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 AOYAMA VIEW

HOT WEATHER, HOT AIR IN POLITICS - FROM WAR ANNIVERSARY TO WHISKY IN SPACE
It's THAT time of the year again in Japan - and this time the whole world takes notice of it. Hiroshima nuclear bombing, 70 years ago today, was the start of dramatic events that led to Japan's capitulation and the final end of WW2 on August 15, next Saturday. Much has been written about how close it was that things did not go another way with the military leadership geared to continue fight to last man, woman and child, Americans ready with more nuclear bombs and Russians charging suddenly from the north. What would have been left of Japan could have been divided into communistic North and western South like Korea was. The Korean War that soon followed there between the former WW2 allies and still divides the nation and the whole world, could have been "Japan War" instead.

If the events 70 years ago should have turned that way, Japan would not have seen the vigorous rebuilding and peaceful rise to a prosperous economy and democratic society that it did from 1945 to today. It is appropriate that the Emperor's famous radio speech that magnificently changed the tide on August 14, "Japan's Longest Day" when the decision was still hanging in the air, has been made now available for all to listen on Imperial Household Agency's homepage. A new movie about the dramatic events is out, too.

Today, worries abound on another speech, namely as to what PM Abe will say on its 70th anniversary. As earlier pointed out, it is inconceivable how just about every historian, politician and commentator here and elsewhere, even in charge of other nations, have set demands as to what exact words Japan's PM should use in his forthcoming speech. In some cases, it has sounded like he should submit a draft for their review before reading it aloud. True, it will be difficult for Abe, who was personally raised to believe that Japan was not an aggressor in WW2, to come up with the right words, but I remain convinced he will do enough not to embarass Japan, its closest friends and allies or ruin the budding warm-up in relations with China. It is also appropriate that the emphasis of the speech should be on all the good that has happened during the 70 post-war years rather than apologies for what happened before it. Why pretentious theories that Japan was somehow "forced" into war still persist in some circles here, is another story.

Hundreds guilty of war crimes were trialed and sentenced to pay for their misdeeds in the Tokyo War Trials and in uncountable military tribunals where ever they were caught. For recent failure to keep orderly budget when building the National Stadium, it seems two heads rolling off is considered enough. The chairman of Japan Sport Council and the top bureaucrat at Education Ministry who rules over it, were selected as sacrificial lambs to save the Education Minister himself and veteran ex-PM Mori, the chairman of the organizing committee, both leading LDP politicians. The "Olympic Minister", a more harmless political veteran, was saved due to his delayed appointment and appeared in television unfettered telling happily he did not have a clue how the schedule would proceed from now. True, it must be difficult to estimate how long it will take to build a stadium that does not exist in planned shape and size yet. Yet, the indefatigable Mr. Mori managed already this promising IOC in Singapore that it would be ready 3 months before the opening in 2020. Such wisdom, such precision of foresight!

More than Tokyo, it is IOC who dwells in problems. The preparations here are proceeding well except for the National Stadium plan fiasco. In fact, City's own arrangements will cost only USD 3 billion - just a bit more than Central Government's last estimate for its now cancelled new main stadium plan and remarkably less than USD 18 billion total bill in London 2012. Instead, the works for Rio 2016 are badly behind schedule, just as they were for Brazil World Cup 2014. Moreover, the reports say sailors and biathlon swimmers in Rio will be wallowing in filthy waters full of debris and coli bacteria from the city affluent that runs straight to the sea uncleaned. The 2018 Winter Olympics arrangements in Korea, too, have proved so expensive that the local government there has had to ask the central government to come in rescue and pay most of the bill.

Looking further on, many democratically ruled countries and cities have ruled out Olympic bids leaving only authoritarian countries willing to bid. For the 2022 Winter Olympics IOC had to make a choice between just two equally bad alternatives, one in Kazakhstan and the other in North China, albeit nominally in Beijing. Both were criticized for their heavy pollution and repression of human rights, something that IOC license for either one would seem to condone. True that Beijing managed to cut back its pollution for the Summer Olympics 2008 by introducing temporary punitive decrees, but equally true that it has only got worse since the Olympics. Same for the repression of those not toeing the Communist party line: it has only got worse since then.

Kazakhstan had on offer at least something that you expect from Winter Olympics, namely snow, while China's location for ski events is 200 km away, has no snow and is so dry that to make it even artificially, water needs to be diverted from far away, something even less environmentally friendly. It is objectionable to many also that the place is a well-known center of world fur industry with kilometers of cages for minks, rabbits and raccoons and more than 1500 companies with 70,000 employees turning the poor creatures into fur coats. 80 percent of the European fur production is said to be exported there for low cost processing. Naturally, the local officials welcome the Olympics as an opportunity to boost their business as much as the party lords in Beijing welcome it as global acceptance for their politics. It does not suit well either with IOC's new commitment for more economic games that to get there a new airport and new high-speed train line need to be built, but certainly it suits the hosts as such giant projects will help boost their GDP figures. Meanwhile, the possibility that millions of wealthy Chinese will take up skiing after seeing the games is wetting the appetite of Western and Japanese equipment makers and raises the image of Olympics as global business, too. IOC's motivation for its choice of China that "they can count on Chinese officials' arrangements fall in with this all - no budget restraints or tax payer complaints there.

It is a pity that IOC is sinking toward the same low level as FIFA whose next two selected World Cup arrangers are Russia 2018 and Qatar 2022. To see Blatter and Putin praising each other at a FIFA event in St. Petersburg, one of the only places in the world where the Swiss chairman can safely travel without risking being extradited to USA, only added insult to the injury. That Boston, the main US candidate for the 2024 Olympics, gave up its bid last week, seemingly hurt the IOC leadership and it is now leaning heavily on the US Olympic Committee to come up with an alternative US city to keep it looking respectable in Western eyes. Hope the US will help to save the IOC from becoming another FIFA.

Following the thread of politics and sports further, the extension of US sanctions against Putin's closest circle reached already Finland with inclusion of the owner of Helsinki ice hockey stadium and Jokerit ice hockey team. The young man is a Finnish passport holder but also a family member of one of Putin's closest friends who already was on the sanction list. As Jokerit plays in the Russian ice hockey league and not in the American one, the sanction has no instant impact on Finnish ice hockey, but there is concern whether any US team or top US music acts can play at the place. As there are no equally large alternative indoor venue in Helsinki, Finnish fans could end up without seeing their favorite players and artists. With such illogical side effect from the US sanctions, I have started to wonder about their overall benefit in line with many others.

Back in Japan, the political focus is now on how long lasting the fall in popularity for PM Abe is and what consequences it might have on his agenda. For one, I am for his defense law changes and agree with comments that if there was not any cry against them from the opposition and left leaning intelligentsia, it would only serve to show they were not that important in the first place. Yet, Abe has failed to convince the majority of voters of their importance and his new efforts to explain them in more simple terms on television using cardboard models of burning houses and firefighters only made things worse. Same for his most devoted right wing supporters' demands that media outlets opposing the proposed laws should be starved by holding back advertising from private companies. This kind of talk is appalling even for the majority of Abe's own party, who worry it will do damage for their other positive agenda. The Buddhist allies Komeito are naturally even more concerned of such talk. The growing differences are starting to look like a power struggle between LDP's traditional leaders and the antagonist Prime Minister's Office. If the PM does not step back, it could well be that a new candidate opposing him will show up in the LDP leader election next month, something unthinkable just a month ago when his popularity was soaring high.

Another new worry for the PM is that the TPP trade deal seems now off as the negotiators from the 12 participating nations did not manage to come over their differences in the talks held in Hawaii last weekend. From now on, it is said, the US presidential campaigns will take over the political schedule over there with no more time and interest available for trade politics - except when it can be used as weapon against another competing candidate. With Japan ready to cave in on most agricultural issues the final stumbling block proved to be US demands for extended IP rights for drugs, movies and music as well as its demands for protection of corporate investment against any new legislation by sovereign states, something unacceptable for most nations. It actually seemed that the whole deal was designed more to protect the US Big Business than to really promote trade flows, so maybe it is just as well that TPP will not happen. Same issues and same time limit are likely to sink the similar trade initiative between USA and EU leaving the Japan-EU trade negotiations the only game in town.

The worry for Japan is that the TPP deal was supposed to make the basis for the long planned agricultural reforms and, without it, these might dry up as the powerful agricultural lobby will again raise its ugly head after having been hammered to accept reforms in exchange for other national benefits in exports. That would be a blow for Abenomics, whose claims for reforms have already proved pretty shallow on other fronts. It is clear to all of us that without reforms, the prospects for economic growth will remain limited and without economic growth the entire program and its final targets of budget balance and stop to public debt growth, will fail.

There's already a growing gap between the government's rosy projections that primary balance will be reached in 2020 with GDP growth averaging 2% per year and the projections by private economists setting Japan's potential growth rate without proper reforms to just 1,0 %, IMF recently at only 0,5%. On short term, too, it is now expected that the GDP figures for April-June quarter will show that economy slowed down from the brisk growth in January-March. Especially, the export figures have been disappointing in face of poor demand from China.

Yet, there's still plenty positive news. The hot weather over the last weeks has led to good summer sales and boosted demand for anything to cool you down from cold drinks and cold patches to air air conditioners. The growing volumes of inbound tourists add their own contribution to the domestic demand: Jan-June figure for visitors to Japan reached already 9 million, another 40 pct up from last year's record!

While the export volumes have failed to rise, the earlier big trade gap has sunk to almost zero with lower import costs for energy. This trend should continue with Brent oil price falling again below USD 50 and Iran ramping up global supplies following its nuclear deal with the Big Powers. Import volumes for oil and gas will also start to decline with the first approved nuclear restart in Kagoshima now loading up its reactor to push the button next month and other approved plants, 6 so far, bound to follow later. Meanwhile, the ultimate measure of overseas business success, the balance of accounts, reached record high and Nikkei index holds steady despite the turmoil in China. No loss of fate on Japan among foreign investors is either evident from the Toshiba fraud scandal.

Toyota, Japan's corporate flagship No.1, marginally lost its position as world volume leader to VW Group last quarter just as expected, but instead booked USD 5 billion profit record for the three months. Other car makers followed buoyed by good sales and strong currency in USA. Among the consumer electronics, Sony finally joined Panasonic in positive profits as expected leaving Sharp the only "problem child" swimming in red ink. Yet, it is a sign of times that both Sony and Sharp make their money today as part suppliers to Apple phones, not selling their own, while Panasonic is the silent battery partner to Tesla, the US electric car maker. Another megatrend is seen at Canon, who was the first Japanese company to shift its manufacturing operations from China back to Japan for lower costs and now plans to go 100% automatic in its camera production for further cost savings.

Last but not least, Suntory's special edition Yamazaki Single Malt Cherry Cask was again selected the world No.1 whisky by English "Whisky Bible". The company says now it will send a few bottles for a six month stay at the International Space Station. Recalling that Norwegians used to send their excellent Linie Aquavit with a freight boat to Australia claiming that travelling across the Equator somehow improved its taste, it makes you wonder if circling around Earth in space will impact whisky in same way.

Timo Varhama  
Tokyo, 6 August, 2015   


Previous Columns

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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