"Further realignment is necessary." Z Holdings CEO Kentaro Kawabe talks Line, the future of the Japanese tech industry, and his plans to take on the world.

Yahoo Japan shook up the Japanese business world last October when it shifted to a share-holding company and changed its name to Z Holdings. Since then, it has announced a string of big name mergers and acquisitions, such as the purchase of Zozo, one of the country's largest online fashion retailers, and integration with Line, the major messaging app operator.

What was the goal behind these deals? NHK correspondent Satomi Motegi sat down with CEO Kentaro Kawabe to talk about his company's strategy and the future of the Japanese tech industry.

Q: Why did you do the deals with Zozo and Line?

"IT giants from the US and China, like Google and Baidu, have increased their market shares in Japan. We believed that if we didn't do anything, we would become a minor player in our own country. We thought another option, one which places a priority on Japanese consumers, should be available. We thought the realignment of the country's Internet service industry was the way to go and that's why we contacted Zozo and Line."

Press conference
Last September, Z Holdings announced the acquisition of Zozo. Two months later, the firm surprised the Japanese business world with the news that it was merging with Line.

"We didn't have a large share of the Japanese e-market for fashion. We needed something big to become a major player and in that sense, Zozo was the perfect partner. And the people over at Zozo were also thinking that they needed something different to continue growing. They felt they needed to expand their user base, so the interest in a deal was mutual".

"As for Line, the idea was 'winning at the starting point,' which is crucial in the world of Internet. What do most people do as soon as they wake up in the morning? They go to Line and check messages from their friends. They don't read Yahoo News. In other words, Line was how users started their day. They were winning at the starting point. That was the biggest appeal for us."

Kentaro Kawabe
Kentaro Kawabe, CEO of Z Holdings

"We need to become a data company"

Kawabe also says the company is focusing on its big data strategy. Last October, Yahoo started providing analysis on user gender, age, location, and search keywords to other companies and administrative agencies.

"Data is the oil of the 21st century so we have to become a data company. We have to prevent our big data from flowing out to other countries. I think as a company, we have the responsibility of presenting another option."

"I also think we can play a big role in promoting disaster preparedness and emergency assistance. Typhoons and earthquakes are big problems for all of Asia. We're considering expanding services we started in Japan to other Asian countries. That's something our integration with Line allows us to do."

Future strategy

Throughout our conversation, Kawabe repeatedly stressed his goal of creating a "third force" that can compete with the US and China. To do so, Z Holdings will have to overcome a large gap in sales.

"We have to promote industrial realignment and come together. If each company tries to challenge China and the US on its own, it will fail. But we can come together and take advantage of our respective strengths for a better chance. I will invite the big tech companies in Japan to join us in doing this."

"Now that we've agreed to merged with Line, I want to work with tech companies in other Asian countries. Once the industry is restructured, we have to build up financial resources to undertake research and development to launch new services."

While Kawabe has concrete plans for how to bring long-term success to Z Holdings, he admits his company has a huge fight on its hands. "It's an intense challenge that has brought me many sleepless nights," he says.