From bidets to AI labs: Japan’s hidden innovators should step out and learn to play the hype game

A Japanese maker of high-tech toilets has been causing a splash in the world of artificial intelligence (AI). Activist investor Palliser Capital recently called on the management of Toto, best known for its Washlet bidets, to highlight that the firm is a growing AI play, thanks to its advanced ceramics segments. Toto is the “most undervalued and overlooked AI memory beneficiary,” Palliser wrote.

Its little-known business of chip parts recently accounted for half its operating profit. Yet, just a page was dedicated to it in the most recent investor presentation, with this limited disclosure leaving its value “effectively hidden from the market,” the fund said. Palliser has a point here—and it’s one that extends beyond the porcelain throne.

Japanese firms often struggle to tell their success stories, particularly if they’re diversified or in niche industries. Carefully stage-managed domestic media engagements tend to dominate. While disclosure is improving, getting information out of some firms can still be akin to pulling teeth.

Worse, for years even companies that were proactive often found it hard to reach a receptive audience. But things are changing in the era of AI and robotics, where Japan has vast expertise in specialty chemicals and wafer substrates, sensors and motors. The country might have fallen behind in the age of software, but these physical hardware supply chains are exactly the kind of industries where firms still have an edge.

While some bemoan the lack of ‘creative destruction’ in the economy, innovation happens differently. Like Toto, companies reinvent themselves with alacrity and transition to new business models. Take Fujikura.