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 AOYAMA VIEW

North Korea boost Abe popularity - opportunity to extend his rule
"Never a dull moment" has become obsolete phrase here thanks to the energetic Young Leader in North. The regular typhoons and quakes and political storms in a tea cup don't count any more in comparison. Noisy J-Alert on Friday 15th at 7.04 am from my mobile and TV in middle of morning news was an unwelcome experience in peaceful countryside. For a moment thought it was something serious, like a big earthquake just about to hit Nagano. It was a relief to hear it was just another North Korean missile flying 700 km high over Hokkaido and splashing into Pacific 2000 km offshore. Now waiting what comes next from the "Rocketman".

Japan government spokesman thinks Kim's next move will be lobbing his new hydrogen bomb for real to somewhere even more far away in the Pacific. It is said that North's own testing ground has started to have tremors by itself after the latest big bomb test there – not a good place to try set up another one. If so, North would follow USA, who also exploded its first hydrogen bomb out in the Pacific in 1953. Back then a Japanese fishing vessel crew, unalarmed out there, was exposed to contamination with many of the members perishing afterwards despite hospital care. Hope no tragedy like Fukuryu Maru 15 will happen again.

It was considerate of the government not to alert Tokyo that morning and stop all trains in middle of morning rush for millions. Same for Mr. Kim not to wake up all North Japan in sleep at 5 am this time as he did with the previous missile two weeks before. We all know he is not targeting Japan with his tests – at least for the time being - and I'm not the only one thinking Abe government try to step up our worries for its own gain. It seems it's succeeding: while South Koreans don't give a hoot to North's threats having lived through them 60 years, more than half of the population here, where they are new, say they are concerned. As result, Prime Minister's popularity is on rapid rise again as always when people feel danger. Some polls show Abe's already back close to 50% so no wonder the snap elections rumored in summer (Aoyama View August 18) have now been confirmed for October 22 – just as rumored back then.

The date is selected carefully before President Trump's first ever visit to Japan early November; you never know what the man is up to. Whatever, it's likely to be something politically negative for Japan – like new trade pressure or mobilization of US nuclear weapons to Japan to counter North. Or maybe North Korea has been then already destroyed and nuclear contamination is spreading all the way to Japan? Never before a world leader has threatened to destroy another country – to kill 20 million people to put it bluntly - from UN podium. This man truly makes history and so does his coldblooded counterpart in Pyongyang. There's no telling what this pair is upto next. Guess we should take their outrageous mud slinging seriously, after all.

It is not only North Korea that plays into Abe's pocket. We also have main opposition party that is busy destroying itself: Democrats' PR play with new leadership election not only failed to lift its rating from miserable 6-7%, but pushed it 1-2% further down. That the almost elected party secretary lady is freshly caught for extramarital love affair - "rysan paalta" as they say in Finnish - is political shambles that once again confirm the old convictions that this party just cannot get anything right.

Another reason for Abe and LDP to strike early is the "Koike School" that has started to take shape in order to participate in next election originally scheduled for 2019. Koike-san is now No.1 name in politics across Japan, not only in Tokyo, with voters seeking for a credible alternative for LDP that neither Democrats, Communists or Buddists have been able to provide. Even if the popular Tokyo Governor will not have an active role in the party and it still lacks official agenda, waves of new hopefuls flock in to become its candidates. As expected, the new group, now named "Kibo" or Hope, is also attracting growing number of disillusioned MP's from DPJ starting with its erstwhile "boy wonder" Goshi Hosono, who will add a handsome male face figure for Koike's largely female support group. Some LDP figures have decided to jump the ship for "Hope", too.

LDP knows that it will lose votes for this new force, but counts to maintain its 2/3 super majority together with its trusted ally Komeito. The first projection for election result tell just that: Hope Party is said to become the second biggest in the Diet – 35 seats against Komeito's 34 – while LDP will lose 14 seats from its 287, but the ruling parties will manage to keep 307 seats or exactly their 66% target. DPJ will lose even more seats to Koike group according this projection. All in all, Japan will remain firmly in LDP's control in contrast to Germany where Merkel's Christian Democrats fell from 41% to just 33% last weekend.

It's another question if voters bother to turn out to vote in the first place. In fact, 2 out of 3 think setting up such extra election is totally unnecessary waste of tax payer money. Apart from Koike fans and nearly 30% who say they will vote LDP as always before, the majority have no idea which party to vote. Prime Minister, who called up the election has to come up with an imaginative idea that this is about something else than just his selfish tactical calculation to extend his rule by one year beyond current 2019. Some say it's actually to postpone Diet’s autumn season start to avoid further debate of his two school subsidy scandals. According polls 80% of voters are not satisfied with his explanations so far.

Good economic figures and rising consumer confidence, thanks to ever tighter employment situation, naturally boost PM's popularity even if they're not really result of his policies. Poor summer weather and slightly lower than before average summer bonus probably cut retail sales somewhat so total July-September consumer spending might show decline from surprisingly good April-June, but it seems exports are coming back for rescue: August shipments to China and USA rose more than 20% and 14% to EU. This was highest monthly increase in 4 years and already 22nd surplus month in trade despite the huge imports of oil, coal and gas to cover the continued lack of nuclear power. Can't wait to hear the figure for the ongoing quarter’s financial surplus.

The incredible 4% GDP growth in April-June was recalculated to more realistic 2.5% – the figure for corporate investment proved too high to be true – yet even that is well beyond what economists deem realistic for Japan's aging economy in long term. With the rapidly declining population it means GDP per capita is rising nicely: we are all better off in average. In fact, somebody calculated that this is what has been happening already during the past 10 years of low growth. No wonder Japanese people are not as concerned of their economic wellbeing as the international analysts are. Their main concern is that the fruits are not shared as equally as before. The gap between haves and have-nots has grown remarkably here just as elsewhere.

Rapid aging is a social challenge where Japan is in class of its own. Fresh figures last week say we have now 67,000 over 100 year olds and 2 million over 90 year olds here. Those over 60 are already 1/3 and those over 65 are 1/4 of the population, something still 10-20 years off in most other countries. Happily many of the old people have sizeable savings and millions over 65 also keep working, so they are actually big consumers, too. Travel services, luxury cruises, spa hotels and health care products all thrive on this "silver market" as evidenced by heavy advertising you see in cable tv-shows with enka music and old samurai drama replays. Yet, maintaining good public health care including the last 10 years in hospital bed that many old people go through, place financial burden for the government budget beyond comparison in any other country.

There's no official news of the progress in finalizing the terms for the EU-Japan Economic Partnership deal that was "politically" agreed in July by Messrs. Abe, Juncker and Tusk, so all eyes here are now on the "TPP 11" deal between the 11 original Pacific Rim members minus USA that is said to be finalized soon. The negotiators, who met again in Tokyo last weekend, say they target announcement in the Asia Pacific Economic conference in Vietnam early November. It's evident it would give the remaining members an extra kick doing it in front of US President, who will be also there, after having their multi-year work scuttled by him almost first day he took office.

It's something new for Japan to take leadership in the agreement after US pullout as Tokyo politics traditionally follow close to lines set up by the Big Brother. Abe-san clearly wish to project a more independent profile today and taking on the role of new world leader for free trade after USA would suit him well as it's as much for this export country's own benefit as for not giving in to China's maneuverings to claim the role. Talks with Putin for economic assistance in Russian Far East and a multi-billion finance deal in India for country's first shinkansen line earlier this month were also parts of Abe's tradesman pattern before he changed on his statesman's hat for the UN General Assembly meeting in NY.

It's clear the final terms of TPP 11 deal won't be as ambitious as Obama originally set them out, especially for things like workers' rights and copyrights. It is likely that Japan is targeting TPP terms that are roughly in line with the EU-Japan deal terms – like lower tariffs and easier health requirements for food imports to Japan in return for benefits for Japanese cars etc. In Asian trade, that would benefit many Japanese companies: numerous fast food chains import their shrimp and chicken meat from Thailand while Chiquita bananas from Philippines are now in every supermarket since Itochu bought the company from its US owners.

New iPhone launch is always big consumer event in Japan: true Apple fans wait in long lines through the night for the shops open in the morning. iPhone is more clear market leader in Japan than anywhere else. Among industry analysts, it is often emphasized that while Japanese mobile phone makers lost the battle for the world as well as for home market – something rare – Apple phones are still full of critical Japanese parts technology upto 70% of their total content. The new iPhone 8 is a lightning strike against that claim as the screen is now OLED technology provided by LG of Korea instead of LED screens long supplied by Japan Display (ex-Toshiba, Hitachi and Sony) and Sharp (owned by Foxconn today).

Losing Apple screen business would mean 20-30% sales loss for these two companies that have been in financial dire already before it. Change to OLED must feel even more bitter for the Japanese companies as this technology was well on its way here years ago in televisions, but was given up by Sony & Co as the initial development cost was deemed too expensive in comparison to the estimated sales prospect. Luckily for them, LG hasn't got yet sufficient capacity to supply OLED screens to all iPhone models, but it's still a letdown for Japan's technological prowess. Happily, many other Japanese parts continue to dominate IPhones starting from capacitors made by Murata, who bought Finland's VTI Technologies 5 years ago. Apple's commitment to maintain strong connections to Japanese part makers is also in evidence in its fresh move to join in the bidding war for Toshiba's random chips in a consortium led by Bain Capital. These must be really critical parts for Apple: the company has never made so big investment in any outside company before as it is planning now.

September 20 marked exactly two years to opening match of the Japan Rugby World Cup 2019, a prelude to Tokyo Olympics. It won't be played at the new National Stadium as it won't be ready yet, but instead at Yokohama Stadium where 2002 FIFA Wolrd Cup final was played. It seems there's plenty other things that are not yet ready for this top world event. The arrangers are targeting to spread the matches all around Japan to make the game more well known here, yet ticketing arrangements, some candidate stadiums and public transports to reach them are said to be lacking from the required standards. The local arrangers are in hurry to fix all in good time before thousands of international rugby fans arrive here for the multiweek competition.

Security threat from North Korea is also looming in the horizon for World Rugby, Tokyo Olympics and, first of all, Winter Olympics in Korea next February. Already one country (France) has said it will reconsider sending its ski team so close to North border if security cannot be guaranteed. South Korea's president has proposed "Olympic peace" with North for the time of the games – there’s no official peace agreement between the two ever since the Korean War – and plans to pay "protection money" in form of food shipments to the starving North. Earlier Mr. Moon proposed to have a united Korean team in the 2018 Olympics like they had in Seoul 1988. He has also said he is ready to meet Mr. Kim for peace talks when USA and Japan say there's no point in talks as long as North lobs missiles and explodes nuclear bombs against all UN agreements.

His efforts for appeasement with North come just when others are trying to stop the crucial food and oil flowing in there from China - another sign of how difficult it is to collect and maintain a united front against North.

I wouldn't bet Moon's moves will receive much understanding from Mr. Kim. In fact, he must be laughing at the disintegrating allied front before he takes another bite of Iran caviar and French foie gras and washes it down with vintage Dom Perignon. Then it's back to drawing board for new tricks to harass Mr. Trump.

Timo Varhama  
Tokyo, September 26, 2017   


Previous Columns

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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