UNCERTAINTY INCREASES AROUND JAPAN
- AT HOME REBUILDING UNCOMPLETED IN 6 YEARS - ABE POPULARITY TAKES A HIT
The geopolitical topography around Japan has shaken quite a bit over past two weeks. Just as the winds from Washington softened for a while, we got a shocker from North Korea, South took a new step deeper into confusion and China heated up more under collar. For Abe-san, the North's missiles provided a handy escape from the school scandal that kept haunting him – no need to invent any absurd claims of his own to divert attention like The Donald. Like him, PM managed to hail Tohoku's "steady recovery" in his annual speech with a straight face. There's other political play, business moves and wonders of nature and human behavior to talk about, too. Too much to fit into one column.
Just when we talked about North's poison stocks, nuclear bombs and its missiles capable to sling them to Japan, the Young Leader surprised us with a new show. Flying "in beautiful formation like aerobatic team" to quote his words, four extended range Scud's flew 1000 km and landed in Japan waters scaring fishing trawlers out on the sea. North's state media boasted it was a simulated mass attack on a US base here and analysts said the presumed target was Iwakuni air base close to Hiroshima, where US just deployed a squadron of new F-35 fighter-bombers to be used against North in case of hostilities. It must be an eerie feeling for 15,000 Americans and Japanese working in the base to hear they are target for a nuclear attack, even more so for 1,2 million residents in the city once destroyed by atomic bomb and and finally acknowledged by US president visit last year.
That North can now shoot a big number of missiles to Japan completely unpredicted off hidden mobile launchers is unpleasant news for Japan's defense planners. The current number of land-based Patriot and ship-based Aegis missiles can probably shoot down one or two approaching projectiles, but not stop mass attack with 4 or even 32 like experts say North can now launch simultaneously. This will put new speed to getting better defense weapons in bigger numbers and even then odds are poor. No wonder, some politicians dared to speak out what has been "unspeakable" until now: that Japan should have a strike capability of its own to prevent any missile launch if known in advance.
All Japan's defense rules and weapon systems are purely defensive to strike back after being attacked first and for traditionalists talking about pre-emptive strike is sacrilege and crime against the pacifistic Constitution. For more practical people including myself it's always been only question of time before that "monster" must come out of the bag. All other countries, even equally defensive Finland, have today missiles that can hit targets hundreds of kilometers away, so why only Japan should not have them? With better missile defense, Japan could also better protect its outlying islands against sudden invasions.
In practice, any strike against North would be impossible as it should have to be so devastating that it would not leave Northern forces with any capability to strike back. Only USA - and Russia and China - has big enough arsenal to wipe out the whole country, yet I don't think even Donald Trump would have guts for such mass murder. And that is exactly where North's philosophy is based: to have credible threat that keeps any attack away until its missiles reach US continent and force Washington to accept it as equal opponent for bilateral talks on "peace". No need to include unnecessary outsiders like China, Japan and South nor hear any more unrealistic demands of denuclearization as until now, but to "make a deal" between equals. As years of condemnations and sanctions have not shown any impact, the worry now is that the impulsive US president could execute some sudden military move against North to promote his own image which then would antagonize Kim to strike back.
It would be Japan and South at the receiving end of his ire as North's weapons do not yet reach USA itself. US bases here might be the primary targets, but they are all located amidst civilian areas. Apart from Iwakuni, Sasebo and Okinawa, we have Yokosuka, the biggest US Navy base outside America, and Yokota, the USAF command center, both close to Tokyo and Yokohama tightly packed with 30 million residents.
While all above hardly have any immediate impact on business, China's violent reaction against South Korean business does and so does the utter confusion that only got deeper in Seoul when Korean Supreme Court confirmed Parliament's decision to boot president Park out of office. New national leader will be elected within two months, but that is unlikely to unite the Korean people, who have been deeply divided ever since they got their voting rights 30 years ago. After past 10 years of conservative rule, the new president will be again leftist, who is likely to change all current policies starting with cancelling the fresh deployment of US missile defense as North will be again "brothers" that must be coddled and cajoled, not challenged or feared, and China a friendly valuable customer, who should not antagonized. Another thing likely to go to waste basket is last year's agreement with Japan to bury old grievances "permanently and irreversibly" as bashing Japan has always been the best remedy for Korean politicians if their popularity sinks.
It is also likely that without protection of her presidential position any more Ms. Park will be subjected to new accusations and could end up in prison and so could Samsung CEO as attacks against "chaebol" will spread. Doing business with Korea will get more difficult on every level and Japanese companies could also end up again target of China's attacks instead of Korean if Abe government takes too rapid steps to improve country's defense.
Same uncertainty for near future haunts Japanese government and business from USA, where White House and Capitol are now both mulling protective tariffs and new demands for bilateral trade talks that will kick off with Vice President Pence's visit here next weekend. Before him the reclusive Tillerson will show up to talk what to do with North, so it's a real American week in Tokyo. (Today, however, itfs King of Saudi Arabia with entourage of 500 people to talk of more-oil-for-investments deals.)
Pence's hosts say they would like to start talks with first clearing out basic rules on what is "fair", but US Trade Office just announced it will flaunt the international rules if they don't favor USA. So much for "sharing the rule based democratic values" that Abe-san likes to talk about. Instead, it looks Trump government wants to use same bully tactics in trade as China does for security around South China Sea: talks must be one-on-one, Big and Strong against each Small and Weak at time. It's the same pattern as Trump is following at home: singling out countries, companies, even individual people for vicious personal attacks – no soft persuasion or carrots, just hit them with Big Stick and threaten with White House revenge if you don't do as President wants. This is not what we are used to expect from a leader of a civilized country.
As earlier, I am all for lower tariffs for food imports – no matter if its beef and potatoes from USA or wine and cheese from France – as I don't have to worry about farmers' votes like PM Abe, but I don't understand US complaints that USD is too high ("JPY and EUR are too low") or that Japanese don't buy their cars. Coming from top politicians, it all sounds so Eighties! USD keeps going up as natural result of global capital relocating to US capital markets in wait for Trump's promised tax cuts, rule removals and billion dollar public investments as well as for US Fed raising base rates. As for the US cars, there's no tariffs here unlike in USA and EU and the products could sell better if they would meet Japanese consumers' taste and if there simply were shops to buy them from – like European cars have and do.
The only US car maker who has own sales and service here is half-European Fiat Chrysler, others don't even try, just cry for help from politicians. Last month, 5 of top 10 selling cars here were all small "kei-cars" with 600 cc engine, 3 others hybrids and none large sedans or big SUV's what Detroit makes. Any small cars that Detroit ever had, came from European subsidiaries, like Opel that GM just decided to sell off as useless technology for US market now when EPA rules on gasoline consumption and exhaust control will be all thrown to dust bin. Of course, there are some Japanese people, who like to wear cowboy boots and Stetson hat and drive a self-imported American 6 liter V-8 SUV gas guzzler that does not fit into any city garage, but they are exceptions. Japanese farmers wear straw hats or baseball caps with "JA" logo and drive around their rice fields in Suzuki "keitora" (kei truck) with 600 cc engine and cabin so small that an American would not fit in there.
Thirty years ago we had Bush Senior here pushing same agenda on state visit - now it seems we have to hear same drivel again. Then it ended up with competitor Toyota buying 500 of them: one to each Toyota shop to show buyers how badly made they were. Don't expect same again.
Politicians sure can talk. It was pretty thick from PM Abe, too, to claim that Tohoku rebuilding is "progressing steadily" in his annual speech on "3-11" catastrophe anniversary. Maybe he meant that there is still much work to do. Six years after the mega quake and tsunami 120,000 people still remain displaced from their homes and 36,000 still live in prefabricated small huts that were supposed to last just 2-3 years. Of course, that's well down from 470,000 displaced soon after the catastrophe and there is improvement in other areas, too. 96 percent of arable land ruined by sea water is back with crops in Miyagi prefecture, 77 percent in Iwate, and once famous fishing ports' output has recovered to 70% of pre-2011 level. Also 70% of those who lived in temporary homes have rebuilt new homes or moved to newly built public housing while decontamination work in Fukushima has allowed officials to re-open 70% of the areas that were declared off-limits. Yet, Fukushima is clearly behind others in recovery "thanks" to TEPCO's fateful plant, where clean-up work has hardly started with 3 out of 4 reactors that suffered meltdowns. With government's big capital input, TEPCO has paid JPY 7 trillion (USD 70 billion) in compensations to 2,9 million individual people and companies (93% of all demands), yet lags behind in payments to municipalities, who then lack money to rebuild infrastructure and arrange normal social services for returning residents. With old houses and streets growing weed, wild pigs roaming around, few shops, schools and clinics open plus rumors of hidden contamination despite clean-up work, only nostalgic seniors want to return there.
The newly designed, higher than earlier seawalls set to run for 405 km along the Sanriku coast to protect rebuilt towns and villages are a story of their own: only 88 km has been completed so far. As earlier with roads, railways and bridges, lack of building material and work force has been blamed. Incomprehensively, in almost 100 locations in Miyagi, officials are planning to build the walls 30 cm lower than original plans since it has been noted than the land has risen up that much from the quake time when it sank more than 1 meter. Unbelievably, in one place officials even plan to shave off 30 cm of the wall that was completed back in 2014! This kind of behavior completely beats me as nobody knows how high the next tsunami will be and you can easily guess that the land could sink in next quake again.
Moritomo Gakuen, the far-right Osaka kindergarten, who bought public land for new school almost free of charge and used PM's name and wife to promote it, proved fraudulent through and through when journalists and opposition politicians dug deeper into it. Its applications for public aid displayed different cost estimates to suit each purpose and the founder's wife had received municipal money for work at the nursery which she never did. Unsurprisingly, Defense Minister Inada, a well-known rightist, seemed to be involved with the school in addition to PM, so the government fought tooth and nail against opposition demands that the schoolmaster should be brought to the Diet as sworn witness.
When Osaka governor, despite his similar political leanings, cancelled the school license he had accepted without sufficient capital, and said he was all for dragging the schoolmaster to the Diet, the culprit suddenly cancelled the whole project.
Finance Minister Aso, who had earlier declared that all papers had been lost, miraculously remembered that the contract stipulated that if the planned school does not materialize, government must buy the land back. It will be interesting to find out this week what Finance Ministry will pay for it as it gave it away practically free, who will pay for the demolition of the school building already completed there and where do we find the JPY 800 million that Ministry allegedly paid for decontamination work that the contractor said he never did.
What we know already is that the government popularity took a big 6 point dive in fresh survey for the scandal. Maybe Abe-san should have taken a few lessons in real estate deals from his new friend in White House? Then again, still at 56% he is one of the most popular leaders in Western countries.
Aso-san, businessman as he is, could also learn from bigger and better new play with private money: Masayoshi Son announced that the first big placement by his new USD 100 billion Saudi tech fund won't be to USA as promised to Donald Trump, but to British chipmaker ARM that he bought last year at USD 32 billion. The fund will buy 25% of the company's shares from Softbank, who will get USD 8 billion new cash to play with elsewhere. Nice play, Son-san!
Toshiba is allegedly leaning towards filing for Westinghouse's bankruptcy before March 31 when the financial year ends here, so it could minimize the USD 7 billion write down it is now expected to take for it. Cutting line off to Japan would be a political bomb to Trump as US tax payers could then end up "carry the can" following Washington's guarantee for
Westinghouse's badly delayed nuclear plant building contract in Georgia. It is said American and Japanese audit companies are fighting what is the best solution and whether the American CEO should be prosecuted for criminally pressing subordinates to hide the losses. Ironically, that is exactly what 3 Toshiba ex-CEO's were convicted here for 2 years ago. Because of this, it is also unclear whether Toshiba can come this week up with the April-December result that it last month delayed to March 14 and if so, how would Tokyo Stock of Exchange react.
On Wednesday we will see this year's first European test whether "old establishment" can resist new populists' attacks in Holland, a country we usually think as small, steady and stable, highly liberal, decent and democratic.
According latest polls, colorful agitator, anti-immigrant, anti-EU and very much Trump-looking Geert Wilders and his Freedom Party will emerge from the election as the biggest party in Parliament followed by current Prime Minister's conservative VVD. Thanks to Holland's proportional election system, same as everywhere in Europe except UK, it might yet be that Wilders will not end up Prime Minister as other parties can shun him if they receive enough votes to make a coalition government without the blond haired populist. Same already happened in Sweden, where every party refused to co-operate with the new Swedish Party when it became the second biggest in Riksdag.
Another alternative is that Holland will follow example from Finland, where the populist Finns Party was "tamed" by taking it into government with Center and Conservatives to share responsibility instead of just making outrageous demands from opposition. In the process, Finns got through many of their ideas, but had to compromise on many others. The practical result was that its support among voters declined remarkably: it's much harder to rule, than just shout out slogans. It looks like the man in White House is learning that, too, these days.
We'll see what happens in Holland this week and what happens next month in France. These two elections will set the direction for the future of European unity.
PM Abe is next week off to meet counterparts in Germany, France and Italy, but he also announced he will travel to Brussels in July, so he seems to count on that EU continues to exist at least until then. I'd like to think, it also means that the long awaited FTA between EU and Japan is ready for signing then.
Tokyo, March 13, 2017
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!"
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"
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
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.