Every morning, I wake up in Tokyo, open my phone over coffee, and find another polite apology from a company I gave my address to four years ago: "Thank you for your continued patronage. It has come to light that our entire server of unencrypted driver’s license data was leaked… We deeply apologize for causing you tremendous inconvenience and anxiety. Please change your password and remain on the alert!!"

And I am definitely not alone…

Data breaches in Japan have become so routine that an online ranking - the 2026 Japanese Data Breach Tier List - is now going viral across the country:

The tier list has every publicly reported data leak and cyberattack in Japan this year, and has ranked them from SSS at the top down to D at the bottom.

Let me just say, it is worse than you could even imagine:

• 494 breaches tracked across Japan so far in 2026 (1 in SSS, 9 in SS, 132 in S, 145 in A, 191 in B, 14 in C, 2 in D)

• 250 disclosed in October alone, up from an average of 20 a month between January and July

• Around 64.36 million people exposed, more than half of Japan’s population

• Around 104.20 million accounts hit across telecoms, car-sharing, insurers, city halls, and fast-food apps

• 7.6 million passwords stored in plaintext inside a single telecom breach (KDDI - SSS tier ranked)

If you’ve been working in Japanese IT like me, this was horribly predictable.

Why Japanese IT is uniquely helpless

When you look at Japanese websites that still look like they haven’t been updated since 1998, it is easy to assume the country simply doesn't understand software. The truth is actually worse: Japan's digital infrastructure is the product of an incentive structure that has rotted from the inside for forty years.

Japanese boardrooms treat software like office plumbing. It is dirty work you outsource to a giant general contractor, who then squeezes a chain of underpaid plumbers while management ignores the pipes as long as the fax machine still works. Let me explain why this is a huge problem:

Five layers of subcontractors and zero engineers

Say a Japanese retailer needs a new loyalty app. Unlike their counterparts in tech-savvy markets like the US or Sweden, executives don’t hire an in-house engineering team. Instead, they hand ¥500 million to an System Integrator (SI) giant like NTT Data, Fujitsu, or NEC. The prime contractor skims 30% to produce some awful looking powerpoint slides, then delegates the actual work down a chain of second- and third-tier vendors, all the way down five layers of so-called tajuu shitauke (multi-tiered subcontracting).

In fact, roughly 72% of all IT engineers in Japan work inside external IT vendors rather than regular companies (Information-technology Promotion Agency (IPA)), against roughly 35% in the United States.

At the bottom of that chain sits a burned-out 24-year-old making $23,000 a year. Working off a beat-up $200 laptop from his shitty staffing firm, he takes the fastest shortcut possible by hardcoding the master API key into the app, leaves the database wide open, and moves on to his next gig. Nobody in the chain ever looks at the code.

Because these subcontractors serve so many companies, hackers only need to breach a handful of them to access massive amounts of sensitive data.

For example, when the platform Commune got breached in early October, 20 separate companies were compromised, from LINE, Yahoo, Sansan, and Mazda to Calbee’s potato-chip fan club and or the cat fan-community “Cat Wall Plaza” (猫壁ひろば).

Even more scary, when emergency-alert vendor Arcadia got hit on October 13, disaster and tsunami warning emails stopped working across Hakodate, Shimonoseki, Okayama, Yokosuka, Fukui, and Oita, alongside NET119 (the emergency 119 text system for deaf citizens) and police roll-call systems covering 13,000 officers in Saitama.

On October, 20 hacks a month suddenly turned into 250

From January through July, the tier list logged about 20 incidents a month. August ticked up to 36, and September hit 68.

Then October arrived.

In the first 25 days of October alone, 250 breaches hit the board. More than half of the entire year’s list happened in the last three and a half weeks.

Why did all of these apps break in the exact same month?

On October 21, Japan’s computer emergency response team (JPCERT/CC) abd Asahi Shimbun released a report detailing what investigators found on the servers behind the attacks. The hackers were using Anthropic’s Claude Code, CyberStrikeAI, and ARTEX - a Chinese multi-agent tool released in July that hunts down software flaws automatically.

To make matters worse, most of these 250 hacks didn’t happen in October. JPCERT/CC just uncovered them then, triggering a classic Japanese PR stampede where companies rush to dump their bad news in the same week to hide in the crowd. Your personal data was likely sitting on the dark web for months before you got that polite October apology email. Unlike in Europe, where hiding a breach triggers massive GDPR fines, dragging your feet in Japan carries almost zero consequences.

The Tier-List of Shame:

When you combine autonomous AI hacking tools with forty years of neglected office plumbing, you get the 2026 Japanese Data Breach Tier List. Here are the standout inductees from top to bottom:

SSS Tier: KDDI with 7.6 million passwords in a text file

Only one company on the entire board earned the “prestigious” SSS rank.

Between May and June, hackers broke into KDDI’s email platform for internet service providers through an unpatched flaw in third-party software. They walked out with 12,231,954 email addresses. Inside that haul sat 7,616,173 passwords stored in PLAINTEXT.

Why on God’s green Earth would KDDI store plaintext passwords?!

KDDI admitted why in its own press release: It didn’t want to inconvenience customers who still use “old email software” that couldn’t handle encrypted authentication. Rather than force grandpa to update his 2003 email client, KDDI left 7.6 million passwords sitting in a plain text file.

SS Tier: When a hack stops the beer trucks

While I luckily don’t do business with KDDI, the SS Tier hit me personally.

Like most Tokyoites, I don’t own a car. Whenever I need to drive, I rent a Times Car from the nearest parking lot. To sign up, you have to upload a photo of your driver’s license into their app. And expectedly, on September 29, Times Mobility admitted that hackers stole 6.6 million member records and shipped 1.5 million encrypted driver’s license images to an outside server. Their apology for losing my driver’s license? A ¥3,000 gift voucher for “special” customers.

Right next to Times Car sits Asahi Group, Japan’s largest brewer. An attacker slipped in through network equipment at a group site, exploited a password weakness to grab administrator rights, and detonated ransomware across Asahi’s Japanese servers. Asahi had to process orders and ship Super Dry by hand for more than two months! It couldn’t even close its books on time, filing a formal Material Weakness in internal controls after admitting its access-rights rules weren’t actually enforced.

Joining them on October 7 was SoftBank subsidiary IDC Frontier, which took a ransomware hit that knocked out cloud services for 495 companies and local governments in a single afternoon - freezing everything from Nissui’s 17 fish-shipping hubs to course registration at Cyber University (yes, a place literally named Cyber University got hacked).

S +Tier: GMO gets fact-checked by its own hackers

If KDDI won the prize for password stupidity, internet giant GMO Internet Group takes the crown for the most embarrassing PR backfire of 2026.

On October 21, GMO’s Onamae.com Desktop Cloud (a virtual server service heavily used by FX traders) landed in S Tier after hackers hijacked 27,000 virtual private servers (VPS), forcing GMO to pull the plug on the entire service and offer ¥5,000 apology payouts.

On October 25, GMO founder and CEO Masatoshi Kumagai published a dramatic statement revealing that the hackers had demanded ¥7.9 billion ($50 million) in ransom. He then went on to blame the breach on “the explosive evolution and malicious abuse of AI technology” and called on the Japanese government to pass emergency national cyber-defense laws.

There was just one problem: The hackers decided to reply to his statement.

Here is the translated highlight reel from the hackers’ official rebuttal:

How did we breach all 27,000 VPS servers? “Every single server was connected together through a single Windows update server. Even worse, that critical server could be accessed using the exact same admin account (dc\ops) used for regular VPS management. It is a textbook rookie mistake.”

How long does it take to fix the vulnerability? “Simple. Just delete one line of text from the RDP file and type a single command (net localgroup administrators ops /delete). It won’t even affect your live service.”

Did this have anything to do with ‘the explosive evolution and abuse of AI’? “Everything above is an elementary mistake that even a beginner engineer would notice. It has zero to do with AI. Why he felt the need to use such grandiose phrasing is beyond our comprehension.”

Think about how retarded this situation is. A self-proclaimed cybersecurity expert leaves their master key in the open for 27,000 servers. The CEO then tries to tell investors that ultra-sophisticated AI attacked them, but end up getting publicly lectured on basic IT hygiene by the criminals currently extorting them…

That’s Japan’s IT-security landscape in a nutshell!

S & A Tier: No app is safe!

This tier might actually be the most interesting because most of Japan uses these apps every week:

• Sourcenext (Oct 15 - 22,519,960 records): Exposed over 22.5 million customer records through a flawed member API. Sourcenext is famous across Japan for selling its antivirus software named “Zero Super Security”. Fitting name, if you ask me. 🥁

• Capcom (Oct 22 - 11,774,247 records) & Burger King Japan (Oct 15 - 11,180,000 records): Over 22 million gamers and Whopper fans exposed in a single week, right alongside Yakiniku King (Oct 5 - 10,790,000 barbecue app members).

• Furusato Choice (Oct 19 - 4,454,097 records): Japan’s biggest hometown-tax donation portal got cleaned out, which means whoever took that database now knows exactly how much Kumamoto horse meat I ordered for my tax deduction last December 🐴

• BookOff Group (Oct 9 - 6,383,279 records): Leaked over 6.3 million second-hand bookstore members, including 212,371 people who had already canceled their accounts.

That last one annoys the hell out of me. Why did BookOff still have the data of 212,371 people who had already deleted their accounts?! Because Japanese databases treat “delete” as flipping a status flag from 1 to 0 and keeping your home address until the sun burns out, knowing there are almost zero consequences for hoarding data.

“Send us a fax if you get hacked”

While digging into the October 21 breach report from Japan’s top national cybersecurity agency JPCERT/CC, I noticed a detail that is both deeply worrisome but oh so Japanese.

Scroll down to the very last line at the bottom of their homepage where the agency leaves its contact information:

JPCERT/CC, 8F Tozan Bldg, Nihonbashi-Honcho, Tokyo. FAX: +81-3-6271-8908.

You see, while hackers have autonomous AI agents that sucks out all your sensitive data while you sleep, the guys defending Japan’s internet are ready to take your report by fax… 📠

Sources:

Data from the 2026 Information Leak and Unauthorized Access Tier List (Sekayasa AI Blog, as of 25 to 26 October 2026), JPCERT/CC’s October 2026 alerts and attack-server investigation, KDDI’s July 2026 incident report, Asahi Group Holdings’ July 2026 internal control filing, and reporting from The Asahi Shimbun and Nikkei Asia.

I love the Swedish podcast Kvalitetsaktiepodden. It is a deep-value podcast that never ever ever stray from their mission to only buy undervalued equities with incredible growth, sturdy balance sheets and products you understand!

I copied their magical stock screener formula (ROE over 15%, an EBIT margin above 10%, consistent multi-year growth, and Net Debt/EBITDA below 2.5, sorting the qualifiers by their combined rank of highest Return on Capital and lowest EV/EBIT), and the company that came out on top was Mizuho Medy.

Mizuho Medy is a test kit maker from Tosu in tiny Saga Prefecture with around 196 employees. And no, there are no connection to any other companies named Mizuho, e.g. one of Japan’s largest banks.

Why is the stock so cheap despite incredible growth you may ask? Because during the Covid pandemic, the company made a fortune selling overpriced Covid test kits. After the pandemic, shareholders retreated, thinking the good times were over. Since it is a small-cap stock, it likely just got forgotten, despite selling record amounts of kits every year since!

Executive Summary

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Last month, hackers broke into Times Car (subsidiary of Park 24(4666)), Japan’s largest car-sharing app, and stole 6.6 million user accounts. Inside the data they stole, there were 1.6 million high-resolution photos of Japanese driver’s licenses, utility bills, and student IDs 🪪!

Because Times Car requires a photo of your license when you sign up, my full legal identity is now sitting on a criminal server.

Today, along with over 80,000 other residents of Japan, I am joining the class action lawsuit against them.

Hacked because their software expired… 10-years ago!

When parent company Park24 announced the breach on September 28, they offered the standard Japanese corpo apology: A deep bow and zero technical details.

Luckily, they didn’t exactly hide the evidence. From any browser, you could just press view source code and find the most blatantly crappy and outdated library of tech:

1. Seasar2 and Teeda (teedaExtension): Times Car built its web system on Teeda, a domestic Java framework tied to Seasar2. The creator of Seasar2 officially declared End of Life (EOL) on September 26, 2016, meaning it has received zero security patches for a decade.

2. jQuery 1.2.6: Their login system was loading a version of jQuery released in May 2008, before the iPhone 3G existed.

   

Fun(?) fact: Seasar2 reached End of Life on September 26, 2016 and the hack happened September 26, 2026, the exact day on the 10-year anniversary of their framework’s death 🎂

Why did Times Car keep your driver’s license even after you quit?

Even on an unpatched server from 2008, a hacker cannot just steal 1.6 million driver’s license photos. Unless… those photos are still sitting unencrypted on the disk.

The breach hit current drivers, former members who canceled their accounts up to 7 years ago, and even people who quit the signup form halfway through! In Question 8 of their breach FAQ, Times Car gave their excuse for keeping deleted users’ ID photos for 7 years:

“Regarding driver’s license information and images, we retain them for 7 years to prevent identity theft (なりすまし対策) and to handle customer inquiries.”

What scammers do with your leaked driver’s license

Most data breaches expose an email address and a hashed password. Times Car leaked the master key to the Japanese financial system:

1. Full legal name and date of birth

2. Current residential address, phone number, and email

3. High-resolution images of the front and back of your driver’s license

4. Proof-of-address documents (utility bills, student IDs, family records)

With a driver’s license photo and a utility bill, organized crime groups (トクリュウ) can attack you on three fronts:

1. Consumer finance loans (サラ金) and credit cards in your name: Japan will not mandate NFC IC-chip scans for online banking verification until April 2027. Right now, plenty of non-bank lenders, BNPL services, and financial platforms still verify identity using photo uploads and an AI selfie check (eKYC). As cybersecurity researchers warned in the Asahi Shimbun this month, scammers feed leaked license photos into deepfake face-swap software to bypass automated eKYC cameras in minutes.

2. SIM swapping and burner phones: Criminals use leaked IDs and utility bills to open eSIMs or data lines under your legal name for fraud mules.

3. “Fake Police” extortion: Scammers spoofing Prefectural Police phone numbers can now read your real driver’s license number and address back to you on the phone to “prove” you are a suspect in for example a money-laundering case, and you need to hand out your bank details to “prove” your innocence…

   

Japan’s corporate playbook: Never upgrade, never pay

Faced with ruining the personal security of 1.6 million drivers, Park24 went straight to the classic Japanese corporate cover-up playbook:

1. Make victims pay for their own replacement licenses: Several Prefectural Police departments are allowing Times Car victims to reissue their driver’s licenses with a new final digit (末尾番号の繰り上げ). When asked if Park24 would cover the police fee (around ¥2,500 to ¥3,500), the company told reporters that reissuing a license is “each customer’s personal decision” and told victims to pay out of pocket.

2. Tell victims to download a free phone app: Instead of providing free credit monitoring or identity-theft insurance, Question 10 of Park24’s FAQ tells victims to go download a free spam-call blocker app from NTT Townpage.

3. Stall until the outrage dies down: Park24 promised forensic results and a response policy within two weeks of September 29, then waited until the news cycle cooled off to push the announcement back to October 23.

Every traditional Japanese company shares the exact same dream: To never change anything, ever.

They keep running mission-critical databases on decrepit 2008 software because upgrading costs money, forces middle management to take responsibility for a migration, and disrupts the sacred ritual of doing things the way their superiors did them 30 years ago.

For 20 years, the penalty for leaking millions of citizens’ records in Japan has been a press-conference bow and a ¥500 Quocard. As long as getting hacked costs ¥500 per user and modernizing servers costs ¥5 billion, corporate Japan will happily hand your driver’s license to hackers every single time.

It is time to make negligence expensive:

How to join the lawsuit in 30 seconds

If you have ever used Times Car, even if you canceled 6 years ago, you can join the joint damages lawsuit organized by Tokyo attorney Yuki Makino (牧野法律事務所). Past Japanese court precedents for sensitive personal data leaks have awarded between ¥3,000 and ¥30,000+ per plaintiff, and over 80,000 victims have already registered.

Step 1: Register on the lawsuit prep site (¥0 upfront)

1. Go to timescar-lawsuit.com.

2. Select 会員 (Current Member) or 退会済 (Former Member).

3. Enter your full name (氏名), furigana (フリガナ), email, and check the box if you received the license-leak notice.

4. In the optional details box (具体的な状況), you can leave it blank or briefly note any spam texts you’ve received and whether you are filing with CIC/JICC (for example: 9月下旬の漏えい公表前後から、身に覚えのない不審なメールやSMSが届くようになった。なりすまし被害を防ぐため、信用情報機関（CIC・JICC）への本人申告および運転免許証の再交付手続きも進める予定。).

5. Check the privacy consent box and click 無料登録する. Registration is free and non-binding until you review and sign the formal retainer terms (委任契約書) sent out later.

Step 2: Save your evidence (and avoid the waiver trap)

1. Save all Times Car emails as PDFs, especially the initial breach notice (「不正アクセスによる個人情報漏えいに関するお詫びとお知らせ」) and the ID leak notice (「不正アクセスによる本人確認書類情報を含む個人情報の漏えいに関するお詫びとご報告」).

2. If you already quit Times Car and got no email: Request confirmation via their former-member inquiry form and save their reply.

3. Do NOT sign a liability waiver for a coupon: If Park24 offers apology points or gift vouchers, do not click agree on any clause stating “I confirm there are no further claims or obligations regarding this matter” (本件に関して、この補償のほかに債権債務がないことを確認する). Accepting a waiver forfeits your right to sue.

Step 3: Lock your credit file (本人申告) and keep the receipts

Filing a Self-Declaration (本人申告) flags your credit file for 5 years so banks and consumer loan companies know your ID was leaked in the Times Car hack, forcing strict verification on any loan application in your name:

1. CIC (Credit Cards): File online at cic.co.jp/mydata/declare (¥500).

2. JICC (Consumer Finance): File via the JICC Smartphone App (¥1,000).

3. Save the receipts and confirmation emails! Makino Law Office is preparing to claim these filing fees and driver’s license re-issuance fees as out-of-pocket damages (実損) in the lawsuit.

Japanese companies will stop running 2008 software on the day that getting hacked costs more than upgrading their servers. Let’s help them!

Every time Japan’s population crisis trends on X, a weirdly passionate genre of online coping goes viral. It always goes something like this: Someone posts a horrifying chart of Japan’s birth rate falling off a cliff, and just like clockwork, an army of Silicon Valley tech-bros and Western anti-immigration Weeaboos rushes into the replies to insist that “everything is actually totally fine, because AI robots will replace most workers anyways”

This is the ultimate get-out-of-jail-free card. The idea that humanoid robots will harvest the rice, change the adult diapers, deliver the packages, and wipe down the hospital beds while Japan safely declines into a cozy, automation-powered utopia. No need for immigrants, no need for hard policy choices, just lean back and let the machines do the heavy lifting.

And it isn’t just anonymous blue-checks pushing this cope. METI (Japan’s Ministry of Economics) preaches it. Keidanren (Japan’s business federation) lobbies for it. Every major editorial seems to repeat it these days.

I mean, I’m not naive, I get the logic.

In two years, AI went from getting 1+2 wrong to writing better code than most senior software engineers. If it can replace a programmer, why not a factory worker, nurse or a teacher?

The real world isn’t a database

I am certain software is the easiest job AI will ever get. Strip away the sci-fi marketing, and modern AI is essentially a colossal, probabilistic database. AI thrives in software because code is structured, can be tested before it ships, and when something breaks, you just hit undo. So if your economy is built on software developers, AI will happily replace them.

Japan however, isn’t a software country. If anything, it’s the opposite. It ran a ¥6.7 trillion digital deficit last year, renting cloud services, digital ads and operating systems from America. Japan’s shortage has never been programmers. It’s hands.

And I can already hear you think “Ok, but AI will replace manual labor too, with robots! Japan is just a bit behind in implementation.”

To answer your hypothetical thoughts, yes, Japan is behind in AI, but definitely not in robotics! In fact, the country builds 38% of the world’s industrial robots.

A factory is the closest the physical world gets to what AI is good at. Everything is structured and clean - just like a database. But the thing is, long before the recent AI boom, modern factory floors were already ruthlessly efficient and largely devoid of humans. Sure, AI robots might take the few jobs that are left, but that’s hardly enough to make a difference in Japan’s massive labor shortage.

You know what isn’t structured like a factory? A grandma’s apartment. Neither is a rice paddy after rain, or a three-story walk-up with a fridge on your back. Every task is different, everything is fragile, and nothing comes with an undo button.

Language AI grew capable so fast because we handed it an endless digital library - the internet. But you can't read your way into physical touch. Memorizing a million cookbooks will never teach you the exact micro-pressure needed to peel a peach without turning it into pulp, or to wash a wine glass without snapping the stem.

A person that definitely agrees with me is Ken Goldberg, one of UC Berkeley’s top roboticists. He has pointed out that modern LLMs already ingested 100,000 human-years of text thanks almost exclusively to the internet. All the while, the biggest robotic movement dataset represents barely a single year of physical trial and error. He doesn’t expect general-purpose robots in the next two, five, or even ten years.

Don’t believe him? Just look at the most advanced robots today that are not just a tech demo: The 1X NEO.

It costs $20,000. Then, to actually use it you need “Expert Mode“: A 1X employee puts on a headset and pilots it remotely...

And sure, AI will help robotics get better faster, but nowhere near the pace of AI in the digital world.

Try automating a nursery

Just for one second, think about the jobs people are claiming AI robots will replace.

Picture a room at a Japanese nursery.

It’s nap time, and according to Japan’s inspector guidelines, staff shall check each sleeping baby every five minutes, touching them to confirm breathing, color, position and temperature.

Then the babies wake up, all at once because one baby starts crying… Now they all need changing, feeding, comforting, and of course, lots of love. One has a fever. One threw her pumpkin on the floor. All of a sudden the earthquake alarm goes! Now, you have to get all babies into an evacuation cart, in under a minute!

If nurseries could find any viable substitute for human staff, they would jump at it in a heartbeat. This year alone, there are 2.54 openings for every nursery job-seeker nationally, and an absurdly high 3.61 roles for every applicant in Tokyo.

And trust me, Japan is trying to substitute people! In fact, the country already ran an experiment to replace human workers with robots on the other end of the demographic spectrum: Eldercare. After pouring billions of yen into eldercare robots over a decade, the payoff was basically zero.

In 2023, anthropologist James Wright spent months inside a facility that deployed three of them, and released a book on his findings literally called Robots Won’t Save Japan.

The staff spent their shifts booting them up, sanitizing them, babysitting their movements, and packing them away, all while still having to do most of the care work. Instead of replacing human hands, the machines ended up shoved into storage closets while workers went back to manual care.

Japan is quietly choosing reality

The ultimate irony is that Western commentators hold Japan up as this no-immigration model. Elon Musk just replied “Good” to a video of an anti-immigration rally in Osaka. Australian senator Pauline Hanson holds Japan up in Australia as a model “monoculture”.

But looking at the numbers, Japan’s own government gave up on that fantasy years ago.

The latest story that set of a twitter storm on Japan being anti-immigration was a Telegraph story on the country’s population decline:

What the Telegraph article conveniently left out is that in January this year, the very same government that’s so “hostile” towards immigration, approved the biggest foreign worker intake in Japan’s history: Up to 1,231,900 workers through fiscal 2028, across 19 sectors from care homes to logistics warehouses.

Foreign residents hit 4.13 million at the end of 2025, up 9.5% in a single year. Foreign workers hit a record 2.57 million.

Japan’s leaders are doing it because despite many of them being staunchly anti-immigrant, they can read demographic charts. The biggest window dresser of all, Takaichi, is obsessed with appearing like a true Nationalist by “laying out a comprehensive strategy to fix the population crisis without immigrants”.

I mean, she can say whatever she likes, but the immigration quotas are only moving one way: Up!

My prediction

These are nothing more than my own predictions, so take them with a big grain of salt. With that said, I am certain I am right:

Japan will not stop shrinking in my lifetime. Not under Takaichi, not under whoever comes next, and not with any magical baby-making scheme yet to be invented.

Japanese births will drop below 600,000 by 2031 and foreign residents will pass 5 million before the decade is out. Every government, whatever it says on TV, will keep raising the worker quotas. And no AI robot will be trusted alone in a Japanese baby room for many many years.

I think the fight that actually matters is whether the people coming in get to stay, bring their families and become Japanese. Right now Japan is making that harder, at the exact moment it needs them most.

I have a US colleague, let’s call him David, who is really really good at arbitrage investing. Lately he has been obsessed with buying public company spinoffs at the dip and sell them when they reach their fair value.

A couple of days ago, he sent me this:

David’s pitch is basically this: When a big company spins off a division, the new shares cannot be picked up by many of the major shareholders. Index funds have to sell them as the spinoff is usually too small for a major index, insiders sell to avoid conflict of interest and a lot of active funds have a different orientation than the spinoff, forcing them to sell too. Basically, almost nobody sell their spinoff shares because the business is bad, but because of arbitrary rules.

And so far, David strategy works. In 15 years, the S&P Spin-off index has risen over 7x in 15 years, far better than the S&P 500.

So I had to ask the obvious question:

Does the spin-off strategy work in Japan?

First off, it’s important to acknowledge just how few spin-offs Japanese companies have had compared to the US.

Why?

You see, until 2017, spinoffs in Japan was taxed just like a corporate sale for the company and its shareholders, meaning it was taxed as pure profit. However, since 2017, reforms have been made to tax them basically the same as in the US, and spin-offs have picked up modestly.

Between 2017 and 2026, exactly five tax-free spinoffs made it to the Tokyo Stock Exchange:

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To read the full article, click here:

During Japan’s never ending rainy season (longest consecutive rain in Tokyo history of 34 days as we speak), I spent a lot of time talking about Japanese stocks with Swedish investors, the deep value kind who treat Warren Buffett like a god and listen to value investing podcasts (like my favorite: Kvalitetsaktiepodden (KAP)) the way other people listen to true crime.

When I sent around my screener of 127 of Japan’s deepest value stocks right now, there was one name everyone came back to.

That my friends, is Fukui Computer, a CAD software company from Fukui Prefecture that almost nobody outside the Japanese construction industry has heard of, and to be honest most people in Tokyo haven’t either.

The reason my Swedish investor friends got interested in this are the incredible numbers (which I’ll get back to later), but the timing is what makes this company interesting right now. If you remember, in February the so-called SaaSpocalypse knocked something like $1 trillion off software stocks in a single week because the market decided AI agents are going to eat every piece of subscription software on the planet, and Tokyo joined in on February 4 with Sansan down 14% and the accounting software firm Freee down 13% in one session. So you have a market that hates software, and then you have a Japanese software company that makes 43.6% operating margins selling the programs builders and surveyors need to get their drawings accepted by the government. That’s a perfect storm!

Executive Summary

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On February 8 this year, Japan’s Liberal Democratic Party (LDP) secured the largest victory in postwar history, capturing a two-thirds supermajority. The victory was so overwhelming that the party ran out of candidates, abandoning 14 seats to the opposition.

What’s even wilder is that just 18 months before, a massive slush-fund corruption scandal had forced two consecutive LDP prime ministers to resign. And in the last election, the party lost its grip on both houses of parliament. In simple terms, the LDP was more hated than any other time in modern history.

Turning a catastrophic political collapse into the biggest victory in postwar history wasn’t because the LDP did some crazy 4D chess moves. It happened because the opposition is so hopelessly incompetent that Japan remains, in all but name, a one-party state…

In fact, since it was formed in 1955, the LDP has spent less than five years out of power.

Parties in countries like China has held uninterrupted power using censorship, prisons, and outlawing rivals. Japan has achieved the same political monopoly under democratic freedom, with a free press, publicly funded opponents, and clean elections.

How are they doing it?

1955: How A Democracy Became a One-Party State

How does an open democracy where anyone can run for office become a permanent one-party state?

To answer that, I picked up constitutional historian Mitsuru Kurayama’s “A Historical Examination: Why Japan’s Opposition Is Hopeless”, which is where much of the facts in this article comes from.

His argument starts from a definition:

“By definition, a political party exists to seize power. […] Yet Japan’s opposition lacks even the appetite to lead, remaining perpetually inept across its entire history.”

However, this wasn’t always the case.

Back in 1955, the main opposition, the Japan Socialist Party (JSP) was guaranteed to win. Riding on an anti-war and anti-poverty platform, they scared the US and Japanese business elites so badly that Japan’s conservative parties, despite having almost nothing in common, merged to create the LDP, which overnight became Japan’s biggest party. The US even pumped covert money into conservative pockets to sustain this unnatural alliance (The New York Times, 1994).

From then on, instead of fighting to retake power, JSP’s goal turned into a fake war to protect Japan’s anti-war constitution. Changing the constitution takes a two-thirds majority, which meant the socialists only needed 34% of parliament to block the LDP.

This was the ultimate cushy gig. JSP could play the heroic defenders of peace forever, receive guaranteed government payouts, without ever taking on the responsibility of ruling.

The JSP spent the next 34 years aiming at 34%…

1989: The Day the Opposition Woke Up

On July 23, 1989, the Japanese left woke up.

Takako Doi’s JSP faced a severely mismanaged LDP, with top members newly being bribed with pre-IPO Recruit shares (now owner of Indeed and Glassdoor). To make matters worse, the LDP was in the midst of forcing through Japan's first, wildly unpopular 3% sales tax.

Voters revolted, and the LDP got its worst result ever.

The JSP was still far from a governing majority, but Doi had managed to convince voters that they were a real alternative. She cemented her victory with three words every Japanese person over fifty can still quote: “The mountain moved” (山が動いた).

The mountain had indeed moved, but the ground beneath them was about to collapse…

Within months of her victory, the biggest bubble in Japanese history burst, starting the “lost decades”. This economic collapse broke the LDP’s 38-year monopoly on power and Doi became Speaker of the House in 1993.

However, the new coalition was so crippled by infighting that in just one year, her party cut a desperate deal with the LDP where Tomiichi Murayama was installed as prime minister. As soon as Murayama came to power, he abandoned every position the JSP had fought for: He formally recognized the Japanese military structure that his supporters considered illegal and backed the US-Japan security pact they had protested for generations.

Now effectively a diluted copy of the LDP, the JSP collapsed in slow motion. By June 1994, the LDP had taken back power, just 11 months after the JSP had won, and in 2003, Takako Doi even lost her own district.

2009: The Opposition Strikes Back

At this point, the old socialist JSP was basically dead. However, something far more dangerous rose out of the ashes: The Democratic Party of Japan (DPJ). This was a coalition mixing former socialists with moderate reformers. Most importantly, they brought in Ichirō Ozawa, a ruthless former LDP kingmaker who knew every dirty trick in the ruling party’s playbook.

They quickly managed to gain momentum by attacking LDP over stagnant wages, rising inequality, and the 2007 scandal where the government had lost 50 million pension records. Meanwhile, Ozawa built up ground operations to fight the LDP in rural areas, transforming the DPJ from a protest party into a genuine government-in-waiting.

However, in May 2009, just three months before the election, Ozawa was forced to resign over a 36-million-yen fundraising scandal. Party co-founder Yukio Hatoyama won the emergency vote to replace him and miraculously managed to recover the party’s momentum by pinching himself as an uncorrupted fresh start. In the August election, the DPJ took 308 of 480 seats, and became the first opposition party in Japan’s democratic history to win an outright majority.

I remember seeing the victory on TV as a sign that Japan had changed; that we could finally throw the corrupt politicians out and get something better.

I should have known better…

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Read the full article here:

Listen, Japan is amazing. It’s the land of the rising sun, unparalleled service, and convenience stores that will ruin your life back home. But contrary to your gaijin beliefs, not every city is a neon-soaked cyberpunk dreamland. Some cities are just concrete, car centric hellscapes peppered with pachinko parlors and chain restaurants…

So, channel your i…

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Every morning, my aunt in Kumamoto sends me a Facebook Reel. Sometimes it’s cute animals, but more and more, it’s things like a foreigner doing something rude on a train, a shop sign in a language she can’t read, a tourist climbing something she definitely shouldn’t. You get the theme.

No shade to my cute aunt, but she’s 71, and never had a problem with …

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Disclaimer: This content is for informational purposes only, not investment advice. I may own equities mentioned in this article. Investing involves risk, so always do your own research before buying or selling any securities. I own the Yomiuri 333 index via SBI's tracking fund, taking advantage of its 0.132% fee.

If you hold a Japanese index fund, there…

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Kyushu is as “real Japan” as it gets! The nature here is something else. The food, I’d put it above any…

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A note on the format: I recorded myself and then transcribed it and cleaned up the formatting. So it reads a lot more like I actually talk than my usual written pieces do. However, all figures and facts are based on Hitachi’s disclosed documents and have been rigorously verified as always. Tell me in the comments whether you like this format better than the normal one!

After last week's Okinawa Cellular Telephone analysis, I've really taken a liking to Katsenelson’s Absolute P/E. To fully test it out, I needed a worthy Japanese company.

Hitachi is the obvious choice!

It is the best turnaround this country has produced in my lifetime, and it happens to sell the electrical infrastructure of the entire AI buildout.

They just reported their Q1 this Tuesday, raised guidance and the stock popped 3.8%.

So now, how do I view this company after a brilliant report and ultra positive management?

Executive Summary

KonichiValue Score for Hitachi Ltd. (6501): Sell | Last: 5,146 JPY | Mkt Cap: 23.1 Trillion JPY

• Trailing P/E: 29.1x

• Forward P/E: 25.6x

• Absolute Fair Value P/E: 16.5x

• Base-case Fair Value: 3,323 JPY

• Weighted Fair Value: 3,444 JPY

• Normalized EPS: 201 JPY (management’s own number)

• Dividend Yield: 1.07%

• Net debt to equity: 15.4%

Why I am writing this:

This is an amazing company with incredible moats.

However, the stock is trading 8% above my bull case, not my base case, my bull case! And my bull case already assumes a decade long global infrastructure boom.

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Duskin is the weirdest company I’ve seen in a long time. The name is a mashup of the English “Dust” and the Japanese word for cleaning cloth, “zokin,” which tells you everything about where this company started, and yet nothing why its biggest business is Japan’s most beloved donut chain.

A company that prides themselves of renting out chemical floor mops and while Pon de Ring donuts (my favorite donut in the whole world by the way) under one ticker genuinely broke my brain.

So I did what I always do: I ran the numbers to see whether this weird concuction is a buying opportunity or a value trap.

Executive Summary

KonichiValue Score for Duskin Co. Ltd. (4665.T): Sell | Last: 4,478 JPY | Mkt Cap: 214.67 Billion JPY

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I finally got around to reading the book Active Value Investing by the other day. The man is one of the greats, and I have learned more about pinning down a company's intrinsic value from him than from Warren Buffett himself.

Okinawa Cellular Telephone popped up on my quantitative screener last week with metrics that immediately reminded me of his brilliant thesis on Charter Communications (CHTR). I listened to an interview where he raved about Charter because it operated as a localized broadband monopoly that generated absurd, predictable cash flow while relentlessly cannibalizing its own share count to force per-share value higher.

Okinawa Cellular runs this exact same localized monopoly playbook in Japan, but they pair it with a pristine, unlevered balance sheet instead of the terrifying debt loads typically found in American cable companies. I had to dig deep into the valuation math to see if he, and I, would actually love this stock today.

Executive Summary

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Kioxia Holdings (285A.T): Hold | Last: ¥71,870 | Mkt Cap: ¥39.45T (US$242.6B)

In 1987, Dr. Fujio Masuoka filed a patent at Toshiba for something the world was not ready for. It was NAND flash memory, the foundation underneath every smartphone, every SSD, and every AI data center on the planet. Toshiba took the credit, paid him less than a million dollars for the patents, and then spent the next three decades systematically running the parent company into the ground:

That orphan is now Kioxia Holdings (285A.T). The stock climbed 6,500% from its IPO, ripped to ¥112,700, briefly overtook Toyota as Japan’s most valuable company! Right after, the stock dropped 36% in weeks. The dip is either the buy of a decade or the top of a cycle.

The market is hurling billions a quarter at software and AI startups with no FCF, while the industrial monopolies actually building the AI boom trade like regulated utilities.

Kioxia is the cleanest pure-play on that gap.

Executive Summary

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It’s as if Toshiba angered the Greek gods and caught a reverse Midas touch…Instead of gold, everything they touched turned to ash. They championed HD DVD right as the entire planet switched to Blu-ray. Then they paid an insanely criticized premium to buy the US nuclear firm Westinghouse in 2006, betting their entire fortunes on a global nuclear renaissa…

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