Sunday, January 25, 2015

Three Points regarding the Hostage Crisis

I was going to refrain from further comment on the ongoing hostage crisis for the time being. However…

First, there are a good number of people in Japan who are indifferent or even hostile to the hostages because one of them went to Syria to build a career as a professional paramilitary and the other, who went to rescue him, did so on his own self-admitted responsibility while fully aware of the risk. The implication for many of the people who hold these views is that the Japanese government should not be expending its resources to recover them. Everyone is free to form his opinions regarding the two men and their actions, but the two men did not do anything illegal when they left Japan, and they are not being detained by lawful authorities. More important, protecting its citizens abroad is one of the basic functions of a sovereign state. Of course the Japanese government must do everything within its power without unduly compromising other foreign policy objectives. A point, incidentally, that the journalist who went on his “own responsibility” will hopefully live to appreciate.

Second, there are people who think that Prime Minister Abe is just going through the motions because there’s nothing that his administration can do. This says more about the people who express this view than about Mr. Abe himself. There is little to be gleaned from the fact that the deadline has come and gone without a word from Islamic State, but the resultant uncertainty is undeniable. I have no idea what the Abe administration is doing/can do, but what outsider does? For example, if Turkey tightened border controls, the IS oil trade and supply lines would be seriously compromised. Would Prime Minister Erdogan deliver a credible threat on behalf of his buddy Mr. Abe? Could face-saving statements (and a discreet, roundabout payment) be crafted that would enable IS to release the hostages? I don’t know. But to claim otherwise and look on the Abe administration’s efforts with disdain is arrogance and/or cynicism. In the meantime, do not be sure that the Japanese government will refrain from paying a ransom, as if that were the international norm. Europe is also committed to refrain from paying ransoms. Yet a Yomiuri search (Jan. 23) showed that IS was known to have taken 16 Europeans excluding British citizens hostage in Syria, of whom only one, a Russian, was killed and the other 15 released. Of the seven U.S. and British hostages taken, five have been killed while the other two remain in custody. Go figure.

Third, RD wondered why there was so little coverage of the crisis in the Western media. My take on that is that other things being equal (emphasis on the word “equal”), the Western media’s priority adheres to the following order of priority:

1.      Citizens of the media outlet’s home country
2.      Other Whites
3.      Middle East locals
4.      Asians
5.      Sub-Saharan locals


Is this racism? Not by my definition, but some will say yes.

Thursday, January 22, 2015

Did Prime Minister Abe Really Say “Counter-ISIL Fund”?

There’s a petition being circulated on Change.org—yes, I’m on its mailing list—requesting that “the Abe administration… suspend the ($200 million humanitarian) aid immediately to facilitate the rescue of the two hostages. As a private citizen, I would be willing to sign on to this if they'd refrained from finger-pointing, as in:

“Shinzo Abe’s characterization of the aid as a “counter-IsSIL fund” apparently conveyed additional hostility to Isil and triggered the threat, while the fund is actually non-military and will be used to support the refugees displaced from Iraq and Syria.”

No, with hindsight, Mr. Abe should not have cast it as part of the war effort. But the petitioners are using this occasion to make a political statement. That's no different from what they claim that Mr. Abe did, except that they are doing it in full knowledge of the situation of the hostages. Moreover, the Saturday speech in Cairo that they apparently are referring to has nothing to that effect. The closest thing that I can find to the petitioners’ claim is the following:

“A stable Middle East that is vibrant. A stable Middle East backed by the spirit of Khair Al-Umuri Ausatoha. A stable Middle East where people can live without anxiety.

“Japan’s assistance always aims at no less than restoring stability in the region. I cannot help but wish for the people of Egypt and for the people throughout the region to be aware of that.

“Let us just imagine how much potential you could unleash in Egypt, in the region, once your society has restored stability and again ensured the path towards growth. Japan wishes to be a never-failing running mate to you as you work towards that future.

“That all said, here, to you, I will make another pledge. The Government of Japan will newly carry out assistance of 2.5 billion U.S. dollars in non-military fields including humanitarian assistance and infrastructure development, intended for the entire region.”

Does that sound like a “counter-ISIL fund” to you?

By making a political statement against Mr. Abe instead of focusing solely on the humanitarian nature of the aid, the petitioners are chasing away well-meaning conservatives who might otherwise sign on. By perpetuating what is at best a significant distortion of Mr. Abe’s statement, they are endorsing the hostage takers’ claim.


I stand ready to be corrected. In the meantime, draw your own conclusions.

Addendum: I have been corrected. Somehow, I failed to see where Mr. Abe said, "We are also going to support Turkey and Lebanon. All that, we shall do to help curb the threat ISIL poses."

I am losing my touch.

Wednesday, January 21, 2015

Some Prompted Thoughts around the Ongoing Hostage Crisis

The following is a Q&A that I wrote out just in time for a morning CCTV English interview on the two Japanese taken hostage by Islamic State. It went largely as scripted, with a few other points that came up in the course of the conversation.

1. How were Kenji Goto Jogo and Haruna Yukawa kidnapped in Syria?  How is the Japanese government reacting to the IS threat?

Not sure about the first. Yukawa seems to have been with moderate rebel forces in Syria around the time of capture, but there’s too much speculative information out there to be sure of anything. Goto is a well-respected and seasoned freelance journalist devoted to humanitarian issues, so he had good reason to be in the neighborhood.

The Japanese government has issued a statement in which it demands the hostages’ immediate release and states that “Japan will not give in to terrorism, and our position of contributing to the counter-terrorism efforts by the international community remains unchanged.”

2. In its video, the Islamist State extremist group criticized Japan’s pledge to aid countries against it. But it also demanded a ransom. What’s the true purpose of the Islamic State? 
-- It marks the first time the Islamic State has demanded cash for hostages.

Actually, holding hostages for ransom is part of the Islamic State’s modus operandi. But in this case, I do not believe that Islamic State expects the ransom to be paid. I believe that the very public and outlandish demand—all such demands are outrageous, but the amount, matching the most recent Japanese humanitarian pledge, dwarfs estimates of Islamic State’s take from previous hostage-taking operations—is largely symbolic and is intended to put the Japanese government on notice for its most recent high-profile diplomatic and humanitarian initiative.

3. Will Japan cave in and pay the ransom of 200 million dollars? What’s public response like in Japan? Do they pay ransom as the French does or follow a similar approach to the US in refusing to pay?

The public response is dismay, and anger, in equal parts. The media demands that we must stand resolute, and that the hostages must be released. My guess is that the Japanese government is willing to discreetly pay a suitable sum to rescue the hostages. But the very public nature of the Islamic State’s demand makes it extremely difficult to negotiate a mutually agreeable outcome, even if Islamic State is willing.

4. From your observation, is Japan going to pay the ransom? Or will it attempt a risky rescue inside Syria 

I think that I already answered your first question. As for your second, no, not even the United States could rescue its citizens from Islamic State. The question is moot though. Japan does have a SWAT team of sorts, but it has never been tested in this kind of situation, and there is strong public aversion to using force overseas.

5. Will this affect Japan’s policy on the issue of fighting terrorism? Japan hasn’t really been active in dealing with terrorism, as it is basically isolated from terror threat. Will Japan be prompted to do more or be more actively supporting the fight against IS? 


I believe that the Japanese government’s policy will remain unchanged. I trust that the Japanese government will continue to support counterterrorism efforts, including against Islamic State, but not as combatants. Never. I expect it to continue to provide humanitarian aid and other assistance for what could be called passive, nonmilitary means to enhance security.

Tuesday, January 20, 2015

The ISIL/IS Ultimatum regarding the Two Japanese Hostages

I was not going to write about this, but I got a phone call from a journalist in which it was one of the issues that was raised so I responded; I’m pledged to cooperate with students, academics, and journalists (and no, they don’t have to cite me, though they usually do). No thoughts were very preliminary, so I’ve written the following memo for clarification after some googling and contemplation.

First, it is my understanding that Al-Qaeda has relied largely on donors, while ISIS/Islam State is essentially a self-financing organization that includes kidnaping for ransom as part of its modus operandi. That is why Al-Qaeda quickly executed the Japanese man during the post-war insurgency, for show and intimidation.

It is also my understanding is that many European nations do quietly ransom hostages, while America and Israel do not. This difference is the main reason for the different fates of Western hostages of ISIL/IS. The Japanese government has negotiated with terrorists and paid ransom to have hostages released in the past. I am now certain that will do so in the case of Mssrs. Goto and Yukawa, the two Japanese men threatened with execution in 72 hours unless the Japanese government pays ransom. I had some doubts in the beginning, but the chief cabinet secretary stated that the Japanese government would “cooperate with countries concerned to act with the top priority on human life,” which is essentially code for “we will negotiate as required.”

However, I have cause to fear that the attempt will not be successful this time. I do not believe that ISIL/IS expects the Japanese government to pay ransom, much less full the 200 million dollars. Instead, I believe that it is trying to send a political message to the Japanese government in the light of Prime Minister Abe’s high profile visit and the 20 billion yen pledge for humanitarian aid. If it were serious, it would have conducted everything sub rosa, as it appears to have done with the Europeans. Conducted openly, it will be difficult for ISIL/IS to settle for anything less than the outlandish asking price, presumably well beyond its typical asking price.

The Abe administration will also have difficulty meeting the asking price. First, unlike the previous known cases where negotiations have succeeded, the two men did put their lives at significant risk voluntarily, although one of them, a freelance journalist, apparently deserves unqualified sympathy and praise for doing so. Public opinion in Japan has not been kindly to such people, although I hope that they share my sentiments towards the journalist. Second, the ransom would finance the activities of ISIL/IS, which would symbolically and effectively cancel out the 20 billion yen humanitarian aid. But the public nature of the ISIL/IS demand makes it difficult to bargain down the ransom.

Thus, I fear the worst. Never have I hoped as I do now, that I am wrong. Yet I cannot stand the thought that Japanese money will be used to sustain ISIL/IS activities. My only personal consolation is that it is Prime Minster Abe task, not mine, to grasp the horns of this dilemma.

Monday, January 19, 2015

“Unbroken,” Coming to Your Metropolitan Center Sometime in the Indefinite Future?

James Gibney’s Bloomberg op-ed on Angelina Jolie’s new film Unbroken is probably as evenhanded as it gets coming from an American. The writer not only identifies it as “really much less about Japanese brutality than the resilience of the human spirit” but also states that “(a)ny forthright exploration of Japan's wartime cruelties, of course, must be matched by an acknowledgment of the battlefield savagery of U.S. troops in the Pacific.” But why would he guess that “‘Unbroken’ does not yet—and may never—have a release date” in Japan? Why not take Universal Filmed Entertainment Group Chairman Jeff Shell at his word when he says, “Obviously, the content of the book is a difficult one in the Japanese market… So we're probably going to wait a little bit and release it later in the year there than in the rest of the world. We're going to delay it a little bit so we can have a different kind of launch there”? Why not come back to this, say, the next New Year’s? In the meantime, the following is my prediction and my reasons for it. It should be at least as reliable as my projection of a Hosono-Nagatsuma runoff for the DPJ leadership election.


Unbroken will be shown in a very small number of largely art film theaters, almost exclusively in metropolitan areas, then go straight to DVD. I do not see a prison film that 1) has an unfamiliar non-Japanese actor playing the hero, 2) takes place in a world that most of the viewers will not be familiar with, 3) is not a comedy, and 4) does not feature a successful breakout having much of a chance at the box office. But limited as it may be, I do believe that there is a market for the film that will be amplified by the commotion from the far-right that will flare up again when the release here is announced, providing the film with publicity that would normally be unavailable. There’s name recognition for the director, too. (Would the film even have been made if no one with Angelina Jolie’s Hollywood connections and clout had been involved?)

Sunday, January 18, 2015

LDP Kettle Calling DPJ Pot Black for Returning Okada to Power

On Sankei, of course, quoting an unnamed LDP official: “It’s déjà vu all over again. There’s no change in its tendency to recycle the same faces in filling its [leadership] positions.”

Amplifying on My “Defense News” Comments around the FY2015 Defense Budget

The Defense News report, FWIW the original full Q&A below, with five words added (in brackets) added so you won’t have to google. As I went back and forth, I was struck by how asymmetrically but strongly mutual the Japan-U.S. security relationship is.

1. How far is Japan in your opinion away from the dynamic defense force that has been touted as necessary?

Building a “Dynamic Joint Defense Force, which emphasizes both soft and hard aspects of readiness, sustainability, resiliency and connectivity, reinforced by advanced technology and capability for C3I, with a consideration to establish a wide range of infrastructure to support the SDF’s operation,” is a multiyear task still in its first year of implementation under the National Defense Program Guidelines for FY 2014 and beyond. Given the necessary overhaul of the hardware, software and wetware involved, it must be very much a work still in progress. Beyond that, I will not attempt to answer a question that panel of real experts establishing a baseline, then asking the suits and uniforms hundreds of questions over weeks to come up with a meaningful assessment.

2. Can Japan be a militarily useful ally to the U.S. on the terms that the U.S. wants (a huge question, I know, but could you pick at an example)?

Ideally, Japan would be a United Kingdom on the Pacific, willing to put its military assets to use on U.S.-led operations, with or without UN sanctions. That, of course, will not happen, even if Shintaro Ishihara were to become prime minister. (Okay, particularly if Ishihara were to become prime minister, but that’s another story.) However, Article 6 [of the Japan-U.S. Security Treaty] enables the United States to use its military assets that are based on Japanese territory for “the purpose of contributing to the security of Japan and the maintenance of international peace and security in the Far East.” That is the equivalent of having a 51st state within shouting distance of the Korean Peninsula and Taiwan and willing to pay part of the upkeep. How much more can you ask for?

Well, the United States does want Japan to provide logistic support in the case of major emergencies in the Far East. In the case of the Korean Peninsula, it is plausible, given that the United States would presumably be operating under longstanding UN resolutions and that such emergencies certainly could be justified as a genuine security threat to Japan. But will Komeito agree to the necessary legislation? Also, without South Korea’s acquiescence, the constraints are likely to be such that a Japanese commitment would be of little value. As for emergencies around Taiwan, the Taiwan Act won’t cut it, and Japan will stick to its role as the 51st state. Beyond that, say, the Middle East, the Abe administration has its hands full getting minesweeping operations before hostilities have ceased past Komeito.

Beyond the actual use of force, though, Japan is remaking itself as a player in weapon system R&D and supply within the network (loosely defined) of states allied or friendly with the United States. Given Japan’s technological and manufacturing resources and existing cross-border ties, that is a major gain for the United States.

3. I would say the Japanese response to China is almost so calm and meek, Japan is actually doing just about the minimum possible. What do you think?

I agree. The Kan administration set a precedent when it failed to follow through on its threat to prosecute the captain of the Chinese fishing boat that allegedly bumped a Coast Guard vessel in Senkaku territorial waters. As for the Chinese maritime surveillance vessels entering the territorial waters, if those are not “gray area” incidents, where are we going to draw the line.


I have several plausible explanations for this, some interrelated. First, there are the psychological scars of the wartime experience and the seventy years that we have spent as a uniquely pacifist nation that have left us deeply conflict-averse. Second, the Senkaku Islands are a historically recent acquisition that have never been able to sustain a human settlement. Politically, Chinese aggression is easier to make light of than, say, an incursion into Tokyo Bay. Third, despite claims by Japanese officials that there is no legal issue to resolve, I believe that the Japanese government tacitly acknowledged the existence of a dispute when it agreed to leave the matter of jurisdiction over the EEZ around the Senkaku Islands pending when the two states signed the bilateral agreement on fishing rights in the East China Sea. I seem to be the only person talking about this (making me wonder if I am merely hallucinating the issue), but I think that it could be a contributing factor in inhibiting the behavior of the Japanese government.

Saturday, January 17, 2015

Misleading Headlines: “NBC Honcho Bob Greenblatt Loses His Temper When Questioned About Cosby”

This Slate piece is an unusual case where the writer must share the blame for the misleading headline. The writer claims that “NBC Entertainment chairman Robert Greenblatt lost his composure when questioned about the network’s abandoned Bill Cosby sitcom.” But the only thing that can be discerned from the transcript is that the writer has no sense of humor. But the copy editor (or whoever wrote the headline) should have noticed it and sought a total rewrite.


The “Top Comment” says it all, I think.

Wednesday, January 14, 2015

Amplifying on My Guardian comments around the FY2015 Defense Budget

The Guardian report, and FWIW the original full Q&A below, with one comma and two words (in brackets) added to remove ambiguity and one word altered (in brackets) to satisfy Word watchdog.

1.      How significant a factor is China, the Senkaku dispute, in today's record-high defence budget?

China is not the only factor driving the level of Japanese defense spending—North Korea, sea lane protection, are serious concerns as well—and the post-Cold War shift in the emphasis away from protection against land invasion and the north to oceanic threats (both in the near abroad and beyond) and the south began long ago. But the tensions around the Senkaku Islands and more broadly in the East China Sea certainly helps the Abe administration justify the level and substance of defense spending as laid out in the current five-year defense spending plan issued in December 2013.

2.      In the sense that China is spending three times as much as Japan on defence, lacks transparency, etc., would it be possible to say that Japanese anxiety over territory, particularly outlying islands, is understandable?

That, China’s increasingly assertive behavior in the East China Sea and air space, plus, of course, China’s overtly hostile actions against the Philippines and Vietnam certainly have a major influence on the direction of Japan’s military spending, the thrust of its military doctrine, and its approach to security alliances.

3.      How will Japan's year-on-year defence budget rises affect relations between the two countries in, say, the coming year?

Not at all. The Chinese authorities, media and netizens will register a modest protest, but Beijing will move on. Remember, the year-on-year increase was determined in December 2013 as a key feature of the current five-year defense plan.

4.      Should we be more worried about political changes - such as lifting the ban on collective self-defence, etc - than modest rises in arms spending? If so, why?

It depends on who you mean by “we.” If by “we” you mean “Japanese citizens,” yes, collective self-defense raises theoretical concerns over some future administration causing Japan to be entangled in ill-advised and/or ill-executed wars (Vietnam, Afghanistan, Iraq…). However, the ruling coalition includes the pacifist Komeito, which has an unbreakable hold on the electoral fortunes of the LDP[, which] makes sure that any definition of collective defense will be severely limited. So perhaps the worrying should go the other way.

“We” as the Chinese have more reason to be concerned, since collective self-defense and joint weapons programs embed Japan more deeply into the international security system led by the United States. That should be of far greater concern to China than a few percentage points one way or another in the Japanese defense program. Remember, China does not have national security allies. (It’s growing relationship with Russia is strictly a marriage of convenience.)

5.      How significant is this recent deal on a crisis management between China and Japan to prevent an escalation of tensions, and possible conflict, around the Senkakus?

Yes and no. Yes, it surely helps improve the overall bilateral relationship, which is positive in resolving or alleviating the effects of any incident. But remember that most of the incidents in the East China Sea—all [the incidents] in the Senkaku waters and air space if I recall correctly—have involved non-military surveillance and/or policing authorities. Indeed, with a consultation/communication channel in place, the PLA Navy and Air Force might become friskier, as they see the risk of escalation diminished.

Tuesday, January 13, 2015

Again… “Will the US Defend the Senkakus?”

Do you remember the online debate between Paul Sracic and me about US willingness to help Japan defend the Senkaku Islands that developed into a panel discussion? The faceoff is now posted on the TUJ YouTube page in case you haven’t had enough of us. You will find that I took my arguments in a somewhat different direction, although my basic position remained unchanged (I think).


My suggestion there that China could drop the North Wind approach and try being the Sun was a riff on my suggestion on Okinawa here.

The 2014 Butter Scare

One blogger that you should be following if you can read Japanese is Professor Hiroyuki Kishi, a former METI official whose acute criticism of Japanese economic policy is detailed and usually to the point. He doesn’t blog nearly often enough, and his latest post is dated December 26, 2014, where he took up the butter shortage, beginning in summer and widely reported in autumn, that threatened the production of Christmas cakes among other things.

There, he wonders why a butter shortage occurred although milk production had been down only 2% year-on-year and the government had added two emergency butter import tranches of 7000 tons (May ~) and 3000 tons (September ~), and places the blame squarely on the government’s shoulders. First, he takes note of the fact that the government has been pushing dairy farmers toward cheese production in recent years. According to Kishi, in FY2014, the Ministry of Agriculture, Forestry and Fisheries (MAFF) decided that it would install a permanent difference in subsidies to producers for milk used for butter and for chees with the former at 12.80 yen/kilo and 15.41 yen/kilo for the latter. He thinks that dairy farmers naturally gravitated toward milk for cheese, creating a butter shortage. He cites the summer increase in cheese production even as butter production was dropping. Second, he blames government intervention. He believes that the government’s virtual monopoly of butter imports creates inefficiencies that would be resolved by allowing market forces to prevail.

Interesting analysis, but could there be something more here than meets the eye? If inefficient government intervention created a shortage, why didn’t it create a glut with the 7000-ton and 3000-ton import tranches? My guess is that a lot of hoarding went on.

Imagine yourself going to the supermarket and noticing that there are fewer butter sticks and patties available than usual. If you are a butter user, you might be tempted to pick one up then and there, particularly if the one in your refrigerator needs to be replaced pretty soon. This could have a snowballing effect, clearing the shelves of butter until the shelves are replenished, first with manufacturers’ stock, later with the additional government imports. But all is not well even then. People, worried that the shortage could occur again, snap up the butter as soon as they appear. Media reports could create a stampede, turning what was initially a modest, temporary shortage into a crisis situation. Imagine every household refrigerator holding one extra stick or patty “just to be safe,” and you have a pretty large stock of butter that will be around until the fears wears off. A one-off increase in the supply of butter to match that stock, and a matching staggered decrease to be managed carefully.

Of course letting market forces deal with the situation by liberalizing imports could smooth out much of the fluctuation, which broadly considered, perhaps falls within the second point of Kishi’s analysis.

Saga Election Trivia

Japan watchers may have wondered why two candidates hailing from the same Ministry of Internal Affairs and Communications (MIC) wound up fighting each other for the Saga Prefecture governor’s office. Simple. MIC is a super ministry put together in the 2001 administrative “reform” from the Ministry of Home Affairs (MHA), Ministry of Posts and Telecommunications, and the Management and Coordination Agency (MCA). Yoshinori Yamaguchi, the winner, joined MHA in 1989, while Keisuke Hiwatashi, the loser, joined MCA in 1993. If you’ve seen how long and complicated the post-merger integration process is in Japanese corporations, imagine what it has been like for Japanese bureaucracies, where most of the pre-mergers functions survived largely intact. To complicate things further, MHA was one of the most prestigious bureaucracies, regularly competing with the pre-2001 Ministry of Finance for the most attractive fast-track candidates*, while MCA was one of the employers of near to last resort for the leftovers**. There was no way that anyone could step in and mediate.

* No false modesty here. The Ministry of International Trade and Industry (now Ministry of Trade, Industry and Economy) competed for the best and brightest with MOF, but not with MHA, which typically did not appeal to officials interested in economic policy.

** I’d wondered why someone in his thirties threw away his career as a MIC fast-track official was serving as a mayor of a city with a population of only 50 thousand, even if it was his home town. This explains it. If he had been a MHA official, he would have waited for something much bigger.

Monday, January 12, 2015

Verbal Threat Follow-up Revisited

While responding to a comment here, I remembered a point that I had intended to make but forgot.
Noah Smith’s op-ed states: Japan’s approach to corporate governance has, for the past 40 years, been very different from that of the U.S. Independent directors are very rare and boards are filled with corporate managers. As you might expect, this makes companies focus more on empire-building than on creating shareholder value and boosting low profitability.

Now the story Japanese “boards are filled with corporate managers,” making “companies focus more on empire-building than on creating shareholder value and boosting low profitability.” was a very popular meme during the go-go, Japan-as-No.1, 80s. But how does that explain the behavior of Japanese corporations today, who we are told are hoarding cash like dragons curled around their gold instead of “building empires” like chatterists claimed that they did in the good old days?

Actually, I do have some idea of why Japanese “boards” “filled with corporate managers” tend to behave the way they have been behaving. It’s not hard to figure out if you actually talk to Japanese businessmen, and I don’t think that they are lying.

Note on the Saga Prefecture Gubernatorial Election

The people of Saga Prefecture have spoken, and Yoshinori Yamaguchi, the Japan Agricultural Cooperatives group (JA, or Nokyo) candidate, has defeated against Keisuke Hiwatashi, the LDP-Komeito candidate, handily in race for the governor’s office between two former MIC officials. This is obviously worrisome to the LDP as they look to the April unitary local elections, where typically low turnouts make the agricultural interests vote more valuable than in the national Diet elections. So what to make of the two relevant items on Prime Minister Abe’s policy agenda: taking down Central Union of Agricultural Co-operatives (JA-Zenchu) sitting atop the JA empire, and TPP?

Prime Minister Abe essentially wants to take the right to provide guidance to farmers and collect membership fees away from the politically powerful JA-Zenchu. Now, anyone who has been reading this blog or has heard me talk at any length on the Abe administration’s policy agenda knows that I think that this is trivial, almost a distraction, and that true reform must change tax law, the agricultural land regime, and restrictions on agricultural corporations. To put it another way, backing away from this to placate the JA political machine will do little harm to the third Abenomics arrow.

I suspect that many if not most policymakers in the Abe administration feel this way too. On the other hand, giving up altogether will reflect poorly on the Abe administration, as the mainstream media and most of the tabloid world will criticize it ferociously, some of that inevitably leaching out to the more docile TV broadcasting and cable networks, with negative impact on the overall LDP prospects for the April elections.

My guess is that the Abe administration will look for some form of JA devolution, taking some of the powers and money away from JA-Zenchu and giving more powers and a bigger cut of the membership fees to the prefectural cooperatives. The Abe administration could also give JA-Zenchu a cut of the inevitable TPP easement money and a role in forming and executing a response strategy.

I cannot rule out the possibility that the Abe administration will just go ahead with its plans despite the outcome of the Saga election. The loser Hiwatashi had been the mayor of Takeo, a small city where he grew up before he relocated to Tokyo for college and eventual acceptance to the civil servant fast-track. Media reports tell us that this background and the national profile that Takeo enjoyed as the result of its mayor’s efforts caused significant jealousy among the prefecture’s political elite. They also note that the Governor Furukawa’s precipitous decision to resign and run for national office and the highhanded way in which Hiwatashi was imposed on them as heir-apparent likewise aggravated the situation. If all this is true, there is a chance that Prime Minister Abe and his political advisors will decide that this was a one-off event, lesson learnt, and make sure that the locals are properly consulted if and when prefecture-wide or big-city offices come up for grabs. But if my guess is correct, then there is a middle way ahead that they will be aware of. If there is a “half-full” solution, why take the risk?

TPP is totally different. There is no way that Prime Minister Abe can allow himself to be held responsible for the total collapse of the negotiations or allow the TPP to move forward without Japan. TPP is the economic face of the larger geopolitical strategy that prioritizes US engagement in an Asia of likeminded nations. It is as essential to that agenda as the bilateral security arrangements (first and foremost with the United States but also including Australia, but also including the Philippines and Vietnam, with future attempts of outreach to India also a strong possibility) including joint development of weapons systems that the Abe administration is seeking. As Ishihara fil No.1 infamously said of the Fukushima victims, at the end of the day, it’s about the money. Likewise with the agricultural interests that suffers losses.


The silver lining for the LDP-Komeito coalition is that the antinuclear candidate failed to register as a factor. The nuclear power units at Genkai Station will rise or fall on their technical merits.

Sunday, January 11, 2015

Verbal Threat Follow-up

I usually forget to follow up on my threats (easy come, easy go), but I see that I’ve been retweeted, so…

The main point of Noah Smith’s op-ed is that the adoption of the corporate governance code currently being considered by an advisory council for the Financial Services Agency and having it heeded by corporations will be an embracement of neoliberalism that will assure Abe’s legacy. This post will not argue one way or other on that, since it is a matter of opinion on which I do not know enough to have one. Instead, I am going to talk about his opening monologue to tell you how bad corporate governance is in Japan. I also have no opinion on how bad or not it is; I’ll leave that to people like Nicholas Benes, whom Smith quotes, to worry about that.

Smith states: Hostess” in Japan refers to a woman who works in a bar or a lounge and is paid to flirt with men. A French journalist once referred to them as “prostitutes who do not think they are prostitutes.”

Nothing personal, there are no hostesses among my relatives and friends that I’m aware of, but does Smith really think that a “hostess” has sex for money? Or does he belong to a religious sect that defines “flirting” as “prostitution”?

Smith goes on to state: Japanese corporate employees are the main customers at hostess bars. It’s a tradition in Japan to send (all-male) work teams to hostess clubs after hours, on the company dime. These sessions are often mandatory. Clients are also traditionally taken to hostess clubs by salesmen. Companies pay for these excursions, which go under the heading of “entertainment expenses.”… [I]n 2013, Shinzo Abe’s government introduced a plan to make “entertainment expenses” partially tax-deductible for large businesses (as they already are for small companies)… [I]t illustrates one of Japan’s biggest structural problems: poor corporate governance…. Wasting money on useless perks like hostess-club visits is merely a symptom of a much deeper disease.

Can Smith tell us what he thinks “useful” perks are? Or does his sect frown on all “perks” as “useless”? Being a loner by nature, I was never a fan of spending a mandatory evening out with people at my workplace, particularly when we had to go back to the office afterwards to finish up. (It also did not help that, as a civil servants, our bosses—mine at least—could not swing hostess club visits our way. Instead, I lost a lot of money playing mah-jongg…) But shouldn’t rewarding your sales team be part of business management 101? You have your business conventions in Miami, we have our afterhours treats. And it certainly seemed to have worked in the 1950s, 60s, 70s and 80s. Of course societies change over time. I have observed within my own working lifetime enthusiasm for such workplace “perks” as well as the once-ubiquitous annual workplace excursion wane, as younger employees increasingly came to prefer their own personalized afterhours companionships. “[E]ven more importantly,” though, Smith neglects to tell you that the FY2014 tax bill that reinstated tax breaks for big business does not cover entertainment for your own directors and employees (or for small businesses either, for that matter). That’s right, half of what Smith is railing against actually did not happen! As for the other half, i.e. entertaining clients, give me a break.

Friday, January 02, 2015

Misleading Headlines: “Abbas trades stalemate for confrontation in ICC move”

The Reuters wire states that “Palestinian President Mahmoud Abbas has entered into his most serious confrontation yet with Israel by signing onto the International Criminal Court” and that “the failure of peace talks this year to win a state or halt the spread of Israeli settlements seems to have clinched his decision that now is the time for what commentators on both sides describe as "lawfare" - conflict by means of law.”


I would have no objections if the term “stalemate” referred only to the “failure of peace talks this year to win a state.” But “failure to… halt the spread of Israeli settlements” is stalemate only if stalemate means that one side gets to make all the moves.

Thursday, January 01, 2015

The East is East and the East is East; the Twain Shall Never Meet

The following is written even as the memory of the event inexorably fades. If someone else who was there can point out any inaccuracy—I am well aware that the passing of time does tend to burnish one’s role in the event of things—I would very much appreciate it.

The young South Korean official sitting next to me would have liked nothing better than to knock my head off. It was obvious from his expressions, body language, the way he tried to talk over me. Strange, since they had invited me, among others, to get a lay of the land in Tokyo.

My crime? I suggested that the vast majority of the Japanese who experienced World War II considered themselves victims of a military-dominated government. A shared sense of victimhood was the source of empathy for the universal suffering victims elsewhere that enabled us to express our sorrow and regret. If Koreans choose to reject that empathy and edit us, Japanese comfort women and all, out from your narrative in order to construct a uniquely national story of suffering, there will never be reconciliation; instead, a cold truce is the best that can be hoped for.

The young official studiously ignored me while we were exchanging pleasantries all around after the dinner. The host was gracious throughout, but I doubt that I will be invited again.

Elections 2015: In Civil Servants We Trust

Of the ten prefectural gubernatorial elections in the unitary local elections being held in April, eight went directly from the national civil service and another former national civil servant served in the House of Councilors before becoming a governor. The tenth was a well-known TV journalist.

It’s safe to say from this that local ties are important, but it’s useful not to be too local. A long-serving mayor or powerful prefectural assemblyperson must run the gauntlet of longstanding regional rivalries. A successful administrator with local ties but above the fray of local politics is an ideal candidate for the prefecture-wide office. IT’s also safe to say that the national bureaucracy still retains considerable cachet in the regions.

Notably, the one exception is the governor of Kanagawa Prefecture, the demi-center of the metropolitan Tokyo area, where fluid, urban demographics generate very different political dynamics.


Note: I incorrectly wrote here that the Saga governor’s office would be part of the unitary local elections. Saga Prefecture obviously cannot go without a governor for four months, and the law says so too. That election will be held on January 11, only ten days from now. Doesn’t change the story much, but it is pretty embarrassing nonetheless, as ignorance of the law is no excuse.

Predictions 2015: Two more. Why Not?

1.    The Islam State (IS) caliphate collapses, leaving a major guerilla-extortion operation consisting of hardcore, increasingly indigenous fighters in the Sunni region. I was surprised when IS, instead of stopping to take a breath, consolidate its hold on Sunni Iraq and Syria, and learn to govern, decided to continue to push south to take Baghdad and north into Kurdish turf. It had obviously won too much, too quickly, which made them forget about such things as home court advantage, US air power, and, more long term, Iran. The outcome was a loss of dedicated facilities and logistic capabilities and a decline in the ability to conduct visible operations. All this accompanies the loss of momentum, which, together with the decline in logistic capabilities, should cut down seriously on the inflow of foreign fighters. I see a relatively short transition accelerated by infighting and purges. Rule of thumb for uprisings: Take over, or go criminal. Do I really think that this will happen this year? Dunno. I’m laying down my bet now so I won’t have to bandwagon later, and I’ll just go double or nothing with my prediction if it doesn’t work out immediately.

2.    Prime Minister Abe does not go to Yasukuni Shrine. I know, I said this before and got it wrong. But circumstances have changed. First, on the personal level, not going at all is a far greater transgression than not going at all. Geopolitical considerations and the pleas of his chief cabinet secretary and foreign minister now have a better chance of prevailing. Second, the US authorities registered their displeasure, reminding the Abe administration of the harm to the bilateral alliance with an administration deeply wary of unsolicited distractions. Third, he did not go in 2014, after a former prime minister (Yasuo Fukuda), the LDP vice president (Masahiko Komura), and the LDP secretary-general (Sadakazu Tanigaki) put their reputations on the line. Fourth, Xi Jinping did provide a grimace-and-greet, and Park Geun-hye did offer to host what is supposed to be a Japan-China-South Korea trilateral summit last month (which Xi kicked forward, to make sure Abe wouldn’t go to Yasukuni and show everyone who was calling the shots).

3.    And to repeat, Goshi Hosono wins the DPJ Representative election in a runoff against Akira Nagatsuma. If you are looking for a long-term alternative to the LDP, hope that Hosono goes against his instincts, stops trying to please everybody, and instead knocks a few heads—for starters, find a way to take Koshiishi and the whole upper house clique down a  notch—in mapping out a plausible alternative to Abenomics.

Wednesday, December 31, 2014

Yet Another Not-Japan Story Speaks to Sony Management Failure

A Monkey Cage blog post entitled “Little mention of Japan in coverage of Sony hack” states that “the focus is much different, now that Japan isn’t viewed as a rival.” We Japanese in our turn think of it largely as an American story involving a company that happens to be owned by a Japanese company. But surely more attention would have been paid to the Japan angle if there had been more coherence and synergy between Sony Pictures Entertainment and the rest of the Sony group? In fact, wasn’t that the whole idea when Sony acquired Columbia Pictures amid all the Japan bashing?


The omissions taken together are an unspoken indictment of Sony management’s behavior over the years. 

DPJ 2015: With Nagatsuma in, Left Also Represented in Representative Election

Former MHLW Minister Akira Nagstuma is now the de facto candidate representing the labor union/ex-SDP wing  of the DPJ left, most likely hurting Katsuya Okada in the first round vote. My no arithmetic, highly impressionistic guess now puts my money on a Goshi -Nagatsuma runoff that Hosono will easily win.

I’m mildly surprised to read that Renho has failed to secure the necessary 20 Diet member support to stand as a candidate. With its ranks depleted, shouldn’t the DPJ change the rules to make it easier to stand?

Election 2014: Abe Won/Lost Election…Yes? No? Whatever? Duh?

There’s some talk out there among people wondering whether Mr. Abe “won” or “lost” the December 14 lower house election. In the most tangible sense, he won, of course, because the coalition extended its supermajority by roughly two years, covering the next upper house election in 2016 and his hoped-for second three-year term as LDP president (which means prime minister), so that he can pass the baton to his LDP successor, who can call a snap election immediately after his appointment as prime minister close enough to the end of the lower house members’ term so that it will cause minimum distress among vulnerable first-term members. If that’s not a “win,” I don’t know what is.

Here’s an argument out there that says the LDP lost because it went into the election with 295 seats and came out with only 291. That’s a defendable argument, but there is a counterargument. The LDP won 294 out of the 480 available seats in the 2012 election and won 291 out of 475 in this election. That’s a drop from 61.25% to 61.13% of the seats available, representing the equivalent of a half-seat decline, essentially a coin toss. There’s more. Of the five prefectures that lost a third seat, the LDP made a clean sweep in both elections in Fukui, Tokushima, and Kochi, while losing the one seat that it had in Yamanashi (although the stealth LDP candidate won in both elections), and lost two out of the three that it had in Saga. Redistricting obviously hurt the LDP. Adjusted for the five-seat cut, the LDP most likely “won.” Of course that’s no reason for the LDP to rejoice. The LDP is losing out as the conservative boondock lose the demographics game. The many adjustments to accommodate the increasingly irate Supreme Court, if nothing else, may redistrict the LDP out existence, if Japan has not childlessnessed itself to extinction first. But that’s too distant in the future to concern Mr. Abe.

There’s a less meaningful argument that says that Mr. Abe “lost” because he did not meet the widespread expectation among chatterists that the LDP would actually register a gain. But we were only parroting what the media was saying. (yes, I, as a charter member of the chatterist, dutifully reported that the media reports were saying that the LDP would “take 300 or more seats”). Yes, so the media reports were wrong. So? The point is?

Of course I also made the point then that “any ‘mandate’ talk from the Abe administration and its opinionating followers will ring hollow. Komeito will make sure of that with regard to any attempts to push the markers further on collective self-defense. And nothing will have changed on the socio-economic agenda beyond the LDP promise to make good on consumption tax exceptions. And that decision technically has preceded the election.”


“Win”? “Lose”? What do those words even mean?

Monday, December 29, 2014

Election 2016 (oops): Keep an Eye on Saga Prefecture

The December 14 lower house election had no effect whatsoever on the nuclear power plant restarts, and the April unitary local elections won’t either, for the most part. But Saga Prefecture, which hosts the Genkai Nuclear Power Station, bears watching. Let me explain.

Of the five prefectures holding gubernatorial elections in the April unitary local election that host nuclear power plants, Hokkaido, Fukui, and Shimane will have highly popular pronuclear incumbents running for reelection, while one, Fukushima doesn’t count because the Fukushima Dai-ni power plants will not be restarted. By far the most interesting race is in Saga Prefecture since most of the conservative vote will be split between two pronuclear candidates, one supported by the LDP, the other by the agricultural cooperatives—remember that the Abe administration is not only pushing TPP but also directly challenging the Japan Agricultural Cooperative Association (JA)—and Professor Yukihiro Shimatani, an environmental engineer at Kyushu University, is standing for the antinuclear forces.

The antinuclear candidate looks like a long shot. He is a helicopter candidate with no discernable local ties running in a deeply conservative prefecture where the LDP currently holds 28 out of the 39 seats (including two vacancies) in the prefectural assembly. The Japan Communist Party (JCP), with just one incumbent but with considerable boots on the ground, will help, but will also limit Shimatani’s upside. The five seat Prefectural Citizens Network, a coalition of the Democratic Party of Japan (DPJ) and the Social Democratic Party (SDP), should provide some help from the junior-partner, antinuclear SDP, but that’s it. It would require a perfect storm where a charismatic Shimatani succeeds in convincing the voters that he is not a one-issue candidate while keeping nuclear power and its alternatives front and center of his campaign—and the pronuclear candidates neatly split the vote—for him to get elected. Still, it’s not implausible. And none of this would have become possible if the incumbent hadn’t resigned to run, successfully, in the December 14 lower house general election.

So keep an eye on the Saga gubernatorial...especially if you hold Kyushu Electric Power Company stock.

Sunday, December 28, 2014

My Call: Okada Will Win the DPJ Representative Election

Katsuya Okada will win the January 18 DPJ Representative election. It’s not the best outcome for the DPJ—Goshi Hosono will lead a better charge in the April unitary local elections—but Okada has amassed too much credit with the local faithfuls over the years to lose.


Hosono is standing for election, and that is a good thing for the DPJ’s future.

Saturday, December 27, 2014

Stratfor’s 2014 Forecasts Short on Geopolitics

The Stratfor 2014 forecasts missed out completely on the two easily greatest sequences of geopolitical events of the year in the Russia-Ukraine military conflict and the expansion of the war in Syria to Iraq. To quote:

“Germany and the European Union will try to maintain some influence in Ukraine through their support of opposition leaders like Vitali Klitschko, but Russia will maintain the upper hand in Ukraine overall.”

To call that an understatement would be the understatement of the year.

“Syria will remain the main proxy battlefield between Iran and Saudi Arabia.”

…mmm…

“A large and capable jihadist presence in Syria will encourage the slow rise of an indigenous jihadist movement in Lebanon.”

But not a mention of Iraq. In fact, Iraq only appears in the context of Turkey’s maneuverings.

And then there was India:

“As the Congress and the Bharatiya Janata Party square off in their decades long rivalry, the national elections are likely to illustrate the rising clout and popularity of local parties on the national level, reflecting growing frustration with the traditional duopoly of India's national politics.”

Well, the Indian electorate did demonstrate its “frustration with the traditional duopoly,” just not in the way that Stratfor envisioned.


In all fairness, nobody that I’m aware of predicted anything like the first two sequences—discontinuities are hard to foresee—and most people were surprised by the magnitude of the BJP’s victory under Narendra Modi.

Will the “Abenomics” Corporate Tax Reduction Discourage Risk-Taking and R&D?

Media reports tell us that the Abe administration and the LDP Tax Council have agreed on a two-stage 2.51 and 3.5 pp reduction of the effective corporate tax rate from the current 35.64% to 33.13% to 29-30%. The stated objective is to stimulate investment by bringing the rate closer to the lower rates prevailing in South Korea, Singapore, China and the like. The reduction will be largely offset by measures designed to increase taxes on corporations.

I have misgivings about this.

First, to the extent that the reduction is offset by an increase, the effective corporate tax rate remains the same. The tax burden is merely being shifted among corporations.

Second, the offset, at least in the first stage, will be achieved by the following means:
(1)   Increasing the corporation business tax. The corporation business tax is a prefectural corporate income tax. In the case of a corporation with paid-in capital of more than 100 million yen, part of the tax is assessed on a composite of value-added (wages, net interest paid, net rent paid, and annual profit) and equity (paid in capital plus capital reserves).
(2)   Reducing loss carryovers. The current maximum carryover is nine years. The media reports do not give any details.
(3)   Reducing R&D tax benefits.
(4)   Increasing taxation on dividends between family corporations.
Measures (1) and (2) will punish corporations that incur losses. In principle, this will discourage risk-taking. Measure (3) will also discourage risk-taking and specifically reduce incentives on activities that lead to innovation. Measure (4) does not appear to be inherently discouraging for risk-taking behavior, but it will be a constraint on managing corporate finances.


So the “reduction” of the effective corporate tax rate, at least in the first stage, turns out to consist largely of a shift in the tax burden that discourages risk-taking activities and R&D. Doesn’t that run counter to the very purpose of Abenomics?