When Sakakibara Sadayuki (70), chairman of TORAY (PINX:TRYIY), was one year old, his father, a submarine captain in the Japanese Imperial Navy, was killed in action. The youngest of five siblings, Sakakibara, impecunious but talented and hard working, put himself through Nagoya University under graduate and graduate programs in applied chemistry.
Graduating in 1967, Sakakibara joined TORAY as a technician. TORAY was founded after WWII as Tokyo Rayon, a maker of synthetic fibers, mainly for the textile industry. (Disclosure: I have TORAY ADRs in my personal portfolio.) Proving himself a leader and innovator, Sakakibara was elevated to the company's CEO in 2002. He became chairman in 2010.
Under Sakakibara TORAY made a major commitment to developing ultra-strong, light weight carbon fiber technology, a technology in which the company now leads the world. TORAY is the exclusive supplier of the carbon fiber used in the fuselage of Boeing (NYSE: BA)787 "Dreamliner" aircraft, and will be similarly support Boeing's new 777X project.
Sakakibara's commitment to innovating carbon fiber technology and his decision to accept Boeing's hardly break-even terms for an exclusive long-term supply contract are emblematic of a once-fabled Japanese business culture. That his leadership revived and created a bright future for TORAY has become an inspiration for others "old economy" Japanese manufacturers.
English: Ekaterina Makarova at 2010 Toray Pan Pacific Open Qualifying Singles Final, Tokyo, Japan (Photo credit: Wikipedia)
This background helps explain the choice of Sakakibara as the next head of Japan's big business association, Keidanren. Sakakibara will succeed Yonekura Hisomasa (76), chairman of Sumitomo Chemical whose term is up in June.
It seems Sakakibara was not Yonekura's first choice as successor. That was Kawamura Takashi (74), chairman of Hitachi Ltd., who, however, adamantly refused to take the job citing age.
In Sakakibara's favor was, in additional to his achievements at TORAY, his smooth working relationship with Prime Minister Abe Shinzo, gained as a private sector member of the Abe government's Industrial Competitiveness Council.
Government relations has always been a big part of the Keidanren chairman's job, and it has not gotten easier under the Abe government.
Keidanren and Abe's Liberal Democratic Party/New Komeito (LDP/NK) coalition have been largely together on such major issues as Japan's entry into the Trans-Pacific Partnership (TPP) trade negotiations and raising the consumption tax. But Yonekura got into trouble when he subtly criticized Abe's rigidity and insensitivity in relations with China and South Korea, both countries of critical strategic importance to Japan's big businesses.
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Sakakibara is likely to avoid ruffling government feathers on foreign policy issues. Rather, he will seek to lend the Keidanren's full weight to realizing Abenomics "Third Arrow" growth and competitiveness reforms.
At a press conference this week Sakakibara called for lowering Japan's corporate tax to 25% in line with the average of Asian and OECD countries with which Japanese companies compete. Japan's current effective tax rate is 38%. It will drop to 35.64% from April as a surtax for Tohoko disaster reconstruction expires.
Within Keidanren, Sakakibara will promote technological innovation as the key to continuing competitiveness of Japanese industry.
The imperative of such innovation and heightened competitiveness, especially in export sectors, was brought to mind this week with news of the continuing sharp deterioration of Japan's trade balance. Last year Japan posted its highest ever trade deficit of JPY 11.47 trillion (USD 112.07 billion). As vexing as the record deficit was its YoY rise of 65.3% over 2012.
TORAY is certainly a model for successful innovation in a traditional industry. Another recent new product is "Heat Tech" fabric used in underwear which was jointly developed with Uniqlo's parent company, Fast Retailing (OTC:FRCOY).
As I write TORAY is trading in Tokyo at JPY 690, up 16 yen or 2.37% for the day. The price-to-book ratio is 1.52 times and the forward PER 16.92 times. The forecast dividend yield for the fiscal year ending March 2014 (FY2014) is 1.48% and the forecast EPS yield 5.9%.
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