TOKYO SUMMER COMING TO AN END, MURPHY'S LAW RULES THE WORLD
With Obon holidays over summer is winding towards end. Thermometer still hovers above 30C daytime, but moisture is down and nights cooler – only 25C – a big difference. Big fireworks are gone, but events like Omotesando Yosakoi, Koenji Awa Odori and Asakusa Samba still draw hundreds of thousand spectators. For us Finns here, today‘s the traditional FCCJ Yakatabune cruise. Cool Biz dress code officially continues until end September, but some serious businessmen already put necktie on. Children are on their way to school again in their uniforms.
Only a couple of typhoons so far, but otherwise violent rains have pounded localities here and there. Nagasaki just reached national record with 395 mm in a day and 120 mm in just one hour. Now, that‘s plenty water on your streets and roads and rice fields!
The big news this month was sudden marriage announcement of country‘s most favorite politician Shinjiro Koizumi, the handsome 38 year old son of ex-PM Koizumi, to Christel Takigawa, the French-born “TV talent”, whose multilanguage speech of “omotenashi” at IOC conference 2013 was probably more decisive to win 2020 Olympics for Tokyo than all Prime Minister Abe‘s assurances that “Japan is back” to provide for fantastic games.
In a symbolic PR move, the couple announced their marriage at PM office lobby after meeting Abe-san to “get his blessing”. This was appropriate, the PM said, as he did same himself with Koizumi‘s father, his boss at the time. Be that as may, expect to see the young prince get his first minister nomination in Abe‘s new minister line-up next month and the smashing couple with their expected child to be heavily featured in women‘ magazines for next years to come. Christel‘s omotenashi will help propel Koizumi Jr. towards his future PM seat as much as it did to get Olympics.
POLITICAL STORMS IMPACT GLOBAL ECONOMIES
While Japan is slowly waking up from its summer lull, outside of the country political storms rage ever stronger and the long feared damage to economies and financial markets has become clearly visible. The list of places ravaged by feud, fight and worry seem endless: it‘s not just the Syrian tragedy, threats from North Korea and US-China trade war, but also Hong Kong, Yemen, Iran, Kashmir, Venezuela, Ukraine, US immigration, Brexit, Brazil, Italy, you name it. They are all different, but together add to the growing global confusion and uncertainty. Old business models, long established sales and supply routes are all impacted and company leaders postpone investment decisions as they can‘t see clearly the way forward.
As one commentator put it, all looks like Murphy‘s Law: anything that can go wrong, is going wrong now. US stocks are wavering and economy is probably slowing down as much as China‘s that it has been deliberately targeting to harm while ”collateral damage” from the two elephants‘ dance and other commotion has been even worse for other countries. Europe, Japan, Korea and SEA are all in slowdown, Germany, Singapore, Hong Kong and India have already seen outright economic decline.
Japan‘s economic growth has been surprisingly strong during first half of the year with GDP registering 2,8% growth during Jan-March and still 1.8% up in April-June supported by stable consumer demand and solid corporate investment despite negative trade balance from rapid slowdown in exports to China. In fact, that‘s not much behind USA, “the world‘s strongest economy in the world by far” according to its president!
The China impact is sure to show out more during the ongoing quarter unless Trump makes another sudden turnaround and gives up his hopeless task to bring China on it knees. The sales and profits of electronic part exporters are down by 30-40% and the Japan boycott campaign organized by Moon government is reducing Korean travel here. Wonder how long consumers‘ confidence can survive with all negative news. The final coup de grace to growth is likely to come from the VAT hike in October whatever financial counter measures government has lined up.
Adding to corporate worries is the steadily rising JPY value that reduces income earned from all overseas business, not only from China where CNY has sunk into new lows. It remains to be seen where is the treshold of pain that prompts MOF to intervene in the FX market, something it has not done since similar global crisis 15 years ago. I‘m sure Japan will hold back any action as long as possible not to earn the wrath of US president, but there‘s a limit. Same time, of course, the higher JPY value is a boon for any import business to Japan and reducing cost of Japan‘s overseas M&A.
US-JAPAN TRADE DEAL
As expected, the trade negotiators from Japan and USA rushed to conclude their talks in time for the US President to announce in Biarritz he has won ”the biggest trade deal ever”. As also expected, Japan agreed to give US the same sliding scale of food tariffs over coming years as Australia, NZ, Canada and other TPP members got last year – and US would have had as if Trump did not decide to jump out in his wisdom. As also predicted, Japan will butter up the deal with one-time buy of “huuge“ volumes of US farm products from Trump’s devoted countryside voters deserted by China. At least according to US president himself. The Big Man seemed highly pleased in announcing this new “win” in contrast to his unhappy rant and rave with other G7 leaders and China.
In return, Japan evidently got only hazy promise that Trump will not impose 25% “emergency tariff” on Japanese car imports as he has threatened – at least not for the time being. The details need to be still worked out for a grand signing ceremony in NY next month when world leaders gather for their annual UN general meeting. Nobody can beat Abe-san in “polishing apple” for his US master, oops alliance partner.
JAPAN‘S LONGEST SERVING PRIME MINISTER
Abe sits firmly in power having retained his seat through 5 elections in 7 years in big contrast to revolving doors at Japan top before his comeback. Last week he passed his relative Eisaku Sato to become the longest serving PM in post-war history and there‘s nothing to stop him becoming the longest serving ever in November. While popular enough as “the best act in town”, he is also a very divisive character among the public: his opposition rate is never much behind his popularity rate. No wonder then that he has progressed carefully with the necessary reforms to avoid stepping on toes of any interest corner of his incoherent big party. As well, he has managed to stay clean from all scandals with his ministers and bureaucrats: no dirt thrown by opposition in fiery parliament debates has stuck on “Teflon” Abe.
Probably the biggest miracle is the image as great foreign policy statesman that Abe has been able to create despite no real show of any thundering success except for the two big trade agreements, Pacific TPP and EU-Japan. Just think of it: his lowly demeanour with Trump has been only to contain damage from the mercurial US leader and no special issue that he has been talking about – from freeing the supposed Japanese captives in North Korea to making peace deal with Russia or mediating in the US-Iran feud – has showed any result, just endless appearances in TV.
Yet, more than anybody before him, Abe has tirelessly traveled to overseas more than 80 times, met with countless guests at home and featured again and again in all kinds of global meetings to show “Japan is back”. Even this week, fresh back from Biarritz G7 he was hosting African leaders in TICAD7, the already 7th Tokyo International Conference for African Development. China is much ahead there with huge investments into infrastructure and mining over the years and Japan is trying to catch up with focusing on the continent‘s growing consumer wealth. It‘s time to change approach to Africa from ODA to business: most economies there have grown steadily past 20 years and the continent‘s population is forecast to double. In 2050 every fourth person in the world will be African.
THE KOREAN PROBLEM
Abe‘s decision to tighten export controls to Korea and downgrade the country‘s status as one of the most trusted trade partners after Moon reneged country‘s basic “peace” agreements and settlements of past history – first from 1965, then again from 2015 – backfired as expected with a national government organized anti-Japan economic boycott that seems to grow steadily with no limit in sight. Last week Seoul escalated its action from business and economy to trilateral security alliance between USA, Korea and Japan by cutting Japan off its military intelligence data flow. Naturally this weakens the alliance and upsets Pentagon, who worked hard to get Korea into the information flow just 3 years ago – even more upsetting for America was Moon cabinet‘s claim that it had obtained US agreement to its move.
If it is true that the information flow has been more from Japan to Korea than vice versa, it seems Korea has really managed to shoot its own foot. Same applies for consumer boycott against Uniqlo stores in Korea: they are half-owned by Lotte. The rocket shooting scoundrel in the North must be laughing.
Yet, according Korean news sources, the ruling party‘s research has confirmed that mobilizing masses on streets against Japan will help it to win the next election by drawing attention away from sagging economy, high youth unemployment and new scandal, similar to previous president‘s, that has caught up with Moon‘s close aid tipped to become his successor. And if Japan is not enough, ex-president Park is being dragged out of her prison for a new trial to add more years to her 25 year sentence. If the Democratic party will not manage to keep president‘s post after Moon, it could well be the sitting president and his close aids will end up behind the bars themselves with trumped up accusations from the Conservatives following Korean tradition.
I always think that, deep in their hearts, Korean people and Japanese people are close to each other. As well, I always write of the dirty play in Japanese politics. Yet, looking at Korean politics, it just goes beyond comprehension how they get away with such theatrics time and time again.
Positive Finnish news from Japan to finish this column.
I hear that the long-held hopes that Finnair would get a hard-to-win slot to fly from Haneda are getting close to fruition. With a new landing route over the city – first ever – now approved, 50 new daily slots will be dealt out. While most will go to domestic and American airlines, there should be some available for European and Asian companies, too. The lucky ones will be announced soon.
Tokyo August 30, 2019