News from and on Japan from April 8 – 21, 2018

Sony’s resurrection, why is it difficult for Japanese to speak English? What did Abenomics achieve? Japan is shrinking and a President of a university in Kyoto from … Mali

During last week’s visit to Tokyo I became aware again of the vast number of foreign workers and trainees in Japan: in restaurants, hotels, airports, at transport companies, convenience stores and even at manufacturing plants. “Where do you come from?”, I frequently asked and I learned that they come from all over the place: China, Nepal, Myanmar, Vietnam, Brazil, Uzbekistan, Bangladesh, Mongolia, the Philippines, South Korea.
In 2017 Japan’s number of foreign workers rose with 18% to 1.27 mln, that is 1% of its population and represents over 2% of its labour force. Not much to Dutch eyes, but for a country that is not known for its welcoming foreign workers it is remarkable. What is even more remarkable is that many of them speak more or less fluent Japanese, while it still is amazing how little English the average Japanese person is willing or capable to speak. Most of these foreign workers will return to  their countries after a five year stay – and that makes me think that in some years when visiting the great cities of Ulan Bator, Tashkent, Luzon, Sao Paolo or Dhaka and the waiter hears that you have been in Japan, you will be recommended the chef’s choice of sheep’s eye soup or stuffed camel à l’Urdu in more or less fluent Japanese.
But there is of course more news from and on Japan than this personal observation.
  • Politics:
    • Premier Abe’s visit to Mar-a-Lago, Donald Trump’s alternative White House, left him empty handed. His main goals were to get Japan off the list of trade sanctions for steel and aluminium exports, to get the USA back into the Trans Pacific Partnership agreement and to have Tokyo’s voice heard at the planned Trump – Kim Jong Un’s meeting. Nothing of that kind: the only concession obtained by Mr. Abe was that the US President will refer to the Japanese abductees in North Korea. A Raw Deal for Shinzo Abe? asks The American Interest. “The summit showed the pitfalls of Abe’s excessive reliance on his personal relationship with Trump. Japan received its baptism into Trump’s signature ‘art of the deal’: a transactional, bilateral approach to alliance management conducted with little regard for broader global stakes.”
    • With friends like the USA, you don’t need enemies, is the tenor of an FT View: Trump’s short-sighted mistreatment of Japan, failure to support an indispensable ally will have consequences. “Tokyo is well aware that Beijing would like to drive a wedge into the US-Japan alliance and will be careful not to fall into that trap. But the more Mr. Trump seems obsessed with the trade battles of the 1980s the harder it is for Japan to resist a hedging strategy that pulls it closer into China’s orbit. Mr. Abe remains a China hawk but, if his domestic position erodes further, he could be out of office by the end of the year. His replacement may be more inclined to cozy up to Beijing.” Or, as the Asahi Shimbun stated: Abe has made his foreign policy agenda heavily dependent on Tokyo’s relations with Washington, particularly his personal ties with Trump, without making sufficient efforts to improve Japan’s relationships with its neighbors and hold constructive talks with their leaders. His approach has undermined Japan’s diplomatic clout in the region. It seems that to Trump, Japan is now nothing but a country with which to hold negotiations to rectify “unfair” bilateral trade, rather than a partner in tackling the North Korea problem.   
    • Meanwhile, at home Japan’s PM is facing mounting problems due to a series of scandals, incl. alleged cronyism and the April 18 departure of the top bureaucrat of Japan’s Ministry of Finance who is accused of sexual harassment. Mr. Abe’s popularity has gone to new lows, and former PM Junichiro Koizumi told a weekly magazine published last Monday and here quoted by the Guardian, that Abe has found himself in a “dangerous” situation over the scandals,adding: “Won’t he resign around the time the current parliamentary session ends [on 20 June]?” (perhaps paving the way for Mr. Koizumi’s 37 year old son Shinjiro, sometimes dubbed as Japan’s Emanuel Macron.) 

  • Economy:
    • Here for the data aficionados some economic figures: March export was below expectations (up 2.1% au lieu of predicted 5.2%), imports were weak (-0.7% au lieu of expected 6.3%.) “The unexpectedly weak growth in exports suggests that while the global economy is growing, concerns about a brewing trade war may be hurting sentiment. Exports to China recovered after a decline in February but imports fell due to the lingering effects of factory shutdowns over the lunar new year. … Japan’s adjusted trade balance showed a surplus of 119.2 billion yen (forecast +104 billion yen). Exports to China, Japan’s largest trading partner, rose 10.8 percent in March from a year earlier. Shipments to the U.S. expanded 0.2 percent. There was a 14 percent decline in the value of steel shipments to the US, and a 40 percent fall in volume, although a finance ministry official said they weren’t sure if that was due to the US imposition of metal tariffs. Exports to Europe increased 0.3 percent.” 
      I add a self explanatory chart with Japan’s government deficit.
    • Trump wants a bi-lateral trade deal between the USA and Japan, while the Japanese government is not keen to look for a 1-to-1 deal but prefers the US joining the TPP. But if we like it or not, there is some reason for Mr. Trump to complain about the trade balance between the two countries: Japan’s trade surplus with the US grew nearly 6 percent in the fiscal year through March, reports the Washington Post, “the first increase in two years, according to data released Wednesday. The trade figures were reported as Prime Minister Shinzo Abe visits the US for meetings with President Donald Trump, who has complained repeatedly about the trade imbalance with Japan. The Finance Ministry said the trade surplus with the US totaled 6.999 trillion yen (USD 65 billion), as growing Japanese exports of cars and other machinery offset rising imports of gas, coal and other major products.”
    • As long as there is Shinzo Abe, there wil be Abenomics – and here an analysis by Prof. Takeo Hoshi of Stanford university in The Japan News / Yomiuri Shimbun. “5 yrs of Abenomics yields uneven success”.  “I think it’s safe to say Japan has moved out of a deflationary phase. What we haven’t reached is an inflationary stage; the two percent inflation target is still far away. One important reason why we haven’t seen inflation in Japan even though the economy is recovering is the lack of wage increases. However, we may start to see the increase of wages this year, as suggested by the results of this year’s spring wage negotiations (shunto) at many companies. Raising wages is something Prime Minister Abe has been encouraging companies to do and that may be finally happening.” OK, that is hopeful, but there is another remark that is more worrying: “Industrial policy may have been effective during the period when Japan was catching up to more advanced countries, when it was clear what Japan should do in order to grow. They were able to look at more advanced countries and it was relatively easy for the government, or anyone for that matter, to identify promising industries. But after Japan caught up, it’s not clear where the next innovation comes from, and what the new promising industries are. We can guess, but our guess often turns out to be wrong and what happens, is something nobody has imagined as we can see from the sudden dominance of the market by products like iPhone or iPad. We never knew we needed those things. So we don’t know where the new innovation will come from. We think it’s probably related to AI or robotics, but we don’t know. The government policy is expected to be less effective in the advanced economic growth based on innovations.”

  • Corporate:
    • Some time ago I wrote in this place on Softbank’s complicated fiscal structure. The Asahi Shimbun reported that the company failed to report 93.9 billion yen (USD 877.57 million) in income over four years through March 2016, mostly collected by subsidiaries that are registered in tax havens; a failure to declare revenue of such size is unusual, according to tax experts. 
    • Always keep hope and determination. Sony, that was at shambles only three years ago, resurrected under the guidance of Kazuo Hirai and just reported a record net profit of 480 billion yen (USD 4.54 billion). Read this story and learn that Sony is launching a new Walkman (EUR 2.500!) machined out of a solid, oxygen-free copper ingot. In other words: the company is focusing on high-end products. From 2005 – 2012 Sony was managed by Howard Stringer, with disappointing results, see graph.
    • Amazon’s presence is anywhere, so also in Japan – and Japan‘s online retailer Rakuten is in head-on competition with this behemoth. In Japan Amazon has a market share for online sales of 20.2%, Rakuten has 20.1%. Hiroshi Mikitani, Rakuten’s founder and CEO is known for his drive to have English as the prevailing language for board meetings and reporting. In 2011 Rakuten gained 77% of its profits from its online-shopping business. Those profits have fallen for the past two years. Its fintech services, such as credit cards and insurance, now drive returns. Like Softbank, it is a remarkable, entrepreneurial company. “Since pioneering e-commerce in Japan in 1997”, writes Economist, “it has been a rare example of a highly entrepreneurial Japanese firm. Today it spans more than 70 businesses providing credit cards, a travel agency, a golf-reservation system, matchmaking, wedding planning and insurance. It owns Viber, a calling and messaging app and has invested heavily in Lyft, a car-hailing service. Now it is adding another: on April 9th the government gave Rakuten a concession to operate Japan’s fourth mobile network (Rakuten currently runs mobile services using another operator’s infrastructure).”  The company faced problems in exporting its online shopping-mall model – offering a platform for stores to sell on – to foreign markets, something that Hiroshi Mikitani said a few years ago was necessary for the company to prosper. The firm found it hard to compete with established rivals in mature markets, and came up against barriers such as inadequate logistics in developing markets in Asia. Chinese Alibaba seems more successful abroad.

  • Society:
    • Wow, Japan’s (ageing) population is decreasing indeed, and with an alarming speed: deaths now outnumber births at an average rate of 1,000 a day, writes Financial Times. As a result there is hardly any company in Japan that is not thinking how to cope with this, be it restaurants (expanding overseas), transport companies (double haul) or hair dressers (serving bed-ridden clients.)
    • So, Japanese companies are hiring foreign workers in high numbers, as the Standard Examiner reported, describing how this system works. “The technical intern training system changed in the autumn of 2017, lengthening the maximum stay from three years to five years. Nursing care was also added to the fields in which interns can work, bringing the total number to 77. However, illegal acts by businesses that accept foreigners under the system have become a problem. Illegal acts have been discovered at 70 percent of participating businesses, such as not paying wages to interns. Some in the business community are calling for the acceptance of unskilled workers to address the insufficient workforce in JapanThe government is considering expanding the range of acceptance, but it is also cautious about allowing foreigners in as unskilled workers because it may lead to acceptance of immigrants.
    • Why do Japanese have trouble learning English?, asked Japan Times. “Usually, the poor achievement is blamed on the way English is taught in schools. It is said that there is too much classroom emphasis on grammar with very little time devoted to actual conversational practice. The emphasis is mainly on the silent skills of reading and writing. Listening is rather passive as opposed to being an active part of a conversation. The focus is on accuracy and avoiding grammatical mistakes. Students spend a great deal of time copying out what was written on the blackboard and memorizing it in preparation for tests. They often describe English lessons as boring. The teachers themselves – most of whom were taught in the same way as they now teach – do not have adequate enough English communication skills. In fact, more than 70 percent of junior high school English teachers have a TOEIC score lower than 730.
    • Let’s finish with an upbeat story, read in the New York Times. Dr. Oussouby Sacko, a scholar from Mali, has been appointed as President of Kyoto Seika University, where he is teaching as professor in architecture and spacial planning since 2001.  “Japanese people think they have to protect something,” he said during an interview in English before a reception recently to celebrate his appointment. But, “someone who has a broad view from outside on your culture can maybe help you objectively improve your goals,” he said, occasionally interrupting the interview to greet his guests, switching effortlessly between English, French and Japanese. Great read as it shows that with perseverance and determination it is possible to reach the seemingly impossible, even in Japan.
Have a great week, wherever you are.
Radboud Molijn, Global Bridges BV for DUJAT / Dutch & Japanese Trade Federation