News from and on Japan in the period of December 12 – 26, 2016

Abe & Putin, Abe & Pearl Harbor, the salaryman’s hologrammic room mate, Japan profits from Brexit, staggering figures on Japan’s debt and household assets and the story of plastic food

Year-end also implies some reflection, hence a couple of long-reads this time: on the meeting early December between PM Abe and President Putin (“Ippon” for Putin, claimed The Diplomat), on the PM Abe’s grand design for 2017 and Abe’s historical visit to Pearl Harbor on December 26, where he will also meet with nearly past president Obama.
And there was more to mention in the last two weeks, e.g. the frenzy by Japanese companies to buy British companies, the staggering figures on Japan’s debt … and household assets, a new word for many: shokunin and a hologram for the salaryman. Take your time and … read!
  • Politics:
    • Asia Pacific Journal, Japan Focus carried a long & great read on PM Abe’s achievements and agenda for the coming years. “As this 4th year of the second Abe (Shinzo) government draws to a close, how are we to understand the Abe agenda?“, asks this on-line magazine. “The Abe government describes itself as committed to the universal values of democracy, human rights, the rule of law. It lets fly policy ‘arrows’ to revive and energise Japan’s ‘hundred million people’ and have Japanese women ‘shine.’ It calls attention to Japan the beautiful. It preaches the gospel of what it calls ‘resilience,’ and declares to the world a commitment to ‘positive pacifism.’ To Okinawa it insists that it is making every effort to “reduce the burden” of the US military presence. Abe’s government enjoys high levels of support (60.7 per cent as of November 2016) and Abe himself, having triumphed in four successive national elections, under party rules revised to clear the way for him to do so, now stands a strong chance of staying in office as Prime Minister for three terms (nine years), in addition to his earlier term between 2006 and 2007. By 2021 he might become both the longest serving of Japan’s modern Prime Ministers, and (if he manages to accomplish his agenda) its most consequential.” But is is not all without criticism. A mag-lev train that shortens the distance between Tokyo and Osaka by >50% will never be commercially viable, states the AP Journal (costs for the stretch between Tokyo and Nagoya is estimated at  EUR 95 bln, RM). There is a lot of wishful thinking in PM Abe’s approach, is my conclusion.
    • That also has been true for the much heralded meeting between PM Abe and President Putin on December 15 and 16. It was a “carefully planned schedule, with a pronounced demonstration of a personal hospitality touch from Abe, listed ‘relaxing; time in the famous hot springs, and a feast with exotic traditional local food, including exquisite dishes of raw and cooked fugu. Things went a little different. Putin arrived nearly three hours too late, without much explanation, and refused his host’s prepared dinner and hot-spa visit with a simple remark: “Best not to get too tired”. The result was disappointing, for the Russians who had hoped of more economic aid, for the Japanese as there seems to be no progress with regard to returning by the Russians of the four islands off the coast of Hokkaido that were occupied by the Soviets in the aftermath of WWII. “As a long-time judo wrestler, Putin aimed at turning the strength of his opponent into his advantage. His Japanese visit seemed to be a friendly sparring match, but even those have winners and losers. In this case, there is no question about who is who. In the greater context of Aleppo’s fall and the controversial role Russia has allegedly played in the American presidential elections, Putin seems one step closer to the geopolitical ippon he has always dreamed about.”
    • The Nikkei newspaper carries a long analysis of the 16th (!) meeting between Abe and Putin top and concludes that progress on the return of the four disputed (at last by Japan) island is very little, if any. Without formal peace treaty, it is impossible for he Japanese government to provide economic assistance to Russia, and question is if Japanese companies, that have been asked to invest in Russia will see enough reasons to do so. 
    • Then: on December 26, PM Abe is to visit Pearl Harbor, a first time for a Japanese PM, at least on official level. Like Obama’s visit to Hiroshima in May this year, this visit to Pearl Harbor is drenched in symbolism. “The meaning of Pearl Harbor has changed significantly over time, reflecting shifts in the relationship between the U.S. and Japan,” writes well-known Japan-analyst Peter Tasker in the Nikkei, while he refers to the change in movies on the subject over the last  half century. “When the President of the United States and the Prime Minister of Japan stand side-by-side in Hawaii in late December 2016, they will not just be laying to rest the ghosts of the past. They will also be seeking to ward off the specter of future peril.” Eri Hotta (whose book “1941” I highly recommend to anyone who is interested in Japanese decision making processes), thinks that this visit “may open a can of worms”. “There is, of course, nothing inherently wrong with praying for Pearl Harbor victims and for future peace. What is dubious is the assumption that so long as those sentiments are genuine, it is fine to wilfully dodge any serious exploration of history. It seems unrealistic that such a well-publicized visit would allow Abe’s cabinet, generally perceived as hawkish, to circumvent the larger issue of war responsibility. Sooner or later, as Abe has made it his business to visit Pearl Harbor, the question of why Japan started such a calamitous war will be more widely discussed. Once this question is raised, nobody, not even a prime minister, can make it vanish.” (Nikkei).

  • Economy:
    • Not yet a President, Trump already made a substantial impact on Japan’s economy. The Japanese yen has slid since November 8, from JPY 103 to the dollar to JPY 118, thus reinforcing the balance sheets of Japan’s exporters to the USA.  As a result, the Nikkei 225 has rallied 17% since November 19 and “even if hope for Japan is merely a glimmer, the point is this: it is suddenly possible to imagine Japan returning to a more normal world where yields rise, inflation is positive and the BoJ has credibility. If nothing else, it is a potent reminder of the power of political risk, for good and bad; and a lesson in the folly of predicting market movement with economic data alone. Particularly in the world of Trump”, writes US managing editor for the Financial Times Gillian Tett (author of the 2004 bestseller “Saving the Sun: How Wall Street Mavericks Shook Up Japan’s Financial World and Made Billions”.)
    • Well, it is time that things go better in Japan as far as its economy is concerned. Last week The Japan News / Yomiuri reported that Japan’s estimated national debt will total JPY 1.094 quadrillion (or EUR 90 trillion when my understanding is right about this mind boggling figure) at the end of fiscal 2017, up about JPY 21 trillion from the end of fiscal 2016. “The amount of the national debt – the combined long-term debt of the central and local governments – is expected to hit a record high, having increased by about JPY 320 trillion in 10 years from fiscal 2008. “No end in sight to Japan government spending”, reports the Nikkei, pointing to a lack of structural reforms by the Abe administration.
    • Another mind blowing figure by The Japan News, but now on the positive side, is that of the assets held by Japanese households: JPY 1.752 trillion or apr. EUR 14 trillion – and part of these assets are invested in government bonds or JGB’s. “The BOJ remained the biggest holder of Japanese government bonds as the central bank is massively buying JGB’s under its ultra easy monetary policy. Its JGB holdings surged 31.3 percent to a record JPY 413 trillion at the end of September, accounting for 37.9 percent of all outstanding JGB’s.”
    • America’s largest creditor nation is no longer China but Japan, writes Bloomberg, after a massive sell-off of American treasuries by China. I remember that at one point in his election campaign Trump stated that he would be willing to default on interest payments to foreign creditors …
  • Corporate:
    • Brexit or no Brexit, over the past six months, and despite Japan’s stern warnings of a disorderly process of Britain leaving the EU, Japan has emerged as Asia’s most aggressive buyer of British companies, writes the Financial Times. “Japanese businesses have spent USD 33.5 bln to purchase 37 British companies so far in 2016, according to Dealogic. That compares with 29 Japan to UK deals worth USD 9.5 bln last year.” OK, a major part may have been Softbank’s acquisition of Arm Holdings, but there are plenty smaller deals as well. Makoto Inoue, president of leasing and investment group Orix, described post-Brexit UK as the “best opportunity” for investment because of the weaker pound and reliable legal infrastructure, and said the company was setting up a UK office to scout for opportunities. He said Orix would move ideally before the uncertainty surrounding Britain’s actual EU exit lifts. At the end of the article there is a list of demands by “Japan Inc.” to the UK and the EU. “The doubts of Japan Inc are expressed in an unusually blunt 15-page memo released in September that included a list of safeguards that Tokyo is seeking to avoid the departure of Japanese banks and other companies from the UK.”
    • Great article in the New York Times about the Japanese attitude towards daily work by John Lanchaster, author of the novel Capital. “What the West Can Learn From Japan About the Cultural Value of Work”. What he noticed when visiting Japan is the deep personal investment people make in their work. “The word shokunin, which has no direct translation, sums it up: It means something like ‘master or mastery of one’s profession,’ and it captures the way Japanese workers spend every day trying to be better at what they do.” 
  • Society:
    • But also here is a flip-side: for more and more Japanese employees their work is either too boring or they are too expensive, reports the Economist. So a new type of “business-school” has opened up, that prepares you for a second career. “The way to prepare them for a second career is to get them interacting as individuals, not as corporate workers or business partners,” says director Ozawa of this Institute, which specialises in this sort of course. In a country that sets great store by formal introductions, the students have not even exchanged business cards. Names, titles and personal information are banned (the ex-salarymen use made-up names) to avoid reproducing the old office hierarchies that exist outside the classroom. “We start from scratch and help these people find themselves again,” says Mr Ozawa.
    • Lonesome? Virtual holographic room-mates will be available in Japan by the end of next year, according to Spoon & Tamago. So you can live with Hikari Azuma, a blue-haired anime girl who will be able to recognise different patterns in your life and respond to them, like when you wake up in the morning or when you come home at night. She’ll even text you during the day with endearing messages like “I miss you” or “see you soon!” It reminds me of Tamagochi that was popular apr. 15 years ago. “Enjoy a life with someone while still retaining your freedom,” is the motto by Gatebox the company that developed this virtual character.
    • To close off, here a funny comic explaining why Japanese restaurants often have plastic food samples outside, easing the way to choose what you want to eat. Mr. Mercury (looks like Freddy), explains to Lady Pippy (Longstocking?) why these plastic samples, at first made from wax, were created.
Enjoy your holiday or work, have a beautiful year-end and have a great start of 2017.
Radboud Molijn