The following piece is from the October 17th Terrie's Take newsletter (subscribe free), by Terrie Lloyd, the publisher of English-language publication Japan-Inc.

Terrie has kindly given me permission to provide this extended quote, since the newsletter is not yet posted online:

Although stock market professionals are worried about the over abundance of IPOs in Japan at the moment, fully 151 IPOs (as of September, 2004) with a value double that of the same time last year, at JPY1.5trn ($13.6bn), a remarkable thing is going on at the grass roots level. Small business owners all over Japan are starting to believe that they too can go public, and are eagerly pushing their companies to reach the qualifying bar: commonly accepted as being JPY1.5bn ($13.6m) in sales and 10% profit. And with them, friends, family, and angel investors are catching the IPO bug.

As a case in point, two acquaintances with a thriving media business dropped by last week. They have the happy knack of being able to produce high-quality magazines and web content and have turned it into an outsourcing business. Their Japanese clients believe that you can't communicate with customers unless you're engaging them with original material and thus business is pouring in -- to the point that they will double sales next year. At the current rate, and they're already profitable, they will meet the requirements to IPO their company in 2007.

A few weeks ago, they were noticed by a local securities company, a second tier firm which picks up IPO candidates and tries to hook them in before a major firm appears, and which suggested that our friends start preparing for an IPO. Although they'd never considered going public as a reality before, being buried in the minutae of running a company and making a profit, the effect on both them and their staff has been galvanizing. Now, for the first time, they are thinking about taking in a second stage of funding, and even looking at taking over one of their competitors to bulk up their business. The IPO buzz in their office is tangible, and everyone is riding a high -- needless to say, their productivity is really pumping.

Is this a good thing? Well, on one hand it smacks of bubble mentality, and one has to ask whether every (and it is virtually every) profitable company with revenue exceeding JPY1bn ($9m) has the wherewithal to go public and withstand the costs and public scrutiny. In particular, those trying to push the growth of their companies beyond the natural (organic growth) limits may find it hard to deal with any market downturns and other setbacks. Outside IPO-focused investors do not sit idly by when the numbers are missed -- and many aspiring CEOs will find this hard to take.

But on the other hand, getting rich is a great incentive and Japan's conservative SMEs are opening up. CEO's everywhere are dreaming dreams they haven't allowed themselves to have before -- and this is exciting. It means a much better circulation of ideas and intellectual property, more inventions being launched, more cross-fertilization with foreign firms, and generally an acceptance of outside resources if those resources mean a competitive edge and a better shot at the IPO market.

So probably the most relevant question left is: will the stock markets in Japan stand up to this kind of massive welling up of IPO candidates? The next couple of weeks will tell, as three massive IPOs come to fruition. However, we believe that these bigger IPOs will draw a different type of investor and so those in the market to buy into smaller IPOs will still be there and be active.

There have been some comments in the media about market worries that the IPO market might be softening, such as in the case of candy maker Sansei, whose market price opened lower than its pre-IPO price on the first day of trading. However, despite all the handwringing, not one week later another company, GF Ltd., stormed out the gates with an amazing 270% first-day gain on its pre-IPO price -- showing that the good times are still with us.