News from and on Japan March 11 – 24, 2018

Trump as frenemy, robots and their 17th century ancestors, Japan as first casualty in trade war, how many Unicorns in Japan? Evacuation in Fukushima, on death-row in Japan and Japanese acquisitions in the Netherlands

It must be tough times for PM Shinzo Abe, being grilled in parliament over a land-sale and with his good friend Donald Trump being less reliable than anticipated when he decided not to exempt Japan from trade sanctions. Then there is the planned meeting between Trump and Kim Jong Un, with hardly any role for Japan. Let’s call it a challenge for Mr. Abe.
But, obviously there is more to report from Tokyo in the last two weeks.
  • Politics:
    • We live in times where strongmen rule the world. Or, where strongmen think they pull the strings. Or perhaps: where we think that they are in control. Trump, Erdogan, Xi, Putin, Sisi … tough men that you have to counter with determination. But how about Japan? Is Shinzo Abe indeed Japan’s strongman? Well, perhaps not much longer. In the wake of the Moritomo scandal, where a very conservative school was able to buy public land in Osaka with a 85% discount and with the prime minister’s wife’s consent, PM Shinzo Abe is rapidly loosing support. Why? He denied that his wife Akie was in any way involved in the transaction and he repeatedly said “I will resign if either I or my wife are proven to have been involved in the land sale in 2016.” However, with falsified documents in which Akie’s names was erased, a bureaucrat who committed suicide and the most important tax-official resigned, there are not many Japanese people who believe the Mr. Abe is fully sincere in this case. So, time to look who could be his successor. Bloomberg quoted a Kyodo poll that found former Defense Minister Shigeru Ishiba is the most popular candidate to become party leader in September, with 25.4 percent of respondents picking him. Second was Shinjiro Koizumi, son of a popular former prime minister, with Abe in third place. When Mr. Abe wins in September, he could become the country’s longest serving PM. When he looses, he could be forced to step down as PM. But there is a silver lining to this: it proves that Japan is a country where public opinion seems to matter and elections can make a difference, with or without a strongman.
    • Mr. Abe has invested much in his relationship with Donald Trump. In November 2016 he was the first world leader to congratulate the President elect, they played golf, Abe presented him at a golf round in Japan with a golden driver, but “after 16 months of warm words, lavish gifts and rounds of golf, Japan’s Shinzo Abe may be discovering the limits of personal rapport with Donald Trump”, reports Bloomberg. Trump took his friend Abe by surprise when deciding to meet with North Korean strongman Kim Jong Un and he did not put Japan’s name on the list of countries that will be exempted – for the moment – from import tax levies on steel and aluminium.  Even worse: “I’ll talk to Prime Minister Abe of Japan and others – great guy, friend of mine – and there will be a little smile on their face,” Trump said Thursday at the White House. “And the smile is, ‘I can’t believe we’ve been able to take advantage of the United States for so long.’ So those days are over.” 
    • From Tokyo’s perspective, the problem on the Korean Peninsula is not simply that Pyongyang’s nuclear and missile capabilities are growing; it is also that Kim blatantly desires to demonstrate those capabilities, and to do so at the expense of Japanese security, writes Foreign Affairs. “North Korea has a reputation of not abiding by agreements, and today it has a lethal military arsenal to show for it. Thus, even if Trump and Kim hash out a deal, there is little reason for Abe to believe that Kim will give up his nuclear and missile capabilities, given how hard he has worked to develop them up to now. Expect Japan to be very skeptical, and to demand sustained evidence of Kim’s intentions. Like the US and South Korean experts, Tokyo policymakers have little reason to trust Kim’s quick about-face. … Abe will need to safeguard his position as Trump’s closest confidante in Asia. In Japan’s lower house election last fall, Abe campaigned on his ability to keep Japan safe against North Korean belligerence. The Japanese public continues to believe its prime minister can fulfill that promise, largely because he has such a close relationship with the unpredictable US president. Trump’s unexpected acceptance of a diplomatic opening to Pyongyang creates a far more difficult future for Abe – one that not only tests his ability to reduce North Korea’s threat to Japan but also tests his legacy as Japan’s most reliable defender.”

  • Economy:
    • Japan gains dubious title of first big trade war casualty”, writes Leo Lewis in the Financial Times. The sharp surge of the yen and a brutal 3.6 per cent plunge for Tokyo stocks combined on Friday (March 23) gives Japan the title it most dreaded: the first major casualty of the US – China trade war. “The decision by the Trump administration not to exempt Japan from tariffs primarily aimed at China produced a mood that traders described as reminiscent of the ‘chilling uncertainty’ that followed the UK’s 2016 decision to leave the EU.
    • Also the New York Times seems surprised by Mr. Trump’s stance on Japan. For anyone who has been paying attention, there have been hints all along that in matters of trade, Tokyo should regard Mr. Trump as much “frenemy” as friend. “During the presidential campaign, he seemed to harbor three-decades-old perceptions of Japan, chastising it for ‘crushing’ the United States in trade, invoking the specter of the 1980s and the height of the trade wars between the two countries. After he was elected, he threatened to impose a ‘big border tax’ on Toyota if it built a new auto plant in Mexico. In niggling comments during a visit to Tokyo last fall, Mr. Trump told Japanese executives to ‘try building your cars in the United States instead of shipping them over,’ ignoring the fact that Japanese carmakers build nearly four million vehicles in plants in the United States annually, more than twice the number the industry ships from Japan.
    • So Japan, get you act together and make it by yourself! But … “Nations looking for new waves of economic growth are competing to nurture entrepreneurs and the companies they start. But Japan is hobbled in this race. Its culture appears risk-averse. So even though venture capital funds raised a record amount of yen last year, they didn’t do much with it”, writes Nikkei. The paper lists the number of Unicorns (startup companies valued at over USD 1 billion) worldwide. Conclusion: where the USA has 99 unicorns, China 45, India 9, the UK 7, Germany 4, South Korea 3, Japan has … 1. There are several reasons: “first, most Japanese venture companies are concentrated in a narrow field – developing game apps for smartphones. Secondly, many of Japan’s ‘socially successful’ entrepreneurs – graduates of prestigious universities who went on to work for financial institutions – are tactful but have difficulty taking risks at critical moments. In a nutshell, Japanese entrepreneurs are inward-looking and lack ambition.

  • Corporate:
    • The Netherlands has become – again – hunting ground for Japanese companies. Two deals in the last weeks: Royal Ten Cate has been acquired by Toray Industries in a deal that looks remarkably to that when Teijin bought AKZO Nobel’s fiber division from CVC Capital, after CVC carved out this fiber business – and sold it to DUJAT member Teijin. Ten Cate was a listed company and was delisted apr. two years ago by a consortium headed by Gilde Buyout Partners. Deal value EUR 930 mln. On a much smaller scale Mitsubishi Chemicals Performance Polymers bought Dutch Filaments established in 2014 to boost its 3D printing business.
    • Bid-rigging, or Dango in Japanese, is often to be found in large infrastructural projects, everywhere in the world. In The Netherlands we have seen this with the construction of various railway projects, incl. the Betuwelijn that connecting Rotterdam Port with the German Hinterland. Costs: four times the original amount, still loss making but a boon for the companies involved in the constriction. The Maglev or magnetic levitation line between Tokyo and Osaka (438 km in less than an hour) that is under constriction will be commissioned as scheduled for costs that are probably not too much in exces of the original planning, but with Dango as an inevitable ingredient. Ohbayashi, Kajima, Shimizu and Taisei executives are arrested or under investigation (Nikkei.)
    • Two weeks ago I reported on the occasion of International Women Day Japan’s performance when it comes to women at the top. The Nikkei published an article on the subject two days ago and Japan ranks 54 worldwide, just above Jordan and Saoudi (The Netherlands is also not outstanding either.) With Japanese companies already extremely profitable, Japan INC. could become even a better performer as a study by Boston Consulting Group suggests a link between the presence of female directors and profitability. So Japan, get your women to the top.

  • Society:
    • This March it has been 7 years ago since the magnitude 9.0 earthquake struck off Japan’s northeastern shore, the most powerful earthquake ever recorded to have hit Japan. “Fukushima” has become a household name since. But what happened to the people in the region of Fukushima and was it worthwhile to have this massive evacuation? “Fukushima nuclear disaster: did the evacuation raise the death toll?”, heads Financial Times in a Big Read. “As life slowly returns to normal in Fukushima – visitors to the plant no longer need radiation suits, a face mask is sufficient – it is becoming increasingly clear, say experts, that the evacuation, not the nuclear accident itself, was the most devastating part of the disaster. It reaped a terrible toll in depression, joblessness and alcoholism among the 63,000 people who were displaced beyond the prefecture; of those, only 29,000 have since returned. There were 2,202 disaster-related deaths in Fukushima, according to the government’s Reconstruction Agency, from evacuation stress, interruption to medical care and suicide; so far, there has not been a single case of cancer linked to radiation from the plant. That is prompting a shocking reassessment among some scholars: that the evacuation was an error. The human cost would have been far smaller had people stayed where they were, they argue. The wider death toll from the quake was 15,895, according to the National Police Agency. Zero evacuation may be implausible. At the height of the crisis there were fears of much worse contamination. The question is rather whether people should have been kept away for weeks, not years. ‘With hindsight, we can say the evacuation was a mistake,’ says Philip Thomas, a professor of risk management at the University of Bristol and leader of a recent research project on nuclear accidents. ‘We would have recommended that nobody be evacuated.’”
    • Japan prepares to execute up to 13 members of Aum Shinrikyo cult, wrote Guardian in an article that refers to the sarin attack in 1995 on the Tokyo subway, which killed 13 people and caused illness among thousands of others. Since 2008 18 people have been executed in Japan and there are more than 100 people on death-row. This link shows you the premises where the condemned inmates spend their time: https://www.mirror.co.uk/news/world-news/death-penalty-execution-japan-hanging–10797256.
    • No first time visitor to Japan will not be tempted to attend a tea-ceremony, even if that is not easy to understand: https://www.youtube.com/watch?v=ayuxbermY_w. From the 17th century onwards, after the introduction of the pendulum clock in Japan (originally a patent by Christiaan Huygens), wind-up dolls have been made, also to serve tea: https://www.youtube.com/watch?v=Flwdw5YsLyY. There is also a 21st century robotized tea ceremony: see https://japantoday.com/category/features/food/robot-performs-traditional-japanese-tea-ceremony. CNN recently presented a 2020 robot – and I think that soon after 2020, thanks to AI and other high-tech it will be difficult to distinguish a robot from a human being: https://edition.cnn.com/videos/world/2017/06/13/vision-the-future-of-japan-robot-nation-orig.cnn/video/playlists/vision-future-of-japan/

From Tokyo where the cherry blossoms can be fully enjoyed: have a great working week!
Radboud Molijn, Global Bridges BV for DUJAT / Dutch & Japanese Trade Federation
 

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