Clinton and Obama split on US-Japan trade deal

japan-rice-2009-8-19-22-10-0Japan’s prime minister Shinzo Abe hailed a trade deal with the US and other countries as a major political victory. The deal has been welcomed by Japanese exporters like Toyota but Japanese farmers are worried about its implications.

The Tran-Pacific Partnership (TPP) aims to make commerce easier between twelve countries, including the US and Japan. It removes many restrictions on imports and exports and should sweep away tariffs and bureaucracy. Because the major players, Japan and the US, enjoy such a large share of the global economy, the media’s attention has been on them rather than the other signatories, such as Peru.

For Japanese exporters seeking greater access to the US market, it presents an opportunity to compete more vigorously with their international rivals. Car makers such as Honda and Toyota expect to benefit. Therefore TPP has the backing of the powerful Japanese business group, the Keidanren.

For Japan’s farmers, TPP is a potential problem. They are worried that Japan will now allow imports of large quantities of rice, which is cheaper than the home-grown crop. Up to now, Japanese farmers have received subsidies from the government and there have been heavy tariffs on some types of imported rice. The leading Japanese newspaper the Nikkei asserts that the Japanese government has managed to exclude five agricultural products from the TPP deal; rice, wheat barley, dairy products, sugar cane and beet and beef (except organ meat).

Still, many Japanese people are concerned about the longer term implications of opening Japan up to this rigorous international competition.  Will it mean that rice farmers lose their livelihood? Or can they adapt to cope with the competition?

However, for the international journalists, the Japanese farmers are not the main story about TPP. The reporters are more interested in a disagreement between Hilary Clinton and President Obama.

Mr Obama – like Mr Abe – hailed the deal as a success. He told business leaders: “I wanted to get the best possible deal for American workers and American businesses, and that is what we have achieved.”

However Mrs Clinton said she cannot support the agreement. The Republican party in the US is not supportive either, which could mean it is not ratified in Congress. The Financial Times says Mr Obama hopes to get TPP passed by Congress before he leaves office in January 2017 but the political process is complicated. 

China – which is not part of the TPP deal – reacted cautiously. China’s Ministry of Commerce called TPP “one of the key free trade agreements for the Asia-Pacific region”, according to the Xinhua state news agency website.  “China hopes the TPP pact and other free trade arrangements in the region can boost each other and contribute to the Asia-Pacific’s trade, investment and economic growth,” it said.

Abe’s ally urges women to have more babies

20150905_asp501What is most important for Japanese women? Getting ahead at work or having babies? These are questions raised in the international media this week, following controversial remarks by a male politician.

Chief Cabinet Secretary Yoshihide Suga encouraged women to “contribute” to the nation by bearing lots of children. Speaking on a Fuji TV news show, Mr Suga expressed his hopes that a recently announced marriage between two Japanese celebrities would encourage more women to marry and have babies.

Mr Suga is a close political ally of Prime Minister Shinzo Abe. The international press generally presented his comments as old fashioned and patronising. For example, the British newspaper The Guardian, which supports gender equality, reported the comments under the headline Sexism Row. It went on to explain that Japan performs poorly in international gender equality comparisons. In the World Economic Forum’s 2014 gender gap index, it ranked 104th out of 142 countries. The Guardian also highlighted Japan’s low female participation rate in the labour force.

At the recent World Assembly for Women in Tokyo, Mr Abe declared that “Abenomics is Womenomics”. The Japanese parliament recently passed a law calling on companies to find ways to promote more women. Previous initiatives do not seem to have gone well. For example not a single Japanese company has applied for a government subsidy to encourage firms to promote women.

This could undermine efforts to create more jobs for women to compensate for a shrinking workforce. Around 60% of Japanese women leave their jobs for childbirth and many find it difficult to resume their careers. Japan’s business newspaper the Nikkei suggests this is because they lose touch with new technology. The Womenomics plan includes support for mothers to regain workplace skills as well as help for companies that let fathers take time off to care for children.

Japanese women fascinate the international media, which often suggests they have a strange attitudes towards sex and romance. For example, the artist Megumi Igarashi has gained enormous attention for making a boat in the shape of female genitals. And this week  many websites reported a new service in Tokyo to send a handsome man with tissues to wipe the tears from distraught women in their offices. Hiroki Terai, creator of Ikemeso – the firm advertising the service, said: “Japanese women are under tremendous stress at the office here in Tokyo, which often ends in in tears. We are here to provide a kind word and brush the tears away by one of our seven lovely men on call.”

Japan experts scrutinise Shinzo Abe at Chatham House Conference

This week I attended a lively conference about Japan at Chatham House in London. The speakers included experts on Japan from universities and institutions from the UK, the United States and Japan. Most of the discussion was about politics, economics and international relations. I heard a number of comments about Japan which surprised me and in this week’s blog, I am going to share what I heard. I do not agree with all the viewpoints. However, all the points below were made by people who study Japan carefully.

Here are some of the comments about Japan’s economic situation. I have summarised them into soundbites which contain very few numbers:

Abenomics has been a big experiment.

Abenomics is an intense, short-term policy. It is not designed to be long-lasting.

Abenomics is like the emergency treatment of a patient in intensive care. The aim is to stop the patient collapsing and dying.

Abenomics was a response to the economic crisis which followed the earthquake and tsunami of March 2011.

More than 200,000 Japanese are still displaced from their homes because of the earthquake and Fukushima nuclear disaster.

Mr Abe promised to fire three arrows: monetary easing, fiscal stimulus and reform. However, the second arrow has not been fired because there has not been an increase in public spending.

There is not much evidence the third arrow of reform has been fired. So far, the only visible reforms have been in the electricity sector.

Abenomics is a response to an ageing population. When people are old they do not spend so much so Mr Abe’s goal is to stimulate domestic demand by convincing people to spend.

Abenomics is based on a false promise. It promises that Japan’s economy can grow but that growth cannot be achieved with an ageing population.

Abenomics has widened the gap between rich and poor. In the financial crisis, assets such as bonds and shares lost value. Action by the Bank of Japan has caused those assets to rise in value. This has benefitted those who held the assets in the first place – mainly rich people, who are now even wealthier.

Changes to employment law have led to companies to hire less full-time staff with a view to employing them for their whole lives. Instead, they hire more part-time and temporary workers. Their pay and benefits are worth less than those of their peers who are doing the same job. This has contributed to an income gap and inequality.

Inequality in Japan is not caused by rich people becoming richer but by the poorest people in society becoming poorer.

Perceived inequality has a social and political affect. People are more like to support extreme political parties or feel disassociated from the political process.

A quarter of Japan’s spending each year goes towards servicing its national debt. This money could go to social programmes, such as helping the elderly.

In Japan, the social safety net which provides for people in time of need has traditionally been provided by family and by companies. Gradually this is changing so that the government takes more responsibility.

Japan has a large population of people who have not married and do not have children so the government’s duty to care for these people when they become old will be expensive.

Here are some of the comments the delegates made about Mr Abe:

Mr Abe is likely to remain prime minister until 2018 so he will become Japan’s longest serving prime minister since the Second World War.

Mr Abe’s political popularity will probably increase provided he focusses on the economy. He is less popular with voters when he is discussing security and reform of the constitution.

Other prime ministers have tried to implement reform but have had less public support than Mr Abe. His strong political position puts him in a good position to push through change.

And here are some other comments speakers made about Japan which could be used as soundbites, not using numbers.

The percentage of people getting married in Japan is falling. The age at which people marry is getting older.

There are more opportunities for women at work than in previous generations. This encourages women to develop their careers before choosing to marry and start a family.

A very tiny number of children in Japan are born to parents who are not married.

Child care provision for working women has improved significantly in the recent years.

Japan is the largest user of fax machines in the world.

Japan has a population half the size of the United States all squeezed into a geographical area the size of the state of Montana.

Japan has for many years been the biggest investor in China.

Japan’s relationship with the US is like that of an adolescent child. Sometimes it gets resentful and tries to rebel against the adult but afterwards it apologises and asks for guidance and protection.

On the whole, the quality of the debate was very high and there was a good rapport between the speakers and the audience. The event was well organised. However, as I want people to improve their communication skills, I made a note when I heard phrases by speakers which I feel should not be used when giving presentations.

I am really sorry but I have got five minutes and that leaves only one and a half minutes for each of my points. I will try to squeeze them all in.

I could say so much more but I need to move on.

I am sorry, there is not time for my next point, so I will skip that one.

On the aeroplane on my way to this conference, I was thinking about what to say.

(Introducing himself) I am sorry I do not know much about the subject this panel is discussing.

I did not understand the meaning of the title of this session so I looked it up on the internet.

I am not an economist (said by a Professor of Economics.)

I am sorry I am using a lot of numbers (speaker used 60 numbers in a short presentation.)

(Chairman, when asked to sum up) I am unable to sum up what has been said in this session.

So, that is my summary of the event. I enjoyed listening and learning and I am very grateful to Chatham House for inviting me to attend. I hope I can join the conference next year in Tokyo and I would love to chair one of the panels.

Abenomics floods the economy with yet more borrowed cash

20141117_abeWhat can be done by Japan’s Central bank to shake off the threat of recession and get the economy growing again?

The media were asking this question before the central bank in the US, the Federal Reserve, left interest rates unchanged.

The Bank of Japan was waiting for that news before deciding what it should do. It is also waiting to see how economic events unfold in China. Japan has benefitted greatly from the rapid rise of China, its largest trading partner, but the rate of growth there is slowing.

The Bank of Japan’s governor Haruhiko Kuroda said that if China’s economy maintains stable growth, Japan’s  exports should too. He is probably also expecting some investors to move their money from China to Japan, just as they did in August when a Chinese stock market crash boosted the yen.

The decision by the Fed to leave rates unchanged makes it unlikely that the Bank of Japan will raise its rates, which remain close to zero. The other tool which central banks use to try to stimulate economies is expensive and difficult to grasp. Since the global financial crisis, they have been buying government bonds and other assets in what the economist David Stockman calls money printing madness. The more polite definition is a “stimulus programme”.

For Japan the annual cost is almost incomprehensibly large: 80 trillion yen, $663 billion. In overall terms that is not quite as much in dollar terms as the European Central Bank spends buying assets each year; 1.1 trillion Euros, or $1.3 trillion.

Challenged on this, the Vice President of the ECB Vitor Constancio suggested the European figure was prudent compared with Japan because the Eurozone’s economy is larger than that of Japan’s.

“The total amount that we (the ECB) have purchased represents 5.3% of the GDP of the Euro area,” said Mr Constancio. “Whereas what the [US] Fed has done represents almost 25% of the US GDP, what the Bank of Japan has done represents 64% of Japanese GDP.”

Hearing this strange defence, economists concluded that the ECB has the scope to spend more if needed and “potentially much more“.

The message from the Bank of Japan seems similar to that of the ECB. Although it has decided not to increase speeding on its stimulus programme yet, it may well do so soon. Its mood is described as bullish by the Financial Times.

As well as the Fed’s decision, the Bank of Japan will be influenced by government spending decisions. As the FT pointed out recently, there will probably be a supplementary budget based on more public works spending, perhaps in November.

The Bank of Japan and the Japanese government share the same goals: a revival of economic growth and modest inflation. Their credibility rests on achieving them and their hope is that once that happens the money printing can stop and monetary policy can get back to normal.

Toshiba’s image tarnished further

ABEThere was a further blow to the reputation of Toshiba. The Tokyo stock market soared. And Shinzo Abe is set to become Japan’s longest serving prime minister since the 1970s.

Toshiba revealed in April it has exaggerated its profits, leading to the resignation of its chief executive Hisao Tanaka. This week Toshiba admitted the scale of the problem: it overstated profits by nearly two billion dollars over the past seven years. The media made comparisons to the recent accounting scandal at Olympus.

Seijiro Takeshita of Shizuoka University told BBC radio that companies such as Toshiba should not hold onto “the old methodology of business conduct without trying to change, or recognising that the world has changed.” Yuuichiro Nakajima of Crimson Phoenix said: “Toshiba will change – they will have to. They will probably sell non-core businesses. This will probably scare other, similarly unwieldy conglomerates to do the same.”

Laws to enforce reliable accounting and honest financial reporting are included in Abenomics and form part of the so-called “third arrow”, which is actually many different arrows. The Financial Times printed an excellent guide to which arrows are on target.

So is Abenomics working? There are encouraging signs. Economic figures were better than expected, so it seems Japan is not about to re-enter recession. The Nikkei recovered all the losses it incurred last month during a panic over China. And there was yet another  takeover, when Mitsui Sumitomo bought the London-based insurer Amlin for three and a half billion pounds. Peter Gray of Cavendish Financial told City AM: “Cash-rich Japanese companies have clearly opted for mergers and acquisitions as a response to a slow domestic market.”

The slow domestic market is the most serious problem for Abenomics. Fund Manager Hideo Shiozumi wants Japan to break the cycle of recession and believes Japan must target real GDP growth of two percent. Mr Abe said: “We will change Japan into a country that is able to keep growing. Placing the economy as my highest priority, I will move forward steadily, step by step, on the roadmap for achieving this goal.”

Mr Abe’s re-election uncontested as leader of the LDP gives him time to work towards that goal. He is now set to become Japan’s longest serving prime minister in more than four decades.

Japan’s defence spending to rise as Chinese troops parade in Beijing

china-mainAn enormous military parade marking the anniversary of Japan’s defeat took place in China. Japan’s defence ministry has requested its largest ever budget. And the Yakuza crime gang Yamaguchi-gumi has broken up.

China marked the 70th anniversary of Japan’s surrender in WWII with a vast parade of soldiers and weapons in Beijing, including intercontinental ballistic missiles and advanced bombers. The event was attended by both Vladimir Putin of Russia and the South Korean president Park Geun-hye. In a speech, the Chinese President Xi Jinping said China does not seek regional hegemony or expansion and that it will never inflict its past suffering on any other nation. He insisted that China was “loyally committed to the sacred duty of safeguarding world peace.” He also made the surprise announcement that Beijing would cut its two million-strong military personnel by 300,000 and described this as a gesture of peace.

Japan’s defence ministry ignored the announcement and requested a budget of five trillion yen (£27bn) next year, citing concern over China’s construction of artificial bases in the South China Sea and its claims to the disputed Senkaku/Diaoyu island chain in the East China Sea. If passed by the Diet, this will be Japan’s biggest ever defence budget and would match prime minister Shinzo Abe’s plan to expand the scope of his country’s military.

This week, Chinese television showed many drama programmes of Chinese solders resisting the Japanese in WWII. The Singaporean newspaper Today said this form of intense Chinese patriotism fuels antipathy to Japan.

Japan’s image was not helped by media coverage of the Yakuza, an organised crime group. The BBC website said the Yakuza mainly make money from gambling, prostitution and violence. It claimed that the name Yakuza is derived from the numbers eight, nine and three; a losing hand in a Japanese card game. This week the Kobe-based Yamaguchi-gumi Yakuza gang said it has broken up. Apparently, the Japanese police force is bracing itself for gang warfare as small groups of Yakuza attack others groups in battles for territory.

The Yakuza often make profit by selling drinks at extortionate prices to the customers of hostess bars. Yet those drinks appear cheap in comparison to the Japanese whisky sold this week. Bonhams auction house said a single buyer from Southeast Asia spent $118,540 on a bottle of 1960 Karuizawa, a world record. The same buyer also picked up a separate 54-bottle collection of Japanese whisky for another $489,968.

Because the whisky was sold in Hong Kong and not in Japan, the astonishing prices did nothing for Japanese inflation, which has now slipped back to zero. Still, that means a refreshing cup of green tea costs no more than it did a year ago, offering a cheap opportunity to reflect calmly on Japan’s more sober and peaceful qualities.

Chinese trouble ripples through the Tokyo market

catu-japan-station_3418145bTurmoil on the Chinese stock market caused alarm in Japan at the beginning of the week. Finance minister Taro Aso called for a “cool headed response”. Yet as one might expect, given the complex relationship between the two countries, China’s trouble could bring benefits for Japan.

Huge losses on the Chinese stock market prompted share price falls worldwide, including Tokyo. The Nikkei lost 13% before starting to recover. Yet despite that fall, the Nikkei remains 20 percent above its value last year.

Many investors are taking money out of China and putting it into Japan instead, as the yen is seen as a safe haven. Japan’s Finance Minister Taro Aso said a sharp rise in the yen (to 116 against the US dollar, its strongest since February) was “rough” and undesirable for the Japanese economy. The Japanese government has been trying to keep the yen’s value relatively low.

In his excellent piece for the Financial Times, Leo Lewis asserted that although the weaker yen has benefitted the top end of Japan’s export sector, it is much less helpful for small and medium-sized domestic companies, which employ the majority of Japan’s workforce. Those small companies have benefitted from low interest rates and cheap loans. That situation may well continue, as the Chinese stock market crash will deter central banks around the world – including Japan – from raising rates soon, according to the BBC’s Economics Editor Robert Peston.

So, despite signs that Japan could be heading towards another period of recession, its relative stability in comparison to China means it remains attractive to investors and therefore a vital part of the global economy.

This week was quiet on the political and diplomatic front but Japanese newspapers said Shinzo Abe will remain unchallenged as leader of the governing LDP party, thus continuing his premiership despite low popularity ratings.

One job that has changed is that of stationmaster at Kishi. The previous holder of the post, a cat named Tama, died recently, and has been replaced by a female “beauty cat” named Nitama. As well as looking pretty, Nitama appears right for the part, unflustered, calm and willing to serve in uniform. We wish her well for the future!

China unimpressed by Abe’s WWII commemoration speech

Prime Minister Shinzo Abe’s speech about WWII led to much debate in the media about Japan’s history and its current international role. A record number of foreigners went to Japan last month but the economy is struggling. And the pop group AKB48 were praised as peacemakers but continue to annoy some foreign male writers.

The language of Prime Minister Abe’s speech on the 70th anniversary of the end of WWII was much scrutinised, in both Japanese and English. The English version included the key terms “aggression,” “colonial domination,” “deep remorse,” and “apology.” The Diplomat magazine said the statement was widely accepted in Japan because most Japanese people agree that those born after the war should not have to keep apologising. The Financial Times, now owned by Nikkei, praised Japan, noting that its armed forces have not fired a single bullet at an enemy in seventy years. Britain’s Foreign Secretary Philip Hammond said he hopes the statement will be received as a positive contribution to reconciliation between Japan and its Asian neighbours. Yet the Chinese and South Korean press expressed dissatisfaction with Mr Abe’s words. Xinhua of China said the speech was insincere and filled with “linguistic tricks” while Park Geun-hye, South Korea’s president, said it did not live up to her expectations.

The diplomatic tension surrounding the anniversary of the end of the war did not prevent South Korean or Chinese people enjoying Japan this summer. They arrived in record numbers in July, when the total number of foreign visitors reached nearly two million. The tourists are attracted by the weak Japanese yen, which should be good for many Japanese businesses, especially exporters. However, economic problems are emerging. Exports from Japan to China are down and overall the Japanese economy shrank again. It was not a particularly dramatic contraction – down 0.4% in the three months to June or 1.6% on an annualised basis. However, some reports said  Abenomics is not working and others questioned if Japan is set for a stock market crash.

The Japanese pop group AKB48 enjoy an enormous following in Asia are appeared to be advocating peace with their song and video We Don’t Want To Fight (Bokutachi wa Tatakawanai). There was a provocative article by the Japanese-American author Roland Kelts in The Japan Times. He said AKB48’s success suggests the infantilisation of women. Chris Harding of Edinburgh University agreed on the BBC that the band play into the western stereotype of subservient Japanese women. The same BBC piece also challenged the Western myth that Japan is inherently strange. Yet what other country could have produced a robot hotel with a dinosaur on the front desk?

Wartime memories still haunt East Asia

This week, the 70th anniversary of the end of World War II led to reflection in the international press about Japan’s past and its role in the modern world. The words of prime minister were closely scrutinised. Japan’s spending power was emphasised by another multi-billion dollar takeover, this time in the insurance industry.  And Toyota intrigued the world by showing off a skateboard that flies like a hovercraft.

Should Japan’s Prime Minister Shinzo Abe apologise for Japan’s “aggression” in WWII? That’s been the focus of intense debate in the media, with the Financial Times producing an excellent analysis of how the war in Asia continues to shape the relationship between Japan, China and the Koreas.

Critics say Japan has found it difficult to clearly distance itself from its wartime past.  After the war, Japan’s charter banned it from holding the capacity for military aggression. The media has been questioning whether that promise was broken when Japan’s lower house of Parliament recently passed legislation that will allow it to send soldiers on combat missions overseas for the first time since the war.  The New York Times points out that while it was the United States that imposed the pacifist constitution in the first place, America has urged Japan to take on a more muscular military role.

Japan’s economic muscle was displayed with the takeover of the American life insurance company Symetra by Sumitomo for nearly four billion dollars, one of several huge deals by Japanese insurance companies in America this year.  Tokio Marine Holdings and Dai-ichi Life Insurance have also spent billions. It is not just Japanese companies that have been spending lavishly: so has the government, encouraged by Mr Abe’s plan to stimulate economic growth. That comes at a price: the government’s debt hit a record high of ¥1.057 quadrillion at the end of June, up by some ¥3.87 trillion from the end of March, according to the Finance Ministry.

Finally, an amazing skate board that can fly through the air without wheels like a hovercraft was revealed by Lexus.  Millions of people watched the video and shared it with friends. Lexus’ owner Toyota does not plan to manufacture the hoverboard and sell it commercially and the prototype only works on special tracks. Nevertheless, it was a delightful image of innovation by Japan’s biggest company in a week when much of the media were examining the country’s troubled past.

Hiroshima survivors remember lasting pain

Extensive coverage of the 70th anniversary of the Hiroshima bombing prompted moving reports of the terrible suffering it caused. The media also reflected on how Japan’s wartime history affects its place in the modern world.

The Imperial Household released photographs of the vinyl records which contain the sound recordings of the surrender speech made by Emperor Hirohito in 1945, along with pictures of his bunker at the Imperial Palace.

Former diplomat Amaki Naoto wondered if this was to counterbalance the nationalistic tone of prime minister Shinzo Abe. Mr Abe used his speech at Hiroshima to call for peace and nuclear disarmament but the Chinese government believes he is still attempting to deny Japan’s “aggression” during WWII.

BBC radio broadcast a dramatic eye-witness account of the Hiroshima bomb with a doctor who was in the city at the time. There was also a moving interview with Kyoko Gibson, who said hostility towards Westerners led some of her Japanese friends and family to boycott her wedding to her British husband 46 years ago.

The Hiroshima anniversary came as Japan is debates whether to restart its nuclear power reactors. One in Kyushu could recommence operations next week. The nuclear power industry is still reeling from the disaster at Fukushima, where a reactor was badly damaged by the 2011 earthquake. Three executives from the Tepco power company will be charged with professional negligence. Nevertheless, a rally in Tepco’s share price enables it to rejoin the JPX-Nikkei Index 400, which contains companies of high market value. Panasonic will exit the index because of an accounting scandal and McDonald’s Japan is leaving following a food safety scandal. However most major Japanese exporters, including Toyota, have seen their profits rise, partly because of a weak yen.

Finally, Brittany Fowler in Business Insider puzzles over why Japanese people do not seem to much like online dating sites, despite their enthusiasm for social media. It could be that shyness plays a part and apparently some women would rather show a picture of their rice cooker than their real photograph on their online dating profile. Perhaps it will help win the hearts of hungry men but I wonder how it leads to passion.