AOYAMA VIEW 12.07.2019
12.07.2019
Trade wars: US-China goes on, Japan attacks Korea, next US attacks Japan?
The G20 spectacle in Osaka and the Trump TV-show at DMZ are but distant bad memories, but the depressing rain continues almost every day. There hasn‘t been this wet rainy season for many years, if my memory serves me right. The downpour in Kagoshima and Miyazaki has been almost biblical, something rare before typhoon season. We‘ve been lucky that not many lives have been lost in the powerful floods there so far.
Analysts have called Osaka G20 “the end of globalism and liberalism” as authoritarians like Trump, Xi and Putin take over the centre of world stage with their friends like Saudi and Turkey in tow. Their world dominance takes another step next year when Saudi will take over chairmanship of the G20, a move few of us could think of just a few years ago. The times when this wide discussion forum of nations, expanded from the old G7, was preaching free trade, global unity, rule based relations and world harmony, will become past memory.
ABE‘S ATTACK ON KOREA
At home, too, Abe-san, fresh after leading the G20 choir into oratory for “free trade without discrimination”, took a chapter from his US teacher‘s manual and declared that exports of chemical materials critical for Korean semiconductor makers were a „security risk“ that demand special permission from Trade Ministry, a bureaucratic measure that will take time and risk Korea‘s electronic giants run out of stock and compleled to stop production. (Some say this is unlikely to happen as demand for their products is so weak today – as evidenced in their huge profit drop last quarter.)
Tokyo is saying better checks are needed because some of the material has been re-exported to North Korea, but what ever they say, we know that the move is in response to Korea outrageously allowing citizen groups through courts confiscate Japanese private companies‘ assets in the country to force them to pay their claims for unpaid salaries more than 75 years ago when they were citizens of Japan Empire and everybody was mobilized for the war effort.
I regret the Japanese response and guess so do many business people here as it is never good that business becomes a piece in political games. It also breaks Japan‘s good record in this area. Nor do I think it will force Korea‘s current leadership back down in their play – on the contrary it will provide ammunition to further agitate bad feelings against Japan. Moreover, Korea seems to have such a strong hold on Western media with its victim story that any trade move, however small and careful, will be made to look like Big One bullying Small One forgetting the cause for it.
Yet, understand that something radical had to be done as Seoul refused to stop the flagrant breach of legal protection for private property nor responded to Japan‘s repeated requests for talk to try solve the twist constructively. As well, understand that Prime Minister had started looking weak unable to protect Japanese property and that looking succesful and strong is essential for a country‘s leader with critical election approaching in two weeks time. The surveys showing wide popular support for his action confirmed that the astute politician in Abe had sensed the move right. Naturally, the popular reaction in Korea has been exactly opposite, but to spell it out dry, they don‘t vote in Japan parliament election.
The spat seems to escalate quickly just like the one between USA and China: Blue House is rushing into countermeasures while Nagatacho is already contemplating next step. Moon government say it now wants talks, yet already took the issue to WTO, even contacted Washington for help to push Japan back. Whatever, the Korean business is in panic: Samsung sent its people around the world to look for alternative supplies while CEO himself flew here for talks with his suppliers and financiers on Sunday.
I am sure that the Japanese material suppliers of the electronic giant are apologetic to Mr. Lee and and equally upset for the political intervention into their sizeable mutual business. As well, Japanese computer makers like Sony worry that cut in its Samsung chip supplies will stop its production. The trans-national supply chains work in every direction and the fact that a company of Samsung‘s size trusts 90% of its critical materials to just three Japanese medium size companies, shows how close and good the business relations between the two countries are despite all blackpainting and money demands from Korean politicians always when their popularity sinks.
Hope the leaders on both sides would change tack and start building back the good relations between the two nations, not speed up tearing them down. Abe certainly could slow down after July 21.
ELECTION OUTLOOK
On surveys, LDP might be four times more popular than the biggest opposition party and some media give it an easy win, yet almost half of the population remain non-committed. As well, Abe‘s personality is highly divisive: the latest survey shows that while more than half support him, one in 3 oppose him.
The long held doubts about Abe’s camraderie with Trump have become home to roost with the US president expected to dump Japan wishes and leave North Korea with nuclear weapons and hundreds of missiles able to hit here. Trump is also expected to demand in the trade nego that starts next month, that Japan will not only buy his beef and potatoes, but „voluntarily“ cut back its auto exports to USA like it was forced to do back in the 80‘s. He is also said to plan to take up his other old idea that Japan should pay not only all costs of US bases here, but 50% extra “for protection”, when the 60 year old security agreement comes up for re-nego next year. (Today Japan pays 70-80 pct, much more than any other host nation for US based.)
It all sounds like a classic Mafia movie.
Those-in-the-know for outlook in each voting area, are doubtful especially for the 32 single-seat places: in order to retain its 2/3 supermajority, LDP candidates should win them all against candidates put up by the amalgam of opposition parties together. If LDP becomes reliant on its buddhist and pacifist partner Komeito, Abe‘s long held dream to renew the Constitution will face complications. Skillful politician that he is, the LDP leader has publicly said that even simple majority together with Komeito qualifies for win, yet doubt this is not what he actually targets.
For majority of the people, the Constitution or foreign politics are not of much interest, it‘s the continuation of current social welfare, public pensions and healthcare as well as stable economy and business to provide good jobs and pay. The opposition parties are riding on demands to repel the October tax increase, but as hateable as such moves usually are anywhere, many here are prepared to accept the VAT rise from 8 to 10% to help guarantee what they want: good social welfare to continue.
For us outsiders, apart from sheer numbers and names, it will be interesting to see the voting rate: are people enough concerned to bother to go vote. According surveys, 55% percent have said they will, but will that hold if it‘s good weather for picnic or heavy rain and wind in a typhoon? As pointed out many times earlier, Japanese people are too content with their lives or too resigned about politics to bother to vote, not to talk about standing up as candidate.
ECONOMY OUTLOOK
The economy is likely to come haunt Abe and his claim of succesful “Abenomics”. The signs are now mixed: private spending and corporate investment were both nicely up in May, yet we got news that machinery orders, usually a good indicator of things to come, were abruptly down in June. In BOJ‘s quarterly Tankan, big manufacturers‘ business confidence had declined futher – still slightly on positive side, though – while the service industry‘s confidence continued to rise. Exports to Japan‘s two biggest markets were China at 14% decline and USA 38% up. (Incidentally, Korea was No.3 biggest.)
The US-China trade war reached its one year anniversary on July 6 and Nikkei counted the losses so far reached about USD 20 billion for each side – a bit more for US than China. In fact, for consumer electronic products made in China, the damage has hit more heavily the part suppliers in Japan, Korea and USA itself, whose products make 90% of the final product‘s value. In most cases, Chinese only assemble them together before shipping to USA.
The damage will continue: the talks in Osaka did not bring any alleviation to the ongoing tariffs, it was just US giving up on its plan to add even more tariffs and on its supply stop of critical semiconductors to Huawei – for the time being. The harm to Japan‘s exports to China will only grow.
Then there‘s Trump threats directly against Japan and the steady rise of JPY value against USD and EUR as always when the global economy faces turmoil. The latter alone is bound to cost billions for all business active in overseas through exports or local production.
THE TAX INCREASE OUTLOOK
At home, there‘s the expected negative impact from the VAT rise in October. Government has lined up billions of various help measures to counter any decline in consumer spending – in fact more than the tax increase will bring next six months to the end of financial year – yet many of them sound so complicated that they make you wonder of their effectiveness.
One example is promotion of cashless payment: you will continue to pay only 8% tax on your purchase if you pay “cashless”. In addition to big chains, thousands of small shops have invested into expensive systems to provide the service for their customers, yet many consumers doubt the reliability of loading up money on their smartphones and prefer to continue use cash or simple credit card.
Their doubts were proved last week when Seven-Eleven reported that a Chinese gang had pilfered millions of worth of goods in just one day driving around from store to store with stolen identities of people registered in Seven-Eleven‘s cashless pay system. Many say the total sales of the convenience store giant will take a hit for losing customers‘ confidence on its overall excellence, so easy was it to break through its safety measures. The chain caused bad will already earlier this year with its demands that the franchise owners must keep the shops open through the night even if there is no customers and they have to stand there by themselves as no willing staff is available.
FINLAND CONNECTIONS
The new Crown Prince‘s visit to Finland was a prestige win for Finland‘s image here. How come he selected such small country for his first overseas trip in his new capacity? The two day program was crammed with more culture than any visitor to Finland probably ever had: National Museum, National Art Gallery, National Archives, new Helsinki City Library, old Turku Cathedral, a kindergarden, a nursery and a homestead farm were all there. Sibelius music, too, that my musician friends played for the Imperial couple at a Japan Embassy reception.
The visit did not attract much media attention in Finland and neither in Japan, where interest for the Crown Prince seem to focus on his oldest daughter‘s marriage plans with not-so-wished for candidate she met in her university. Still, when I finally caught a 10 minute TV shot of them in beautiful summer Finland with Finlandia Hymn piped in the background, I could not help feeling that this visit again enhanced the positive image that Japan has about my home country.
Talking about culture uniting the two countries, two recent Sibelius concerts at Suntory Hall were sold-out successes: one featuring young conductor Pietari Inkinen and not much older violinist Pekka Kuusisto, the other celebrating 100 year anniversary of Akeo Watanabe‘s birth in Finland. The famous conductor, born in Karelia that is today Russia, was the founder of Tokyo Metropolitan Orchestra and recorded all Sibelius symphonies with it as first in the world. Thanks largely to him Sibelius remains so exceptionally popular in Japan, more than anywhere outside Finland.
There was an interesting photo exhibition of Watanabe‘s career and family life at the Hatoyama family mansion at Edogawabashi – he married to this famous political dynasty who, in turn, were connected with the Ishibashi family of Bridgestone fortune. The stately mansion from the 20‘s was grand, indeed, yet the story goes Mrs. Watanabe, daughter of the family scion who founded LDP, never failed to cook her husband‘s favorite “kaalilaatikko” cabbage stew once a week or bake “tiikerikakku” cake for his birthday.
The solists in the Watanabe concert were Akeo‘s sons Kikuo and Tamio, both excellent pianists, and Etsuko Terada, Kikuo‘s wife and an outstanding violin player. Kikuo received last year the Sibelius medal, an award for promoting the great composer‘s music, rarely given to anybody outside Finland.
Ex-president Halonen was present in the other concert: she still enjoys big following here for her role promoting women‘s position in the society – as well for her face that perfectly match a popular female comedian. She was here in her first mentioned capacity: to open an art exhibition of Finnish female artists‘ paintings and sculptures from the 1900‘s to this day. Please go to see if you have time and it continues rain outside.
A bit different Finnish culture comes here next month with Finnish ice hockey league team Mikkeli Jukurit playing a few matches with Japan league team Nikko Ice Bucks, who has a Finnish manager. The Tokyo match will be on August 18 at Dydo Drinco Ice Arena and hope all Tokyo readers will show up there to support the teams – you can choose which one. (For more information on tickets, arena address and so on, click here)
There might be similar football matches with Barcelona and Chelsea in Tokyo this month – both teams have a Japanese main sponsor – but that‘s nothing in comparison to this ice hockey match for those with Finland spirit.
Timo Varhama
Tokyo July 12, 2019
