Britain asks Japan to take key nuclear power role

Artist's Impression of the Westinghouse AP1000 design
Artist’s Impression of the Westinghouse AP1000 design

Britain is asking Japan to build nuclear power facilities in the UK, five and a half years on from the Fukushima disaster.

Hitachi has been approached to build a new nuclear plant in Wales, in a deal backed by money from the Japanese government.

It follows on from a deal reached earlier this year for three nuclear reactors in the north west of England to be built by a consortium controlled by Toshiba.

The Welsh deal involving Hitachi is not yet finalised but Britain’s trade minister Greg Clark went to Tokyo this week to discuss it. The British finance minister, the Chancellor Philip Hammond, also spoke to Hitachi in Tokyo recently.

For Japan, investments in the UK fit strategically with its plan to build nuclear power plants worldwide including in China, India and the US.

Japan’s own nuclear reactors were entirely shut down following an accident at Fukushima 2011, following an earthquake and tsunami.

Although most plants have restarted operations, there remains significant resistance to nuclear power among many Japanese people and distrust of the government’s ability to manage nuclear accidents.

There is also an anti-nuclear movement in the UK. The pressure group Greenpeace warns of the possibility of leaks and radioactive pollution and says advances in renewable energy and a drop in electricity demand should make the new nuclear power plants unnecessary.

However, the British government is committed to building a new generation of nuclear power stations. It recently commissioned EDF of France to build the enormous Hinkley Point power station in the north England, the UK’s first new nuclear power plant in decades.

Hinkley Point will cost of $24 billion. It will be paid for with French and Chinese money.

For the British government, the extensive investment by Asian countries in its energy infrastructure is a boost, following the referendum vote for Britain to leave the EU.
The involvement of both China and Japan fits with the UK government’s strategy of promoting trade with both countries.
The Japanese deals are based on a different funding model to the Hinkley Point power station, which is totally financed from foreign money, including Chinese investment.

According to the Financial Times newspaper, the Hitachi project in Wales would be paid for by a mixture of British and Japanese government funding.

Jiji news agency suggests that loans to fund it would come through the Japan Bank for International Cooperation and the Development Bank of Japan.

Separately, Toshiba has teamed up with a French utility company, Engie, to build three Westinghouse reactors in Cumbria in the North West of England.

Reuters reports that the Korean company KEPCO would also like to invest in the Cumbrian project, backed by support from the Korean government.

Strongman Putin seeks solace in Japan

n-abeputin-a-20161216-870x625The Russian President Vladimir Putin flew into Japan on Thursday, the day he was pronounced the most powerful man in the world by Forbes.

His first stop was Nagato, the hometown of the Japanese Prime Minister, Shinzo Abe, where he stayed in a luxurious onsen spa resort. Mr Abe said he hoped the spa would refresh his guest as they prepared for two days of talks.

The aim is to settle a dispute between Japan and Russia over the Kuril islands, which lie to the north of Hokkaido.

Russia has claimed them as its territory since the end of the Second World War. Japan calls the islands its Northern Territories and would like them returned to its sovereignty.

The Japan trip enables Mr Putin to side step the intense criticism of Russia’s recent actions in Syria and its annexation of Ukraine in 2014, which resulted in international sanctions.

Russian support for the assault on the Syrian city of Aleppo, in which many civilians died, led Samantha Power, the US Ambassador to the UN to angrily ask: “Is there nothing that shames you?”

President Obama has said the United States must and will retaliate Russia for hacking which he believes was designed to interfere in the American election.

The White House has said a cyber attack would not have happened without Preisdent Putin’s personal knowledge.

Russia has dismissed the claims and hopes for a warmer relationship with the US follow the inauguration of President-elect Trump, who has said Mr Putin is someone he can do business with.

Mr Putin, too, has spoken of his desire to befriend the leaders of previously hostile foreign countries. Russia and Japan warred twice in the 20th Century but Mr Abe and Mr Putin have enjoyed a cordial diplomatic relationship and have met more than 15 times.

This week’s meeting represents “a rare opportunity for Japan and Russia to normalise bilateral relations and finally leave behind the legacy of the Second World War,” according to Yoichi Funibashi, founder of the Rebuild Japan think tank, who wrote an opinion piece for the Financial Times.

Mr Funibashi also cautioned Japan not to become an ally of Russia or to abandon its duty of “shoring up the liberal international order.”

The newly launched website of the Japanese conservative newspaper, the Sankei Shimbun called Japan Forward carries extensive analysis of the Japan-Russian relationship.

Its contributors include Ilya Lozovsky who says he would welcome any deal over the islands which would benefit both Russia and Japan.

But Mr Lozovsky is scathing of Mr Putin, saying that although he may be “a tactical mastermind… strategically speaking, Putin has been a failure, having led his country for 16 years down a corridor that is gradually narrowing and darkening.”

That dark view of Mr Putin is rare in Russia, where most people watch state-controlled media. The President’s approval rating at home jumped from 81% in June to 86% in November, according to a Moscow-based research centre. 

Mr Abe appreciates the conversations about the islands will be complicated. He told reporters the discussions will probably stretch into the night.

He may also be wary of an unequal balance of power with the visiting Russian strongman. While Forbes says Mr Putin stands tall as the most powerful man in the world, Mr Abe ranks at a lowly number 37 on its list.

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US & UK Signal New Outlook on Asia

imgresTwo of Japan’s western allies have been sending messages about their policies in East Asia.

America’s president-elect Donald Trump has criticised China over trade and security and opened up an unprecedented dialogue with Taiwan.

Meanwhile, the British Foreign Secretary, Boris Johnson, has said Britain’s policy towards the region should not only be decided by trade and exports but also by the rule of law.

Mr Johnson said that Britain supports bids by India and “other countries” to become permanent members of the UN security council.

Mr Johnson said nothing directly about Japan in his speech but Japan has long aspired to be on the UN Security Council, even though China objects.

Mr Johnson used cautious language about China and stressed that Britain was one of the first Western countries to join the China-initiated Asian Infrastructure Investment Bank (AIIB).

China has substantial investment in the UK. But in fact, Japan is the largest Asian investor in Britain and accounts for around half of all Japan’s investment in Europe. Mr Johnson said the recent vote by Britain to leave the EU should not be seen as the UK turning its back on the world. He said that following the Brexit, Britain must be “more outward-looking and more engaged with the world than ever before.”

Mr Johnson delivered his message through an elegantly-crafted speech at Chatham House in London. President-elect Trump on the other hand used social media to Tweet his views on China.

He accused China of unfair trade practices and complained about its military activities in the South China Sea.

“Did China ask us if it was OK to devalue their currency” and “build a massive military complex?” he asked on Twitter. “I don’t think so!”

President-elect Trump also defended his decision to speak to the Taiwanese president Tsai Ing-wen.

China regards Taiwan as a breakaway state and never calls its leader a president, instead referring to her as “a Chinese regional leader”.

China can hardly be surprised by Mr Trump’s approach. He was sharply critical of China during his election campaign. The Chinese media has been calm, noting that the US and China have long had “highly mutually beneficial” relations.

The BBC’s China Editor Carrie Gracie says China’s leaders must be wondering what will happen next in terms of its relations with the US.

Japan will be wondering that, too. However, Mr Trump’s friendly gesture towards Taiwan could be pleasing to Japan, which also wants to be friends with Taiwan and definitely does not share China’s animosity towards their neighbour.

Mr Abe was the first foreign leader to meet Mr Trump following his recent election success. That may signal that the US-Japan relationship is on a much better footing than the rather tense one that seems to be developing between America and China.

Has Abenomics Fizzled Out?

b-boj-a-20161102-870x582Throughout 2016, economists have been asking if Japan’s shocking decision to introduce negative interest rates has been beneficial.

In January the Bank of Japan adopted its negative interest-rate policy, which in effect penalises banks for hoarding too much money.

This dramatic and unconventional move was part of the Bank’s plan to support Abenomics, the programme devised by Prime Minister Shinzo Abe to stimulate the economy.

The negative interest rate policy seemed like a desperate measure and it came in for a lot of criticism.

The goal was two-fold: firstly, to encourage the banks to lend more money to their customers, especially to small and medium sized business. And secondly, to produce a more normal rate of inflation: the target inflation rate is two percent.

Has it worked?

Kwok Chern-Yeh, head of Japanese equities at Aberdeen Asset Management, told the website FT Advisor that it does not seem to have been successful in increasing lending. “Instead, the Bank of Japan’s move simply hurt banks as their lending spreads narrowed,” he said.

When it comes to inflation, the actions of the central bank appear to have had little measurable benefit.

As the Japan Times points out, Japan’s core consumer price index, excluding volatile fresh food prices, fell for the seventh straight month in September, down 0.5 percent from a year earlier.

This led to something resembling an apology from the governor of the Bank of Japan, Haruhiko Kuroda.

“It is regrettable that we were not able to realise two percent inflation within two years,” Mr Kuroda told a news conference at the start of this month.

So has Abenomics fizzled out?

That was a question posed on the website of East Asian Forum. They approached the respected economics professor Kazuo Ueda from the University of Tokyo. His conclusion is that “after more than three years of Abenomics, it is almost an acknowledgement that the stimulus so far has failed to work.”

However, Professor Ueda holds some optimism. “In the near term,” he says, “a more solid expansion in the global economy, especially in the United States and Asia, would relieve pressure on the yen and the Bank of Japan. In the medium term, a two per cent inflation rate, if achieved, could animate business spirits and trigger a substantial rise in investment and growth. But for now we will just have to wait and see.”

Abe first in line to meet President elect Trump

JS113987735-REUTERS-abe-Trump-large_trans++ek9vKm18v_rkIPH9w2GMNvl_bi2RExISIc6CxmLUK94Japan’s Prime Minister Shinzo Abe has become the first foreign leader to meet President elect Donald Trump. They held a 90-minute conversation at Trump Tower in New York.

Mr Abe said he has great confidence in Mr Trump. He described their talk as candid and with a warm atmosphere.

There was very little information disclosed to the press about what they spoke about, which led to the media speculating on what subjects would have been important to them.

One of the main ones would have been the US military presence in Japan. There are around 50,000 American soldiers based in Japan. Many of them are stationed in Okinawa, where local people have often complained about their presence.

However, Mr Abe has supported Japan’s defence alliance with the US and has sought to maintain a good relationship with President Obama.

During the election campaign, Mr Trump challenged the amount of money the US spends on its military presence in Asia. He has even floated the idea that Japan and South Korea should develop their own nuclear weapons to counter the threat from North Korean missiles.

Speaking after the meeting, Mr Abe said: “I believe that without confidence between the two nations the alliance would never function in the future and as the outcome of today’s discussion I am convinced Mr Trump is a leader in whom I can have great confidence.”

Another subject which may have been on the agenda for the meeting was the Trans Pacific Partnership, known as TPP. This is designed to create a free trade area involving both Japan and the United States and Mr Abe’s been strongly backing it, despite some political opposition within his own party.

In the election campaign, Mr Trump said he would scrap TPP and Hilary Clinton also cast doubt upon the deal. In essence, Mr Trump believes that such trade deals threaten the jobs of American manufacturing workers by opening them up to competition from countries where wages are lower. For this reason, he also threatened tariffs on manufactured imports, such as Japanese cars.

However, most of the Japanese cars which are sold in the United States are actually manufactured there and Toyota has invested heavily in its US factories and its American staff.

Michael Pillsbury who has been advising Mr Trump on Foreign Policy told PBS Newshour that Mr Abe’s meeting with Mr Trump was due to the initiative of Japan and the leaders of India and other countries could be jealous that he was the first in the line. Mr Pillsbury also praised Mr Trump for taking the opportunity to “educate himself” about other countries.

The editor of Foreign Policy magazine Donald Rothkopf told the same programme that everything Mr Trump does or says is being watched carefully and everything has a consequence for America’s relations with the rest of the world.

Mother, father, baby and work

Koga Family In Houston
Most Japanese men expect to gain more money and status the longer they stay with their company. By the time they reach their forties or fifties, they expect to become managers and earn considerably more than they did when they joined their company in their twenties.

That was the system which was common throughout corporate Japan during its rapid growth period from the 1960s until the 1980s. Yet this seniority based-management culture is being challenged. One of its critics is Professor Seijiro Takeshita from Shizuoka University who complains that it creates “stagnation” within Japanese corporate culture. He wants the seniority based-management culture to be replaced with a meritocracy-based system and a fresh approach towards promotion.

“We need to reward people for taking risks,” said Professor Takeshita, “and not punish them for failure.”

Professor Takeshita and other critics claim that older, long-serving employees are unlikely to embrace change and seek new opportunities. He argues that this corporate conservatism is likely to become stronger as Japan’s working population grows older but says it is not a good characteristic to have when Japan is competing against other more youthful Asian countries for business.

Another issue with is that the high rates of pay rarely go to people who have young children. Yet it is families with young children who may require the most financial support. One of the big challenges for Japan is how to create an environment in which more people are prepared to have children and offset the falling birth rate.

One radical suggestion for encouraging people to start families has been put forward by Kaori Sasaki, the founder and chief executive of ewoman, who said that companies should offer “automatic promotions” to men who take paternity leave in order to look after young children. “Men do not take paternity leave because they fear their careers will suffer. If we promote those that do, then the circumstances will change,” she said.

Although the idea has appeal, it is hard to imagine that it would ever be implemented by any Japanese corporation. Rather more importantly, women who want to take maternity leave need assurances that their careers will not suffer as a result of having children and also that they will be able to access child care when they need it so that they continue working and raising a family at the same time.

Nissan warns of consequences of hard Brexit

ghosnThe boss of one of Japan’s major businesses has warned about the consequences of a so-called hard Brexit as Britain leaves the European Union.

Carlos Ghosn, the CEO of the car-manufacturer Nissan, said his company would need compensation for tariffs which could result from the change.

It was suggested by a BBC reporter that the tariff on cars exported from Britain to Europe could be ten percent.

Mr Ghosn responded by saying that would “without any doubt” have a harmful impact on Nissan’s factory in Sunderland.

Such high tariffs would also be a problem for all the Japanese companies which have manufacturing facilities in the UK.

Some of them might move their factories to other parts of Europe, as Japan Tobacco did several years ago.

However, the post-Brexit tariff of ten percent tariff which was suggested in the BBC interview was only speculation. It is not known at what level the tariffs will be set, as the negotiation process has not yet started.

Like the Japanese companies based in the UK, the British government wants any tariffs to be as low as possible. However, the level will be set not by Britain but by the European Union.

This week, I attended a meeting about the Brexit, along with about two hundred Japanese business people at the Japanese Embassy in London. We heard a speech by the British Trade Minister Lord Price.

He said that the UK government’s goal is a smooth transition to life outside the EU, with low tariffs and continued trade with Europe.

He also said the UK government is supportive of Japan reaching a free trade deal with the European Union.

When asked about the so-called hard Brexit, Lord Price said: “I think it’s just a phrase designed to illustrate an extreme point of view.”

Yet he also said there are a range of views within the government about how the Brexit should work. On immigration, for example, ministers have various opinions.

That is a concern for Japanese companies in the UK, who want consistency on immigration law and access to well-qualified, international staff.

Lord Price said that Japan is the largest Asian investor in the UK, and its investment in Britain is higher than that of China.

I asked him if there’s been a shift in the UK government relationship with China and Japan since Theresa May became Prime Minister. He denied this.

He also said he is looking forward to holding talks with Japanese business leaders in Tokyo later this month.

Does Japan have a deeply embedded gender bias?

p10-lotl-a-20160929-870x561Does Japan really have a deeply embedded gender bias?

That was the claim in the headline over an opinion piece about politics in the Japan Times by a foreign, male professor from a law school in Kyoto.

Gender was also discussed in a report about attitudes to sex and, quite separately, in the context of a puzzling TV advert in which a woman turns into an eel.

Foreigners are generally curious about the nature of relationships in Japan. In the media, journalists tend to highlight complaints of sexism or “a deeply engendered gender bias”. However, these views are less common within the Japanese press.

In his piece of the Japan Times, Professor Colin Jones discussed Renho, the leader of the Opposition. Her father is Taiwanese and her mother is Japanese. This led to a debate over whether she could stand for parliament. Professor Jones believes it would not have been an issue if Renho had a Japanese father. He says Renho’s case “thus offers a stark illustration of the deeply rooted structural impediments faced by women in Japan even today.”

In fact, the controversy appears to have been settled and Renho now attracts a lot of respect as Japan’s first female leader of the opposition. Of course, the hard won success of prominent female leaders does not indicate that gender discrimination has vanished but it partly explains why gender is such an issue for the media.

Away from politics, there was widespread interest in a story which showed Japanese young men in a rather negative way. The sex survey  claimed that about 40% of young single men and women have never had sex – a phenomenon that is being blamed for the low birth rate in Japan.

The Guardian reminded its readers that the study is one of several in recent years that portray Japan as a country with a collective loss of interest in sex. It was the theme of a prurient 2013 BBC documentary No Sex, Please, We’re Japanese.

But the Guardian suggested such claims are exaggerated and misleading.

Another story which was shared on social media was about a TV advertisement in which a Japanese girl turns into an eel. This ad was designed to promote ethical farming.

Many websites claimed – without much evidence – that it was “withdrawn for being sexist”. Yet the community which discussed it on Japan Today generally felt that it was unlikely to have been seen as sexist by its Japanese viewers. Many of them found it rather charming.

“Keep borrowing money – it makes no sense not to!”

That would have been a suitable headline over an opinion piece in the Japan Times concerning economic and monetary and policy.

The newspaper said “excessive debt is always a concern” but it went on to encourage more government borrowing. “It makes no sense not to borrow when interest rates are this low,” it said. “Central bankers have done their part, it’s up to politicians to do theirs.”

The paper was responding to this week’s monetary policy meeting of the Bank of Japan. There was no headline-grabbing change to come out of the meeting. But the international media concluded the most significant point is that the Bank plans to keep its key interest rate in negative territory at -0.1%, for the time being. In addition to keeping short-term rates at -0.1%, the bank said it will also keep long-term rates, specifically the yield on ten-year government bonds, at about zero for the foreseeable future.

In its analysis, the Economist said the BOJ policies have “not only lowered interest rates, they have also flattened them.”

The Bank of Japan’s goal is to create an environment in which inflation can climb to two percent. It will therefore continue its costly QE programme through its purchase of government bonds. As I explained in last week’s blog, the bank has a serious credibility problem unless its goal is achieved.

The Bank of Japan’s policies are similar to those of the European Central Bank, which also has super-low rates and a QE programme. By contrast, the United States Federal Reserve is ready to raise rates. It had hoped to do so earlier this year but held back because of several factors, including uncertainty over the outcome of the US election.

Andrew Wilson, the CEO of Goldman Sachs Global Asset Management told the BBC: “I think this potential rate cut by the US Federal Reserve is well discounted by the markets. Other central banks are going in the opposite direction, so I don’t think it will have a broad global impact.

“At the same time as the Fed is moving interest rates up, the amount of liquidity created by the Bank of Japan and the European Central Bank will, we think, keep global interest rates at a relatively low level for a prolonged period.”

Although the Bank of Japan’s goal of reaching, or even surpassing, the two percent inflation target seems implausibly ambitious, it is hard to imagine that things could have been better had it done nothing.

Bank of Japan faces credibility crisis Bank of Japan has a crisis of credibility, according to the Financial Times.

The tactics it is using to try to invigorate Japan’s economy are not yet working and it has made a promise which seems impossible to meet.

For that reason, trust in the Bank and its governor Haruhiko Kuroda is undermined both within Japan and abroad.

The promise the Bank has made is to raise Japan’s inflation rate to two percent “within a couple of years.” A former policy maker at the bank, Sayuri Shirai, has pointed out that Japan has not had inflation rate that high for more than two decades. She believes it is time to cut the inflation target to one percent.

The methods by which the Bank of Japan is trying to create inflation include a negative basic interest rate of -0.1%. This effectively charges banks money to keep their cash in the system and is designed to prompt them into lending more to consumers and businesses. However, Forbes Asia claims the policy discourages lending.

There is speculation that the negative interest could soon be increased from -0.1% percent to -0.2%. An announcement is due following the Bank’s policy meeting on September 21st.

The negative interest rate is unwelcome for savers who have put their money into the banks, many of whom are old people. Japan has one of the highest savings rates in the world.

The negative rate is not the most expensive of the Bank of Japan’s policies. It is currently buying ¥80 trillion ($780 billion) worth of Japanese government bonds a year.

This policy, sometimes known as quantitative easing, is designed to flood money into the system; “printing money” is the way journalists sometimes refer to it. Yet it adds to the mountain of debt the government must face in the future. It also interrupts the system by which the government uses banks to fund its borrowing.

For most people, huge numbers and jargon make it difficult to grasp complex monetary policy. Yet everyone can see the targets of higher inflation and sustained economic growth are not yet being met.

This undermines credibility of the Japanese Prime Minister Shinzo Abe who is working closely with the Bank of Japan.
If people lose trust in both the government and the central bank it creates an environment of cynicism. Of course, Japan is not the only country to struggle to respond to the economic disruption following the 2008 financial crisis.

Yet other countries will not wish to copy Japan’s policies if they leave a trail of broken promises and distrust.