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 AOYAMA VIEW

Tokyo Great City, Japan hmmm...Colorful People
Listening to Tokyo Governor Mazusoe's high spirited presentation at Foreign Chambers' luncheon last week was a good reminder again what a great city we live in. When you are writing about Japan economy, business, politics and society, you easily end up picking up on negative points and forget to highlight the positives. So let me remind all readers again that this city of 9 million people with budget bigger than Sweden state's is such a great place to live in. Last year, after years in World Top Ten, Tokyo was voted "The World's No.1 Livable City" by Monocle life style magazine and Financial Times nominated it the No.1 Mega City in Asia Pacific. As Mazusoe-san reminded us, Tokyo has more Michelin Guide three star restaurants than Paris and much better safety and environmental record to boot with. It has impeccable public transport, good health care, plenty culture, international schools, good flight connections and easiness to do business next to "world business city" Singapore. Tokyo is targeting to be even better next year in the last category when it will take only 4 days to establish a new company in City's new multilingual one-stop service office instead of today's runaround for different licenses for 20 days.

More goodies are on the way by 2020 Olympics, promised the internationally minded Governor, who spent years in Paris and Geneve as academic followed by professorship in Todai before entering national politics in the Diet and as Health Minister, then elected Tokyo City leader. With this background and his uplifting presentation all in English, Mazusoe-san is such a fresh breath in Japanese politics and would be a waste in the usual inward looking party power games. He had a spirit of good salesman, too, and was not shy to emphasize that, in contrast to many negative report in media, all City's Olympic arrangements are in schedule and it was only the new National Stadium, that is being built by the central government, not by Tokyo City, that has been delayed.

Incidentally, on same day, we had Finland-Japan Culture Society's annual Gala Dinner Concert with modern concert music by composers like Salonen, Saarioja and Nordgren played by seasoned Japanese musicians, some with traditional instruments like koto, shamisen and sakuhachi. Princess Takamado graced again our black tie event with her presence as did Emperor's sister Madame Shimazu and the wonderful Meiji Kinenkan offered its delicious, inventive kaiseki selection. The sake was donated by Meiji Jingu shrine and Finland friends had arrived all the way from Fukuoka, Sendai and Sapporo. I am always impressed by the special appreciation felt for Finland across this country and again admired chairman Matsudaira's relentless effort to organize it all for Finnish culture. Such groundwork extending from grass root level to highest spheres of the society by an Imperial family member reinforce the great base for our Finnish business efforts here.


As our Chamber's Annual General Meeting this week is commented elsewhere in FCCJ Bulletin I go to comments on news, twists and turns in Japan over the past two weeks. There's again no lack of them. The most colorful case is Hirotaka Ototake, the bright young man born without hands or legs, yet living a perfectly normal life, who became a national idol with his book "No One's Perfect". Looking for "perfect" candidates to fit Abe's mantra about "society where everyone can shine" LDP asked him to be one of its candidates for election to Upper House this summer only to be stymied by weekly magazines' report that Ototake-san was not THAT perfect husband, but had an extra marital affair including a romantic trip to Paris. This was quite a loss of face for the government party coming soon after another young LDP "exemplary husband", who insisted on taking father leave, something unheard in the parliament, was caught having one night affair with a model when wife was alone in hospital. However, in Ototake's case, we were all bowled over even more when, instead of trying to dispute it, he told the press that the Paris trip was not his only love affair, but, in fact, he had had already five lovers during his marriage! When wife even apologized in public that "it was all partly her fault", the furor among women voters was flowing over all limits.

I probably risk my reputation, but must say that as a man, I am truly impressed that such heavily handicapped man can have such attraction to women. Just think that he cannot even dress or undress himself not to talk about climbing into bed or going to toilet! Think it's a pity that we won't see him rolled in to the Diet hall in his wheelchair to debate child rearing benefits or farm imports with other MP's, some of them seemingly as handicapped in intellectual department as he is in physical. Instead we might end up seeing there another new LDP find, who met party ideas for "perfect candidate" in several departments: pretty female, ex-pop idol, single parent, has handicapped child, is home from Okinawa (tick each box), but has no previous experience or public show of interest to record for society's concerns (no need tick here).

I am always impressed by party talent scouts new candidate search, but much less by resorting to old crooks like Muneo Suzuki that LDP has decided to use in Hokkaido. Often referred as "Hokkaido Emperor" or just Muneo, he was ejected from the parliament and party as well as stripped of his civil rights for gross bribes and political power sales 25 years ago, yet remains immensely popular in his home constituency. As he cannot stand for election by himself, Muneo is using his daughter as stooge and continue to sell his services. Today a Lower House member for opposition DPJ, she will now jump wagon to LDP to deliver crucial votes in next election there. What the party leader Abe paid for this service to father Muneo remains unknown.

In business, the biggest news last week was that Taiwan's Hon Hai finally confirmed its deal to take over Sharp as expected after one month's further wrangling that followed Sharp's last minute admittance it carried USD 2 billion worth of potential liabilities in its books. As a shrewd businessman, CEO Terry Gou waited for the truth to come out, the share price fall further and Sharp's financial situation tighten up at the approaching book closing to negotiate better terms for his company. The final price for the agreed shares turned one billion USD cheaper than the original USD 4,5 billion and more money was saved renegotiating the loans from Mizuho and Tokyo Mitsubishi to lower terms to suit well-to-do Hon Hai instead of buying them out. With year-end approaching, Sharp admitted it will book over USD 2 billion loss for FY2015 instead of small profit it had forecasted before. Following losses already amounting to USD 10 billion over past four years, the company would have probably been denied further financing from the banks this month without the Hon Hai take over.

This was a businesslike end to the colorful drama that marks another end to the period when Japanese electronics industry giants ruled the world - and beginning of new period of Asian cross-border co-operation between the best each in their own way. As experts have pointed out, the new Sharp is a "marriage in heaven" between Hon Hai's global mass market expertise and Sharp's otherwise isolated technological prowess. However, it will not be easy for Terry Gou to turn the ailing Osaka company financially around keeping in mind his commitment not to resort to major "risutora", ie mass firings and head cuts like any Western owner would surely do.

Another sign of the changing times in Japan - from industrial giant to consumer service society - was recorded almost same day when the new Tokyu Ginza Plaza opened up in the Sukiyabashi corner where Toshiba's head office used to be. After spending JPY 180 million (USD 1,5 billion) on rebuilding the place, Tokyu Group waits 10 million shoppers per year to its 125 high-end stores and restaurants and expect them spend JPY 33 billion (USD 3 billion). A central feature will be the big tax-free store to be operated by Korea's Lotte Group selling jewelry, luxury watches and cosmetics that are expected to make almost half of the Plaza's total turnover. It's another sign of new times to co-operate with a foreign retailer and count on foreign tourists as long term customer base. So is the news that outbound Japanese travelers, too, can visit the big shop with wide product offerings.

The new Matsuzakaya department store close to the actual Ginza crossing with 6 stories of underground parking big enough to take tourist buses will take another 2-3 years to complete, J-Front chairman Okuda told me at the Gala Concert, and so will the original Tokyu Plaza close to Shibuya station, that has now been torn fully down. Even more than Ginza, the whole Shibuya station area is in a gigantic rebuilding process that will take more than this decade to complete. It is difficult to imagine anywhere else that one private company is handling such big transformation of a major suburb, but to get a grip what Tokyu can do, just go check out how it has changed Futakotamagawa, a suburb on Denentoshi line, one of many commuter connections it runs in West Tokyo. It helps when you own all the land around them as well as the construction company, who does it all.

Reflecting above, last week's media reports of BOJ's latest Tankan survey focusing on big manufacturers' business sentiment now lowest in 3 years, missed the point that the sentiment among big non-manufacturers - ie. service sector - remains high at +22, only slightly down for the first time in 1,5 years. To paraphrase Mark Twain, the news of Japan's economic demise are again exaggerated and premature. Instead, it's a big structural change that is going on here. It was also telling that the manufacturers' main reason for negativism was the slowdown in emerging markets, especially China, while the non-manufacturers said that their view was moderated by slight slowdown in overseas visitors spending spree, not by any gloom and doom among domestic consumers.

Yet, both are good enough reasons to add to PM's list why he will not raise the sales tax next year as planned.

One of Abenomics' better achievements came to realization on April 1 when the long planned liberalization of the consumer electricity market took effect. Instead of just fixed rate from the one and only monopoly power utility in their region, the 80 million Japanese households can now choose between 260 suppliers offering better prices and bonuses. It is said that 80 pct of the consumers are considering to change to new suppliers at this first ever opportunity, so fed up they have been on the monopolies' haughty dictatorial policies. Yet, the new offerings are often confusing as many of them are not real power producers, but purchase their power from new producers or even old monopolies and just package it together with their own products. So you can now pay your electricity bill cheaper together with your mobile phone bill (Softbank) or get discount at your petrol station (Eneos) or for your groceries (Tokyu). Among the "real" producers taking up the competition with the regional monopolies you will find other regionals like Kansai Power trying to penetrate the lucrative Tokyo market, non-electricity power companies like Tokyo Gas or trading companies like Marubeni, who owns 6 million gigawatts of small independent power plants and Mitsubishi, who owns Lawson convenience store chain, an ubiqituos outlet to pay your bill together with some snacks, baseball tickets and ATM banking. It remains to be seen how the electricity business will really turn out.

In contrast to the big step forward in electricity retail, the past week saw more setbacks for government in the nuclear business area. Firstly, another nuclear reactor restart cleared by the safety officials, Shikoku Power's Iikata plant No.1, did not start, after all.
This time it was not some activists in a neighboring prefecture who challenged the officials and locals by obtaining junction in their own court like they did to stop the restarted reactors at Kansai Power's Takahama, Fukui prefecture plant, but the company itself, who deemed that, despite safety clearance, it was not commercially viable to start the old small reactor (just 560,000 kw from 1977) as its 40 year life time according to rules was approaching soon anyway. Instead, Shikoku Power will focus to get everything right in NRA's 50 point check list for the plant's No.3 reactor with 890,000 kw output and longer life time left (started 1994).

As for the Takahama case, it is reported that Kansai Power is considering to counter sue the complainants in Shiga prefecture for big business loss as without nuclear power it cannot meet the lower prices from new competitors and will probably lose big number of its customers. Meanwhile, another activist court challenge against Kyushu Power's Sendai plant in Kagoshima prefecture was rejected in Fukuoka High Court. As said before, I think it is highly inappropriate that such important issue as nuclear safety has been taken from democratic process and technical experts into hands of local judges who can only rely on its legal aspects.

Elsewhere in the restart front, Chubu Power has just completed a 22 meter high, 1,6 km long seas wall against potential tsunami at its Hamaoka, Shizuoka plant at cost of JPY 400 billion (USD 3,6 billion) requested by safety officials. As readers might remember, Hamaoka was the first plant to be closed immediately after the Fukushima Dai-Ichi accident as it was considered the most vulnerable in Japan due to its location right at Pacific Ocean beach line. Chubu started to build the requested wall soon after that and is now after 4 years asking NRA to come and check that it's safe for restart. The problem is that in the meanwhile, it was found that the plant sits on a potential quake fault line and the safety checks focus first on whether that alone will prohibit the plant's start. Just think it could end up all the work, money and time wasted!

At the Fukushima Dai-Ichi another wall, namely the long sought hi-tech underground ice wall to prevent the polluted water leaks, 1,5 km long and 30 meters deep, has been completed, too, and is now being switched on. This one, too, took years to build and cost billions, yet nobody is sure whether it will work. Nobody has either told us what are its operation and maintenance costs. It reminds me of the old saying: "If there is a quick, easy and economical way (like pouring concrete in the ground in this case) and a difficult and expensive way, the Japanese always chose the latter."

To show that the comedy of nuclear mishaps is not limited to Japan, the two (!) special ships that Japan commissioned from UK to carry 235 kg spent uranium to USA as requested by President Obama at Nuclear Safety Conference in 2012 were denied access to the dumping site in South Carolina by the local governor just as Obama was holding court for world leaders in a repeat conference in Washington. The matter is being settled between US federal and local officials so that, hopefully, this expensive PR exercise can be completed and important faces saved. Yet, it has little practical impact on Japan's 5 tons of holdings of similar dangerous material that can be used to make atomic bombs.

In parliament, the FY2016 national budget passed in schedule for the new financial year and the focus shifted immediately on possible new extra budget for next three months to boost growth and votes in the July Upper House elections. According the latest news MOF will try to frontload most of the public spending money in the budget - including Tohoku rebuilding - to the first half year to September, where after a new supplementary spending budget might take over.

Deliberations on the TPP trade deal also started in the Parliament, a futile exercise now that all US presidential candidates found opposing it one of the main topics in their campaigns. Also the new defense laws that government parties pushed through last autumn against noisy public opposition, took effect. Yet, it looks like SDF won't be going off to start wars in faraway places anytime soon as feared by protestors last year because it is simply not prepared for that with suitable equipment and training. So, the biggest change will be that the SDF caterpillar drivers in South Sudan UN mission may now strap a pistol on their belts and defend even their UN mates from other countries in case of terrorist attack.

In fact, it took a long time before SDF finally managed to open up a new radar position at Yonaguni, the furthermost island in Okinawa chain that will help to keep track on Chinese Navy and Air Force movements further out than before. Unexpectedly, even this was met with noisy protest from China. Japan Coast Guard also got 10 new 1500 ton frigates to patrol the Okinawa waters so that the re-enforcements that have been deployed from all over Japan to counter continuous encroachment by Chinese ships, can return to fulfill their duties in their original areas that were left totally empty for the past four years. The new amphibious SDF marine unit planned to reinforce SDF's defense of the Southwest islands remain still some time away from materialization.

Always looking for positive news, but lacking any to report, Prime Minister came up with a dream of his own, namely long term tourist target. Following 20 million inbound visitors to Japan already last year, five years ahead the original target, and talks that then 30 million could be achievable by 2020, the government announced that the 2020 target would be instead 40 million visitors and this would be increased even to 60 million by 2030. Bureaucrats and politicians managed to even project that each of these tourist would spend year by year more than before: when the 20 million last year spent JPY 3,5 trillion, the 40 million in 2040 will spend JPY 8 trillion and the 60 million in 2030 will spend JPY 15 trillion. Good work, it's all in the bag now, boys.

The reality is that Tokyo's capacity for accommodation and transport is pretty well stretched already now with hotels priced up and fully booked ahead, local commuter trains full even day time, the two airports working tight schedule and passport queues taking up average 40 minutes. It is difficult to think Japan remains an attractive destination for growing mass tourism without solving such challenges. Sure, diverting the flows to destinations outside capital and getting them to enter in local ports there is a possibility and there is a growing interest to such places, but it is hard to think that it would support such numbers. The limited capacity for hospitality and foreign language service in small towns would find it also hard to handle much bigger numbers. Apart from Tokyo, other big cities like Kyoto, Osaka and Sapporo are already working at high capacity level.

In this respect, Finnair's decision to start direct flight to Fukuoka is a healthy reminder that not all business is based on inbound tourist flows but also outbound Japanese travelers. While it's hard to believe that Finnish and European tourists would fill the Fukuoka planes just for the new direct access to Kyushu island as culturally interesting as it is, there's little doubt that the new offering is excellent for Kyushu's 9 million people and big industries, who have been forced to travel first to Tokyo or Osaka for their international access to Europe.

Let's get back on the line in two weeks' time after the Fukuoka maiden flight and listening what the visiting Finnair CEO has to tell us.

Timo Varhama  
Tokyo, 7 April, 2016   


Previous Columns

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



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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