Mainichi Scoop on ISIL Embezzler? Think Again

Today (Feb. 17), the Mainichi website uploaded a remarkable report from its Cairo correspondent, citing a Syrian antigovernment activist as the main source. Specifically, an Egyptian official of ISIL charged with collecting donations in Deir Ez Zour province in East Syria reportedly disappeared. The report also says that there is information (情報もある) that the Egyptian absconded to Turkey taking approximately 1 billion Syrian pounds in donations.

I always get suspicious when a Japanese newspaper comes across unsourced “information.” (Likewise, when something “becomes known (明らかになった),” it usually means, “We’ve been scooped!” But I digress.) In fact, the “information” given here looks suspiciously like it was summarized from this English-language report dated February 3, which in turn gives as its source an Arabic report (Feb. 2) that cites yet another news site.

Mainichi’s story is more than two weeks old. And it’s not giving credit to a key source. And its “Syrian antigovernment activist” (in Cairo?) adds nothing of value to the English-language report.

What If the New Minsk Agreement Takes?

It can happen. It’s really up to Russia. The separatist rebels surely want more, and they are more likely than not to take Debaltseve. But if they do, the Ukrainian military leaves the premises, and the Ukrainian government decides to maintain the “ceasefire,” there will be an opportunity for Russia to take a breather and tend to its own wounds while capping EU and US (and Japanese wink-wink) sanctions and the cost of subsidizing the rebel territory economy. In the meantime, it will always have the option of unleashing the rebels again if it finds the direction the Ukrainian government is taking with regard to the EU and NATO not to its liking. I have to wonder if the Poroshenko administration will be willing and able to cut losses—I am reminded of the Japanese mindset before and during WW II—but who knows?

Now what in the world does that have to do with Japan? Well, if the ceasefire holds, the Putin visit to Tokyo will happen. Not much substance to come of it ultimately, I’m sure, unless the ceasefire holds long-term, but it will put Prime Minister Abe’s marker on the table.

Here I Am Ranting at Yet Another “The Atlantic” Report, This Time on Superannuated Japanese Businesses

I judge a publication by what they write about things that I know something about or have a feel for. If they get it right, I give it the benefit of the doubt regarding things that I do not know and have no feel for. The Atlantic? People who have been reading my blog for some time may remember my take down of a piece on the Japanese Tea Party. If that called for a big fat F, this one…  

This Atlantic report states that Japan “is currently home to more than 50,000 businesses that are over 100 years old. Of those, 3,886 have been around for more than 200 years... But in the past decade, some of Japan’s oldest businesses have finally shut their doors. Last month, the roughly 465-year-old seafood seller Minoya Kichibee filed for bankruptcy, which came after the news last year that the 533-year-old confectioner Surugaya met a similar fate. In 2007—after 1,429 years in business—the temple-construction company Kongo Gumi ran out of money and was absorbed by a larger company. Three companies going bust doesn’t quite make a trend…”

They sure don’t. At this rate, it will take the last of the companies more than 200 years old another 13,000 years or so to fold. But then, this should be no surprise if between “1955 and 1990, only something like 72 Japanese companies went bankrupt.” Let me quote at more length.

“So if they made it 500 or even 1,500 years, why would any of these companies collapse now? The most compelling explanation has to do with how the Japanese government has changed the way it treats struggling companies, according to Ulrike Schaede, a professor of Japanese business at U.C. San Diego. Historically, Schaede says, Japanese banks helped out even the most hopeless businesses without a second thought. “Between 1955 and 1990, only something like 72 Japanese companies went bankrupt. The reason was that the banks were supposed to bail them out,” Schaede says.

                                                                                                                                                

Then, in 2000, Japan passed its first Chapter-11-like bankruptcy law, and four years later, rewrote 1922 laws concerning corporate liquidation. This changed the default fate of troubled businesses. “Non-performing companies no longer receive help from lenders unless they have a solid plan for change,” Schaede says.

Something must have lost in transcription, because 6,468 businesses with 10,000,000 yen or more in total debt went bankrupt in 1990 alone, according to Tokyo Shoko Research. Coming at the end of the bubble economy years, this actually marked a 24-year low, down from the post-WW II peak of 20,841 in 1984. The figure jumped to 10,723 in 1991 and largely kept climbing through the (first) lost decade to 18,769 in 2000, peaking at 19,164 the following year.

It is also only a half-truth that “in 2000, Japan passed its first Chapter-11-like bankruptcy law.” The 2000 Civil Rehabilitation Act replaced the Composition Act, which, its defects notwithstanding, had long provided non-liquidation options for bankrupt businesses and their creditors, together with the still very much in use Corporate Reorganization Act. More damning to the point being made in the article, Kongo Gumi never went through formal bankruptcy procedures. Instead, its business was bought outright by the Takamatsu Corporation, where it apparently thrives as a subsidiary, building and repairing temples and the like the old-fashioned way.

The conventional wisdom that banks kept zombie companies on the prowl during the first lost decade appears to have considerable truth to it, but bankruptcy numbers and the legislative record that the article relies on do not support it. To be fair to the writer, that is not the only reason that he gives for the (three) old companies folding. Let me quote at length again.

Even if bankruptcy legislation is the most logical theory of why these companies finally folded, it’s not the only plausible one. It’s also worth noting that Japan’s cultural norms have eroded quite a bit in recent decades, which turns out to be a problem for a company selling traditionally-prepared squid guts. “Japanese Millennials are not that interested in really traditional Japanese culture as compared to their grandparents or parents,” says William Rapp, a professor business at the New Jersey Institute of Technology. “As the old population dies off, there is just not enough demand that is able to sustain such firms.”

Japan has also started to take a different stance toward marriage, adoption, and inheritance. “It's also likely become harder to recruit young men to enter a small firm under the presumption that they will marry the president's daughter,” says Mike Smitka.

There’s plenty of truth to the first point, but does it hold true in the cases cited above? The article makes much of Minoya Kichibee’s “salted squid guts using a 350-year-old recipe,” but Minoya Kichibee is even better known to the discerning Japanese gourmet for its high-end fish paste products. In fact, it is the high-end nature of its preserved food product lineup that forced it to seek protection under the Civil Rehabilitation Act, as routine corporate gift-giving (where, incidentally, fish paste products were the safe choice over the not-so-universally-popular salted squid guts) dwindled in the post-bubble years. Meanwhile, cheaper fish paste products, salted squid guts and other aquatic animal body parts as well as pickled plums (another item in Minoya Kichibee’s product lineup) continue to line the shelves of supermarkets.

As for building and repairing temples (and shrines, don’t forget them), most of the new edifices that have been going up are steel-and-concrete, faux-traditional contraptions, where conventional construction companies have a cost advantage. But Kongo Gumi probably could have continued in its original form if it had not been lured into real estate speculation during the bubble years, particularly if it had decided to downsize and return to its traditional construction roots, as it was ultimately forced to do in 2007.

I cannot find enough information on Surugaya to judge one way or other, but in two out of three, it is at best only a half-truth that “there is just not enough demand that is able to sustain such firms.”

As for the other point, I have no argument with the statement that it has “also likely become harder to recruit young men to enter a small firm under the presumption that they will marry the president's daughter.” Suffice to say, though, that this was irrelevant in the cases of Kongo Gumi and Minoya Kichibee, since they were both being headed by the family scion at the time of their fall. Again, I could not find the relevant information on Surugaya.

So there you are. The general points that the article makes may very well be true. But the three examples it employs do not make the case for them. Moral of the story: When you write about something that you do not understand, do your homework. Otherwise, a straightforward update of the Bloomberg piece that the article links to (and refers to, bizarrely as a Businessweek item) would have been of more utility.

Three Diplomats Walk into a Publisher’s Office…

… Or perhaps the Japanese Consulate-General in New York delivered a MOFA demarche, in order to convince McGraw Hill to remove two paragraphs from its college textbook entitled Traditions and Encounters: A Global Perspective on the Past, which states that the Japanese army “forcibly recruited, conscripted, and dragooned as many as 200,000 women aged 14 to 20 to serve in military brothels, called ‘comfort houses.” It also says that the Japanese Imperial Army "massacred large numbers of comfort women to cover up the operation.”

One wonders if the diplomats were surprised when McGraw Hill refused to oblige or when the author of those two paragraphs, Professor Herbert “Ziegler, who teaches modern European history at the University of Hawaii,” issued a protest, which in turn was supported by an impressive array of “19 academics from American University as well as Princeton, Columbia and others” who “stand with the many historians in Japan and elsewhere who have worked to bring to light the facts about this and other atrocities of World War II.” Did MOFA not learn the lesson of the full-page WaPo advertisement that Japanese nationalists bought that arguably led to the adoption of the 2007 H.R. resolution condemning Japan?

Koreans and activists and the Americans, the latter whose hearts the Abe administration wants to win over, came to the issue with different contexts—occupation and annexation, human rights, Pearl Harbor, respectively—but have largely converged on a more or less singular narrative. To challenge the facts and nothing but the facts without a compelling narrative of its own, without a roster of credible academics and activists spontaneously pleading one’s case, is like dropping cherry bombs without boots on the ground.

Regardless of where you stand, you have to admit that the Abe administration reminds one more of the Kwantung Army in Manchuria and beyond than the Imperial Navy in the Battle of Tsushima.

On ABC NewsRadio, Yes, around the ISIL Murders

Here it is, “the first episode,” I’ve been told.

I’ll have to trust that the producer did not edit it completely out of context, since there are few things that I dislike more than watching/hearing myself talk. My crib sheet, as usual, though it only went loosely scripted.

(1) Japan's past record on paying ransom money, (2) the international pressure Japan faces while negotiating with captors and (3) whether aid spending in the Middle East and the recent reinterpretation of Article 9 in the constitution might provoke IS to capture more Japanese nationals in the future.

(1) There is one occasion on which the Japanese government is known to have paid a ransom to private-sector terrorists. That was in 1977, when it paid a 6 million USD ransom to terrorists who hijacked a plane in Dacca that was carrying142 passengers including the five terrorists and 14 crew members, and also freed six men and women criminally convicted or charged with acts of terrorism. As you can see, the circumstances were very different. Then there are the state-sponsored terrorists—the return of the abductees and their families from North Korea in return for cash. Prime Minister Koizumi didn’t get enough credit for that in my view.

(2) There was no meaningful international pressure at all. Japan stated at the outset that it would not pay ransom money, just as all Western European countries and the United States have always claimed. But all the known Continental European hostages of Islam state have returned safely except one, who is still in ISIL hands, while all the known American and British hostages are dead except one, who is still in ISIL hands. Go figure.

But once ISIL went public with their 200 million USD demand, negotiating over a cash payment became extremely difficult for two reasons. First, backdoor negotiations became problematic. Second and more important, ISIL almost surely made the announcement to send a message, not to cut a deal. I hoped against hope that I was wrong, but subsequent developments bore it out.

(3) On the first point, about aid spending, for two reasons, I don’t think that the risks to Japanese assets have increased noticeably. First, it remains very difficult to strike at targets in Japan for tactical and logistical reasons. Second, attacks on soft Japanese targets overseas are nowhere near as effective for propaganda and recruitment purposes as attacks on similarly soft West European and American targets. That said, the more Japanese aid workers and other personnel there are in the neighborhood, the more likely it is that there will be an attack that impacts Japanese individuals, just from a statistical perspective. On the second point, about collective self-defense, which is the point of the Article 9 reinterpretation, I think that Western liberals and all South Koreans should leave the obsessing to China. But I digress. Now, maybe Mr. Abe wants to put troops on the ground in the Middle East combat zone, maybe he doesn’t. He says that he doesn’t, I don’t think he should, but I’m not worried in any case, because Komeito, the pacifist coalition partner, will make sure that it won’t happen. So, until Mr. Abe changes his mind and Komeito turns nuts, ISIL will have more important things to worry about than Japanese troops on the ground there. 

Is Mainichi Turning into the Daily Version of Its Weekly Magazine?

Mainichi’s weekly magazine, once a staple of the waiting lobbies of banks, medical clinics, dentist’s offices and other reputable establishments, has in recent years become difficult to distinguish from the run-of-the-mill weekly tabloids put out by publishing companies large and small. Here’s what I mean:

Read the Mainichi article while it lasts if you understand Japanese; if you don’t, it’s enough for my purposes that you know that the article is written around the claim that an exchange of Kenji Goto, the murdered Japanese journalist, and Sajida al-Rishawi, a female terrorist on Jordan’s death row, had gone to the brink of being consummated, only to fall through, apparently because of dissent within ISIL.

Now, anyone following this issue outside of Japan would be wondering at this point: What about the Jordanian pilot, Moath al-Kasasbeh, whom ISIL had taken prisoner when his fighter jet went down in Syria? The writers were certainly aware of his existence, since they immediately follow this assumption by their acknowledgement of the fact that ISIL had, on the day before the exchange was supposed to occur, stated that it would not kill Mr. Kasasbeh if the journalist-terrorist exchange went through. But they make no mention of the fact that the Jordanian government demanded to no avail that ISIL produce proof that Kasasbeh was still alive before any negotiations were to be conducted, or the Jordanian government’s assertion, already known for several days before the article was published, that Kasasbeh had been killed on January 3, weeks before the Japanese crisis surfaced. Indeed there is no effort to put the Jordanian government’s demand into context, and the story goes on as if it had never existed.

Would the Jordanian government actually have gone along with the exchange if ISIL had been able to produce proof? After all, if the Jordanian government had made the exchange, ISIL would then have gained a negotiating tool that could be reused again and again. But then, if not, the Jordanian government could have been blamed for having the means to save Kasasbeh’s life yet not using them. Hard to say for me—my guess is that the Jordanian government would have held out for an exchange for both Mr. Goto and Mr. Kassbeh—and it certainly would have put King Abdullah on the horns of a dilemma. But Mainichi edited out the Jordanian angle to highlight the exchange that barely failed to materialize, or so it claims—sensationalism at its worst.

Liberal media like this leaves that much less for Prime Minister Abe to worry about. 

JA-Zenchu Reform Appears to be Proceeding on Abe Administration’s Terms

Nikkei headlined its February 7 morning edition with “Nōkyō-kaikaku Ōosuji Kaiketsu e (Agricultural Cooperative Reform Largely on the Way to Resolution).” According to the report, Abe administration will announce on February 12 that the Central Union of Agricultural Co-operatives, or JA-Zenchu for short, will lose its special legal status and become a general incorporated association. JA-Zenchu will lose the authority to audit and provide guidance to the local agricultural cooperatives. Instead, its auditing arm will be separated and must compete with ordinary auditing firms for the coop business. The National Federation of Agricultural Co-operative Associations (ZEN-NOH), its mammoth produce wholesale and input and provider arm, will be allowed to transform itself into an ordinary stock company. Local cooperatives will be encouraged to transfer their financial businesses to the Norin Chukin Bank.

I cannot claim that I got this one right—far from it, since I wrote:

“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 devil is in the details, but so far, the outcome looks much closer to the latter than the former. It is surely being made possible by the fact that individual LDP Diet members are far more intimately connected to their respective prefectural associations, which, tellingly, will be preserved. In hindsight, I should have placed more trust in the incentive devolution would have for the prefectural associations. In any case, this does not address the core needs of agricultural reform. If he takes a whack at the agricultural committees, though, that would be a meaningful break with the past, depending on how deep he cuts.

And on a totally different matter, I also said that Prime Minister Abe would not go to Yasukuni, and his second work anniversary passed without incident. His administration still has some legs, so never say never, but so far, so good.

First Rudd Goes…

So Prime Minister Kevin Rudd is offed by Julia Gillard, Gillard is whacked in the backswing by Rudd, Rudd loses to Tony Abbott, now Abbott is facing a party leadership vote that he could very well lose. Australian politics are not for the faint of heart.

One thing that Prime Minister Abe doesn’t have to worry about is an unlikely Rudd comeback in the next national election. Rudd’s sinophilia, I’ve been told from someone reliable on this matter, has been greatly exaggerated.

My Second Point, I Think, Was the Crisis around the ISIL Hostages

Looking back, it appears that it was the crisis around the two Japanese taken as hostage by ISIL. What I was able to say within what I thought were the boundaries of human decency largely aligned with the subsequent unfolding of the situation. I did not foresee the exchange twist, but I did not talk about it either (and no one else foresaw it either), so I won’t hold myself up against that part.

I (Think I) Got Three more Calls Right and One Call Wrong

If my memory serves me correctly, I got or am getting three more calls right, and one wrong.

First, I said that the TPP would move after and only after the U.S. midterm elections and that a positive outcome in the Japan-U.S. bilateral negotiation would be dictated by the Japan-Australia FTA deal. It’s certainly looking that way, and the naysayers are saying that the odds have improved. No they haven’t. They haven’t changed one bit. Those people think (or say) that they have, because they’d listened to one too many informed sources who in effect provided the illusion of action while the two sides jogged in place, ate up too much Japanese media coverage by reporters canvassing for headlines, or just hated Prime Minister Abe too much. I’m not saying that it’s a done deal; I know too little of the political dynamics in the United States to be certain of TPA and (more crucially) bicameral consent. I’ll leave those calls to experts like Paul Sracic.

I’ve been trying to remember what the second one was—it’s been on my mind for several days now, and now that I’m armed with my Jack Daniels typing this, it completely escapes my mind—so let’s go straight to the third one, which is..,

I tweeted that I would be surprised if public opinion in Jordan hadn’t turned against ISIL already as the result of the murder of the pilot although a good number of pundits thought that the monarchy would catch the brunt of the criticism. For now, things appear to be going in my direction. My call was based on my observation of human nature’s desire for revenge, augmented by a piece of conventional wisdom that was implanted in me in my preteens about an Arab predilection for eye-for-eye justice.

I got the DPJ leadership election doubly wrong, of course, when I called a Hosono win over Nagatsuma in a runoff. It was a gain for me, though, since I probably would not have noticed how poorly Natgatsuma did in the party dues-paying rank-and-file vote. The labor and teachers’ unions, who were supposed to be well-represented there, turned out to be much smaller or more pragmatic than I’d expected. The DPJ will be more right-center, at least on foreign policy, than I thought, which, according to Lully Miura’s analysis, will be a good thing for a true two-party system, if not for the diehard liberal-left.

Finally (for now), I did say that the ISIL murders of the two Japanese hostages would do little to move the needle policy-wise, and I think that Mr. Abe’s denial that he wants to send troops to the Middle East for logistic support bears this out in part, but I don’t think that it was the second call that I had in mind. 

The Thumb

For those of you who are too old or too young to remember, interviewing one’s thumb was what many a callow American correspondent in post-WW II would use for an informed source when he ran out of material. 

No, Mr. Saletan Did Not Go Nuts. But Very Careless

I interrupt my relatively post-free week to ridicule some nonsense.

William Saletan at Slate, who usually writes about technology, has a piece on the latest Islam State atrocities in which he writes:

“Japan’s prime minister is trying to amend the constitution to expand his authority to use military force. In that domestic campaign, the ISIS murders of two Japanese hostages in the last two weeks have become his most effective weapon.”

My first thought: has the normally cogent and lucid Mr. Saletan gone mad? But then I click through and find the following passage:

“Many observers suspect that Abe sees the events of the past two weeks as an opportunity to push ahead with his ambition to drastically amend the pacifist Constitution for the first time since the war, although the government denies it.”

So who are these “many observers”? Well, I assume that Reiji Yoshida, the writer, has two thumbs, so that makes it three, including his head. I am willing to begrudge Mr. Yoshida’s big toes, which makes it five.

I leave it to you to decide whether 5 = many.

Beyond that, though, Mr. Saletan fails to take into account the impact on the street, recruitment, and the IS troops on the ground. My call was based on what I understand of the local culture, is that, revenge is first and foremost on the pilot’s family, tribe, Jordanians, and local Arabs in a concentrically declining vector of rage—they’ll deal with grievances against King Abdullah later. I couldn’t see the other two being moved by much. He either missed these talking points, or omitted them because he didn’t know how to treat them. Either way, bad journalism.

Exchange Rate Forecasts: Could Your Guess Be As Good As Nihon Soken’s?

Having too much time on my hands this morning, I had the choice of ripping into yet another Noah Smith Japan op-ed (not that I currently have a strong objection to the core piece of conventional wisdom itself that he festoons, mind you) or satisfying my curiosity as too just how good or not experts were at forecasting exchange rates. I decided to go with the latter, since I thought that it would be more useful (to you, not me; I don’t play the markets). For that, I turned to the Japan Research Institute, Limited, arguably the most reputable economic think tank in Japan, and its exchange rate forecasts during this decade (the regular ten-year one that began in 2011, not the 12-year one that began in 2010), which it posts on its website here. Specifically, I looked at its January yen/dollar and yen/euro forecasts for fourth quarters and compared them with the actual outcomes. It was not pretty.

		2011 (10-12)		2012 (Oct-Dec)		2013 (Oct-Dec)		2014 (Oct-Dec)		2015 (Oct-Dec)
		2011.01	2012.01	2012.01	2013.01	2013.01	2014.01	2014.01	2015.01	2015.01	2016.01
Y/$	range	80-92	75.35-79.54	77-82	77.8-86.8	82-89	96.6-105.4	100-105	105.19-121.85	116-127	?
Y/$	average	86	77.35	80	81.2	85	100.4	105	114.46	123	?
Y/€	range	102-112	99.41-111.6	92-104	99.8-114.7	100-112	131.1-145.7	136-148	134.14-149.80	138-150	?
Y/€	average	107	104.2	98	105.3	106	136.7	142	142.9	144	?

In the above chart, I’ve marked out in red the figures in the years in which there was no overlap between the forecast and the outcome ranges for the exchange rates. Four out of eight turned out to be complete duds. The yen/euro forecast for 2012 4Q didn’t turn out that well either, which I’ve marked out in yellow. Had you taken the fourth quarter of the previous year, take a five yen band, and expanded it a few yen both ways depending on if and how uncertain you were, and you wouldn’t have done much worse if at all than the JRI experts.

Incidentally, when I entered the 123 yen average forecast for 2015 Q4 in the Excel sheet that I used, it came out in red and refused to change to black, so I had to devise a workaround. Was my Office software trying to tell me something?