Mystery train and other unpredictable moves in geopolitics around Japan
"Mystery train, coming down the tracks" sang Elvis Presley when he was still young and fresh in Memphis, Tennessee. It was another "mystery train" that Kim Yong Un used for his surprise visit to Beijing. Bet there was no blues singers, burgers or Coke on his extravagant, heavily armored luxury carriage. Rather it was Grand Cru Bordeaux and Beouf Bourgignon, maybe lobsters and champagne, too, like when his father had when he visited Beijing on same train many years back.
It was another astute move by the Young Leader following his own manuscript that started with the surprising New Year speech "peace offer". Beijing was more than happy to be promoted to second lead role from bit players that other actors have been given in Kim's spectacle that's being played out to global audience and - more importantly – to viewers at each players' home. It was a well-calculated choice: one way or other, Xi would not just stand looking from side when Trump and Kim would set the terms for Korean future.
The three allies at the other side of the negotiation table were left flat-footed again. Firstly, the US president who's been dreaming to take the global spotlight by bringing peace to the world – or at least removing nuclear threat against his own nation. (Guess that's about the same in his vocabulary.) Vainglorious Trump must have been also upset that Xi gave even grander honors to Kim for his "unofficial" visit than what he was given at his official one. Secondly, Moon who was dreaming of reaping fame at home and favors from both Trump and Kim for being the instrument bringing the two gamecocks together. Thirdly and worst out of all, Abe-san who was played out again by others despite his claims for diplomatic skills and close relations with all. It almost seems we are back to "Japan passing".
Kim seems to have dropped Russia out, too, in his manuscript. Instead, Putin has kept his name well featured in global headlines with the hideous murder attempt of Russian asylum family in a British country town - his re-election to continue the longtime rule was not that big news in comparison. In fact, following the Beijing meeting, China's leader already proposed to Trump that for follow-up talks after Trump-Kim meet, four nations would be enough: North and South, USA and China. Not surprisingly, Xi does not expect any groundbreaking agreement from the mercurial US president, but rather sees his meeting with Kim as "introductory" to resuming the earlier long-winding talks where China would this time take the lead instead of USA. In China's view, the four original participants in the Korean war would there finally conclude the peace agreement that has been missing ever since and that would include the coveted denuclearization of Korean peninsula. To him and Kim "denuclearization" means an end to US nuclear umbrella for South Korea while "security" means withdrawal of US troops from South Korea. Against that Kim would give some concessions from his own arsenal, China none.
I don't think Trump would easily accept being dropped from his intended role as the "peacemaker" in Korea with his superior deal making skills. Neither don't think his new advisors Bolton and Pompeo have any boring, long winding talks in mind, but rather see the Trump-Kim meeting as final step before USA's "pre-emptive" strike against North. As one US commentator wrote, for these guys trade wars with friends and foes are little fun and waste of time compared to having real wars starting with Iran and North Korea.
As readers have noted, I have neither held high hopes for anything sustainable coming out of the Trump-Kim meet - if it ever even happens - but rather saw Trump's eager acceptance of Kim's invitation as another PR-move from the popularity focused US president.
This president simply don't have any clear policy on any issue - anything goes for him if it gels with his supporters and can be launched quickly to grab attention. His recent broadsides in "trade wars" are another example: just shoot big from the hip, adjust the aim later if the bullets went astray and hit bystanders instead. Main thing is that it goes down well with those who voted for him. Now with new advisors like the two above, his true instincts are "unchained" and he is free to go for the Real Thing.
Poor Abe, left out like a snowman in sunshine with all this buzzling activity while blackmailed by his "good friend" for trade concessions and under ferocious attacks at home by the opposition for favors to friends! It sure isn't fun to be Japan prime minister today.
In the Diet, loyal official's testimony temporarily saved Abe, but only led to new calls to have Mrs. Abe called up to testify what really happened. In the area of foreign diplomacy, Abe has a steep hill to climb now instead of planned media glory with travels to meet Trump and Putin and hosting trilateral Asian summit meeting in Tokyo with China and Korea, all in April-May. His calls to get a meeting with Kim have not produced any result either so far: seems Kim prefers to humiliate his long-time critic in Tokyo. He allegedly even ordered his government officials NOT to negotiate Abe's pet theme, the issue of Japanese abductees, with anybody else either. Abe-san really looks politically weak now and this does not project well for pushing important reforms through during remaining months of the ongoing parliament session to June. For us Europeans, it's important he could at least pull through the law changes necessary for ratification of the EU trade deal.
All this uncertainty in geopolitics and US trade moves has already made its mark on economic expectations. BOJ's quarterly Tankan review of business confidence took Monday its first dip in two years as big companies worry where this all will lead. Stocks have kept in decline and JPY value has kept up - as always when there is commotion. This must have cut into March 31 book closings by hundreds of billions yen, probably. Foreign investors, who have made most of the equity action recently, are retreating from Japan and Goldman Sachs, who has been very upbeat on Japan for long time, says now outlook for any stock revival is limited. If similar worries grow in US, too, they will dampen Japan further.
Looking for positive news from past week, could only find that vegetable prices that shot up to more than double in winter storms have started to come down. In contrast, it's pretty much OK with me that price of "natto" fermented beans - pretty yucki stuff - went up 20%. As for Finland here, the annual Tokyo Slush event was as successful as before with 6,000 participants again – it really seems to have stabilized its place in Japanese start-up business scene. Thanks for this also go to strong local sponsors – I hear that Recruit has now taken over from Gung Ho and Softbank – and to 600 voluntary helpers who worked day and night without salary to make it run smoothly. Another Finnish news is that the selection of Marimekko designs that Uniqlo launched last week seem to sell really well – at least in my local shop – contrary to my doubts when I saw some of them. Maybe my idea of Marimekko designs is just too old fashioned and I still don't fully appreciate how strong power the venerable Finnish brand has among Japanese ladies.
Looking for Big Money Numbers, Softbank has come up with the biggest schemes again with Son-san's announcement that his Vision Fund will launch USD 200
billion project for world's biggest-ever solar power project in Saudi Arabia. It's not just covering the sand dunes with millions of panels, but to connect them with huge batteries to store electricity for 24/7 use and a factory to build those batteries locally. Obviously, the project starts with a small step of just USD 7 billion, but the total grand scheme reflects again this visionary's big ideas to change the world: it would include a whole new city in desert that would be the world leader in his AI world. Naturally, it's all planned together with his friend and business partner Prince Mohammed, who is trying to change how the world sees his country all together. Think: in comparison US president can only sell the Prince more guns, tanks and jet planes - and dance swinging a sword.
Son's plans to make the Uber-type taxi industry globally his own – and to make a few billion dollars on the way – has taken steps forward as well. While Japan remains an open question for Uber despite Son's controlling stake,
he already got the company to give up South East Asian markets to Singapore-based Grab for 27% ownership share in the business where - as it happens - Son is the biggest owner in Grab, too. With markets neatly divided between Uber and Grab and Son's shares in upswing for both, the next step will be giant IPO for Uber next year. Meanwhile, Son has also bought his way in Didi Chuxing that dominates China market and Ola that dominates India. To secure steady income while these investments grow mature, he is now taking 24% share in Swiss Re, world's biggest re-insurer.
It's difficult to keep in mind that it was only 12 years ago that Son started his global on march by acquisition of Japan Vodafone, a bad loss maker then, on borrowed money. Many said it was a foolish move doomed to fail in competition with government-owned NTT Docomo. He's been through similar predictions at many moves since then, yet Son's schemes have got only bigger and bigger.
As one analyst wrote in baseball terms: while most Japanese businesses go for safe bunts to get runner to next base, Son hits for home run every time he gets to swing his bat. Wish there were more people like him.
Tokyo, April 6, 2018
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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.