Thomas the Tank. Engine helps Tomy Co. join other Japanese companies fight the “Galapagos Syndrome” and take off in overseas markets


These days, it’s used to describe the perception that Japan is increasingly becoming isolated from the outside world, in the same way that the Galapagos Islands did over centuries when their species evolved on their own separate paths.

As toymaker Tomy Co. president Kantaro Tomiyama put it, when explaining why the company bought the U.S. maker of Thomas the Tank Engine railroad sets last year: “We wanted to break away from the Galapagos syndrome.”

The M&A boom could also eventually help cure another Japanese ill: an eroding current-account balance. Japanese exports have been falling recently as a strengthening yen and fierce overseas competition pummel the ability of manufacturers to sell their wares abroad.

But the rush in M&A should help bolster that balance, since the current account counts money earned from overseas investments as income. To be sure, it will take some time for those earnings to show up on corporate Japan’s books.

“An increase of outbound M&A activity by Japanese firms is a factor of pushing the current account surplus in the long run,” says Kengo Suzuki, vice president and forex strategist at Mizuho Securities in Tokyo. “There is a time lag. It would take one year at the earliest or five-to-10 years at the latest to feel the effect, as it takes time until companies come to reap profits or dividend through purchase of firms overseas.”

Adapted from:
The Wall Street Journal


Let's Discuss!