were large corporations like Kintetsu and Zebu, they're mostly gone. And so now they're smaller type. Because historically you're correct that the major inroad by Japanese investors was of course the purchase of the Sheraton Waikiki and Royal Hawaiian by Kyoya, Osano Kenji. Kenji Osano in the early 60s and he was a pioneer. Wow, he looked at Hawaii 30 years in advance. And then comes the 80s where you had companies because of the appreciation of the yen, suddenly companies that you never heard about, Azabu Jiroshia for example. But you're correct that in the past they were, for example, Mitsukoshi, department store that came and left. You can tell how old people are, they still refer to that as the Mitsukoshi building on Kalakawa, the multi-colored one. So there have been a varied investment I guess categories or services and products coming in. But nowadays it's more the entrepreneur seeking some kind of visa and trying to start up or some kind of that they can put on their restaurant or shop back in Japan that they have a stand or a branch in Hawaii. So these days, the majority of the companies deal with either restaurants, bars or hair salons, nail salons. And when they come to you for the first meeting, what do you tell them about Hawaii? I mean, Hawaii even for people from San Francisco, Seattle, New York LA is a challenging place to business in terms of taxes and labor laws, regulations, health insurance, real estate, electricity rates that are 32 cents a kilowatt hour compared to 11.9 cents on the mainland. There's a lot of barriers. What do you tell them? In fact, I just met another prospective investor this morning, in fact. And because of my litigation background, I tend to think sometimes in the worst case scenario, prepare Japanese investors for what could possibly happen, things I've seen ending up in litigation. And my goal is to try to help them do their due diligence and their vetting upfront so they don't have to confront litigation or other kinds of regulatory or employment issues down the line. And so some of the things I tell them is that, one, you should be wary of trusting people too much, only because as a legator, I've seen a lot of investment scams in Hawaii, unfortunately, targeting Japanese. And often the perpetrators are also Japanese. And also, I tell them, don't use Japanese common sense or social norms to apply to Hawaii, because this is neither Japan nor it's part of the United States, but not exactly like the mainland. And so they should prepare themselves for things being different. And if they don't, they can be in for a big surprise. A big surprise. And what percentage of these investors think of just Hawaii as a Hawaii, having a business here, or thinking ahead as a bridge, maybe the larger companies, mediums and larger-sized companies, maybe thinking of as a bridge to the mainland, bigger markets like San Francisco Bay Area, San Diego, LA, or Seattle? Are most people just satisfied with finding success in Hawaii, or are they thinking of finding success here that will ultimately bring them to a bigger market? Good question. Again, it varies, but I think for maybe roughly 20% of investors think maybe going into the US mainland market, but the success or failure rate for businesses here from Japan is relatively high. So before they can get there, a lot of times they close down or they realize they just want to stay in Hawaii. So it's pretty rare actually to see businesses from Japan come to Hawaii and then do well on the mainland unless they're a really large company. And then another issue is, this is kind of a simple issue, but a lot of people who come to Hawaii specifically because it's friendly in terms of the language, they don't necessarily have to be fluent in English, but on the other hand, that's a significant impediment for them to do business on the mainland, because you don't have professionals who can help you who are bilingual, for example, and employees maybe who speak some Japanese. So I think Japanese are famous for studying English in school for 12 years, but then when it comes to actually using it in a business environment, they're 12 years of studying, doesn't really bear fruit. Yeah, it's strange that we were talking like this because we were talking about my 20 years in Japan. I was doing the reverse of trying to assist US companies to our, they're called Gaishike, if you love them all foreign companies in Japan, achieve success in the Japanese market. And many of the issues you mentioned about management, about services and products geared or fashion for the Japanese market, regulations so forth, are out there for American companies going to Japan. And this is a mirror image of Japanese investors and businesses coming to Hawaii. But in the next second part of our show, I want to focus on how we can really bring best practices or do diligence aspects after this important break. Aloha, my name is Mark Shklav. I am the host of Think Tech Hawaii's Law Across the Sea. Law Across the Sea is on Think Tech Hawaii every other Monday at 11am. Please join me where my guests talk about law topics and ideas and music in Hawaii, Anna, all across the sea from Hawaii and back again. Aloha. Welcome back to Business in Hawaii with our guest, Andrew Daisuke Stewart of the Showa Law Office. And we've had a scintillating discussion on the issues and challenges of Japanese investors coming to Hawaii. And of course, this is a big topic. The ambassador from the United States of Japan, Mr. Hagerty, has been involved for many years attracting Japanese investment to Tennessee. Every state in the Union is trying to bring what is called a reverse investment. A Toyota plant in Kentucky brings catered to companies from every category to as suppliers to their plan. And this of course boosts the local economy and of course creates new jobs for the local population. So of course, for Hawaii, we must find ways to attract more capital, more business, to really employ more people in Hawaii. So this is a very important topic in the economy of Hawaii, how to make businesses succeed from not only from Japan, from Korea, China, Taiwan, Singapore and from the West Coast and Europe or Brazil in Hawaii, because that will of course boost the economy. But right now we are focused on what can we say or discuss or list as topics so that Japanese companies can succeed better in the Hawaii economy. First of all, where can or how can these investors or business people, business leaders, before coming to Hawaii or when they're in Hawaii, get doing business in Hawaii 101? That's a great question. You know, what I've heard is, I mean there are obviously Japanese expat business community here in Hawaii and you know, if you ask around, I'm sure people share their experiences, but at the same time I've heard that you know, it's people can tend to be very protective of their niche. Very good point. Why show your secret sauce or your secrets to success with some competitor that may arrive from Kobe or Sendai? So in a lot of it, it's just trial and error, I think. I mean, I guess they could watch your show. Well, some of them of course go to local banks like first of YN, CBB and back in Hawaii, all have Japanese speaking officers. They can help out also. Japanese consulate may have some people who know about business in Hawaii, but you're right. It's a challenging one because in a very low employment economy that we have in Hawaii right now, which is quite unusual because we've had recessions as late as 2008, 2012, and now we're doing quite well. We're running all six cylinders in the Hawaii economy and it's hard to get top people, qualified people, to run your business in Hawaii, but that employment area of course is like a very high priority because you just can't stay here all the time. These investors of business people have to go back to Japan and kind of ensure the success to somebody else and what kind of people should they hire? Well, even before we're talking about employees, I think it's crucial to have a team of attorney accountant, perhaps realtor, that you can trust and they work together. So I think that's the first step is to have a group of professionals that can advise them properly and not just kind of isolated issues, but trying to get a professional who has an understanding of the bigger picture and they can kind of give you comprehensive advice instead of just on a case-by-case basis and sometimes I see professionals not giving advice unless they're specifically asked, but since people coming from Japan, they really need to be taught from square one. What is the question? One of the questions they ask, you're absolutely right. They don't know the question asked and they don't have the answers. That's I think a very good area. I've worked with investors from Japan locally, but you're correct that they need somebody on the ground and who knows whom they can trust. You're absolutely right on that. But also somebody that they would allow that person that they hire, Li Wei, to really run a business in the Hawaiian style, employees in a culture and to communicate in their language. I think that's something some Japanese investors want to micromanage or think it's the same as Japan, how to treat employees or the run a business and that will invariably snowball into constant questions later. Yeah, that's a double-edged sword because on one side it would be great to have somebody here managing your business, but it's really difficult to find somebody who basically to replace you as the owner. On the other hand, like you said, if you're here and you're the boss trying to run things the Japanese way, quote unquote, that's going to make some employees very unhappy also. So it's a happy medium that you've got to find. I think you're correct and also there are areas of Japanese service or products that are unique of high quality and they don't want to lose that. In America, a lot of times you encounter bad service, bad products, and you go to Japan and say, wow, this is the envy of the world in terms of global standards. And if you lower the standards, again, you may lose your customers. And so you're correct. There's a happy middle that somehow you can introduce top quality Japanese products or services in Hawaii while having a culture of employees who are really happy and doing their best. Correct, right. And another thing kind of relate to that, what I always tell potential investors that don't go into your Hawaii business as sort of a hobby or if you're going to do it, you should be committed. Because I see a lot of people just wanting the visa and they hire a manager and basically assume they're going to run the business for them and that almost always never works out. So they should be hands-on. And again, back to your working litigation, which is tragic. It's something that nobody wants to see. But again, they're coming from a culture where real estate deals are three pages long or barely. And here you have dozens and dozens of pages covering every possibility that may happen or not. And the role of lawyers and how real estate agents are used and the quality of designers and construction in Japan are all different in Hawaii. Right. And I don't want to talk too much about law, but I think it's important because the Japanese legal system is so different. It's based on a continental, I think German system. There was a lot of U.S. input after the war. It's not a common law system and just basic tenants of the law and concepts are very different. In Japan, it's still a culture of relationship and trust. I'd say the United States is a culture of duties and obligations according to whatever agreement you saw. And I think that's a big difference there on the role of contracts that in the United States you have so many people speaking so many different languages and cultures that the only way to ensure moving forward is a contract in English. So I've seen in the last decade more than one occasion Japanese people still wiring or giving somebody a million dollars or more with nothing in writing or having entered into a transaction by business with no professionals advising them. And it's almost always doesn't turn out very well. And I know a lot of Japanese people want to they probably want to conserve their expenses because American lawyers are certainly expensive but I think spending that money up front can avoid a lot of headaches down the line. Another big thing is to purchase insurance and be well informed and have a good insurance agent because things like if you get sued by your employees that's something you don't even think about in Japan hardly but here it's very prevalent and that doesn't come with your standard liability insurance you have to get an extra type of insurance or business interruption insurance. So I think you're right. I think the first thing is if they're new to business in America or in Hawaii the role of a lawyer is quite different. And as you know in Japan there aren't that many that many times a contract is a basis for further negotiation rather than something set in stone. So it is a very different world when they come here. But again if I ask the question you know two three years five years from now do you see no more of these Japanese vessels coming to Hawaii from Japan. The answer is they'll keep on coming. Am I correct. I hope so. Although I was talking to one client of mine who ran a successful business here and went back to Japan and take care of the elderly parents. And I think you and I talked about this off camera. You know Japan has an aging population and you know he made a very good point that a lot of the tourists who come here they come with like three generations and the grandparents kind of sponsor the trip and you know grandkids and the kids come. But now those that big rumor generation you know they're getting ill or you know can't move around or travel. So you know his point was that we shouldn't Hawaii shouldn't take Japanese visitors for granted and that in the next five or ten years that those numbers can dramatically drop. So I'm definitely you know on my toes and definitely not assuming it's going to continue. And yeah I think Hawaii needs to diversify. I mean we don't know what's going to happen in Japan's and you know real transformation right now in many ways. So ironically this year maybe the best year many many years maybe close to two million. It was 2.3 in 1998 and ever since then it's been up and down from that time. But you have a very good point that the savings rate among older Japanese is the highest in the world. But the economy with the Tokyo Olympics is still moving ahead. And young people you know they're not interested in traveling or they don't have the money. So I think now they travel domestically or maybe go to you know Korea. Right nearby cheaper places. You may be right. But I think if we can make Hawaii a place where the investors and so forth can be successful this will draw even more people here from Japan and continue with the affection. Well I think it's federal you know rules and regulations about immigration or banking laws. It's you know making it much more difficult to transfer money or even come into the country without you know. Well that's I think that's a whole another topic and we are at the end of another show Business in Hawaii. Thank you so much and thank you Andrew for your input and insights. This is Ray Toshiyama.