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 AOYAMA VIEW

From North Korea's missiles to Turku Terror and US Navy Mishaps

Never a dull moment here. It looked like North Korea's expected missiles turned out just 3 short ones, but then we got the Big One flying over Hokkaido this morning. US president must be satisfied his threats made Kim steer away from Guam to "over there" as Trump famously once vowed. Pentagon was also satisfied to note "it did not pose any threat to United States". Guess same for Chinese and Russian bombers circling around Japan.

Seems Japan has to worry not only about its neighbors but also of US protectors, who have been bumping with civilian shipping and running aground in Tokyo Bay. Two of the US Navy's Aegis destroyers based in Yokosuka, key element in Japan's anti-missile defense, are now out of play and the rest are pulled back to base, just when they are really needed. On top of all that we got news of terror in Barcelona and even Finland.

The "Turku terror" was big news for all Finland friends and Moomin lovers here. "Now it has happened even in peaceful Finland" is the general verdict. Yet, it was not without precedent and clearly something just waiting to happen. Deranged young Finns have attacked schools and shopping centers with guns and bombs several times before. This one was a frustrated young Moroccan – same as the Barcelona attackers and remarkably not an Iraqi, Syrian or Afghan who made most of the 30,000 refugees to Finland two years ago. Guess those people appreciate to be anywhere away from death and destruction at home whereas Moroccans just escaped government oppression and poor economy at home.

Held in dormitories waiting for their asylum application processing without permission to work and engage with the society, the immigrants must all feel forsaken and frustrated by now and hence easy prey for radical propaganda over the internet. Like this youngster, many have already received negative decision for their stay, but are fighting Finland's weak deportation measures. In fact, it's surprising that this kind of tragedy has not happened earlier and there's no guarantee it won't happen again.

Finnish media emphasized the positive sides in the tragedy: spectators, locals and immigrants alike, bravely fought the attacker the best they could and the police got their man in just minutes – alive and not shoot dead as often elsewhere. This sounds all good and helped to mitigate the expected backlash: social media went wild with threats against foreigners but only one immigrant-owned business in the town was vandalized.

With North Korea failing to lob missiles over Japan(until this morning), no huge natural catastrophe recently, people feeling good about the economy and politicians on holiday, the US Navy mishaps – following series of accidents with Marines' tilt-rotor Osprey copters in Okinawa, Hawaii and Australia – have caused concern in Japan instead.

Two big and two smaller collisions in short time seem to indicate serious deterioration of discipline and/or skills at US Navy. Its top command ordered the whole 7th Fleet, some 70 ships, home to Yokosuka for thorough review of what's wrong and fired the commanding admiral. Pretty embarrassing for the US top brass, who happened to be visiting here and in Korea to confirm that the mighty US forces stand solid with the allies against the threats from the North. China did not miss the opportunity for gleeful schadenfreude telling all the world that despite their claims to be in Asia to ensure safety, the fumbling Americans rather are a traffic risk for others. Seems the table is set for plenty PR work for the new US ambassador, who finally arrived here after six month delay. Maintaining normal relations with foreign countries, even the closest allies, do not rank high in today's US government list of things to do. Inviting foreign leaders to White House, gilded NY penthouse or Florida golf resort to be bathed in sugar coated suavities only to attack many later with vicious tweets, is no substitute for regular contacts between working level officials. Hope Finland President, who was there yesterday, will not get backstabbed afterwards.

As always, the official Japan keeps its face and asks no unnecessary questions. FM Kono and DM Onodera just arrived back from "successful" meeting with their US counterparts in Washington. Guess it was not so difficult to agree on unified course with two of the few sensible guys in the Trump government, Tillerson and Mattis. It's another thing what their Boss says later – it does not always match. Just wait for his next tweet.

Taro Kono, a straight talking realist, said all efforts should now focus on ensuring proper implementation of the new sanctions against North Korea than how they turned out in the past. Think he shares my concern that not all parties play the game fairly. North Korean products have long tradition to be sold on world markets repacked as Chinese. As always, there are those who say This Time it's different, but track record is not convincing. As the old Romans said: "Vestigia terrent."

Both US and Japan announced extra measures against selected North Korean and Chinese companies with central roles in Pyongyang export-import trade, however, the black list covered only a few of over 5000 Chinese companies actively involved and stopped again from touching Chinese banks who finance it all. In contrast, the US measures to halt the trade with Iran saw big European banks levied fines up to USD 12 billion. North Korea is still treated with silk gloves. It suits the picture: the silk worms, after all, came from China.

Moving to more mondaine things that have not been openly discussed, happy that some experts finally have pointed out the lunacy to schedule the 2020 Tokyo Olympics to this hottest time of the year. Risk of heat stroke is high for top athletes as well as for thousands of incoming tourists, who have no idea of how hot and humid summer Tokyo is. When locals accustomed to the heat are being taken to hospitals by hundreds every day, there's good reason to expect there will be hundreds more. Can hospital facilities and ambulance capacity handle all that? Who pay the costs and how to arrange communication in Japanese? And how about risk of a fatal case on live-TV for a top athlete pushing himself or herself beyond capacity? It sure would not make good PR for the Olympic organizers and sports itself.

Average Tokyo temperature in July 24 – August 9 when the 2020 games are scheduled, has been 31-35 C over the past years. Counting in the humidity factor it's effectively much more. A Todai professor measured the course of the marathon route: it was 30C already at 7.30 am at the National Stadium start time and reached 35C at halfway turning point in front of Asakusa Kannon. The return from there back to Stadium was judged extremely dangerous.

The 1964 Olympics were held in October, a much better time for sports here. International sports schedules based on money is the reason Olympics are these days always mid-summer. It was mid-winter in Rio, but it sure isn't here. Football World Cup 2022 will be played also mid-summer in even hotter place, Qatar. Money seems to be more important for IOC and FIFA than human health. Time to rethink that?

Like many others, Prime Minister Abe escaped the Tokyo heat during the Obon holiday week to his summer place in Kawaguchiko, Fuji Highland. It was just three days at his own Finnish log house, not 3 months in a government-owned granite mansion like Finland president, but nevertheless it seemed to bring smile back to his face, something we have not seen in long time. Photo of a dinner together with three ex-PM's circulated in the media: his rival and deputy Aso, his old faction boss Mori and the old maverick Koizumi, who seemed to be falling off from his chair for laughing out so hard. PM continued to smile still last week when gathering up his ministers for the first post-holiday meeting: the surveys are showing his popularity is rising again from the recent depths.

Maybe it has not been only fall in popularity that has worried Abe: there's concern that his earlier health problems are back. Grapevines report of frequent, multi-hour visits to Hotel Grand Hyatt's exclusive fitness club with doubts that they're not for exercise, but camouflage to consult his doctors without public getting to know about it. We all remember how Abe had to give up his first premiership 10 years ago due to acute gastritis problem that made it impossible to travel and attend long meetings. It has stayed under control with new, strong medicines for 4 years now and let us hope this will continue. If Abe is to be defeated, it should not happen by such menial personal problem.

Let's see what reforms government can achieve during the coming autumn season. At least, it seems Abe's pet policy to change the Constitution does not seem to get traction even inside his own party: another gossip tells that The Leader's orders for a special LDP committee to urgently hammer out unified stand for the issue did not go down too well: the first meeting this week was cancelled as some members preferred to attend a golf competition instead.

There's been many negative comments about Toyota taking just a measly 5% share in Mazda - there isn't much you can achieve with such a small ownership according to Western business logic. Foreign investor activists have always claimed such cross shareholdings, still common in Japan, are without any real impact and just waste of precious money. I agree with the money waste, yet can see that for Japanese companies the share swap is a symbolic expression of the commitment of the two involved companies' will to work together. The smaller it is, the less "money waste". The actual core of the Toyota-Mazda deal was, of course, the agreement that Toyota's new US factory will also build Mazda's, who have so far been without any local production in US, and this will release capacity at Mazda Mexico to work for Toyota, who, in turn, can then postpone its own new plant project there beyond Trump time, for safety's sake. Let's see what's the next step on the two partners' mutual path.

It's crazy that business decisions in USA must be made to suit the whims of its political leader. After all, it's not Russia, China or Venezuela, but "Land of Free Enterprise"!

Overall, the cross holding between Japanese companies has been remarkably diluted from the bubble days in early 1990's when it made up half of the stock market; these days it's about 15%. Especially banks and other financial institutions have actively reduced their crossholdings so that they make today only 4% of the market's value. Yet, some companies stick to traditions: it is said Toyota owns at least 2% in almost 70 companies in Japan.

Toyota's new business deal in Japan is easier to understand: Seven-Eleven has agreed to change all its delivery trucks to Toyota fuel cell powered two-tonners. It's a remarkable step forward for Toyota's FC technology and probably a sizeable order, too. With over 20,000 Seven-Eleven shops across Japan, the number of trucks to service them twice a day must run in thousands. For Seven-Eleven, in turn, it's mostly about environmental customer image: clean and quiet trucks on narrow streets instead of polluting diesels must be agreeable for the public. Actually, many of its trucks already are hybrids and more than half of its stores already get their electricity from their own solar roof panels, something well relayed to consumers in the company's daily TV ad barrage.

A remarkable M&A in retail business should not go unmentioned: highly successful discount chain Don Quijote takes 40% share in Uny stores that Family Mart took over recently, ostensibly to help run them better, while Family Mart will launch its convenience store branches in selected Don Quijote properties. It is said the small and nimble newcomer "Donki" is taken on board by much bigger, Itochu-owned Family Mart to give it fresh retail know-how and young energy to fight its rivals Seven-Eleven and Lawson. Or is it that "Famima" needs fresh capital and new real estate to expand? Maybe both.

To finish off business news, Toshiba finally settled on suitors to buy its random chip unit: the public financial institutions INCJ and DBJ will take on most of it as together with US fund KKR as planned, but the Korean chip maker SK Hynix was dropped in favor of the noisy US Western Digital. It is said that the decision comes from INCJ, who was afraid that, unless taken on board, Western will put up fight in US courts that will ruin the new company's business. INCJ can ill afford this venture go sour as it is already licking wounds from an earlier similar bailout, namely Japan Display, another public-private firm established to take over the lossmaking display units of Sony, Hitachi and Toshiba a few years back. Instead of successful turnaround under INCJ guidance, the company just announced USD 1,3 billion loss and major restructuring to shed 1/3 of its 10,000 jobs. An ominous example of what could happen to the new Toshiba memory chip company, too. Guess I'm one of the many who see little business sense in such government bail outs.

Politically, it certainly suits Abe government to look favorable for US demands. It already promised to see that Westinghouse, Toshiba's bankrupted US subsidiary culpable for its downfall, will pay out all US debtors' demands. "Better watch out for those tweets, boys!"

In sports, Japan followed its positive record in Athletics World Championships with even better one in World Wrestling Championships: 4 gold for women and one for men. They're no graceful geishas, these ladies! Some new names there, too, and no more veteran Saori Yoshida, who won the Worlds 13 times and Olympics 3 times. The ski jumping season has also started well for Japan's two top girls, Sara Takanashi and Yuki Ito from Hokkaido. Expectations for Winter Olympics in February run high.

Less good news from men. Hideki Matsuyama fumbled in the last round to fail to win the US Open Golf as many had expected from the World No.2. Tennis star Kei Nishikori has dropped out from top tournaments time after time and fallen way down in rankings from his earlier No.4. In football, the Blue Samurais have their last chance on Thursday to win their ticket to the 2018 Russia World Cup in the home match against Australia. Failing to win in Saitama Stadium would lead to the first time since 1998 when Japan would not be in the finals. The Socceroos were very strong when I saw them play in Finnish TV in June against Germany, but I'll be holding my thumbs up for Japan tomorrow like millions of others.

Timo Varhama  
Tokyo, August 28, 2017   


Previous Columns

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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