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 AOYAMA VIEW

 It's "smile time" in politics, Olympics, economics and business

It's been smiles all over in politics last weeks. Sauli Niinisto got re-elected Finland president with 62% of votes in the first round, unprecendented in the multiparty country's modern history. Next week the newly elected president attended the birth of his expected child, another first for sitting president.

Here Shinzo Abe decided to go to Korea's Olympics despite opposing voices from the right side of his own party and also said he resists demands for radical changes in Constitution from the same cohorts. A man of reason – and "real politik"! His warm up act with China took another step forward, too, with Foreign Minister Taro Kono's visit to Beijing: a trilateral summit meeting with China and Korea leaders this year in Tokyo was confirmed. Kono-san's "smiley" selfie with the notoriously sour spokeswoman of China's Foreign Ministry once again showed his talent for new style.

Unexpectedly, there were critical voices for that, too, from you-know-where.

In Korea, North women athletes arrived to Olympic Village in purple fur coats, high heel boots and black stockings creating huge media attention, just as calculated. "It's not just Olympic peace, but peace for the whole world!", gushed an excited South minister. Men's overcoats were blue, but also decorated with black mink - a common fashion in North, I guess. Happily men didn't wear pantyhose, though. Can't wait for the 230 cheerleaders! Maybe there will be some sports, too. Heating in sleeping quarters would be nice as well, tweeted a Finnish athlete from there.

Even Donald Trump turned on a smile campaign: he's now all for unifying the nation, protecting the US migrant children and ready to join back in Paris climate deal, even in the dreaded TPP trade deal started up by his nemesis Obama and finished last month without USA under Japan's leadership. TPP 11, as it's called now, covers only 15% of the world economy, but combined with Japan-EU deal last year, the two send a clear message to US government that the world is moving on without them if they want to isolate themselves. Trump says he prefers bilateral trade deals, but can't think of any country who wants to wrestle with a 400 pound agressive gorilla one-on-one. Even Japan politely refused the invitation to such pas-de-deux and sent US trade officials here last week empty handed back home. Next US envoy will be Vice President Pence who will drop in this week for 3 days (!) before atttending the Olympic opening ceremony. Guess he will have his trusted Bible with him to convince the pagans here.

Both trade deals are victories to Abe's foreign policy: Japan has never taken such active initiative in world trade negotiations. Same goes for changing tack to get closer with China, even if many obstacles remain on the way. Hope he can get close to Korea's new leader, too, once the Olympic fever is over, North returns to its naughty ways and Koreans get their feet back on the ground. Abe also held a full hour long telephone conference with the US President to assure again that both remain tightly on the same page despite Kim's recent smile campaign. With Trump, Abe put his bets in early on before anybody else and, so far, that has proved a win for Japan. Hope his hold will continue.

Plenty smile in economic news, too. Robust exports brought Japan a sizeable trade surplus in 2017 for second year in row. USA and China were the biggest customers on roughly equal footing followed by Europe, yet the surplus came all from US as China and EU both managed to export more to Japan than their imports. Proves again that offering good products at right price is better than simplistic political pressure. The global demand for Japanese products is expected to continue, yet the rising costs for energy imports are cutting into the surplus again. Corporate profits are hitting another record year and the US corporate tax cut is said to add billions more to the bottom line of Japanese companies operating there. Honda already announced its FY2017 profits will hit JPY 1 trillion (USD 9 billion), an all-time record. Three out of four big companies expect all will continue well this year, too. Instead, 2019 is overshadowed by the projected consumption tax hike.

In GDP terms – an increasingly criticized measurement – last year probably saw 1.8% growth and private forecasters say growth will stay this year at 1.7%, not so much behind estimates for EU at 2.2% and USA 2.7%. (Finland is running ahead of all at 3%.) Adding to strong exports and stable big private consumption, corporate investments are waking up with Oct-Nov machinery orders rising unexpectedly to highest since 2008. Especially transport and postal services were ordering more trucks and computers to handle rising volumes of parcels from online trade. Numerous new hotels, restaurants and shops are also opening to serve rising crowds of tourists that reached already 28 million last year. Their spending rose to USD 40 billion, not a small addition to the overall growth.

In business news, all Finns here cheered the news that Uniqlo will introduce a selection of Marimekko clothes into its spring offerings in March. The leading "fast fashion" retailer has operated with many other European designs before and it will be interesting to see whether Marimekko's bright colors and strong patterns go down with Japanese consumers' taste for clothes as well as its canvas bags and interior designs have done. Uniqlo itself is doing well again with last quarter profit doubled up and – for the first time – more than 50% of it coming from overseas operations.

Softbank is planning to raise JPY 2 trillion (USD 18 billion) by listing its telecom operation – whether it is to lower its USD 100 billion debt load or to make more new investments remains unclear. Mobile telecom's high prices here make for good business, but making the actual phones is coming to its end as much as in Finland. Fujitsu finally managed to find a buyer for its phone making unit leaving Sony (former Ericsson) the last man standing out of Japan's once proud phone technology. Some of us are old enough to recall time when Japan was leading the world with color display and email function when others were still sending black-and-white text messages. Now it's into 5G network technology: after years of testing NTT Docomo ordered building of its 5G network from our own reborn Nokia. It will be probably the world's first when ready in 2020. Part of Tokyo's Olympic drive that, too.

It's not that Japan isn't a technology and science leader anymore, it's just that its focus has changed away from consumer gadgets that can be made cheaper in China. Sony is a good example: the old television and audio maker has made a full turnaround from a 2012 lossmaker with complete restructure and massive investment into state-of-the-art image sensors, network services and game consoles. Despite taking one more massive USD 1 billion write-down in its Hollywood movie business, Sony just upped its FY2017 profit forecast to USD 6.5 billion, its highest ever.

Not that well known, Japan is big in space, too. Space agency JAXA used its light and economical Epsilon 3 rocket last month to launch into orbit new Asnaro 2 radar satellite developed by NEC that can identify objects as small as 1 meter wide on the ground, even at night and through clouds. Bringing the launch costs down is a business target in itself in order for Japan to be able to compete with American, European, Russian and Indian launch services. Another step in that direction came one week later, when JAXA shot up a 3 kg minisatellite developed by university amateurs using SS-520, the smallest ever space rocket just 9,5 metres long and 50 cm in diameter or "size of a telephone pole".

In medical field, too, Japan stands at practical forefront: a team of scientists led by chemistry Nobel winner Koichi Tanaka announced last week a new, simple and affordable blood test to diagnose Alzheimer disease based on his spectrometry technology to substitute the old painful and expensive tests using spinal fluids taken by long needles. Good news for all of us appproaching that age!

Another example of change in focus: a former semiconductor plant in Yamanashi made a fresh business start as local winery using its liquefied nitrogen gas that once protected silicon wafers from oxygen to prevent grape juice from oxidiation. It might have a long way to go to reach Chateau Latour level in quality and price, but Suntory whisky seem to have already done it: a bottle of 50 year old Yamazaki, a limited series launched in 2011 priced at JPY 1 million, was resold last week at JPY 32 million (USD 300,000) at Sotheby's Hong Kong.

It's not just hard business, it's also Japan's soft power reach. Was surprised to see last week pictures from my old home town Lahti doing a national anime and cosplay festival in its Sibelius Hall. Wondered what "Janne" might have thought about it, then remembered that the redbrick building was originally part of glass factory that was taken over by British giant Pilkington Glass that, in turn, was devoured by even bigger giant Asahi Glass. It was then closed and redesigned for culture. If they play music, classical or pop, in an old glass factory, why not do anime carnival as well?

Equally surprised to read that half of the Top 10 selling novels in Shanghai's biggest book store last month were by Japanese writers like Haruki Murakami, Keigo Higashino, Miyuki Miyabe and (half-British) Kazuo Ishiguro. As well, Japanese mobile game called "Travelling Frog" was the top-downloaded app in China last month. Chinese consumers know what they want and today they like Japan.

In contrast, even strongest orders from president Xi cannot develop goodwill for China, if the country continues its rough and raw politics. Last week its agents seized again (!) Gui Minhai, a Hong Kong bookseller and Swedish national, just released from his first secret captivity in October, in front of two Swedish diplomats riding on train with him. With China's hard money power, it must be difficult for Sweden to do much to help its own citizen, even if kidnapped from alledgedly self-governing separate city. Wonder what impact it would have for big Chinese investment plans in Finland, if Finnish citizens would disappear same way.

It's definitely safer to travel trains in Japan. The biggest risk today is that, packed like sardines there, you catch a flu from the ongoing epidemy. Almost 3 million people were seeing doctor for the virus last week, several of my friends and business contacts included. Urge all readers to be careful and put the mask on in train as bad as it looks!

Timo Varhama  
Tokyo, February 4, 2018  


Previous Columns

23 January 2018
"Moomin crisis, panda frenzy and Olympics turned into political farce"

12 January 2018
"Heisei 30 looks good: share prices soar, PM rides high "

20 December 2017
"Look back at 2017: commotion around Japan, but steady and safe here"

11 December 2017
"Missiles, footballers and fishermen from North - Big spending on child care to get more mothers working"

28 November 2017
"Foolish things sell in retail, but sports are to be serious"

20 November 2017
"Making China Great - with Gaffes, Platitudes and Bullying"

10 November 2017
"Good news week: Finland business grows, EU trade deal gets cleared, Nikkei hits new heights and Trump visit goes smoothly"

20 November 2017
"Making China Great - with Gaffes, Platitudes and Bullying"

1 November 2017
"Japan: Endless Discovery"

21 October 2017
"Power play in Japan and elsewhere - some potentially serious, some not"

10 October 2017
"Abe's useless snap election sparks big changes he did not count on"

26 September 2017
"North Korea boost Abe popularity - opportunity to extend his rule"

7 September 2017
"Kims'allah, Japan is OK and doing well"

28 August 2017
"From North Korea's missiles to Turku Terror and US Navy Mishaps"

17 August 2017
"Raining cats and dogs, missiles and threats, but strong sunshine in economy"

27 July 2017
"Forests, floods, fish and consumer prices - stories too good and data too bad to be true"

21 July 2017
"From Cool Finland to Hot Tokyo: A Round-Up of Recent Happenings"

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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