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Starbucks Begins Trading on Tokyo Stock Market - 2001-10-10

The Japanese subsidiary of American coffee shop chain Starbucks began trading on Japan's NASDAQ stock market Wednesday. The share offering went ahead despite concerns about Japan's slowing economy and the poor performance of the country's stock market.

Until recently, Japan was known as a nation of green tea drinkers, but Seattle-based Starbucks appears to have turned many Japanese into coffee lovers. Since opening its first shop here five years ago, Starbucks has become a surprisingly big hit in Japan, with nearly 300 shops and plans to open 200 more in the next three years.

Because of its strong growth prospects, the company went ahead with a planned share listing in Japan Wednesday, even though the overall stock market has been performing poorly for months and is now hovering around an 18-year low.

Starbucks shares made a strong debut, opening at 80,000 yen a share, 25 percent above its initial public offer price. They closed 9 percent higher, at 70,000 yen.

Hideki Sakurai, an analyst at Nomura Securities, is confident that the company's stock will continue to outperform the market.

He says that Starbucks is successful because it has created a thriving brand image in Japan and introduced Japan to the concept of gourmet and specialty coffee. He adds that the company has consistently increased its customer base and enhanced its earning power.

Mr. Sakurai and other analysts are hopeful that Starbucks' popularity will help it weather Japan's economic slump. The country is suffering from a slowdown in domestic consumption for more than 10 years and is on the brink of recession.

Starbucks coffee is relatively inexpensive here, which analysts say is another reason for it popularity. But some market watchers are skeptical. They warn that more gourmet coffee chains are opening in Japan's major urban centers and predict that Starbucks will face heavy competition.

Starbucks Japan says it will use $50 million from the public offering to open new stores and another $33 million to pay off debts.