Week of June 6, 2016
- Tens of thousands of protestors rallied last Sunday in Tokyo to voice their discontent with PM Abe, as shown in this Asahi Shimbun article. There are several issues at stake: the proposed change in Japan’s constitution, but also the government’s economic policy. Thanks to a landslide victory in the 2013 election, there is virtually no chance that the Liberal Democratic Party (LDP) and its junior coalition partner Komeito will lose its upper house majority. Even if it does (almost certainly triggering Abe’s resignation), the replacement will follow similar domestic and external policies, supported by a lower house super majority to override the upper house if need be. There is even less chance that the ruling coalition will win enough seats for an upper house super majority. That is unfortunate for the LDP, which has been committed since its founding in 1955 to amending the current constitution adopted during the Allied occupation after WW II. A super majority vote in each of the two houses is necessary to put a constitutional amendment to a simple- majority national referendum.
- Tokyo’s Governor Masuzoe is in the fire line for misusing public funds, such as using his office cars for traveling to his weekend home in Kanagawa Prefecture and costly overseas business trips. The two lawyers that investigated this case concluded six hotel stays that cost 802,000 yen and 14 instances of wining and dining that cost 336,000 yen were “inappropriately” booked as political expenditures as they likely included his family. Some books, including a comic book that he apparently bought for his family during a trip, were also deemed as inappropriate use of political funds, as well as some artworks Masuzoe claimed he purchased to improve his knowledge of art as a politician. Masuzoe told the press conference he will donate an amount equivalent to the hotel fees and dining expenses to charity and the artworks to museums or elsewhere (Japan Today).
- China and Japan are at loggerheads again over the disputed Senkaku Islands. Last week a Chinese warship that sailed by the disputed Senkaku Islands early Thursday could at one point have planned to enter Japan's territorial waters, possibly bringing the two countries dangerously close to an armed clash. Mark my words: within the foreseeable future there will be a clash - that no one wants (Japan Today).
- The sales of household safes and vaults in Japan and Germany have been exploding over the last monts, but now also banks start to stick cash in their corporate vaults. Japanese banks have been more muted but Bank of Tokyo Mitsubishi UFJ has become the first leading lender to break ranks, confirming it is considering giving up its primary dealership status for sales of Japanese government bonds. Negative rates have hammered share prices. Japan’s Topix bank index is down 28 per cent this year and the Euro Stoxx Banks index is 21 per cent lower. (Financial Times).
- Japanese banks and block chain: The Asahi Shimbun reported that Mitsubishi UFJ Financial Group is taking the plunge and will introduce its own virtual money. The lender, along with the two other megabanks in Japan, is part of a global consortium of more than 50 financial institutions led by blockchain technology firm R3. That means MUFG's move is likely to be followed widely and quickly in countries as far-flung as Brazil, China and Spain (Bloomberg).
- Fitch Rating Agency reported that Japanese banks are facing strong headwinds. "Japanese banks will continue to face profitability pressures on several fronts, says Fitch Ratings. These include a challenging low-growth operating environment, the central bank's negative rate policy, and increased foreign-currency funding costs, among others. Net interest margins (NIMs) at the three Japanese "mega banks" - MUFG, SMFG and Mizuho - have declined steadily since 2010, with the average NIM falling to a multi- year low below 0.7% in the fiscal year ending March 2016. The macroeconomic environment remains challenging for the banking sector, with 'Abenomics' policies struggling to gain traction and private consumption still dragging on GDP growth.” (Fitch).
- Cash holdings by listed companies in Japan rose (again) to a new record at the end of fiscal 2015, with more than half of the businesses having turned effectively debt free. Aggregate cash holdings of publicly traded companies with varying fiscal-year ends - excluding financial businesses and the Japan Post Group - climbed 2% on the year to 109 trillion yen (USD 1.01 trillion), data compiled by Nikkei Inc. shows. The tally had topped 100 trillion yen for the first time in fiscal 2014 (Nikkei).
- DUJAT member Nippon Yusen will expand its activities into seafloor equipment engineering for oil drilling, adding a new component to the Japanese shipping line's offshore rig business. EMAS Chiyoda Subsea is a 50-50 joint venture formed in March by Japanese plant builder Chiyoda and Singapore-based offshore oil field services group Ezra Holdings. Subsea engineering is vital to the oil industry's offshore development activities. Yet Japanese groups have been slow to enter the business, ceding it to companies like France's Technip and U.K.-based Subsea 7. Nippon Yusen sees offshore resource development as a growth industry that promises steadier earnings than its highly cyclical mainstay business of shipping. It has already been involved in offshore rig operation as well as transportation of offshore crude oil. You may ask Why? The Japanese government designates development of undersea resources as a pillar of its offshore development policy. Seafloors near Japan are thought to hold vast amounts of methane hydrate, a source of natural gas.
- Bank of Tokyo Mitsubishi UFJ is raising the stakes by proposing to become the first Japanese institution to surrender its membership of the club of Japanese Government Bonds primary dealers, a severe embarrassment to the Bank of Japan. Such a move - dubbed a revolt by local media - shows a clear erosion of the unity between government, bureaucracy and financial sector that has underpinned the growth revival programme known as Abenomics, analysts said. JGB dealers said it sent a “very clear message to the central bank.” (Financial Times)
- The risk for a major earthquake around Japan’s pacific coast is increasing, reports the Asahi Shimbun, see also the map in the article. Most of Japan’s manufacturing is located here and a major quake may cause enormous damage to Japan’s economy. A quake with the force of 6 on Japan’s own scale could destroy 40% of Japan’s manufacturing capacity when taking place in the Nagoya region. See also this info re. Japan’s own earthquake measuring standard: https://en.wikipedia.org/wiki/Japan_Meteorological_Agency_seismic_intensity_scale
- Work / Life balance is for Toyota becoming more and more important to retain its employees and the company plans to introduce a telecommute program as early as August to allow roughly 25,000 career-track employees work at the office as little as two hours a week. The comprehensive program will target employees at Toyota's headquarters here who handle office work in such fields as human resources, accounting and sales, as well as workers engaging in R&D and other engineering tasks. Certain credentials that employees receive after working for the company for five years or so will be needed to qualify for the program. Toyota had roughly 72,000 employees on its parent-only payroll as of March (Nikkei).
- And in another effort to address Japan’s declining population: a city in Chiba Prefecture plans to help young women freeze their eggs in the largest publicly funded project of its kind and one of the first aimed at healthy women. The Urayasu Municipal Government will cooperate with Juntendo University Urayasu Hospital to extract eggs and freeze them to help address the nation’s declining birth rate. Explorative work began last July to determine how such a program might work, and whether a publicly funded campaign might help address Japan’s low birthrate. It is rare for a government body to subsidise the freezing of women’s eggs. Urayasu is budgeting ¥90 million (EUR 750K) over the three years to March 2018 to help potential mothers preserve eggs for future use. The subsidies are available to female residents of the city aged 20 to 34, and the frozen eggs are intended to be used by the time they are 45 (Japan Times).