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 AOYAMA VIEW

To come.....
The world is shaking after British voters decided to leave European Union. I would not go as far as EU President Donald Tusk who claimed "this is the end of the Western civilization as we know it", but certainly it will have a deep, lasting impact on European unity, politics, business and economy as well as global finances. Quoting another comment, it was "the greatest blow to globalization, free trade and liberal international order since it started 70 years ago by one its own founder members" and exactly the kind of shock that the feeble global recovery did not need. "Volatility will be now the new norm" and countless business plans will be re-written, investments put on shelf. It was a surprise and disappointment for USA and Japan while probably a source for celebration for the leaders of Russia and China.

Markets were swinging wildly within hours of the news on Friday, not least in Japan. The "safe haven" JPY surged 10-15 pct to new levels below JPY 100 per USD and JPY 110 per EUR and Nikkei index collapsed 1000 points in morning trade alone.". PM Cameron's failure in risky game wrecked further damage on his Japanese colleagues already crippled, non-performing Abenomics. If the forex rates stay at this level, much more of the corporate profits will be wiped out and the inbound tourist wave will stop. I would not be surprised if Japan MOF makes an intervention this week, as futile as it is unless other central banks support it.

In Europe, it is clear the European unity has been badly tainted and will never return to same as before. The path towards further integration has been washed out for long time to come. On the contrary, you can expect selfish leaders and nationalistic movements to demand their own national votes on just about anything just to boost their own support. It's a wake-up call for EU to improve its act to survive, while UK itself looks already clear to disintegrate as Scots will now renew their vote for independence in order to remain in EU. The move could even bring about the miracle of long sought unification of Ireland as the vote in North Ireland was overwhelmingly "Stay" and news tell about long queus for Irish passports in Belfast. Never to miss a joke my Irish friends already talk of forthcoming wave of English refugees paddling over the sea in small rubber dinghies. Jokes aside, the outlook for business, finances and economies will be shrouded for at least two years that it will take to negotiate the terms for the divorce.

Following the campaigning from Tokyo, has been painful, to say the least. The arguments put forward by the "Leave" camp have been full of nostalgia and romanticism - "Make Britain great again!" - as well as xenophobia, racism and fantasy - "Close the borders for immigrants who are taking our jobs!" - in line with what Donald Trump has been preaching across the Atlantic to get to White House. The Brexit movement even had its own DT lookalike and sound alike in ex-London Mayor Boris Johnson - same big bully with wide mouth, same mop of blonde hair albeit without heavy dose of spray and make up - whose been serving similar unfound scaremongering and half-lies as Trump just to grab the seat of party leader and prime minister from the wretched David Cameron. It seems he has now succeeded in his quest and I am now more convinced that Trump will also reach his target in November. Much depends on how critically the media review his "Trumpist" stories from now on. It seems there has been a "shape up" movement in US media. In Britain all big dailies were firmly passing their usual anti-EU propaganda that sells to their readers, but happily it looks like there has been a "shape up" movement in US media recently.

Cameron will go down in history for his miscalculated risk to call a public vote just to firm up his control of his own party, that now leads to a train wreck in relations with other European nations and most likely will break up his own United Kingdom. As Financial Times put it, this was "the most unnecessary and irresponsible act by a British government in modern history".

Japan's political campaigning for the 121 seats or one half of the Upper House, up for grabs every three years, carries similar shades of twisting the truth and glossing over cold, hard facts as Brexit and US prez campaigns. After urging his troops for an overall assault to gain 2/3 UH majority he needs for his long-time dream to change the Constitution, PM Abe has now declared to voters that this is NOT the issue at all, but the vote is again about support for his trademark Abenomics. While admitting that his policies have not yet shown expected results, he is asking people to believe that the better salaries are soon on their way for all and social welfare will only keep getting better. As most people feel his policies have only benefitted employers, not employees, multinational companies and rich investors, not SME's and salary earners, Abe now promises to raise salaries for non-regular workers, income support for low-income households and empowerment of female workers, all issues that DPJ and other opposition parties have criticized the government has been lacking in. Copying their signature policies Abe seeks to undermine their arguments while keeping the lights off the constitutional agenda that opposition parties have declared another major issue.

The surveys show that he might succeed again: while over 60% don't believe in Abenomics anymore, support for the government still remain close to 50% and, as party, LDP commands 38% support dwarfing DPJ's 8% and just 3% for Communists and Komeito. No wonder, Abe keeps a confident face in the public, yet inner party sources tell that LDP confidence is low and the true target is to just keep simple majority in the Upper House. The simulated numbers from previous election show that LDP could lose a high number of seats in the 32 single seat constituencies to the unified candidate that DPJ and JCP have managed to agree upon. Things don't look that good in some big multi-seat areas either: for instance Tokyo seems so bad that LDP is expected to get only 2 seats out of total 6 - increased from earlier 4 by the election reform urgently confirmed just weeks ago to avoid risk of courts declaring the result illegal due to twisted candidate/voter numbers. Over all, it is said that the Masuzoe scandal will cost LDP 5 millions votes. That's more than whole Finland!

Another recent law change can also impact result in an unexpected way: the voting age has been lowered from 20 to 18 years for the first time and it will be interesting to see how young people take this newly given opportunity. My guess is "without any interest" as past data shows voting rate for 20-30 years olds is less than half of those aged over 60. To get them interested, the parties are now learning how to use internet and social media, something that were forbidden them still a few years ago. They have also re-edited a special youth version of their printed pamphlets - in manga form. Think the latter shows well how politicians rate their intelligence: the change is nothing but a trick to get more easy votes. After all, you might ask, why adult age limit remains at 20 in all other respects? You are not old enough to drink or buy cigarettes or stay out late at night, but you are so well informed that you can vote in issues of national policies?

The latest political scandal has come to end with Tokyo Governor resigning "voluntarily" following ugly public grilling by City Assembly members that was broadcasted live day after day. I maintain it was a political hunt, hypocritical and futile. It did not help that Masuzoe promised to pay all back and even work without salary. Now tax payers won't get back his JPY 4 million "improper" spending, but instead will be hit with JPY 50 billion (!) bill for the cost of new governor election set for July 31, three weeks after the national Upper House election. This does not sound clever. Neither does comparison between Masuzoe's travel costs and PM Abe's travel costs: the total bill for the big groups of officials Governor took along for his 9 trips to world capitals to promote Tokyo Olympics was JPY 247 million (EUR 2 million) while PM Abe's travel bill has been only little less for EACH overseas trip he has taken since 2012 to some 50 cities and countries at the last count. Japan's Prime Minister command naturally a bit bigger profile than Tokyo Governor, but is it really 9 times bigger?

For me, Masuzoe was no saint, but not a thief either, rather a poor soul who lost control of himself and his expenses after getting the coveted job. Like many others, I was more upset by his small mindedness booking calligraphy brushes and a Chinese silk shirt bought tax free at Shanghai airport as "office expenses" than for staying in a suite in a good hotel or taking along so many "kaban mochi" or "salkun kantaja" for his trips. I could not help feeling bad looking at him grilled in television - why was he taking all that? - until I heard from a friend that if he managed to stay on his full term 4 years, he would get JPY 100 million pension. Now he had to walk out with just JPY 22 million in hand for 2 years in the office. Wonder if even Cameron can get same? How tough life is for Japanese politicians!

The leading parties were faced with urgently finding substitute candidates for the Tokyo seat just when busy preparing for the national election. With no suitable old men on offer at short notice, it looked for a while it would become a run between two power ladies, Yuriko Koike for LDP and Renho (no family name) for DPJ, both well-known ex-ministers. It would have been an exciting fight and so was prospect for a woman in charge of Tokyo, even a "half-foreigner" in case of the Taiwan-born Renho. Alas, the snappy former "talent" refused to run as she still dreams of another minister job if her party returns to power, where as Mrs. Koike seems more ready to run as she has been passed for a minister post by every LDP leader since her heyday with the maverick Koizumi more than 10 years ago. Mrs. Koike's election to lead Japan's capital would be a lucky strike for Finland as she is very much pro-Finland and has been an active leader of the Finland-Japan Friendship Group of in the Parliament. Just imagine how much more she can do for Finland in the high level executive position of Tokyo City mayor. Meanwhile, Finland already has another power lady fond ready to take over her place at the Parliament in Masako Mori, another ex-minister, who last year "competed" for the Finland Friendship position with Koike-san.

To finish off this time, some updates to issues dealt in previous columns.

Finland remains so popular here that, in fact, it must be unfathomable for most people in Finland how much their country is cherished in Japan and what a great advantage it is in our business - even if we local Finns and our Japanese colleagues have been pounding that message to media and decision makers back at home for a long time. Actually, it's all Nordic countries that carry this highly positive image in Japanese people's minds: untouched nature with honest, reliable people, well-educated, creative and innovative with high-level and free (!) schools, hospitals and child care plus long holidays, good pensions and relaxed, slow life style for all. It's a full catalogue of things Japanese people would like to have themselves and would like to experience by travel or by buying products from there. Yet, we always thought, Finland sticks out from other Nordics as that little bit different, even "better" somehow and has made a great base for us Finns here to sell just about anything - as long as the quality and price is right, of course.

As it happens, our long time beliefs have now been proven scientifically right by a survey of Japanese attitudes run by marketing professionals from my old university. The Aalto University study, that was published two weeks ago at Embassy, found that all Nordic countries shared exactly those positive images among Japanese people as listed above, but they thought Finland was somehow emotionally a bit above others.

One Japanese travel professional explained it simply: "In Stockholm, people are friendly and if you ask them to find a way, they are happy to assist you. But in Helsinki, if a Japanese tourist just stands on a street looking at his guide book, it is enough to get some Finn to come and offer help without asking. For Japanese people, who are shy to ask anything from strangers, it makes a big difference."

Softbank got USD 7,3 billion dollars for its 84% of Supercell shares to Tencent of China. This puts the total value of the company at USD 10 billion, more than Nokia's phones to Microsoft at the time! Earlier this year, Supercell reached level of 100 million daily users around the world for its four games. Now it expects to get millions more in China, thanks to its new owner's connections and other platforms there like WeChat. Finnish game industry is said to be at top of the world, yet I fail to see how this kind big money attractions will help to lift the national economy there.

In comparison, Softbank only got USD 700 million for its shares in Gung Ho, the No.1 mobile game company in Japan, clearly a sign of Galapagos phenomena prevailing even in this business. Another sign is that the acclaimed Indian CEO hired from Google with huge money decided to quit the company as chairman Masayoshi Son decided, after all, to stay on another 5-10 years. The investors are again alarmed what crazy mega moves he will come up with next - lately he has been deep into AI and robotics. In the Softbank shareholder meeting, Son and his selected "outside" director Tadashi Yanai of Uniqlo, who changes position with Son as the richest man in Japan depending on their companies' share value, both laughingly declared they are somehow "mentally twisted". You would not expect to hear such statements from Western big company bosses.

Hon Hai chairman Terry Gou says his company will complete legal procedures for its Sharp takeover by end of this month. We are waiting to hear how Taiwan's Hon Hai will reform and rebuild the Osaka company after that. It seems that robotics are one area where Sharp, too, will expand. Mobile phones are likely to end up on drop list as Foxconn doesn't need them. On other hand, I believe the world's biggest phone manufacturer is somehow involved in last month's deal of a pretty unknown Taiwan company buying right to start making "Nokia" named phones even if its name was not clearly mentioned in the news.

Hon Hai, with most or its giant factories in the Mainland, has huge stakes riding in the political game between Taiwan's newly elected, nationally minded president and China's communist leadership, who regard the island nation as just a runaway province of its own. Ms. Tsai's first test will be whether she allows the sale of Taiwan's two major chip makers to a big Chinese state company, who wants to get their technologies. China stepped up the pressure last week by closing its Taiwan liaison office to show its displeasure, a move similar to calling back Ambassador from another sovereign state. Same time, Putin was meeting Xi in Beijing swearing their friendship, economic ties and, I guess, celebrating their growing strength over weakened Europe. "Divide and conquer" is an age old policy from Roman times for those seeking power over others.

China will face a big test with the rest of the world in how it will react to the International Court of Justice verdict on its claim of most of the South China Sea that is expected to come any week now. Early indications are that China will dispute the court's authority and resign from its commitments to international maritime order, something it had flaunted already for long time in practice. This is not exactly same as Japan's resignation from League of Nations in 1933 when it was told to withdraw from its occupied areas in China, but the response is the same: "Other nations are denying what rightly belongs to us".

Then, 1940 Olympics were taken away from Tokyo and given to Helsinki. So far, nobody is proposing to take away the 2022 Winter Olympics from China. I would bet that China would also be one of the first alternatives for FIFA if the soccer World Cup in 2018 or 2022 would be taken away from Russia and Dubai for some reason.

"Raha ratkaisee" or "money talks" Finnish singer Irwin Goodman sang long ago.

Timo Varhama  
Tokyo, 24 June, 2016   


Previous Columns

13 June 2016
"Rainy season: it's pouring on Prime Minister "

30 May 2016
"Obama is a Class Act, G7 Meeting Was for Japanese Audience "

8 May 2016
"With More Headaches at Home, Abe Takes Golden Week Europe Tour "

23 April 2016
"Dramatic Giant Quake, Business Slowdown, Election Mode in Politics"

7 April 2016
"Tokyo Great City, Japan hmmm...Colorful People "

22 March 2016
"Spring energy, child care and train travel "

11 March 2016
"Five Years from Japan "3-11" - Making Best Out of Gigantic Recovery Task "

28 February 2016
"A Dig Deeper into Politics: Ignorance, Camouflage, Chicanery "

15 February 2016
"Markets in turmoil, economy in decline, challenges grow for Abe"

5 February 2016
"Minister scandal distract, economy slow down, Kuroda rides for rescue "

28 January 2016
ABE: THE REALITY BEHIND ALL THAT TALK "

20 January 2016
"Bear Outlook for Monkey Year Grows, Taiwan Votes to Keep Distance from China, but Pop Group is More Important for Many "

12 January 2016
"NEW YEAR VIEWS - AND A LOOK BACK AT 2015"

17 December 2015
"Global Environment, Food Tax, National Stadium: Historical Decisions or Political Parading? "

8 December 2015
"Challenges in Paris Conference, Challenges Back Home in Japan "

27 November 2015
"Refugees, bombs, business and global warming - can we control them all? "

3 November 2015
"Japan, USA, UK or Germany - China Impacts Us All Today "

22 October 2015
"New Ministers, New Trade Deals, All Political Play"

7 October 2015
"Power games, ball games, trade deals and refugee misery"

25 September 2015
"Big Problems, Big Talk and Big Figures - Each in Their Own Way".

9 September 2015
"Challenges in Japan, Tougher in USA and Europe ".

1 September 2015
"Looking at Neighbors, Japan Seems Stable and Safe ".

19 August 2015
"End Summer, Ceremonies and Holidays Over, Back to Work for All".

6 August 2015
"Hot Weather, Hot Air in Politics - From War Anniversary to Whisky in Space".

23 July 2015
Greece, China, EU, Japan: looking for the lost reality

23 June 2015
World No.1 City? The Difficulty of Passing New Laws, the Easiness of Spending a Lot

16 June 2015
"Only in Japan?" - Somethings, Yes, But Others Are Same All Over

4 June 2015
Security and Finances: Pensions, Companies, Banks, Olympics, FIFA

21 May 2015
Economy Back on Track, Record Profits at Big Companies

11 May 2015
Spring Events: Odaiba Rock, Shibuya Sex, Capitol Hill, White Hall and Red Square

22 April 2015
Elections, Elections - Finland, Japan, Around the World

30 March 2015
Sakura: beautiful, but just for a short, fleeting moment

16 March 2015
Better late than never - Japan moves slowly

2 March 2015
Three struck out, three more in doubt - Abe's ministers under attack again

19 February 2015
Spring, Sibelius, Chocolate, Budget and Big, Bad Putin

5 February 2015
Reform Work Starts - Energy, Farming and Food on Wish List

26 January 2015
Terror strikes, plenty work, sad memories wait

15 January 2015
Watching AKB, Eating Mochi, Spending JPY 96 Trillion - Japan Off to Better 2015 After So-So 2014



About the Columnist

The columnist is a Japan veteran among Finnish business, our Chamber ex-president and today Member of the Board of Trustees.
After running a major Finnish industry company's Japan business for over 20 years, he is now Senior Associate in a strategic consulting company.

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