Sunday, November 23, 2014

Fred Kaplan Obviously Did Not Take to Physics in High School

“In its natural state, uranium has 238 atoms and is thus called U-238. Fissile uranium—the stuff that can make an atom bomb—has 235; therefore, it’s called U-235. The process of enrichment is done with gas centrifuges, which, by spinning very rapidly, separate the heavier U-238 isotopes from the lighter U-235 ones.

“About 0.7 percent of U-238 is naturally fissile.”

—excerpt from footnote to “Jaw-Jaw With Iran” on Slate website.

I know, it’s not hard to figure out what he means; in fact, I might have missed the errors altogether if I had been just scanning the article. But they are so elementary, and clearly not typos, that they do make me wonder, what else does the guy not know?

Good News and Bad News for People Who Dislike the Abe Administration

…and there are many of those people…

But first, the good news: A Yomiuri poll (Nov. 20-21) shows a drop in support for the Abe cabinet to 49% from 55% just a couple of weeks ago (Nov. 7-9); a shift that can only be accounted for by Abe’s call for a snap election—a move largely criticized in the mainstream media, including in my estimate NHK commentators, which appears to be making an extra effort to make the event seem relevant to actual issues such as nuclear start-ups (actually, now the host local governments and the communities that they represent) and collective self-defense (Komeito, Komeito, Komeito…sheesh).

The bad news: Intentions for proportional representation vote came out 41% LDP, 28% undecided, 14% DPJ, 6% Komeito, 5% Japan Innovation Party (JIP? The party formerly known as the Japan Restoration Party), 3% Communist Party…

…you get the picture. If actual voting behavior ends up proportionally anything like these numbers except for Komeito, which will at least double up, likely more given what is sure to be a low turnout, then the LDP will clean up in the single-seat districts and dominate the regionals, just like in 2012. 

Saturday, November 22, 2014

Friday, November 21, 2014

Do Those Old Japan Hands Retain Any Relevance in Washington?

I thought so.

Old soldiers don’t die; their cold, cold hands hang on desperately to their retainer fees—or more or less so someone (who does not rely on retainer fees) told me.

Crib Sheet for CNBC Asia Interview on Upcoming Snap Election

- Why is PM Abe likely to dissolve parliament tomorrow?
Because he can. The opposition is in disarray, the Abe administration’s poll numbers are still reasonably good, and the prime minister can go a long ways in putting the political financing scandals behind because general elections have an ablutionary effect on miscreants—it’s called “misogi.” And postponing the consumption tax hike gives him a plausible excuse.

- Impact of the tax delay on domestic politics & economy?
Each percentage point accounts for roughly 2 trillion yen, so an 18 month delay of a 2 percentage point hike means a loss of 6 trillion yen, not counting exceptions for necessities. That’s a lot of money for me to lose, but when you’re 900 trillion yen in hock, 6 trillion does not move the needle much one way or the other. Politically, it does give the opposition a hook for negative campaigning, since they could argue that the postponement is a confession that Abenomics has had two years to work its magic —three if you remember that the second hike is supposed to come into force not now, but almost a year from now—and guess what, it doesn’t.

- Would Abe & his party survive this snap elections?
Depends on what you mean by “survive.” The majority that Mr. Abe talked about as a threshold, that’s not a low bar, that’s digging a narrow ditch in the ground and saying that he’d resign if he failed to cross it. The low bar is what the Liberal Democrats thought they’d set when they talked about a 30 seat loss max. It became a little iffier with the bad 3rd quarter figures—a technical recession?!?—but I still think they’ll clear it, since independents are more likely to abstain than to vote for an opposition in disarray.

- Outlook for the economy, with recent GDP numbers confirming that the country is in a technical recession?
You are asking a political analyst? Okay, let me give it a try. All the main components of GDP did poorly in the third quarter. The employment and investment outlook as well as one-off effects wearing off likely with regard to inventories and surely with regard to consumption, it’s hard to see a third straight quarter in the negative. After that, there’s a lot of uncertainty about China and Europe, and even South Korea—and these things matter to the Japanese economy. But in the long-run, the third arrow of Abenomics must be transformative. Now, it’s pointing in the right direction, but I’m an open-minded skeptic about its flight arc.

Click here if you want to know why I don’t appear on TV more often.

Thursday, November 20, 2014

Crib Sheet for Radio Interview on Upcoming Snap Election

Yesterday on China Radio International (yes, they still call on me), largely as scripted, except for a question about Okinawa, where I made the point (I think) that it was a local issue as far as the general election was concerned and that its outcome was largely drowned out by the uproar over the prospects of the latter, as I mentioned in this post.

1. Is it a surprise to you that Abe called for an early election? (There has been speculations that he might do so after newly released figures show Japan's economy slipped into recession in the third quarter)

It depends which me that you are talking to—a month ago? Two weeks ago? I think that the first whispers were a bluff to push the opposition away from the political financing scandals back to the business at hand in the Diet session. After all, the opposition always had more to fear from a snap election. Then, when the July-September GDP forecasts came out looking less than cheerful, I thought that Prime Minister Abe would postpone the tax hike whether he wanted to or not because it would be a good enough reason to call a snap election. But when the July-September GDP numbers came in negative, Mr. Abe had no choice but to postpone the tax hike anyway. But it came to the same thing. Snap election.

2. What can be achieved by calling an election two years ahead of schedule?

It resets the political clock in two ways, and they both help Mr. Abe serve out his two three-year terms as the head of the Liberal Democratic Party, therefore six years as prime minister, and do so from a position of strength—the economy willing, okay? Now, first, obviously, the LDP-Komeito coalition will prevail, and everyone elected to the lower house gets a four-year term instead of the two that remained. Second, old sins tend to be forgotten with every general election. In Japan, it’s called “misogi,” or “cleansing.” And the stench of the political financing scandals will be washed away.

3. Analysts say Abe is almost certain to win another majority in the lower house, and then he will have the mandate he needs to introduce unpopular policies such as restarting Japan's nuclear power generation plants. Do you agree? Will that strategy work?

The election has nothing to do with moving forward with those “unpopular” decisions. The nuclear power plants? They are already in the process of being restarted; politically, it’s up to the host municipalities and the host prefectural governors. The Sendai power plants will be up early next year, and it will barely register in the poll numbers. Collective self-defense? Komeito is the one who is holding up decisions on the details, and the election itself won’t make Komeito change its mind one way or the other. And so on. I don’t see a controversial issue on which the Abe administration will be helped or hurt by the outcome—unless, of course, the LDP-Komeito coalition loses so many seats that Mr. Abe is forced to resign. But that’s not going to happen.

4. At the news brief, Shinzo Abe also announced the delay of a planned increase in sales tax. How big of an impact will that have on Japan's plan to ease the country's public debt? How would the Japanese consumers respond to that? (The first increase taking place in April didn't boost income but instead Japanese consumers stopped spending)

I’m not an economist or a financial analyst, so you are putting the question to the wrong person. But since you asked…it’s 2 trillion yen for each percentage point, so an 18-month delay of a 2% hike means a 6 trillion yen loss of tax revenue. That’s a lot of money for me to lose even in the long-run, but not so much for the Japanese treasury. And remember, it was supposed to kick in almost a year from now, not next month. So the decision has little immediate effect on consumer behavior. Now, given the positive note on all kinds of employment data and a not-so-gloomy investment outlook, it’s hard to imagine October-December GDP going negative again, and the Abe administration will be ready with a supplemental budget for January-March 2015, which will also help out in April-June. But can Abenomics convince businesses to invest in Japanese capital and Japanese labor for the long-run? Can Abenomics instill enough confidence in consumers about Japan’s fiscal and demographic future to spend more? I think that Abenomics is headed in the right direction. However, a kick can be headed in the right direction, but it has to reach the end zone to count as a goal. I have serious worries about that when it comes to Abenomics. As a Japanese citizen, I hope that the security of an extra two years will push him to do more.

5. Seeing Japan's economic output shrinking for the second quarter in a row, questions about whether the "Abenomics" have failed are inevitably being raised. What's your evaluation?

I think that I just answered that question, in a way. But just to add. I don’t blame the technical recession on Abenomics. It’s not Mr. Abe’s fault that the LDP took part in a bipartisan agreement—two years ago—including a consumption tax hike. It’s not Mr. Abe’s fault that the Chinese economy is slowing down. And it’s only a little bit Mr. Abe’s fault that the Japanese multinationals have not altered their global investment decisions to have an impact yet—after all, there’s no assurance that a 110 yen-dollar exchange rate will prevail forever. But progress on the third arrow—and that’s going to make the real difference in the long-run—that has been slow. The Abe administration needs to put more of its time and political capital into the economic agenda after the “misogi,” or “cleansing,” and less into forays in the rest of the world, worthy though they may be. And unless it does that, there is a good chance that history will remember Abenomics as an opportunity lost.

Tuesday, November 18, 2014

One Surprise in Abe’s Snap Election Announcement

Prime Minister Abe covered all the necessary bases in his televised announcement of his intent to dissolve the lower house on the 21st for a snap election except the actual election date. NHK could have done a better job to make the teleprompters less conspicuous? Is that how presumably liberal-minded production side of the institution to subtly undermine the prime minister in revenge for foisting his outspoken soul mates on them as top management and board members?

Whatever. The only surprise for me was how low Abe set the bar. He stated that he’d resign if the LDP-Komeito coalition failed to secure a majority. Dude, you guys have 326 seats between the two of you, the LDP and Komeito. You’d have to lose 88 seats to fall under the 238-seat threshold required for a majority of the 475 seats to be contested. That’s not a bar, that’s a ditch that Abe dug in the ground, claiming that he’d admit defeat if he failed to walk over it without getting himself wet. when

I predicted that the LDP-Komeito coalition would clear the 30-seat drop bar that the LDP set when they expected the July-September numbers to be far more ambiguous, and I’m sticking by that prediction. I expect a low turnout. Many independent voters will abandon the LDP, but they won’t be going to the polls, they’ll stay away. And that will help the LDP-Komeito coalition. What was a 50 meter dash with a 10 meter head start will become a 40 meter dash with a 10 meter head start.

Already? The Imminent Your Party Split

It’s not my party so I’m not going to cry over it, but my preceding post is now superseded by the news that Your Party, barring a political miracle, is set for a formal split as early as this evening. Current YP head Keiichiro Asao, the introverted DPJ dropout, looked to an eventual merger of the opposition parties with the DPJ at the core while his predecessor and bankrolling YP founder Yoshimi Watanabe, the happy-go-lucky LDP renegade, wanted to focus on getting the policy right—which in his case meant making whoopee with the Abe administration and its Abenomics. A marriage made in limbo, it appears to have fallen apart when Abe kicked the lower house into snap election hell.

This will obviously help the DPJ. The Asao camp will be free to collaborate with the DPJ in the Dec, 14 election and towards ans eventual merger. The rump Your Party will for all practical purposes be headed by Watanabe, who chose months-long occlusion when a political financing scandal broke out and has yet to give a meaningful public account of the money or his disappearing act. This will make it that much more difficult to find and/or finance YP candidates for the snap election, making it that much easier for the DPJ and its potential allies to have a more or less clean field (the token Communist Party candidate notwithstanding) in contesting single-seat districts against the LDP-Komeito coalition seat-seekers.

I still think that the LDP-Komeito coalition will emerge with a very healthy majority; indeed, I do not think that the LDP’s single-seat majority will be threatened either. With 475 seats to be contested and with 296 seats in hand (including one nominal independent, as custom requires the president and vice president of the two Diet houses to drop their party affiliations), the LDP could lose 58 seats and still hold onto a single-party majority. However, with the unexpectedly poor July-September GDP numbers and this latest YP split, the very low bar for success that the LDP set for itself and the Abe administration when it talked about a hypothetical 30-seat loss has become a plausible goal. Let’s see how the media plays with all this—the media always prefers a real race—and how good a negative campaign the opposition parties can mount around that.

Technical Recession, and the Coalition Still Wins

The Japanese economy against all expectations—and lowered ones at that—is in technical recession, the worst backdrop imaginable for the Abe administration in postponing a consumption tax hike (no longer as a choice but out of necessity) and going to the polls for a renewed mandate. And there’s still not much chance for the opposition to deny the LDP a lower house majority and absolutely no path in sight blocking the LDP-Komeito from securing one. Imagine that.

That’s how bad the opposition looks, with just under four weeks to go before the prospective December 14 election. Over time, it is possible, even likely, that large chunks of the Your Party and the Japan Innovation Party will get together with most of the DPJ to form a viable alternative. But for now, the best that those three parties can hope for is to overcome their respective internal differences—YP for one is running the risk of a formal split, while the Hashimoto wing and the rest of the JIP have agreed to disagree on collaboration with the DPJ—and eliminate most of their overlapping candidacies in the single-seat districts to improve their chances of prevailing over the LDP/Komeito candidates. The irony is that this task is made much easier by the fact that the DPJ will have a hard enough time finding enough candidates to contest just half of the single-seat districts.

All this intra- and inter-party maneuvering is making it difficult for the opposition to put together coherent policy messages, especially since there is not that much in policy terms separating the ruling coalition and the opposition parties in the first place.(The DPJ for instance voted for the tax hike and is now supporting a postponement.) In fact, going negative is the only meaningful election tactic available to the opposition: “White flag goes up on three year-failure Abenomics (remember, the Abe administration is postponing a tax hike not now but one year from now).” In a stroke of luck, the technical recession combined with the postponement is providing it with a strong tailwind. There’s no way it will come near to carrying it over the finish line in victory, but it’s certain to put a crimp in the Abe administration’s already cramped-to-be legislative schedule come January, when the Diet convenes for its regular session.

Sunday, November 16, 2014

The Okinawa Gubernatorial? What Gubernatorial?

The Okinawa gubernatorial election was always going to be an uphill battle for the LDP favorite, pro-Henoko relocation incumbent Hirokazu Nakaima. Today, conservative anti-Henoko relocation candidate Takeshi Okinaga emerged the winner. My guess is that work will move forward on the relocation anyway, albeit against significant local resistance. But the rush to a snap election largely kept the story out of the national media, and that’s of more consequence for now.

Prime Minister Abe is one lucky man.

Why Is the Maritime Self-Defense Force Staying Out of the Coral Poaching Incident?

I have been informed that my essay on The Diplomat has touched off a Facebook discussion about the lack of involvement on the part of the Japanese Maritime Self-Defense, a discussion that has been focusing on Prime Minister Abe’s alleged unwillingness to do so. I’d never considered the matter at all, since it was, is, and for the foreseeable future, illegal to bring the Self-Defense Forces into this. Article 79 of the Self-Defense Forces Act states, “The Prime Minister may order all or part of the Self-Defense Force for operations in the case where it is determined that public security cannot be maintained with general policing powers in an indirect invasion or other emergency situation. So does an “indirect invasion or other emergency situation” exist here? Remember that these are the high seas. The Chinese boats have every right to loiter there, (pretending that they are) doing nothing. The Japanese authorities can and do accost and board these boats for inspection, at which point they are known to attempt to flee, but none have been reported to resist using force. Suspicion of surreptitious criminal activity and lack of capacity to police it appropriately are hard to justify as grounds for finding “indirect invasion or other emergency situation.”

A more useful course of inquiry is this: Why not give the Self-Defense Force policing powers, in the same way that the U.S. Coast Guard doubles as a civilian authority and an arm of the military? I am not opposed to this as a matter of principle, although I suspect that the greater part of the Japanese public, even many traditional conservatives, will not accept a domestic policing role for the military. But it will bring the Self-Defense Force into play against incursions into the Senkaku territorial waters as well as the islands themselves. The possibility alone would be seen as provocative by the Chinese authorities; actual deployment would be regarded as escalation, very likely compelling them to respond in kind.

The last is a grim possibility that not even the most hawkish administration is willing to countenance, in my view. The Abe administration is looking into the so-called gray areas, but that is about as far as it appears to be willing to go, even if public opinion were not situated as I believe it to be.

Saturday, November 15, 2014

Don’t Worry, China, Obama Didn’t Really Say That

There’s a good chance that I’ll take part in a panel discussion on security issues where I’ll be making a case on China’s behalf. So, in order to stay in character…

Reuters claims in a report entitled “Obama delivers veiled message to China” that “[t]he United States is a Pacific power committed to its Asian allies and will not tolerate small nations being bullied, President Barack Obama said,” but the only direct quote that it provides is the following: “"We believe that nations and peoples have the right to live in security and peace; that an effective security order for Asia must be based not on spheres of influence, or coercion or intimidation where big nations bully the small, but on alliances of mutual security, international law and norms that are upheld, and peaceful resolution of disputes.” So I go to the White House website and confirm said fact.

So, a) where did “will not tolerate” come from, and b) what the heck does it mean? My guess: a) The Obama WH press minders, working correspondents writing against a deadline, and one of those minders scored an ace; and b) the WH will stand by its allies and issue supportive statements for the others if and when “big nations bully the small.” And the US cut-off date for new bilateral alliances in the neighborhood came and went a long time ago.

Don’t laugh. It’s more than most other states will do.

Friday, November 14, 2014

’Splainin’: Mixed Currency Bitcoin Wallet Exposed

Unlike real currencies, the Bitcoin has no currency area of its own, an economically meaningful group of entities that conduct most of their daily transactions in Bitcoins. Unlike real commodities, the Bitcoin has no practical use other than its role as an embodiment of value derived from its scarcity. Given the massive volatility that these two conditions generate, I do not see how the Bitcoin can ever have any meaningful role in our economic life unless it already had one, which it doesn’t. But this article on the Tech in Asia website purports to have identified a business model that manages to get around the volatility problem though mixed currency wallets anchored by the Bitcoin.

Leaving aside the mumbo-jumbo in the article and the vacuous sound bites including the word “egalitarian” in the Bitreserve promotion video that it links to, the writer of the article buys 1 Bitcoin (BTC), then exchanges 1/3rd each of that amount for US Dollars (USD) and Euros (EUR) at the going rate, ending up with 0.3398 BTC, 115 USD, and 90 EUR minus the 0.45% and 0.95% exchange fees for the conversion to the USD and EUR respectively. When the writer wants to buy a merchandise priced in Bitcoins, Bitserve buys the requisite Bitcoin at the going rate with the USD, presumably charging a 0.45% fee on the transaction and uses that Bitcoin to execute the transaction. It is clear from the text that any other conversion back from USD and/or EUR to BTC will be executed at the going rate, not the original conversion rate. So I guess my question is: Why not buy 0.3398 BTC and 90 EUR (or 115 USD if your money is in EUR), and convert your USD into BTC when you make the purchase, saving yourself the initial transaction fee? Or better, buy the merchandise with your USD if the vendor also accepts USD, which should be the case unless you have encountered the rare vendor who is willing to run horrible “currency” risks, and save yourself, unless you are entering into a small international transaction where the handling fee savings may justify a BITCOIN transaction?

Of course, the high that you get from executing a Bitcoin transaction may be worth the extra, (to me) meaningless cost. But what kind of a person are you that gets a high from that? Perhaps a head of product at a Bitcoin startup?

Question: Why Would LDP Diet Members Be Willing to Risk Losing Their Seats for a Chance at a Two-Year Extension?

This question was raised specifically with regard to first-term Diet members, who are typically the most vulnerable. As usual, I gave a long-winded answer, which I am going to reproduce in more coherent form.

The LDP Diet members who managed to pull through anyway in the 2009 LDP debacle that brought the DPJ into power do not fear a snap election. There is very little risk as far as their personal prospects are concerned. They are quite willing to let the prime minister choose what he deems to be the optimal timing as far as the interests of the LDP is concerned.

The LDP members who lost in 2009 but made it back in the 2012 landslide victory that brought the LDP-Komeito coalition back to power are in a much more ambiguous position. For them, a snap election means betting the certainty of two more years against the uncertainty of four more years. The hasty rush towards a snap election even before the decision regarding the timing of the next consumption tax hike is made indicates that the typical LDP Diet member thinks that the uncertainty is low enough to make a snap election worth looking forward to. My guess is that the Diet members who made it back generally fall into this category.

Rookie Diet members who did not inherit family heirloom seats—their number is unusually high this time—are typically the most vulnerable. They would very much prefer to spend the next two years building and consolidating their support base and collecting funds to repay the debt that they incurred in launching their (national) political careers, rather than run the risk of  losing everything—a significant possibility even in the case of a modest 20-seat drop-off for the LDP. Unfortunately, single-term members are relatively powerless as far as decision-making in the LDP is concerned. Their personal interests will carry little weight, leaving them to sink or swim.

Posts on Coral Poachers Make It Online with One Day to Spare

The Nov. 14 Mainichi and Yomiuri report from Japan and Shanghai respectively that the Chinese authorities are identifying and calling back the coral poaching boats back to their home provincial ports in Fujian and Zhejiang. The Yomiuri carries an account of a Nov. 12 Fujian online news service report that says four poachers have been indicted. Peace dividend from the Sourpussy vs. Mr. Whatever photo op in Beijing? Perhaps. What matters to me, honestly, is that my The Diplomat post (faulty link restored) made it online with one day to spare before the media story broke out and that the media report corroborates three verifiable conjectures of mine while refuting none of them.

1)      “…the high likelihood of these poachers operating in groups…”
I made this conjecture because of the well-known propensity of Chinese fishing vessels to work in packs as well as the obvious dangers of working solo among lawless competitors. Geographical concentration suggests strongly that this is the case.
2)      “The Chinese authorities know the identities of the detained vessels and their crew members…”
This was an easy call to make because the Japanese authorities would obviously be providing ID information to their Chinese counterparts.
3)      “The poaching will abate fairly soon.”
Actually, I didn’t realize that it was already happening (the Mainichi reports says that the number of observed vessels peaked on Oct. 30 at 212, declined from there, and dropped significantly to 141 on Nov. 10, the day of the Abe-Xi meet-and-kinda greet), wand I had qualified my conjecture with the weasel word “fairly.” But I’m going to let myself off on this one, with the admonition to take note that the Chinese authorities appear to have a pretty good handle on their ocean-going vessels that they can wield when it suits them to do so.

The last point suggests, though, that one conjecture is likely to be proven wrong, namely:

 …a few vessels will continue to show up…

I’ve changed my mind.

Correction: Yomiuri article appeared on the 13th, the same day as The Diplomat post.

Thursday, November 13, 2014

TPP, Agriculture, and Elections

For those of you who think that the need to drum up the agricultural vote for the upcoming Lower House election will complicate things for Abenomics with regard to TPP, I have a questionnaire:

1) How many rice farmers are there in the United States?
2) How many dairy farmers and stockbreeders are there in Japan?
3) What would happen to Japan’s dairy and meat imports if there is no TPP deal with Japan? (Hint: The Japan-Australia FTA is likely to go into force by the end of the year.)
4) What are the alternatives for dairy farmers and stockbreeders in the upcoming election?

There’s talk emanating from the LDP that it can lose 30 seats in the next election and still have a simple majority on its own. I think that’s called setting the bar low, in order to claim anything as victory and mandate. Dairy farmers and stockbreeders, with the most to lose, will be the last among the agricultural interests to bet on a losing horse.

Go figure.

The Chinese Poachers: A Good Source of Red Coral – and Information

For TheDiplomat. I’ll post another notice when the Japanese translation goes up on the MIGA website.

Was thinking of writing about how the Abe administration and the LDP are supposed to get away with collective self-defense, nuclear start-ups, consumption tax hike (and now postponement) and the like in the upcoming Lower House election, using the Obama administration and the Democrats as a counterexample. But not tonight.

Addendum: Sorry, bad link, now repaired.

If You’ve Been Looking for a Korean Electronic Violinist Playing “Enka”…

Wednesday, November 12, 2014

What I Say? The Increasingly Inevitable Snap Election

An alcohol-fueled self-commentary follows:

There has been a lot of talk out there that says Abe should call a snap election if he decides to postpone the consumption tax hike. They’ve got it ass-backwards. Abe decides to go to the polls, then he decides to postpone. Think about it. Postponement is tantamount to an implicit admission that Abenomics isn’t working, and that’s why Abe would dissolve the House of Representatives? Look, the number appear to be mixed enough to justify either conclusion, and it was not quite rational, if otherwise impractical, to allow the 2014Q3 numbers to dictate a decision on a tax hike for 2015Q4 in the first place. The reason for a snap election must be something else, something less publicly mentionable, if all too understandable.

Now, the Abe administration’s public poll numbers aren’t all that bad, and should get a modest boost from the Abe-Xi summit, while the opposition is in no shape to fight one. The more time goes by, the more uncertainty there is, with an accordingly growing downside risk. That’s reason enough for many members of the ruling coalition to want to get it over with now, so that the winners can get an extra two years tacked on to their terms.

Abe, of course, needs a fig leaf. Since losing two newly-appointed cabinet ministers to political financing scandals and retaining two more as a matter of choosing the lesser of two evils won’t work, seeking a public mandate on the consumption tax hike postponement turns out to be the best available excuse.

Other than that, this SCMP article is a reasonable abbreviation of my thoughts around the now-almost certain snap election.

Yes, There Will Be a Second Time, President Xi

President Xi Jinping said that “people may be strangers when they first meet, but they become friends from the second time,” Prime Minister Abe reports on his November 10 bilateral meeting on his meeting with the Chinese leader. What Xi meant, of course, was that Abe shouldn’t go to Yasukuni. And Abe openly talked about it, which must be his also-coded answer.

Tuesday, November 11, 2014

Heads Talk of “End” in TPP Negotiations in Non-News Story of the Day

The heads of the TPP negotiating members met on the sidelines of the APEC summit in Beijing to pretend to hammer out differences and issued a hopeful statement with “the end coming into focus.”

Well, yes, it must be at least a year since it became obvious that the Obama administration could never offer a done deal before a) he got trade promotion authority (TPA) and b) the November 4 midterm elections were over and done with, which meant that none of the negotiating parties would reveal anything like its bottom line until it was time for the US Congress to convene for its lame-duck session; and several months since conventional wisdom pushed the US showdown to the new year, when the new Congress would convene (so yes, with the new Congress coming into acute focus, we would expect the “end” would “come into focus” too, barring a case of severe temporal myopia). This meant, though, that what the negotiating parties told us were increasingly do-or-die negotiations were little more than negotiators going through a lengthy bird-of-paradise mating dancing act (a birds-of-paradise mating dance, mind you, that is supposed to end in an atypical 12-member clusterfu…) until the moment of truth arrived. And the media and some analysts dutifully played along—while other were completely taken in, oohing and aahing at every twist and turn in the costume play that the negotiators put on.

Mind you, the process has not been without value. Far from it. The mating dance of the bird-of-paradise reveals something very important: the Darwinian fitness of the individual specimens—a very important consideration for procreation purposes. In the case of trade negotiations, it reveals the true concerns of the negotiators and the countries and constituencies that they represent, and builds the trust that make the mutual accommodation of these concerns possible. Moreover, the various permutations of a final agreement will have been examined in excruciating technical details so that the final sprint, once the fundamental blocs of the deal is in place, will be over and done with in a geological nanosecond.

So it goes with the TPP. There is no assurance that the deal will actually go through, though I am (as usual) cautiously optimistic. But for those of you who have been gyrating, knowingly or unknowingly with every twist and turn in the get-togethers of the trade ministers and their minions, I have one message for you: Relax, the wait is over. And for the negotiators: Thank you for providing us with entertainment over the past…oh, say, the past year, at least.

Monday, November 10, 2014

Of All the Tennessee Waltz Covers Out There…

This one wins hands down. The Tiffany Lamp dress, the cheaped-out special effects; I don’t think Lady Gaga could do better.

That said, I think she captures the 1950s slicked-up production feel better in this rendition.

Meandering Thru the Media: “Who Gave Ground? China, Japan Tweak Translations to Claim Victory”

Yuka Hayashi at WSJ has done a good job of parsing the various versions—two English, one Japanese and one Chinese—each of the parallel announcements of the Japan-China agreement-to-disagree-sort-of in “Who Gave Ground? China, Japan Tweak Translations to Claim Victory.” I have looked at both English versions and the Japanese version, and I tentatively agree with what the article says. It’s a very clever, alert mini-scoop.

Addendum: I say "mini"-scoop because a) it is a fascinating piece of diplomatic arcana illuminating the difficult task of papering over fundamental differences but b) adopting one translation over the other makes no material difference going forward. Specifically, the two parties will be able to move on, but the Chinese surveillance vessels will keep entering the Senkaku territorial waters and the issue will never be taken to the International Court of Justice regardless of which translation they choose.

The Candid Camera: Abe-Xi Meet-and-Greet

Abe: Don't you think we can let the folks out there think that we’re warming up to each other?

Abe: Okay, have it your way then.
Xi: Good.

Meandering Thru the Media: "North Korea Still Holds Sway Somewhere: These Japanese Schools"

It’s a slow news day in Japan when the top Bloomberg political story coming out of Tokyo is entitled “North Korea Still Holds Sway Somewhere: These Japanese Schools.” I mean, Bloomberg is a wire service, not a Slate or Salon, right? Anyway, since it’s a slow work day for me, I’m going to critique this report because—well, just because.

Overall, I think that the writer made a conscious effort to treat all parties fairly. I don’t see any particular agenda being promoted here—the hate speech segment could have easily been sensationalized—and both sides of the issue are given voices. Does the fact that I am on good terms with the writer affected my judgment on her work? I like to think that it’s working the other way around. Now, some details:

Like many students in Japan, Kim Yang Sun cycles to school each morning. Unlike most, she then changes into a traditional Korean outfit and studies under portraits of former North Korean leaders Kim Il Sung and Kim Jong Il.

That’s the opening paragraph, which caught my eye because I thought the writer was setting us up here. The tell? “…she then changes into a traditional Korean outfit…” But the writer never goes there later on, despite the appearance of the Zaitokukai and hate speech issues. Perhaps she knew about it but thought that it would be too much of a digression on a story largely about the predicament of the schools and the students trapped at the center of a historical and political crossroads, or the editors dropped it for that or some other reason. But I suspect that Norimitsu Onishi or fashion-conscious Martin Fackler would have dwelt on it at length.

The schools were set up after World War II by Koreans who came to Japan during its 35-year occupation of Korea and stayed on as the instability that led to the Korean War and division of their country deterred them from returning. Barred from learning their own language under colonial rule, these Koreans set up schools to prepare their children for eventual repatriation, relying on North Korea for textbooks and cash.

I’m sure that’s what the North Korean schools told the writer, but it’s wrong. Korean was part of the Korean primary and secondary school curricula, until at least 1938, when the parallel school systems were unified. Compulsory education introduced under Japanese rule actually raised Hangul literacy rates—the kind of thing that Japanese nationalists like to boast about and Koreans prefer to ignore. In any case, moral of the story: don’t trust, and verify.

Japan now has about 70 such establishments offering education for 8,000 or so students from kindergarten through university. While numbers have slumped from more than 40,000 in 1961 because of the falling birthrate and some ethnic Koreans taking Japanese nationality, that compares with only four schools backed by South Korea.

This is striking. The two Koreas were engaged in a Cold War battle for the hearts and minds and nationalities of the special-status permanent residence Koreans in Japan. Yet if there are only four South Korean schools now, there couldn’t have been that many back in the 1950s and 60s either. I can make some conjectures, but I’m not going to put them out there without some research. If anyone wants some ideas for an MA thesis, you know where to find my email address. Incidentally, in addition to “the falling birthrate and some ethnic Koreans taking Japanese nationality,” could it be that proportionally more of these Koreans short of taking up Japanese citizenship are going to Japanese schools, now that North Korea-oriented schools no longer have the allure of the halcyon days of “Great Leader”?

While the schools had been tolerated for decades, anger over North Korea’s failure to return the abductees has bubbled over into discrimination against teachers and pupils.

A quibble here. Not that I agree with the Education Minister’s decision to bring the abductees issue into the picture—I disagree, as a matter of fact—but to the best of my knowledge, it is the schools that are being discriminated against; the teachers and pupils are collateral damage. It is the schools that receive the per-student subsidies, not the students themselves.

The curriculum is largely based on that of Japanese high schools, enabling 40 percent of graduates to go on to local universities.

This is an interesting figure. The national figure has hovered around 50% for some time. Do graduates matriculating at the Korean “college” make up the 10 percentage point difference?  

No, No Abe-Putin Kiss-Cam; No, No Peace Agreement in Sight

So here I am with a group of Japanese that includes a few prominent middle-of-the-road public figures—vastly more prominent, and public than me—and somehow the talk turns to Ukraine, so I let loose with a very much edited version of the following conjecture:

Abe is right, Russia should be condemned for using force against Ukraine, but it’s Europe’s problem, they helped break it, and we’re only helping pay for it because we need to maintain appearances as a member of the G7. That’s why we are always one or two steps behind the US and Europe with our sanctions—and why South Korea steadfastly refuse to sign up despite reported US pressure—and Putin gets it.

Nobody demurred. Actually, nobody does. Put together any group of Japanese journalists, politicians, businessmen, what have you, and they’ll agree with me. And now, out of Beijing, Bloomberg reports, “Abe, Putin Vow Better Ties in First Summit in 8 Months.”

Putin: Relations have been developing rather successfully both in the economic and political spheres…When I mention the political sphere, I also mean the resumption of our talks about concluding a peace agreement.”

Abe: Your knowledge of Japanese martial arts as a judo fighter, which also means a deeper understanding of Japan itself, I think is a big plus for further development and further strengthening of Russia-Japan relations,

Abe and Putin called each other on their birthdays in September and October…


Actually, there will be no peace agreement in the foreseeable future because a) no Russian president, much less Putin, is going to give up more than the two by far the smallest of the four islands in the Northern Territories and hope to weather the domestic backlash, and b) no Japanese prime minister can settle for such a deal and hope to weather the domestic backlash.

There’s no need for one. Contrary to what some commentators will tell you, any deal that makes economic sense can be made—and would be made but for the Ukraine-related sanctions. And Japan is not going to pay through the nose for anything less than half the geographical cake.

Saturday, November 08, 2014

The More I Look, the Less I See in the "Joint Statement"

“Regarding Discussions toward Improving Japan-China Relations” is one of if not the most sobering joint statements (or better, perhaps, “simultaneous announcement”) that I’ve seen. Phrases like “some recognition” and “gradually resume” are more the reluctant recognition of the need to work together and if that’s impossible to at least coexist than the expression of expectations of a better relationship going forward. The establishment (fingers crossed) of “a crisis management mechanism and avert the rise of unforeseen circumstances” is a tacit recognition that the tensions around the Senkaku Islands and otherwise in the East China Sea will continue.

Two more takeaways for the foreseeable future. First, any bilateral meetings between the two heads will be held on the sidelines of a multilateral setting—no state visits. Second, there will be no similar efforts or outcome between Japan and South Korea. The embattled president of a democracy does not have the kind of elbow room to negotiate a political truce that her counterpart in an authoritarian state has. Patching up things with Prime Minister Abe has little potential economic value. It’s not as if South Korea could coax, say, Toyota into building a factory there even if the folks there wanted to. President Park would be strongly incented to behave differently if the statement had been less equivocal and the prospective summit more cordial than it is likely to be. As it is, there’s no need to play catch-up-to-China.

Abe and Xi Meet and I Eat Crow

The Japanese and Chinese governments issued an extraordinary joint statement that all but ensures that Prime Minister Shinzo Abe and President Xi Jinping will hold an official meeting on the occasion of the upcoming APEC summit in Shanghai. Frankly, I did not think that it could be done. Even when Ambassador Shotaro Yachi arrived in Beijing to make last-minute arrangements, I continued to believe that it was for an unofficial chat on the sidelines—which explains why Mr. Yachi is the diplomat and I am merely a blogger.

The benefits of an agreement and a Japan-China summit for Abe are the following. First, for Abe, it provides a welcome boost in the polls in the wake of the political financing scandals that have so far taken out two cabinet ministers and casting doubt on his political competence, and adds credibility to the unspoken threat of an early snap election before a) the prime minister’s popularity drops further and b) the opposition parties can get their acts together to offer a credible threat to the LDP-Komeito coalition. I still believe that the election talk is a bluff to make the opposition more cooperative in the ongoing extraordinary Diet session, but I am less certain now.

Second, for Xi, it is an important step in reversing the consequences of its aggressive acts regarding sovereignty issues that have driven its neighbors into closer cooperation with each other as well as the United States. It may be true that it is better to be feared than loved, but not when that fear drives its neighbors into the welcoming arms of the global hegemon in the  process of a “pivot”/”rebalancing act. Try instead for respect, which is exactly what I think that the Chinese authorities are aiming at.

Third, it improves the background against which economic activities take place, which is a benefit for both men, particularly for Xi, since his authority, indeed the legitimacy of the Chinese Communist Party that he leads, turns on the outcome of his management of the domestic economy.  The first clear evidence of this should be an uptick in Japanese tourism in China next spring. Chinese tourism in Japan will also be up, but the effect of the new relationship will be hard to recognize, as it is already well on the road to recovery from the hit that it took as the bilateral relationship deteriorated, perhaps because most of the overt anger in Japan remained within the confines of the populist-conservative media and internet forums and only rarely and narrowly ever spilled over into the streets, storefronts and the like. But the effect of the improvement can easily be overstated. The rapprochement will not make Chinese consumer products feel any safer for the Japanese consumer, and there are no meaningful Chinese brands to stop boycotting. At the other end, it is hard to make out how much the summit meeting will move the needle as far as the Chinese consumer’s mindset is concerned. The somber tone of the statement clearly indicates to the Chinese that all is far from well as far as the political relationship is concerned.

And this brings me to my fourth point, which is the effect it may or may not have on Japanese investment in China. Japanese FDI into China has fallen significantly this year, which is surely one significant factor affecting Xi’s appetite for political compromise. But it is notable that Japanese investment kept rising in 2013, after the bilateral relationship had taken a dramatic turn for the worse and while US and European investment into China was falling. Given the typical last-in, last-out behavior with which Japanese corporations respond to changes in the investment climate, it is highly likely that much of the 2014 drop has been a form of delayed reaction to the economic slow-down and diminished future prospects affecting all foreign businesses. Japanese investment in China may rise next year, but it could merely be a dead cat’s bounce back from a bad delayed-reaction off year. At the same time, the positive effect of the rapprochement may be masked by a generally negative investment climate affecting all businesses, foreign corporations in particular.

Finally, let’s take a look at how the two main issues, Yasukuni and the Senkaku Islands, were treated.

First, with regard to the Yasukuni Shrine, the Chinese side demanded that the Japanese side promise that Abe would not visit Yasukuni while he was prime minister, while Abe was not going to do such a thing. However, there was no way that a post-summit visit would fail to plunge the bilateral relationship into an even deeper abyss than the one that it had fallen into after Abe’s December visit, and there was no way that Abe could have been unaware of this. So a de facto guarantee was issued in the form of the following bullet:

2. Both sides shared some recognition that, following the spirit of squarely facing history and advancing toward the future, they would overcome political difficulties that affect their bilateral relations.

Somewhat cryptic and only “some” recognition that “they would overcome political difficulties” “following the spirit of squarely facing history,” it was still enough in the wake of repeated assurances from Masahiko Komura Yasuo Fukuda that Abe would not indeed visit Yasukuni again as prime minister to go ahead with the bilateral summit. nyway...

The Senkaku Islands and more broadly the East China Sea receive their own dedicated bullet, which
is an indication of the more dangerous and imminent nature of the issue. The Chinese side reportedly demanded that the Japanese government recognize that there was a dispute, while there was no way that the Japanese government could be seen to be making a concession in the face of highly aggressive actions by the Chinese side.

3. Both sides recognized that they had different views as to the emergence of tense situations in recent years in the waters of the East China Sea, including those around the Senkaku Islands, and shared the view that, through dialogue and consultation, they would prevent the deterioration of the situation, establish a crisis management mechanism and avert the rise of unforeseen circumstances.

What made this recognition of “the emergence of tense situations” and the “different views” that they held possible was the fact that, contrary to conventional wisdom, the Japanese government had never denied the existence of a “dispute.” Instead, it had provided much narrow grounds for refusing to engage the Chinese government on the matter; namely that “[t]here exists no issue of territorial sovereignty to be resolved concerning the Senkaku Islands.”  This is a legal statement, which can be challenged in the forum of public opinion or in the International Court of Justice, and about which the Chinese obviously have “different views,” regarding the very real on-the-ground (if you will) dispute. But that dispute itself is not going anywhere. So the Chinese incursions into Senkaku territorial waters will continue, which is one reason why a “crisis management system” will be needed. Any who thinks that the Chinese side will provide any show of good will on this point should remember Xi Jinping’s September state visit to India, when the People’s Liberation Army chose that occasion to push soldiers into a region contested between China and India. The new normal is the new normal, and so it will remain. Abe has no illusions here or anywhere else for that matter. And neither does Xi. That is why the fourth bullet is couched in such cautious tones, stating that the two sides will only “gradually resume dialogue.”

Thursday, November 06, 2014

Too Many People Have Problems Blow Up in Their Faces Because They Thought They Were Taking the Easy Way Out

The moderator of a certain forum (no, not yours, John) apparently thinks that I’ll go away if he/she ignores me. I don’t blame him/her for not getting it on the first try, but could someone tell him/her how wrong he/she is and that he/she should just post my comment and let the others take their own potshots at me and see how I fare? (Or meet my counter-demand for making me meet his/her demand?)

Tuesday, November 04, 2014

Next Stop for Chinese Nouveau Riche; New Zealand

My golden rule: Never blog/tweet while intoxicated. But you know what, rules are made to be broken. So here it is.

My Australian friend has further informed me that Chinese purchases of Australian real estate are down. Abbott effect? Perhaps. But the question is, as ever: What is the next hedge for the Chinese nouveau riche (technically speaking everybody in China remotely riche)? Poaching red corals from Ogasawara waters? Russian oil-and-gas equity?


I nominate New Zealand real estate. After all, NZ is to Australia what Canada is to the United States, and you know how popular Canada has been with Asian immigrants. There are, gorgeous post-glacial landscape (Exhibit A AWESOMELY CUTESY-POO PROMOTION VIDEO*, exhibit B AWESOMELY CUTESY-POO MAKING OF-PROMOTION VIDEO*)…, no persistent African-American underclass—and a serious aborigine problem swept under the rug with the help of a smattering of aborigine world-class athletes.

* Seriously, was the Lord of the Rings trilogy one of the most racist works of fantasy of the last century or not, even with a discount for the Nazi domination across the pond? Mind you, I read it and enjoyed it nonetheless. As for the xenophobic Harry Potter series…

Mr. Abbott Could Teach Creationism to Australian Children and Mr. Abe Wouldn’t Bat an Eyelash

A friend of mine in Australia emailed me a link to a Nikkei Asian Review article that takes up the Abbott administration’s intention to “adopt a review of the school curriculum that will severely cut back content about Asia and explicitly celebrate what it calls the nation's ‘Judeo-Christian heritage, values and beliefs’” and wondered what that might do the Abe-Abbott bromance. I wonder what Gough Whitlam would say if he were alive today. Anyway, I’m posting my response lightly edited here, since it might be of interest to anyone else in Australia that reads my blog.

Not much. Neither Putin's increasing tightness with the Russian Orthodox Church and tacit acceptance of ethnic intolerance and anti-semitism nor Erdogan's increasingly authoritarian rule under Islamist influence has stood in the way of Abe's dalliance with these two strongmen (not to mention Modi and his (what I believe is overplayed) Hindu nationalist background). No big deal. Hey, if Abbott doesn't care if Abe goes to Yasukuni, why should Abe care about Abbot teaching Australian schoolchildren that same-sex marriages are an abomination?

What Abe should not do is to get too infatuated with the Australian policy swing from Redd/Gillard to Abbott. The important thing for him is to keep an eye on what has been constant in Australian foreign and regional security policy and to make sure to nail down any gains that have been made (from Abe's perspective) so that they will survive a pro-China regime change, possibly from the Labor Party returning to power*.

* For starters, I would do my best to ensure that the submarine deal is done and well on its way by way of implementation by the time Australia’s next general election rolls around.

Creative Accounting at GM Undetected—Business as Usual?

The QUOMODOCUOMQUE blog caught GM cooking its books by pushing losses back to the previous half-year and getting “a sunny headline in the New York Times saying they ‘doubled their profit’.” This reminded me of the time that I noticed in what I think was some Nissan PR material about 30 billion yen that Nissan took an early charge for through what must have been a change in accounting rules, an income boost of 30 billion yen and a 60 billion yen year-on-year turnaround without selling a single extra car. This was important because Carlos Ghosn had said that he would resign if he could not return Nissan to profits in a year, so every little 30 billion yen helped. It was so obvious that even a person like me, who knew next to nothing about corporate accounting, could detect, yet I don’t recall any media accounts cricicizing Nissan or Ghosn on this point. So I wonder, what other gimmicks were used to make sure that Ghosn did lose his job?

Or so I remember; it’s been a long time, and this is not exactly my cup of tea. I’ll be happy to issue a correction if someone can show me otherwise. Until then, I’ll keep on suspecting that creative accounting is pretty common but that the mainstream media rarely catches it.