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 AOYAMA VIEW

Moomins, Metsä, Mitsubishi and missiles - business, politics and sports
The Chamber's visit together with our new Finnish Ambassador to Hanno City site, where Moomin theme park will rise next year, was interesting and impressive. Despite the rainy weather and nothing built yet, we could imagine the planned fairy story attractions fitting well into the leafy lake side. The pulsating enthusiasm of Hanno people for the project and towards Finland in general was also clear and touching. While Moomin Monogatari company, the builder and future operator of "Metsä" as the park is called, is majority Japanese-owned, it's sales point is based on the wide recognition of Moomin characters across generations of Japan society and special love for Finland here. As well, the future park will be entirely different from Disneylands, Universal Studios and other big theme parks here in that it will be small, leisurely and nature orientated where families can take it slow and enjoy the peaceful environment as well as Moomins.

We all wish well to the FCCJ member company in its big project and wait anxiously to see how it will turn out in reality. There is no doubt that "Metsä" will serve as another boost for Finland brand here and encourage more Finnish companies to come to Japan to sell their products and services.

In fact, it's been a delight to watch the Finnish companies' growing interest to Japan recently. It seems the firms' basic approach has changed from the old "I will visit next week, please arrange us big business there" to more realistic "we know you have to be present there and have patience to work long time to establish your own place in the market". There has been a steady flow of visitors coming to check out the markets and many new companies from varied business areas have established presence in Tokyo. In many cases, they are manned by young professionals, who know how to mix in here culturally and find your own connections that get you through the jungle of distributors and competitors to the end users. Many have strong belief in their product, many are probably encouraged by the other's success stories, many have already tried out China and many have been pushed out of Russia by EU sanctions. As an example, at FCCJ we were last year surprised to learn there is a sizeable group of Finnish companies now in Nagasaki, all part suppliers to cruise ships, well experienced with years of work in Finnish shipyards and now serving the Mitsubishi Heavy Nagasaki yard that started making luxury cruisers again. The yard's 20 years long break from this niche showed in the first ship launch delayed more than one year from the original schedule, but I am sure the next building will proceed smoother. Good interior and machinery parts from Finland will contribute to this positively.

Incidentally, Mitsubishi Heavy also has had delay in its project to build its new medium-size passenger jet MRJ (Mitsubishi Regional Jet), the first of its kind in Japan. The plane has been sent from Nagoya for testing in USA and returned and re-sent already several times, in the most recent case turning back even before Sapporo because its air conditioning malfunctioned. The ownership transfer of Heavy's car making subsidiary Mitsubishi Motors to Nissan has been delayed, too, due to new unexpected problems. It was different before: the transfer of Mitsubishi paper machine business unit to Finland's Valmet some 10 years ago went smoothly and the 100 or so Mitsubishi paper machines at Japanese paper mills have provided steady service income to Valmet Japan, one of our member companies.

Achieving something first time is difficult even for a gigantic old company like Heavy, yet failing its first big foreign deal for submarines has turned out an ultimate win for the company and the country. With clearly superior product according all experts, but reluctant to share its technological secrets for making the boats at local yard in Adelaide as the political decisions makers demanded, Mitsubishi lost the rich deal to a state-owned French shipyard, well experienced in arms deals and already building 12 similar boats for India. The decision was probably bigger disappointment for Abe government than for Mitsubishi as it had been heavily promoting Japan's first big foreign arms deal after changing the long time law that forbid exports of such equipment, yet the company's doubts seem now have proved right as the French secret technical data has been leaked out from India. The 22,000 pages explain every detail how the boats function so that they will be easy to find and follow by the potential enemy. Japan and Mitsubishi can sigh relief it was not theirs, while Aussie politicians look stupid. "We don't want to put our sailors in a coffin that can be traced from far away", one said at the time. Now they seem to have done just that.

Soon after, another industrial controversy developed between France and Japan. In trying to explain the multiyear delay in building a nuclear plant in France another French state-owned company blamed inferior quality in the special super-strong steel used for the reactor core from Japan Casting and Forging Corp. (JCFC), the global leader for such products. The French are now "conducting further tests", but with such serious doubts from another country, Japan's safety officials have already rushed to demand that the 13 Japanese nuclear reactors, which also have high-pressure reactors cores made by JCFC, must now re-test their equipment to prove again they meet national safety standards. These include the two Kyushu Power Co's reactors that are now running as well as several, who have been already approved by NRA to restart. It's another unpleasant surprise for the government's long time push to get more nuclear power back online. Safety comes first, of course, but it easy to think there is a touch of politicking behind the move as well. I have not heard that the Finnish safety officials would have requested re-tests for a similar reactor there, equally badly delayed by the French, after they already tested and approved it. Instead, we hear from Finland that there are growing problems to even start the construction of another new NPP that has part-ownership and equipment coming from Russia.

With Abe back from his foreign sojourns, it's back to daily politicking here, too. Opposition DPJ is anxiously waiting for the start of the TPP ratification debate in the Diet with the deal's Japanese head architect, then Trade Minister Amari back in line of duty at his MP seat, as this will give them a chance to call him in as sworn witness to what really happened behind the closed doors during the long winding negotiation process. Readers might recall that last time they tried that, Amari got suddenly "sick" and had to stay home to recover by doctor's orders, later on giving up his minister seat. Obviously this is not something that government and LDP would like to happen again and, luckily or unluckily depending on your viewpoint, somebody found out that DPJ's newly elected party leader Renho's nationality change to Japanese at 17 years age was not fully completed with disavowal of her Taiwanese nationality. This does not legally disqualify her from parliament seat, party leadership or even for future PM job, but it's a sensitive issue politically. So, not surprisingly for Japanese politics, there is a rumor floating of a proposed deal: "You don't demand Amari to disclose all secret talks and we will not take up Renho's nationality issue."

Such dirty drivel must be so disturbing to our high flying Prime Minister that he is already planning to fly out again, this time to Cuba, where he would generously cancel 2/3 or USD 1,2 billion of the country's unpaid debt to Japan and set the scene for big trading companies to establish business there. Not even North Korea's new nuclear bomb test and suspect of another coming soon are enough to hold back Abe's urge for globetrotting and trade promotion with tax payer money. It seems it's enough for him to tell that "Japan is losing its patience" with North and that new sanctions are on their way as soon as government has "determined the most effective timing" for them. For one, I would like to see Japan stop the money flow to North from the thousands of pachinko parlors that are widely owned by North sympathizers living here. In fact, I would not mind if they would be all closed as they only bring depravation and social problems for the society. It's such a sad scene to see the long lines of game addicts waiting for their hell holes to open early Sunday morning and to read news of children neglected by mothers and fathers spending hours by the noisy machines. As well, investing into better anti-missile defense would be highly appropriate against the acute threat from North whatever the pacifist part of the voting population say. It's hard to believe but some of them are so allergic to reality that they even oppose the Self Defense Force to have "katana" swords in its new emblem together with the old chrysanthemum. "At least they should be in their sheaths, bare swords are so bellicose!"

For most of us Tokyoites a much more important topic is the escalating environment scandal that our new governor Koike has uncovered at the City's new USD 2 billion fish market site. Digging into what really has happened under previous 3 governors' watch, it's been established that while 2 meters layer of polluted soil at the site from the old gas plant was removed as instructed and replaced by a protective layer and 4 meters of new clean soil, this insulating maneuver was omitted under the buildings themselves. Instead, the new massive buildings have only empty basement space separating their first floor, where fish and veggies are handled, from the highly polluted old ground. As result, bad smelling and certainly not clean ground water is leaking in and floating on the basement floor, not a pretty sight for tv-cameras now allowed in and a reminder of same problem plaguing Fukushima Dai-Ichi plant. How this could happen will be a big topic in the City Council next days and weeks and it is not impossible that the whole JPY 200 billion (USD 2 billion) building will not be taken to its intended use for quite some time. How this will impact the Olympic schedule is anybody's guess.

While building of the new Olympic stadium still has not started, the construction plans for Tokyo 2020 renewal are proceeding elsewhere and the prize winning architect Kengo Kuma has been awarded another big design work for the new Yamanote line station between Shinagawa and Tamachi. The initial computer image with big halls, restaurants and shopping areas looks grand, yet makes just one part of the JR East's overall plan to develop its entire old rail yard area into a new metropolitan business, shopping and entertainment hub. As no politicians are involved in the private company's development venture on its own land, I am sure everything will go well in schedule.

It is not only such big construction schemes that stretch long into future, but overall investment by private corporate sector that looks good today. After consumer demand, this is the second biggest pillar of Japan economy making 15% of the GDP. While traditional manufacturing industry investments excelled with 11% rise in July, it's been the non-manufacturing sector who's been leading over longer period with new shopping centers, hotels and restaurant complexes etc. Same applies for new machinery orders that rose 5% to JPY 890 billion in July: most of this (JPY 525 billion) came from non-manufacturers like mobile networks. Even here, however, the export markets are almost as significant as those at home with JPY 725 billion worth sold there in July, sadly 12% down from year ago "thanks" to expensive JPY value. Hence any news that US economy is doing well enough for US Fed to raise its base rate are keenly followed here as that would surely raise the USD value back against JPY. It's not only for exports from Japan: some 40% of Japan's industrial capacity is located overseas and the FX rates impact the JPY value of any profits those factories want to repatriate to Japan head office.

While currency rates can have big impact on corporate profits and finances – at Toyota one step in JPY/USD rate is said to count for USD 400 million in profit – it's still price and quality that makes the base for business and even a small glitch in latter can create unexpected havoc. No better example of this than the battery problem in Samsung 7 phone: its tendency to heat up and burst in flames led to its worldwide ban from airplanes which, in turn, forced the company to recall all 2.5 million phones it had already shipped out. The USD 1 billion estimated cost for that pales in comparison to the damage to Samsung brand image and corporate value: in just two days the company's market value dropped USD 22 billion! It remains to be seen how Samsung, already under pressure from cheap Chinese phones, will recover from this blow.

Japan football team recovered from its first World Cup qualification match loss with 2-0 win in Bangkok, but what a painful spectacle it was to watch! Totally dominant with probably 90% possession Japan should have won at least 5-0, but despite constant dribble around opponent's goal the elusive ball just did not go in more than two times. I really sympathized with Japan's Bosnian manager, who was tearing his hair and shouting in frustration. As well known, such theatrics are not acceptable in the social norm here and his hard words at break times hurt Japan's tender soccer stars so bad that JFA appointed a Japanese co-manager to "improve" his communication with the players. It seemed to me that the poor man was so frustrated that he would surely walk out of the job if it wasn't for super high salary to compensate him.

Biggest sport news past week was, however, Hiroshima's win in baseball Central League, first time in 25 years. Celebrations in the city that has gone through much in history, but always dwelled in bottom of the baseball league, were wild and colorful with red dressed fans running around streets "high-fiving" each other. Nama biiru and okonomiyaki must have sold well in the street "yattais".

The scenes will be surely even wilder if they manage to beat the Pacific League champion, still unknown, for the All Japan championship. PL winners have dominated over CL winners at least five consecutive years now, so CL win would be a delight even for Tokyoites then.

Paralympics have been widely featured in television with direct broadcasts from Rio running over regular morning news time just like "real" Olympics did. It's great that sport media gives equal treatment to paraplegics and blind, just like the wider society is supposed to provide them. In fact, Japan seems model country in this area: streets and station platforms have well marked touch-point guidance strips all over for visually handicapped and elevators, even help staff, for wheelchair riders.

It's another story with Rio results. With Russia banned for doping, China has ruled the medal standings grabbing more than twice No.2 USA. In many events, all medals have gone to China and in tennis the whole top four were Chinese making it look like a local event. Good for them, but a bit boring for others. Guess it all comes from their meticulous, state funded training. Their national training institute is said to be bigger than anybody else has for normal sports.

In world top tennis it's Japan all through. Not in actual play, but in what top players wear. Japan's star player Kei Nishikori has been wilting this year, often falling off GP tournaments in quarterfinals or semifinals. In US Open last week, he managed to beat Britain's Andy Murray for the first time, then again lost his semi against Swiss Stan Wawrinka, who then beat Croatia's Djokovic in the final. Yet, businesswise it looked like it was Japan all through as all four top players were sporting Japanese brand jerseys: Djokovic and Nishikori play wearing Uniqlo, Warinka is sponsored by Yonex and France's Monfils by Asics. It was great promotion for the Japanese brands and especially for Uniqlo, who is a newcomer to the sportswear market. It now has as many shops overseas as in Japan, yet lag to reach same target in sales and profits. The two other brands are already there: for instance Yonex earned half of its profit overseas last year.

People, who worry about the decline of Japanese brands in consumer electronics business, don't always recognize Japanese brands that are successful in other consumer business areas. Then again, many don't either realize that big selling Wilson is a Finnish-owned brand. At FCCJ, we all do. After all, Amer Japan is one of our member companies.

Timo Varhama  
Tokyo, 16 September, 2016   


Previous Columns

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



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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