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 AOYAMA VIEW

RAINY SEASON IN JAPAN, POLITICAL STORMS IN EUROPE
It's officially rainy season now so "real" summer should be still a month away, yet No.2 typhoon of the season already passed over Okinawa on its way to China. Another reminder that nature follows its own schedules was a good jolt right under Tokyo – in fact, 350 shakes that day! Scary reminder of the Big One likely to hit us one day. In Europe, it's been political storms each side of The Channel with UK and France going opposite directions: one leader had a scathing set back, the other celebrated another triumphant win. Finland, too, added its own little political storm to the European turmoil last week.

We traditionally think Britain as a steady and firm nation ruled by two big parties that occasionally change places yet country staying much same beyond Whitehall. This month's election was supposed to be a surefire win for Conservatives and confirmation of PM May's unelected position ahead of the forthcoming Brexit negotiations. Yet, the British voters delivered another Brexit-like surprise, a stinging reminder of May's unpopularity and that other important things are closer to their hearts than the much vaunted "taking back our borders". Moreover, after it became clear Tories were losing their majority, it was not the Scottish National Party who emerged the crucial "kingmaker" as it lost even more seats – another surprise. Instead, May turned to Northern Ireland Unionists for the necessary support, not one of my favorite bunch of people in view of past history. Instead of uniting the nation for the crucial talks Britain seems much more disunited - it's not just those unruly Scots any more. A continuous flow of terror attacks and a horrifying apartment tower fire add further to Brits' anxieties. Even there May's belated reactions did not do any service for her reputation.

In contrast, French image for many of us is politically unstable with Socialists, Gaullists, Communists and more recently Nationalists ferociously squabbling each other without ever finding unified voice and many voters entertaining unreasonable demands for their individual life style instead of thinking what is best for the entire nation. What a surprise then that there comes a young man from outside traditional parties who preaches reason and rightness for all, a united nation and embrace of European values, and gets elected President with overwhelming majority. Last week he continued his triumph in Parliament election when his En Marche! novices, who did not even exist before, grabbed an overwhelming majority with over 400 seats from zero! Monsieur Macron's story so far is a miracle and we all wish him luck and success to carry on. Hope he will change not only French politics, but French economy and society at large. Such a great country deserves better!

It was political panic in Finland a week ago. It looked like the worst many of us had feared: True Finns party, which had become a reasonable ally of Center and Conservatives in the government line up under its long standing chairman Timo Soini, currently Foreign Minister, elected new far-right leaders to follow his retirement. Quoting "a serious clash in values", the two main parties announced they did not want to co-operate with the "new" Finns and PM Sipila, an avid pilot, flew his business jet to Turku to submit letter of resignation to President at his summer house. A government crisis was the last thing Finland needed for its 100 year anniversary year, even less when the economy shows all signs of recovery from long time recession! It would have looked even worse if Finland government included a party whose new leaders had been indicted for racist hate speech.

Then, almost overnight, the experienced old chairman pulled a rabbit from his hat: he left the party that he had established himself and took with him all its ministers and majority of MP's, a masterful political maneuver worth Veikko Vennamo, his mentor from the 70's - or Ichiro Ozawa and his mentor Kakuei Tanaka in Japan. Like latter, Soini will continue to stay in the background, not in party lead. The "New Alternative" as they call themselves, are same people as before so perfectly OK partners for Center and Conservatives. No crisis, everybody happy! Except the new Finns leaders, of course, who ended up in opposition much smaller and weaker, not key ministers from third largest party who could pressure for change of direction in Finland's policies as they had planned.

Looking at it from Tokyo, it was just a storm in a teacup in a small country, almost like television soap opera with unexpected twists and turns in story line, yet happy end. For me and probably many others, it was an amazing trick from "the old samurai" as Soini likes to call himself. It will help to keep political peace in the country and Finland's international reputation intact.

If this was a soap opera and the political clownery that goes in USA today even lower level reality-TV entertainment, then Japanese politics always felt like kabuki to me. In both, actors' lines are well known to the audience in advance, posing and finesse in how they are presented are important. What's more, the play is slow and seemingly endless in both. Yet, Kabuki-za in Ginza has more colorful drama and movement than the Diet where grave looking MP's in dark suits read their lines from paper and similar dressed government ministers read out the professional replies written by ministry bureaucrats, both following an advance written manuscript. The only fun part comes from follow-up questions that sometimes find the minister totally unprepared and uninformed of the subject. Or when both sides get excited to sling personal barbs like recently with Prime Minister who's been under pressure for "helping out" here and there beyond his line of duty. Yet, throwing papers in air and mobbing the chairman's desk to prevent a vote is too "punk rock" for me.

In the 193th session that ended this weekend, "Teflon" Abe managed again to wiggle his way out of trouble even if Education Ministry was forced to admit the existence of documents that showed he had pushed for the permit to his friend to build another university even if we all know there is much too many already now in comparison to shrinking student numbers. To avoid further public digging into the scandal and with noisy demonstrators against his conspiracy law outside the gates, Abe did not extend the spring session as expected, but forced the bill through cutting further debate short to opposition’s indignation. The law is intended against terrorist groups and organized crime, yet it's criticized all the way to UN Human Rights Commissioner for leaving too much leeway for government to use it against private people. As thanks to Komeito’s support on that law, the party’s renewed sex crime bill was guided through as well. Now it is recognized even in Japan that a man can be raped, a subject that was debated by feminists in Sweden and Finland back in the 70's. More importantly, the prison terms for such crimes are now clearly higher here than in Finland.

Other milestones from this Diet session include the Emperor's abdication law, that already prompted Crown Prince to give interviews how he will do his best even if the change won't happen until end of next year (!) and the Lower House seat allocation law where new set-up now guarantees no regional vote has more than 1.99 times more power than other, a limit set by Supreme Court. Also we have now "Airbnb law" that makes renting out private homes for tourists legal business that anybody can do as long as you register it. This is welcome help to the acute lack of accommodation for rising number of tourists, even more so for the 2020 Olympics. In fact, Japan's new rule allows renting out your apartment for 180 days every year, much longer than New York, London and other big world cities.

Abe's popularity took blows from his controversial moves falling below 50% while those opposing him rose to new high 36%. Clearly, he is a divisive leader for the voters, yet far off from the current US leader, who has only same 36% voters supporting him and 64 against. The fact is that Abe's LDP rules unchallenged and there's nobody in party ranks who would dare challenge him. His 5 year rule combined to his earlier one year stint, brings his total time now beyond Koizumi, the longest serving PM in last 30 years until now.

In order to prop up his popularity, PM is expected to re-arrange his line-up of ministers this week. According my Nagatacho source, the current line-up that consists of many veteran MP's rewarded for their long-time service rather than selected for their talent – some already badly stumbled in their jobs - will be substituted with real heavy weights including two highly popular young stars Shinichiro Koizumi and Yuko Obuchi, son and daughter to ex-PMs. It is speculated that even long serving Foreign Minister Kishida, who has done a good job and could be a future challenger to Abe, as well as Defense Minister Imada, Abe's female pet with far-right opinions, will be dropped. More popular ministers showing up coming weeks for stump speech around Tokyo would help to back up LDP candidates for the July 2 Assembly election and stop Governor Koike's "Tokyo First" wave.

Meanwhile, Madame Koike, under criticism for indecisiveness in the fish market move issue, has promised to announce her decision this week. It's a difficult dilemma that might hurt her whichever way she goes. The ground below the new location in Toyosu is tainted, but so is old Tsukiji according new measurements. Moreover, its old rambling structures are a death trap in case of big earthquake. Even the fishmongers themselves are divided to go or not to go. To me, it's clear the future is in Toyosu with new protection against any leaks from the soil. What will come out of Tsukiji, a large valuable land area in Central Tokyo, is another interesting question.

Let's also see what will come out from Abe's trip to Europe next month. The schedule includes G-20 meeting in Hamburg and talks about the long-coveted EU-Japan FTA in Brussels.
Will that be finally completed? Is it possible that Abe would drop in Finland on his way?

The big economic news, if Japanese media is to be believed, is birth of baby panda in Ueno Zoo. Experts are quoted for their calculations how much more "good feel" consumer spending the happy event will bring out – over USD 200 million or same as Sendai's surprise win in baseball league after the 2011 tsunami catastrophe, they say. It adds nicely to investors' positive mood: Nikkei index hit over 20,000 mark earlier this month and is likely to stay high in foreseeable future if US economy continues to do well and US Fed will raise rates and push up the USD value. The US impact will add further to BOJ's sizeable QE that has kept JPY down and is not about to change anytime soon. The central bank's holdings will this year pass beyond Japan's nominal GDP value JPY 537 trillion (USD 4.7 trillion) but that's not considered any problem - the main challenge is to find enough JGB's and other papers to buy, experts say. BOJ's official target 2% inflation remain still far off.

The latest in the ever continuing Toshiba story is that it accepted to pay USD 3.6 billion compensation to US power companies for Westinghouse's delayed nuclear plants. This should be noted in Finland, where French Areva keeps dragging its feet to compensate TVO for its Olkiluoto No.3 delay. It's also reported that investors claim USD 900 million compensation for their business losses caused by Toshiba's poor management. As these come on top of the USD 9 billion dollar write-off that the company takes for Westinghouse's bankruptcy, it is in real hurry to finalize the sale of its memory chips business. Unfortunately, the deal does not seem to go anywhere with US partner Western Digital throwing road blocks to prevent sale at better price to other applicants. Apart from lower price, Toshiba worries selling the unit to Western would result to prolonged antitrust examinations in many countries as the company already is No.3 in the world. Western does not even have sufficient funds, but plans to borrow it from Toshiba's Japanese banks. It sounds all pretty screwed and money is needed quickly for Toshiba to stay alive.

Aoyama readers have commented how could such a well-known global company make such big miscalculations with its US subsidiary? The simple answer is poor corporate governance and lack of international business understanding still evident in Japan. Happily, there are many Japanese companies who are doing well around the world, yet we just got another reminder of poor overseas business control from another well-known brand Fuji Xerox. Accounting "errors" at its Australian and NZ sales units translated into USD JPY 37 billion (USD 340 million) loss that parent company Fujifilm have to write off its otherwise good JPY 131 billion profit for FY2016. Once again, pressure from Head Office to make better profits was blamed for the local guys to crunch their numbers. This story hits close to my heart as Fuji Xerox was the biggest customer in whole Asia Pacific for my old company. Good they did not blame high copy paper prices!

It's not only economy doing well, but Japanese themselves are ever healthy and look forward to long life. Fresh WHO data confirmed again that Japan continues its 20 year world lead in life expectancy. A Japanese baby born today can expect to live 83,7 years in average. It's bad luck if you're born a boy, though, as that cuts back your life to 80.5 years, behind the Swiss, Icelanders, Australians and Swedes.

Nobody has been able to pinpoint any single reason for Japanese long life, so doctors think it is just result of many contributing factors in genetics, social, lifestyle and food. The No.1 death cause for men going out earlier is cancer - lung or stomach - so you'd better stop smoking and stressing about your job! Of course, there's also good health care, yet with more than 60,000 centenarians today, it is clear that is being tested as high number of Japanese spend the last years of their life mobility impaired, even bed-ridden in hospitals. Or in serious dementia unable to look after themselves: last year 15,432 such people went missing from their homes – 26% more than year before. Luckily, almost all of them were found by the police within a day or one week, yet 471 were dead and 191 are still missed. That work load is bount to grow, too: it is said that by 2020 there will be 12 million senior citizens with dementia risk.

Looking after old people costs Big Money for the government, about USD 1 billion more each year if my memory serves me right and it's a challenge for the government to find more budget revenue to pay for that. All experts agree the solution is to hike up the VAT tax that's still just 8%, but Abe-san has showed no guts to go back to that path since consumer spending sank like a stone with the rise from 5%. No wonder, his deputy, Finance Minister Aso, notorious for his foot-in-mouths blurbs, once uttered frustrated: "Japan's financial problem would be solved if people would die when their time is due!"

Aso-san should know. He is 75 years old himself now.

At least he could stop sleeping in live TV from Parliament when his buddy Abe is being grilled for his misdoings by the noisy opposition.

Timo Varhama  
Tokyo, June 19, 2017   


Previous Columns

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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