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 AOYAMA VIEW

POPULISM, IGNORANCE AND ISOLATIONISM LEADS TO MAYHEM AND MESS
Populism is as old as politics, but it's long time ago since we've seen it spread so widely and gain power all over the world. We already thought populism can rule today only in developing countries with tin pot dictators, but now increasing number of seemingly democratic nations have fallen under populism's spell. While you might think this is not so surprising in, say, Turkey, Hungary or Poland, who don't have long democratic traditions, it certainly was a surprise when Europe's oldest democracy Britain fell for it to vote for Brexit. It's even more shocking to follow the daily escapades of the new US president, who seem to live himself in the populist fantasy he created for his supporters. Alarmingly, elections are scheduled for this year in Italy, France and Holland that could see populists taking power and even in stable Germany newly grown populists threaten the long time rule of Frau Merkel, the de-facto leader of EU. As predicted, we are in for a turbulent ride this year and should be happy that Japan remains one of the steadiest places in the world.

Uncountable studies about populism have explained its character, how it gained power and what then happened, often a mess and catastrophe. A recent review of a Princeton professor's book summarized handily populisms's basic elements which are good to keep in mind when you try to make sense of what's going on around us: 1) Populists always claim to be "true" representatives of the people – other parties, especially those who ruled before, do not somehow represent people, so "we are taking our country back", 2) The old ruling "elite" has ruined the country into wretched condition, so old ideas and rules must be changed, 3) We know what is best for the people – political debate, free discussion, even elections are not needed any more, criticism is unconstructive and free media must discredited, harassed and marginalized, closed if possible, 4) Those who are against us, do not love the country and are disqualified to voice their opinions, 5) There's often also a minority – Jews, Moslems, gypsies, immigrants – to blame for problems and threats to the nation, who therefore must be eliminated, 6) We have a charismatic leader , who can read the people's mind, so 7) Just sit back and enjoy the benefits of our revolutionary policies. You can recall how famous populists from Caesar to Hitler, from Fidel Castro to Vladimir Putin, from Marie Le Pen to Nigel Farage, from Venezuela's Hugo Chavez to Finland's Veikko Vennamo, all used these claims to various extent and you can rate how today's populist rulers - or those who aspire to be one - place on this ideological policy framework.

Each populist leader adapts his or her message to the country's culture and tradition. It is exactly our ideal image of America in this respect that makes it especially difficult to accept the untruths and misleads that keep coming from the new US president. From the beginning, many of Trump's stories were hogwash. US economy was in turmoil when it was doing better than ever since the 2008 bank crisis and industrial jobs were "robbed" by foreign countries when actually most disappeared due to automation. US friends were misusing Washington's stupid benevolence as much as enemies did. A wall was needed to stop cross border people traffic from Mexico when already for 10 years the net flow has been from USA back to Mexico, not the other way. As for China's currency manipulation, certainly any country that keeps its currency fixed to some mark is "manipulating" it, but recently China has focused on keeping CNY value UP, not down, to fight the gigantic financial flow out of the country. The list of "alternative facts" was endless and it has only amplified ever since.

Trump's recent rant and rave of media criticism, his own popularity and his government's unity instead of focusing on real things like his much awaited economic agenda, raise concerns that, at least from time to time, the plot is lost. So far, his much acclaimed action has been just self-promotion with widely published stunts on minor matters. Yet, the investors still believe the promised tax cuts, bank deregulation and big infra spending, all prospects for high profits, are on their way, just delayed by the slow confirmation process of the key ministers. True, the new finance guru from Goldman Sachs just got his credentials last week, so maybe the music will start finally. Let's see what will come out. Economists already worry about impending debt growth and rising inflation. Europeans are aghast of planned removal of bank regulations put in place so that the 2008 global finance crisis would not happen anymore.

Ironically, after campaigning against the Establishment, it's now Wall Street bankers, other big business and old generals, who represent the best in Trump Team line – many of the rest are morons and maniacs. Like the environment minister known to be against every environment rule and theory, the education minister who has never visited a public school or labor minister who said he would prefer robots to human staff serving customers in his fast-food chain. When the same guy also told Senate Hearing Committee that joining Trump Team would be "the best fun you can have with your clothes on", that was probably the one-too-much that got him rejected – one exception to my claim that all candidates would sail through.

In opposite direction, the first exit took place quicker than expected when the national security chief resigned after just 24 days for "talking with enemy" on his own and lying about it. For active generals, that would mean court martial. No wonder, another general, who was offered the job, refused the honor, yet another brave enough to try his luck was found. Bets are already placed who will be next to get Trump's favorite phrase "Youfre Fired!". The steady Inner Circle is prevailed by ideologists and family members and that makes you worry how these amateurs will react if some serious incident, international or national, hits suddenly? The North Korean regional missile test, that posed no national threat, seemed to be enough to put them in panic.

Luckily, against expectations, China and Russia have both so far refrained from doing anything provocative to test the new government. Instead, they seem to wait through all bombast and bluster in speech and tweets to see how Trump's foreign policies really will formulate – if they ever will. They also take their time to analyze what are his weak points and how to use them. Japan found that flattery and promise of big money helps. China seem to follow: Trump's confirmation of "One China" policy was instantly rewarded by Beijing with a court grant for his trade mark in a case that had been pending for 5 years. There's 49 more similar Trump trademark cases waiting for clearance to the big, prospective market, so more positive statements from White House are expected in Beijing. However, at least the maker of Trump toilets says he will fight to keep his brand name ownership as his products sell in millions in China.

If US government looks messy but hopefully clearing up, we have our own corporate mess in Japan with Toshiba and it does not look like clearing up. Supposed to come up with final figure for the big write down for its US subsidiary last week, the company fumbled with the long awaited press conference, first delaying it several hours, then just announcing chairman's resignation "to take responsibility" and telling it will take another month to clear up the mess in USA. Flaunting the TSE deadline and recalling three previous chairmen in court for pushing underlings to report inflated results for years, this only serves to raise further doubts of what's going on there. It's clear Westinghouse write down will be bigger than the USD 5,6 billion Toshiba paid for it 10 years ago and will lead to sizable negative equity that must be fixed within one year. Yet, when Toshiba directors say they now think to sell out not just 20 pct, but majority of the flagship random chip operation, that helped them survive the past 5 years of nuclear business freeze, it makes you think what is their recovery plan? Usually, companies in distress try to sell off unprofitable parts of their operations, not the best one. Maybe there is not much left to sell as Toshiba already sold medical instruments, another profitable part, as well as not so profitable PC's, fridges and televisions to recover from its previous scandal. Naturally, following such announcement from top management, Toshiba share price went to free fall with worries that the company's crown jewel will be put on fire sale at ridiculous low price. It's clear to all that the erstwhile electronic giant from Tokyo's Shibaura is deep into "it" and close to bankruptcy or at least delisting.

Even without Westinghouse scandal, Toshiba's failure in its key nuclear business was spectacular, something especially embarrassing to Abe government, who set export of Japanese nuclear technology as one of the cornerstone policies for national economic revival. It also casts doubt on Abe's corporate governance reform: Toshiba board had several outside directors that have been daunted as the new safety ring against bad management decisions, yet that did not help. It seems the US management was allowed on its own to go ahead and buy a construction company that had huge liabilities for its poor performance. I always said that outside directors are only as good as their expertise and role they are willing/allowed to take. Same for the "inside" directors as earlier cases at Toshiba, Olympus, Mitsubishi Motors etc show. Friends also point out that, incredibly for such an international conglomerate, none of Toshiba's directors, inside or outside, were foreigners, who would know better to require proper audit of any takeover subject. In fact, data shows that despite Japan's fame for big multinational business less than 1 pct of corporate directors in the TSE listed companies are foreigners. It certainly looks like Toshiba will end up another monument for continued cultural isolation, poor corporate governance and very thin layer of skilled managers for truly international business in Japan.

For an entire nation in complete mayhem, take a look at our neighboring Korea, whose cultural isolation, feudal economic structure and deep rooted political corruption stand in a class of its own. Now the results are showing out. President has been disposed and waits for impeachment, something that will be decided by just a few judges under heavy political pressure. The government and ruling party are powerless and triumphant opposition is already itching to soon rule again and reverse all of the two previous presidents' policies. Of special concern to other countries is foreign policy with united stand against North with USA and Japan and relation with Japan in general, an eternal bashing object for Korean populists. Internally, knives are now out to stab each other and anything, anybody that can be used as scapegoat. Just retired UN chief Ban Ki Moon, probably the most well-known and respected Korean internationally and shoo-in for next president anywhere else, declined to take part in the mud wrestling. Japan took its ambassador back home frustrated of the feeble government's failed promises and it's difficult to understand why US Defense Secretary travelled there to "agree" with lame duck ministers, who stand to be replaced soon by others who think totally differently.

Meanwhile, Korea's gigantic "chaebol" family groups that make most of the country's industry and exports much like Japan's "zaibatsu" did before the WW2, are shaking in scandals and business decay. The family princeling and de-facto CEO of Samsung that alone makes 20% of Korea's GDP has been arrested for involvement in President Park's friendship scandal. Hanjin, the big shipping company went bankrupt last year and threatens to drag down Korean Air Lines that is owned by the same family even if its name suggests it's a national carrier. We all remember KAL's "peanut queen" scandal a year ago when the family daughter went berserk on cabin staff for serving nuts wrong way. Lotte group is torn by family infighting for power. In fact, repeated news tell of despotic behavior and business incompetence from new generation at top, who got their position thanks to their family connection, not talent. Pervasive corruption between big business, bureaucrats and politicians, inbuilt since old times, comes as natural addition to the picture. Yet, with founding fathers' well laid foundations, hard work of normal Koreans and internationally minded career managers, the export dependent system has continued to bring economic growth that has kept majority of the voters reasonably happy. Younger generations, who did not experience the old military industrial rule that lasted until late 80's, yearn for change in politics, yet are let down at each president change. Even with the current crisis, ironically, you can say that the only change this time is that President is being prosecuted while still sitting in power while earlier they were all sentenced after their retirement. Can we call this progress?

Like China and Russia with USA, the neighboring North has refrained from serious provocations against South to instead just follow how the disintegration there will turn out. Certainly, it feels it has more space to do what it wants without any backlash from the international community as the recent missile test and audacious assassination of the ruler's long exiled half-bother show. While Western media often depicts Kim Jung Un as madman, he has his house in strict control and follows logical policy steps to develop weapons which enable him to threaten US mainland, the only way to force Americans accept him as equal for direct talks. His methods are cruel and despicable, but effective. Trump's "red line" with North Korea will prove as ineffective as so many before from US.

Finally some updates to earlier.

It looks like Masayoshi Son's USD 100 investment fund is now ready with USD 45 billion committed from Saudi-Arabia, USD 25 billion from Softbank itself – or rather its banks as the company is over USD 100 billion indebted – and, generously, USD 1 billion from his US friends Apple, Qualcom and Oracle each. With that money, Son looks like becoming a leading global technology investor, another new role again, and he is spending USD 3,3 billion to buy a Wall Street fund called Fortress for his operating tool. Don't think this buy is only to make his friend Donald happy.

Health Ministry's plan for smoke free restaurants, schools and hospitals has gained support from law makers after initial objections from LDP old guard for breaching individual rights. In contrast in USA, the "fight for freedom" is taking a step forward with a proposal to repeal Obama ban on selling guns to people with mental disorder. Such rule discriminates a group of people and denies their citizen rights, say the initiative makers.

Was this organized to please Trump? After declaring last year the first in five with positive trade balance for Japan, the government announced the balance turned back to negative in January, due to rising imports, mainly energy including the first shipments of shale gas from USA. In contrast, shipment of cars to USA was 10% down - not for Trump, but for the slowing market there. Whatever reason, the trade surplus with US shrank for second month in row. Haroo Donardo-san, r u happy now?

It seems EU-Japan trade deal plan is still alive, after all. At least FM Kishida and EU Trade Commissioner Cecilia Malmstrom agreed so in their meeting last week. In fact, they pledged to push forward for "swift conclusion" of the talks before crucial elections in Europe. As other reports say PM Abe is planning to visit Europe again this spring, this seem to indicate another time line to have some initial paper ready for signing then.

In sports, ski jumper Sara Takanashi, now 20, clinched her fourth consecutive World Cup win even if it's still mid-season, with a win in Korea's new Olympic hill. She has now 53 wins over her short career, as many as Austria's Georg Schlierenzauer, men's all time champion. Of course, that speaks as much of her opponents' level as her own excellence. Yet, gold in Olympics and World Championships has escaped her so far. We'll see if she can correct that next week in Lahti, my old hometown.

Timo Varhama  
Tokyo, February 24, 2017   


Previous Columns

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!"

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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