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Raining cats and dogs, missiles and threats, but strong sunshine in economy

Summer in Japan: hot and humid, beer gardens and beaches, hanabi fireworks and matsuri fests, Obon holiday rush for a few days in hometown or Hawaii. Add this year: violent rains, dramatic floods and mudslides, earthquakes here and there - and North Korean missile tests. By now we are into typhoon season, but it looks like June rain season is back again: it's been steady rain every day in Tokyo this month. You have to go back 40 years to find as rainy August as this one, 89 for matching humidity.

Sports on television bring welcome relief for many. The annual high school baseball tournament at Osaka's Koshien stadion that started last weekend keeps half the nation nailed at their sets. Even after 30 years here I cannot understand the nationwide attraction to schoolboys sweating it out in helmets in unbearable heat, yet sensible business executives as much preppy housewives all love to break off from their chore to take a look and root for the home town school they left ages ago.

Personally preferred to watch Athletics World Championships in London in early morning hours. There's still something spellbinding in top athletes stretching it out for their best. Held every second year since 1983 in Helsinki, these games are kind of substitute Olympics. This year was "sayonara" for the great Usain Bolt, who has ruled short sprints for the past 10 years, yet it did not come out as gloriously as planned and ended up in cry of pain on relay's last stretch. Looking at the drama it might have gone unnoticed for the global tv-audience that Japan team grabbed the relay bronze even if it was without two of its best members. In Rio last year the same team took silver. As they are all young – the best one is only 18! - they are bound to make quite a challenge in Tokyo 2020.

What international viewers certainly did not miss was the input of Japanese corporate sponsorship. Either Toyota or TDK names were on every competitor's number bibs as big as their country's and Seiko stood out on runners' starting blocks. Add another Japanese brand, Asics, and you got all the main sponsors of London 2017.

Back to North Korea: the US president fumes hot under collar now that his Pyongyang nemesis with even funnier hair piece has announced that next missiles will fly all the way to Guam waters instead of Japan's. The plan has been drummed up big in North and experts say August 21 is the likely launch date as it's another special day in country's short history. Trump has been threatening Kim with fire and brimstone in same low level ferocious talk as we are used to hear from the "obasan" newscaster in North Korean television. Where was US prez when the missiles kept landing around Japan, an ally US is supposed to protect? Counting on Mattis, Tillerson and other advisors to keep Trump under control to avoid human catastrophe in Seoul and Tokyo. Tweet as much as you like, buddy, but keep your finger off That Button.

Global media is already contemplating with nuclear war and other countries' leaders including Finland president have expressed their concern of what's going on in this part of the world. Yet, with all respect to seriousness of North's recent development, the threat from its dictatorial leadership is not just acute but rather long term constant.

Aoyama View on the issue has been all along this:
  1. Kim will continue unhinged to develop his missiles and nuclear bombs despite all sanctions to level that he can reach US mainland as he sees this is the only way to guarantee his regime's survival. In fact, experts say he is almost there already. After that he is ready to negotiate on equal terms directly with Washington, not with South or Japan or China.
  2. Kim will never accept giving up his program at any terms offered – he does not want to end up in gutter like Gaddafi and Sadam Hussein. Any "deal" to curtail North would be only fake delay like before. North Korea is 100% unreliable.
  3. Any sudden "pinpoint strike" from US would unleash a retaliatory strike from North to Seoul and Japan with unmeasured human cost. Hope this is enough to keep Trump from doing something stupid.
  4. The new UN sanctions will fail just like others before as China will implement them just for show again. Xi is only playing along to buy time from trade friction with USA. Besides, the new "strict" terms are not even half as strict as imposed against Iran.
  5. US and the world must accept DPRK as new member in the nuclear club – just like Russia, China, UK, France, India and Pakistan at the time and deal with it accordingly. They've done it before.
  6. After all has been settled with USA, there is a risk that North will use its weapons to bully South for reunification on its own terms, not the other way round as many in South keep dreaming. Then South must acquire its own similar weapon to balance it out. No more dreaming there.
  7. Japan, too, would have to develop its own weapon much to horror of all pacifist dreamers here who believe Japan's special Constitution somehow protects it from all evil. It's clear that in the new situation where US mainland will be threatened, Japan cannot any more count on protection by US nuclear umbrella. US will not protect Sendai or Sakata at cost of San Francisco. The US-Japan alliance will finally shift to one between equals with equal responsibilities.
This might all sound hard to accept to many readers, but I'm not alone in such cold realism and the sooner the nation accepts that this is how it looks to turn out in face of Mr. Kim's unrelenting determination, the better. Afraid there will be no miracles to change the course barring sudden death of Mr. Kim. Any change of course must come from inside the hermit nation, not forced from the outside. The long, hard way to start work for that is to step up efforts to break the North regime's unique propaganda grip and get correct information of the surrounding world to people there. Surprisingly little has been done to that effect so far.

Let's hope the current crisis drummed up by media and politicians here and there for their own benefit will pass over. If the analysis that North's rocket technology is from Russia or Ukraine and the fuel from China is correct, it shows well how hypocritical the political play it all is.

Mr. Abe is certainly one trying to benefit from the situation as he has to climb up from his "hell hole" - as one local commentator put it – where the scandals and popularity collapse dropped him. Swearing at grandfather's grave that "he will protect Japan" is just empty talk and deploying the few Patriot missile batteries that SDF has on the Guam bound missiles' expected route over West Japan definitely smells pure political play, too. After all, Patriots are for local defense and reach only 30 km away when North's missiles will fly at hundreds of kilometers' height!

In contrast, Abe's new minister line-up looks like a real deal. It includes 13 old, experienced hands and just 6 newcomers rewarded for their long party service this time. Especially happy to see US educated globalist Taro Kono as new Foreign Minister, realist Itsunori Onodera again as Defense Minister, cool Yoko Kamikawa as Justice Minister and affable Yoshimasa Hayashi this time as Minister for Education, Science and Culture. Even Seiko Noda, popular since Koizumi times, is back in favor as Minister for Interior, Communications and Women Empowerment. Naturally, Suga-san, Abe's right-hand man, continue as Chief Cabinet Secretary and Aso-san, the veteran big wig with second biggest support group in the party, keeps his seat as Deputy Prime Minister and Finance Minister.

It must have been tough for Abe to accept some of the strong names into the new line-up as they are no pets and puppets like many previous ones and could take some shine off the PM himself. For instance, the straight talking Taro Kono is well-known for his opposite views on nuclear power and immigration. Yoshimasa Hayashi is said to be much more popular in his native Yamaguchi than Prime Minister himself, who claims it as his family's original home place but has actually lived all his life in Shibuya's plushy Shoto. Counting on Hayashi-san doing something for music education: he is a member in a well-known men's choir and an able pianist and guitarist with a smooth version of Let It Be!

Unfortunately for Abe, his Kake problem doesn't seem to go away: more evidence is piling up to dispute his claim that Education Ministry's decision to his friend's favor was based on neutral consideration or that he didn't even know Kake had made an application for the special permission. In fact, Abe has been a paid executive board member in Kake Institute for 20 years and three Kake representatives physically attended Ministry review panel meeting, but their presence was wiped out from the meeting records.

Despite Abe's problems and LDP's trashing in Tokyo election, the party remains as popular as ever around the county - simply because there is now credible alternative. DPJ was whipped in Tokyo even worse than LDP and as predicted, its leaders, president Renho and party secretary Noda, her mentor, resigned. Rumors tell that, in fact, Renho wanted to continue, but nobody in the party wanted to serve as party secretary for this ineffective leader. New leaders will be elected in September with old hags Maehara and Edano main candidates and it will take them long time to lift up the party from its quagmire, if ever possible. Meanwhile, few believe JCP can ever be trusted with responsibility to govern Japan despite its recent strong support as protest alternative.

As result, LDP is set to continue rule unchallenged and Abe will stay Prime Minister unless another party member can beat him in next party president election September 2018. Despite such comfortable position and considering Abe's own low popularity, it is rumored – hold your breath! - that the party leadership is planning for a snap parliament election this autumn. My LDP source says Abe has even date for it: October 22.

Motivations? According to normal schedule, the next election would be held end 2018, yet by that time world politics and economy might change, for worse, DPJ might get its act together and, worst, the super popular Koike-san could spread her green movement nationwide despite all her assurances to stick to Tokyo today. So why not to use the lack of opposition today and expand LDP's rule to 2021 when a new election will be a sure-fire triumph for the party in Olympic euphoria? Read that "Abe's rule" as surely the party members would reward a successful election winner with leadership extension next year. This way Abe would also guarantee realizing his vainglorious dream to host world leaders and celebrities in His Olympics. As I always said, this man is an incredible political operator!

As usual, he is also lucky: fresh economic data suddenly seem to show his Abenomics are finally producing long waited strong results. The April-June GDP data this week showed whopping 4% annualized growth far beyond the most positive analyst expectations. As importantly, the main thrust came this time from private consumers, not from rising exports as until now. (That side did continue well as well.) It seems the allegorical Mrs. Watanabe has finally got confidence to open up her purse strings. Her temp job salary is finally rising and husband's permanent job is now secure from any "risutora" in face of ever tightening labor market. The latest figure is now 1.51 jobs for every applicant, average across all industries around the country, and all companies are rather stepping up efforts to recruit and keep good workers than to shed jobs. It is clear that labor shortage, now a boost for growth, will in long term become a bottleneck for it, but that's beyond today's concerns. Maybe the gates for more immigration will be opened up then, officially or unofficially.

To finish off, a couple of business news from global motor industry. First, the unexpected data that Nissan-Renault passed Toyota, VW and GM as No.1 in global car sales during first half of the year. Last year when adding Mitsubishi to the French-Japanese alliance CEO Carlos Ghosn said the triumvirate now has manufacturing capacity to challenge the Top 3 in their 9 million cars per year category, yet few expected the sales would pass them so quickly. The notoriously ambitious Lebanon-Brazilian Frenchman must have been pushing his sales force hard to make it happen. It is reported that Nissan is offering the biggest rebates to US buyers to counter the declining demand there. It also seems VW's long time success in its main market China has slowed down as buyers there these days go for big SUV's or generously supported domestic electric cars. As well, VW's big luxury Audi sedan has fallen from favor as the No.1 chauffeur car for government officials and corporate big wigs thefre – the first ones are pushed by Xi to stop splashing out state money in front of people and the latter may opt now for Mercedes, BMW or Lexus instead. Of course, you can ask whether the Chinese sales should be counted for global brands at all as they are all actually produced by government majority-owned factories.

Profits, technology and structural changes are more important than temporary changes in global sales volumes and Toyota remains the world leader in these areas. Last week it announced a new move to take 5% share in Mazda, Japan's smallest independent car maker. Along with the deal, Toyota told it will start making Mazda cars in the new US factory it is building there. Until now, all Mazdas sold in US, its No.1 market, have been made in Mexico and this has been a growing worry in Hiroshima in light of constant criticism and tariff threats coming from US president. The news this week proved its fears correct. It has been also long clear that producing just 1,6 million cars Mazda doesn't have the muscle to finance gigantic R&D costs for future technologies like electric and fuel cell. The Nagoya giant's big muscle come to rescue here: last year it spent USD 9 billion on technological development if my memory serves me right.

Mazda has its own presents to offer Toyota, it does not come to the party totally empty-handed. It has always been known for its own innovative technology and design and it timed remarkable news with the Toyota move: it has developed a revolutionary new petrol engine that works without spark plugs like diesel engine. It saves 20-30% in fuel consumption like diesel, yet without its obnoxious fumes and nitrogen emissions. Mazda plans to introduce the new technology in its cars by 2019 and "has no plans to supply such engines to Toyota so far". Time will tell on how that holds.

The consolidation of world car industries progress now in Japan, too. Nissan-Renault's takeover of Mitsubishi was one big step and Toyota is now making its own moves. Already for long time it has had minicar maker Daihatsu and truck maker Hino under its wings as well as sizeable share in specialist 4WD maker Subaru. Early this year it started "technology alliance" with Suzuki, an independent family company in Hamamatsu, Shizuoka, who needs Toyota's R&D muscle just like Mazda. Once the 83 year old CEO Osamu Suzuki finally accepts to hang up his gloves, Akio Toyoda is ready to take over. Now he has his foot in Mazda's door in same way and the progress will be easier as there is no old family ram on the way, it's enough to persuade professional management and institutional investors of the Toyota alliance benefits.

This will leave Honda as the only truly independent car maker in Japan. Think it will survive that way in medium term as it, after all, makes over 3 millions cars in its global factories and doubles in motor cycles, now even in small airplanes.

Toyota had reason to celebrate in Finland last month when its rally team based in Central Finland country side and managed by ex-world champion Tommi Makinen, won the famous Rally of Thousand Lakes. The driver was not its experienced Finnish chief pilot Jari-Matti Latvala, but young Esa-Pekka Lappi competing his first year in top WRC category. Another Finnish youngster Juho Hanninen completed Toyota's success with third position.

Toyota's team seem to have mastered the technical problems that ruined the beginning of its first year of return to World Rally. Akio-shacho, who is an avid sport driver himself and personally attended the team launch this spring in Helsinki, has every reason to be proud of the success.

Timo Varhama  
Tokyo, August 17, 2017   

Previous Columns

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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