News from and on Japan, May 28 – June 10, 2017

Who would win a war between China and Japan? Tokyo to take-over London’s role as major financial hub? Taizo Son on entrepreneurship in Japan and why to bring your high heels to Osaka?

Mixed signals about economic developments in Japan: Abenomics is working and at the same time the number of households on welfare increased. Without doubt it is partly the result of a greying society, but it also marks the increasing gap in wealth between the haves and the have-nots like in any other rich nation. But there was more to report from and on Japan in the last 2 weeks:
  • Politics:
    • This week Japan’s Diet (Lower House) approved a legal change to allow 83-year-old Emperor Akihito to abdicate. That should be welcome news for Japan’s Emperor Akihito. But, writes Japan Today, “many Japanese believe it is also time to properly address a potential succession crisis of the imperial family under the current male-only inheritance rule. The abdication law was enacted Friday after parliament adopted a resolution calling on the government to consider ways to secure a stable imperial succession, but a deadline for drawing a conclusion was omitted from the clause.” Part of the debate focuses on the many duties Japan’s Emperor has to perform as head of state. With a dwindling Imperial family to take up more duties, one should have appreciation for the way the current 83-year old monarch fulfils his duties.
    • In 1987 the Japanese government created the post of ‘special adviser to the Cabinet Office’ – and now there are 12 of them. The Nikkei carried an article “Meet the intellectual muscle behind Japan’s prime minister” and describes the most important members. Interesting to see who are the persons behind “Abenomics”. One of them is a professor emeritus of Harvard (who invited Noel Prize laureates Stiglitz and Krugman to meet with PM Abe), another is Etsuro Honda, former professor at Shizuoka University and now Japan’s ambassador to Zurich.
    • With an American President whose words are not always reassuring Japan’s leaders when it would come to a not-hoped for clash between Chin ad Japan, and China becoming more and more assertive in claiming territory,  The National Interest just reprinted an article by James Holmes, Professor of Strategy at the US Naval War College: Who would win a war between China and Japan? “A Sino-Japanese war could break out over matters Westerners deem inconsequential. It would be a coalition war, and it could be big, bad, and long. The US-Japan alliance might appear solid in the early going, obscuring subterranean fractures within the alliance. Yet transpacific unity might dissipate should the struggle wear on and American resolve flag – exposing these fissures.” Also Forbes carried an article on the subject: “China Sets An Easier Goal In Its Dangerous Maritime Contest With Japan”. Let’s hope that reason wins over emotion.

  • Economy:
    • Brexit, and now for sure Ms. May’s disappointing election results, provoked Tokyo’s Governor Ms. Yuriko Koike to position Tokyo as a top financial hub. “We need to seize the chance,” Koike said, pointing to the British general election Thursday and uncertainty surrounding the status of London as a major financial center. Among her key proposals: lowering taxes for financial services companies to levels in line with global peers, such as London and New York; making the city an easier and more comfortable place to live in; and attracting more foreign financial companies to Tokyo. The strategy is aimed at making the most of Japan’s underutilized assets, such as the trillions of dollars its citizens have in savings accounts as well as the nation’s strong engineering base. “We will attract and nurture financial technology companies and asset managers, and make Tokyo the center of the fintech industry,” Koike said.
    • Abenomics Back On Track as Japan’s Abe Marks Longevity Record“, writes The Diplomat, a Toyo-based online magazine. “2017 could mark a turning point for the prime minister’s signature economic reform policy”, and it quotes Nikko Asset Management representatives. “What is interesting in Japan is that, empirically, there appears to be an inflection point around 3 percent unemployment from which inflation starts to pick up. This leads us to believe that the final push toward wage hikes and inflation is finally here,” it said. “As the labor market tightens further, we are likely to see more wage hikes. As a result, we should finally start to see households spend more as their concerns regarding future income ease. This in turn should result in inflation picking up, kicking off a virtuous cycle.” Nikko AM also sad that inflation would “pick up gradually in the second half of 2017,” helping spur higher expectations of inflation, as sought by BOJ Governor Haruhiko Kuroda.
    • However, the number of households on welfare in Japan in March increased by 2,588 from the previous month to hit a record high of 1,641,523, up for the first time in three months, the Ministry of Health, Labor and Welfare said Wednesday as quoted by Nikkei. “The increase reflected a rise of people who lost their jobs at the end of the fiscal year in March. The data excluded households on welfare whose payments were being suspended. Households with only elderly members aged 65 or over and those made up of only the elderly and children under 18 numbered 855,586, or 52.4 percent of the total recipient households. Of the elderly families, single-member households accounted for 90 percent, totaling 776,415.

  • Corporate:
    • Acquiring companies  abroad is not always a panacea for Japanese corporations wishing to expand (or to invest their access funds). Bloomberg stated that companies in Japan “booked at least JPY 2 trillion (EUR 17 billion) of write-downs on their overseas assets in the fiscal year ended March – and it based this figure on the latest earnings reports released through mid-May. “Dealmakers in Japan blame some bad deals on a corporate culture that encourages firms to seek out viable targets but discourages them from focusing on vital details like valuation and compatibility, according to executives Bloomberg interviewed. What can make matters worse, they say, is acquirers are often slow to cut losses when things don’t work out.”
    • Autonomous driving? OK, but how about autonomous navigating? Japanese shipping companies are working with shipbuilders to develop self-piloting cargo ships, writes BBC. “The ‘smart ships’ will use artificial intelligence to plot the safest, shortest, most fuel-efficient routes, and could be in service by 2025. The AI will also be used to predict malfunctions and other problems, which could help reduce the number of maritime incidents.” Mitsui OSK Lines and NYK plan to build about 250 self-navigating ships. Navigation and basic operations will be automated, while a human ‘captain’ based on shore will continue to look after ‘critical decision-making.  “The best helmsmen stand on shore” is a literal translation of a Dutch expression. Will be true in a decade!
    • We all know the name of Masayoshi Son, the outspoken founder and CEO of Softbank (and Japan’s richest person). I did not know that he has a brother with a similar drive and gusto, Taizo Son, who started with his brother Yahoo Japan and who founded GungHo, making him a billionaire. He had an interview with Nikkei on Japan’s start-up culture. “Taizo, convinced he will one day outshine his brother, quietly invests through Mistletoe, a venture investment vehicle he founded with his own considerable capital. It has basic psychological work to do in Japan: triggering an ‘attitude revolution’ towards business risk. Since 2013, Mistletoe has directly invested approximately USD 100m in about 50 start-ups. One of the largest is Planet Table, a Tokyo-based online platform that aims to reduce food waste. Through Mistletoe, Mr Son has incubated medical delivery drones, micro satellites, self-driving cars and disease- detecting toilets – the technological furniture, he says, that will change the world.” Why is there no Google or Facebook in Japan? “Critics say that Japan cannot found a good venture company like Google, Facebook or Apple. But those companies didn’t emerge in the UK or China either. It is wrong to be sad that Japan doesn’t have a Google. We have a different approach. … Hardware engineers are as vital as their software counterparts. “When everything is connected, the Japanese can contribute their expertise at making the products and bringing them into the world of innovation”, se says.
      Very interesting remark at the end of this interview, partly explaining Japan’s entrepreneurial culture. “The Japanese demand too much quality,” he concludes. “They apologise when a train is five minutes delayed . . . There is too much quality and too many customer demands – and that sometimes gives you a waste of resources. Japanese society is too sophisticated.

  • Society:
    • Dragging your suitcase up and down stairs in Japan when you want to visit shrines, temples or whatever great location you have in mind? Leave your luggage in a cafe or restaurant, that is a new (also English language) service by Japanese company Ecbo, reports SoraNews24. With Ecbo Cloak’s partners (cafes, restaurants, shops) simply store your bags on their excess floor space, any size of luggage, including large suitcases and baby strollers. “Another advantage over the first­-come­-first-­served nature of lockers is that you can reserve storage space in advance. That way you’ll be assured of having a place to leave your bags, instead of having to roam from one bank of lockers to the next throughout the city until you finally find an opening.” See also https://cloak.ecbo.io/en.
    • Japan is the country of anime and mascottes – and voila: the challenge the Japanese Olympic Committee is facing when deciding what mascotte is to be seen – and marketed – for the Tokyo 2020 Olympic games. No easy task, writes Leo Lewis in the Financial Times as Japan has mascottes everywhere, for any occasion. So what to select is the key question? In a quite brilliant stroke of legerdemain, Toshiro Muto, the Chief Executive of the organising committee and his team “already appear to have solved their impending mascot crisis — or, at least, found a way to escape blame. The design process has been thrown open to both domestic and international competition, and hundreds of thousands of primary school pupils from across Japan will vote on the shortlist, before a final review by an adult panel. Never has market research and plausible deniability been so neatly achieved. The Olympic committee not only gets to boast that this is the first time a task of such paramount national importance has ever been entrusted to the under-11s — it also gives itself a vast defensive wall of children to blame if the design they go for is, in fact, a bit rubbish.”
    • Great marketing gimmick: Hilton Osaka is offering women an economic incentive to slip into a pair of high heels. One of the dining and drinking options at the Hilton Osaka is the cafe/bar My Place, which just opened at the end of March. Hoping to shore up its credentials as a stylish, sophisticated establishment, starting June 15 My Place will be giving discounts on food and beverage orders from women wearing heels, and the higher their heels, the more they’ll save. To qualify as “high,” the heels must be at least five centimeters (two inches), which gets you 10 percent off any non-course meal menu options, including My Place’s selection of craft beers, organic wines, and cocktails. Each additional two centimeters of heel height ups the discount, with heels seven to nine centimeters shaving 15 percent off the tab, nine to 11 centimeters 20 percent, 11 to 13 centimeters 25 percent, and 13 to 15 centimeters 30 percent. Go beyond 15 centimeters (5.9 inches), and there’s an extra bonus as the discount tops out at 40 percent off. 
      In Hokkaido a hotel gives a discount to men when they are bald… check it out: http://en.rocketnews24.com/2014/08/15/lose-hair-save-big-hokkaido-hotel-offers-discounts-for-bald-guests/
Have a great Sunday and fruitful working week!
Radboud Molijn