猿の尻笑い

The Monkey Has Laughed His Last

2005-04-22T19:52:00.000-04:00

This is officially the last posting on this blog.

For there are too many other pithy, online summarizations and oversimplifications of the world with a far greater readership than this waste of time.

さよなら

America must stop dictating our lives!

2005-04-20T12:35:00.000-04:00

So shouts the dictatorial Asian figure with an unmistakable resemblance to a certain other Asian dictatorial figure in this Russian language television ad for Dell Computer.

Not one-hundred percent certain it's authentic, but it appears real enough and seems to have even won two awards.

Machimuri to Visit Beijing

2005-04-13T13:40:00.000-04:00

From a MOFA press release:

Mr. Nobutaka Machimura, Minister of Foreign Affairs, to visit China

April 12, 2005

Mr. Nobutaka Machimura, Minister for Foreign Affairs, will visit China (Beijing) on April 17 (Sun) and 18 (Mon) subject to Cabinet approval.
During his stay in China, Mr. Machimura will have Japan-China foreign ministerial talks with Mr. Li Zhaoxing, Minister of Foreign Affairs, to exchange views on such matters as Japan-China relations in general, the North Korean situation, and other issues facing the international community.

(END)

This will certainly up the ante on the cost side of the Chinese government's cost-benefit analysis described in the previous post.

More anti-Japan protests this weekend?

2005-04-13T10:51:00.000-04:00

The Yomiuri Online is reporting this morning that there is a wide and growing internet-based call for another anti-Japanese protest this weekend, this time in Shanghai.

According to the report, internet postings are calling for wide spread participation in an "anti-Japanese demonstration procession" in the city's central square on the morning of April 16th, but are urging restraint from violent acts.

Shanghai authorities reported yesterday in a scheduled briefing that they have not received any formal petition for permission (for the protest), but that the city government is closely keeping an eye on the situation and "has the abilityto protect the safety of all the City's foreigners and foreign enterprises."

Most everyone is probably aware that large protests took place last weekend in Beijing, Guangzhou, and Shenzhen. (No need to rehash details on TLM, but fellow bloggers Joe, the guys at Mutant Frog and Coming Anarchy, as well as the Marmot, have all addressed this and related issues in detail.)

It is often aruged that the Chinese government has used anti-Japanese in the past as a political tool to strengthen its own hand domestically. Some observers might even go so far as to say that such behavior continues unabated. On the other hand, having gained control of the country in the past largely on a wave of popular rural discontent, it seems likely that the Party is very well aware of the potential danger in allowing public protests, even against Japan, spiral out of control for fear of popular backlash against the government. Such fears might explain the tight media control over coverage of last weekend's protests and the close watch over protesters by Chinese police forces.

By allowing these earlier protests to take place, the government might also have eased some of the pressure that has been building against Japan for some time now. Arguably, suppressing the protests, either through a visible dispatch of force, or the use of force could easily spark a backlash or at least added to that pressure.

But because popular sentiment cuts both ways, a balance must be maintained between allowing the people to exercise their frustrations, but ensuring that those frustrations do not escalate to the point of damaging the Party in some way, be it direct domestic opposition, or external international pressure generated through criticisms of Chinese behavior.

How far should the demonstrations be allowed to go? How widely shoud the media coverage be? And how effectively can such coverage be controlled? And finally, will the government allow this thing to take place?

Summertime in Japan

2005-03-15T23:55:00.000-05:00

As anyone who has lived in Japan is probably aware, the Japanese do not adjust their clocks by an hour in spring and winter to maximize daylight hours as do Americans (except those in Arizona), Europeans, and practically every other industrialized nation.

(This isn't meant to be another unjustified critique of Japan's failure to yet again conform to Western standards and practices. Personally, I've very little to nothing at stake in Japan's adoption or refusal to adopt daylight savings. Aside from a few days confusion each April and October over whether the time difference is now 13 hours or 14 hours between Japan and the East Coast, perhpas 40 seconds or so of amazement when I first discovered the absense of daylight savings during my first visit to Japan, and the extra cumulative 100 yen that early evenings have added to my electric bills while in Japan, I've given little thought to the matter.)

Readers of John Dower's Embracing Defeat may recall his brief mention of widespread public opposition to the introduction of daylight savings time by occupation authorities in 1948 (It's at the bottom of pg. 105 of the hardbound edition if anyone happens to be interested). The imposition was overturned in September of 1951.

Since then there have been sporadic efforts to reinstitute the system, and the topic receives occasional mention in the press. Supporters have included the Ministry of International Trade and Industry (for reasons of energy conservation), while the move has been opposed from such unlikely quarters as the Ministry of Education (allegedly out of fear that the extra daylight hours would distract students from their after-school studies). Shiga Prefecture and Hokkaido Prefecture have even tested out the system. The latter has even launched an online promotional effort complete with a video, detailed charts, and a "summertime screensaver" to bolster the effort! Currently, a group of legislators is considering a readoption of daylight savings.

With that as background, today's Asahi print edition carried the results of a public opinion poll surveying current public attitudes towards daylight savings time. According to the results of the poll, 73 per cent of Japanese questioned "knew about" the daylight savings system, but opinions were almost evenly divided on the question of its application in Japan, with 39 percent opposed and 38 per cent in favor.

Even more interesting were the reasons (selected by participants from a choice of four reasons) cited for opposition and support. Among those oppposing daylight savings, the most popular justification (32 percent) was its incompatability with Japan's geography and climate - specifically, Japan was located at a lower lattitude than the United States or Europe. 27 per cent of those opposed said it would adversely affect their bodies daily routine. 26 percent said they worried that it would contribute to longer working hours, with a large number of 30 to 40 somethings seemingly worried about the difficulties of leaving work while it was still light outside. Finally, 9 per cent opposed it on the grounds that it would be too time consuming.

Among supporters, 35 per cent, said they would like to work to finish with daylight to spare, with a large number of 20 to 30 somethings falling into this category. 31 per cent cited reasons of energy conservation, again with a large number of 20 somethings here. 31 per cent said it would be good for their health, and 6 per cent felt Japan should adopt daylight savings to follow the example of the majority of other developed countries.

Incidentally, nearly all of the above cited reasons are reflected in this commentary from Japantoday.

The Shameless "Debate" on Social Security Reform (and something on North Korea too!)

2005-03-12T17:14:00.000-05:00

Due to time constraints I try to limit the rather sparce postings here to issues related to East Asia. And I certainly strive to avoid the messy subject of U.S. politics altogether, but I occasionally run across something like this and against my better judgement cannot resist.

WaPo ran a story today on the presidential roadshow to make the case for Bush's private social security accounts. This isn't going to be an economic criticism of the President's plans, but his tactics certainly leave something to be desired in terms of honesty and display a certain lack of trust in the judgement of the public. Here's a sample of the Post's description of the latest show, in Memphis on Friday.

The White House follows a practiced formula for each of the meetings. First it picks a state in which generally it can pressure a lawmaker or two, and then it lines up panelists who will sing the praises of the president's plan. Finally, it loads the audience with Republicans and other supporters.

The night before the event, the chosen participants gathered for a rehearsal in the hall in which the president would appear the next day. An official dispatched by the White House played the president and asked questions. "We ran through it five times before the president got there," Darr said.

What a sham.

And to think that the people were actually outraged over Rumsfeld's embarrasment by the Tennessee National Guardsman last December.

Not as though this is the first time that the White House has shamelessly combined politics and theatre. As the post notes, this was quite a successful model during the campaign as well. And let us not forget the nice photoshop work on that campaign ad last year. The pun may be old, but whatever it takes, indeed.

Finally, in keeping with the East-Asia focus of this blog, and just so there are no accusations of partisian hackery, here's a link to a story from WaPo's arch-nemesis on Secretary of State Rice's unapologetic stance towards North Korea after labelling them an "outpost of tyranny."

Fair and balanced.

US Debt and the RMB Peg

2005-03-12T16:48:00.000-05:00

Last week I was engaged in this discussion over at Coming Anarchy on the topic of "Why do foreigners buy US debt."

For anyone interested in the subject, I strongly suggest checking out the latest post on NYU Professor Noriel Roubini's always excellent Global Economics Blog.

And for anyone who likes what they see, I also recommend his Feb. 7th scathing critique (scroll to the bottom of the Feb. archives to read it) of Presidnet Bush's budget plan.

Here's a small sample of Professor Roubini's take on, "Why China should move its peg and pull the plug on the US reckless policies."

I arrived today in China for 10 days in the Middle Kingdom: wonky policy conferences, meetings with officials, policy makers, academics and market folks. In my paper with Brad on the unraveling of Bretton Woods 2 and the hard landing scenario for the US, we have argued that it is increasingly in the interest of China to pull the plug on the US as maintaining the peg and accumulating increasing amounts of forex reserves is increasingly costly. The arguments are at least ten...

NBS takeover plot thickens, but it's still too early for optimism that Japan is ready for change

2005-03-12T00:00:00.000-05:00

Recent developments in the ongoing takeover battle between internet upstart Livedoor and old guard Fuji Television for control of Japan Broadcasting are making things interesting for Japan watchers.

Yesterday came the unexpected news that the Tokyo District court had ruled in favor of Livedoor, ordering NBS to halt its intended direct issuance of new shares to Fuji in an effort to dilute Livedoor’s holdings. Yahoo! Asia News ran this rather optimistic analysis of the ruling, describing the court’s decision as, “turning the clock forward on Japan’s capital markets.

Experts say the closely watched decision goes in line with Japan's goal of easing regulations on the financial sector to gain a global competitive edge, easing worries that foreign investors otherwise might have shied away from making further investments in the country.

But if foreign investors were reassured by this positive news, then surely they were equally disaopointed by reports from sources inside the the ruling Liberal Democratic Party that the government was moving towards further restrictions on the activities of foreign companies.

An LDP panel on legal affairs decided at its meeting Friday to ask the Justice Ministry to change the bills regarding restrictions on M&As by foreign firms to postpone theimplementation of the step to 2007 from the originally planned 2006, the sources said.

The planned bill on M&As by foreign firms also include measures against hostile takeover bids, such as the so-called poison pill, designed to discourage bidders by increasing the takeover costs usually through the issuance of equity warrants.

So while Livedoor appears to have scored at least a temporary legal victory in its efforts to get at Fuji Television through control over its largest shareholder NBS, the successful passage of such a bill by the Diet would ensure that there will be no such future victories.

Why? Consider this observation from Youichi Yanai, chief fund manager at Tokyo Mitsubishi:

Permitting the use of `poison pill' tactics would leave investors highly skeptical about the overall Japanese market and the very meaning of having a fair and functional capital market...

So much for easing the worries of foreign investors.

And, if these mixed messages weren’t confusing enough, today came reports that Fuji Television may be reconsidering its tactics and might seek out some sort of cooperative partnership with Livedoor.

Fuji Television Network Inc. Chairman Hisashi Hieda said past midnight Friday that his company may form a business tie-up with Livedoor Co., voicing the possibility for the first time in the monthlong battle with the Internet company over control of NipponBroadcasting System Inc.

Hieda has previously categorically rejected a tie-up offer from Livedoor and the about-face was apparently triggered by a court ruling earlier Friday in favor of Livedoor over the acquisition battle.

"If there are some merits, we can consider forming a business alliance with Livedoor," Hieda told reporters following the decision by the Tokyo District Court to bar Nippon Broadcasting from selling massive equity warrants to his company in a bid to thwart Livedoor's hostile takeover bid.

So, should these developments to be taken as a positive sign that Japan is finally changing, or might it merely be once again creating false hopes? I'm not holding my breath, but this is one case where I would happily admit to being wrong.

Still, the type of drama currently unfolding in the court system has all been seen before. In a worst case scenario, this may be turn out to be a repeat of the fight late last year between megabanks Mitsui Sumitomo and Tokyo Mitsubishi over a merger deal with ailing rival UFJ. Although Mitsui Sumitomo appeared to be gaining ground early on with its victory at the district court level, the Supreme Court later overturned the lower court’s ruling, effectivly giving Tokyo Mitsubishi the green light to proceed with the merger, much to Mitsui Sumitomo’s chagrin. If NBS appeals yesterday’s ruling, as appears likely, there is a good chance that the Supreme Court will rule in its favor.

In the past, there have simply been too many examples of outsiders, both Japanese and foreign making progress and then having the door shut in their faces by defenders of the good old days.

ROK-Japan Economic Partnership Agreement Plot Twist

2005-01-31T16:58:00.000-05:00

The joint North-South Korean industrial park that began partial operations in Kaesong last December may prove to be yet another stumbling bloc along the road to completion for the economic partnership agreement (EPA) between Japan and South Korea, reports today’s Asahi. A small number of South Korean firms have already begun to produce household goods for sale south of the DMZ, and the park is expected to expand operations during the next 12 years to host some one thousand firms and employ over 100,000 North Koreans.

Needless to say, should this project ever get off the ground as envisioned it could provide huge and desperately needed stimulus to the North Korean economy. Of course, for the North Korean government there are as many potential dangers as benefits involved in this project. But for now the lure of growth seems to outweigh the risk of greater openness, and Pyongyang appears to be betting that this will somehow strengthen its hand. And therein lies the rub for the Japanese.

Since the North Korean government admitted to the abduction a number of Japanese citizens in September 2002 during a visit by Prime Minister Koizumi, relations between Tokyo and Pyongyang have steadily worsened. Although Japan has managed to secure the release of five of the abductees as well as their families, a number of Japanese remain unaccounted for. Included among them is Megumi Yokota, who was abducted 27 years ago at age 13, and who has become a magnet for sympathy for the Japanese public due to vigorous campaigning by her parents to publicize the issue. The North managed to pour fuel on the fire late last year when DNA testing revealed that remains believed to be those of Yokota-san belonged to two unidentifiable persons.

The North’s refusal to recognize the test results and intransigence in further discussing the matter has infuriated not only hard-liners within the Japanese government, but also an overwhelming majority of the Japanese public. One recent public opinion poll by the Yomiuri Shimbun showed three-quarters of respondents favoring the imposition of economic sanctions against the North, an action the North has declared it will consider an act of war.

Now the South Korean government is sending signals that under the terms of the economic partnership agreement, it might insist Japan to recognize goods produced in Kaesong as South Korean in origin. South Korea managed to gain such a concession from Singapore, with which it concluded an FTA last November. Although the Asahi quotes one South Korean trade official as saying that the same terms will be insisted upon with Japan, the Japanese foreign ministry is remaining coy on the issue and has refused to comment since the South Koreans have yet to make such a request formal.

It’s a little difficult at this point to read into the intentions of both sides based only on what was reported in the Asahi. However, if the South Korean government eventually does formalize this request it will unquestionably add yet another level of complication to already difficult negotiations (past problems include automobiles, agriculture, and even seaweed) by facing the Japanese with the extremely unpleasant proposition of indirectly subsidizing Kim Jong Il’s regime through its own trade policy.

And given present Japanese public sentiment towards North Korea this is a politically unpalatable option. Furthermore, asking the Japanese government to do so threatens to solidify opposition to the agreement within Japan. Protectionist interests already pressure LDP lawmakers against further trade liberalization, especially in sectors such as agriculture, which is a traditional support base for the party. A South Korean request that Japan treat Kaesong-produced goods as South Korean could have the effect of adding a new dimension to this pressure if conservative and nationalistelements take up the cause. And with the anti-North Korean sentiment among many LDP members, they probably wouldn’t have to push very hard.

MOF = Ministry of Futility?

2005-01-28T01:47:00.000-05:00

A story this rich only comes along once in a blue moon, even in Japan. I couldn't help but have one of those moments where I wonder, "what in God's name is the Japanese government thinking?" At the same time, it's all a little sad because I know exactly what they are thinking and why they are doing it - they've little other choice.

According to the Daily Yomiuri, officials from the Ministry of Finance have been travelling to major world financial centers (ie. New York and London) in an attempt to attract foreign buyers for Government Bonds (JGBs).

What's the problem with this one might ask? Wasn't everyone complaining a while back about how closed and backward the Japanese financial system is?

For starters, no one (outside of Japan, at least) in their right mind would conceivably think of buying a single JGB, let alone enough JGBs to meet MOFs fund procurement needs to meet debt obligations on the large number of domestically issued JGBs that will begin to come due in 2008. Since the government began to first issue debt instruments in 1965, it has had to rely in some form or another of coercing Japanese banks to buy the them, primarily because the returns were so low that no investor would touch them otherwise.

This worked well for a while because MOF could force banks to buy them, hold them for a year, and then sell them back to the governemnt even at below market interest rates. Beacuse of the tight control MOF weilded over the Japanese financial system, the banks had little choice but to grin and bear it. With the onset of massive bond issuance in the 1970s, and the growing government unwillingness to repurchase the bonds after a one year period, even the banks began to realize what an ill bargain it was to get stuck with government debt issued at below market rates while having to pay higher rates on short term deposits.

And as this story in the Japan Times points out, once (if) postal privitization takes places as planned in a few years, even the postal savings system, which currently holds some 90 trillion yen in soverign debt, will have to begin thinking twice about holding such a large amount of government debt.

Although it came some time later, the next move was a campaign aimed at selling JGBs to individual private investors - Japanese citizens. MOF even enlisted Fujiwara Norika to be a literal poster girl for the campaign. (Can't locate the FN poster, but check out their snazzy advertizing campaign here.) Needless to say, this approach hasn't worked all that well either and now MOF is turning to foreign investors as well.

Saith the Yomiuri:

In spite of these changes, though, JGBs have not taken off with overseas investors. The main reason for this is Japan's low interest rate policy, under
which the yield on JGBs is less than 2 percent.

The low credit rating for JGBs is also to blame. Credit-rating agency Moody's Investors Service Inc. has rated JGBs as A2, which places them lower
than those of Botswana. Given these factors, even fund managers who might want to purchase large quantities of JGBs would be unable to do so as they would face complaints from investors.

In fact, the only reason one might possibly come up with as to why a foreign investor might be intereted in JGBs is if there were expectations that the government were willing to let the yen appreciate against the dollar. At least then a profit might be turned off of the exchange rate differential. At the moment however, there seems little chance of that happening.

Another real danger here, as both the Japan Times as well as this analysis by Morgan Stanley indicate is the possibility of a bond bubble or glut. And that means that the government is eventually going to have to find a way to reduce deficit spending.

Why flowers are so bad for the Japanese economy (or, who says think tanks never contribute anything to society?)

2005-01-27T14:12:00.000-05:00

From today’s Asahi print edition -- According to estimates released on Monday (01/24/05) by Dai-ichi Life Economic Research Institute, 2005 national pollen count predictions could have a 0.6 per cent drain in year on year GDP growth for the first three months of 2005.

Apparently, when a very cool summer is followed by a very hot one, there is a greater likelihood of high pollen count in spring of the following year. This last occurred in the 93, 94, and 95, and is expected to be repeated this coming spring. The Ministry of the Environment has forecast the pollen this year could be 17 times as high in Tokyo, and as much as 31 times as high in Osaka.

So what’s the connection here? A cynical reader who has spent a summer in Japan might ask, but what about all the face masks and anti-histamine sales? Won’t that contribute to GDP growth?

Not so says Dai-ichi. Although they calculated a “special hay fever demand” of perhaps 63.9 billion yen, it will be far outweighed by the expected loss in leisure spending, less shopping and eating out, and a decline in various other outdoor/external activities resulting from the high pollen count.

Here’s the breakdown of the numbers provided by Dai-ichi (I’m not making any of this up):

Last summer was 1.45C degrees hotter than average, so real personal consumption for January through March 2005 will be 0.7 per cent lower than average, or about 533.9 billion yen.

Additionally, because last summer was 2.05C degrees hotter than the previous summer, the fall in real personal consumption will a full one per cent less than in 2004, bringing the entire total fall in consumption to 754.9 billion yen, or six tenths of a per cent of GDP for January through March 2005.

And here're the figures to back this up:

How to outrage the Japanese public to the point of no sympathy

2004-12-15T10:00:00.000-05:00

Prediction: This guy is going to hang – literally.

From JapanToday:

Killer of 7-year-old Nara girl sends email targeting 2-year-old sister
Wednesday, December 15, 2004 at 07:09 JST

NARA — The alleged murderer of a 7-year-old girl in Nara in western Japan has sent an email message to her mother saying his next target is the girl's 2-year-old sister, police sources said Tuesday.

The police believe that the murderer used the victim's mobile phone, possibly from around the town of Kawai, Nara Prefecture, to send the message to her 28-year-old mother early Tuesday, the sources said.

The police announced early Wednesday that the mother received the message. But they declined to release details, saying the girl's parents were deeply shocked by the threatening message.

The 7-year-old girl, who is believed to have been kidnapped on her way home from school on Nov 17, was found dead in a gutter in Heguri, about 6 kilometers from her home in the city of Nara. Her body had abrasions and bruises.

The police believe that the caller still has the girl's cell phone, the sources said, adding the police are speeding up to check the communications record.

The latest email message showed the victim's email address in her cell phone, the police said.

The girl, who lived with her parents and her younger sister, went missing around 1:40 p.m. on Nov 17 after speaking with her mother on the cell phone.

The girl's phone was used to send her mother single rings or a picture believed to be the girl's body.

When the girl's body was found the day after her disappearance, her denim jumper which she was wearing when she left the school and her school bag were missing, in addition to the cell phone.

The police believe that the caller sent the messages from an area straddling the towns of Heguri, Ikaruga, Sango, Oji and Kawai, the sources added. (Kyodo News)

Trying to make sense of the Japanese Defense Outline

2004-12-14T11:19:00.000-05:00

Last week, fellow-blogger and long-time Japan resident Curzon posted a somewhat frustrated entry on the much-heralded “Japanese military build-up.” In a reply to his post, this author indicated that while the total numeric figure for defense spending will be reduced in the FY05 budget, spending within the military budget itself will most likely be shifted.

SDF compositional changes detailed in last Friday’s release of Japan’s five-year National Defense Program Outline, and the concurrent announcement by Cabinet Secretary Hosoda that the long-standing “3 Principles on Weapons Export” would be loosened, allowing Japanese firms to export missile defense components to the United States, seems to confirm this spending shift.

Which brings us back to the original topic – Japan’s defense buildup – and Curzon’s original question: “Is Japan remilitarizing or not?”

Consider the following commentary by a “political expert in Seoul “, which appeared in yesterday’s Korea Herald, and is rather typical in its attitude toward Japan:

[T]his kind of defense buildup by Japan will trigger competitiveness among regional players, thus leading to an arms race which of course brings tension in the region…An arms expansion is suicidal for everyone - Japan, China, North Korea and especially South Korea, centered between all of them.

But to exactly what defense buildup is he referring? The problem is, aside from cooperating with the United States on a missile defense system (which admittedly could be used for offensive purposes, though it’s difficult to imagine a case where this might occur) trouble remains in determining where the so-called “build-up” is taking place.

In fact, Japan is actually downsizing the size of the SDF, shrinking the number of soldiers in the GSDF by 5,000, from 160,000 to 150,000. The number of tanks will also be reduced to 600 from 900, as will the number of main artillery.

Still, Japan, and certain current and former Koizumi administration cabinet officials, are indeed more openly adopting an aggressive and often hawkish stance. With the release of the Defense Outline, the extension of the SDF dispatch in Samawah, and the relaxation of weapons exports, last week was unquestionably a good one for LDP hardliners. But does all of this amount to a military build-up, or simply more military activity?

Let us start with the facts and first turn to the defense outline itself, which has the following to say concerning the justification for what is being hailed as the “build-up”:

Given the new security environment, the future defense force should be capable of effectively responding to the new threats and various situation while elements of the Basic Defense Force Concept preserving valid [sic]…

Fair enough. Some of the old threats still remain, and it’s a hard argument to make that the security environment hasn’t changed much since 1996, when Japan released its last defense outline. And the outline does make specific mention of this:

…unpredictability and uncertainty still remain in the situation on the Korean Peninsula as well as the Taiwan Straits. North Korea is developing, deploying, and proliferating weapons of mass destruction and ballistic missiles, and maintains a large number of special operations forces…in addition, China, which has strong influence on the security in this region, has been modernizing its nuclear and missile capabilities as well as navel and air forces, and expanding its area of operation at sea.

Leaving aside the controversy over whether it was wise or not to mention potential threats by name, all of these claims are rather hard assertions to refute.

Consider North Korea. Since the last defense guidelines were issued, Pyongyang has withdrawn from the NNPT, admitted to having a secretive program attempting to process HEU, kicked out IAEA inspectors and began reprocessing spend nuclear fuel, test-launched two missiles which flew over or landed near Japan, and admitted to the abduction of at least13 Japanese civilians. (As a side note, the degree of public anger over the abductee issue is truly amazing.)

As for China, one can’t help but wonder if that last barb was added at the last minute. Sure it might have only been a Han-class rust bucket, but the recent submarine scandal has left the Japanese somewhat sore. The Chinese make no attempts to conceal their own military build-up, though much of this likely relates to Taiwan, and they seem rather excited of the prospect of the EU lifting the arms embargo imposed after Tiananmen.

But the question is, do the above conditions necessitate a change in Japan’s national defense structure? Assume for a moment that they do (because this seems to be exactly what the GOJ is presently assuming) and it’s only natural that Japan should rework its thinking on national security. After all, the current defense structure was envisioned with a Soviet invasion force in mind (nevermind that the Soviets would never have bothered invading anyway, because a nuking Japan would have been a much easier option). That being said, the new outline specifically calls for the following changes (paraphrased from the original):

1) The introduction of a ballistic missile defense system. This in combination with the US nuclear deterrent should effectively deal with any nuclear threats to Japan.

2) Enhance the readiness and mobility of defense force units, allowing them to respond more effectively to attacks from guerrilla or special operations forces.

The outline goes on to say:

Japan will try to deal effectively with the new threats and various situations by developing and deploying highly ready and mobile defense force units capable of responding properly to various different situations…

Looking at the figures in the appendix, these recommendations are reflected in the creation of a “Central Quick-Reaction Group” in the GSDF, the inclusion of figures for the Ballistic Missile Defense Force (which are somewhat confusingly also included in the MSDF and ASDF figures), and finally the addition of mid-air refueling aircraft.

So, those are the facts of the matter. Although the content of the outline alone is little cause for concern, it must be considered in the context of a larger series of events recently affecting the Japanese military and its presence in the world. And of course, there’s always the history issue. The confluence of these factors appears to be what is generating fears over a remilitarizing Japan.

A number of questions and problems remain to be addressed. Whether or not a more active Japanese military is a good thing or not, suffice it to say for the time being that like it or not, it seems as though that is what the world is going to get. Whether Japan actually needs this stronger military reamains to be seen. Given rising fears of North Korea, the missile defense project might be argued as necessary, but is there much need to go further than that at the moment?

It probably wasn't the best of ideas to mention the Chinese by name in the report as for the time being it's difficult to imagine them posing a real military threat to Japan. This is certainly going to make the Chinese jumpier than they need be, and in their minds this won't be without good reason. After all, in all of history (excluding the Mongols, which Han Chinese would hardly claim as their own) China has never invaded Japan, but Japan has invaded China several times in the last 100 years.

Changes in SDF Force Structure

2004-12-10T13:46:00.000-05:00

No time to comment in detail just yet, but here are the figures and breakdown on SDF force structure in the new FY05 National Defense Program Guideline, hot off the presses and just approved by the cabinet hours ago.

To tired to say any more than this...

2004-12-02T17:10:00.000-05:00

By the way, the Dutch are leaving and the Japanese are staying.

Political Ethics, Japanese Style

2004-12-02T17:06:00.000-05:00

Yesterday, former Prime Minister Hashimoto Ryutaro appeared before the Lower House’s Deliberative Council on Political Ethics to explain his alleged involvement in a political funds scandal that has dogged his faction and party for the past several months, and cost him his position as leader of the LDP’s largest faction. Although charges against him have been dropped, Mr. Hashimoto requested last Wednesday (11/24/04) that the ethics committee convene to hear his testimony, apparently hoping that such a forthcoming attitude would lay things to rest.

Hashimoto’s troubles began on July 2, 2001 during a lunch with LDP members Nonaka Hiromu and Aoki Mikio and two former executives from the Japan Dental Association (JDA). It was then that Hashimoto was allegedly handed a 100 million yen check by then-JDA lobby chair Usuda Sadao and then-JDA director Uchida Hirotake. Mr. Hashimoto’s faction subsequently and deliberately concealed the donation, violating the Political Funds Control Law. The donation occurred conveniently just before the 2001 Upper House election.

Although Mr. Hashimoto has continually maintained his innocence in the matter, saying he has no memory of even meeting with JDA representatives, much less of receiving a donation from them, this defense has been progressively weakened by admissions of guilt from others involved in the case.

Both Mr. Usuda and Mr. Uchida have pled guilty to charges of illegally donating funds to Hashimoto’s faction in 2001 and are currently standing trial. Most damning however, is that just last Wednesday, Takigawa Toshiyuki, the then-treasurer of the ex-Hashimoto faction, pled guilty before a Tokyo District Court to charges of failure to declare the donation. He has also admitted to having received the check from Mr. Hashimoto, who said at the time that it was from the JDA.

Hand all but forced, Mr. Hashimoto requested to speak before the ethics council. He then promptly reversed course, telling the panel that after checking his calendar and car’s driving records, and considering the ongoing legal investigation into the matter, he now “thinks” that he “probably” did receive the check and pass it on to Takigawa as alleged.

However, he continued to repeatedly deny any involvement in the donation’s concealment, carting out the classic politician’s excuse – the hospital. In Mr. Hashimoto’s words:

I was in hospital with heart disease at that time and wasn't in any condition to make such a decision or instruct faction members. I didn't know even such a meeting was being held then. I didn't know of the faction's decision not to issue a receipt and was not informed of the decision. I depended entirely on Mr. Takigawa for the faction's fund management.

Not that the believability of any of this matters anyway. As mentioned earlier, charges against Mr. Hashimoto have already been dropped. Furthermore, the council meeting was closed and perjury was not possible under the circumstance of Mr. Hashimoto’s testimony. All that was really required of him was to simply stand there and look sorry.

For anyone who finds this difficult to believe, just consider this reaction from the chair of the Ethics Council (!), made a press conference:

I feel that Hashimoto made a sincere effort to meet his responsibility to explain the scandal.

And speaking of responsibility, it seems that Mr. Hashimoto has convinced himself that his guilt has been absolved by stepping down as faction chair, just as easily as he convinced himself that he never met with Usuda and Uchida. Again, straight from the horse’s mouth:

I've taken responsibility by quitting as the faction leader and deciding not to run in the next lower house election from a single-seat constituency… [t]here are various ways for lawmakers to take responsibility. It's my responsibility from now on to attend international conferences as a representative of the country.

What brazen shamelessness!

Does the Japanese public really want this man representing their country abroad? The cynical answer to this one is that it doesn’t matter what they want because in all likelihood they are going to be stuck with him. His magnanimous decision to not stand as a single-seat constituency candidate in the next election is meaningless because there isn’t a chance in hell that the LDP will exclude him from their candidate roster in the proportional representation constituency.

Incidentally, charges against Aoki, who is presently head of the LDP caucus in the Lower House, have been dropped, and prosecutors abandoned attempts to indict Nonaka, who retired from politics in 2003. Rather neat how it all comes together like that, no? Hashimoto, Aoki, and Nonaka get off scot-free; Usuda and Uchida are now sitting on trial; and the faction underlings take the fall.

Note: Quoted material taken from this story in the Daily Yomiuri Online Edition

Japan surpassing... December 14th?

2004-11-11T13:29:00.000-05:00

Given the recent spate of bad luck for the Japanese concerning Iraq, it’s probably a safe bet that Prime Minister Koizumi is praying (one might imagine at Yasukuni) that nothing else goes wrong before the impending December 14^th deadline for the decision to extend or recall 550 SDF troops from the Southern Iraqi city of Samawah.

First, there was beheading of 24 year old Koda Shosei, whose quest for self-discovery took him first to Jordan and then to Iraq, where he was kidnapped and later killed by a group of militants linked to Jordanian militant nutbag Abu Musab al-Zarqawi. Koda’s flag-wrapped and headless body was found outside of Baghdad on October 30^th.

A week prior, a rocket round was said to have landed inside the SDF compound, piercing a large container before striking the ground and then apparently bouncing over the outer wall of the compound. Sounds a bit dodgy, that’s the official story. Although this was not the first time insurgents have tired to attack the Japanese presence there, and not even the first time a round had landed inside the compound, it was the first time damage had been caused to the base, and seems to have given the troops quite a scare.

Then yesterday, a website connected with the Iraqi militants suspected of beheading Koda posted a warning to the Japanese government that attacks within Japan are inevitable and that, “Even the wide oceans cannot protect you all. Your people will for sure be shaken.” As with the mortar attacks, this isn’t the first time militants have issued such an electronic threat to the Japanese government, so it’s difficult to access its seriousness at this point.

In spite of these incidents however, Koizumi has remained resolute and unapologetic. He has stated publicly on numerous occasions that he would not give in to the terrorists and that SDF forces will remain in Iraq.

On November 2, the Prime Minister told a plenary session of the House of Representatives:

I recognize that the security situation in Samawah is unpredictable… [a]lthough it is relatively stable compared with Baghdad and other areas, we cannot rule out the possibility that incidents similar to the recent landing of a dud shell inside their camp may occur again…But when we look at information in the past and this incident comprehensively, we don't consider the areas around Samawah, where the Self-Defense Forces are operating, to have become unable to meet the requirement of a noncombat zone immediately.

With a second Bush administration now a certainty, Koizumi has managed to avoid one big obstacle – a Democratic administration led by candidate whose opponent Mr. Koizumi openly supported prior to Nov. 2^nd. After cabinet members’ and the Prime Minister’s own public support of President Bush (see Oct 15^th entry), relations with a Kerry Administration would certainly have begun with a chilly start.

On the other hand, public sentiment does not seem to be on Koizumi’s side. Looking at the polls, the progressive Asahi has 63% of respondents opposed to the extension past December 14^th. Not surprisingly, the more conservative Mainichi reported this week that only 50% opposed the extension, but the paper went on to admit that recent fall in support is most likely due to the gruesome death of Koda early this month.

Furthermore, cabinet approval ratings remain weak, currently at 38 % according to the Asahi. Though not the lowest since taking office (support fell to 36% in April 2004), the disapproval rate has risen to 43%, once again topping the former.

Politically, opposition party (DPJ) leader Okada Katsuya announced on a Sunday morning television program that he planned on submitting a bill to the diet calling for the withdrawal of forces and a repeal of the “special forces” law which allowed the dispatch in the first place.

Given the apparent rise in popular sentiment against Japan’s role (vague though it may be) in Iraq, one might think that Koizumi would be a fool to extend the dispatch for another six months. But come December 14^th, anyone thinking so may very well find they were wrong.

For starters, the Koizumi administration and many Japanese government officials seem to feel that U.S.-Japan relations have never been better. Tom Cruise tatemae aside, Koizumi also appears to have been emboldened by Bush’s re-election, making a series of statements describing his admiration for the president and his determination to have the Japanese Self-Defense Forces play a more active role in regional and global security.

Koizuimi has also publicly supported U.S. attacks on the insurgent-held city of Falluja, describing U.S. action as “successful,” going on to note, “Improving the security is key to assisting Iraq's reconstruction…[w]e must ensure safety as terrorists are intensifying their moves to put the country into confusion.”

Such remarks coincide with a flurry of naval SDF activity in the waters around Japan. Japan hosted and coordinated “Team Samurai,” the most recent Proliferation Security Exercises (PSI) - jointly conducted by Japan, the United States, France, and Australia – sending an unequivocal signal to Pyongyang not to attempt export of chemical, biological, or nuclear weapons.

Presently, two Japanese destroyers and a team of PC-3 planes as well as helicopters continue to pursue a mystery submarine that invaded Japanese territorial waters sometime yesterday and refused to surface and identify itself.

On the positive side of the political equation, the leader of LDP coalition partner Komeito leader Kanzaki Takenori told a group of reporters yesterday, “[a]s far as I see the current security situation, it warrants a continued dispatch.”

All in all, with the next election over a year away and the Komeito on his side for now, the risk of extending the SDF dispatch is less than one might expect even if cabinet approval ratings continue to plummet. Koizumi has never been an LDP party hack and knows it would require either a Komeito defection and passage of a non-confidence motion in the Diet, or severe pressure from within the LDP before he would consider stepping down. With regard to the troops, it’s difficult to imagine anything short of a major disaster resulting in Koizumi changing, or being forced to change his mind on December 14th.

U.S. to Japan: "How are you?"

2004-11-09T17:21:00.000-05:00

"Tom Cruise threw the first pitch at the Japan Series.
How can you imagine anything better than that?"

Regular readers of Japantoday.com are probably already aware of this, but that gem of a quote comes from Japanese Foreign Ministry spokesman Hatsuhisa Takashima on why the nichi-bei kankei has "never been better."

Figure of the day

2004-10-26T16:40:00.000-04:00

From the 10/26 Asahi print edition:

Percentage of Japanese with earthquake insurance - 17.2%
Percentage of Japanese in Niigata Prefecture with earthquake insurance - 11.2%

Res ipsa loquitur (this one's for David)

2004-10-20T08:31:00.000-04:00

From Reuters via Yahoo! Finance:

Matsuya Foods Co. Ltd. recently revived the dish using Chinese beef, but as
Ogawara confirms, the results haven't been completely satisfying.

"Oh, it was Chinese beef, was it?" said the 27-year-old publishing
company salesman. "It's not like I can put my finger on it, but somehow it
didn't seem to taste quite the same."

de mortuis nil nisi bonum

2004-10-20T08:22:00.000-04:00

From The Onion:

Jacques Derrida 'Dies'

Daiei's Surpluss Workers

2004-10-19T14:59:00.000-04:00

This is from a Kyodo wirefeed on Daiei’s Surplus Workers:

Struggling retail giant Daiei Inc. may have as many as 27,000 surplus workers if
it specializes in food supermarket operation under its rehabilitation, sources
close to the case said Monday.

The figure is about half the 58,000
full-time and part-time workers employed by Daiei as of the end of February. The
government has requested that Daiei fully take into consideration possible
impacts on Japan's employment situation and regional economies in compiling its
rehabilitation plan.

The banks concluded in the estimate that those
personnel could be employed by rival retailers and new tenants who will enter
buildings now housing Daiei outlets. But it remains unclear whether their
reemployment is ensured.

This last bit is absurd. Isn’t part of the problem overcapacity? Wouldn’t shifting these workers to rival chains amount to a shell game where the excess is simply transferred?

Besides, what rival retailer would want to take on extra workers right now? Last week the IHT reported that rival Mitsukoshi planned on closing nine of its outlets and eliminating 800 jobs in an effort to speed up its debt payments. The article went on to note that:

Six years of falling prices have squeezed Japanese retailers, forcing some of
them, including Daiei, the country's third-biggest merchant, to seek fresh funds
from banks and investors to avoid bankruptcy.

And on Tuesday last, the Wall Street Journal reported that French retail chain Carrefour planned on selling all eight of its stores in Japan. (To be fair, part of the reason was due to increased competition in Europe, but they are still leaving.)

So much for rival employers picking up the slack.

And if Daiei’s inability to cut costs was one of the reasons (of the many, admittedly) it eventually had to seek out IRCJ help, it’s sadly ironic that it now may have to rid itself of nearly half of its employees, when cutting a smaller percentage of those jobs two years ago might have made a difference. It may not have been enough to save the ship, but it would have at least indicated seriousness on the part of Daiei’s management.

So, either Daiei was aware of this fact, and felt like the gamble for private-sector funds was worth the risk, one might be forgiven for concluding that keeping so many surplus workers is just another example of Daiei’s failure to cut costs and payback its debt.

Too tired to think of a catchy title, but it's about Daiei

2004-10-15T17:28:00.000-04:00

Daiei has finally given up on its hopes of independently finding private sector funds for its desperately needed reconstruction. Under pressure from its three main creditors, the largest of whom, UFJ, is concurrently struggling with its own financial troubles, Daiei broke down and has asked the government-run International Revitalization Corporation of Japan (IRCJ) to provide funds for the company’s revitalization.

Daiei had been facing a Tuesday (10/12) deadline, set last week by the IRCJ, after which the IRCJ indicated it may not extend its help. When the deadline passed, the IRCJ withdrew its offer, and its assistance came only as a last minute negotiation between Daiei, its creditors, and IRCJ officials was pieced together.

According to the Daily Yomiuri, “sources close to the case revealed” that Daiei had hinted that it hoped for assistance from the government-run Resolution and Collection Corporation (RCC), which would have allowed it more control over its rehabilitation plans, including choosing external creditors. At the time of its decision, it had been allowing external private sector asset investigation by foreign groups, but has since ceased these operations.

To better understand Daiei’s decision, it is helpful to consider the likely positions of the major actors involved. There is a strong possibility that behind the three banks’ refusal to extend further funds is pressure from the Financial Services Agency (FSA) to meet the non-performing loan (NPL) targets set for March 2005. In addition to past debt, Daiei’s three main creditors have provided an additional total of 250 billion yen in two separate bailout packages during the past two years. By selling loans to the IRCJ, these banks are able to reclassify them, thus shrinking their total holdings of non-performing assets.

As suggested by today’s Asahi print edition’s page 4 analysis * of the situation, this would be in keeping with Takenaka’s plan to reduce NPLs. The paper quoted the Prime Minister as sounding supportive in saying that the NPL problem, “will be normalized next year in accordance with the plan. Things are proceeding steadily.”

The article goes on to suggest that the desires of others involved might not be in accordance with the FSA however. The Ministry of Economy, Trade, and Industry for example had been a strong supporter of Daiei’s effort to revitalize itself using private funds. METI Minister Nakagawa has been quoted as saying, “Things that the private sector should do should be left to the private sector.”

It is tempting to suppose that handing Daiei’s loans over to the IRCJ keeps it out of the hands of foreigners, for now anyway. Still, it’s difficult (for me at least) to say how serious either Daiei or potential foreign investors might have been to carry through with a deal independently of the Japanese government.

This is especially the case given that one of the foreign contenders happened to be Ripplewood Holdings, owner of Shinsei Bank, which in June 2002 demanded repayment of 100 billion yen in loans to Daiei. For all the talk about the harshness of the IRCJ, one might be caused to wonder, would Daiei have honestly been willing to undergo Ripplewood’s knife a second time?

There is still of course a chance that foreign money could be involved in the Daiei affair. The IRCJ will now be faced with the decision of what to do with each of Daiei’s 100 plus divisions. Wal-Mart still may be interested in Daiei’s large-scale supermarket operations, as may be some of Daiei’s Japanese rivals.

* Sorry for not posting a link to this, but Asahi Shimbun unfortunately does not make all of its content available online. For anyone interested and with access to the Asahi, the story is titled 「ダイエー再生機構決断の舞台裏‐官邸、水面下で誘導」and is in the upper right hand corner of page 4.

Koizumi Administration Not Playing Coy On Picks in Nov.

2004-10-15T15:30:00.000-04:00

First the Prime Minister and now the Secretary General of the ruling party. Both Koizumi and Takabe have recently been rather vocal and unambiguous in their hopes for the outcome of the November U.S. presidential elections.

According to Nikkei Net, on the afternoon of the 15th, the LDP Sec. Gen. said while on a radio program that, come November, “if it isn’t President Bush, there will be trouble.” He then went on to criticize Kerry’s bilateral approach toward the North Korea problem, “out of the question.”

This came only a day after Prime Minister Koizumi remarked, "Because I'm friendly with President Bush, I want him to do his best." Following both men's statements, Koizumi explained on the evening of the 15th that "it's best not to meddle in the elections of another country. No matter who is president, I will continue and devleop the alliance." (Nihongo mavens can see here for the original text.)

The Japan that says "no" far too often

2004-10-14T16:51:00.000-04:00

(Caveat: Somewhat flippant)

Condom manufacturer Durex has released its annual survey of sexual activity around the world and of the figures presented in this AFP story, Japan ranks the lowest of all, with a paltry (and somewhat surprising) 46 times annual average.

Asians are the least sexually active. Japanese have just 46 rolls in the hay per year, followed by Hong Kong Chinese and
Singaporeans with 79, Taiwanese with 80, Indians with 82 and 90 for mainland Chinese, the survey said.

A record 350,000 people in 41 countries were questioned for the company's ninth annual online survey.
(AFP 10/13/04)

Just two somewhat impish comments on this one, in spite of any tempation to say more: First, such infrequnt sexual activity might help explain the potentially problematic demographic situation in Japan.

Population Pyramid (1930-2050)

(Source: National Institute of Population
and Social Security Research)

Second, small wonder Japan is often perceived as having obsessions with (often strange) sex(ual fantasies) * – perhaps it’s because they simply aren’t having enough of it. Although a Thai sociologist described the Japanese as, “thinking too much about business and not enough about their sexual desire,” readers with male Japanese friends knows that however much they may think about business, sex usually isn’t far from their minds. The problem is not thinking too much about business, and too little about sex, but spending too much time doing business instead of having sex.

* One can actually pay to rent a room cleverly designed to resemble the interior of a traincar, while a woman dressed to resemble the average office lady on her morning commute allows herself to be fondled and groped.

Of course, given the groping problem on crowded subway trains - prompting the designation of "women only" cars during rush hours - the commodification of semi-legal groping in the aforementioned context raises an interesting question that paralells some of the common debates surronding prostitution. If the groping occurs in a semi-regulated environment and is between two consensual adults, does this actually provide the service to society by keeping these men from getting thier jollies at the expense of innocent women on public transportation? Or does it only encourage such behavior in addition to futher objectifying Japanese women?

And if this topic strikes you as delicate, try this one about the reaction of South Korean female sex workers to their government's crackdown on red light businesses.

Chinese beef - by no means inferior

2004-10-08T15:31:00.000-04:00

This will be much safer than U.S. beef...

Matsuya Foods Co., Japan's second-largest chain of restaurants serving "gyudon" beef-on-rice dishes, said Friday it will reinstate the
popular menu item on Wednesday following a six-month hiatus.

Matsuya Foods said it will use a supply mainly consisting of Chinese beef. Australian beef will be mixed in with it in the dishes, it said.

But the Matsuya Foods move does not warrant unreserved optimism, the observers said. Japan has banned imports of Chinese beef that
is not first heat-treated following the outbreak of foot-and-mouth disease that has struck Chinese cattle farms. Matsuya Foods plans to
import Chinese beef after heat-treating it in Chinese plants.

Company President Toshio Kawarabuki said Chinese beef "is tasty, tender and palatable."

"By no means is it inferior to U.S. beef," he added.

(Kyodo, 10/08/04)

Good job guys! I honestly think a strong case could be made that allowing this to happen puts the Japanese consumer in much greater danger than reopening imports from the U.S. would.

And on the seventh day the BOJ rested.

2004-10-01T16:30:00.000-04:00

The Bank of Japan is finally done buying out Japanese banks of (a portion of) their losing stock holdings. Otsukaresama! The entire project has taken 2 years and cost the central bank 2.18 trillion yen, which was one year longer and 180 billion more than originally had been earmarked for the buyback program, but still under the 3 trillion yen revised ceiling. The object of the BOJ’s plan was to lessen the risk of further falls in the bank’s capital holdings caused by falling stock prices, while providing a needed injection of funds for the banks to boost their capital.

Unlike U.S. banks, which are prohibited from holding stock, Japanese banks are allowed to own stock, as well as to count 45% of unrealized gains on these stocks towards the Tier-2 portion of their capital adequacy ratios. Unrealized gains came about because of an accounting regulation that was in place until March of 1998 allowing banks to reflect on their balance sheets only the lower of either the book value (price at the time of purchase) or the market value (current value) of stocks they held. The difference between these two values, usually quite large given that many of the stocks were purchased in the first decade after the war, is the unrealized gain.

The down side to this is that since Japanese stock prices went into freefall in early 1990, banks began to accumulate unrealized losses on their holdings, as the market value of their stock holdings began to fall closer and closer to their book value. This had a significant weakening effect on their overall capitalization. (All this was in addition to their problem with non-performing loans, which only worsened the situation by further weakening capitalization.)

So, a tremendous amount of paper losses have now been transferred from the private financial sector to the government. Now all that remains is the question of what is the Bank of Japan going to do with 2.1 trillion yen worth of stock? The BOJ has announced a ten-year plan to begin selling off its holdings in October 2007. But as the Asahi print edition pointed out today, misjudging the time of sale could leave the central bank to eat a large loss or create a severe and negative effect on the stock market.

But that's three years from now, and if there is one thing to take solace in it's that one thing the Japanese government has been extremely adept at in the past is sakiokuri.

What is going on with the UFJ merger?

2004-09-30T18:42:00.000-04:00

For some time now, I have been hoping that something exciting would “break” on UFJ’s impending merger with Mitsubishi Tokyo Financial Group and shafting of Mitsui Sumitomo. But it’s been a month since the Supreme Court ruled in UFJ’s favor, allowing the merger to proceed as planned, and Mitsui Sumitomo has done nothing other than to say it still has not changed its position.

But the burning question that still remains is what can Mitsubishi Tokyo (or Mitsui Sumitomo for that matter) possibly be thinking? To the best of my knowledge, aside from Bloomberg's William Pesek Jr. and University of Chicago Economics Professor Anil Kashyap, no one has even dared ask this question publicly. (Happily, the commentary provided by these gentlemen has asked many of the right questions and pointed fingers in the right direction – more on this below.)

So, what’s happened so far?

First, for the most part, Sumitomo’s original offer made sense. They were hoping to buy UFJs Trust Bank operation in an effort to strengthen their own trust banking business. This might have been the only part of UFJ that was worth buying, so separating it from the rest of the group was only going to make what remained of UFJ that much less attractive to potential buyers.

Then along comes Mitsubishi Tokyo and offers to buy the whole thing, including the trust division. It probably didn’t take UFJ (or government financial authorities) too long to realize this was an easy way to avoid another publicly funded bailout, so they jumped at the chance.

But Sumitomo wasn’t done yet, because they counter with an offer of a one for one share exchange with UFJ – deal worth some 3.2 trillion yen or a 23% premium on UFJ’s share price at the time. Who knows what motivated Sumitomo to go whole hog on this one. Perhaps as the media has been reporting, part of the drive really has been fear of losing out to larger competition.

In any case, it doesn’t really matter why they wanted it, because after the courts had done their work Sumitomo didn’t have a chance in hell of getting UFJ anyway. But why have Mitsubishi Tokyo and UFJ have gone so far out of their way to ensure that nothing interferes with this merger?

Returning to Pesek’s and Kashyap’s commentary on this, Pesek’s article appeared in the IHT at the beginning of August, before things began to heat up in the courts, and took the form of a series of questions. Among the most trenchant (and still largely unanswered) are, “why would anyone really want UFJ anyway?” and, “is the government driving this, or is it merely an interested party?”

With respect to the first query, who knows? The popular explanation is of course that which ever bank can claim the UFJ prize will hold the title of largest financial institution in the world, never mind the fact that bigger is not always better when it comes to bank mergers in Japan. Just look at Resona Bank, formed in March 2003 from the merger between Daiwa and Asahi Banks. Bad + bad = worse, as everyone found out a short two months and $17 billion dollars later.

(Chart Source: Economist.com)

Or look at UFJ for that matter. Since its formation from the merger of ------ and ------, total employment has actually risen for the holding company although increasing costs by employing more workers (even if many of them are part-time) undercuts the logic behind such a merger. As Kashyap points out, "against that backdrop, I just don't see how MTFG gets in there and just starts slashing and getting rid of people if they haven't been able to do it when you took two very sick, weak banks and couldn't find reasons to cut there."

Hazarding a guess on the second question, it’s a relatively safe bet that the government is involved in this somehow, though proof at this point may be scare. Alluded to in Kashyap’s interview with the Daily Yomiuri is the fact that Mitsubishi Tokyo is deciding not to wait until UFJ goes under, is nationalized, and then buy it up in parts at a discount. One reason for this could be the presence of Sumitomo's offer. On the other hand, it seems more likely given the history of government involvement in the Japanese financial system that some kind of "guidance" is being given here. The merger essentially saves UFJ from an almost certian death (one hopes!) and saves the government from having to use any (more) of the public's money to bail out another unsuccessful bank.

Time (and more experience with such matters!) may prove me wrong on this but...

UFJ - Not looking so hot...

Good news for Japan?

2004-09-29T20:10:00.000-04:00

The IMF released its September 2004 World Economic Outlook report today, and happily for the Japanese, it predicted 4.4% GDP growth for Japan in 2004, although a 2.1% decline is expected for 2005. For the moment at any rate, Japan can bask in the news that for first time in 13 years, its growth is seen as potentially surpassing that of the U.S. (4.3% predicted), giving Japan the highest ranking among all the developed countries.

As one can see from the graph above, this is no doubt news that a lot of Japanese are no doubt going to be repeating for some time to come. As of 5:00 pm today, the Nikkei and Yomiuri had already posted stories to that effect on their Japanese language websites, while the Asahi was slightly less optimistic and didn’t even mention 4.4% in its headline.

The IMF report cites increased exports to Asia and higher business fixed investment as main drivers behind a rise in real GDP in the first quarter, although this growth slowed somewhat during the second quarter. The remainder of 2004 should be positive barring a decline in exports or a continued increase in the price of oil.

Nevertheless, problems remain, not the least of which is Japan’s national debt which had broken the 160% of GDP mark at the end of last year. In order to begin addressing the debt, Japan may have to consider some combination of further increases in expenditure in the short term, while longer term possibilities include increasing the retirement age, seeking higher tax revenues, or boosting potential growth through further structural reform.

In closing, I would like to announce more good news for Japan (or at least for unprepared foreigners who travel there without enough cash.) Shinsei Bank, of which I have been a fan for quite some time now, has just introduced ATMs that allow customers to use foreign bank and credit cards to withdraw cash or check their balances.

Since my first trip to Japan in 1997, I've had a series of mixed feelings about the Japanese banking system and its business practices, although I must cite substantial improvements (i.e. ATMs that stay open after the bank closes, and finally this year ones that operate 24 hours a day!). However, I'm still a little torn on this one because although I empathize with the American custom of paying for everything with plastic, and as a result panicking when they find themselves in a cash-based society, I once had another foreigner berate me for not warning him that banks in rural northern Japan would not accept foreign bank cards (the same gentleman later became upset with my not adequately informing him that he would have to remove his shoes inside many Japanese buildings). On the other hand, it's difficult to sympathize with a country that launchs a massive "visit us" PR campaign involving the Prime Minister, yet still allows this.

So, to all you foreigners out there thinking of visiting Japan, remember: always take lots of cash, and a Japanese escort.

Kim Jong Nam I am

2004-09-27T20:10:00.000-04:00

Both the today and Sunday’s print edition of the Asahi carried short pieces about the appearance of a “mystery man” at the Beijing airport on the 25th. The man was spotted by a group of Japanese reporters who were in Beijing covering working level talks between Japan and Korea. When they noticed he resembled the son of a certain well know, bouffant-headed, regional despot, they approached him and asked, “Excuse me, are you Kim Jong Nam?” to which the main replied in fluent Korean, “Yes, I am.”

(Source: Chosun Ilbo)

This is the second time the Dear Leader’s oldest son has been spotted outside North Korea, and his second run in with the Japanese. In May of 2001, Japanese authorities caught him trying to slip into Japan on a fake Dominican Republic passport and sent him packing on an ANA flight to Beijing. (C’mon Kim, Japanese airport security is relatively lax by international standards, but even they aren’t going to mistake you for a native of the Dominican Republic!) He told Japanese authorities at the time that he had come to Japan to visit Tokyo Disneyland.

Kim told reporters that he had been traveling outside North Korea since his expulsion from Japan. After indicating that he came alone and that he planned to stay in a Beijing hotel, he caught a taxi and sped off.

Although some uncertainty remains about the man’s identity, the Asahi quoted one North Korea expert as saying, “Even the moles are in the same place. I think there is no mistake.” The paper also included to photos of Kim, who is now sporting a much suave look than three years ago. (The South Korean Chosun Ilbo has also posted "before and after" photos (see above), or "fat and fatter" if you like, photos on its website, although they are somewhat blurry.)

Which beef is safer?

2004-09-23T16:30:00.000-04:00

Here is a question to ask yourself if you happen to be Japanese: Which beef would you rather buy, that imported from the United States or that from domestically raised cattle? It seems like an easy question, but before settling on an answer consider some (or all if you can find them) of the facts of the situation.

First, it is indeed true that the U.S. does not test every cattle (all 35 million per year) slaughtered for consumption as does Japan. Thus, it is conceivable that a diseased animal could find its way into the food supply.

It is also true that the U.S. does not have an accurate system for determining the age (and place of origin) of a cow as do the Japanese. Thus, even though Japan has agreed to reopen imports of cattle 20 months and under, the United States has no way of being certain how old an animal is, and this increases the risk in the eyes of some.

From this, it would seem that Japanese beef would be the safer bet since all of its animals are tested past the age where symptoms of the disease are believed to be detectable.

On the other hand, Japan is the only nation in the Asia Pacific region to have turned up a case of BSE. And, it recently discovered its 13th case in three years, all of which were from domestic cattle. Compare this with the United States, with only one confirmed case of BSE, and that from a cow originating in Canada.

This isn’t intended to be a mindless defense of the U.S. beef industry. Testing every single animal in the United States may indeed find a dozen or more infected animals. Thus far however, there seems to be little reason to worry about the safety of U.S. beef just because of one cow. Don't beleive it? Recall the Japanese government's response to the discovery of its first mad cow back in September 2001.

"Milk, meat and dairy products are 100 percent safe," said former Agriculture Minster Tsutomu Takabe, seen to the right in the above photo (The other man in the photo is Chikara Sakaguchi, Health Minister at the time).

"Very good! Very tender," said former Finance Minister Masajuro Shiokawa as he and other members of the cabinet put on a dog and pony show for the press, chomping down on domestically raised beef to ensure the public of its safety.

That was three years and thirteen dead cows ago.

But maybe the Japanese government is more trustworthy than a foreign government? Well, the beef that Takabe and Shiokawa were eating had been tested for BSE beforehand according to dietman and the event's sponsor Naoto Kitamura. Clearly lawmakers didn't trust the safety of the beef even as they encouraged Japanese consumers to continue eating it. Yet these are the kind of men that are now looking out to protect Japanese consumers from dangerous foreign beef?

Furthermore, although every animal is said to be tested, before criticizing the United States’ policy too harshly, or trusting the Japanese policy too hastily, one might do well to remember the how effectively the Japanese government screened the nation’s blood supply for the AIDS virus back in the 1980s. If that doesn’t hit close enough to home, consider the Yukijirushi (Snow Brand) beef scandal that erupted following the last BSE scare in Japan. (That company’s second, and final, scandal one might note.)

True, there are a number of sides to this arguement, and they have not all been fairly or adequately addressed here. And, concern over food safety among Japanese consumers is certainly understandable and sometimes justifiable. But other motives underly the food safety issue in this case.

Telling the truth... sort of

2004-09-22T13:35:00.000-04:00

A quick clarification on my 9/20 posting in which I wrote that the South Korean government had declared no explosion to have occured in North Korea - this was quite literally only part of the story. My criticism of the ROK was misdirected and should have been aimed at moron journalists who butcher AP wire reports and then publish them.

The AP report I refered to in the previous post quoted South Korean Unification Minister Lee Bong-Jo as saying, "we believe that there was no explosion in the place where intelligence authorities had previously suspected that there were signs of an explosion." Having read this statement, and because the story was titled, "South Korea now says no explosion occured in North Korea," it's understandable how one might draw the conclusion that the South really believed that no explosion had occured at all. The account in the Washington Post only helps confirm this conclusion, reporting that "there was no blast at the suspected site," and citing Lee as saying that Seismic signals and strange cloud formations picked up last week were not from an explosion.

Contrast the above to this version of the AP report that appeared in the International Herald Tribune on the same day as the first AP report appeared in the Billings Gazette. This one is only slightly less misleadingly titled, "South Korea says there was no explosion in North Korean county." Here one finds the same quote by Lee about there being no explosion in the previously suspected place, but this is immediatly followed in the next paragraph by the clarification, "we believe that the explosion described by North Korea took place in Samsu County, about 100 kilometers (60 miles) from the originally suspected site..."

I don't know about the Billings Gazette (which printed the first AP story), but why the Washington Post would report in a manner that makes the headline writers at CNN.com look like amatuers is beyond me. Perhaps I didn't take the reporting literally enough, but the intentional exclusion of relevant information to an extent that the entire meaning of a story is changed is what I call journalism of the highest caliber... not.

No explosion, no explaination.

2004-09-20T16:50:00.000-04:00

The North Koreans recently seem to have a penchant for creating large craters and not bothering to explain them satisfactorily to the rest of the world. Earlier this year for example, an explosion occured at Ryongchon Station in North Phyongan Province, killing (perhpas) hundreds and injuring (perhaps) thousands, and destroying (perhaps) as many homes. I say perhpas, because five days after the explosion, the Korean Central News Agency reported that "damage is unexpectedly gaining in scope," and if the government mouthpiece couldn't get it right after five days, we'll probably never know the truth.

Whatever the case, initial reports indicated that the blast was triggered when one train car carrying ammonium nitrate and another carrying fuel oil (think Oklahoma City) collied with one another during shunting. Later information suggested the cause of the blast to be explosives carried on board the trains. Several monts after the fact, at least one source reported that the tragedy happened following the train's coming into contact with power lines, though the story was probably refering to the electric power cables between train cars. (If this really were caused by actual power lines, it has to be one of the sadder ironies of the century that in such a power-starved country, such a massive explosion could be caused by the tragic contact between two energy sources. ) And of course there are those who believe the whole thing to be a botched assassination attempt on the Dear Leader's life. All anyone can say for certain was that it was a big explosion, that left a big hole, and killed a lot of people.

So, given the North's record for explosions and sudden weapons tests, when reports described a large explosion and a two-mile wide mushroom cloud hovering just south of the border with China, the most immediate question on everyone's mind was, "was it nuclear?" U.S. and South Korean officials were quick to dismiss that possibility, and soon after the blast the North Korean government allowed a government delegation from the U.K. to visit the site and verify.

Speculation during the following week was rampant, while the North Koreans continued to maintain it was a planned demolition of a mountian as part of a hydroelectric project. However bizzare that might have been, coming from the North Koreans, it was to be expected. Now, the story has taken an even more bizzare twist over the weekned as the South Korean government has come out and declared that there was no explosion! I first ran across these two paragraphs (see below) tucked away in the "World in Brief" section of the Saturday Washington Post and was able to confirm it this afternoon with an AP report.

Not only was there no explosion, but there was no explaination either. But the South Korean government's attepmt at writing the whole thing off as a "natural occurance," isn't going to satisfy anyone and just has the them sounding exactly like the North Koreans when they try to cover something up. So here we have the South reporting an explosion, which is later confirmed by the North, only to be later denied by the South, and then re-confirmed by the North!

There are a million questions that one could ask here, but to begin with a few... If there was no explosion to begin with, why in God's name would the North lie and say that there was? On the other hand, if there was indeed an explosion, why in God's name would the South try and cover it up after admitting it? And given the South's recent bombshell about its tests involving plutonium and uranium, which side does one trust on this one?

(From the Washington Post, World in Brief -- Saturday, September 19, 2004)
• SEOUL -- South Korea's latest assessment of a widely reported explosion in North Korea last week is that there was no blast at all at the suspected site, a deputy minister said.
Seismic signals and strange cloud formations picked up last week were not from an explosion, said the deputy minister of unification, Rhee Bong Jo.

Japanese Ban on U.S. Beef Imports

2004-09-08T21:10:00.000-04:00

Yesterday, Japan’s Agriculture Minister, Yoshiyuki Kamei stated at a press conference that, contingent upon the outcome of a Thursday meeting of the Cabinet Office’s Food Safety Commission (FSC), the Government of Japan (GOJ) might reconsider its position on the testing of all beef cattle for BSE. Kamei’s remarks have begun to generate some speculation in the media that should the GOJ agree that testing young cattle is unnecessary, then there might also follow a change in the government’s stance towards reopening domestic markets to U.S. imports.

In related news, The Daily Yomiuri reported today that Chief Cabinet Secretary Hiroyuki Hosoda indicated at a press conference that the issue of beef imports will be on the agenda at the September 21st meeting between the two heads of state (although Kamei claimed not to know anything about the agenda in the aforementioned press conference). The news was not all positive however, as the article went on to note that serious issues remain and could stall progress on the talks. Most interesting perhaps, are concerns inside Ministry of Agriculture, Foresty, and Fisheries (MAFF) that resumption of imports could be perceived inside Japan as yielding to U.S. Government (USG) pressure in the run-up to November presidential elections, while disregarding public safety.

What this all means for the future of U.S. beef exports to Japan still remains to be seen. The combination of statements made by both Kamei and Hosoda could signal that the government is setting the stage for at least the partial reopening of its markets sometime later this year. Much of the debate now seems to be centering around the appropriate age of cattle that should require testing, with the Japanese currently for 20 months and the Americans insisting on 24 months.

The Japanese position is supported by their claim that in a test on 3 million cows, the youngest age of infection was 21 months. The most likely reason for this is that abnormal prion protein (see background info below) is difficult to detect in young cows because the disease has not had time to run its destructive course. Therefore, the meat of young cows should be safe to eat – the problem remaining is, “how young?” Back in July of this year, both parties reached a tentative agreement to begin working towards partial reopening of imports on the meat of young cows, so the fact that there is now disagreement on the appropriate age might be interpreted as a step in the right direction.

That said, there is a high likelihood that the attitude of MAFF is an overreaction for which there is little scientific, and considerably more economic/political, justification. First, consider the scientific side of the situation. U.S. laws passed in 1997 and in January of 2004 outlaw the feeding of proteins (bone and blood meal) of ruminants to other ruminants, as well as the inclusion of beef blood or beef fat in feed for calves. Because BSE is believed to be passed from animal to animal through contaminated feed products, the passage of the latter of these laws should have closed the door on BSE outbreaks within the United States.

No matter how disgusting one might find the feeding practices of the U.S. meat industry to be (full disclosure: the author wholeheartedly agree that they are indeed disgusting), without a specific case where a ruminant has succumbed to BSE or some other such dehabilitating and potentially dangerous disease to humans as a result of consuming non-ruminant protein, there is scant evidence that U.S. beef is a threat. Besides, if not a single one of the countries that implemented the ban in 2003 seemed to have a problem with these feeding practices before, why should they find fault with it after inclusion of the dangerous ingredients have been eliminated? (Never mind that there have been no repeat cases and few Americans seem bothered by the prospect of having their brains spongeified.)

As for the economics/politics of the matter, it’s no secret that concern over food safety (though sometimes justified) is a favorite tool for blocking foreign produce and livestock not only in Japan, but around the world. The upshot of this, without going into any of the potentially boring detail, is that domestic producers are protected while consumers and Japanese restaurants quite literally pay the price.

Perhaps the most visible example of this is the Japanese fast-food chain Yoshinoya, which earlier this year had to stop selling its trademark gyudon(beef bowls) due its 99% reliance on U.S. beef. While it's difficult to say how Japanese consumers as a whole feel about the matter, many are not happy. It angered at least one man so badly when he was told "no more gyudon" that he became violent and began swinging at the clerk behind the counter in one Yoshinoya. It’s easier to see the effect the beef ban has had on the restaurant chain itself. According to the Asahi, in July Yoishinoya’s year-on-year, same store sales were down 35.3%, the fourth consecutive month in which year on year sales had fallen below the 30% mark.

It’s quite easy for MAFF and others who favor protectionism to hide behind the food safety excuse and demand that U.S. producers test 100 percent of their cattle, but because of the sheer number of cattle slaughtered in the United States each year, this is an impossible demand and everyone knows it. That’s why MAFF can fearlessly continue to insist upon it. To the best of my knowledge, Australia doesn’t test 100 percent of its cattle, yet Japanese consumers and the government were more than happy to import from them to make up for the shortfall.

And as an added bonus, whenever the Japanese government does finally decide to reopen U.S. imports, Japanese consumers can probably expect to pay a little extra for the imports. Because of a special type of tariff in place on beef imports in Japan (yes, it’s WTO legal), the likely surge in beef imports will trigger a special kind of tariff. The tariff was intended to protect the domestic Japanese meat industry from a sudden and unexpected surge of cheap foreign imports. But there would be nothing sudden or unexpected about this spike; it would simply indicate that Japanese consumption of imported beef had returned to pre-BSE-scare levels.

(Background Information: Japan has maintained a ban on U.S. beef imports since late December 2003, when a cow imported to the United States from Canada tested positive for BSE. One prerequisite for reopening their markets was that U.S. beef producers conduct infinitively costly tests on all cattle to ensure product safety, something already carried out by Japanese beef producers on the relatively small number of cattle raised for consumption inside the country.

The USG has unofficially asked GOJ to exclude cattle under 24 months of age, because according to U.S. tests, BSE symptoms are nearly impossible to detect through testing of animals younger than 30 months. And although the US and Japan did agree in July that current tests were unlikely to detect abnormal prion protein [the presence of which is considered an indication of infection] in younger cattle, Japan has so far refused to budge on its position that all cattle be tested.

Japan was one of more than 20 countries that implemented an import ban in December 2003. According to the National Cattleman’s Beef Association, U.S. beef exports in 2003 reached a record $3.86 billion in 2003 and some 88.3 percent of these exports went to Japan, Mexico, South Korea, and Canada, all of which did implement and still maintain an import ban. Nevertheless, as of June 2004, 31% of exports had been restored as a result of other countries reopening their markets.

Australian exports of beef have skyrocketed since Japan’s ban reaching a new record high in 2004. Australia has also gone one step further than the United States in its ban on ruminant feed. Since 1997 use of ruminant blood or bone meal in the feed products of other ruminants was outlawed, and this was extended in 1999 to include all animal meal excluding blood meal, which was banned two years later in 2001. Japan also banned use of ruminant meat and bone meal in cattle feed products in September 2001.

One Step Closer to a Two-party System?

2004-07-21T13:27:00.000-04:00

Considering all the recent talk in the media about Japanese politics moving towards a two-party system, one might expect recent poll data to reflect this. Below, are some of the numbers collected in two separate polls conducted by the Asahi Shimbun on July 12th and 13th, and a week later on the 18th and 19th. Read into polls what one will, but these numbers are a chance to ask whether Japan truly is moving towards the long-awaited two-party political system, or whether the July 11th election outcome indicates an entirely different trend.

First, some good news for those who are hopeful for just such a realignment of the political system – you aren't alone. According to Asahi’s second poll, a clear majority of respondents indicated that they felt favorable about the country moving towards a two party system. 65 percent said they thought it would be a good thing, while only 18 percent indicated otherwise.

Support figures for the LDP and DPJ - the two parties that would comprise the yet unborn system – seem to support the two-party hypothesis as well. Support for the Democrats has risen above that of the LDP, and has grown by one percentage point since exit polls conducted on the 12th and 13th. In fact, there were as many people who said they supported no party at all as those who said they supported the LDP.

Meanwhile, approval ratings for Koizumi’s cabinet have also reached a new historic low, falling to 36 percent, down three percent from 39 just a week ago. When asked if they felt it okay to entrust the LDP with the mantle of power, although 39 percent said yes, 43 percent answered that it was not okay.

As a corollary of the rising support (as expressed in the polls at least) for the Democrats, a larger number of respondents polled in the twenty-four hour period following the election said they would rather have a government centered around the DPJ (44 percent) than the LDP (31 percent).

Looking at these numbers alone would seem to spell certain disaster for the LDP. (I might also note that reading only the English language version of the Asahi Shimbun would probably lead to the same conclusion, as it clearly favors the types of numbers discussed above to those I will discuss below - see attached stories below for the differences.) However, in the context of the entire results of the poll, neither the LDP’s end, nor the development of a two-party system looks to be a forgone conclusion, at least anytime in the near future.

First, consider the other side of some of the figures cited above. It may be the case that more people gave their support to the DPJ, but that does not mean that they are ready for a transition to a Democratic government. Quite the contrary, 36 percent seemed more content to let the LDP stay in power, while only 31 percent felt that it would be okay to let the DPJ take up the reigns.

But what of Koizumi’s approval ratings? Here things may be a little tougher to read. Although the naysayers have taken the lead on this issue as well, aside from the 27 percent who were unhappy about policy matters (based on what I’ve been hearing the past few days this is probably due to cutbacks on public works spending and various other restructuring measures), few others seemed to have a clear or strong reason for not giving their support. On the other hand, not many of his supporters were able to do so either, and 8 percent admitted as much.

Prior to the elections, Prime Minister Koizumi had said that he would stay in office no matter how grim the results and most observers would have probably agreed that excepting a total disaster (i.e. massive seat losses) for the LDP, it would be difficult to force him to resign. A majority (56 percent) of those polled by the Asahi on the 12th and 13th did not seem to have a problem with the continuation of his tenure.

But perhaps the most telling numbers to emerge from the Asahi data are the responses to the question, “Why do you think the DPJ vastly increased the number of candidates elected?” While a combined total of 21 percent said they felt it was because they could trust the party’s policy or its President, Okada Katsuya, nearly three quarters said it was because people have a problem with the LDP.

Nevertheless, it’s difficult to make the case for a two party system based solely on the assumption that people are fed-up with the LDP. Looking at the outcome of the elections themselves helps to reveal why this is so.

In the larger scheme of things, one may as well consider the loss for the Greens as a gain for the Independents, and the loss for the LDP as a gain for its coalition partner Komeito. That only leaves the Socialists and the Democrats. Calculating on a zero-sum basis, it is clear that the expansion of the Democrats in the Upper House came at the direct expense of the Socialists, not of the LDP.

When asked why they supported or didn’t support the current government, respondents seemed to find it easier to cite their dislikes than to give reasons for their support. This trend is most clear on the issue of policy, where 27 percent (by far the highest percentage for any reason) of respondents indicated their dissatisfaction, while only 7 percent cited the same as reason for their support. And while only 3 percent said they didn’t support the government because of Koizumi, some 53 percent said they could no longer trust what Koizumi says. This seems to echo the point made above that while voters may be dissatisfied with the way things are now, they aren’t ready for change just yet.