Minister quits and BOJ takes extreme steps to fight deflation

_87969094_87969093The resignation of Japan’s Economy minister Akira Amari has revealed the considerable influence of Japan’s gossipy weekly magazines.

Mr Amari told a press conference in Tokyo on Thursday that he is resigning.

He was under pressure following allegations of corruption made by the Japanese magazine Shukan Bunshun.

Shukan Bunshun is one of a number of weekly magazines which specialise in scandal. Most respectable people say they do not believe all things they read in them but a good story will be picked up by the quality newspapers and the Japanese broadcaster NHK.

In this case, the allegations, which were published last week, were that Mr Amari and his aides were given money and gifts worth twelve million yen by a construction company in return for favours linked to land ownership.

Mr Amari’s denial was less than robust. He said he did receive money but denied it was a bribe.

The international press concluded Mr Amari’s departure is a blow for Prime Minister Shinzo Abe, although some Japanese journalists wonder if it was part of a power struggle.

“This is possibly the biggest scandal the Abe administration has faced,” said the BBC’s Mariko Oi.

It turned out that Mr Amari, who said he was trying to fight deflation, resigned just a day before the Bank of Japan picked up another weapon in that ongoing battle.

On Friday it announced it would introduce negative interest rates for the first time.

That move is designed to persuade the commercial banks to lend more money to businesses and to encourage Japanese people to spend some of their savings.

This policy will run alongside the Bank of Japan’s existing programme of buying Japanese government bonds.

The problem is that as it does so, it amasses more public debt.

Professor Masanaga Kumakura from Komazawa University complained about this in an article, published in East Asia Forum, saying that Japan is sinking “in a sea of money”.

The Bank has already bought more than 300 trillion yen (about US$ 2.5 trillion) of bonds and has pledged to go on buying more until the rate of inflation rises to two per cent.

Professor Kamakura said that this misguided policy is based on an inaccurate view of deflation.

Elsewhere, in an article for Forbes, Bryan Rich suggested that the Bank of Japan now holds the steering wheel of the global economy.

He claimed its policies will be beneficial to investors because it wants Japanese stock prices to rise and it is also aiming for a weaker yen.

But like Professor Kamakura, he is concerned that Japan will run up more debt without a credible plan to repay it.

 

Chocolate taxis promise exam success

taxi2Japanese taxis are not actually made of chocolate but a few are painted in the colours of Kit Kat, the famous chocolate biscuit made by Nestle.

Kit Kat in Japanese sounds like kitto katsu, which could be translated as “sure to succeed”.  Nestlé Japan has teamed up with the Nishitetsu taxi company in Fukuoka Prefecture, Kyushu, to provide a lucky cab service called the Juken ni KitKat model, or the “Sure to Succeed in the Exam” model.

The driver offers chocolate snacks to passengers although he cannot answer all exam questions.

Still, it is a fun marketing approach and it reminded me of a promise made by another taxi firm, Hailo, that using their cabs will help passengers spend more time with their family.

Hailo encourages working mothers to use its cabs to quickly travel from work to home or to pick up their children from school. The company says this is part of its corporate social responsibility. It is also a way to expand its customer base.

Japan has a huge number of taxis, most of which are safe, clean and quiet. The driver is usually courteous. The doors open automatically and there is normally a box of clean tissues (or, if you are lucky, a Kit Kat).

Yet I have found many drivers who do not know the routes to famous destinations, such as the Ministry of Foreign Affairs or the Imperial Hotel.

To my eye, it also looks like a very inefficient business with long lines of empty taxis waiting outside stations or idling in entertainment districts.

This over-capacity means I have never had any difficult hailing a cab in Japan but apparently, many people prefer to use a smart phone to book because they think it is cheaper or more efficient.

So Hailo has developed a smart phone app to connect with the taxi fleet. It launched in London in 2011 and expanded to Osaka two years later. The CEO of the Japanese operation is Ryo Umezawa.

Umezawa san was born in Tokyo but spent ten years in the Philippines where he learned English. He became an entrepreneur at a young age and sometimes people tell him they do not believe he is a CEO and ask him to bring an older colleague.

“Studying abroad and learning English helped me see Japan as a foreign country,” he said and this perspective makes him a useful partner for the British.

“Japan is an island country and in many ways it is closed. So outsiders coming in need to show to the Japanese that they are committed,” he said.

“Japanese people tend to see foreign companies coming into Japan as black ships,” he explained, in reference to the black ships of the US General Perry which sailed into Tokyo Bay in 1853 and which forced Japan to trade with America – a classic example of gunboat diplomacy.

What about the language gap with the managers from his British partner company?

“I do not think it is necessary for everyone in Japan to speak English. After all, you can use the services of a professional translator although I do think relationship building may be harder if there is a language barrier,” he said.

“A lot of foreign companies turn to English-speaking Japanese people to help them. Yet those English-speakers may not keep up with their professional skills. Their skill set is more important than language.”

I met Umezawa san through Export to Japan, part of the British government’s Department of Trade and Industry. Its webcast was hosted by Steve Crane, CEO of Business Link Japan, who helps British companies enter the Japanese market.

Mr Crane said: “I spent the first six months telling Japanese people how they should do things because I thought I could teach them. Then I realised that I really needed to listen more and understand how they do things. When I started to listen more, business became much more successful.”

Tabloid paper claims elite Shinzo Abe is out of touch with real people

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Shinzo Abe does not understand what it is like to be poor, according to an influential tabloid newspaper in Japan.

It was dismayed by his comments about low-income families made in parliament this week. This added to the debate over the prime minister’s credibility at a time when experts are taking stock of his attempt to revitalise the economy.

Abenomics was examined in a special report called Japan and the World, jointly produced by the Financial Times and its owner, the Nikkei.

The FT’s respected economics correspondent Martin Wolf asked if the three arrows of Abenomics will deliver the revival Mr Abe promised. “It is, alas, unlikely,” he replied.

Mr Wolf believes that weak private demand within Japan itself is the main problem and he urged companies to use the profits they make overseas to stimulate the domestic economy. He also said an increase in consumption tax could encourage Japanese individuals to spend their savings.

That is not a view shared by Mr Abe’s political critics. They say raising the sales tax further would be discourage spenders and push Japan back towards recession. Mr Abe plans to increase the consumption tax to 10% in the spring of next year and according to NHK, he has said he will do this “as planned, irrespective of the business environment.”

Mr Abe’s apparent “lack of understanding” of the economic situation of ordinary people was a discussed in the popular magazine Nikkan Gendai. It reported Mr Abe’s comments in parliament about how a low income couple could be entitled to a tax break by combining the earnings of the husband with the salary of the wife’s part-time job. The magazine said his answer suggested he is out of touch with how much money real families earn. It said that Mr Abe is an elite and wealthy politician who does not understand his citizens.

Masamichi Adachi, an economist at JP Morgan, believes “Mr Abe is doing Abenomics 2.0 because Abenomics 1.0 was not going well at all. He should have started with Abenomics 2.0 first because the most crucial issue is the population issue”.

That is a reference to Japan’s falling population. One theory is that many Japanese people resist having children because they are so expensive, according to research by the University of Pennyslvania. It also says many people think motherhood can harm the professional status of women.

However, there was encouragement for Mr Abe in the Nikkei Asian Review.

It said that in the three years since the prime minister’s economic policies were rolled out, corporate Japan has achieved record earnings. Furthermore, unemployment has dropped to about three percent, the lowest of any developed country in the world.

The magazine says that: “Abenomics has given foreign investors plenty of reasons to be interested in Japan.”

The former head of the US Treasury Larry Summers agrees that Abenomics has made Japan a better place, although Mr Summers remains concerned about the lack of a normal inflation environment and he suggests that the Bank of Japan should now halt to its expensive quantative easing programme.

Mr Summers told the FT: “The next decade will be pivotal for Japan. We all hope that Abenomics – to borrow from Winston Churchill – will not even be the beginning of the end but the end of the beginning of Japanese renewal in the 21st century.”

North Korea taunts Japan with “thrilling sound of H-Bomb blast”

CYAdo8eU0AAl2kN-150x150What can Japan do in response to North Korea’s claim it has tested a hydrogen bomb? Prime Minister Shinzo Abe has promised firm action but his options are limited.

North Korea exploded a weapon early in the morning of Wednesday 6th January 2016 and claimed on the television news at 10am that it was a hydrogen bomb.

A note from the leader Kim Jong Un was used as propaganda.

He wrote: “Let’s start 2016 with the thrilling sound of a hydrogen bomb blast”.

The media turned to nuclear experts in South Korea, the US and Japan for advice. The general view is that it was probably a nuclear weapon but not a hydrogen bomb.

“North Korea’s nuclear test is a serious threat to our nation’s security and absolutely cannot be tolerated. We strongly denounce it,” prime minister Abe told the parliament in Tokyo. Japan sent surveillance planes to the region.

Mr Abe said: “Japan will take a firm response, including at the UN Security Council, in cooperation with the United States, South Korea, China and Russia.”

It is a path the countries have been down many times before but it does not seem to concern the North Koreans.

President Barack Obama talked by telephone with Mr Abe after the explosion.

Mr Obama reaffirmed the US commitment to Japan’s security and the two leaders “agreed to work together to forge a united and strong international response to North Korea’s latest reckless behaviour,” the White House said in a statement.

Christopher Hill who led the US delegation in North Korean nuclear talks told the BBC that even if it was not a hydrogen bomb this time, North Korea clearly has the intention to develop hydrogen weapons.

He said the only country which could now influence North Korea’s behaviour is China.

“(North Korea) is already one of the most sanctioned countries in the world,” Mr Hill said.

“The real issue is whether or not their only friend in the world, China, can be used to put pressure on them. If the Chinese cancelled all tourism and if they stopped buying North Korean raw materials and if they stopped allowing North Koreans to use their banking system, that would be real sanctions. But I don’t think we’re there yet.”

China immediately condemned the bomb test and said it wants an end to all nuclear weapons on the Korean peninsula.

China’s other concern is a collapse of North Korea, which could mean a flood of refugees. A reunification of the Koreas would create an enlarged country allied to the United States. Such a situation would be a relief for Japan but a concern to China.

In an excellent piece for the Daily Mail, the former British Ambassador to North Korea John Everard said China does not want North Korean aggression to disturb the delicate political and military balance in East Asia.

He wrote: “It’s notable that relations between South Korea and Japan, both close U.S. allies, have grown notably warmer in recent months, which will not have pleased China, which hopes for a loosening, not a tightening, of ties between the Asian democracies.”

The Times described Kim Jong Un as a “fat bully who is a great deal more scared of us than we are of him”.

In his analysis, the Times’ Tokyo correspondent Richard Parry suggests it would be a grave mistake to dismiss Kim as mad. He said Kim’s actions reflect his desire to protect his regime despite the enormous financial burden of the nuclear weapons programme.

Yet what use is a diplomatic response to a country which rejects negotiations?

North Korean television said in the wake of the explosion: “The way of peace does not lie across a dirty conference table.”