Week of June 13, 2016
- New elections in Tokyo by July 31 after Tokyo Governor Masuzoe resigned over a scandal. Mr. Masuzoe was elected after his predecessor Hirose quit after having accepted a JPY 50 mln loan from a medical company. Questions grew over Masuzoe’s use of political funds after reports of his costly overseas trips as governor and frequent visits to his vacation home in a hot spring resort outside Tokyo using official cars. Mr. Masuzoe’s resignation comes at a time that the Tokyo Olympics in 2020 are facing difficulties, or better: to keep the costs within budget. Costs of these elections: JPY 5 bln or more than EUR 40 mln.
One of the candidates to succeed him is a DUJAT acquaintance: Ms. Yuriko Koike, former Minister for Environmental Affairs, who we invited in 2008 as a speaker at DUJAT’s symposium in Tokyo: CO2: nuisance or opportunity (Economist).
- What is it to be the wife of a Prime Minister? Here an interview in the Japan Times with Akie Abe, also known by het DJ name Akky. She is a rather outspoken woman, supporter of LGBT rights and 8 years PM Abe’s junior.
On a later age Akie went back to school, receiving a master’s degree in Social Design Studies from Rikkyo University in March 2011. And she began airing her views on certain issues publicly, even though they sometimes contradicted the policies of her husband’s political party. As a result, she is popularly known as kateinai yatō (at-home opposition party). Akie has openly questioned the policies of the ruling coalition on a number of topics, ranging from the export of technology in the field of nuclear power to the Trans-Pacific Partnership agreement.
- Japan <> China: tensions are escalating. Last Wednesday, a Chinese naval intelligence-gathering ship entered Japan's territorial waters off Kagoshima Prefecture, northeast of Okinawa, for about an hour and a half. It was the first time in 12 years for a Chinese naval vessel to enter Japanese territorial waters. Japan protested, China claimed that it was it was in its own right (Nikkei).
- Trillions of Japanese yen have been spent by the bank of Japan in buying up Japanese government bonds, but alas, Japan’s currency is back to square-one. The yen has strengthened 23% in the past year as investors have flocked to the Japanese currency, which is widely considered a safe asset, amid concerns over a slowdown in emerging economies and waning hopes for an interest rate hike in the U.S. A strong yen negatively affects Japan’s economy. Will there be an intervention by the Bank of Japan? Big question (Nikkei).
- "In hunt for yields, Japanese investors are making risky bets”, warns the Nikkei. Japan's securitization market is defying the risk-off sentiment pervading financial markets as investors stuck with negative interest rates on government debt pour money into higher-yielding instruments. The growing appetite for risk in Japanese markets stems largely from investors such as banks, insurers and pension funds that maintain positive yields on the liability side of their balance sheets.
- Long-Read: Japan’s economy might be stagnating, but that’s different for the sales of vaults or better: household safes. Sales doubled over the last 12 months. There are two explanations, explains the Financial Times. The first is that their popularity has more to do with the introduction last autumn of national identification numbers, a move that has led some to conclude that hoarding cash will protect them from the taxman and the prying eyes of the government. The second is that the average Japanese person can see that the Bank of Japan’s negative interest rate policy has been implosive. Negative rates may have been introduced earlier in Europe and Switzerland, but the consequences have been more spectacular in Japan. Within four months, almost 80 per cent of Japanese government bonds are trading at negative rates. As economists point out, buying a safe is more emotional than mathematical: this article explains that the cost of a safe and an insurance result in negative yields (apart form the question: does a safe that can contains let’s say JPY 10 mln or EUR 80.000 fit in your house?).
A note on what happened after the tsunami of 2011: by August 2011 people had turned in thousands of wallets and safes found in the debris, containing USD 48 million in cash. More than 5,700 safes that washed ashore along Japan’s tsunami-ravaged coast had also been hauled to police centers by volunteers and search and rescue crews. Inside those safes officials found USD 30 million in cash. One safe alone, contained the equivalent of USD 1 million (ABC News in 2011).
- Second Long-Read this week, also from the Financial Times on Suntory’s acquisition of American spirits distiller Beam. No less that JPY 16 bln was paid for this 7th generation led company (first Beam Bourbon was bottled in 1795.) Combining the corporate cultures of the two drinks groups after the USD 16 bln merger has proved a headache - and Suntory emerged from it with net debt at about JPY 1.6 tln (USD 15 bln), some five times its earnings before interest, tax, depreciation and amortisation. The deal was undermined from the start by broken promises, misunderstandings and different agenda’s. It is a great story to read for everyone interested in what may happen (and what is to be done) after the transaction. Lack of proper communication, that’s what we see here.
- But failing acquisitions by Japanese companies can be an advantage for non-Japanese global private equity firms that are now circling a rich new pool of potential deal targets in Japan: the failed takeovers, litigation battles and integration fiascos of the country’s record merger & acquisition boom. Private equity executives have said they are weighing a range of deals — some would see them take troubled assets off their Japanese owners’ hands and others that would involve teaming up with local companies as partners in turnaround efforts (Financial Times.)
- When there is not too much to be earned in Japan itself, then let’s go abroad, that is what several Japanese companies and the government must have been thinking wen they started to be involved in housing projects in Vietnam. Backed up by the Japanese government, Japan's Maeda Corp., Kyoei Steel Ltd. and Tokio Marine Holdings Inc., which have operations in the Southeast Asian country, will be involved in the project. A subsidiary of Mitsubishi UFJ Financial group, is also part of the pack (Nikkei).
- Elderly Japanese are among the world's richest retirees and now "the battle for Japanese inheritance is heating up”, reports Reuters. Trillions of dollars parked in savings accounts (and in household safes, as we just learned) are set to be released in the coming years as Japan's death rate climbs and new, more onerous inheritance tax rules kick in. Over 60-year-olds own more than half of the country's USD 14 trillion in personal financial assets, according to the Bank of Japan. But the Japanese government, however, wants a bigger slice. Japan already has among the highest inheritance tax in the world with a top rate of 55 percent, and changes introduced last year lowered the threshold for paying the tax to USD 280,000 from USD 471,000.
- The Tokyo Olympics in 2020: the event is currently six times over budget, with costs expected to reach USD 15 billion, writes Japan Today. During bidding, Japan said it could stage the event for USD 2.5 billion. Anybody expecting drastic cost-cutting would be an extreme optimist. A revised budget prepared by the Tokyo Metropolitan Government showed officials could find little to cut. All costs remained the same after searching for price reductions, and the only savings resulted from axing plans to remodel Tokyo Big Sight, which will be used as a media center. But what will happen with the Olympic infrastructure after the games are over? Read this article in Japan Today. It also tells that almost as soon as the first Tokyo Games ended in 1964, the country slipped into recession … hope that history will not repeat itself.
- New trend - at least for me: overeating without guilt. At this January's DUJAT Japan Update we heard from health measuring company Tanita that it pays off to know how much calories you should eat, even more precise: at their Tanita Shokudo (company canteen - and in the restaurants they opened in various Japanese and overseas cities) you measure meticulously what you put on your plate and shovel into your mouth. I hope that this overeating trend to do the opposite does not inspire you the coming week.
- The yen trades 0.0096 to the USD an 0.0085 to the Euro. At What Level Does Yen Matter to the BOJ?
- Pepper the robot suggests what haircut is best for you at Japanese barber shops【Video】. Still not perfect but Pepper makes progress.
- "Donald Trump in Japan” (not really Japanese but more Wendy van Dijk’s Ushi-type): Big in Japan? Faux Trump ad video goes viral.