DUJAT News Coverage on Japan week 12 – 18 September 2016

Wednesday September 21 is due date for the Bank of Japan, as it announced weeks ago that it would come by that day with a major change in its program to fire up the Japanese economy. Bank of Japan Governor Haruhiko Kuroda in July surprised investors worldwide by ordering a “comprehensive review” of the central bank’s policy measures and some economists see this as a sign there are doubts over the effectiveness of QE. Fine, let’s wait for next week Tuesday you would say. But that’s not what the markets think: they are confused by the unspecified announcement, and as a result the Nikkei was down this week.
And there was more this week: a major acquisition by Teijin, a research on how Japanese and Chinese see each other’s country and Apple heard it has also has to pay more taxes in Japan. Here the News from and on Japan in the week of September 12, 2016.

Politics:

* Arrogant, violent and to varying degrees, nationalistic: that is how the Japanese and Chinese publics see each other’s country, according to a new poll by Pew Research Center released last Tuesday that reflects the geopolitical tensions between the neighbouring
East Asia powers. To me a little strange as there are hundreds of thousands of Chinese tourists visiting Japan (good for Japan’ economy, great for Chinese people to relate with Japanese), but somehow this mutual benefit does not change their overall opinion. Obviously
media play an important role in opinion-creating. Here is an interesting article in the Nikkei, stating that
Chinese President Xi “behaves like a ancient Sinocentrist”. The article includes the images in The People’s Daily’s Sept. 6 domestic edition, showing how national flags were displayed at Xi’s meetings with G-20 dignitaries earlier this month, except
for the one with Abe, bottom right.
* Last Thursday Japan’s new Defense Minister, Ms. Inada, was in Washington to confer with her American colleague Ashton Carter – and she expressed in a speech to a Washington think tank, strong support for the US Navy’s “freedom-of-navigation operations”
in the disputed South China Sea, saying they went a long way to upholding “the rules-based international maritime order.” “Japan, for its part, will increase its engagement in the South China Sea, for example, Maritime Self-Defense Force joint training
cruises with the U.S. Navy and bilateral and multilateral exercises with regional navies.” (Deutsche Welle). A large majority of the Japanese are think that a confrontation between the Chinese and Japanese navy is inevitable.
* Two weeks ago saw a Japanese beauty queen with mixed ancestry (Afro-American & Japanese),
last week Japan’s main opposition party, DPJ, chose as its leader a woman with a Taiwanese father and a Japanese mother. She is the first person of mixed-ethnic heritage to lead a big political party in Japan, and has sought to cast herself as a voice
for the country’s younger generation, writes the Financial Times. However, she might have some trouble in national elections as she has a dual nationality, forbidden by Japanese law.

Economy:
* When it comes to advise on the Japanese economy, the best helmsmen stand on shore, but you can’t say this about Nobel recipient
Joseph Stiglitz in this article in the Guardian. He has a clear vision about
Japan’s debt (“Japan could protect itself from an interest-rate spike starts from the recognition that a large share of the money that the government owes it owes to itself. Many on Wall Street don’t seem to understand that what matters is the net debt
– what the government owes to the rest of society. If the government repaid the money it owes to itself – netting it out, in effect – no one would know the difference. But those on Wall Street who look only at the headline debt-to-GDP ratio would suddenly
feel better about Japan”), about’s Japanese white collar efficiency (“Data on output per hour worked suggest a supply-side problem, most clearly manifested in the service sector, where the impressive ingenuity seen in so many manufacturing industries
typically is nowhere in evidence”), and introducing a large carbon tax, if accompanied with “green finance,” that “would stimulate enormous investment to retrofit the economy. Almost surely, this stimulus would exceed the contractionary effect of money
being taken out of the system and the negative wealth effect of the decreased value of “carbon assets”.
* Another way to get Japan’s economy in the next gear would be by increasing wages – and this seems to be tough according to the Economist. “Morgan Stanley reckons wages would have to rise by 4% rather than the current 2% to hit the government’s inflation
target (also 2%). Rengo, Japan’s largest trade union, argues that pay must rise faster at small and medium-sized firms where wages are lower and are rising more slowly than at big firms.” And Rengo states that it is more effective to raise low-earners’ incomes
than high-earners’. Interesting comparison: using government figures, Morgan Stanley calculates that average personnel costs for civil servants are JPY 8.8m per year, compared with JPY 7.1m for workers in large firms and JPY 4.2m for those in medium-sized
ones.
* Japan has long stated that it is an egalitarian society. However, the Yomiuri Shimbun / The Japan News reports that
the income gap among Japanese households widened to the biggest level on record in 2014, mainly because of the ageing of the country’s population and elderly-led households, the Health, Labor and Welfare Ministry said Thursday.

Corporate:
* DUJAT member Teijin, a major Japanese technology-driven company active in the fields of advanced fibers & composites, performance polymers and healthcare products, announced last week a major acquisition in the USA: it will buy American composite-autoparts manufacturer
Continental Structural Plastics in a strategic move to boost supplies to the large American car makers. The USD 825 million deal would mark Teijin’s biggest acquisition ever, reports the Nikkei. Teijin’s acquisition in 2000 of AKZO Nobel’s Twaron (now:
aramid) was so far Teijin’s biggest acquisition.
* The EU has, as you will know, ordered Ireland to claw back EUR 13bln in taxes from Apple as it thinks that Apple’s ruling with Ireland on the way royalties are taxed is illegal. Tokyo tax authorities also ordered a Japanese subsidiary of Apple Inc. to
pay about JPY 12 billion in penalty taxes for failing to properly pay withholding tax on usage rights for software allowing online music and video distribution. This Japan News / the Yomiuri Shimbun article has a flow chart. According to sources, iTunes
K.K., based in Minato Ward, Tokyo, accepted the findings of the Tokyo Regional Taxation Bureau and paid the amount in full.
* Sharp Corporation, once one of Japan’s icons in consumer electronics, has been acquired by Taiwanese company Foxconn
and if you think that the Taiwanese are adapting to the usual (slow) Japanese speed to reform a company, you are wrong:
the Taiwanese owners are in a hurry to turn Sharp’s red figures into black. And Foxconn is betting that the Japanese government will support Sharp’s plans to build a mass-production line for organic EL panels at a cost of JPY 200 billion or EUR 1.8 bln.
That is needed as Japan lags behind in OLED display technology.

Society:
* A survey of Japanese people aged 18 to 34 found that almost 70% of unmarried men and 60% of unmarried women are not in a relationship, writes the Japan Times. Moreover, “many of them have never got close and cuddly. Around 42% of the men and 44.2% of
the women admitted they were virgins. The government won’t be pleased that sexlessness is becoming as Japanese as sumo and sake. The administration of Prime Minister Shinzo Abe has talked up boosting the birthrate through support for child care, but until the
nation bones up on bedroom gymnastics there will be no medals to hand out.” There are now many more virgins than in 2010, when the last study was conducted when only 36.2% of men and 38.7% of women between 18 and 34 said they had never had sex.
* The position of disabled people in Japan: it remains problematic according to Reuters, and it refers to te killing of 19 disabled people and wounding 26 in their sleep last July. “The silence surrounding their identities are forcing Japan to grapple
with its attitudes toward physically and cognitively impaired persons, less than four years before Tokyo hosts the Paralympics.
Almost nothing except their genders and ages – ranging from 19 to 70 – has been made public about those who died when a man went on a stabbing spree at a facility for disabled people in Sagamihara town, southwest of Tokyo.” Thew news agency also quotes
Seiko Noda, a prominent ruling party lawmaker who has suffered abuse on the internet for “wasting taxpayers’ money” on medical care for her five-year-old disabled son, Masaki. She was not surprised that the Sagamihara victims’ families chose anonymity. “Some
families are positive and try to change the world by being open about their disabled children. But the ‘silent majority’ still has a negative view and does not want it known that they have disabled children,” Noda, 56, told Reuters. See also video.
* Japan’ electricity generation changed considerably after the Great East Japan Earthquake in 2011. Electricity generated by nuclear power disappeared almost completely. Whether or not Japan embraces nuclear again, it needs to reduce the role of petroleum-based
fuels, and to do so, it needs far more renewables than it is on track to achieve.
Here a graph by the Japanese Federation of Electric Power Companies / WSJ picturing the composition of electricity generation in Japan. Interesting to note that Japan’s electricity generation reduced with 12%.

Recommended video’s:
* What options the Bank of Japan has after it introduced negative interest rates? See this Bloomberg video with comments by Morgan Stanley: The Challenge for the Bank of Japan <http://www.bloomberg.com/news/videos/2016-09-16/the-challenge-for-the-bank-of-japan>

* According to a Japanese cabinet survey released Wednesday, there are currently 541,000 young Japanese aged between 15 and 39 who lead similarly reclusive lives. These people are known as hikikomori — a term the Japanese Health, Labor and Welfare
Ministry uses to define those who haven’t left their homes or interacted with others for at least six months. CNN article + video:http://edition.cnn.com/2016/09/11/asia/japanese-millennials-hikikomori-social-recluse/index.html

* The killings of 19 disabled patients at a specialist facility sparks debate about the need for change in Japanese society where disability is stigmatised:
http://www.reuters.com/video/2016/09/16/japan-disability-stigma-in-spotlight?videoId=369862948