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 AOYAMA VIEW

 From Singapore to soccer - wrapp up for summer

So the Singapore summit turned out a tasteless reality TV spectacle and a complete flop for content, both as expected. The cartoon with Trump proudly showing paper where the two leaders had signed to agree "We'll see what will happens" sums it up perfectly. Number of other cartoons, some bordering limits of good taste, have followed, all ventilating disappointment felt around the world.

As expected, the U.S. Hero is bitter that "fake media" does not appreciate his great achievement. "This was just a first step in a long process", he says confirming what all critics said it will be before the meeting. "I turned the world to peace from threat of nuclear war" - yes, from his own threat for pre-emptive strike on North. Once again Trump set up a threat by himself that he could then "win". From now, it's time for the diplomats to take over, just as many times before, something Trump said he would never accept to do. I wish I was making this all up.

It's anybody's guess whether talks will lead to some kind of solution in the denuclearization dilemma this time or will they stop after after North's fake play is exposed or US policy changed with a new president as before. Foreign Secretary Pompeo foresees the negotiations will be successfully completed in 2.5 years – just before the next US president election, as it happens. We all wish his result will be something true and permanent– not just a PR trick like last week's meeting.

Pompeo says the sanctions will be kept up until all is clear, yet China has already said UN should give them up "now that peace has returned to Korean peninsula" quoting Trump himself. If that happens, afraid the denuclearization talks will not proceed well as North has then already got all it wants from USA. China, too, seem to have gained plenty new stature out of this to firm up its footmark in the region and obfuscating attention from what it does in South China Sea in addition to the possibility to re-start the lucrative cross-border trade. It's now a crucial piece in the play and Trump's escalation of trade war certainly does not help to persuade it for further co-operation in Korea. Likewise, South Korean President Moon, whose diligent charm campaign persuaded Trump aboard and kept him from falling off by his own incoherence, surely feels vindicated despite Trump's off-the-cuff announcement without any advance warning that US will stop joint military exercises. Such slights only serve to feed Moon's conviction how important detente with North is as you cannot trust US support any more.

JAPAN'S ROLE IN THE TRUMP-KIM PLAN

Japan has been the one left out of the loop all along and Singapore talks confirmed its worst fears. It also must draw its own conclusions from Trump's self-serving play. Yet, Prime Minister tried to explain it in positive light: Japanese abductees, The Most Important Issue for his politics, WAS taken up even if it didn't make it into the written text - the remains of US soldiers died and buried 65 years ago were that much more important. Abe says he will now try to tackle the abductees directly with Kim in September when the two will both attend a Russian economic seminar in Vladivostok. Like with Pompeo, we all wish good luck to Abe-san! Just hope that unlike Trump he will not forget other issues - obviously smaller - like North's medium range missiles and big stocks of poison gases that it can easily lob to Japan. That's something just as destructive as a nuclear bomb.

Japan has a card to play if we really move into rebuilding North Korean economy: Japan's money and know-how will be welcome there. Our old friend Jesper Koll, in a recent presentation comparing the costs of German unification back 25 years ago and possible one in Korea, calculated that the task is so huge that it is impossible for the capital poor, foreign finance dependent South to handle alone as much as it would like to do. The economic difference between East and West was then 1 to 4 and the capital need was equivalent to 10 years of West GDP. Now in Korea the GDP difference between North and South is 1 to 20, so with same comparative input, the task would take South 50 years!

Despite big talk of great, prosperous future for North, Trump has made it clear he will not invest any US public money into to the project, but only dreams of building there his own beach hotels and condos mayby coupled with big numbers of McDonalds, Starbucks and Walmarts, hopefully some US cars, meat and potatoes, too. The outside finance for making North prosperous would largely come from China and Japan: think of basic infrastructure work coming from China together with affordable consumer products while some special technology, the coveted soft power and finance for Korea's own entrepreneurs coming from capital rich Japan.

As for nukes, my original assumption stays: North will remain nuclear and South and Japan must balance it out with their own.

JAPAN PRIME MINISTER AND PARLIAMENT "WORK HARD"

Our energetic PM has pledged not only to take care of those 5-10 Very Important People from abductee families, but also pledged to put "sekuhara", widespread problem across the society, under control.. There will be "zero tolerance" for it among government officials, he says. Under Abe's command, all senior officials working in their male-dominated ivory towers must now undergo training to learn what sexual harassment is and how to avoid it. There will be also "contact points" at each ministry for internal complaints and for "inquiries" from private sector. All very impressive, isn't it? Seiko Noda, minister for interior and women's empowerment, who probably knows about the subject much more than her male colleagues, proposed making a law that would make sexual harassment a crime with clear penalty, but that was too far out for the old men in government panel.

Parliament is working feverishly to catch up all lost time and pass all the laws on the spring agenda before closing for summer holidays June 20. Following passage of the new labor law, PM's personal pet project, the crucial missing piece now is "casino law", the pet project of LDP's ruling partner Komeito. Protecting innocent Japanese from the perils of soon-to-be-allowed gambling in a few upscale establishment - not in noisy and smoky pachinko parlors in front of every station - and "integrating" the casinos with cultural activities like theater and concerts to become high level "resorts", is in line with the "clean politics" of the Buddhist party.

From Macau, Lawrence Ho, whose family dynasty runs 5 of the 42 casinos there and now applies for a license in Japan, tells us that, even without such legislation, only 5% of the casino areas there are dedicated to gambling and it's no problem for him if Japan rules that it should be only 3%. Ho plans to invest anyway some USD 10 billion into his future venture in Japan, most likely in Osaka. That's such a good sum of money that some of it will surely spread beyond big construction companies to local politicians there, too.

Two rather more meaningful laws passed last week are lowering the age of adulthood to 18 years and creating a new visa category that will allow up to 500,000 non-professional foreign laborers into the country in addition to 1,5 million, who already work here already as students, interns and professionals. The first one will bring Japan finally in line with the rest of the world, yet, typically for Japan, with some exceptions: tobacco, alcohol and gambling will remain forbidden until 20 and so will bearing full criminal responsibility. Still kids to be protected, after all!
The latter law, too, comes with many caveats: you can only work in 5 industrial sectors deemed to suffer the most acute lack of labor – construction, ship building, agriculture, nursing and hotels – and the visas will be limited to 5 years and don't allow workers to bring their families along. Yet, it is a historic first step for Japan's political leadership to accepting the unavoidable reality.

Naturally, the limitations raised criticism among the local industries and human rights groups abroad. The government panel chairman himself said he didn't understand where the 500,000 figure came from as the expert recommendation already two years ago was 900,000 and the problems have grown from bad to worse since then. Yet, it's understandable the ruling parties prefer to introduce step by step to avoid creating friction in local communities if they are suddenly swamped up by wave of foreigners. That could create anti-immigration political movements, even right-wing parties that would challenge the ruling conservatives from right like has happened in Europe and USA. LDP certainly wish to avoid such challenges to its rule. The official line is that accepting low-skilled workers here under any visa category is NOT a change in immigration policy. In fact, "temporary" laborers are not "immigrants" at all.

NEW RULES FOR PRIVATE LODGING BUSINESS

Same old fear of foreigners causing unnecessary "meiwaku" seems too lurk behind the sudden change in "minpaku" or private lodging rules, maybe even envy of the new successful model. While the society was given until 2022 to get ready for the 18 year old adults, apartment owners, who rent their dwellings to tourists, were given only 2 weeks to have their places registered, checked and accepted for the business by local officials. From this week on, the owners are responsible for any problems that their guests might cause, they must have proper fire safety equipment in place and they must register the guests' personal data with the local officials like hotels do. Moreover, they can rent out their properties for only 180 days per year and local officials can pile up even more limitations. Some have already come up with weird rules of their own.

Not unexpectedly, many owners got discouraged or were unable to organize the new licenses in such short time. As result, offerings from Airbnb, the most well-known service provider, dropped from 60,000 to 3,000 and many tourists were forced to cancel their trip to Japan. The US company, hit with expensive cancellations, still put on a brave face saying it believes its business with private owners will recover with time and, anyway, it's good for all to have clear rules. Interestingly, however, the new rule change does not apply to Japanese companies operating same services with their self-owned apartments.

As a long-time resident here I do understand some of the local concerns. Modern apartment blocks in Tokyo are often marketed under pretext of safety: you have to get through even 3 locked doors to get to your apartment. Anybody, who has paid big money for this, is understandably not happy to see new strangers every morning and late night in the lift and to think how wide around the world his door keys and safety codes have been passed. Same with cleanliness and garbage disposal: once you learned to sort out your waste in many different bags, maybe even put them out on certain mornings only, you won't be happy to come home seeing it spread all over the streets ripped up by the vicious crows. Then again, why doubt all foreigners for such unacceptable behavior?

NUCLEAR POLITICS
In Niigata governor election, for the first time since 2011, the LDP candidate managed to beat the anti-nuclear opposition confused from the sex scandal of its own incumbent man, opening the possibility to restart Tokyo Power's giant 6 reactor nuclear plant there. This has been main target for the old monopoly's business survival over the past 7 years, so the change in political power in the northwestern prefecture is big news even if the new governor is unlikely to allow the restart immediately against the popular opinion - over 70% in Niigata remain against it.

Losing no time, Tepco rushed to pledge to Fukushima governor that it will now give up seeking permission to restart Fukushima No.2 plant there and will rather decommission it together with the stricken No.1 plant. Nice PR for the governor, who is also seeking re-election soon and will be in central position for the decision to let out the huge amounts of controversial waste water held in almost 1000 tanks at the derelict No.1 site. My knowledgeable friends in Finland tell me that the Fukushima No.2 plant, even if it did survived the 2011 quake well, is of same old technology as No.1 and should have been put on closing list for security reasons from the very start.

CORPORATE BUSINESS: FROM RECOVERY TO NEW BLACK CLOUDS

Talking about nuclear matters brings us to Toshiba, who somehow managed to stay out of bankruptcy and delisting despite the huge loss from its nuclear play with US Westinghouse. A new CEO from the financial industry managed to turn around the FY2017 numbers to show some positive capital instead of negative that would have got the company thrown out of Tokyo Stock Exchange - despite China holding back against the company's original survival plan, sale of the highly profitable memory chip unit to a Korean competitor and US investors. With some thaw in China relations, Beijing allowed the sale go ahead last month and with USD 19 billion in pocket now, Toshiba announced last week what all companies with extra money these days do: a USD 7 billion buyback of its own shares that are valued today next to nothing. To complete the story, Toshiba also sold its lossmaking PC unit, once the No.1 in the world, now with miserable 2% global market share, to Sharp that's newly resurrected to good profitability under Taiwan's Honhai's guidance.

Sharp, Sony and countless other Japanese electronic consumer giants have been successfully reborn as electronic parts suppliers to consumer products made today in China, however they face black clouds now in the horizon. One is Apple, who has been the main client for many of them, but now has warned it won't buy any parts at least for one quarter as the sales of its latest phone have been so disappointing. It seems iPhone's market position has been seriously shaken in global markets by new Chinese makers even if it remains steady No.1 for Japanese consumers: I'm still waiting for Docomo to lower its excessive price for iPhone 8 before I change my old model to it!

The black cloud No.2 is Donald Trump: if he escalates his trade war against China as it looks now, it can further cut back global sales of phones made in China, no matter if they are branded Apple, Huawei or TZE, and this would further reduce demand for Japanese parts in them. As well, China's plans to have majority of the phone contents made locally will reduce demand from Japan even more on long term. It's time for Japanese companies to look in the mirror again for mistakes made and start planning new strategies.

Sorry for the long story again: too many issues to wrap up.

The world attention is now focused on World Cup that started in Russia – and so is mine. What goes on in Japan politics and business seem suddenly much less important. Moreover, summer holidays are ahead and Aoyama View heads for summer break, too. Catch up with you again in August – let's see how Japan and the world look then.

Timo Varhama  
Tokyo, June 17, 2018  


Previous Columns

11 June 2018
"Showdown in Singapore, commotion in Canada and cover-ups in Tokyo"

28 May 2018
"Morals and responsibility, blind loyalty and power harassment"

17 May 2018
"Big Business in record results again, but consumer are not convinced - North Korea spectacle continues under Kim direction"

26 April 2018
"Political spectacle approaches grand finale
- people's trust sinking ever lower"


17 April 2018
"Cruise missiles and cronyism, business boom, old people and sumo"

6 April 2018
"Mystery train and other unpredictable moves in geopolitics around Japan"

26 March 2018
"Trump Unchained and Abelympics – Can PM Make the Party?"

16 March 2018
"Anniversaries, updates, fallacies and deception"

5 March 2018
"WHILE WE WERE WATCHING OLYMPICS..."

26 February 2018
"Korean Olympics: sports shine, politics stink"

14 February 2018
"Korea: Murky Politics and Big Business Behind the Sport Spectacle"

4 February 2018
"It's "smile time" in politics, Olympics, economics and business"

23 January 2018
"Moomin crisis, panda frenzy and Olympics turned into political farce"

12 January 2018
"Heisei 30 looks good: share prices soar, PM rides high "

20 December 2017
"Look back at 2017: commotion around Japan, but steady and safe here"

11 December 2017
"Missiles, footballers and fishermen from North - Big spending on child care to get more mothers working"

28 November 2017
"Foolish things sell in retail, but sports are to be serious"

20 November 2017
"Making China Great - with Gaffes, Platitudes and Bullying"

10 November 2017
"Good news week: Finland business grows, EU trade deal gets cleared, Nikkei hits new heights and Trump visit goes smoothly"

20 November 2017
"Making China Great - with Gaffes, Platitudes and Bullying"

1 November 2017
"Japan: Endless Discovery"

21 October 2017
"Power play in Japan and elsewhere - some potentially serious, some not"

10 October 2017
"Abe's useless snap election sparks big changes he did not count on"

26 September 2017
"North Korea boost Abe popularity - opportunity to extend his rule"

7 September 2017
"Kims'allah, Japan is OK and doing well"

28 August 2017
"From North Korea's missiles to Turku Terror and US Navy Mishaps"

17 August 2017
"Raining cats and dogs, missiles and threats, but strong sunshine in economy"

27 July 2017
"Forests, floods, fish and consumer prices - stories too good and data too bad to be true"

21 July 2017
"From Cool Finland to Hot Tokyo: A Round-Up of Recent Happenings"

26 June 2017
"Anniversaries and Memories: Finland, Japan, USA."

19 June 2017
"Rainy Season in Japan, Political Storms in Europe"

8 June 2017
"Trump impact spreads - Japan struggles with workforce issues"

30 May 2017
"Taormina to Tokyo: Heavyweights and fashionable ladies"

"New Missiles, Diet Debates, Yet Big Business in Big Profits - Down on Ground Challenges Remain Basic and Simple"

9 May 2017
"Golden Week, Special Trains, Luxury Spending, Even North Worries Makes for Good Business"

20 April 2017
"North Korea, USA both worry Japan - Koike worry Abe and LDP even more"

5 April 2017
"Spring, Sakura and New Year Start in Japan - Commotion, Tensions Rise Around the World"

27 March 2017
"Questions Unanswered, Unasked – Lifestyle and Surveys Bring Light"

21 March 2017
"Finland in Focus: Friendship, Dictionary, Music, Food - Even Elevators?"

13 March 2017
"Uncertainty Increases Around Japan - At Home Rebuilding Uncompleted in 6 Years - Abe Popularity Takes a Hit."

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!"



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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