Finland's onmarch continue, Japanese companies awash in cash|
but Prime Ministerfs headaches grow
Finland's position in Japan took a step forward again last week. Economy Minister Lintila's visit was well received based on new EPA with EU and Strategic Partnership with Finland agreed three years ago. Business Finland got Japan's own trade organization Jetro as co-organizer of its business seminar – same public co-operation as Tekes got from Ministry of Environment for last year's Circular Economy Forum. At Slush Tokyo, Tokyo Governor Koike, former Finland Friendship leader in Parliament, came to open the event, already 5th and bigger and better again. In movie theaters, winter Lapland and summer Helsinki scenery got exposure to half a million viewers as Yuki no Hana, a tear jerker story shot in Finland, proved one of the top movies this month thanks to its popular young actor/actress pair.
Also in TV, Finnish business has been visible every day this week in broadcasts from "Stora Enso FIS Nordic Ski World Championships" in Seefeld, Austria. Finnish forest company's name has been widely displayed on every participant's number tags and countless billboards. Finnish athletes have not been as visible on result lists even if skiing and jumping used to be our champion sports. Luckily we have our Super Hero Iivo.
We FCCJ members got a breakfast meeting with Minister Lintila and his entourage to exchange views on Japan business. We also met there Ville Skinnari, Member of Parliament from my old home town and Japan Friendship leader in Parliament. Think I was not the only one impressed of his wide knowledge of and keen interest in Japan. It traces back 20 years to when he was young trainee at Marubeni. If his party wins in Parliament election next month, Ville could be in the new minister line-up.
At Embassy, also heard that just a week before Finland Defense Minister had visited here to sign an agreement on defense industry co-operation between Japan and Finland. That's another remarkable step forward that had gone unnoticed. Most people know that the big local industrial companies, who develop and produce most of Japan's defense equipment, got permission to do business with other countries than US only a few years ago. Ever since British and French defense companies have radically stepped up their presence here to challenge the traditional US dominance. What only a few people know is that Finland, too, has over 100 defense related companies, who develop and produce advance equipment from sharp-shooter guns, mortars and mines to communication and cyber security. Now they have an official blessing to seek business co-operation here – a highly potential new opening.
Japan's space technology took a step forward last week, too, when Hayabusa 2, a small probe, landed successfully on an asteroid 300 million kilometers away and collected samples that may provide us with new information how life started in our universe billions of years ago. It is thought that the asteroid contains large amounts of organic matter and water from that time. It's impressive that Japan focuses on scientific research in its space exploration when some others talk about space wars and killer satellites. In business, Japan is targeting to become a satellite launcher for countries without their own rockets on par with US, Russia and European Space Agency.
A step backward in general business outlook with official export figures confirming the decline in China sales that some companies earlier said impacted their profits. Of course, not all companies are involved there and, among those who are, there are always exceptions - fish that swim against the currents. Like Softbank, who reported 62% rise in operating profit and 52% rise in net profit when all other global technology companies reported big slide. Sure, almost half of it came from its investments, but even there its biggest bet is in China: Ali Baba, where Softbank is the biggest owner after Jack Ma himself, saw USD 200 billion decline in value following Apple's USD 300 million slide that kicked off panic in Wall Street. How Son-san then managed to surprise us once again positively escapes me. The old financial wizard was talking about derivatives.
Despite the China slowdown and threat of further trade wars, Japan's big companies' position is today solid. The latest estimate for cash that they hold now is JPY 446 trillion (about USD 4 trillion) and they are finally using some of it, too. In addition to pouring money more than before to foreign acquisitions - totally JPY 19 trillion (USD 175 billion) last year, almost triple of 2017 which was record at time - Japanese have followed American example and used big wads of their cash to buy back their own shares to prop up their corporate value. It is estimated that Japanese buybacks will reach JPY 8 trillion (USD 7,2 billion) during FY'18 that ends next month, an all-time record. This helps to patch up the hole left by retreat of foreign "fast money" from Tokyo, totally JPY 13 trillion last year. The difference to US share buy backs is, of course, that Japanese companies did not need a big tax cut from government to do them.
PRIME MINISTER'S CHALLENGES
Tokyo Stock listed companies' EP values look still cheap in comparison to their US counterparts. Seems many long term foreign investors, too, have turned sour on slow progress of Abe's much boasted economic reforms. Another good reason for Prime Minister to speed up his moves on that front, too.
For this week, however, PM has been busy with urgent political challenges. First, Okinawa US base poll turned out strongly against the shift from Futenma to Henoko – as expected. Second, his buddy Trump is meeting the wily North Korean dictator again and anything might come out of that. Abe-san has to explain to voters if there's no concrete progress in denuclearization despite repeated promises and in releasing Japanese abductees, a target he has invested big political capital. As well, if there's a "peace deal" as anticipated – no official peace agreement is possible without China, a major war participant as much as USA - what consequences will that carry? Is it an excuse to reduce US forces in Korea even if North remains a nuclear power with missiles and a million man ground army close to South's capital? If so, will that lead to gradual pull out of US military presence in Asia and security cover for Japan? Like other in Trump's circle of servants and "friends", Japan PM faces constant challenge to try explain the erratic US president's moves. Having just been played out by Putin in his own peace initiative, another let down by Trump would make Abe-san's credibility as global leader look to his voters pretty doubtful. (After this went out, we suddenly heard the meeting ended dud, after all, despite all fanfare and positive statements of progress until last minute. Confirms again that anything can happen with Trump. Talk is cheap, results are more difficult.)
Okinawa vote is a tricky practical challenge. While central government said already in advance that the non-binding poll has no impact on its ongoing building work, treating local people's concerns in high-handed manner would make LDP look a bad choice in the nation-wide community election in April. And if the ruling party takes a hiding there, it might turn the expected loss in July Upper House election even bigger.
Constant losses do not spell good for a football team manager and neither for a party leader. . Many younger leaders in the party are waiting to take his place. Then again, there are also devoted supporters, who are already talking about changing the party rules again to allow Abe-san fourth term as leader.
That reminds of what Finnish parties did with a President we once had.
Tokyo, February 28, 2019
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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.