News from and on Japan, July 9 – 22, 2017
Japanese DNA, PM Abe’s popularity down, but what about Abenomics? How many millionaires (in dollars) in Japan? How to connect 1 trillion devices? Why is the Nikkei not moving up? Japanese DNA and sushi robots
- Approval ratings for Japan’s Prime Minister Shinzo Abe have hit an all-time low, raising questions about his mandate to lead the country. Fewer than one in three voters support his leadership, a mere 29.9 per cent, according to a survey for Jiji news agency. Public support for the cabinet slid nine points between June and July to 35.8 per cent, Japan Today reports. More than half of those who expressed disapproval – 51.6 per cent – said Abe could not be trusted. That is bad news, not only for PM Abe, but also the Japanese economy. “Japan needs Abenomics, With or without the man”, headed the Financial Times. “Mr. Abe’s fall from grace has little to do with the economy, which is performing well. Rather, it reflects a pair of disastrously similar scandals. In one case a private school operator called Moritomo Gakuen bought discounted public land. In another, an operator called Kake Gakuen got a license to open a new veterinary school in a special economic zone. Both companies are linked to Mr. Abe. There are signs that officials acted, perhaps unprompted, to please the boss. … Where Mr. Abe has gone wrong is turning away from the economy to focus on issues of constitution and foreign affairs. They matter greatly to him but little to the average voter. A 2015 security bill and a conspiracy law this summer both hurt him in the polls. Now he has vowed to revise Japan’s constitution by 2020. The revision he wants is perfectly reasonable, but an extremely low priority on any objective list of issues facing the country.”
- There will be a host of contenders looking to replace Mr. Abe – if his popularity would go south further – and one of them is without any doubts Ms. Yuriko Koike, Tokyo’s Governor whose newly established party “Tomin First no Kai, or “the party that puts Tokyo citizens first” crashed Mr. Abe’s LDP in Tokyo elections earlier this month. “Let’s make Tokyo great again”, is her new motto. “‘First things first, we need to create an environment to attract international financial institutions to Tokyo, such as by establishing multiple international schools, securing housekeepers and preparing multilingual medical facilities,’ she said. The Tokyo government will come up with an interim blueprint by autumn.” In this Nikkei article I noticed that no less than 820,000 houses in Tokyo are unoccupied and this number could shoot up easily given Japan’s low birth-rate.
- Unnoticed in The Netherlands is the battle by the population of Okinawa, a chain of islands 1,600 km south of Tokyo, to cope with the US bases at Okinawa. Okinawa makes up only 0.6 percent of the Japan’s land area, yet approximately 62% of U.S. bases in Japan (exclusive use only) are in Okinawa. Nearly 30,000 American servicemen are located in a number of bases in Okinawa. In 1996 it was decided to move the largest base, in Futenma, to a quieter location, at Henoko, but protests by the Okinawans, headed by Governor Takeshi Onaga, are rampant. The Economist concluded that there is a risk that the governments of America and Japan will win the battle for Henoko but lose the heart and minds of long-suffering Okinawans. Meanwhile, the Okinawa Prefectural Government will file a new lawsuit against the central government Monday to block ongoing construction work at the relocation site for a contentious U.S. Marine base, local government sources told earlier this week to The Japan Times.
- The man behind Abenomics is not only Shinzo Abe himself, but also Haruhiko Kuroda, the Bank of Japan’s President who “was hired to make irrationally exuberant adventurism seem safe. Abe bet correctly that Kuroda’s gravitas as a former Finance Ministry bigwig would keep at bay bond vigilantes tempted to bid up yields. But the BOJ’s historic easing was always meant to set the stage for the main event: a structural change big bang that loosens labor markets, catalyzes innovation and empowers women. Since Tokyo has achieved little on the reform front, Abenomics is mostly just Kurodanomics”, writes journalist William Pesek in the Nikkei. “Kuroda’s shock-and-awe monetary blasts have struck many as audacious, if not excessive. After weakening the yen by 30%, cornering the bond market, and big-footing stock bears by fueling a massive Nikkei rally is he still, somehow, thought to be underperforming? The whisper campaign is code for: Kuroda had better try harder, and fast, to save Abenomics and achieve the BOJ’s 2% inflation target. Yen bulls might want to take cover. Recent interventions to cap bond yields are a sign that Kuroda got the message – and may be about to weaken the yen anew.
- And the Japanese yen is lower indeed, resulting in a big increase of exports. The Japanese Ministry of Finance reported that exports grew 9.7 percent year-on-year in June, versus a 9.5 percent annual gain expected by economists in a Reuters poll. It followed a 14.9 percent year-on-year rise in the previous month (Reuters).
- Bloomberg / Business Week carried an article about Japanese Hight Net Wort Individuals. “Japan’s economy doesn’t produce many of the super-rich – only six Japanese make Bloomberg’s list of the world’s 500 wealthiest people, compared with 164 Americans – but it is cranking out millions of millionaires. In fact, Japan has more people with liquid assets worth USD 1 million – 2.7 million of them – than Germany and China combined, according to the World Wealth Report from consulting firm Capgemini. Many of them are retired, mortgages paid, children raised – and what is next? Luxury travel! In May East Japan Railway Co. debuted ia 10-carriage sleeper that whisks its 34 passengers around in absolute splendor, Bloomberg reported. “A modern re-imagining of the old Orient Express, it has walls and ceilings that look like a glass honeycomb, a lounge pianist and menus by Michelin-starred chefs. Despite ticket prices as high as USD 8,400 for a three-night trip, it’s fully booked through March.”
- Great read in the Nikkei: “Japanese companies have never been in better financial shape. Their sky-high ratio of capital to assets testifies to that fact, with the average figure topping 40% for the first time last fiscal year. There’s a catch, however: They are inveterate hoarders, which critics say points to a corporate governance problem”, writes Nikkei, adding that “Saving money itself is not a bad thing, of course. Diligently socking away profits helped Japan Inc. absorb the collapse of the economic bubble at end of the 1980s and the global financial crisis that erupted in 2008. But companies have done a poor job of putting that money back into the economy by funneling it into investment or returning it to shareholders.” As a result Japanese stocks seems to be undervalued compared to those of American companies. “Part of the reason U.S. companies are enjoying higher stock prices is because their executives are careful not to let equity capital increase too much. The amount they spend on shareholder dividends and share buybacks exceeds 100% of earned profits. The higher shareholder returns, in turn, help boost stock prices. Japanese companies, in contrast, returned just 48% of their profits to shareholders in dividends and share buybacks in fiscal 2016. The remaining profits were held as internal reserves, which is why their cash and deposits totaled a record JPY112 trillion (EUR 865 bln). An impressive figure, but it is money that could be used to help the companies grow. All this hoarding has institutional investors taking a tough approach toward Japanese companies. Institutional Shareholder Services, a U.S. proxy advisory, recommends that investors vote against proposed executive appointments at companies where the ROE has averaged less than 5% for the past five years, unless the figure was 5% or higher in the previous fiscal year.”
- Do you remember the Fyra, the Dutch equivalent of the Shinkansen? The Shinkansen is operational since 1964, the Fyra was operational in 2013 … for only two months. Bad rolling stock from Italy, the Italian company AnsaldoBreda took back the 9 trains delivered and paid EUR 125mln as compensation. A report by EY showed that AnsaldoBreda had at that time a solvency of -47.5% and low credit ratings for its parent company Finmeccanica. In 2015 Hitachi bought AnsaldoBreda and Ansaldo STS from Finmeccanica – and trouble again, now because Hitachi was not able to fence off Elliot, the activist hedgefund that also targeted Dutch paint maker AkzoNobel. The result is a paralysed Board at Hitachi’s acquired company in Italy.
- Robots and AI: is there is one evangelist in Japan it is Masayoshi Son, Softbank’s founder and CEO, who launched a couple of months ago an investment fund of no less than USD 93 billion. Prior to this he had acquired ARM Holding, a UK manufacturer and designer of semiconductors. ‘I am a believer in the singularity thesis,’ the Japanese telecommunications company’s 59-year-old founder said as quoted by the Nikkei, referring to futurist Ray Kurzweil’s hypothesis that machine intelligence will at some point exceed that of humans. Thanks to ever-accelerating progress in information technology, especially in computer chips, Son’s vision is edging closer to reality. And he sees big opportunities in that. “Even if we took over the entire mobile phone market, that would still amount to just 7 billion lines,” the CEO said. “We want to connect 1 trillion devices.” I know that Mr. Son likes big numbers. This is for me the first time that he passes the 1 trillion barrier.
- I was once told by a then famous Japanese professor, Tadanobu Tsunoda, that “the Japanese are Japanese because they speak Japanese”. In other words it is, according to him, language more than anything else that defines cultures and societal structures. Well, read this article in The Japan Times, a summary of an article that was published in New Scientist about Japanese DNA (apparently shared with Chinese and Koreans): one of the genes controlling the release of serotonin can be found in a short and a long version. “The chunk is found in the serotonin-transporter gene on chromosome 17. You’ll have heard of serotonin, a chemical commonly associated with feelings of happiness. We tend to feel happier when there is more serotonin in the bloodstream, which is why stopping it from being mopped up by using drugs such as Prozac can benefit people suffering from depression. The serotonin-transporter gene’s job is to make a protein that carries serotonin away to be recycled. Joan Chiao, a psychologist at Northwestern University in Evanston, Illinois, knew that the short form of 5-HTTLPR occurs at a higher frequency in East Asia than it does in, say, Europe. The short form, remember, is the one linked to depression, while the long form is associated with greater reported well-being. Could these genetic differences between East and West form the basis of cultural differences in individualism and collectivism? She teamed up with colleague Katherine Blizinsky, who is also from Northwestern, to examine the idea. The pair gathered data on 5-HTTLPR from 50,135 people in 29 countries, including Germany, the U.K. and U.S., Japan, China and South Korea. They compared this with other data from those countries, such as cultural values, economics and disease prevalence. They found that collectivist cultures were much more likely to contain people with the short form of 5-HTTLPR. The relationship held even when they controlled for economic and health factors.” Whatever may be true of these findings, interesting to read.
- With all developments in two area’s as different as autonomous driving and food delivery services, here the combination: sushi delivering robots. The Tokyo based company ZMP that develops robots started trials with a sushi delivering device that moves with the speed of 6km an hour. ZMP has teamed up with delivery service Ride On Express and the sushi robot is designed to cater 60 people with sushi meals (Japan Today).
- More robot news, albeit on a rather sad subject: a newly developed robot by Toshiba has most probably detected the location of the melted rods of the failed #3 nuclear power reactor in Fukushima. Previous robots failed due to a extreme high radiation (which gives these robots almost human-like features.) The recent findings could speed up the cleaning process that are estimated to cost USD 72 billion and that may take over 40 years. TEPCO aims to decide on the procedure to remove the melted fuel from each unit as soon as this summer. And it will confirm the procedure for the first reactor during the fiscal year ending March 2019, with fuel removal slated to begin in 2021 (Bloomberg).