Selling American : Irvine-Based Firm Hopes to Ease U.S.-Japan Trade Imbalance--If Only a Bit

By CRISTINA LEE

March 8, 1992 12 AM PT

TIMES STAFF WRITER

IRVINE —

The construction site at Aliso Viejo looks like many others in Southern California--messy, muddy and noisy. But to Kai Katsuo Hoshi, the 158 wooden skeletons that Kathryn G. Thompson Development Co. will transform into single-family homes are beautiful.

As president of Irvine-based Canon Trading USA Inc., Hoshi’s primary mission is to help U.S. companies sell their goods in Japan.

He will buy goods directly for sale in Japan or link American companies with other Japanese buyers who could help market their goods in Japan. Since his subsidiary was founded here in January, Hoshi has reviewed a parade of exportable products--from wrist rests for computer users to medical equipment.

So far, only a San Juan Capistrano meat processor--Bradley’s Beach Jerky Inc., which makes beef jerky--has cleared his scrutiny for fine detail and product marketability in Japan. But the product he likes most is more basic: lumber.

Later this year, Canon Trading will start shipping tons of cedar from lumberyards in the Pacific Northwest to Japan to start the first phase of a $100-million housing project to build American-style homes on corporate properties on the outskirts of Tokyo.

“First, we would like to build houses for Canon employees to provide affordable housing to our people,” said Hideharu Takemoto, the trading firm’s chairman. “After that, we will expand into selling the houses to the public.”

While exporting U.S. consumer goods to Japan is currently a small part of the work of this fledgling trading firm, its importance will grow rapidly in the next few years as his company becomes more familiar with the trading business, said Takemoto, who’s also the president and chief executive of the firm’s parent, Canon U.S.A. Inc. in Lake Success, N.Y.

Despite the ambitious goal, Takemoto realizes that trading in U.S. consumer products alone will not balance Canon’s trade surplus with the United States, an amount he described as “continually growing each year.”

Last year, Canon’s sales worldwide reached $14.95 billion, up 16.8% from 1990 sales of $12.8 billion. Despite the recession and a strong exchange rate of the Japanese yen against the U.S. dollar, North American sales of the camera and business machine manufacturer rose by 14% to $4 billion in 1991 from $3.6 billion in 1990. The United States market accounts for about 90% of Canon’s sales in North America, with the remaining coming from Canada, said Hajime Hirai, a Canon U.S.A. spokesman.

“We already import a lot from the United States, but mostly from Canon Business Machines, like semiconductors,” Takemoto said. “Our aim is not just to become profitable (in the trading business), but we want also to promote and accelerate more American, non-Canon product exports to Japan.”

To better balance Canon’s trade surplus with the United States, Takemoto believes that larger projects, such as housing, will trigger more imports from the United States.

Meanwhile, in Irvine, Hoshi is about to complete arrangements with Michiels International Inc., a Seattle building materials supplier, to purchase lumber and other wooden products, including window frames, doors and cabinets.

Hoshi added that he’s also considering other suppliers in Oregon, where the moist weather conditions are similar to Japan’s. Oregon lumber will also be ideal, he said.

“The problem we have is to make sure that the wood we use can stand a lot of moisture, especially during Japan’s rainy season,” Hoshi said.

If the model homes are a hit among Canon employees, large-scale construction will start next year, Takemoto said. Because only a few Japanese construction companies have adopted U.S. construction methods, Canon will hire American carpenters and architects from the West Coast to build the model homes and to teach their Japanese counterparts the West’s more affordable way of building houses.

The traditional Japanese form of construction is labor-intensive and requires highly skilled laborers, said Eric G. Fickeisen, purchasing manager at Michiels International, which supplied wood products and building materials to Japanese developers since 1979.

It can take between nine and 12 months to build a two- or three-bedroom house using the Japanese method, twice the U.S. average.

Fickeisen, whose company sells about $20 million in wood products and building materials to Japan annually, said construction is much faster here because building materials come in standard sizes. By contrast, Japanese builders use wood of various width and thickness to complete the wooden frame of a house, a feature designed to help the house withstand earthquakes.

“Japan is in an earthquake zone, and houses there are built to sway during a temblor,” Fickeisen said. “The way we build it is rigid, and a house doesn’t move much during an earthquake.”

The average cost of purchasing a two- or three-bedroom house in the suburbs of Tokyo can be at least $550,000, said Hiroaki Kinoshita, a partner at KTGY Group, an Irvine architectural firm that has many Japanese clients.

“Housing has been an explosive issue in Japan,” he said. “As housing costs continue to climb, it is becoming nearly impossible for many average workers to afford to buy their own homes, and many are living with their families or renting expensive but small apartments.

“Canon is just following the footsteps of many big Japanese companies (such as Sony Corp. and Matsushita Electric Industrial Co.) that are attempting to retain their pool of skilled employees by trying to provide affordable housing,” Kinoshita said.

Takemoto agreed that the housing project should assist his company’s effort to maintain employee loyalty at Canon. In a 1990 survey of Canon’s 24,000 employees in Japan, the company found that 80% of those between 25 and 35 years old did not own their homes. They also found that this housing shortage is widespread among all Japanese in this age group.

The project will allow Canon to address employee needs for affordable housing and give it an opportunity to cash in on its real estate holdings. The real estate is about 150 miles southwest of Tokyo, near Mount Fuji. The company will sell some of the homes at market value to non-Canon employees, he said.

Canon’s housing effort can expect some help from the Japanese government. According to the National Forest Products Assn., a Washington trade group, the lumber that Canon plans to import from the United States does not carry import duties in Japan.

In fact, Japanese companies mostly buy three major U.S. wood products--unprocessed logs, lumber and wood chips--because there are no tariffs on those products, said Stephen M. Lovett, the international vice president of the association.

While Canon is late coming into the trading business, it hopes to become a significant player in the future to make it a better “global citizen” of the world, Takemoto said.

Evening the Trade Balance

Products Canon Trading USA Inc. is considering for export to Japan:

Company, Headquarters: Advantage Life Products Inc., Laguna Hills

Product: CigArrest (how to stop smoking); Be Safe (AIDS prevention information)

Status: Translating tapes and booklets to Japanese and redesigning packaging to fit Japanesetaste.

Company, Headquarters: Bradley’s Beach Jerky, San Juan Capistrano

Product: Seasoned dried beef

Status: Translating ingredients into Japanese. Samples are being test-marketed in Japan.

Company, Headquarters: CMS Enhancements Inc., Irvine

Product: Manufactures computer peripherals

Status: Waiting for samples to test-market in Japan.

Company, Headquarters: Equities Group, Newport Beach