News from and on Japan, December 16 – 31, 2017

Japan’s best, worst, biggest, most spectacular, most popular and lowest …. in 2017 

The end of the year invites to list the biggest, best, worst, most spectacular etc. of the previous 12 months. So, herewith my recap of what happened in Japan in the Year of the Rooster, combined with new developments over the last two weeks.
  • Politics:
    • Without doubt the most spectacular event in Japan in 2017 in the category “domestic politics” was the victory of PM Shinzo Abe in the October 2017 elections. The traditional opposition parties, incl. the DPJ, were smashed and where many expected a strong performance by Tokyo Governor Yuriko Koike’s Party of Hope, Abe-san also outplayed his upcoming opponent with big margins. In numbers: the Liberal Democratic party won 284 seats in the House of Representatives election. Together with Kōmeitō, the ruling coalition secured 313 seats, just over the two-thirds majority needed to propose revision of the Constitution. The newly formed Constitutional Democratic Party of Japan captured 55 seats to become the largest opposition party. The Party of Hope spearheaded by Tokyo Governor Koike won only 50 seats after losing its pre-election momentum. Nippon.com published its own month-by-month highlights over 2017.
    • Higher, further and more advanced: this was Kim Jong-un’s motto when he launched in 2017 no less than 23 missiles, see this explanatory videohttp://edition.cnn.com/2017/05/29/asia/north-korea-missile-tests/index.html. Some of the missiles flew close to or even over Japan.

      What can be expected in 2018? Pyongyang based KCNA or Korean Central News Agency (see http://kcna.kp/kcna.user.home.retrieveHomeInfoList.kcmsf) declared on December 30 that “Our party and state, indicating the path to be covered by socialist Korea in the new year, clarified the principled stand that it would continue bolstering the capabilities for self-defense and preemptive attack with the nuclear force as the pivot as long as the U.S. and its vassal forces persist in nuclear threat and blackmail and war drills under the mask of annual ones at the doorstep of the DPRK.” Russia Today interpreted this statement as “Boombastic: N. Korea salutes 2017, promises more tests in 2018”.
    • 2017 was also the year in which several idle nuclear power plants were tested – and approved according to the new safety rules by the the Nuclear Regulation Authority (NRA). Kashiwazaki in northwest Japan hosts also the largest nuclear generating station in the world by net electrical power rating. I visited the plant on invitation by Tepco in 2000 – and if you like nuclear energy yes or no: it is an impressive site. Or rather: was, as the operations were fully halted in 2011 after the Fukushima disaster. Reactors 1-5 have not restarted, reactors 6 and 7 (Toshiba/Hitachi/GE Advanced Boiler Water Reactors) have just been approved by the NRA, but the start-up has to be approved by the local (prefectural) government. And it is not sure if that permission will be granted. However, if not, there is a chance that subsidies by the central government to Niigata-prefecture to keep the reactors idle, will be cut, reports the Asahi Shimbun. Meanwhile the utility says the money it will generate from Kashiwazaki-kariwa’s power is key to funding its continuing decommissioning efforts at Fukushima.

  • Economy:
    • Lowestthe seasonally adjusted unemployment rate released Tuesday by the Ministry of Internal Affairs and Communications fell to 2.7% in November, a 24-year low,reports Nikkei. The jobs-to-applicants ratio hit a 44-year high, according to the Ministry of Health, Labor and Welfare. Stable payrolls moderately pushed up consumption and inflation in Japan. Finally inflation in Japan – and that is to my opinion an achievement as Japan’s population is more rapidly greying than elsewhere, with an actual decrease of the number of inhabitants as a result.
    • Highest: the Nikkei 225 index closed year-end at 22.764 after opening on January 4 2017 at 19.594, a 19.5% increase over the year and the highest since December 25, 1991.For Dutch investors however, the gain was limited this year as the Euro / Yen exchange rate went up from 123 to 135 (see attached graphs.)
    • Martin Wolf, the Financial Times eminence grise on economics, states that conventional wisdom on Japan is wrong. “Why is Japan finding it so difficult to raise inflation to its 2 per cent target? Why has its monetary policy become so extreme? Why is Japan’s public debt so remarkably high? The answer is that the country shares challenges confronted by other high-income economies, but in extreme form. This does not mean its situation is disastrous. It means that conventional wisdom is misleading.” Wolf claims that there is ample room for productivity improvement (white-collar productivity in Japan is lowest among OECD countries). But he does not think that the objections by e.g. the IMF on Japan’s “unsustainable debt level” is right: “the BoJ holds more than 40 per cent of all Japanese government bonds. It can continue to hold this debt forever, should it need to do so. It can also continue to pay no interest on commercial bank reserves if it wished. It needs only change required reserves. More fundamentally, the Japanese public is the creditor: it is not hard to see ways for the government to manage its liabilities to the public. When the government ceases to run primary deficits, it could, for example, convert its debts into irredeemable low-yielding bonds.” (the Greeks must be jealous…)    

  • Corporate:
    • The world’s largest technology investment fund can be found … in Japan and is managed by Masayoshi Son. Admired and despised, Mr. Son, the founder and CEO of Softbank (everything but a bank: it is by origin a telecom company) made headlines in 2017 when spending huge amounts for a number of foreign companies. After his spectacular 2016 acquisition of UK chip designer Arm Holdings for GBP 24 billion, Mr. Son launched his Vision Investment Fund with a size of no less than USD 93 bln. Founding partners  include Apple, Qualcomm and Sharp, as well as sovereign funds from Saudi Arabia and the United Arab Emirates. On December 29 it announced that it will invest USD 9 bln in Uber, the taxi-app company, making Softbank’s fund the #1 shareholder in Uber. The Nikkei carried an article on Mr. Son and his upbringing, a story from rags to riches. In June and October I visited the investment fund Mistletoe of Masayoshi’s Son’s younger brother: equally spectacular. The Vox Media’s online magazine Recode headed that SoftBank’s Masayoshi Son is about to make either himself or you look like a fool: “to snickering venture capitalists, the 5’5” SoftBank chief executive is the definition of hubris, an egotistical investor who will chase any deal, pay any price, rush any diligence and ignore any warning, all so he can acquire the tiniest sliver of the sexiest companies in the world and drain himself clean of his USD 100 billion technology fund … Love him or hate him, Son has reshaped Silicon Valley finance in 2017. Son has, without a doubt, emerged as the most controversial and powerful tech investor of the year. To worshipping CEOs, the man known simply as “Masa” is a visionary without peer, a charismatic daredevil who is one of the few tech investors willing to actually sacrifice his own billions, his own reputation and his own labor – whatever it takes – to gain.”
    • Softbank is new money, how about the old money in 2017? The Nikkei published an analysis of perhaps the most blue of all blue-chip companies in Japan: Mitsubishi Corp. and a number of affiliated companies incl. Mitsubishi Heavy Industry and Bank of Tokyo Mitsubishi UFJ. The core of the Mitsubishi family counts 28 members, incl. Nikon, Kirin Beer and Yusen Logistics. “Cross-shareholding arrangements have also held the group together. But now, ties that once seemed unbreakable appear to be fraying. As one executive put it, ‘times have changed’. And the iconic group’s struggles to adapt may be representative of the difficult adjustments facing many Japanese companies these days. A major factor is the growing presence of overseas investors.” But informal ties continue. There is a weekly meeting symbolizing this spirit of unity by the Mitsubishi Kinyokai, or Friday Club, which brings together the heads of 28 core group companies – from manufacturers to financial institutions – for a monthly meeting among the #1’s of all the “3-diamond” members. “Foreign shareholders now own about 32% of trading house Mitsubishi Corp., 29% of engineering giant Mitsubishi Heavy Industries and 36% of Bank of Tokyo-Mitsubishi UFJ. The three companies have long cross-held one another’s shares. But international investors frown upon this practice, arguing it undermines management efficiency. And simply ignoring about a third of your stakeholders is not an option. Last fiscal year, Mitsubishi Corp. and BTMU sold some of their shares in each other.” 

  • Society:
    • Lowest: according to data released today by Japan’s Ministry of Health, Labor and Welfare, child births in Japan will drop to just 941,000 in 2017, the lowest since data first started being recorded in 1899, and nearly 65% below the peak birth rate from the late 1940’s, reports Zero Hedge about the ‘celibacy syndrome’. “Unfortunately, the crisis is only expected to get worse over time as projections from the National Institute of Population and Social Security Research suggest the pace of population declines will accelerate and that by 2045 Japan will be losing about 900,000 residents a year. On current trends, the population is set to fall from 126.5m to 88m by 2065 and to just 51m by 2115. All of which means there is really only one thing left to do…instruct the BOJ to print even more money and start passing it out to expecting parents…which we’re pretty sure will solidify Haruhiko Kuroda’s official title of “biggest pimp in the world”.
    • But the question is: are government subsidies for child-care and free-education enough to turn the tide? Perhaps not entirely. Why? Japanese women seem to be most tired, writes Japan Times: “As sad as it sounds, the nation’s women appear to have joined the ranks of men as overworked employees, too drained from the daily grind. Specifically, women appear to be fatigued by the alternative – shokubano ningenkankei (workplace relationships) – and avoid going out on random dates, as they have now become synonymous with stress. And when women can muster the energy to go out, 1 in 4 have confessed to having fallen asleep during a date. The overall feeling among these women is that the whole renai (love-relationship) thing is overrated, strenuous and, ultimately, unsatisfying. Why waste time dating strangers when you can watch ‘Terrace House’ in your pajamas or use a ‘love app’ to hear the velvety voices of actors Takumi Saito or Sota Fukushi telling you to relax after a hard day’s work?”
    • Most doting: Japanese dog owners are said to be the most doting in the world, spoiling their furry family members with all sorts of trinkets and special experiences, “so when it comes to naming their new pets, nothing but the cutest and sweetest name will do”, writes Japan Today. As 2018 is the Year of the Dog, herewith the most popular dog names in Japan: Kotaro, Koro and Choco for male dogs, Momo, Sakura and Choco for female dogs (the last name should apply also for transgender dogs).
    • And when you are bored at year-end and look for something more exciting: Oshogatsu is Japan’s most important holiday and Japan Today lists up a number of New Year traditions in Japan: https://japantoday.com/category/features/lifestyle/new-year-traditions-in-japan, followed by this monks ringing a bell: http://www.asahi.com/ajw/articles/AJ201712280029.html.
Enjoy your holidays, remember that Japan is back to work no earlier than January 4 and: best wishes for a great Year of the Dog. Woof! Or wan-wan (ワンワン) and kyan-kyan (キャンキャン)!
Radboud Molijn
Global Bridges BV for DUJAT / Dutch & Japanese Trade Federation
 
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