WARM FEELINGS IN JAPAN,
WILD WINDS FROM USA
Nice new business year start for Japan's Finnish business community at FCCJ Shinnenkai party last week. It seemed everybody is full of positive expectations for the special anniversary year for Finland here and more Finnish companies are on their way. Our new Ambassador egged us up further with his positive speech promising all the support and co-operation companies need. Believe all members are looking forward to special events he lined up for end of the year when Embassy's ongoing rebuilding has been completed. For one, hope that special beer with recipe from the 300 year old Äland shipwreck makes it tto shop shelves. Maybe we have to wait some more time for Karhu beer launch predicted in last column.
Despite our happy feeling I feel obliged to focus this column one more time on the new US president and the cold winds that are picking up from Washington. Some of the wild projections in last column unfortunately have already materialized as Trump's wrecking crew started swinging hammer from its very first day. Healthcare, environment protection, trade deals, Moslems, neighbors, friends and foes were all at receiving end from the new President, who seem to have gone wild with his new power and loves to pose for tv-cameras signing his "executive orders". Some of them are rather out of reality or against accustomed norms and there might be even wilder to come. It will be tough for the conservative Republican Congress to get this lose cannon under sensible, democratic control as many expected to happen.
Take the Mexican wall as an example. With estimated cost of USD 20 billion, it certainly looks like what Trump promised to his voters, possibly the first installment in the new grand infrastructure building plan. Yet, any boost on national economy from this one is doubtful and despite the executive order to start building it, there seem to be no money, no workers nor steel material for it. The propaganda of getting Mexico pay for it has run aground of reality – the proposed import tax would hurt American business and American people more than Mexicans - and powerful conservative forces have stated their opposition to allocate any extra budget money for such big public spending. Meanwhile, US steel mills are actually running at full capacity and the booming construction industry in Texas relies on illegal aliens already now for half of its work force. In fact, the Aoyama forecast to use Chinese government companies with their own finance, material and workers looks now the most realistic solution, but that's a political anti-thesis for the Trump team.
Early feed-back from Finland suggested that my description of the real estate moguls's character, the only serious part of my last column, was too harsh and we should not judge him by his character or words but wait for what he really will do. Many foreign leaders also held their tongue: maybe some good will come out of it all, after all, for the US economy and rest of the world.
This is correct: we should simply ignore his erratic tweets and daily gripes, focus on his action and hope for the best. Unfortunately even that piles up evidence every day it will be a wild ride. The dubious minister appointments, refusal to accept there's any contradiction running a global family business in parallel with US presidency, pugnacious speech and classless behavior in the inauguration, then the first week's frenzied moves, they've all only raised concerns we will not be spared of mayhem and confusion.
The inauguration certainly looked more like a professional pugilist or show wrestler entering the cage than a serious statesman taking over the most respected and powerful leadership in the world. It seemed almost planned to put off the other half of US, who voted against him combined with thinly vailed threats to other nations, their people, companies and political leaders. The ensuing petty denial of the crowd numbers and television ratings confirmed again that narcissists don't let facts stand on their way in claims for success. Waking up his first morning in the White House to noise of even bigger demonstration crowd must have further hurt his feelings. His latest step, the sudden change in US travel rules, that was condemned around the world, was so badly prepared that it caused quite a confusion around the world airports, yet went perfectly smooth according to Trump. Trust you also noticed that nationals from the seven countries banned had never participated in US terror acts since "9-11", but some Moslem countries that did and remain IS main financiers today, were excluded. Presumably, because they are hosting ongoing Trump business.
It's still early to say how Trump's policies will fold out over four years, if there ever will be consistent ones or even full four years. There are some promising appointments in his team that might bring expertise and realism into the new government's future actions.
On other hand, it's emerging that his "spiritual advisor" Bannon, a hillbilly recluse ex-Wall Streeter, far-right extremist, racist and nationalist, seem to have gained upper hand in the Team. Taken first as kind of Goebbels or Himmler to the Leader, a grey eminence backing The Boss up, it turns out his confessed idol is Lenin, who went on to destroy all normal democratic government institutions to create the new Soviet regime. Like his idol, he is also dreaming of New Rule that will last 100 years and holds strong influence on Trump. This explains President's repeated attacks on media, Congress, secret service, other agencies and US democratic institutions, even contents of the travel ban and its execution without hearing professional advice from relevant agencies. New York Times already named him "de facto President", but to me he looks more like Rasputin tp use another reference to Russian history. The the powerful monk also had an incredible grip on Tsar's mind, who did nothing without consulting him. Bannon's appointment into National Security Council instead of top leaders of military and intelligence is certainly a worry for the US democracy and world security.
Let's still hope more nuanced views will come out once Trump government starts working properly. Advance info on new Defense Secretary's quick visit to Japan this week points to that direction. Despite his wild nick name ex-general Mattis looks like one of the more cool-headed characters in the new line up. It will be important for US image to sooth the concerns running high among US friends around the world as well as across USA, where people have never been so badly divided about their new leader. How Trump's moves will impact us outsiders also depends how well prepared we are.
In Japan, 84% of the people are worried and so are companies involved in US business, yet the corporate sector and the government are taking positively active approach to tackle any forthcoming challenge.
Abe's meeting with Trump is now scheduled to Feb 10 after UK' s May took his booked time last Friday while Abe was stuck in opening Diet's spring session and PM seem to be preparing himself well with impressive facts of apanese companies contribution to US economy, if only Trump has patience to listen. Over the years, Japanese companies have invested over USD 400 billion into USA, more than anybody else expect UK, and employ directly around 900,000 people and probably double as much indirectly. I'm sure Abe will even pledge much more to come when he meets Trump. He might even remind Trump that Japan is again his government's No.1 financier after surpassing China last year. Toyota that got on Trump's firing line for a Mexico factory plan, has not yet decided upon a totally new US plant within its USD 10 billion new investment pledge, but did announce a USD 600 million expansion at its Indiana plant. As it happens, that is VP Pence's home state.
Even if Trump threw wet towel across his face on TPP trade deal, cancelling out six years of hard negotiations between 12 nations just snapping his fingers, the ever flexible "Teflon" Abe has quickly recovered to tell Parliament that, in his new consideration, a bilateral US-Japan deal can be almost as good. After all, that's what the Boss wants – and quickly. "Of course, I will defend our five holy food items as I did with the TPP deal", he also bravely promised. I have my doubts on that. Let's see when the talks will start. It will be sooner than you think.
Flexibility on trade and other issues close to Trump's heart is part of the price Japan has to pay for continued good relations, smooth business and the ever-important security pact with USA. Happily, there seem to be some basic understanding already. The visiting Defense Minister, who spent part of his Marine career here, knows well that Japan's almost USD 2 billion pay for US armed forces for their presence here is a good deal in comparison to what US has anywhere else, yet peanuts in comparison to Japan's own defense budget that runs around USD 50 billion. The key point is to get Japan to do more on its own, not just spend money but expand its co-operative role. It's not just one way traffic either: US military is keen to acquire Japanese technologies for their weapons, too, now that arms exports became possible with Abe's law change in 2014.
Smooth business with both USA and China is important for Japan's economy as they are the two biggest export markets as well as host countries for big corporate investments over the years. EU comes out clearly No. 3 as big as it is on its own, something we need to keep in mind when trying to understand the delay in our FTA deal. It might be we will end up, after all, without our reasonably priced French cheese and instead with lots of Idaho potatoes and Wyoming beef. Just wonder who will buy those Detroit cars he keeps pushing? As for the money games, think players in New York and London move much bigger volumes than Tokyo traders, who anyway don't dance to the music from Abe's pipe. It's not a family business here.
Japan's exports did not go well last year, but happily the imports declined even more thanks to big fall in crude oil and LNG prices, so we finally managed to record an annual trade surplus, the very first during four years of Abenomics (!). Moreover, the prospects are good in USA on back of promised tax cuts, public spending and deregulation. China, too, looks again positive thanks to growing public spending on construction and infrastructure to thwart off any decline in official growth rates. Unfortunately, 2016 also registered the first full year of deflation during Abenomics area despite mega lose money from BOJ, another sign of limits to what central banks can do. Whether there will be any inflation this year is anybody's guess.
In most recent data, household spending sank again -0,3% in December while industrial production increased +0,5%. Put together, they confirm that the economy is not really on rise or decline, but rather just slipping sideways as one economist well put it last year.
The employment is at its tightest ever with 1,43 jobs on offer for every applicant across the country, even tighter than previous record year 1991 when there still were slack spots in remote areas like Okinawa and Hokkaido. Now it's tight all over and some industries are desperate to find workers, yet remarkably move for higher wages remain surprisingly slow, something difficult to understand for outsiders and traditional economists. Once again, big corporate unions are not asking for any bigger pay rises than before in spring wage negotiations this, but prefer to focus on firm job contracts.
On corporate investment front, Toyota did not only pledge USD 10 billion to new factories in USA but another USD 10 billion to hydrogen technology in next 5 years together with its new FC alliance partners Honda, Hyundai, BMW and MB from car industry and Shell, Total, Alstom and Anglo-American from other. Toyota's target is to get rid of 90% carbon dioxide emissions from its cars by 2050, something that might not be exactly in line with US new president's policies, but then again he is hardly around by the target time. This serves as another example of Japan's continued technological prowess, in case you doubted it because cheap consumer electronics in shops around the world are today dominated by Korean and Chinese products. The choice of jumping from hybrid technology directly to fuel cells skipping electric cars also lines Toyota and its partners against electric car strategies adopted by Nissan, Tesla and many Chinese car makers, for instance. You can expect a propaganda war rising up among the two camps as to which one is right.
Taiwan's Hon Hai's pledge to invest USD 7 billion for a Foxconn factory in USA was one of the rumors reported after Masayoshi Son's visit to Trump Tower to talk about his own US business plans. After all, Hon Hai CEO Gou is Son's good friend and so is China's Jack Ma, who also visited Trump to tell him he would like to establish a wide US network of small companies to supply genuine US products to his Ali Baba mega website. That might be difficult in practice but the pledge gave again great PR for both Ali Baba and Trump. Foxconn's Gou, too, knows well that having Apple phone produced even in just one factory on US soil would be a big political coup for Trump and he seeks now offers from US states as to which one could promise him the biggest public aid in construction costs and tax cuts. Analysts tell us that mass producing IPhones phones profitably in USA is practically impossible task – all parts would have to be imported from current sources and with the higher US salary costs each phone would cost USD 60-100 more – yet, famously, details and facts are never an obstacle for Trump's stories. It might be enough for Foxconn to make just a few expensive special models that selected US consumers would be prepared to pay for, then fill up the rest of the capacity with something else. With such good show, even Trump himself could upgrade from his old Android Tweet machine!
Back to Japan for one more New Year forecast realized - and a happy one for change. Ozeki Kisenosato won the January tournament – his first ever - and was promoted "yokozuna" quicker than you can say "omedetoh". It seemed the whole nation - or at least the older part of it - was overwhelmed for having again a Japanese grand champion, first time since 1997. Moreover, it looks like two of the ruling Mongolian trio have problems to stay on top and as grand champions cannot be demoted for poor show but must retire, their disappearance could boost the new Japanese star's position at the top. Yet, you can also expect Hakuho to come back with vengeance in next tournament in March. He was probably not yet fully recovered last month after staying away most of 2016.
As an old sumo fan, I do feel some reservation that Kisenosato's promotion came so quick, on account of one "basho" win only. In my early days the yokozuna candidates had to win at least two tournaments and show their mettle even in other ways before they were accepted for promotion - especially if they were gaijins. But seeing how happily the new promotion was received across the nation, I will rest my case.
We need all happiness we can get in these testing times.
Tokyo, February 2, 2017
20 January 2017
"Ready for Rooster?
It will be a wild ride!"
17 December 2016
"AOYAMA AWARDS: THE BEST AND THE WORST IN JAPAN 2016"
9 December 2016
"Finland independent with free word, good education - Japan and USA: Abe to Pearl, Son in Trump Tower"
4 December 2016
"Statistics, politics and plain bad management - difficulties to plough through it all "
24 November 2016
"TPP is dead – or is it? What comes next?"
14 November 2016
"US uproar shakes up the old world order, Korea in turmoil"
2 November 2016
"Showdown in U.S., Japan battles on"
25 October 2016
"Nobels, Narita and Niigata -
Olympics and popularity politics"
26 September 2016
"In autumn downpours, Japan's wheels are slipping"
16 September 2016
"Moomins, Metsä, Mitsubishi and missiles - business, politics and sports"
6 September 2016
"Uunivited Guest Crashes the G20 Party"
31 August 2016
"It's not Super Mario, It's Super Abe! -- And Super Japan! "
8 August 2016
"Summer holidays, heat, rush and relax, while the world keeps turning"
12 July 2016
"Fog of uncertainties ahead: Japan, Britain, China and USA, each in their own way"
24 June 2016
"UK Splits, shakes EU, even Japan"
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
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.