<figure id="attachment_392953" aria-describedby="caption-attachment-392953" style="width: 1414px" class="wp-caption alignnone"><a href="#" data-ident_hash="d0aeda4f"><img src="https://res.cloudinary.com/fridaydigital/image/private/t_article_image/wpmedia/2024/09/df0b2807d6e114a65b59c9ff8df93a8f.jpg" alt=""></a><figcaption id="caption-attachment-392953" class="wp-caption-text">Chairman Nitori smiled as he called out, &#8220;Nitori no &#8216;ni~'&#8221; (&#8220;Nitori&#8217;s &#8216;ni'&#8221;). He wrote his motto, &#8220;First come, later benefit,&#8221; on a piece of colored paper.</figcaption></figure>
<h2> Making up for a three-year delay</h2>
<p> Records will be broken someday. Although he knew this, it was still a shock when it became a reality.</p>
<p> In the fiscal year ended March 2012, Nitori HD, a major furniture manufacturer and sales company, broke its record of 33 consecutive terms of sales and profit growth since its listing on the Tokyo Stock Exchange.</p>
<p><span class="strongInContent"> In addition to the irregular 13-month and 11-day accounting period of the previous fiscal year, the biggest reason was the depreciation of the yen. Looking from March 2008, the yen has depreciated by 50 yen from 111 yen to 161 yen per dollar. Our company is affected by the exchange rate by 2 billion yen per year at 1 yen, so if the 50 yen difference continues for a year, we will have a 100 billion yen loss. There is nothing we can do about this. Even so, we managed to keep the decrease in ordinary income to 11.7 billion yen. The employees did a great job. Moreover, during this period, the company was able to be reborn as a muscular company. Just like people, a company needs to be trained. I am also doing muscle training now, and at most, I gained more than 1 kg of muscle mass in a month. If you put in the effort, the results will come back to you.</span></p>
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<p> The yen has weakened sharply and the Nikkei Stock Average has fluctuated wildly. In these uncertain times, what strategies is Nitori, led by its charismatic founder and chairman Akio Nitori (80), planning to pursue? We asked him about the outlook for the Japanese economy as well as the company&#8217;s top management.</p>
<p><span class="strongInContent"> We asked him, &#8220;In order to cope with the severe changes in the external environment, we will continue to provide products that satisfy our customers, without fail making efforts to reduce costs, such as by reviewing where in the world we procure the raw materials for our products. Nothing will change that, even if the increase in sales and profits is interrupted. In Japan, the number of places where we can open large stores has become quite limited, but overseas is unlimited, so our business will be centered overseas from now on. While the number of new store openings in Japan is approximately 50 per year, the number of new store openings overseas is 100, and in the future we aim to open more than 200 stores overseas each year. Our medium- to long-term management strategy was originally to &#8220;accelerate the expansion of our global chain,&#8221; and we need to make up for the three years we have been unable to do so with Corona. Eventually, we would like to increase the ratio of domestic and overseas sales to 50% each.</span></p>
<p> As of March 2012, Nitori had 179 overseas stores, and the company plans to increase this number to 270 by the end of this fiscal year. The company has already opened stores in 11 countries, mainly in Asia. The company is focusing on Taiwan and mainland China.</p>
<p><span class="strongInContent"> The 19th century was the era of the Industrial Revolution in England, the 20th century was the era of war and America, and I believe that the 21st century will be the era of Asia. I believe that the 21st century will be the era of Asia. Asia will probably account for more than half of the world&#8217;s GDP. Where we should aim to open new stores is where development is taking place.</span></p>
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<p> The Chinese economy is said to be in the midst of a bubble burst, and the conflict with the U.S. is expected to intensify. When I asked him whether it would be risky to rush into China in such a situation, he gave a strong answer.</p>
<p><span class="strongInContent"> There is no doubt that the Chinese economy is in decline. Japanese companies that have entered the Chinese market are also in trouble. To be honest, we are also struggling. But that&#8217;s OK. Some say we should wait a little longer, but that is too late. Now that the economy is in a slump, rents are cheaper and we can open new stores under better conditions. Some of them have opened new stores, but the numbers are worse than expected. But then you can just pull out. Through scrap and build, the good stores will remain. In other words, we can make even a pinch into an opportunity. Thus, by the time the economy improves, the number of stores in China will be 300 to 400, and the time will come when we will be glad we opened those stores. We will wait and see. I think that&#8217;s what overseas business is all about.</span></p>
<figure id="attachment_392957" aria-describedby="caption-attachment-392957" style="width: 2412px" class="wp-caption alignnone"><a href="#" data-ident_hash="a6156d65"><img src="https://res.cloudinary.com/fridaydigital/image/private/t_article_image/wpmedia/2024/09/ca6ec124c1e5320929e4e60e815557e6-1.jpg" alt=""></a><figcaption id="caption-attachment-392957" class="wp-caption-text"> Since the COVID-19 crisis, the company has been accelerating its expansion into mainland China and Taiwan. The photo shows the first store in mainland China, which opened in October 2002 in Wuhan, China.</figcaption></figure>
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<h2>To 130 yen per dollar by the end of the year</h2>
<p> Needless to say, the strength of the domestic business is behind the company&#8217;s ability to launch a bullish strategy. Sales are growing steadily thanks to the business integration with home improvement retailer Shimachu and the company&#8217;s foray into apparel and other non-furniture areas.</p>
<p><span class="strongInContent"> We are also moving forward with in-house production of items that we had previously outsourced. For example, we have switched from renting distribution centers to building our own. That alone will reduce annual costs by more than 1 billion yen. We are also focusing on in-house production of carpets and curtains. We are amateurs, so we have a hard time at first, but after a certain amount of time, we are able to make better improvements than the specialized companies that have been doing this for decades. By making our own profit from the profits we used to give to outside companies, we are able to give back to our customers in terms of price.</span></p>
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<p> Above all, the yen&#8217;s depreciation, which has been a source of pain for the company, has now reversed. The fact that the yen has begun to appreciate is good news for Nitori. The chairman of Nitori Corporation says with a smile, &#8220;We are currently at 143 to the dollar.</p>
<p><span class="strongInContent"> The yen is currently at about ¥143 to the dollar, but we expect it to be in the ¥130 range by the end of this year, between ¥120 and ¥130 next year, and eventually in the ¥110 range. The reason is the narrowing interest rate gap between Japan and the U.S. While interest rates have finally started to rise in Japan, the U.S. will probably lower interest rates significantly in the future. Some indicators of economic deterioration have already begun to emerge, but what I am focusing on is the real estate market. Rents in major American cities have already fallen by about 20-30%, and some say that they will eventually be cut in half. This is just a premonition for now, but the economy is going to get real bad from now on, so we have no choice but to cut interest rates.</span></p>
<p><span class="strongInContent"> It is expected that interest rates will be cut by about 0.5% by the end of this year, and it is possible that they will be lowered by 1% next year, and then by another 1% the year after that as well. If this happens, the yen will naturally strengthen. What will Nitori do with the increased profits from a stronger yen? Of course, we will return the profit to everyone by lowering the prices of our products. We may be able to review prices as early as the beginning of the new year.</span></p>
<p> While the strong yen is a tailwind for Nitori, it is not necessarily positive for the Japanese economy as a whole. This is because large corporations, especially those in the export industry, have been benefiting from the weak yen. Many of these companies have achieved their highest profits, including foreign exchange gains, but the situation will be the exact opposite from now on.</p>
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<p> The Nikkei Stock Average has been declining since reaching a record high of 42,224 yen on July 11, but could there be a further decline? Mr. Nitidori&#8217;s view is as follows.</p>
<p><span class="strongInContent"> The assumed exchange rate for major companies is about 146 yen to the dollar, but it has already fallen below that level. Since profits will decrease, stock prices will reflect this.</span></p>
<p> The decline in stock prices is not only a sad news for individuals who have invested in stocks through the new NISA and other programs, but it is also a headache for companies, as it increases the risk that Japanese companies will become targets of takeovers by foreign companies, as was the case in August when Seven &amp; i HD received a takeover offer from a Canadian convenience store giant. However, the chairman of Seven &amp; i Holdings remains calm.</p>
<p><span class="strongInContent"> You may be surprised that a company of that size could be the target of a takeover bid,&#8221; he said. But in the eyes of large overseas companies, their market capitalization is small. Thanks to the current depreciation of the yen, they can buy Japanese companies at a very reasonable price. If the yen appreciates to 110 yen again, the story will change, but the possibility that Japanese companies will become easy prey for foreign companies will continue for some time. Moreover, foreign funds will closely study the cutoff, including how many fixed shareholders they have. Even large companies cannot be too careful.</span></p>
<p> Are there any secret measures that Japanese companies can take to prepare for takeovers? Chairman Nitidori continued.</p>
<p><span class="strongInContent"> Chairman Nitidori continued, &#8220;In any case, you have to continue to expand. To do so, they should not save the money they make, but invest it in their businesses. And we will raise the salaries of our employees. Looking at the Engel&#8217;s coefficient, which shows the ratio of food costs to expenditures, Japan&#8217;s is 27%, almost double that of the U.S., which is 15%. As you can see, Japan must realize that it has become a very poor country. If this situation continues, consumption will not increase, nor will the profits of companies themselves. However, the high cost of living is due in large part to the high cost of imported goods as a result of the weak yen. In addition, the government is aiming for a 2% inflation target, but as long as wage increases are not keeping pace, I feel that the 1% level is appropriate.&#8221;</span></p>
<figure id="attachment_392954" aria-describedby="caption-attachment-392954" style="width: 2500px" class="wp-caption alignnone"><a href="#" data-ident_hash="a449d3f7"><img src="https://res.cloudinary.com/fridaydigital/image/private/t_article_image/wpmedia/2024/09/49c6c70d4a75717d0a3b95cc0b7f800c.jpg" alt=""></a><figcaption id="caption-attachment-392954" class="wp-caption-text"> The Kobe DC, a large-scale logistics center, was completed in 2010 and started operation the following year as part of a review of domestic logistics bases. The company is aggressively investing in the business with the goal of reducing costs in the future.</figcaption></figure>
<figure id="attachment_392956" aria-describedby="caption-attachment-392956" style="width: 2500px" class="wp-caption alignnone"><a href="#" data-ident_hash="efb091b4"><img src="https://res.cloudinary.com/fridaydigital/image/private/t_article_image/wpmedia/2024/09/aa7c8a70802c730240a20862e30dfdc9.jpg" alt=""></a><figcaption id="caption-attachment-392956" class="wp-caption-text"> On July 2, the yen temporarily hit 161.70 yen per $1.00. The Nikkei Stock Average was also volatile. The Nikkei Stock Average has also been fluctuating wildly.</figcaption></figure>
<div data-friday-nextpage-lead=" What is required under these circumstances"></div>
<h2>Nitori&#8217;s Successor</h2>
<p> So what is required of companies and individuals in these difficult economic times?</p>
<p><span class="strongInContent"> What is required of companies and managers is romance and vision. You might say ambition. I want them to formulate a long-term vision with the primary goal of being useful to people, and to push forward with that vision. In fact, when our company was founded, we too were thinking about sales and profits, but our performance improved after we changed our mindset to &#8216;for the sake of others. Sales and profits are just rewards. It is the same for individuals. I want people to think about how they can benefit society when they do their work. If you do that, you will rise in the ranks and increase your income, even if you don&#8217;t want to.</span></p>
<p><span class="strongInContent"> We have our employees create a long-term vision for the next 20 years. For those employees who say they can&#8217;t come up with one, I tell them that for now they should just write down &#8220;president of a subsidiary at age 50. In terms of successors, we now have about 10 subsidiary presidents who are around 50 years old. It is too late to suddenly become president at the age of 60. I want to entrust the next leader to someone who has gone through the same hardships as the founding president.</span></p>
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<p> At the end of the interview, Chairman Nitori wrote on a piece of colored paper, &#8220;Senkaku kouri,&#8221; which means, &#8220;The customer comes first. This means, &#8220;The customer comes first. This is a phrase that Chairman Nitotori himself coined, meaning, &#8220;The customer comes first; if you satisfy the customer, profit will follow.</p>
<p><span class="strongInContent"> He also said, &#8220;If I tell you not to think only about money, you might say, &#8216;What about you? I have also donated the shares I own to a scholarship foundation. The best thing is for someone to be happy. It would be great if I could die completely empty in the end.</span></p>
<p> Mr. Nitori laughed off the situation in a hearty manner. Nitori, with its grand vision, has no hesitation. Nitori, with its grand vision, has no doubts that it will overcome these turbulent times with great strength.</p>
<figure id="attachment_392955" aria-describedby="caption-attachment-392955" style="width: 2500px" class="wp-caption alignnone"><a href="#" data-ident_hash="3b76835b"><img src="https://res.cloudinary.com/fridaydigital/image/private/t_article_image/wpmedia/2024/09/37ee406d67642119a1ec7be45ba5cb36.jpg" alt=""></a><figcaption id="caption-attachment-392955" class="wp-caption-text"> He laughed off the idea that it would be great if he could die completely empty at the end of his life.</figcaption></figure>
<p> Akio Nitori was born in Sakhalin in 1944. After graduating from Hokkai-Gakuen University with a degree in economics, he worked for an advertising company before founding Nitori Furniture Store in Sapporo in 1967. Changed the company name to Nitori Corporation in 1986.&#8217; In 2004, he was appointed Chairman and Representative Director of Nitori Holdings, Inc.&#8221; In February 2012, he returned to the position of president of Nitori, an operating company, for the first time in 10 years.</p>
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<p> From the October 11, 2024 issue of FRIDAY</p>


 Satoru Hirahara

 Hiroyuki Komatsu (Chairman Nitotori)

 Nitori HD's record of 33 consecutive terms of increased sales and profit since its listing has come to an end. The future of Nitori HD is uncertain due to the sharp depreciation of the yen and the wild fluctuation of the Nikkei Stock Average. Akio Nitori, the charismatic founder and chairman of Nitori HD, discusses his outlook for the future of Japan and how the company should move forward.

Akio Nitori, Chairman of Nitori HD, talks about “The dollar will eventually reach 110 yen – how will we work then?

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