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 AOYAMA VIEW

Golf Diplomacy, Chocolate Festa and Hokkaido Deams-Come-True
The Abe-Trump meeting went better than expected and we can all breath again. The reception at White House was not just friendly, but overwhelming with warm hugs and handshake for cameras that seemed to last forever. Even poker faced salesman Abe looked caught off guard. The unpredictable US president stuck thankfully to the official script – no unwanted surprises or bombastic requests. The ever important security alliance was confirmed unchanged now from the very top and both sides pledged to continue talk mutual economic relations on "free and fair basis". What that would be was kicked down the road to ministers and bureaucrats to work out. Main thing, the two leaders seemed to get along fine, Trump praised US-Japan relation "exemplary" and the golf match was so fun that it went on for extra 9 holes. That North Korea commemorated the outing with its own "greetings' only gave the two leaders a new possibility to talk up the two countries' firm relation to the press again.

I had a hunch Trump would be a bit more subdued after recent headwinds at home front and look for a friend for change after picking up fights and making enemies left and right over the past few weeks. It probably further helped that he was humiliated just hours before by China president Xi, who refused to take his call unless he accepted in advance to follow "One China" policy like all others. That's exactly same as Trump did to Mexican president except that Senor Nieto then proudly backed out from the scheduled visit. If it earlier looked like Trump did not really grab that Japan and China are different, last Friday certainly drove that message home.

We'll see how the bilateral talks will develop from here on. Bureaucrats are usually careful and will take their time to make any progress, but naturally expect that Trump's earlier complaints about cars and currency will come up together with repeated demands for agricultural imports that US had already won with the TPP deal. Have a lingering doubt about Deputy Prime Minister Aso heading the trade and investment talks from Japan side. Despite plenty bad mouthing about Trump's ministerial choices – "all bankers, billionaires and bigots" - think Vice President Pence, who will lead the US side, looks like a decent country boy from Indiana in comparison to the 75 year old foul mouthed aristocrat "oyaji", who dress like a mafia don. No schedule has been set for the Pence team Japan visit, but Aso already invited him for golf. As always, there's order of importance in these proceedings! Why not throw a "sakura" party in program as well?

Afraid Japan government will forget again about the long-awaited EU-Japan FTA deal as it will submerge into long-winding talks with the Americans. Come on Japan, a few pieces of French cheese and good wine without excessive tariffs is much easier to take than big demands for US beef and pork that American farmers are already clamoring for!

It's clear Japan food market is of big commercial interest to all. Chocolate might be just a niche product there, but in just last few weeks USD 250 million worth of prime quality chocolate was sold here for St. Valentine presents. Yet, like in just about anything here, competition and consumer demands in chocolate are beyond any other place. As with luxury cars, European brands are doing well in the prime chocolate selection: the brand names, packages and prices were simply mind boggling again, all selling from their own (!) shops when visiting my department store for a look. Crowds were thronging to get their Godiva, Lindt's, Leonidas, Maison de Chocolat, Pierre Marcolini, Patrick Agnellet etc priced at JPY 3000-6000 (EUR 25-50) for just 9-12 pieces in a beautiful, shiny box. An interesting newcomer was "Rolling Stones Chocolate" with the band's famous logo on each piece and similarly branded canvas bag as added bonus. Bet Mick Jagger was not involved in any part of the process except collecting money for the license.

With all this just for ladies to give to the men in their lives – the office boss included, of course - you might think it could be much more if men were involved equally. Think again; on "White Day" one month later, it's the men who will have to buy back to the ladies the same or better what they received now. Here it's St. Valentine two times! As well known, only part of the St. Valentine chocolate is true "love choco", much more is "giri choco" that office ladies feel obliged to buy to their male colleagues under old fashioned social pressure. Happily, since a few years back, a healthy new trend has emerged; ladies who are fed up buying expensive chocolate to unappreciative men, now buy "tomo choco" to their real friends. And that "friend" can be yourself, too! Why not? Any trend is OK if it helps to maintain the demand.

As much as would like to see Finnish favorites Fazer Blue and Geisha here, too, afraid it's pretty tough for a late comer to penetrate this high price category. Instead, saw another Finnish power brand in my department store's Valentine present shelf: bright colored Moomin underpants for JPY 4100 (EUR 35)! Maybe more for true love than the office boss?

Mr. Nitori, the owner of the furniture and interior chain with his name, has talked about his future business plans. In short term, he would like to add a separate apparel chain to his 430 furniture stores throughout the country. His idea is not to compete directly with equally ubiquitous Uniqlo, but focus more on older shoppers that seem to be left behind by its young style. Nitori is said to have JPY 56 billion (USD 600 million) cash pile ready for an acquisition and one target could be Shimamura, a very plain looking, but highly successful chain for budget clothes. You never find Shimamura shops in premium city center locations, but pretty much anywhere throughout suburbs and country towns.

In long term, Mr. Nitori, 72, would like to expand his interior business to overseas and compete with Ikea just like Uniqlo is doing with H&M and Zara. His dream is to have 3000 outlets in 15 years' time: 1000 at home, 1000 in China and 1000 elsewhere with turnover JPY 3 trillion (USD 26 billion) in comparison to Ikea's JPY 4 trillion (USD 35 billion) today. By that time he will be 87 old. Who says old men from Hokkaido can't have big global ambitions!

Despite the huge market, niche booms and successful individual companies, the consumer demand stays flat and the small 4Q GDP growth just 0,2% up from the previous quarter was brought about by rising exports, mainly to USA and China, the two main markets. This underlines again Japan's precarious dependence on the two countries' policies that is many doubled by Japanese companies' big investments there. Their continued success is the key for Japan's big current account surplus more than physical movement of goods.

The GDP growth for full calendar year ended up with +1%. That's in line with +1,2% for 2015 and the estimated potential for the economy without deeper reforms that remain unrealized despite Abe's many promises since 2012. Of course, PM could ask, who needs reforms now that my popularity is record high, many companies are awash with cash and Nikkei stock index is approaching again the magical 20,000 point level?

Talking about delayed reforms, we did not have to wait long for objections to Health Ministry's proposal to make Japanese restaurants – and schools, hospitals, city offices ! – smoke free by 2020. Quicker than restaurant keepers, those who have been elected to make our lives better here, Members of Parliament themselves, slashed back on such outrageous proposal. A number of LDP lawmakers slammed it as "too radical", an attempt to "discriminate smokers", who enjoy their "constitutional right" for a "legitimate luxury". Sounds almost like Americans talking about their right to carry a gun. Recalling my days selling packaging materials to Japan Tobacco, a government monopoly those days and not much different today, I bet there's some votes and support money involved in the politicians' abrupt opposition, not just holy principles for individual freedoms. They think Japan should continue focus on separation of smokers and non-smokers, which is expensive and seldom works properly. An old recollection of this idea is JAL, the last airline in the world to "fight for smokers' rights", who proposed to have left hand side seats reserved for smokers and right hand for non-smokers. That didn't take long to come to end.

There has been no Trump casino proposed for Tokyo yet, but other international operators - including Donald's friend Sheldon Adelson from Las Vegas - have certainly started to visit here and "grease the palms" of local politicians of the benefits to have their operation opened up in their town. It still remains unclear how the rules will be: last year's new law only said casinos should be allowed and obliged government to make the appropriate rules for the "integrated resorts" that will combine gambling with other "cultural" activities. If anything, it looks like Osaka City and the Singapore casino operator are ahead of others; Osaka already has a place for their casino on a new man-made island that will also host the World Expo in 2025. Essentially a huge rubbish dump, it's suitably named Yumeshima ("Dream Island"). Before starting to enjoy the promised big tax income, however, the tax payers are expected to pay a small entrance fee: an estimated JPY 70 billion (USD 625 million) for a subway line there. What an unnecessary nuisance for The Dream!

On other hand, as explained before, it is difficult to take casino opponents' talks of huge social problems, crime and prostitution resulting from a few luxury casinos when we already have pachinko parlors at every shopping street, every town and village. In fact, Japanese gamblers wagered JPY 23 trillion (USD 200 billion) to pachinko and slot machines in 2015! Even if that was down by third from the peak in 2005, this gigantic gambling business stands way above anything else in the world - all Las Vegases and Macaus put together. And it's all owned by private operators, some of them among richest in Japan and some of them ethnic Koreans. While most money end up in owners' pockets, who pay generous taxes for them, of course, some of it is said to find its way to North Korea, a nostalgic family home. Think that is something politicians, who are so ardent to protect us from "casino invasion", should talk about.

On sports side, the big news last weekend was Japan's women's ice hockey team qualifying to next year's Olympics for the first time ever. "Smile Japan", as they are called, beat Germany, France and Austria all in the qualifying tournament that was played in Tomakomai, Hokkaido, the home place of Japanese hockey. In fact, they played so good, well organized hockey, skated fast, passed smoothly and posed all necessary skills with the stick, that it was a pleasure to watch on television. We don't get to see much hockey here in Tokyo, but guess this achievement will make a change to that. How about a practice tour to Finland and other Nordic countries now?

It was no big news here, but in the rally crazy Finland it surely was: the new Toyota team with Finnish champion driver and another ex-champion as manager won the Swedish Winter Rally, the second World Rally competition this year, after placing No.2 in the Monte Carlo, the first one. For those who know, this was nothing short of phenomenal as Toyota just launched its return to the rally world after 17 years away. That the team is not placed in Nagoya or Nurnberg, but in a small eastern Finland village called Puuppola, raised the Finnish national feeling further. I am sure it also raised a smile on face of CEO Akeo Toyoda, who himself is a keen sports driver and was present in Helsinki at the launch of the renewed Toyota Rally team. It's still early days in the 2017 rally schedule, but many Finns are already dreaming of return to the 90's glory days when Toyota cars and Finnish drivers were an unbeatable match in the rally world.

Renewed success in World Rally would be much better promotion for Toyota brand in Europe than millions wasted in unsuccessful efforts in Formula racing.

Timo Varhama  
Tokyo, February 16, 2016   


Previous Columns

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!"

2016

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"

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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