This time focus is on trade politics and foreign politics – they often go hand in hand and there's been big steps recently, forwards and backwards, some very colorful. They clearly register on the domestic political agenda, too. . Japan is not all just about Abenomics after all. Another remarkable step outside politics is JAL's planned start to fly to Helsinki.
Japan's much discussed entrance into the Trans-Pacific Partnership (TPP) is finally a fact with acceptance received from all 11 current members and Obama government submitting the matter officially to US Congress. Japan will join the negotiations in July when Congress approval automatically takes place. Japan is expected to face strong pressure on cutting down its ridiculously high tariffs on agricultural imports from Western members, who are all big exporters in that area. On other hand, U.S. government is keen to conclude the talks successfully by end of this year as targeted, so Japan thinks there is some room for compromises so that the schedule would not be delayed. This is in contrast to Free Trade Area (FTA) talks with EU, that already started, where neither side is seeking any big changes to their protection of domestic farming, yet expect the talks take long time, possibly several years. Interestingly, USA and EU have started their own bilateral trade talks same time, so the three proceeding all same time makes them a global triangle that covers most of the developed countries plus a good number of Asian countries except China. It is clear that TPP is not only about trade, but also targets to tie Asia Pacific other than China countries together under U.S. umbrella even in other ways. Korea, which has close security alliance with USA just like Japan, already has free trade deals with both USA and EU, so it is implicitly included even in this trade move. Abe's choice for foreign travel since becoming PM also reflect this "China containment" policy: Indonesia, Thailand, Vietnam, even Australia and Singapore for his FM, then USA and last week Russia, also Saudi Arabia and Turkey for energy politics.
Not to be left out in cold, China took a turn to engage Japan together with Korea by agreeing that the three East Asian nations will set up trilateral trade talks targeting their own FTA, that covers tariffs, investments and services. This is drastic change of face from China, who has been recently doing its best to hurt Japan economically organizing boycotts against Japanese car sales in China and stopping Chinese tourists to go shopping in Japan. The first round was already held in Seoul last month with Japan insisting that intellectual properties should be included as well. "We felt the willingness of China and Korea to quickly accomplish things. It was a fruitful meeting", said Japan team leader back at home.
China is Japan's No.1 export market and Japan is China's No.3 trade partner. The total trade between the two exceed USD 300 billion. The trade flows between Korea and China are over USD 200 billion and about USD 100 billion between Japan and Korea, so all together we are talking about USD 600 billion worth of business. Needless to say, should there be an agreement that further boosts this big trade between the three neighbors, it will surely help improve also other relations between them.
Such improvement is badly needed after things changed for worse again when China and Korea reacted strongly to 3 cabinet ministers and not less than 168 parliament members visiting the well-known Yasukuni shrine. Top politicians' visits to the private shrine, which has six A-class war criminals' names registered in addition to hundreds of thousands others, who died in Japan's wars over the past 100 years, has always been like a red flag to the bull for the two neighbors, who were at the receiving end those days. When criticism came, it did not help that PM Abe responded saying that he does not mind which shrine Japan cabinet members or parliamentarians practice their prayers. Immediately, Korean foreign minister cancelled his visit to Japan scheduled for the following day. Sadly, he was supposed to come here to talk how to save the annual trilateral summit meeting between the three countries `top leaders, that was supposed to be held in Seoul this month, but called off when China's new leader announced he would not come. This trilateral top meeting between the East Asian leaders has been held every year, last years in Japan featuring Messrs. Noda, Wen and Lee. Now with new leaders in place in all three countries, this year`s meeting in Korea was supposed to be extra important. Hence Mr. Xi's sudden refusal to meet with his counterparts was an unpleasant surprise in Seoul and Tokyo. It seems the whole affair is off again, just as it was for several years when PM Koizumi decided to visit the same shrine despite knowing well this would antagonize the neighbors.
This time Abe did not visit, but he left no doubt that he thinks China and Korea should stop their criticism about "how Japan pay respect to those who died for the nation". He refuted critics, who said that Japan would be better off if its political leaders would not deliberately antagonize its neighbors. Apart from China, the new twist also complicates repairing Korea-Japan relation that took turn for worse last year when previous president Lee suddenly chose to visit the island that Japan continues to claim. No Korean leader ever visited there before. It was expected, that new president Park and new prime minister Abe, both well-known conservatives, who share antipathy and distrust of North Korea, would be able to patch up the relation.
Japanese cancellations followed after Korean and Chinese moves. Having been told that they will not be allowed an audience with the new president, Japan-China Parliamentarians' Friendship Union cancelled its annual visit to Beijing.
The let-down spread to the business community: with relations cut off between the political leaders, Keidanren bosses considered it fruitless to make their own annual trip to see Beijing leaders at this time. The bad mood is reflected on street level: earlier high numbers of Japanese tourists to Korea are down by 30% with many people citing poor political relations as reason in addition to weak yen and danger from North Korea. According surveys, 71% of Japanese now believe that the relations are "bad", sharply up from just 27% in 2011. On Korean side, 78% feel same, but that is not much different from earlier 64% saying so. Despite such survey result, the much improved strength of Korean won against yen has been more decisive how Korean actually act: they are actually rushing to Japan in record numbers, the No.1 source of inbound tourists. Especially Kyushu island, with its capital Fukuoka just 2 hour fast boat ride away from Busan, has seen a big number of Koreans, who come in for shopping, enjoying restaurants and hot springs, playing golf and pachinko, that has been banned in their home country.
All is not lost between China and Japan either. Sincere efforts to boost up co-operation still continue on numerous levels, in travel, business as well as practical diplomacy. For instance, Japan is trying to make new steps in discussing how to establish communication channels between the militaries, especially navies, to talk to each other when facing difficult situation out it in the sea, to avoid any mistakes and misunderstandings. As we know, there has been some close encounters in seas around Senkaku that could have ended up bad and escalated the stand-off between the two nations. During the cold war US and Russian militaries developed such "hot line" and both Japan and USA think it is now needed with China.
Officials, academics and business people also met recently in Beijing to discuss co-operation in fighting air pollution in China. Japan has obviously wide experience to show how it overcame its own pollution over the past decades, while Japanese companies have lots of cutting edge technology to offer in this area. For instance, Japanese car makers are world leaders in electric and hybrid modes and Japanese air purifiers are said to be big sellers for Beijing homes, especially those of well-to-do party officials and government company executives. Japan government's new "Blue Book" pledges to patiently continue dialogue with China to mend the bilateral ties and deal with its sudden moves "in calm, but resolute manner". Yet, Japan's "security environment is getting increasingly tough", the paper says, citing threats against Japanese lives, property, land, waters and air space.
With all these negative changes with two neighbors, it should be noted that same time there has been steady positive progress with Taiwan. Claimed to be part of China and having history of being occupied by Japan like Korea, the island nation has yet always maintained basically good feeling about Japan after WW2. It's not that there hasn't been feuds on this or that between the two, but more often than not, the two sides have been able to discuss them mutually and "agree to disagree" where needed. One positive, concrete new step between the two last month was agreement on joint fishing in waters around Senkaku in East China Sea. The islands are claimed by Taiwan as much as by China, yet the two sides were able to set this aside and just talk fishing, to make it available for both sides whoever owns the islands. Obviously, that the two sides could agree on this was a win for both and a show to China, that it does not yet rule Senkaku nor Taiwan.
Naturally, all these posturing moves in each country have been played out for domestic audiences. In Japan, the Yasukuni visit and neighbors' expected reactions was clearly a calculated shift in Abe's overall agenda from feel good economics and finances to his pet theme of standing up against China and "normalizing" the pacifistic Constitution written by young team of blue eyed Americans soon after WW2. While it has served well for more than 50 years in changing Japan and Japanese people from Emperor worshipping, centrally led, indoctrinated masses into democratic society with free thinking individuals and materialistic consumers, yet disciplined and law abiding citizens, many people feel that it would be only reasonable if world No.3 country would put some own touches into its constitution after all these years.
Abe has pointed out that Constitution is not a holy script that cannot be changed: USA has changed it six times while France and Germany have changed it 27 and 58 times respectively. Abenomics as political attraction has been played already for months, so it is obvious the A-Team decided to add new focus on the topic list for the upcoming July election. Not any troubling details about military etc. but just how to make any change to Constitution easier, i.e. change the current law requiring two thirds majority into simple 50% majority. It remains to be seen how voters will take this, but early signs are that in the rising fear about China as well as loathing for North Korea , many will support Abe even in this. He is now riding on incredible 74% popular support according to polls. Not only it is one of the highest support any time for any PM, but, remarkably, his support has gone UP step by step already for 4 months, first time ever for any PM in Japan history. That his new stand against neighbors' abrasive demands how Japanese should think and behave, is likely to make him even more popular, especially among the older generation.
New steps have taken place in Abenomics front as well. After much complaints that the economic agenda has been "only" financial and monetary policy shifts, that have boosted share markets and devalued yen, but done nothing so far for the actual "hard" economy, the A-Team finally announced first small steps in economic reform and business deregulation, the "third arrow" in the declared program. It was nothing big, but seemingly useful and attractive to many, about university education, company hiring procedures, medical industries, mother leave and child care. Of the three areas, the two last ones are probably the most important for the society and whole economy. For long, experts have pointed out that Japan has to get more women into the working force and that it is poor provisions for mother leave and lack of organized, affordable child care, that is preventing that. Now Abe requested that companies should extend mother leave up to 3 years and boldly promised that by 2017 there will be a day care place available for every mother willing to go back to work. How the change from today's reality, where parents are desperately looking for day care place from the first signs of pregnancy to after the child has been born, will be actually arranged was not explained in much detail, but surely this new promise will again boost PM's popularity.
Overall news about economy and business tell that big manufacturers like car makers are reporting much improved results with even better outlooks and consumers are now spending like never before: March spending was 5% up from year before. Yet, signs are also emerging that the drastic change for weaker yen has also its negative impact. Earlier predictions of higher electricity prices eating up consumers' valuable incomes are about to materialize while higher gasoline prices are already a reality. It is feared that these will cut into consumer spending. Moreover, fishermen already complained they cannot afford to go out with their boats every day any more, something unheard of in this fresh fish paradise. Yet, for the time being the overall picture looks great and the latest predictions say that the 1Q GDP figures, to be announced soon, will show annualized growth at 2.8% level.
One important step last week for Japanese airlines as well as for the local part suppliers of their chosen American plane maker, was U.S safety officials' decision to allow Boeing's new 787 Dreamliner to resume flights with some small fixes to its battery problems. As I am not a flight safety expert, it is hard to criticize the decision, but for a layman it all looked like a cheap whitewash with just a fire proof box around the battery and exhaust pipe leading the smokes out in case of any new fire. What was important here, was that the 50 grounded planes – 46 of them in Japan - would fly again and the production would be resumed at the U.S company. Waiting for the officials' decision for already four months, JAL and ANA had to cancel hundreds of flights for lack of capacity with an estimated loss USD 100 million. Meanwhile, on the other side of Pacific, Boeing is an important supplier to U.S. military and a big employer in North West and it won`t hurt here either that the Japanese part suppliers of 787 carbon fiber parts will get their production lines running again. The move has a connection to Finland, too. With its fleet back in full strength, it is expected that JAL will now rush to make true of its planned new Narita-Helsinki route soon, probably by July in order not to miss out the Japanese holiday travel season in August. It is a remarkable move from the earlier national carrier, who during its "chapter 11" period cut off most of its European connections, to put Helsinki the first new one it is adding on following its recovery. While our Finnair surely would have liked to take on the new Narita-Helsinki slot on its own, the JAL move is not bad for it either as it will add to the Japanese customer volumes, who transfer in Helsinki to its European flights.
Connected to that, Kansai Japan-Finland Society, who celebrates its 40th anniversary this year, was planning to arrange a "yabusame" event in Helsinki center with JAL as the main sponsor. As you know, this is a colorful sport with samurai horsemen riding in full gallop and shooting arrows into targets at 50 meters space from each other. As much as I heard the location for the event was supposed to be either Kaisaniemi park or Kaivopuisto park, both well known places with easy access that would help attract big crowds. Now understand that with the delay in the JAL connection Finland, friends in Kansai might postpone their event into next year. It's worth waiting.
Timo Varhama, 2 May 2013