News from and on Japan from January 14 – 27, 2018

Nissan into self driving slippers, what drives Shinzo Abe? Japan’s defense industry and Yanai and Nagamori on leadership in corporate Japan 

No doubt that Shinzo Abe is Japan’s undisputed leader, in a country that has seen a quick succession of prime ministers in the previous decade. But what makes him tick? As a member of a political dynasty (grandson of PM Kishi, son of former foreign secretary Abe) he is well-versed in Japan’s political traditions. But what is his personal drive, his vision on Japan? Here three articles on the man, in the Nikkei, The Diplomat and the Economist.
  • Politics:
    • “A decade ago, it made little sense to analyze Japan’s diplomatic strategy. Between 2007 and 2011 there were six prime ministers in five years; by the time a strategy was formed, the leader would be on his way out”, writes the Nikkei Asia Review in an unusual long article on PM Shinzo Abe. “Abe, now in the sixth year of his tenure, is the second- longest serving leader of a Group of Seven country after German Chancellor Angela Merkel. While he is better known internationally for “Abenomics” and his desire to change Japan’s pacifist constitution, he is pursuing an active foreign policy. Abe’s office boasts that he has visited 76 countries and regions in his term – the most ever for a Japanese prime minister.” The article weighs Abe’s relation with Donald Trump, Angela Merkel, Theresa May and Vladimir Putin. The Nikkei claims that Mr. Abe consulted a team of psychologists to understand Mr. Trump’s character prior to his surprise visit to Mr. Trump day after he had been elected as America’s next president. 
    • The Diplomat, a Tokyo based on-line magazine, asks “Why Shinzo Abe visited Serbia on his recent tour of Eastern Europe?” Abe’s visit to the Baltics and the Balkan countries was part of a charm offensive to get support from small European countries, also to counter China’s Belt & Road Initiative. The article shows the battle between China and Japan for the hearts & minds in Europe. “Beijing’s plan to expand the BRI’s reach deep into the heart of the EU. For that purpose, China is now heavily investing in Serbia’s railroad and highway systems, putting down hundreds of millions of dollars for building or repairing and reconstructing bridges and roads – many of which still remain in devastating condition since the NATO bombing 20 years ago – or creating new road infrastructure, such as the building of a USD 740 million highway that would connect the capital Belgrade with the coastal city of Bar in Montenegro. But Beijing’s crowning project is the USD 3 billion investment project to build a 350 kilometer high-speed rail link between the Hungarian capital Budapest and Belgrade. … By promising to invest in crucial energy projects, such as the building of a desulphurization unit for the Nikola Tesla power plant, investing in the Serbian pharmaceutical, agricultural, and IT industries, or using the expertise of the Japan International Cooperation Agency to identify potential areas for economic cooperation, Japan hopes to counter some of the effects of the recent Chinese economic incursion”.
    • Also the Economist tries to peer into Shinzo Abe’s soul and finds part of the answer to the question “what drives Mr. Abe?” in his upbringing in Yamaguchi, also known as Chosu. The Choshu men, he explained some time ago to the magazine’s reporter, saw the threat from Western imperialism (around 1860). “Japan’s harsh choice was either to be the meat served at a Western banquet or a guest at the table. By modernising, Japan became the only big country in Asia to safeguard its independence. It joined the Western high table.” In December 2012, when Mr. Abe re-started his role as PM after a disappointing first, short tenure in 2009, the Economist headed “Go on Mr Abe, surprise us”. They may not have been disappointed, so far.

  • Economy:
    • One of Mr. Abe’s priorities is to boost Japan’s defense force: for the 2018 -2019 financial year he has announced Japan’s biggest military budget since World War II. The spending spree not only includes buying expensive equipment from the USA, but also boosting Japan’s own considerable defense industry. But what are Japan’s major players? The ranking in this article shows Kawasaki Heavy Industries, Komatsu and NEC as the top-three players. Somehow Mitsubishi Heavy Industries / MHI is not present in this 2017 ranking by Nikkei, although it is with a 21 position in the global top-100 a far bigger player than Kawasaki Heavy (see: Defense Top-100 2016). “There is, however, one big step still to come. That is creating and maintaining a robust security regime for the defense industry that protects national and intellectual property, and will help Japan to work more closely with the U.S. and other allied nations in developing and producing advanced defense systems”, writes Arthur Herman of the Hudson Institute. “Unless Japan’s allies believe it has installed effective protections and protocols to stop Russia, China, North Korea, or even a random hacker from stealing classified data or foreign intellectual property, they will be reluctant to share their most sensitive technologies with their counterparts in Japan.”
    • Exports from Japan rose 9.3 percent in December from a year earlier, versus a 10.1 percent gain seen by economists and following a 16.2 percent gain in November. A survey out on Wednesday showed Japanese manufacturing activity expanded in January at the fastest pace in almost four years, reporting solid output and employment levels. Wednesday’s data comes after the Bank of Japan offered a more upbeat view of inflation expectations on Tuesday, showing its conviction a strengthening recovery will gradually push price growth to its 2 percent target. By value, exports reached 7.3 trillion yen ($66.27 billion) in December, the biggest amount since September 2008 when the last global financial crisis erupted (Reuters).
    • Japan posted a goods trade surplus of JPY 2.99 trillion (USD 27 billion) in 2017, the second straight year of black ink, as robust exports exceeded imports that surged amid higher energy prices, government data showed Wednesday. Exports jumped 11.8 percent to 78.29 trillion yen, reflecting an increase in Asia-bound shipments to a record-high value, while imports surged 14.0 percent to 75.30 trillion yen, according to preliminary data by the Finance Ministry. Japan’s surplus, however, shrank 25.1 percent from 2016. Japan’s trade deficit with the European Union came to 96.8 billion yen, down 43.0 percent, the ministry data showed (Nikkei).
  • Corporate:
    • Corporate leadership in Japan, here in this newsletter: two up and one down. Two of Japan’s corporate icons, Tadashi Yanai, Uniqlo’s CEO and Shigenobu Nagamori, speak about the way the lead their companies. A long read in the Financial Times tells us about Toshiba’s downturn. 
      Uniqlo, that is finally to open soon its first shop in The Netherlands (Amsterdam Rokin, replacing Forever 21) is a succes story pur sang and Tadashi Yanai provides in the Nikkei some wise cracks on what he thinks leads to success. Hard work, it seems, had little to do with his success. “If your effort is pointed in the wrong direction, you’re out of luck. No chance. You’d be going around in circles.” And: “Many people don’t understand this, but truly successful entrepreneurs are very cautious. Microsoft founder Bill Gates, for example, says ‘You must worry.’ He notes that boldness doesn’t pay and that you need to be focused. Another thing is finding the megalomaniac inside you, I mean, entrepreneurship. Our company motto is: ‘Changing clothes. Changing conventional wisdom. Change the world.’ Even I’m like, ‘Wow, this is a big statement.’ But, seriously, I think you need to have this kind of spirit.
    • Shigenobu Nagamori’s company Nidec creates motors that operate car windows, car wipers and makes air conditioners run efficiently. He claims to have acquired 56 companies, all outright successes. Nagamori has a rather peculiar approach in targeting companies that he thinks should be part of Nidec: at the end of each year, as Japanese sit down to write New Year’s cards to friends and family, he is busy with a different sort of correspondence. The chairman and president of industrial motor maker Nidec writes several dozen letters to the top executives of overseas companies he is targeting for acquisition. “If you are ever willing to sell your company, please let me know,” he writes with characteristic courtesy (which belies his steely tough reputation). The executives usually reply that they have no intention of selling for now, but will inform him if things change. Again and again, Nagamori repeats his post Christmas ritual. And sometimes, years after the first overture, the executives really do have a change of heart. One of these target companies replied after 16 years … Nagamori said there are three reasons why he does not fail. “Don’t overpay, don’t buy what you don’t need and always create synergies with your mainstream business” (sounds all like pretty standard logic.) Nagamori is proud that he has not laid off anybody in the companies he has acquired and that none of the 56 companies is losing money.
    • Different story is Toshiba, and the Financial Times’ Leo Lewis and Kana Inagaki write how this once blue chip company has been demoted at the Tokyo Stock Exchange and is now hoping that the sale of its NAND flash memory division can rescue its famous name. Its health care business has been sold to Canon, its white good division to a Chinese company and its bankrupt nuclear power plant business to Canadian asset management company. It looks like the company has been trimmed as a bonsai tree. “The Toshiba crisis, say bankers, lawyers, accountants and others closely involved with the asset sale, is a perfect microcosm of Japan. Its causes, such as a complacent “salaryman” management, are common. Its solution has laid bare government meddling, dysfunction and an outdated assumption that an “all-Japan” deal could be found. Toshiba’s future will test how long once impregnable household Japanese names can survive without radical reform.” 

  • Society:
    • More than 20 per cent of Japan, an area the size of Denmark, has no readily contactable owner. By 2040 the projected area is bigger than the Republic of Ireland – a spreading nightmare for government, construction and the property industry, because if nobody knows who owns the land then nobody, except for flytippers, can use it. Forestry roads go unmaintained, solar farms are left unbuilt and taxes uncollected. According to a private sector working group on unowned land, by 2040 the annual economic cost will rise from JPY 180bn (UDS 1.6bn) to JPY 310bn. It is one of the most striking results of a greying society and an urban based economy that attracts people in their 20’ and 30’s.    (Financial Times).
    • Out of the top 10 universities in the world with the best student-to-staff ratio no less than six are Japanese, reports Times Higher Education. Japan currently has two universities in the top 50 institutions on the planet, according to QS Quacquarelli Symonds: Kyoto University and the University of Tokyo. Tokyo has also recently been named the third best city in the world for students by The Telegraph. These results make Japan the best country in Asia for education, with 20 of the top 100 spots in Times Higher Education’s Asian University Rankings (number one was the University of Tokyo). Japan hosts apr. 250.000 non-Japanese students – and this number is increasing.
    • Everyone who visited Japan knows: clean socks because you often park your shoes at the entrance of the house, restaurant of even office and you are to put on slippers. But arranging these slippers at the entrance seems to be a burden so Nissan, known for its electric cars and tests for autonomous driving, now has developed self-parking slippers. Well, why not? Perhaps at one point these self-parking slippers will drive you to a your place in the restaurant where you booked your meal. 

Enjoy!
Radboud Molijn
Global Bridges BV for DUJAT / Dutch & Japanese Trade Federation