With automatic bidet function, a self-lifting seat, an armrest bristling with controls and even your choice of mood music, the Japanese lavatory remains pre-eminent in the world of bathroom opulence. Naturally, they sell exceptionally well in Dubai.
Since the emirate began its ambitious expansion, Toto and Inax, the two biggest names in Japanese toilets, have thrived on the demand from luxury developments. Combined, the two companies do about 2 billion yen (£13.7 million) of business with Dubai every year — precisely the kind of business that the market is now worried about.
Far bigger Japanese industries could be affected. Analysts this week flagged construction companies Shimizu and Taisei as Japanese groups that stand to be hurt if the problems at Dubai World become contagious throughout Dubai’s economy. JPMorgan cut its forecasts on the large Japanese construction companies, while Merrill Lynch warned investors that “the Dubai development will have a negative impact on the recovery in stock prices of general contractors that have won many large contracts in Dubai”.
Japan effectively faces a double headache from any wider crisis in Dubai. First, there is the direct financial risk to lenders and investors. Analysts believe that Japanese banks are among those with lending risk in Dubai and Japanese trading companies are investors in projects that may now be postponed or abandoned.
But Japan’s second, bigger problem could arise not only from the possibility of payment delays but from its total business exposure to a market in trouble. Like Toto and Inax, Japanese companies have built a reputation in emerging markets as engineers, builders and infrastructure-makers of the highest quality. Japanese machinery of the sort produced by Komatsu and Hitachi is the first choice of many of the world’s biggest contractors.
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As Dubai pushed for ever more eye-catching mega-projects, Japanese companies pursued and won lucrative contracts. Dubai World’s Palm Jumeirah plan was particularly attractive, with Shimizu winning the contract to build the luxury residences and Taisei building the undersea tunnel that connects the artificial, palm-shaped archipelago to the mainland.
With public works projects in Japan dwindling, Japanese companies have spent more than a decade fighting to gain Dubai’s contracts and were successful in winning the $9 billion (£5.4 billion) project to build the Dubai Metro. A consortium of Japanese companies is involved, including Mitsubishi Corporation, Mitsubishi Heavy Industries, Obayashi and Kajima. Revenues for Obayashi alone are expected to be $2.2 billion.