Week of May 16, 2016

Politics:
  • Politico had an article on President Obama’s “nuclear nightmare” now that Donald Trump recently questioned one of Asia's core security assumptions: a nuclear-weapons free Japan. "Wouldn't you rather, in a certain sense, have Japan have nuclear weapons when North Korea has nuclear weapons?" Trump asked in a March New York Times interview. Shortly after Trump’s comments last month, the governor of Japan’s Osaka prefecture told reporters that the country should revisit the question of nuclear weapons, which the country has forsworn. “What do we do if America’s military strength disappears?” asked the governor, Ichiro Matsui. “Wishful thinking doesn’t get us anywhere.” 
  • The Yomiuri Shimbun / The Japan News carried an article about PM Abe’s envisioned change of Japan’s constitution. When the Japanese Diet and the Upper House agree with a planned revision, a national referendum has to take place and this article describes the necessary steps. The change of the constitution, and in particular Article 9 dealing with defense, will not be an easy task for the Abe government, as there is resistance from the opposition parties. And his own party LDP there are voices to look for a broad consensus on the changes.
  • Next week President Obama will visit Hiroshima. Washington said Obama won’t apologise and a meeting with survivors is unlikely. Japan’s government has also told U.S. officials that it is not expecting an apology, according to Japanese and American officials. However, two leaders of a Tokyo-based nationwide group of survivors of the bombs on Hiroshima and Nagasaki, told a news conference Thursday that many survivors still want an apology, though they have long avoided an outright demand for one out of fear that it would be counterproductive. Shizuka Kamei, a national lawmaker from Hiroshima whose sister died in the blast, said Obama is not welcome without an apology. “If he is not going to show remorse or offer an apology, he shouldn’t come,” he told a separate news conference. “Is he going to Hiroshima for sightseeing? Then please come after stepping down as president. I’ll be there to welcome him.” (Japan Today).

Economy:
  • Japan’s economy grew at an annualised rate of 1.7 per cent in the first quarter of 2016, easily beating expectations of a 0.3 per cent rise, in a big boost to the country’s beleaguered policymakers. That must have been good news for the Abe government, although expectations are that next quarter will be less favourable (and according to the Financial Times, Japanese data on GDP are notoriously unreliable, and revisions often change the picture substantially.. At least Japan has avoided another technical recession, defined as two consecutive quarters of negative growth. And this is even with a stronger yen, that is hitting exports of Japanese companies. (Financial Times).
  • And … the outlook for capital spending in Japan doesn’t look so dire either after machinery orders grew faster than expected in March. Machinery orders are seen as a popular proxy for capital expenditure. The so-called core measure, which excludes ships and utilities, jumped by 5.5 per cent month-on-month in March from a 9.2 per cent drop the previous month. That lifted the year-on-year rate of growth to 3.2 per cent, from a 0.7 per cent contraction in February. 
  • But at the start of the G-7 finance ministers in Japan, Tokyo and Washington clashed over whether Japan should be allowed to arrest the yen’s recent rise. A sharply weaker yen, catalysed by the Bank of Japan’s easing policies, had been a key element of Prime Minister Shinzo Abe’s growth program, but the currency has rebounded moderately since January. The two-day meeting ended without an agreement on a more balanced policy mix, including additional, possibly coordinated fiscal stimulus, and aligning divergent monetary policies (Wall Street Journal).

Corporate:
  • "Japan show signs of auto-dependency syndrome”, writes the Nikkei. Autos are having a bigger impact on economic growth as Japan's industrial structure changes. Takuya Hoshino, an economist at the Dai-ichi Life Research Institute, estimates in this article the value of the country's auto shipments at JPY 59.9 trillion yen (EUR 480 billion) in 2015. That is equivalent to 20.2% of the country's manufacturing shipments in value terms, the first time the figure has exceeded 20%. The Japanese car industry has grown significantly over the past three decades, despite difficulties such as trade friction with the U.S. The auto-industry is considerably larger now than the electronics industry or machinery. One of the reasons is Japan’s R&D spending in automotive. "If the automotive industry falters, Japan's economy will become even more unstable.” 
  • The newly formed team Nissan - Renault and Mitsubishi Motors has to be part of the solution. "Japan and North America are Nissan's most important markets, while Mitsubishi Motors is stronger in the developing world. To counter Toyota's popular hybrid vehicles, Mitsubishi got a jump on other Japanese automakers in all-electric cars and has a longer track record and higher name recognition than Nissan in Southeast Asia”, writes the Financial Times. A stronger alliance with Mitsubishi Motors will "make some contribution" to Nissan's profits, said Hitoshi Kaise, principal at Roland Berger, a German consultancy. For Nissan-Renault, securing Mitsubishi Motors as a partner is a significant step toward joining the ranks of automakers that sell 10 million vehicles a year, such as Toyota and Volkswagen. 
  • Two years ago DUJAT organised a seminar on the way decisions are being made in Japanese companies: the so-called “ringi-system”. Decisions are made after approval of all relevant managers by putting a seal on the documents describing the planned decision. Japanese banks are also not known for their efficiency, but this week Resona Bank announced that customers will be able to open deposit accounts and carry out other procedures without using their seals, starting by … the end of March 2019. The two banks’ branches nationwide will instead use biometric and other technologies to identify customers, said Kazuhiro Higashi, president of Resona Holdings Inc. The company “aims to have all customer procedures done electronically.” With negative interest rates Japanese banks have to go abroad and look for more efficient operations (JiJi Press).

Society:
  • Is Japan ready for the Big One? One of the areas where a big earthquake (“The Big One”) can be expected is the Tokai region, te industrial heartland of Japan. The Japanese government has calculated the possible effects of an 8 or even 9 Richter quake in the region, where Toyota cars are made, Boeing parts, industrial robots etc. The estimates of casualties are frightening: in the worst case, the government expects 323,000 deaths. Of these 230,000 would be due to the impact of the tsunami, 82,000 from the collapse of houses and 10,000 due to fire. As many as 2.4m houses would be destroyed. In the worst case of a magnitude 9.0 quake, close to land, Tokyo puts losses at JPY 220tn (EUR 1.8tn) for the first year alone. The amount is hard to imagine: it would cost as much as 40 per cent of Japan’s gross domestic product and disrupt worldwide supply chains at companies such as Toyota, with repercussions for everything from the yen to national defence and the country’s public debt. The government’s figures put the odds of a magnitude 8.0-plus Nankai Trough earthquake at 50 per cent in the next 20 years, 70 per cent in the next 30 years and 90 per cent in the next half century. There is critisism as well: the recent earthquake in Kumamoto was not predicted, so Japan should prepare for the unpredictable. What are the costs of this Kumamoto quake? No less that JPY 500 bln or EUR 4 bln. 
  • PM Abe announced Friday that up to 150 Syrians will be allowed to enter Japan over the next five academic years to study at universities, as part of the government’s efforts to help refugees in the war-torn Middle East country. He also also pledged a total of EUR 5.5 bln in official development assistance to support Middle East countries affected by the refugee crisis and to strengthen the global healthcare system, including responses to the outbreak of pandemics.   
    The plan to take in Syrians was announced as Japan is often criticised for admitting only very small numbers of refugees. In 2015, the Ministry of Justice received a total of 7,586 asylum applications from around the world, but approved only 27, far fewer than many other developed countries  (Japan Today).
  • Dutch - Japanese success at the Cannes Filmfestival. The film The Red Turtle was awarded the Special Jury Prize and the movie is made by Dutchman Michael Dudok de Wit and produced by Japanese Studio Ghibli. The dialogue-free picture centers on a man shipwrecked on a tropical island inhabited by turtles, crabs and birds. It’s the first international co-production for Japanese animation house Studio Ghibli which partnered on the film with France’s Wild Bunch, in association with Why Not Productions. See also the trailer: Studio Ghibli's The Red Turtle Trailer Looks Stunning - Film 

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