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 AOYAMA VIEW

From Cool Finland to Hot Tokyo: A Round-Up of Recent Happenings
Two weeks away in peaceful, cool Finland and so much has happened in Japan. Unforeseen strong rain falls, floods and mudslides have ruined Kyushu again and the whole country suffers of extreme heat, violent outpours and frequent quakes locally from Hokkaido to Kagoshima. Tokyo City Assembly election was another landslide – namely landslide win for Governor Koike’s new movement. It shook the whole Japan's political establishment. PM Abe's strong popularity has seen a shocking slide down and his position is suddenly not that sure anymore. Happily, the financial market, economy and business seem to continue unperturbed by all this upheaval.

Earlier compared to Monsieur Macron's new fresh wind, Koike-san's win turned out even more overwhelming than in France as almost all her newcomer candidates – 49 out of 50 – passed through. As remarkably, LDP that has ruled Tokyo as it has whole Japan, lost half of its seats and fell to 23, just 4 more than Communists. Prime Minister, who showed up on street for a stump speech for his party, was booed - probably for the first time in his life. His recent (small) scandals have been taken so badly that surveys show his popularity has collapsed from over 60 % to around 30% in just a few weeks. "Dust has settled on Abenomics, the glorious Trump-Abe golf diplomacy in Florida is yesterday's news and LDP has become like old uncle who refuse to leave when the host says the party is over", wrote one commentator.

Tokyo makes 20% of Japan's GDP and election result here often leads to new national elections, yet we can count out any such move this time. No doubt, Koike is The New Face of Japan now across the whole nation, but she says she will stay focused on Tokyo – there's plenty to do before 2020 Olympics! And without her there is no other credible alternative for LDP. The traditional opposition DPJ, whose disastrous 3 years rule paved the way for Abe's triumphant return, polls today in single digits, about same as JCP. In fact, it collapsed in Tokyo vote even worse than LDP to just 5 seats. In other words, people are tired of LDP and Abe, but there is nobody to challenge them – except, potentially, Koike-san.

Yet, there's plenty movement below the surface. Starting with DPJ, its chairperson Renho, another fashionable ex-TV newscaster and clearly a puppet for party secretary ex-PM Noda, has failed to stop party's demise and should go. If not, the party is likely to split with some heavyweights resigning unhappy. In LDP, Abe's sudden weakness has set a new motion with potential challengers starting to maneuver themselves into attack positions and the power center changing from PM's office back to party apparatchiks where it was before Abe took over. Fumio Kishida, who has done a good job as Foreign Minister through Abe's 4 years, has emerged as the No.1 challenger for the 2018 party chairman vote and will probably move to a cushy party job that will allow him freedom and time to build support within rank and file for that. Shigeru Ishiba, who actually beat Abe in the initial 2011 party vote, yet lost the chairmanship in revote, has been doing exactly that already two years.

Like all political leaders, Abe's power has been based on his overwhelming popularity, yet there's many in the party who don't like his bossy style and such people will now dare to raise their voice. For the nation's sake, we must hope PM's sudden weakness does not mean he will succumb to other members' vested interests to curry their favors and forsake even the small steps of reform he's been able to achieve. Probably, the one most likely to stall is his pet project to reform the pacifistic Constitution; it remains the most controversial with voters and any unity what exactly should change remain unclear even inside LDP. If so, let's hope this will help to divert Abe's focus back to valuable social and business reforms. His first obstacle is to try clean his name from the favoritism scandal; according surveys majority of the people don't believe his explanations so far. Back from Europe, he already volunteered for a Diet committee hearing. Naturally, first off he was on television reviewing the Kyushu disaster damage in his freshly pressed blue overalls and promising financial help from Central Governement’s coffers. Several of his ministers are also reprimanded for their dealings and deserve to be dropped: the new earlier promised more popular minister line-up will be announced August 3. Other political moves, possibly a new "stimulus budget" again, are likely to follow.

Possibly media coverage of Abe hob knobbing two weeks ago with other global leaders in the G20 meeting in Hamburg and subsequent lightning visits to popular Nordic countries will also help lift his ratings. In Finland, the official program lasted only 4 hours, yet even that small acknowledgement from the busy Japan PM was an achievement for our diplomatic corps. The "strategic partnership" agreed during President Niinistö's recent visit here was re-confirmed and Japan announced it will actively participate in the Arctic Council that Finland will head for next 2 years. Finnish "cleantech" technology was discussed, so hope this will help drum up business interest here. Moomins were mentioned in his speech, too, so next step should be to have PM or at least his wife to visit the Moomin Valley Park in Hanno, where official ground breaking ceremony was held last month.

The EU-Japan EPA agreement that was signed in Brussels served well for public consumption all across Europe as reminder to the new US leadership that "we can well manage without you", yet did not seem to raise similar positive interest in Japan. As expected, the farm lobby raised alarm that Japan dairy industry will suffer for better European cheese coming in without the punishing 30% tariff. As equally expected, this was followed by government promises that any damage to farmers will be compensated from tax funds. As the Brussel signing was only "political agreement', many details remain to be finalized and it could well take years, if not full life time before my favorite prosciutto, parmigiano and chevre are in the shops here duty free. There is much more on the list for many other areas, but I'd better refrain from commenting as long as the final result remain open. Anyway, happy that this project that I was along to kick start in EU-Japan Business Round Table 12 years ago, has now been brought to (almost) conclusion by 4 years of indefatigable diplomatic negotiations.

Business outlook for foreign products and services seem good even without such agreements. The fresh business confidence survey of foreign companies here, bi-annually conducted by our own FCCJ, shows further improved sentiments with respondents positive about Japan economy, reporting much better sales and profitability than before and forecasting more of the same for next 6 months. Strategy for 77% of foreign-affiliated companies in Japan is for more growth with only 2% planning to downsize and 1% to withdraw from the market. That Americans are even more optimistic than Europeans and Australians should be counted on their natural character rather than actual business success. For full results check here: www.fcc.or.jp/fcij/bcs.html.

We must wait until next month for the April-June GDP figures, but don't expect any big surprises this way or that way. The FX rates and energy prices have remained rather steady, the exports keep growing, Nikkei index stays high and BOJ easing policy remains in place, only private consumption hasn't shown any sign of waking up from its slumber. Toshiba declared that the consortium led by public financial institutions INCJ and DBJ plus US fund Bain and Korean chipmaker Hynix is its favorite buyer for the random chip unit, yet it's held back from finalizing the deal by court injunction raised by its old US partner Western Digital. The Californian court last week postponed its verdict by another month, a nightmare for Toshiba who badly needs the money by next March to avoid delisting from Tokyo Stock Exchange. Meanwhile, the other trouble maker Takata declared itself bankrupt as expected after paying US government fines and compensating car makers for their troubles. It requested US court protection against any private compensation demands, a nightmare for those who got injured from its oversensitive air bags. Their greedy lawyers, waiting a big payday from the case, will fight, of course, and already won court decision that Takata must pay their grandiose fees. Takata's target is to clear itself from such liabilities where after its assets will be sold to the US subsidiary of a Chinese competitor

The third trouble firm Tepco had 10 out of its 13 board members replaced, a new young CEO elected and a well-known industry veteran, ex-Hitachi CEO, elected as Chairman in its shareholder meeting attended by 1200 people. Despite such big public interest, there was not much to vote for as the government now owns majority of the shares. Tepco's new "revitalization program" hit headwinds immediately as the new Niigata prefecture governor confirmed he is as steadfast as his predecessor against restart of the giant 6 reactor nuclear plant there. Meanwhile, the situation at Fukushima Dai-ichi is looking worse than before as Tepco has not been able to stop the water flows and its only solution to the problem – endlessly build new giant tanks to hold the water – is now seen coming to end in two years' time as the site will simply run out of space. It has again started to talk of letting out the contaminated water to the sea, something feverishly opposed by Fukushima fishermen, who now have resumed their valuable business after "all-clear" verdict from environment officials. Same time, the court case against Tepco's old top management for professional negligence causing the catastrophe has finally started despite repeated efforts to block it. With all this, it's hard to believe in any "revival" for this wretched company.

It seems even government has given up on promoting Japan's nuclear knowhow as it just declared that renewable energy technology is now the vanguard of its export drive instead of nuclear and "clean coal" selected 4 years ago. The declaration sounds surprising as Japan is actually a newcomer in this field, even if plenty solar has been installed in recent years and new floating wind power technology has been developed for Japan's deep ocean fronts. Reading between the political lines, it comes clear that what METI is talking about is the new fuel cell hydrogen technology, where Japan IS clearly a world leader. It makes the new stand understandable.

Corporate ambitions for global nuclear business are not yet fully over, however, as Mitsubishi Heavy announced last week it has reached an agreement with French government to take a 19% stake in what is left of the state-owned Areva. For a Finn, this sounds ironical as it means Mitsubishi, who has managed to stay clean when Toshiba has been tarnished, will then participate in paying the EUR 3-4 billion compensation likely due for Areva when the Olkiluoto No.3, now 9 years late, will start next year. Thought Toshiba's billions lost for its Westinghouse debacle and US delay compensations were enough for Japan!

Updating again on these 3 corporate scandals muddles my message that business is good here and there is plenty demand for new products and new market entrants here - maybe we should rephrase that to say "plenty place for clever new entrants". In fact, good Japanese companies continue to do dazzling big business moves. The most visible one to homes across the world will be Rakuten's USD 235 million 4 year deal to have its name on Barcelona FC shirt fronts that took effect on July 1. It joins the globally televised sport with Yokohama Tyres having its name on Chelsea shirts. Meanwhile Softbank is reportedly negotiating with Warren Buffet for a USD 10-20 billion infusion to Sprint, its US subsidiary. Last month, Softbank bought Boston Dynamics, a US robotic company, from Google to add to its French robot maker, who developed Pepper, the popular humanoid. It also bought a Chinese robotic start-up and invested in "China's Uber" in follow-up to similar placements in India and SEA. It is rumored that SB is planning to take a stake even in the US Uber itself now that its shares have lost some of their shine. Son-san really believes in global future with internet and robots and says he wants to connect all 1 trillion devices in the world. He can afford the big money, big risk game – Softbank's stake in China's Ali Baba is now rated at USD 105 billion compensating for the equally huge corporate debt. For Rakuten's Mikitani-san his corporate logo on Barca shirts is probably as much for his love of football as for his ambitions for global business expansion. Why he continues to sponsor Finland's Slash in Japan, however, is definitely not for football: our national team has not won even one of its qualification matches for World Cup 2018.

As for Japan national soccer team, despite dropping valuable points here and there, it still has a chance to qualify for Russia 2018 if it beats Australia at home in its last match on August 31. The Blue Samurais drew with the Socceroos last year 1-1 away in Melbourne but watching in Finnish TV the way today's Australian team played against top teams like Germany and Mexico in the Russian preliminaries makes me doubt of Japan's chances. Hope I'm wrong, of course, but watching Japan national team play is always nerve wrecking for me. It's much more relaxing to watch sumo where you can enjoy Grand Champion Hakuho back to rule the field again. He is likely to pass Japan all-time record of 1047 fight wins today and by Sunday clinch the Nagoya "bassho" for his 39th tournament win, another all-time record he already holds with 38 wins. And at 32 he still has a few years to go. What a man!

If you don't like sports, there's other ways to enjoy the "real" summer that's finally here. Beat the heat by drinking "nama biiru" and eating "kakikori", go to a beach or enjoy one of the many spectacular "hanabi" fireworks. Just go early for the latter to get a seat: for instance Sumida River Hanabi, the Tokyo classic on July 29, attracts one million people!

Timo Varhama  
Tokyo, July 21, 2017   


Previous Columns

26 June 2017
"Anniversaries and Memories: Finland, Japan, USA."

19 June 2017
"Rainy Season in Japan, Political Storms in Europe"

8 June 2017
"Trump impact spreads - Japan struggles with workforce issues"

30 May 2017
"Taormina to Tokyo: Heavyweights and fashionable ladies"

"New Missiles, Diet Debates, Yet Big Business in Big Profits - Down on Ground Challenges Remain Basic and Simple"

9 May 2017
"Golden Week, Special Trains, Luxury Spending, Even North Worries Makes for Good Business"

20 April 2017
"North Korea, USA both worry Japan - Koike worry Abe and LDP even more"

5 April 2017
"Spring, Sakura and New Year Start in Japan - Commotion, Tensions Rise Around the World"

27 March 2017
"Questions Unanswered, Unasked – Lifestyle and Surveys Bring Light"

21 March 2017
"Finland in Focus: Friendship, Dictionary, Music, Food - Even Elevators?"

13 March 2017
"Uncertainty Increases Around Japan - At Home Rebuilding Uncompleted in 6 Years - Abe Popularity Takes a Hit."

3 March 2017
"Book Readers, Police Jokes, Nerdy Napoleon and Poison Scare"

24 February 2017
"Populism, Ignorance and Isolationism Leads to Mayhem and Mess"

16 February 2017
"Golf Diplomacy, Chocolate Festa and Hokkaido Deams-Come-True"

9 February 2017
"Tokyo overcoming winter, business changes, political battle and Trump threats "

2 February 2017
"Warm Feelings in Japan, Wild Winds from USA"

20 January 2017
"Ready for Rooster? It will be a wild ride!"



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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