Week of May 23, 2016

Politics:
  • "The American leader kept that pledge, walking a tightrope between saying too much and too little, but ultimately satisfying the majority of Japanese merely by being the first serving US president to visit the city”, wrote Deutsche Welle. No apologies were asked for by the Japanese government, no apologies offered. There were small demonstrations but it seems that Obama’s presence and forward looking speech has been well accepted in Japan. However, there were also critical remarks. “Obama should have stated what lesson we are clearly to learn by that atrocious and inhumane act. Lacking a concrete plan for achieving a nuclear-free world, we in Japan may have confirmed that we kind of like Obama personally,” Koichi Nakano, a political science professor at Sophia University said. “But there’s no plan to rid the world of nuclear weapons.” See also this short compilation of the visit Barack Obama in Hiroshima: ‘the memory must never fade’ (below the full video).
  • Chinese media were bitter, reported Japan Today. "The bombing of both Hiroshima and Nagasaki was justified, the China Daily said, as “a bid to bring an early end to the war and prevent protracted warfare from claiming even more lives. It was the war of aggression the Japanese militarist government launched against its neighbours and its refusal to accept its failure that had led to US dropping the atomic bombs,” it added. I wouldn’t be surprised if comments on this visit will linger on for some time to come. 
  • Then there was the G7 in Ise, producing the regular statements by the leaders of the world’s 7 biggest economies. And of course there was a display of technology, including the transportation (over a short distance though) of the G7 leaders in driverless cars. Canadian Prime Minister Justin Trudeau and other G-7 bigwigs went for a spin in Toyota Motor Corp.’s self-driving Lexus LS, Honda Motor Co.’s autonomous Accord and Nissan Motor Co.’s driverless Leaf on the grounds of the Shima Kanko Hotel, the main venue of the May 26-27 conference (Asahi Shimbun).

Economy:
  • No good news on inflation: April is a particularly important month for inflation in Japan because many companies raise prices at the start of the new fiscal year. Consumer prices in Japan sank further into deflationary territory in April, adding to pressure on the Bank of Japan for further easing in monetary policy and there are signs that the slide will accelerate in the months ahead. Preliminary data for the Tokyo area in May showed headline prices falling at an annual rate of 0.5 per cent, quicker than the 0.4 per cent decline in April, but in line with economists’ forecasts. During the G7 PM Abe compared the current global economic situation to that of pre-Lehman in 2008. Not all the leaders of the G7 countries agreed, but it seems that Shinzo Abe is preparing the announcement of a delay to raise the VAT from 8 > 10% (Financial Times).
  • Bloomberg quoting the Nikkei reported that PM Shinzo Abe plans to propose a fiscal stimulus package of as much as 10 trillion yen ($90.7 billion) after warning Group of Seven leaders that the global economy faces significant risk of another crisis, according to the Nikkei newspaper. Abe will seek a second supplementary budget after July’s upper-house election, the Nikkei reported Saturday. Proposals will include accelerating the construction of a magnetic-levitation train line from Nagoya to Osaka, issuing vouchers to boost consumer spending, increasing pay for child-care workers and setting up a scholarship fund, the Nikkei said.
  • Bill Gross, billionaire bond investor, expressed a pessimistic view on the sustainability of Japan’s debt. The only way for Japan to eventually cut its enormous debt burden is for the central bank to acquire it and forgo repayment, a scenario that may play out in similar ways in other countries, he told a Bloomberg seminar for fixed-income investors. “Ultimately, they could own all the market. At that point they could say to the fiscal side, ‘Olly olly oxen free. You don’t have to pay us back. Or we’ll extend your debt to 50 years with a zero percent coupon and at that point we’ll essentially eliminate the entire obligation.’ That would have serious impact on the world economy. 

Corporate:
  • Japanese companies plan aggressive capital spending in fiscal 2016, which started on April 1, although the pace of growth will slow slightly from their initial plans for fiscal 2015, according to a survey conducted by The Nikkei. The survey covered 1,140 Japanese manufacturers and non-manufacturers. They see their combined capital expenditures rising 8.3% in fiscal 2016 from a year earlier to 25.281 trillion yen ($229 billion). However, for fiscal 2015, the surveyed companies said they planned to raise their capital investments by 10.5%. In actuality, they only invested 2.8% more. Many companies cut back on spending in the second half of fiscal 2015 amid growing economic uncertainty at home and abroad (Financial Times).
  • Call it “being well informed” or “insider trading”, but listed businesses in Japan can selectively share material information with whomever they want - and it’s long been customary for executives to give analysts early peeks into their quarterly results. The tips flowed to brokerage clients via “earnings preview” reports, allowing investors to digest the numbers well before their official release. Now that system is changing, and it has big implications for the JPY 523.2 trillion stock market. At least five major brokerages have banned analysts from talking to companies for preview notes, jolted into action by an official censure of Deutsche Bank’s local research unit in December and a regulatory report last month that called for new disclosure rules (Japan Times / Bloomberg).
  • Executive pay in Japan has been often low when compared internationally. Not for Softbank’s President Nikesh Arora. He received about JPY 8 billion yen (EUR 65 million) in compensation last fiscal year, a shareholders meeting notice posted Thursday shows. The pay package is the largest for a director at a Japanese company, according to Tokyo Shoko Research. Companies first started disclosing executive compensation in fiscal 2009. However, the previous record was held by Toshihiko Miyauchi, senior chairman at leasing company Orix, the owner of Robeco. He was paid JPY 1 billion less.

Society:
  • Preparations for the Tokyo Olympics are not as smooth as could be expected. There is an investigation into a possible bribery, but the big challenge is the Olympic stadium. Financial Times’ Leo Lewis sees the problems with the commissioning of this stadium as a metaphor for Japan’s economic woes. "Despite the wounding collapse of Japan’s 1980s bubble and the ensuing decades of economic torpor, the past quarter century of Japanese politics has lumbered to the chant of “if it ain’t broke, don’t fix it”. The great lure of that line is that Japan does not look terribly broken, and there is no large, persistent or especially vocal segment of the Japanese public arguing otherwise. Abenomics - its figurehead becoming more paranoid and controlling by the day - is visibly losing the steam it requires to push through big fixes on labour market, workplace diversity, agricultural reform and corporate governance.” The good news is that also in preparation for the Tokyo Olympics in 1964, there wasn’t a lack of problems and they were solved by the end of the day.
  • Recently there has been a re-think on the use of nuclear energy in Japan. Now a target of 10-15 percent for nuclear by 2030 has been mooted, one of the sources said, down from 20-22 percent under current policy (i.e. post Fukushima). Compare this to the projections before Fukushima: nuclear supplied about 30 percent of Japan's electricity needs and the energy plans envisaged increasing that to about 50 percent. Renewable energy, incl. wind and sun will replace nuclear, but also the use of coal is expected to grow (Reuters).
  • A great and upbeat article in the Nikkei about the Maglev train that is to run between Tokyo and Nagoya / Osaka. The Japanese government and Central Japan Railway may launch high-speed maglev train service between Tokyo and Osaka as much as 8 years earlier than the initial 2045 target date. The planned Linear Chuo Shinkansen bullet train will connect Tokyo to Nagoya in 40 minutes, and the capital to Osaka in just 67 minutes. The first leg of the magnetic-levitation line is already under construction and is expected to start running in 2027. This is how we know Japan! 

Recommended pictures:
Recommended presentation on Japan’s economy: 
  • The Financial Times presented a full picture on Japan’s economy. Very useful (attachment).​




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