Week of July 18, 2016

Politics:
    • For those interested in an analysis of what is happening with democracy in Japan: read this article in the Japan Times by Michael Hoffman, author of “Land of Kami”. It isn’t a cheerful, but worth reading, also as it describes the voting behaviour of Japan’s youngsters: “of all demographic sectors, you’d think youth would respond most sourly to a government whose conservative values are so redolent of the past - but no. Polls show them embracing Abenomics more warmly than their elders: 50 percent of them support the governing coalition. They have their uncertain futures to think of, and stability, as represented by the status quo, is what they want - or think they want.
    • The International Court of Arbitration’s ruling of July 12 on the South China Sea, that China lost, bodes ill for Japan, writes the Nikkei. "Beijing has long tried to inculcate in citizens the belief that a vast area of the South China Sea is rightfully China's. The tribunal's total rejection of the claim - and the government's inability to prevent it - raises the risk that public anger could be focused on the regime. To avoid this, the government is working all out to convince the public that the decision was arbitrary, and to redirect people's frustration. Japan is a preferred target." Interestingly enough, it is not “the man in the street” but China's better educated people that are determined not to give in when it comes to territorial claims, including the Japanese governed Senkaku’s. And as a result it could hinder business between Japan and China. In particular, it could hurt Chinese tourism to Japan. Bakugai, or "explosive buying" by Chinese visitors, was a bright spot for Japan's economy last year. And now Chinese shopping in Japan is getting less, that’s for sure.
    • Trump and Japan: it is a horror scenario for the Japanese. No Trans Pacific Partnership Agreement, and on top of that Trump criticises the Japan-U.S. security treaty for being “one-sided.” Foreign policy advisers to the GOP presidential candidate have indicated a Trump administration would re-evaluate it and negotiate for an increased share by Japan of the costs for its defense by U.S. forces. With China’s “assertiveness” towards Japan, that is bad news (Japan Today).

Economy:
  • Helicopter Money in Japan: the country has experience with this, in the ’30’s of the previous century. As Bank of Japan Governor Haruhiko Kuroda confronts pressures to launch helicopter money, he could do a lot worse than remember the life - and death - of Viscount Korekiyo Takahashi, according to the Japan Times. "As Japan’s economic czar in the early 1930s, Takahashi initiated the equivalent of helicopter money, using the BOJ to directly finance deficit spending by the government. Coupled with abandonment of the gold standard, Takahashi’s reflationary policies “brilliantly rescued Japan from the Great Depression,” Ben Bernanke, a former chairman of the U.S. Federal Reserve, said in 2003. A steep yen decline helped. Unfortunately, the tale does not end there. After Takahashi subsequently sought to rein in deficits by slashing military spending, he was assassinated in 1936 by rebelling army officers. A breakdown in fiscal discipline and an inflationary surge followed as Japan geared up for World War II.”
  • There are apr. 1 mln foreign workers in Japan, but Japan is loosing its shine to attract these, often unskilled, people with South Korea and Taiwan competing to attract foreign workers, writes the Nikkei. One reason is that South Korea and Taiwan are fast gaining on Japan in terms of wages and other working conditions for foreign workers. Another is that job opportunities are improving in China, a major source of overseas workers in Japan. That is an important development, in particular with a declining population in Japan. 
  • For those of you interested in investing in Japan, there is a part of the Tokyo Stock Exchange that provides higher yields but that is also much more volatile than that of the TSE1: Mothers, the “small cap & starters” stock exchange. However from last Tuesday, in a move that could transform the way the index is viewed and which analysts at Nomura say will generate “high trading activity”, investors will be able to buy a Mothers futures contract for the first time, writes the Financial Times. The Osaka Exchange will list a Mothers futures contract for the first time, allowing small-time punters to hedge themselves against volatility in an index where the four largest stocks represent two-fifths of the entire value of the board. But more critically, say traders at one of Asia’s largest brokerage firms, the Mothers futures contract may allow global funds to invest in small-caps directly for the first time. Until now there is a comparative absence of foreign investors in Mothers stocks. This has made them largely immune to the mass exodus of foreign capital from the main Japanese stock market.

Corporate:24.3 bln
  • Mitsubishi UFJ Financial Group reorganised its European operations in May and now also Mizuho Financial Group will augment functions at its Dutch arm and give the unit a new moniker that reflects the wider European perspective, possibly by the end of 2016. The unit operates bank branches in Austria, Spain and Belgium, among other offices, and provides typical services such as deposits and lending, writes the Nikkei. Does it have to do with Brexit? Not necessarily: according to the newspaper Japanese megabanks are looking to their overseas businesses as domestic operations are predicted to shrink under the Bank of Japan's negative-rate policy. With the slowdown among developing economies, especially in Asia, Europe has emerged as a key region. 
  • Japan’s SoftBank made a spectacular acquisition last week when it agreed to buy the UK’s Arm Holdings for GBP 24.3 bln (EUR 29 bln) in a big bet that the British smartphone chip designer can help it become a leader in one of the next big technology markets, the IoT or the “internet of things”. The Japanese telecoms group’s takeover of Cambridge-based Arm, which was founded 25 years ago and employs 4,000 people, will be the largest acquisition of a European technology business. 
    Let’s have a look at what drives Masayoshi Son, Softbank's founder and president and the second richest man in Japan. He is from humble, 2nd generation Korean background and developed his appetite for tech-investments when studying as a 19-year-old student at a small college in California, following an electrifying encounter with a tiny computer chip developed by Intel. “It struck me deep in my mind. Some day, the chip is going to surpass mankind’s brain,” Son told the Financial Times this week. At the time, he kept a magnified photo of the chip under his pillow and stared at it as if he was admiring a celebrity.
    Mr. Son is famous for his claim that he can look 30 years ahead, but his shareholders and colleagues are often sceptical of that audacious vision. Mr. Son however, is convinced of his ability to connect the dots before the lines form. He is fond of drawing an analogy with the ancient board game, Go: “The experts do not put the stones right next to the earlier stones. They put them in a completely different part of the board. That is what I do. I try to look in the future and think backwards. That is when I am at my most comfortable. Because then I am just like the movie, Back to the Future.” Now, vision is one thing, managing is another chapter and let’s see how he will handle ARM Holdings.
  • Pokemon Go is an outright success and shares of Nintendo, the company that created Pokemon - and that now is a minority shareholder in Pokemon Holdings - nearly doubled in 2 weeks time. Moreover, also companies that made tie-ups with Pokemon, incl. Hosiden, which produces electronic components and is a key hardware supplier to Nintendo, have jumped more than 30 per cent since the Pokémon Go launch. Even shares in McDonald’s Japan have risen more than 30 per cent since it emerged last week that the company would turn 400 of its Japan stores into Pokémon “gyms” where players can pitch their Pokémon into battles against rival teams. 

Society:
  • Great story in BBC news on Kumamon, a 1.5 meter mascot bear created by the government of Kumamoto Prefecture, Japan in 2010 for a campaign to draw tourists to the region after the Kyushu Shinkansen line opened. It explains much about the power of “kawaii”  or “cute” - and it shows that when you hit the right level of cuteness, you are able to make serious money. Only in 2015 Kumamon made 1 billion dollar. 
  • Depression - and I don’t mean economic depression - and Japan: up until the late 1990s in Japan, "depression" was a word rarely heard outside psychiatric circles, states BBC News. Some claimed this was because people in Japan simply did not suffer depression. They found ways to accommodate these feelings while somehow carrying on with life. And they gave low moods aesthetic expression - in art, in film, in the enjoyment of cherry blossom and their fleeting beauty. A more likely reason is Japan's medical tradition, in which depression has been regarded as primarily physical rather than a combination of physical and psychological, which would be more common in the West. While the diagnosis itself was rarely used, people suffering classic symptoms were likely to be told by their doctors that they simply needed to rest. All this made Japan such a poor prospect as a market for anti-depressants that the makers of Prozac all but gave up on the country. But then at the end of the 20th Century a remarkable marketing campaign commissioned by a Japanese drugs firm helped turn things around. Word was spread about depression as kokoro no kaze - a cold of the soul. It could happen to anyone, and medication could treat it. 
    As we could learn at DUJAT’s seminar on Work & Health in March this year, since 2015 Japan has brought in workplace stress checks. A completed questionnaire covering causes and symptoms of stress is assessed by doctors and nurses, leading to medical care for those who need it - with results kept confidential from employers. This is mandatory for companies with more than 50 staff, and smaller  businesses are also encouraged to do the same.
  • But to cheer you up when you get depressed by reading the above article: in recent years, a number of agencies have been offering “rent-a-friend” services paid by the hour. Customers can rent an agency employee as a fake friend, family member, or companion for various occasions such as weddings, funerals and parties. Some use them just to have a conversation partner to ease times of loneliness and isolation in old age. Costs: from JPY 1,000 or EUR 8,50. 
    Those who use the service say it allows them to forget the expectations of their family and friends and speak freely - an option which experts say is especially useful in Japan, where social roles can be tightly defined and expectations rigid (Japan Today).

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