News from and on Japan from March 18 – April 2017

Cherry blossom parties in Tokyo, nearly full employment in Japan, Toshiba’s troubles, “sontaku”, why to wear a white surgical mask? Toyota Indusries’ acquisition of Vanderlande, yen going up?

Judging a fundamentally different culture always brings you back to the basics: language. How well a person might speak another language, there are simply words, terms, expressions that are not easy or even impossible to translate. One of them I learned recently: sontaku, a word that popped-up in a Financial Times article describing the “unsaid statements”. It was picked up by Japanese newspapers to describe developments that are not caused by an action or an order but that are nevertheless the result of a something “unsaid”. In this FT article it referred to the developments affecting PM Shinzo Abe and the sale of a piece of land in Osaka to an ultra-conservative school. It also referred to Toshiba’s troubles. In the attached FT article you’ll find more on this.
  • Politics:
    • With North Korea posing a real threat to Japan and with “an assertive China” testing Japans territorial waters, PM Shinzo Abe recently “announced to the Diet, with little accompanying fanfare, an official break with his predecessors’ policy of restricting defense spending to 1 percent of Gross Domestic Product (GDP). This break is notable for a variety of reasons and is a decisive step toward achieving the Liberal Democratic Party’s defense revitalization goals. English-language resources hardly address the subject, but the 1 percent policy (which is not law) was, next to the constitution itself, one of the most tenacious obstacles restricting meaningful defense reform in Japan”, reports The Diplomat in an article written by American Airforce officer John Wright. Apart from this fact, you’ll read in this article an interesting description of the modus operandi when it comes to government budgeting. Here it shows why this time PM Abe will succeed in raising his defense budget: his close relation with Finance Minister Taro Aso.
    • Like in The Netherlands, politics in Japan is a male dominated affair. But Ms Yukiko Koike, Tokyo’s governor, looks like changing this. I met her 10 years ago when she was keynote speaker in a seminar in Tokyo that I organised for DUJAT – and I have to admit: she made a strong impression so I am a Koike-fan. The Economist carries an article on her march to Japan’s leadership. “There are few obvious candidates to succeed the current prime minister, Shinzo Abe. Ms Koike’s lack of a clear ideology is no handicap: the LDP itself, after all, flirted with austerity under Mr Koizumi but now runs one of the world’s most spendthrift governments. (…) The party’s grandees are probably waiting to see how Ms Koike’s protégés fare, says Mr Hirasawa. Whatever happens, she is already Japan’s most popular politician; if her luck holds, she could one day be its leader.”
    • French and other European wine is expensive in Japan because of a JPY 125 levy per liter or 15% of the unit price, whichever is lower. Two of the obstacles to bring this import duty down are cheese and car parts. Why? The Nikkei explains that farmers in Hokkaido object to further cheese import into Japan, while the EU is not yet ready to reduce its levies on Japanese car parts. But there is hope, now that the signing of the Economic Partnership Agreement or EPA between Japan and the old continent is within reach.

  • Economy:
    • “Some mixed readings on inflation and a drop in household spending in Japan have taken some of the shine off solid industrial production and unemployment numbers, and drawn a range of reactions from economists. Data showed inflation in February was stronger than economists had expected, but the headline and so-called core-core (which strips out fresh food and energy prices) measures retreated from the previous month,” writes the Financial Times. Somehow inflation is now entering Japan again.
    • Good news is also the near-full employment in Japan: 2.8% unemployment is the best achievement among OECD countries. Even better news: before seasonal adjustment, the number of regular employees increased 1.5 percent from a year earlier to 33.97 million, up for the 27th straight month. Meanwhile, the number of non-regular employees fell 0.5 percent to 20.05 million, down for the first time in 15 months. The internal affairs ministry official said, “An increasing number of companies are moving to convert non-regular workers to regular employees, in order to secure sufficient staff.” That is a quite different trend from what is happening in The Netherlands, where the number of freelancers is high and on the rise (Yomiuri / The Japan News).
    • Trump’s policy, or the lack of it, might result in a stronger yen, writes the Nikkei. I think much will depend on the outcome of a Japan – US summit on April 18 when VP Pence and Commerce Secretary Wilbur Ross will be in Tokyo to discuss a bilateral trade agreement. Trump has so far maintained that Japan manipulated its currency, so the topic of exchange rate could be imminent.

  • Corporate:
    • Big news in The Netherlands when Toyota Industries announced that it would acquire logistics systems provider Vanderlande for EUR 1.16 bln (Reuters), but somehow the news did not make for many Japanese headlines. A major step for both companies as Vanderlande’s technology and products are assured of continuity as well as expansion. In 1996 Japanese company Daifuku was ready to pay 150 mln guilders for the company that had a sales of apr. 10% of its current turnover. It wasn’t successful, this Japanese-Dutch cooperation. I am sure Toyota Industries’ acquisition of Vanderlande will be a shining success.
    • Toyota Motor and other Japanese companies might be looking to pamper Donald Trump, but that’s different for Uniqlo’s CEO Tadashi Yanai. He blasted these measures by Trump, saying, “They would not do U.S. consumers any good.” Even if Trump directly called on Yanai’s company to build a plant in the U.S., as he did with Toyota Motor, Fast Retailing “would not be able to manufacture [products] at costs that enable attractive price points for customers” in the U.S., Yanai said. Yanai said the company would withdraw from the U.S. altogether if Trump did so because “then there’d be no incentive for us to be in the U.S.” (Nikkei).
    • Toshiba, that is likely to miss quarterly earnings deadline for 3rd time according to Reuters and that might face a loss of USD 9 bln due to its write-off + claims related to US nuclear power plant builder Westinghouse, was accused of lying by its shareholders. “There is a chronic culture of lying. We can’t possibly trust such a company. Shame on you,” an angry shareholder said in a meeting held outside Tokyo, which was shown to reporters through a video feed. Seven months ago the company had promised a clean break from a USD 1.3 bln accounting scandal in 2015 through a turnaround plan centred on its nuclear and flash memory businesses. Toshiba even risks a delisting. What a drama for a once blue-chip company.

  • Society:
    • Sontaku … “Unspoken word behind a string of Japanese scandals”, headed the Financial Times – and it referred to PM Shinzo Abe’s scandal-soaked kindergarten, the fraudulently padded accounts of Toshiba and a trio of sacked news anchors. “Sontaku refers to the pre-emptive, placatory following of an order that has not been given. The word may not (until now) be widely used by Japanese, but everyone instinctively gets its sinuous prevalence in both government and private sectors.” Somehow this article by FT’s Leo Lewis made other newspapers, incl. the Nikkei and the Asahi wrote articles about this word, as if it was coined by Leo Lewis. “In many ways sontaku is a classic cop-out – an excuse for wrongdoing that joins ‘groupthink’ and ‘reflexive obedience’ on the list of Japanese self-criticisms that neatly dilute individual responsibility in the well of cultural explanation.” Fascinating.
    • Two articles on the white surgical masks Japanese often wear in Japan – and also abroad. The first one is by Japan Today. “When a group of masked Japanese tourists hit up an ASDA supermarket in the Merseyside town of Southport, England, their fellow shoppers were decidedly alarmed. According to an article by local news site On The Spot News, the group of tourists were spotted making other shoppers uncomfortable, with one witness to the scene stating: ‘I have never seen anything like this before. I immediately thought that this was some sort of terrorist operation in place and could see other people were getting really anxious. My family were genuinely frightened. ‘I asked a member of ASDA staff what was happening and was told that it was probably some type of ‘cultural thing’, which did not answer my question or allay our fears. The masked people were pulling big cases on trolleys, which could have contained anything.’”
      One month ago Rocket News 24 explained why Japanese wear those white (and sometimes other colored) surgical masks: not only for health reasons (to avoid spreading your bacteria in the train / work / convenience store), but also to prevent getting hay fever, seal yourself off from communicating with others, to keep your mouth warm, or to not have to put make-up to your face. There is even a company that has strawberry scent in its masks “to prevent your metabolism and loose weight”.  Mind you, this is a EUR 200 mln market in Japan.
    • Germans are never free from some angst and Deutsche Welle asks if we should worry about the cherry blossom in a time of climate change. And it is true: In Japan, cherry blossom festivals are being scheduled as much as 3 weeks earlier than 60 years ago. But for the time being, let’s cherish cherry blossom festivals, by the way a major Japanese soft-export product. As we speak, April 2 2017 Tokyo’s cherry blossom trees are in full bloom with hanami-parties all over the place. Wherever you are, enjoy the ultimate symbol of spring.

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Have a great Sunday and a fruitful and sunny week!
Radboud Molijn