May 9 2016

Week of May 9, 2016

Politics:

From a Japanese perspective, President Obama’s visit is bound to stir deep emotions because more than a few Japanese regard the atomic bombing of Hiroshima and Nagasaki in August 1945 as unjustifiable atrocities. Financial Times columnist Jacob Weisberg looks to this historic visit from an American perspective. "Among historians the debate about the use of nuclear weapons against the Japanese has remained very much alive. Why did President Harry Truman decide to drop atomic bombs on Hiroshima and Nagasaki, killing more than 200,000 people? And was he justified in doing so?”. But, states Weinberg, "Others point out that Japanese hardliners opposed surrender even after Nagasaki, and that dropping the atomic bombs was ultimately a humanitarian act. By ending the war the US probably saved many more lives than it destroyed”. It is a delicate visit, that’s for sure.
But how about PM Shinzo Abe visiting Pearl Harbor?, asks Foreign Affairs. "it is important that both sides craft a narrative that dispels as much partisanship as possible. To do so, Japanese Prime Minister Shinzo Abe should attend memorial services for the 75th anniversary of the Pearl Harbour attacks later this year as a show of goodwill in return for any similar U.S. gesture.” Foreign Affairs claims that there is more than one good reason for this: "During an address to a joint session of Congress last April, Abe said, “On behalf of Japan and the Japanese people, I offer with profound respect my eternal condolences to the souls of all American people that were lost during World War II.” A visit to Pearl Harbor would build on this momentum, and would give Abe an opportunity to provide historical context for Obama’s visit; he would be able to convey that the bombings of Hiroshima and Nagasaki did not happen in isolation, and would show a stronger awareness of Japan’s painful past. This visit would also help demonstrate to the world that Japan is more committed to promoting peace than in revising its own history.”
Brexit? What for?, asks Hiroaki Nakanishi, Hitachi Corp.’s Chairman of the Board in an article in the Financial Times. "Why would Britain want to squander its influence in the world’s largest trading bloc and risk Europe’s stability at a time when the globe’s security and economy are increasingly fragile? What gain could possibly compensate for these risks to the UK itself? … From a business point of view, the reasons for Japanese investors’ fears are simple. Together, Japanese companies account for about 140,000 permanent jobs in the UK. Britain is the centre for Hitachi’s two largest overseas infrastructure projects, in rail and new nuclear power. We invested in the country as the best base for access to the entire EU market. For our manufacturing and supplies we depend on skills and parts that come from within the UK and from Europe. Take away its EU membership, and the investment case looks very different.” That sounds convincing.

Economy:

Last week the Japanese yen went up and the stocks went down, and the Bank of Japan Governor Haruhiko Kuroda said the bank has "ample space" for additional monetary easing, keeping alive market expectations for further stimulus after maintaining the current policy last month. There is no doubt that ample space for additional easing remains for the central bank in terms of quantity, quality and the interest rate, the BOJ chief said in his speech here quoted in the Nikkei, pointing to moves in overseas economies as "the most important risk factor.” The Nikkei wrote this week that next year’s planned VAT hike from 8 > 10% most probably will be postponed.
But perhaps some very unorthodox measures are needed, says the Wall Street Journal. "In Japan’s Economic Extremity, Few Ideas Are Too Extreme”, and here are some examples. How about “helicopter money”? The BOJ would buy bonds directly from the government, effectively providing free money. They could be “perpetual bonds” with a zero coupon, meaning the government would never have to pay back the principal or any interest. Tax on cash and deposits, would be another measure. Keio University professor and former BOJ official Mitsuhiro Fukao proposed a tax on cash - say, by replacing cash with government-issued cards preloaded with electronic money that comes with an expiration date. People would have until that date to use it - or lose it. Government enforced wage increase? The IMF economists offered several possible measures in a paper in March. They range from having the government ask companies to explain themselves if they fail to raise wages at least 2% each year, to strengthening tax incentives for higher wages to introducing tax penalties for companies “not passing on excessive profit growth.” Japan as an economic laboratory, who would have thought that 10 year ago?
Bloomberg reported that Japan’s biggest banks may forecast the lowest profit in four years as negative interest rates squeeze lending margins and the commodity slump risks souring energy loans. Combined net income at Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. is expected to fall 6.9 percent to 2.25 trillion yen (EUR 20 billion) in the year ending March from a projected 2.42 trillion yen last year, according to the average estimate of nine analysts surveyed by the news company. Japan’s net interest margins are among the lowest in the world.

Corporate:

Mitsubishi Motors inflated its engines data, as we could read last weeks, and as a result, the company had to look for a saviour ... this time not one of its Mitsubishi related shareholders, but now competitor Nissan. Why? The scandal exposed the extent of Nissan’s dependence on its joint venture partner for Japan sales. Mitsubishi Motors is a manufacturer of small Nissan cars and after suspending deliveries of the affected models for the last two weeks of April, Nissan reported a 51 per cent plunge in its monthly minicar sales. Under the agreement unveiled on Thursday, Nissan will have the right to nominate the chairman of Mitsubishi Motors’s board and a third of its directors. Mitsubishi group entities, which currently have a 34 per cent stake in Mitsubishi Motors, will have 22 per cent after the Nissan deal. Nissan, having an alliance with Renault, is to inject JPY 237bn (EUR 2.1bn) into Mitsubishi Motors by buying newly issued shares that will amount to a 34 per cent stake (Financial Times). With the French state having voting power in Renault and Nissan, it may raise some eyebrows …
But how did this fraud at Mitsubishi Motors happen? The Nikkei explains: Mitsubishi Motors conducted both a mandatory testing method and its own improper method to compare the differences in basic fuel economy data back in January 2001. The comparison was aimed at checking how much difference between the two testing methods in terms of fuel economy data. This indicates that the embattled automaker may have been aware of its method's illegality even back then, the sources said.
Interesting read in the Financial Times on the lack of foreign expertise by Japanese companies’ employees. Japanese Japan’s workforce is becoming more insular just as its employers have realised they need to be more global. "From banks and drugmakers to producers of beer, tyres and steel, Japan Inc has justified more than 200 outbound deals since the start of 2016 with variations on the argument that growth must come from overseas”, writes the Financial Times. But nobody wants to admit just how few employees they have with international experience. Part of the problem is that the pool of young Japanese workers with a proven interest in the world outside has been drying up. After peaking at 83,000 in 2004, according to the OECD, the number of Japanese nationals studying abroad had dropped more than 30 per cent by 2011. Figures from the Japan Student Services Organisation (Jasso) show that 81,000 Japanese studied abroad in 2014 - but this is not yet the victory Japan Inc requires, as some 60 per cent of them studied overseas for one month or less. Only 2 per cent were outside Japan for more than a year. So, how could we help Japan?

Society:

In Japan young employees often do not understand the customs pushed upon them by their older coworkers and there are quite some business manners they feel are unnecessary. Japan Today has the main five complaints, such as "When seeing a client off at the elevator, having to continue bowing until the doors close completely” and "After being served tea at a client’s office, not taking a sip until your client does so first” or "Having to be at your desk five minutes before work starts”.
Spoon & Tamago (egg) is a funny digital magazine by "Johnny Strategy”, raised in Tokyo, based in Brooklyn. This week’s main article is about a very special Shinkansen: the Genbi Shinkansen, here described as the World’s Fastest Moving Museum. With a 240 km speed you’ll enjoy from your designer seats great installations, paintings, an interactive playgrounds for kids and more. Also see the related posts with some other examples of great trains in Japan. "Trains=Japan” I say.
Bitcoins & Japan, there have been some scandals in the past, Bitcoin’s founder uses the Japanese name Satoshi Nakamoto (some weeks ago Australian Craig Wright claimed to be this person) and frankly, I never thought much about it until recently. But early May Japan officially Recognized Bitcoin and Digital Currencies as Money, so that’s a good starter. Here an article from the The Cointelegraph. Why would Japan become a bg market for Bitcoin? “Believe it or not, Japan has the largest forex trade market in the world, which is like 40%, as I know of”, says Takao Asayama, CEO of Tech Bureau Corp. "I believe Japanese people would love bitcoin trade as high-volatility product. Japan is kinda "late" by a year or two, compared to US or Europe adopting cryptocoins, once we Japanese do, which I always say "when it hits boiling point", market here could outgrow US or Europe, or even Chinese market. As a payment method, numbers of retail store accepting bitcoins are growing but still, it is kind of slow. That will follows other countries when more people earn benefit from trade.” Japanese like point cards, and provides a good starting point as wel. And then there are the negative interest rates at banks that make Japanese savers look for different ways to keep their money up-to-value. I will report you more on Japan & Bitcoins in the next months.