Week of July 11, 2016

Politics:
  • Let’s start top-down: Emperor Akihito indicated that he wishes to step-down, and abdication is new to Japan’s monarchy, the oldest in the world. Under the Imperial House Law, when an emperor dies, the next Imperial family member in the line of succession immediately assumes the throne. No provision is made for abdication. Changing this would not be as simple as tacking on a clause. "As for his duties as emperor, Akihito is an anomaly”, wrote the Economist this week. "At home, he has knelt to comfort victims of natural disasters. Across Asia, his frequent travels and sensitive speeches have helped make amends for Japan’s militarist past - even as the country's politics has lurched rightwards.” But revising the Imperial House Law is no easy feat, according to the Nikkei and may take years.
  • Then last Sunday’s elections for Japan’s Upper House. As expected PM Abe won a sweeping victory and he announced it was above all a vote of confidence for his Abenomics program, that will be extended with an other economic stimulus program. With a 2/3 majority in the Lower and the Upper House he has now the possibility to change the constitution - after a referendum. That will prove to be a tough match. But a little surprising - at least to me - was that the majority of young voters aged 18 and 19 as well as voters in their 20’s and 30’s voted for the well-established LDP. "I voted for LDP. It is safe”, said a young IT worker to the Wall Street Journal. And young voters, that is what PM Abe needs to win the referendum. 
  • And last week saw the long awaited verdict by the Permanent Court of Arbitration in The Hague: China has no legal basis for its claims to sovereignty over the South China Sea, through which apr. USD 5 trillion worth of cargo passes every year. China's "nine-dash line" territorial claims, which cover most of the South China Sea, will not be recognised under international law. The July 12 ruling from the Court of Arbitration resolves the case brought against China by the Philippines under the United Nations Convention on the Law of the Sea. There are no enforcement provisions in this convention, so there is nothing to prevent China from continuing to expand its presence in the South China Sea. "China's true interest in the South China Sea has much more to do with history and politics than with oil and security. The South China Sea dispute is not about China's interpretation of international law. It's about China's interpretation of itself, writes Al Jazeera. For the US and China, the South China Sea is more a matter of the geopolitics of sea control. The US Navy has policed the crucial maritime waterway for most of the past 70 years, and believes that China wants to slowly nudge it out of crucial parts of the western Pacific. A dominant position in the South China Sea would give Beijing a platform to exert greater influence over the foreign policies of its neighbours and the terms of economic engagement in East Asia (Al Jazeera, Financial Times). But with China not obeying the verdict of the Court of Arbitration, also the issue of the Senkaku’s, claimed and governed by Japan and claimed as well by China, will remain unsolved. 

Economy:
  • Forecasts on Japan’s economy have been cut to 0.9%, down from 1.7%, writes BBC News. Moreover, inflation forecast has been scaled down to 0.4%, drown from 1.2%. So there is another economic stimulus program in the making that could be as big as JPY 20 trillion, or EUR 172 bln (23% of Dutch GDP!). With a solid majority in both houses, this will face little objection and will be coordinated with the Bank of Japan. The bank is already buying roughly JPY 80 trillion (EUR 690 billion) of government bonds each year. 
  • The Abe government is contemplating a drastic reform of the labour market, writes the Nikkei. Overwork, minimum hourly wages, equal pay, maternity and paternity leave: it is all subject to change, and let’s hope this is the start of PM Abe’s third arrow. 
  • And still there is the discussion about “helicopter money”, a term coined by Milton Friedman in the ’80’s. Under the idea, the government would issue perpetual bonds and have the central bank accept them, so that the government can keep spending without having to pay back the debt, writes the Asahi Shimbun. See also this video: Will Perpetual Bonds Work in Japan's Favor? “There is no strong push from Prime Minister Shinzo Abe's administration to revise the law and force the central bank to resort to helicopter money, said the officials, who declined to be named due to the sensitivity of the matter”, states the Asahi. And to change the law wouldn’t be a major problem as well with the new majority in the Diet.
  • Brexit has also impact on the speed of the talks between Japan and the EU to conclude a Free Trade Agreement. Brussels needs to secure a deal with Japan to show EU nations the advantages of remaining and to prevent other departures. For Japan, if an agreement fails to materialise in the short term, it will have to drastically rethink its trade strategy, especially with the early enactment of the Trans-Pacific Partnership facing a threat from U.S. presidential election results, according to the Nikkei. Issues at stake are government procurement (the EU is claiming access to contracts with regional governments, incl. municipalities > 100,000 people), cars, automotive parts and farm products. But when the talks between the UK and the EU start on short notice, there is a fair chance that the talks with Japan will be put on the back-burner.

Corporate:
  • Line, Japan’s version of WhatsApp, went IPO last week in New York and in Tokyo - and its shareprice went up 48% on the first day. Line’s service lets users make free calls, send instant messages and post photos or short videos, along with a host of other paid services. It combines attributes from Facebook, Skype and WhatsApp with games and a mobile payment service also on offer. But what has set it apart so far is a huge assortment of cartoon ‘stickers', which some too-busy-to-text fans rely on to communicate - a kind of animated language. The IPO is a big success for South Korean owner Naver and for the Japanese development team. 
  • Another smashing success is the introduction of Pokemon Go by Nintendo: its shares went up 96% in just a week. Nintendo Go is developed by John Hanke, whose previous company provided the core technology for Google Earth and Google Maps. The Financial Times carries an article about the development of Pokemon Go, and how Tsunekazu Ishihara, chief executive of the Pokemon Company, which is jointly owned by Nintendo with developers Game Freak and Creatures, was impressed by another game Mr. Hanke developed. 

Society:
  • Alarming news about Japan’s population. Japan’s population excluding resident foreigners dropped at the fastest pace since the current population survey started in 1968, down 271,834 from a year earlier to 125,891,742 as of Jan 1, the government said Wednesday. The country’s population also declined for the seventh straight year, while sliding below 126,000,000 for the first time in 17 years, the Ministry of Internal Affairs and Communications said. The number of births grew slightly to 1,010,046, up from 1,003,554 in the previous year, but the number of deaths also rose. The 'natural population loss' - calculated by subtracting deaths from births- thus came to 286,098. The pace of loss was the fastest since 1979, the earliest year for which comparable data are available (Japan Today).
  • So how to promote more babies? It is at least partly a matter of sex education. Nanako Oba is a 51-year old mother of 5 kids: “the term ‘sex education’ scares parents off as well as kids. In Japanese kanji ‘sex’ is a combination of two characters for ‘heart’ and ‘life’ but it’s not seen that way,” she said as reported by Japan Today. In 2005 Oba struck upon the word ‘tanjogaku'—literally, 'the study of birth'—and five years later it was accepted into the lexicon of contemporary terminology. Today, her trained group of 400 tanjogaku advisors visit between 1,000 and 1,200 public schools per year, using their own method to teach about pregnancy and birth in an effort to make students familiar with their own sexuality and enhance their self-esteem. 
  • Finally: as you might know less and less Japanese young people are travelling abroad and that is well reflected in the number of Japanese in their twenties that have a  passport: down to 5.9% compared to 9.5% twenty years ago. So Narita International Airport Corp. and the Japan Association of Travel Agents (JATA) will launch a campaign on Friday in which up to 500 people aged 18 to 22 will be given JPY 10,000 (EUR 86) in cash to help them obtain a passport, that costs JPY 11,000 for a validity of 5 years. According to an agency survey in 2015 on students in middle school through university, the most common reasons for not wanting to travel abroad were feeling scared, poor safety overseas and the inability to make themselves understood in foreign languages. 

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