Challenges and Opportunities for the Next Generation of Japanese Shipowners
In the heart of Imabari City, Ehime Prefecture, as December embraced the warmth of the day and freezing rain embraced the night, I delved into the realm of Japanese shipownership. The occasion was an evening meeting with a seasoned shipowner, emblematic of a generational shift in the industry.
The current stalwarts of Imabari’s shipping legacy, in their 70s and 80s, have steered the city to become Japan’s premier shipping hub. Their management approaches, distinct personalities, and adept negotiating skills have been the driving force behind this success. However, the challenge of passing down these qualities to the next generation, currently in their 40s and 50s, looms large.
A prevailing sentiment among the elder shipowners is that the younger generation is diligently learning and adapting. Contrary to the common perception that personal relationships and characteristics are challenging to inherit, the next generation is actively cultivating skills beyond character, focusing on English proficiency and an international mindset to compete on a global scale.
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One enthusiastic young shipowner from Imabari shared his perspective, highlighting the resilience of his generation in weathering economic challenges of the past. He emphasized the importance of emulating the pioneering spirit of the elder shipowners and acknowledged the need for international exposure through training abroad.
The landscape for Japanese shipowners has undergone a significant transformation. Moving away from the traditional era of long-term chartering by major Japanese companies, the majority of charterers are now overseas shipping companies. The challenge for the next generation lies in embracing a global perspective and navigating this changing environment.
The prospect of expanding into Singapore has been contemplated by many Japanese shipowners, although opinions on the opportune time vary. While some anticipate a profitable 2023 due to the yen’s depreciation against the dollar, the reality is nuanced. Medium to large shipowners with fully depreciated vessels are expected to benefit, while those employing a sale-and-leaseback model face challenges due to high U.S. dollar interest rates and reduced fixed charter rates.
The surge in newbuilding prices presents another hurdle, coupled with a reluctance to reduce loans for vessels still under repayment. A medium-sized shipowner expressed concerns about competing with foreign counterparts, citing differences in corporate tax implications, particularly with Japan’s special depreciation system for ships.
Despite these challenges, some mid-sized shipowners have reported increased charter revenues. Singapore’s tax system has become an attractive option for Japanese shipowners looking to maintain profits from ship sales. Several have established ship-owning companies in Singapore as local subsidiaries, finding solace in the favorable tax environment.
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However, caution prevails among the majority of Japanese shipowners. Concerns about transfer pricing taxation and the current market dynamics pose potential drawbacks to establishing ship-owning companies in Singapore. Some are seeking advice from trading companies, mindful of the sharp ascent in the dry cargo market and the high market prices of owned vessels. Several Japanese shipowners have established ship-owning companies in Singapore as local subsidiaries. However, the prevailing sentiment among the majority of Japanese shipowners is caution.
In the face of increasing competition with Greek shipowners and European shipping lines, there are calls for the expansion into Singapore and the creation of special economic zones in Imabari and Okinawa within shipowning clusters in western Japan. The Japanese shipping tax system, while frequently reiterated, may play a pivotal role in either mitigating or accelerating the “hollowing out” of Japanese shipowners.
As the next generation of Japanese shipowners strives to compete on a global stage, the journey involves not only preserving the rich legacy of their predecessors but also embracing innovation, internationalization, and strategic decision-making. The future of Japanese shipownership will undoubtedly be shaped by the ability of these emerging leaders to navigate the complexities of the global maritime industry.
