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The Honolulu Advertiser
Posted on: Sunday, June 17, 2001

Crime a boon to Japan's security industry

Bloomberg News Service

TOKYO — Yoshie Mizuochi is afraid to be alone in her Tokyo apartment. A month after the 24-year-old computer programmer moved in, burglars stole cash. Soon after that, someone took underwear from her balcony clothesline.

"Criminals are lurking around, watching over apartments to work out our daily routine," said Mizuochi, who also had her purse stolen on a train. She has persuaded her landlord to put in better locks.

In a nation long known for its low crime rate, Japanese have been jarred by a 34 percent jump in felonies in the late 1990s. The latest example: the stabbing deaths of eight schoolchildren in an Osaka suburb this month. The increase is stoking demand for locks, security systems and other crime-fighting products, opening a largely untapped market of 126 million consumers.

"People are only beginning to become aware of just how dangerous Japan is," said Kazuhiko Udagawa, a sales manager with Kagi No Kyu Kyu Sha Ltd., which franchises stores selling locks, alarms and other security products.

For Kagi No Kyu Kyu Sha and companies such as security- systems maker Secom Co. and Miwa Lock Co., Japan's newfound crime- consciousness presents an opportunity. Lock makers have backlogs as long as six months as they scramble to keep up with orders.

Japanese sales of security systems rose an estimated 9.4 percent, to $3.4 billion, in the 12 months ending March 31, according to a national trade group, even as other industries were pinched by an economic slowdown. Only 1 percent of homes in the world's second-largest economy are hooked up to such systems.

Once considered a concern mainly for businesses touched by "yakuza," the Japanese mafia, crime is now affecting every-day consumers.

Japan's number of reported rapes, robberies and other felonies rose to 9,087 in 1999 from 6,768 in 1995, according to the latest National Police Agency figures. The biggest increase has been in stalking complaints, which rose to 11,500 in the first six months of 2000 from 8,021 in all of 1999.

"In the past, we didn't have to worry about crime," said Masae Ogino, a researcher at Tokyo's Ochanomizu University. "Nowadays, it's scary because it's all around us."

Ogino, rattled by a burglary at her neighbor's apartment and by a man who once chased her home, bought a Secom security system when she and her husband purchased a house.

"People who own houses and flats are buying high-security products, and that's new," said Heribert Alleman, chief operating officer with Switzerland's Kaba Holding AG, a maker of locks and alarms.

Kaba's Japanese sales will double over the next two to three years, to about $39.1 million, Alleman said. "Twenty years ago, people had their rice-paper doors, and they didn't need locks," he said.

Lock sellers are benefiting because an estimated 70 percent of locks sold by industry leader Miwa Lock can be picked within 30 seconds, according to Miwa.

Tokyo-based Miwa last fall saw monthly orders for replacement locks double, to about 1 million, said company spokesman Noriyuki Koshino said. The closely held company currently controls about 50 percent of Japan's lock market.

Kagi No Kyu Kyu Sha has increased its number of franchises in the Tokyo area, the world's largest metropolis, to 25 from 15 over the past 6 months. Based in southern Japan's Kita Kyushu, the chain plans to expand to 500 stores in the next four years from its current 130.

Tokyo-based Secom has a commanding position in the security systems market, with a nationwide share of more than 60 percent. The company's network of centers where operators monitor customers' alarms and dispatch guards is already built across Japan, so most new revenue becomes profit, said Ken Uryu, a Merrill Lynch Japan Inc. analyst.

The costs of building such a network may prevent start-ups and foreign companies from threatening Secom. Smaller rivals, such as Osaka-based Toyo Tec Co. and closely held Sogo Keibi Hosho, don't have enough subscriber revenue to pay for the network expansion needed to challenge Secom, analysts said.

Secom's brand recognition also will help stave off competitors, said Akira Hisatsu, an analyst at Okasan Securities Co.

"People don't choose security systems on price," Hisatsu said. "They choose them on trust, which means a company needs a history in the industry to succeed."

In newly crime-conscious Japan, trust sells.