DUJAT News Coverage on Japan week 22 – 28 August 2016

>>>Download PDF version


Last week Sunday saw the closing ceremony of the Rio Olympics, with PM Shinzo Abe dressed as Super Mario, popping up from a green pipe. See the video below. As impressive was Ms. Yuriko Koike, Tokyo’s newly elected governor, who vowed to control Japan’s costs for this major event in 2020 and who added a word to the Olympics motto of Faster, Higher, Stronger: “let’s make them Cleaner!”. Herewith the news from and on Japan in the week of August 29, 2016.


  • Politics:
    • TPP or the Trans Pacific Partnership and Japan: Politico carried an interesting read about the effects if the TPP is not to be approved by the US Congress. “Japan has frequently relied on ‘gaiatsu’, foreign pressure, to make difficult decisions on domestic reform,” a former US trade negotiator stated. “The provisions of the TPP itself are an important way for Japan to make some changes at home, as well as to create more market access among the other TPP member economies.” Although not explicitly mentioned in this article, I think that well needed reforms of the Japanese agricultural sector will be delayed.
    • Compared to Chinese investments in Africa, Japan performs poorly, but this is going to change with coming week’s Tokyo International Conference of African Development / TICAD. PM Abe arrived some days ago with a 75 strong delegation of business leaders and looks to invest JPY 30 trillion or EUR 280 bln in private- and public-sector funds to invest in Africa over three years to boost infrastructure building in the resource-rich continent. Japan ranks now #11 in terms of FDI in Africa, well behind the USA, UK and China (The Financial Times).
    • The G-20 is to take place in Hangzhou from September 2 – 4 and China urged Japan that it should play a “constructive” role because cooperation is in the interests of all parties, China’s top diplomat told a visiting Japanese envoy. See here an article in the South China Morning Post / SCMP, the newspaper bought by Alibaba early this year.  SCMP is widely recognised to be inclined towards the central government of China, and questions have been raised over the paper’s editorial independence and self-censorship, according to the Wiki page, but its views are interesting when you want to see the Chinese perspective. Meanwhile Tokyo is planning to build three more patrol ships for the Japan Coast Guard (JCG) to better protect the waters around the disputed Senkaku Islands from Chinese intrusions, Kyodo news agency reported on 22 August.
  • Economy:
    • In July the CPI in Japan showed the biggest annual fall in three years, according to Reuters, and that is not good news for the Abe government. The nationwide core consumer price index, which excludes volatile fresh food prices but includes oil products, fell 0.5 percent in July from a year earlier, the fifth straight month of declines, data showed on Friday. It exceeded a median forecast for a 0.4 percent decline and June’s 0.4 percent drop. For the Bank of Japan that is aiming to materialise a 2% inflation (thus also reducing Japan’s public debt), it becomes a true challenge to reach its target. There is much to blame (strong yen, Brexit), but domestic consumption is not picking up.
    • Any idea on Japan’s hourly minimum hourly wage? This will rise by JPY 25 to JPY 823 or EUR 7.219 (1 JPY = 0.00877101 EUR) on average in fiscal 2016, according to the Health, Labor and Welfare Ministry. This will mark the sharpest growth in the minimum wage since Japan began evaluating it by the hour instead of as a daily wage in fiscal 2002 (Japan Times). Interestingly enough, minimum wages vary per region in Japan.
    • “Shinzo Abe doesn’t wear a wizard’s hat. Nor is the prime minister known to be skilled in sorcery, voodoo or hypnosis. And yet somehow Abenomics entranced millions for nearly three years, none more so than the MBA set in New York and London that should have known better.” It is an interesting article in the Japan Times that tries to explain why so many well-known economists including Paul Krugman were convinced that Abenomics was to work. Richard Katz, publisher of The Oriental Economist, says there is / was “a misguided faith in the power of monetary policy by itself to produce a desired rate of inflation and for that inflation to produce better real growth. Japan was the first real-world experiment in applying that popular academic theory, and it has failed.” Likewise, he says, banks learned the hard way that “the desire to have a good story to sell to customers, plus lots of wishful thinking,” does not a recovery make. At the end of this article there is a tribute to former BOJ Governor Shirakawa. “The most prominent economist who saw this failure coming is Masaaki Shirakawa. He’s the BOJ governor Abe sacked in 2013 to make room for his chosen monetary wizard, Haruhiko Kuroda. Shirakawa resisted calls to abandon all monetary sanity and open the yen floodgates, arguing it wouldn’t be enough to end deflation. He’s been vindicated tenfold. As Shirakawa cautioned, there’s no magic wand to revitalise Japan – just a lengthy reform to-do list that Abe never got to.”
  • Corporate:
    • Japanese chip maker Renesas Electronics Corp. on Monday said it is in talks to buy U.S.-based chip maker Intersil Corp., a move that could strengthen the Japanese company’s business of making semiconductors for automobiles. Price tag: USD 3 bln. The Financial Times has doubts about this transaction. “There is a distinct lack of overlap between target and acquirer’s businesses: while Intersil has an automotive speciality, much of it relates to power management for electric vehicles. It ranks a lowly 63rd among world makers of automotive semiconductors, while Renesas is third. The acquisition is perhaps part of a strategy to diversify the business, but shareholders can achieve such diversification for themselves.” If Renesas were privately owned its shareholders would be trying to stop this deal at conception, says the newspaper. And interestingly, Renesas, the combined former chip businesses of Tokyo-listed NEC, Hitachi and Mitsubishi Electric, is for the bigger part state-owned. “Rebirth is a key theme in growth-starved Japan. In some cases the Japanese government has to play the role of worried parent. One such case is Renesas Electronics, bailed out by the government in 2013.”
    • At the same time, orders for 7 Japanese semiconductor-equipment manufacturers are picking up, underpinned by brisk demand for 3-D memory and ravenous investment in chip miniaturisation  Tokyo Electro, Hitachi Kokusai Electric, Tokyo Seimitsu etc.: shares up (Nikkei). I wouldn’t be surprised if there were some  acquisitions to be announced in the coming time.
    • Here a great article about cross-cultural communication: “Business in Japan plays by its own distinct set of rules from Western countries and even other Asian nations,” reports BBC News in an article about feedback in the workplace. “Traditionally, the Japanese language had no word for feedback because it just wasn’t something that anybody did, says Sharon Schweitzer, CEO of Protocol and Etiquette Worldwide, and an expert on how managers can assimilate in foreign countries. So they had to make up a word, fīdobakku.” “Managers in Japan aren’t likely to ask for an update because employees are expected to constantly provide them. It’s a process called hou-ren- sou and it involves subordinates sending their boss emails, all day long, about when they’re going to lunch, the percentage of the project they’ve finished, when they’re taking a coffee break, everything”. Foreign managers in Japan are often looking to single out extraordinary efforts by their Japanese workforce. Question is if that works …
  • Society:
    • The problems with the crippled nuclear reactor at Fukushima Daiichi are not yet over: around 10,000 tons of contaminated water have pooled in underground trenches around the Nos. 1 to 4 reactor buildings of the crippled nuclear power plant, according to the plant operator TEPCO. The electricity firm has so far removed a total of around 10,000 tons of highly radioactive water at three locations in the trenches running in the seaside of the complex and completed the procedure to fill locations concerned with cement to prevent water leaks, reports Japan Today. Still, the level of radioactive cesium remains unchecked at 40 locations in the trenches due to high radioactive levels as well as debris and other objects blocking the research operation. Around 8,000 tons of contaminated water, including those with an extremely low level of contamination, have also been found in the trenches running around the Nos. 5 and 6 reactor buildings. The two units have lower levels of radiation doses than the Nos. 1 to 4 units as there were no nuclear meltdowns or hydrogen explosions there during the nuclear disaster (Japan Today).
    • The area of Fukushima is also making headlines with a sustainable energy project: floating wind farm. At the center of Japan’s effort is a demonstration project off the coast of Fukushima north of Tokyo. The largest floating turbine project of its kind at the moment consists of a 2-megawatt turbine, a 7-megawatt turbine, a substation, and a 5-megawatt model, which was towed into place last month and is expected to begin generating power soon. Costs to mount floating wind farms are considerable less than those for seabed-fixed wind turbines. Japan is making a big effort, while also European countries such as France and the UK (Scotland) are building commercial floating structures. In Japan, operators of the Fukushima project have said installation of the first 2-megawatt turbine cost about 2 million yen a kilowatt. “Even with offshore wind operators winning more favourable tariffs compared with onshore projects, costs must still come down to at least 500,000 yen a kilowatt”, according to a representative of Marubeni, that is coordinating this project. Though costly, the payoff for Japan may be great. Japan has 500 gigawatts of potential floating wind capacity, according to a June 2015 report by Carbon Trust, an environmental group”, claims Bloomberg. I attach an overview of Feed in Tariffs / FIT’s in various countries for solar energy. Have a look at the high tariffs in Japan: no less than JPY 22 per Kilowatt hour, or apr. EUR 0,20.
    • One of the reasons why yours truly likes Tokyo so much is its often unexpected architecture. Here an article in CNN News, that describes a number of “micro-homes, tiny houses on tiny plots of land that serve the purpose: to make you live in one of the most exciting cities in the world. “In Japan, there’s a saying (‘tatte hanjo nete ichijo’) that you don’t need more than half a tatami mat to stand and a full mat to sleep,” says Yasuhiro Yamashita of Atelier Tekuto. “The idea comes from Zen – and a belief that we don’t need more than the fundamentals.” Yamashita’s houses sometimes have a footprint of 182 square feet or 17m2. Have a look at these pictures, unbeatable designs.
  • Recommended video’s: