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 AOYAMA VIEW

BOOK READERS, POLICE JOKES, NERDY NAPOLEON AND POISON SCARE
Thanks for positive reader feedback for last week's column. Was afraid that it was on heavy side, so it was nice to hear readers appreciated the analysis of populism. We'll see where this prevailing political trend will take us this year. Probably we will face it again and again – it has such fertile seeding ground when people are fed up with the ever growing income gap as fruits of globalism are kept by ever smaller, ever richer minority. Yet, in Japan any discontent remains practically unseen, so this time focus on some business happenings, cultural changes and political challenges. However, a couple of references to Trump cannot be avoided even this time.

Thousands of "harukists" or die-hard fans of Haruki Murakami gathered last Thursday night in book stores around the country waiting for the midnight release of Japan's leading author's new book "Kishidancho Goroshi" ("Killing Commendadore"). The thankful fans cherished the special opportunity arranged by many retailers to keep open at midnight so they could get their hands on it immediately upon release. Many told afterwards they devoured part of the book in train back home and the rest through the night before going to work in the morning.

A new Murakami book is always such a big seller here and this time publisher Shinchosha decided to print out unheard 1,3 million copy first edition. That means it expects sales to rise in time toward 2 million mark, something not even Harry Potter books reached when they were hot, hot, hot. On top of that will come millions of copies of translations into other languages. Guess the fans' grumbling antipathy toward Nobel prize committee for not recognizing Murakami's talent and global popularity will keep growing. Will we see demonstrations outside Swedish Embassy? Boycott on Ikea or Volvo? Just joking, this is not China.

Million sellers are rare in Japan, but my check on book publishing data reveal the impressive width that the business commands here. Total sales of books, was JPY 785 billion (USD 7 billion) according to latest available data, only slightly less than magazines' JPY 897 billions. The number of new titles published was 78,349 which makes 213 new books per day – just try to keep up with that! There were 3700 publishers to share the cake, so it was not that much for each one of them though. No wonder, only 30 publishers employ more than 100 staff. Another result is that the average circulation is small: just 9400 copies for novels and about half of that for art/hobby/home, youth and philosophy, the 3 next biggest categories. I deplored the demise of book shops in a past column, but there are still 14,000 of them (22,000 in 1999)– almost as many as Seven-Eleven stores – to move the impressive new print flow plus stock the 940,000 old titles still available from publishers. Online sales with handy home delivery have taken big share, but there are also new interesting shop models: Book Off chain, that specializes in selling second hand books, and Tsutaya, the big video and CD rental chain, who has built new comfortable "hybrid" stores together with Starbucks and other food chains, where customers can browse their favorite books with a cup of latte or glass of wine. Community libraries are also available in every suburb and village, just like in Finland, where you can pick up your favorite books by order.

With such high level of book readership here, it's "so sad" to use Donald Trump's favorite phrase, that many in USA cannot any more read properly or calculate simple mathematics. This came out when President was pressing big business bosses in White House to "bring those jobs back to US", another favorite phrase. In response, they told him that, actually, there are over 300,000 industrial jobs unfulfilled across USA because many young people just out of school cannot comprehend the company manuals. Add to that 200,000 open jobs in construction because there's not enough people who can handle hammer, saw and screwdriver. As well, when the new "Homeland Security" boss announced his ministry will hire thousands of new border guards to stop the aliens infiltrating to USA, it was pointed out that already today the Boarder Guard has 2000 positions unfulfilled as 2 out of 3 applicants don't pass the basic test. Recalling old jokes about policemen's reading level in Finland when I was young, I refrain from commenting further.

Another remarkable news last week was Carlos Ghosn's announcement that he will give up his Nissan CEO position after 17 years in the job. It was in 1999 when the snobby 45 year old French genius arrived here commissioned to turn around Japan's No.2 car maker that was on verge on bankruptcy after five consecutive years of losses and USD 40 billion in debt for turning out unimpressive cars that cost too much to build and managed by dull directors, all from same top university, who did not know how to do better. Cutting deadwood, cancelling out traditions, slashing purchase costs and rationalizing production – 8 chassis with 16 colors instead of 24 chassis with 3 colors! – the hard working no-nonsense Napoleon did what nobody expected a "gaijin" could do here. Already following year, Nissan result turned back to profit and it has never looked back since then.

Nissan is today the most international of Japanese car makers with not only international ownership and international management, but also the highest level of international production and international parts contents. Together with its cross-owned partner Renault and now Mitsubishi Motors, the group's production is approaching the 10 million car mark that only Toyota, GM and VW have reached until now. The Japanese company faced a sudden political challenge two years ago when the protective French government increased its ownership in Renault and indirectly (theoretically) ended up also Nissan's biggest owner, however Ghosn negotiated a deal where Paris pledged not to have any say as to how the Yokohama-based company was run. Last year he negotiated a deal with Mrs. May where the new British PM promised to compensate Nissan for any business costs Brexit would cause to the big Sunderland factory who sells 70% of its production in Continental EU. In return, Ghosn pledged to go forward with continued Nissan production in UK and not transfer it to France.

With growing political challenges to business like this – today it's Trump against Nissan's big production in Mexico – it is appropriate that Ghosn will concentrate on them and on further unification of the three companies as chairman to each one of them. That he will also continue as CEO for Renault, probably indicates where he thinks the group's biggest problems are today: Europe and France.

Without Ghosn in 1999, despite Nissan's early international successes from Finland to USA, the company could have ended up another victim of "Galapagos syndrome" like Japanese consumer electronic makers, whose new creations back then stopped to become world hits like Walkman and VHS earlier, but were content to continue just rule the home market. Taken in wider view, "Galapagos" stands not just for their management's failure in international markets, but also for general inability to think out of box and come up with imaginative solutions and brave decisions or simply take risks, but instead stick to safe, well tested ideas that might lack ambition but will lead to happy retirement for the CEO and all board members.

Just think that it was exactly same year 1999 when the world's first internet phone was launched in Japan by NTT Docomo, the leading domestic carrier and its nameless domestic phone makers. The first camera phone had been launched here already two years earlier by Sharp and not soon after we had color screens on our "keitai", while Nokia users around the world were still sending black-and-white SMS text messages to each other. Yet, the Japanese failed to take the world with their advanced technology and it was left to Nokia, Samsung and Apple to take it over, polish up and turn into world dominating business. Docomo made some haphazard efforts to introduce its i-Mode in some European markets, but it did not have sufficient ambition or interest as it was happy making plenty money as No.1 in Japan.

Like the big turtles, Japanese technology companies were satisfied with life on their isolated islands. They had to completely re-invent themselves to climb up from their hole; Sony and Panasonic managed that by themselves over the years, Sharp in just six months after it was taken over by a foreign company last August. It's another testimony of old management's incompetence that the new Taiwanese leaders could cut off USD 600 million costs in such a short time!

The most shocking political news of past two weeks was surely the brazen murder of North Korean dictator's half-brother, a seemingly harmless creature who lived a quiet life in Macau with his family under China's protection. Ever since, the media has been full of speculation of how and why it was done and how easily the real perpetrators managed to escape Malaysia or still continue to hide in the North Korean Embassy with diplomatic immunity. Much less has been written about the 5000-10,000 tons of the same super powerful VX nerve gas that North Korea is said to have stocked up ready for use in case it deems it necessary or useful. When just a few drops can kill a man so quickly, you can imagine what thousands of tons can do if spread into Japan by missiles that Pyongyang has developed. While much of recent debate has focused on whether North's scientists have managed to miniature their nuclear bomb so light (500 kg?) that it can be carried by ICBM's all the way to USA or by smaller ones to Japan, it is clear the same missiles can easily carry 100-200 kg VX gas to anywhere as well. To shoot the poison across the border to Seoul with its 10 million population just 30 km off DMZ, North does not need even missiles; it can reach there with simple artillery fire from its hundreds of cannons hidden in fortified positions just a few kilometers behind the border. In addition to nerve gas, it is said North military is well stocked with many types of biological weapons like anthrax and bubonic plague. The missiles to Tokyo take just 8 minutes and grenades to Seoul can start flying in thousands in a flash. Even one kilo of poison in each and...

No wonder South Korea and Japan are keen to develop their anti-missile defense even if some citizens still continue dreaming pacifist, friendly policies are enough to protect their countries. Yet, big brother China is not happy with any defense capacity build-up or sign of increasing co-operation with USA as such moves weaken its dominant power position in the region. As always, Beijing is prepared to use its commercial power as an extension of military: it started last year curbing Korean business with limiting Korean popular culture exposure in China– tv-dramas, boy band concerts etc – as well as cutting back on its own tourists to Korea. Now it is ramping up the action by blocking a billion dollar construction project by Lotte Group and urging for consumer boycott against Korean products. Even cutting out diplomatic relations should be considered, say the official party media, if Korea installs missile defense.

Most of Beijing anger is this time directed towards Seoul and not Tokyo; bullies always select the victim that looks weaker. Korea's political confusion sure makes it look clueless today: the court decision on president's impeachment is still a week or two off but the opposition forces already want to impeach her temporary stand-in, the Prime Minister, too. Samsung CEO was paraded in court for indictment this week in handcuffs and rope around him. It's all like a nightmare fantasy.

China has neither kindly refrained from testing President Trump's promises and policies as I claimed in last column. While the Prez has been busy with his Tweets about Oscars and what have you, China has quietly built bomb proof bunkers for missiles on its South China island bases in addition to earlier radars, anti-aircraft guns and other defensive armament. With missiles China can control the whole vast area and prevent any intrusion by US Navy or Air Force. It is now practically impossible for Tillerson and Trump to deliver on their boasts to challenge China's domination there, another populist fallacy to swoon US voters. In fact, since Tillerson's swearing in, we haven't heard anything from the powerful US Secretary of State. Is he focusing on new oil deals for Exxon or already on his way out after realizing he has been rendered powerless by Trump's Inner Circle?

Maybe Trump's promise to build bigger nuclear weapon arsenal and ask Congress to add USD 54 billion to next defense budget was a response to China's challenge? It's definitely "I'm bigger and better" and "America First" again in words and numbers and feeds a mighty industry, whose shares shot further up in response. The increase idea alone is more than Japan's total defense spending, world's fourth highest behind USA, China and Russia and about same as UK, No.1 in Europe. The US military spending stands in a class of its own and Trump's increase, if realized, would bring the 2018 total to USD 603 billion, more than next 7 countries put together. "When I was young, we won all the wars. Now we just keep losing. But I will put a stop on that", Trump claimed in another spasm of fallacy. As we all know, the last war that US won ended up in Japan capitulation on board USS Missouri in Tokyo Bay before Trump was born. Since then, Korean and Vietnam wars did not go well at all for US and the ones started in Iraq and Afghanistan 15 years ago drag on without any end in sight. Moreover, the real wars of people's minds are fought today with "soft power", not with weapons, and taking that much money out from US aid to foreign countries to feed arm industry, like Trump plans, will only play into hands of USA's opponents, just like scrapping the TPP deal.

Unlike Trump's ideas for 2018, Japan's FY2017 budget totaling JPY 97 trillion (USD 900 billion), that passed the Lower House this week, does not offer anything much new. Sure, the defense money is slightly up again to accommodate for expensive equipment, but spending on social security, medical care and pensions, remains 6 times bigger and up even more, a central element of the budget that takes about 1/3 of total. The second biggest item, infamously, is debt service that takes about 1/4 of the total.

While the budget is now practically through – it will pass the Upper House automatically within 30 days in time for FY2017 start – the embarrassing scandal with a weird, far-right kindergarten in Osaka keeps pestering the Prime Minister. It surely is strange how a school, who teaches children memorize ancient patriotic pledges, despise Chinese and Koreans and spread racist hate speech leaflets, would get to buy public land worth almost USD 1 million for new building practically free of charge. As it also happens that the school owner is well-known local member of Nippon Kaigi, one of Abe's main support groups, that the school was supposed to be named "Shinzo Abe Memorial School" and Mrs. Abe was its honorary chairman, it's no wonder Prime Minister has had hard time to explain in Parliament that he has nothing to do with it. As grilling continued intensively, it also turned out PM had made a sudden trip to Osaka just one day before the land purchase and the officials there have mysteriously "lost" the papers used for evaluating the price and "cleaning up" the soil that was claimed to have been tainted.

Let's see how "Teflon" Abe will clear the opposition fire in this matter and how much damage the scandal will do to his super high popularity. his super high popularity. Wisecrackers already call it "Akheed" combining Mrs. Abe's first name Akie and Lockheed scandal that fell Kakuei Tanaka, the highflying outright populist PM in the 70fs go-go years. Maybe Abe was pondering on this when he took off early from office last Friday to meditate in a temple as his contribution to "Premium Friday" campaign, another widely publicized, but practically useless government effort to get citizens work less and spend more. Despite claims that it is supported by Big Business and will increase GDP 0,6% or something of the like, interviews with wider corporate sector say only 2,5% of Japanese companies consider ever introducing such scheme.

Knocking off at 3 pm even one Friday a month remains a dream for most Japanese workers. In Finland, especially summer time, it is practically impossible to find people in their offices any Friday that time.

Timo Varhama  
Tokyo, March 3, 2016   


Previous Columns

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!"

2016

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"

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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