Weeks of May 6 - June 5, 2018
Just back from a week long series of meetings in Tokyo, I notice that Japan’s most pressing themes are security (North Korea, China, Trump, Russia) and the growing lack of workers in basically any sector, be it manufacturing, agriculture, the financial or service industry. So let’s look to the implications of these themes from a political, economic, corporate and societal perspective. And, in view of Dujat’s annual mission to Japan from June 6 - 10 with a seminar on agriculture, let’s replace “Economy” by "Agriculture”.
Politics:
Just back from a week long series of meetings in Tokyo, I notice that Japan’s most pressing themes are security (North Korea, China, Trump, Russia) and the growing lack of workers in basically any sector, be it manufacturing, agriculture, the financial or service industry. So let’s look to the implications of these themes from a political, economic, corporate and societal perspective. And, in view of Dujat’s annual mission to Japan from June 6 - 10 with a seminar on agriculture, let’s replace “Economy” by "Agriculture”.
Politics:
- PM Shinzo Abe’s claim to fame is based upon two pillars: 1. his self proclaimed ability to connect to strongmen outside Japan, and in particular his relation with Donald Trump (dubbed a “bromance” between the two) and Vladimir Putin. 2. Abenomics, his grand design to revive Japan’s economy from a stagnating into a vibrant one.
Last week Mr. Abe visited Russia’s President Vladimir Putin whom has met no less than 21 times over the last years in trying to come to a peace treaty between the two countries, including a solution for the four Russia held islands north of Hokkaido. The result is disappointing: no development at all. "Abe has always sought to present himself as an international statesman in whom the Japanese can place their confidence at a time of global insecurity. Yet, at just the time when he would most benefit from a foreign policy success to distract from domestic troubles, Abe's touch appears to be deserting him”, writes James D.J. Brown, an Associate Professor at Temple University and specialist in Japan - Russia relations. And, apart from delivering at least some progress, Mr. Abe isn’t part of the US- North Korea summit that are to take place on June 12, while any deal between Trump and Kim Jung Un will have huge implications for Japan (Asia Nikkei Review.) - "How Trump’s Obsession With China Could Turn America into Japan”, is a thought provoking heading in Politico. "Donald Trump’s plan to make the American economy great again is deceptively simple: wrestle jobs, market share and indeed the future back from China. But what if the U.S. president, in the process, morphs America into Japan?”, writes William Pesek, a Tokyo based author and commentator in this interesting analysis. What I learned is Trump’s rallying against Japan is not a recent thing. "Three decades ago, Trump the real estate mogul railed against Japan-style tariffs and a zero-sum view of economic relationships. Japan, in the midst of its own economic boom, had 'systematically sucked the blood out of America and American manufacturing, he said in a 1989 'Morton Downey Jr. Show' interview. 'They have gotten away with murder. They have ended up winning the war’”. This article has ample references to the reasons for Japan’s economic decline from the early 90's and stagnation over the last 20 years.
- What is PM Abe’s position in view of the allegations of cronyism, and in particular to his yes / no dealings with the Moritomo Gakuen scandal, in which public land was sold to an ultranationalistic school with a 90% discount? For sure his position has been weakened, and left-leaning newspaper Asahi Shimbun asks when Mr. Abe will take full responsibility for this scandal. But Mr. Abe will be relieved as on Thursday May 31 prosecutors in Osaka said they would not indict the officials, including former tax agency chief Nobuhisa Sagawa, who testified to parliament that Abe did not order the document changes.
- Three articles / reports on Japan's agriculture. The average Japanese farmer has less than 2 hectares of land. In contrast, the average size of a Dutch farm is more than 27 hectare. But the Japanese government has big ambitions: to become a food exporting country, whereas it now imports 60% of its food - calculated on calorie basis. As often in Japan this may be wish-thinking: the Canon Institute for Global Studies published some months ago a report on the future of Japan’s agriculture and this research institute isn’t positive about the policy by the current administration. Major hurdles are the Agricultural Land Act, which prohibits corporate entities from entering the industry and inhibits the emergence of successor farmers, while ensuring strict farmland zoning; and purchasing farmland owned by absentee landowners at a low price and leasing it to farmers at the responsibility of the central government.
- And there are a lot of absentee land owners in Japan. The Economist quoted a 2016 report for the government by a panel of experts that estimated that about 41,000 sq. km of land, or 11% of Japan’s surface (that is apr. the surface of The Netherlands), was unclaimed, most of it in rural regions. By 2040, it warned, the area could more than double. The cumulative cost in lost productivity could be as high as JPY 6 trn. (USD 56 bln.). Japan’s Big Brother in the agri is JA, Japan Agricultural Cooperatives or Nōkyō, a body that controls Japanese farmers to a great extend. However, as in other sectors in Japan, the structural changes that the Abe government promised in the farming sector, have been carried out reluctantly or not at all. Attached a picture of Japan’s land utilization.
- A labour market with a very low unemployment forces Japanese companies into robotization and the development of all kind of technologies, also in agriculture, see http://www.dw.com/en/robots-take-over-japanese-farm/av-36228910.
IEEE just published an article about vertical farming in Japan incl. about indoor farms run by AI and lit by LEDs. The article quotes a Japanese farmer, or better, techno-agriculturist, who claims that Japan, which began experimenting with plant factories in the 1980s, is now the world’s leader in this field. Most of these vegetable production “factories” are to be found in or around the cities, thus reducing transport-related CO2 emissions.
- Brexit proved to be a challenge for Japan’s automakers, but the Trump administrations’s levies on Japanese cars and parts is a headache as well. Above quoted William Pesek also shines his light on the Japanese car industry in the wake of US trade restrictions in this sector. According to a Japanese government publication, Japanese companies employ a significant number of US workers: almost 840,000 Americans are employed by Japanese companies. Roughly 46% of them work in manufacturing and earn an average salary of USD 79,819. The accumulated Japanese FDI in the USA is apr. USD 411 bln.
- Poison pills, or anti-takeover measures: recent research showed that Japanese companies with a market cap over JPY 300 bln (EUR 2.4 bln) that have abandoned their takeover defences since January 2013 have outperformed the benchmark Topix index by an impressive annual rate of 6%. Examples are Panasonic, Yamaha Motor and Shimano. Other research shows that a third of companies in the Topix 500 have more than 50% of their shares held by “allegiant shareholders” guaranteed to vote with management, and another third have between 33-50% held by that type of investor (Financial Times.)
- Rakuten, Japan’s e-commerce giant, is betting on the rising digitisation of cross-border payments and invests in UK company Azimo. Rakuten values the fast-growing British financial technology company at several hundred million dollars (Financial Times.)
- Japan and robots: in the top-25 of global robot manufacturers, Japanese companies count for 50%. But why are and have robots been so popular in Japan? In an analysis in the Financial Times, one commentator explained that generations of Japanese children had been brought up to think of robots as helpful heroes. "Take Astro Boy, a popular manga series which has sold 100 mln copies worldwide. Astro Boy tells the tale of a humanoid robot created by Dr. Umataro Tenma to replace his lost son. Aided by seven super powers, including a neat retractable machine gun in his hip, Astro Boy fights evil and injustice. … Masatoshi Ishikawa, a robotics professor at Tokyo university, has an alternative theory. He suggests that religious belief is influential. Whereas the monotheistic religions of the west have a hard time crediting a non-organic body with any intelligence, the spiritualist religions of the east find it easier to believe that robots might have a separate spirit. 'The Japanese religious mind can easily accept a robot-type of existence, he says. 'We see them as friends and believe they can help humans.’”
- The annual number of newborns in Japan in 2017 dropped to 946,060, marking a new record low and below 1 million for the second consecutive year, a government survey showed last week (and note: the number of marriages in Japan also fell to a postwar low of 606,863, down by 13,668 from the previous year.) According to health ministry data, a natural decrease in the country's population came to 394,373, the largest margin of decline, with the number of births down by 30,918 from the previous year and the number of deaths climbing to a postwar high of 1,340,433. So loving robots is less a choice but more a necessity.