Hatoyama's Japan a karate chop for the once-powerful Sogo Shosha

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A mix of jubilation and fear is in the air in Tokyo today. Yukio Hatoyama has been sworn in as the country's 93rd prime minister. In the few hours since he was approved by parliament, he has promised everything from straight talk with the Americans on beef and war, to slashing emissions by 25% in just ten years. 

Japan has turfed out the Liberal Democratic Party, dominant since 1955, and ushered in a new party with a new leader. The Japanese are certainly enjoying an Obama moment. And just like America back on January 20, the sight of a new leader promising sweeping change is bringing as much terror to Japan's vested interests as it is bringing euphoria to those who felt on the short end of Japan's decades-long deflation.

Fear is especially powerful for the Sogo Shosha, the middle-aged warrior class that feeds -- and feeds off -- Japan's giant $5 trillion-a-year economy. The Japanese insist, above all, that Hatoyama must finally fix the economy. And he's expected to take aim at the kind of cronyism that is their life-blood.
More than anything else, the election of Hatoyama symbolizes the desire of most of the rank-and-file in Japan to dismantle a Power Triangle that has locked up Japan for the chosen elites for more than 50 years. The Government, the Bureaucracy, and the Big Corporations have held the keys to Japan since the 1950s.
    
The government, at least the decrepit LDP, is gone. The bloated and meddling bureaucracy might be reformed with time, if the new Democratic Party of Japan government can hold on for long enough. Big business is next in the firing line.
    
The Sogo Shosha should be fearful of what, logically, comes next. And they are. The big seven, Mitsubishi Corporation, Mitsui & Co., Itochu, Sumitomo Corp., Marubeni, Toyota Tsusho and Sojitz, are wrapped around the Japanese economy like an orange peel. They have been a thick skin protecting thousands of smaller Japanese companies that keep Japan ticking on the inside, and keep millions of Japanese in lifetime employment -- even as the steely blades of globalization have shred decades-old social and business systems overseas.

The shosha bring in the products and raw materials that those companies need to survive. They also export Japan's generous surplus -- everything from refined oil products to TVs and food products. Most importantly for Japan's elite, the shosha have acted as a latter-day samurai, projecting Japanese business power overseas, while guarding the domestic economy against unwanted intrusion.

For this, they have levied a hefty surcharge. Margins on imports strain the cost of running Japan's inner machinery to breaking point. Straight fees, along with hidden costs that often come in the shape of unduly generous trading terms levied on the end-users, fund extravagant skyscrapers in Tokyo, brimming with thousands of staff.

And the shosha have enjoyed the trappings of power in Japan's post-war era. Like the katana-wearing samurai that once enjoyed a right to execute commoners who insulted them, Japan's warrior-trader class wield enormous power over the lesser companies that go about their everyday business inside Japan. They are obeyed, as much as they are respected and admired.

Meeting shosha and end-users in Japan this week, change is in the air, and it smells a lot like fear. The five biggest shosha, Mitsubishi, Mitsui, Sumitomo, Itochu and Marubeni, all posted crippling double-digit drops in both revenues and profits in the second quarter. The worst performer of the bunch, Sumitomo, saw net profits from its energy business collapse by a stomach-churning 90%.

Together, the big five earned a mere Yen 206 billion ($2.3 billion) on combined revenues of Yen 12.35 trillion ($137 billion). A deathly 1.7% net profit from revenues has slowed the pulse of the shosha, and made their regal marble office towers look more like stony granite tombs.

The shosha need to adapt to survive in Hatoyama's Japan, especially if the promise of big changes is kept. Change has been slow at the shosha in recent years. Many seem keen to fashion a semi-retirement role as the ageing middle men of Japanese trade and industry, if they see a need to change at all.

A review of their websites is telling. All seven offer the same services, by and large. In a bid for survival, their competitive edge against could come -- at best -- from differentiation. Yet all seven websites are strangely similar. The contemporary business slogans mark a spread from Mitsui's banal, "To become a global business enabler," to Marubeni's slightly saucy "Beyond your expectations....", and Toyota Tsusho's amusingly bizarre motto, "Creating G Value! With you, out in the world."
    
As Japan prepares to springboard, at long last, into a brave new world, the most poignant new shosha slogan must be Mitsubishi's pathos-dripping: "Right now, somewhere on this sleepless planet, knowing what we must do, we are doing what we can do, one thing at a time."

The humbled shosha must hope that is enough, if they are to survive another Meiji Restoration.