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Week of June 20, 2016

Politics:
  • “The only surefire is you buy yen, you buy U.S. Treasuries, you buy gold, and you sit tight,” is what a senior economist at Mizuho Bank, told Bloomberg News, quoted in the Tokyo-based online magazine The Diplomat. By all means, it is remarkable the the Japanese yen is seen as one of the few safe havens, given the Bank of Japan’s policy to bring quantitative easing to the next level. And Japan’s Mizuho Research Institute has estimated that a stronger yen could dampen Japanese exports, reduce business investment and contract Japan’s GDP by up to 0.8 percent – enough to send an already fragile recovery back into borderline recession territory. That is bad for Japan, bad for PM Shinzo Abe who will be campaigning for the Upper House election in the weeks to come (but polls show a convincing win for him.)
  • The Asahi Shimbun reported that fears are being voiced in Tokyo "that Britain will now try to snuggle up closer to China, with which it has historic ties. Such an eventuality would have a big impact on Japan's national security in light of moves by Beijing to strengthen its maritime presence in the region.” The UK was the first of the G7 nations to join the AIIB, the China-dominated Asian Infrastructure Investment Bank. And: the EU banned in 1989 the export of weapons to China, a ban still in place, but “there is the possibility that Britain could lift its export ban after it formally leaves the EU.”
  • Japan and Russia started their peace talks, only now, 71 years after the end of WWII. The Soviet Union declared war to Japan six days after the (first) atomic bomb was dropped on Japan and it occupied 4 islands off the coast of Hokkaido. With the Russian economy stagnant, there should be at least some quid-pro-quo’s you would say (Telegraph).

Economy:
  • More news on the economic impact of the UK’s decision to back out from he EU. This country counts many Japanese production companies, incl. Hitachi (rolling stock), Nissan (cars), Toyota (engines) and many more. As an island nation, Great Britain has always been seen by Japan as “of its own kind”, hence the massive investments by Japanese companies in this country. However, says Jesper Kroll of Wisdom Tree Japan, "corporate profits from Europe, including Britain, account for just 6 percent of all Japanese corporate profits." The bigger impact, he said, was uncertainty for Japanese banks and insurers, which rely on London markets for 25-35 percent of their funding (Reuters).
  • But, it is not only big corporate that will suffer from the Leave decision. The Yomiuri Shimbun / The Japan News interviewed a series of employees and directors at Japanese SME’s. There is worry that the strong yen as a result of the British turmoil will affect them. And obviously: small investors saw part of their investments evaporate on June 24. 
  • Like many other papers, also the Financial Times reported on a possible Yen intervention by the Bank of Japan, and Finance Minister Aso already warned the markets. Interesting table in this article by Nomura with the 5 intervention levels.  

Corporate:
  • The Japan Times reported on the worries of some specific Japanese companies with production facilities in the UK. Example: Nissan is to make further investments to cope with new EU CO2 emission regulations, but will the UK standard be the same as in the EU? Even more worrying is a statement by Hitachi’s top shot. Late Friday, Hitachi Chairman Hiroaki Nakanishi said there is now a need to “carefully” think about the aftermath of Brexit. “Not only Britain but the whole of Europe is unstable,” Nakanishi said. Hmm, BREXIT as the canary in the coal mine for Japan’s view on the EU …?
  • A well-known fact: foreigners in Japanese corporate boards earn more than their peers - and even more than their superiors. Executive Vice President Didier Leroy, who assumed that role last June as the first non-Japanese person to do so, was paid JPY 696 mln (EUR 6.1 mln), while President Akio Toyoda earned JPY 351 mln yen (EUR 3 mln) in the year ended in March. His salary remained unchanged at JPY 102 mln and bonuses declined by JPY 1 mln yen to 248 mln. (Nikkei).
  • That was also true for Nikesh Arora, the Indian successor-to-be to Masayoshi Son, founder and President of telecom and tech company Softbank. He earned a record-breaking remuneration totalling JPY 25 bln (EUR 220 mln) during his 21-month tenure,  more the Silicon Valley standard than that in Japan. He left unexpectedly, as Masayoshi Son was not to hand over the helm in the agreed upon time. “Japan is no country for young men”, states Bloomberg, showing in a graph that of the world’s 10 biggest stock markets, Japan’s chiefs are the oldest. "Succession planning is going to be the biggest issue for Japanese companies run by their founders in the next five to 10 years," Dairo Murata, an analyst at JPMorgan Securities Japan Co. in Tokyo, is quoted in this article. "It comes to the surface as a risk for investors if there’s still no clear picture of succession when they get old.” (Bloomberg). 

Society:
  • Why are fewer Japanese men and women seeking marriage? A study by an affiliate of Tokyo-based Meiji Yasuda Life Insurance shows that the proportion of Japanese men in their 20s who want to marry has slumped to 38.7 percent, down alarmingly from 67.1 percent just three years ago. For women in their 20s, the rate fell from 82.2 percent in 2013 to 59 percent. Japanese women have traditionally sought the "three highs" - of high academic achievement, physical height and an elevated income - in the perfect partner, but the report suggests that income is now their prime concern. More than half of single women want their spouses to earn at least JPY 4 mln a year, writes Japan Today. But according to the report, only 15.2% of single men in their 20s earn JPY 4 mln (EUR 35,000) or more and this gap seems to be one of the reasons for more people not marrying at all or marrying late.
  • Japan is often seen as a very egalitarian society, but The Guardian reported a little different. Japan is now #2 when it comes to the most High Net Worth Individuals (HNWI’s), just after the USA. Japan and China together accounted for 60% of the growth in the number of millionaires around the world last year, according to a CapGemini survey. Asia-Pacific is expected to account for two-fifths of the world’s wealth within the next 10 years – more than that of Europe, Latin America, the Middle East and Africa combined.
  • Japan is the country for sector organisations, industry groups etc., but this one was new to me: the Japan High Heel Association (JHA), which is calling on women across the country to trade sensible shoes for a pair of stilettos, insisting that standing tall will give them “confidence” - and improve their gait. No less than 4,000 women have registered for a JPY 400,000 (EUR 3,500), 6-month course. "Critics have branded the idea sexist and laughable, particularly as women are still battling against a deeply ingrained patriarchal culture that once expected them to pace three steps behind men", writes Japan Today. However, the Japan High Heel Association, managed by Madame Yumiko, is convinced that it won’t take long before also men will walk high. Not me, take that for granted.


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