News from and on Japan from November 14 – 27

Earlier this year, Singapore’s Prime Minister Lee Hsien Loong, speaking at the White House, said that “in terms of America’s engagement of the region, you have put a reputation on the line” and warned what may happen to the US should it decide to pull out of the TPP agreement. “If, at the end, waiting at the altar, the bride doesn’t arrive, I think there are people who are going to be very hurt, not just emotionally but really damaged for a long time to come,” he said. 

Well, the bride won’t arrive at the altar after The Donald declared that stepping out of the TPP negotiations would be his first step as the 45th President of the USA. Japan and the 10 other Asian countries that are – or better: were – committed to sign this agreement, are uncertain. So is Japan. The Japanese parliament agreed to ratify this agreement, but most likely: wasted time and effort. “It also leads to uncertainty in the region on where to look for leadership”, writes Foreign Policy.  “Japanese Prime Minister Shinzo Abe, who was originally opposed to the TPP, has ironically become the deal’s most prolific salesman. Success or failure will sway the direction of the global free-trade system and the strategic environment in the Asia-Pacific”, he claimed. Last week Shinzo Abe also stated that a TPP without the USA is useless, after he met as first foreign leader with Donald Trump on November 17.

  • Politics:
    • “I have full confidence’ in Trump”, declared PM Abe after his meeting with the president-elect in Mr. Trump’s penthouse in Trump Tower in NY.What has been discussed wasn’t disclosed, but for sure the main topics will have been Japan’s comprehensive defense pact with the US and of course TPP. In a Facebook post after the meeting Trump stated that “it was a pleasure to have Prime Minister Shinzo Abe stop by my home and begin a great friendship,” reported the Nikkei.
    • Foreign Policy focused on what could be the result of this meeting and concluded that a domestically focused Trump might even serve Japan.“Dennis Blair, the former director of national intelligence and former head of U.S. Pacific Command, said if Trump follows through on his ‘America First’ rhetoric, that could push Japan into leadership role in the region as the main advocate for liberalism and open markets”, wrote Foreign Affairs. “If the United States simply withdraws from the field, that leaves Japan on its own as the biggest country committed to basic free trade and strengthening the WTO. And that leaves the field to the Chinese if that doesn’t happen,” Blair told FP. “That would be an interesting read if the UK, Japan and Germany became the leaders of the free trading bloc while the United States sorted itself out for the next several years,” Blair said. “It might have the effect of pushing that mantle onto others and we are sort of left behind.”
    • The JapanTimes had a bolder conclusion: expect even closer Japan – US ties. “The future of Japan-US relations will continue to deepen but also broaden under a Trump presidency. With so many aligning interests in the realms of security, economy and regional and global leadership, we should expect Japan to expand the scope and number of cooperative security activities with the US while firmly abiding by Article 9, its September 2015 security law that stresses multilateral security cooperation and stance on being nuclear weapons free.Joint patrols and surveillance in the South China Sea will expand and the number of partners will increase as well. At the same time, Japan will continue to engage in a dual hedging strategy by pursuing nimble but less committed strategic security partnerships with India, Vietnam, Australia and other willing partners.” Somehow it seems that a Trump presidency could reinforce Mr. Abe’s position, in Japan as well as in East Asia.
  • Economy:
    • More benefits from Trump to Japan … “Trump gives the Bank of Japan / BOJ exactly what it needs”, writes the Nikkei. There are some assumptions in this article like: “when U.S. interest rates go up on expectations for an economic recovery, as they are now, the US – Japan interest rate differential will widen due to the BOJ’s 10-year yield peg. This creates strong downward pressure on the yen, which in turn pushes up prices.” And: “under the program, improved market conditions will likely trigger a mechanism that reinforces people’s inflation expectations. Under the new QQE program, the BOJ promised to continue expanding the monetary base until the pace of price increases exceeds and remains above 2% in a stable manner. The BOJ calls this its “inflation-overshooting commitment.” This ‘bold commitment,’ as described by BOJ Gov. Haruhiko Kuroda, is designed to stoke inflation expectations.” And: ”this strategy does not work well unless people have at least some sense that prices are going to rise. When nobody expects prices to rise, the BOJ’s QQE does not look so ‘bold.’ When prices finally start rising on the back of a weaker yen, the ‘overshooting commitment’ is more likely to have its desired effects. Trump’s victory has put the markets in risk-on mode, opening a way for the new QQE to come into its own. If this can be sustained, Japan’s economy can expect a strong boost.” But another condition is that the Yen will not become too strong – and that is a matter for people able to peer into a crystal ball.
    • For the moment at least the news is not that good, reports Deutsche Welle. “In October, core prices – excluding fresh food – in the world’s third largest economy were down 0.4 percent compared with the same month a year ago amid sluggish consumer spending and falling global energy prices, the government said Friday. According to the data, the October decline was the eighth in a row, and comes several weeks after the country’s central bank has pushed back its timeline for hitting its goal of around two percent inflation.” Main worry for the Japanese government is the low increase of wages.
    • Then the economy of Tokyo metropolis. After her first initiative to reduce Tokyo’s burden of the 2020 Olympics, Tokyo’s Governor Yurie Koike postponed the move of the Tsukiji fish market from November 7 until January, if not later. She cited growing concerns over ground pollution at the site, ballooning costs and lack of communication between departments. “I decided to postpone the relocation after reaching the conclusion that it has not received the support of the citizens of Tokyo and the workers at the market,” Koike said. And last week she relaunched the plan to make Tokyo into a major financial global hub. The idea is that Japan’s deep markets, acquisitive companies, globally liquid currency and massive household savings make it a natural international hub. As the city’s promoters like to point out, Tokyo is also home to the headquarters of more Fortune 500 companies than any other city in the world.I am sure that Amsterdam could serve as her benchmark, with its multi-linguistic work force and its risk-taking attitude …
  • Corporate:
    • Capital investments by Japanese companies in 2017 will be lower than initially planned, due to economic uncertainties,writes the Nikkei with as basis a survey among 1,255 Japanese manufacturers and non-manufacturers which are either listed or capitalised at more than 100 million yen (EUR 834,000). “Their planned combined capital spending as of the end of October for this fiscal year is 26.0351 trillion yen, up 8.8% from the previous year, marking the seventh consecutive year of increase. However, when compared to their initial forecast, the figure is down 1.6%. Manufacturers in particular have downgraded their plans by 2.6%, adopting a cautious stance toward economic uncertainties overseas.”
    • The easiest made profits are by a more favourable exchange rate, and this is what happens in H2 this fiscal year. The assumed exchange rates of 180 major corporations average 101.9 yen to the dollar for the half, a Nikkei analysis of baselines disclosed since October shows. “But the Japanese currency has weakened to near 110 yen in anticipation of fiscal stimulus in the U.S. under Donald Trump, the incoming president. It has also moved lower versus the euro, against which it now trades around 116 yen. Meanwhile, emerging-country currencies are weakening across the board and may weigh on earnings”. Will it last, this weaker yen? Put your crystal ball again on the table.
    • We all know what keiretsu are, but it is interesting to see that some of them are dismantling, according to the Financial Times. “Japan Inc’s management style has fallen out of favour over the past quarter century. Japanese companies have started to dismantle their own keiretsu. WitnessNissan’s decision last week to sell off its 40 per cent stake in Calsonic Kansei, the car parts maker, to private equity fund KKR.” Nissan made a USD 1 billion profit from the transaction and the FT advises that more Japanese companies should follow Nissan’s example.
  • Society:
    • There are many drivers for an economy to expand, but among them “optimism” of its young workforce is one of them. Read this article in Bloomberg: Japan Has the World’s Gloomiest Millennials or: those born between early 1980s to the mid-1990s to early 2000s. The comparative research in major economies has been carried out by gigant staffing company Manpower. “Preferring security, young Japanese show little of the ‘animal spirits’ needed to help realize Abe’s vision of a great entrepreneurial nation,”claims Bloomberg. “Younger workers are the least inclined to strike out on their own in more than a decade, according to a survey of recently employed people by the Japan Productivity Center.” One of the reasons for this dark mood is, according to Bloomberg, the share of the debt for each Japanese child under 15. In 2011 it stood at USD 794,000 each, more than two and a half times that of children in Italy and Greece, the two next-worst cases, according to Bertelsmann Stiftung, a German non-profit foundation. Because of that, and a disproportionately large share of social spending going to the elderly, Japan ranks as the world’s second-most ‘intergenerationally unjust’ country, it said.
    • My recommendation to Japanese millennials? Eat ice cream in the morning!At least, this is what I learned through Rocket News24 from a research by Yoshihiko Koga, a professor at Tokyo’s Kyorin University, specialised in psychophysiology, including the potential stress-relieving and anti-aging benefits of food choices. As part of a joint study with a major Japanese confectionery producer, Koga had a group of test subjects eat ice cream right after waking up in the morning. The immediate effect, no doubt, was to make Koga every participant’s best friend. Of greater scientific importance, though, was that the subjects’ brains exhibited an increase in high-frequency alpha waves, which are connected to enhanced alertness and reduced mental irritation. Wow, let me try it in the coming week.
    • Now the opposite: soup for elderly people. The BBC reported an initiative by the police in central Japan that are offering elderly people cut-price meals if they agree to surrender their driving licences. “The deal has been arranged for senior citizens in Aichi Prefecture in a bid to reduce the number of traffic accidents on local roads (and there are many of them.) From last week, elderly drivers who hand over their licences will get a 15% discount on ramen – the popular noodle and broth soup – at the Sugakiya restaurant chain.The savings will be available at 176 eateries across the prefecture, after police agreed a partnership with the chain’s owners. People who relinquish their licences will be given a certificate by police, which will give them access to a reduced-price set menu including ramen, rice and salad.” In Tokyo the Metropolitan Police has a different approach and are asking elderly drivers to straight up surrender their licenses. In exchange, they are offering a “Driving Graduation Certificate” to honour their many years behind the wheel. Here’s how one family dealt with a Driver’s Graduation as told through the tweets of Satomi Inoue: “The family of a man with dementia held a ‘Driver’s Graduation Ceremony’ for him. They decorated the alcove and took a photo of his grandson presenting him with a gift and a certificate of appreciation saying, ‘Grandpa, thank you for the trouble of driving for so long.’ They sold the car, got a bicycle and put a bench in the driveway for chatting with neighbours. Whenever he asked ‘What happened to my car?’ his wife pointed at the photo they took and he understood. It was helpful.” Great approach!
  • Must read: 
    • Fukushima’s decommissioning costs are mind-boggling: in 2013 the METI estimated these costs for compensation payments, decontamination work, the construction of interim radioactive waste storage facilities and the costs to scrap the reactors at JPY 11 trillion – now the estimate is JPY 20 trillion or EUR 166 billionas reported by the Nikkei.
  • Long Read:
    • A research into Japan’s identity in these time of big changes. Oguma Eiji is a professor in the Faculty of Policy Management at Keio University. His research focuses on national identity and nationalism, colonial policy, and democratic thought and social movements in modern Japan. Impressive soul-searching.

Have a great Sunday and fruitful working week.

 

Radboud Molijn