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Japan
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Japan country profile - Overview
Aug 11, 2015 | BBC News
Japan has the world's third-largest economy, having achieved remarkable growth in the second half of the 20th Century after the devastation of World War II. -
Foreigners Flee Japan Stocks at Fastest Pace Since at Least 2004
Sep 3, 2015 | Bloomberg
By Yuji Nakamura Toshiro Hasegawa Anna Kitanaka
Global investors are pulling money out of Japan’s equity market at the fastest pace since at least 2004, according to Mizuho Securities Co. -
In Jeopardy - Shinzo Abe’s sliding popularity is putting Abenomics at risk
Aug 15, 2015 | The Economist
“NO SOONER does the Japanese economy raise its head from the mat than it falls down again.” So wrote one longtime Japan-watcher last month on the news that, after zooming along at a real annualised rate of 3.9% in the first quarter, GDP may well have contracted during the second. Preliminary data will be released on August 17th. -
Japan’s Economy Shrinks in Second Quarter
Aug 16, 2015 | The Wall Street Journal
By Eleanor Warnock and Mitsuru Obe
Japan’s economy contracted in the second quarter as overseas demand for Japanese goods slumped and households spent less, raising the possibility the government will act to bolster an anemic recovery. -
China's Devaluation Becomes Japan's Problem
Aug 13, 2015 | Bloomberg View
By William Pesek
Among the clearest casualties of China's devaluation is the Bank of Japan. The chances were never high that Governor Haruhiko Kuroda was going to be able to unwind his institution's aggressive monetary experiment anytime soon. But the odds are now lower than even skeptics would have previously believed. -
Japan Exports Its Way to Irrelevance
Aug 17, 2015 | Bloomberg View
By William Pesek
There's a difference between bad economic news and the devastating variety that Japan received Monday. Prime Minister Shinzo Abe might have been able to weather the second-quarter data showing a drop in Japanese consumption and a 1.6 percent decline in annualized growth. -
Japan to adopt wide-ranging national identity system
Sep 3, 2015 | Financial Times
By Robin Harding
Japan is to adopt one of the world’s widest-ranging national identity numbers, spanning everything from taxation to disaster relief, in a move set to raise revenues as well as privacy concerns. -
Japan Takes Step Toward Reviving Nuclear Industry as It Restarts Reactor
Aug 21, 2015 | The New York Times
By Jonathan Soble
For more than four years since the nuclear meltdowns in Fukushima in 2011, Japan has been debating whether it should permanently abandon a technology that went so disastrously wrong but that for years was seen as essential to its economy. -
Gas Golden Age Fades as Supply Boom Meets Japan Nuclear Rebirth
Aug 21, 2015 | Bloomberg
By Ben Sharples and James Paton
The golden age of natural gas lost some of its luster this month. Japan, the world’s biggest buyer of the fuel in liquid form, restarted a nuclear reactor on the island of Kyushu Aug. 11, re-embracing atomic power to shrink energy-import costs. -
Japan: A pacifist’s plan to arm the world
Aug 17, 2015 | Financial Times
By Leo Lewis and Robin Harding
PM hopes defence exports will boost the country’s industrial base and counter China’s rise -
Why Is China Playing Nice With Japan?
Aug 4, 2015 | Foreign Policy
By William Sposato
It was no coincidence that when Chinese President Xi Jinping wanted to signal a willingness to warm up his nation’s chilly relations with Japan, he chose a group of business leaders as his audience. -
Japan Slips Chasing Australian Subs Deal
Aug 17, 2015 | The Wall Street Journal
By Rob Taylor
Six months ago, two Japanese companies better known for producing trains and motorcycles were favorites to win a roughly US$20 billion Australian defense contract to build submarines, launching them into the nearly US$1.8 trillion global military hardware market after an almost 50-year ban in Tokyo on weapons exports. -
Japan's Peace Constitution Is the Future, Not the Past
Aug 17, 2015 | Huffington Post/Asia Today
By Emanuel Pastreich
Japan's future role in global security is the most significant question in the minds of many in East Asia on the seventieth anniversary of the end of the Pacific War.
Overview
Economy
Energy
Defense
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Japan country profile - Overview
Aug 11, 2015 | BBC News
At a Glance
Politics: The Liberal Democratic Party (LDP) has been in power for most of the post-war period. It was ousted in 2009 by the Democratic Party, but returned to office with a landslide election win in 2012
Economy: Japan has the world's third-largest economy; its multinationals are household names. But a spiralling public debt has hampered competitiveness
International: There has been tension with China and South Korea over Japan's wartime past and territorial waters, and with North Korea over the latter's nuclear ambitions
Japan has the world's third-largest economy, having achieved remarkable growth in the second half of the 20th Century after the devastation of World War II.
Its role in the international community is considerable. It is a major aid donor, and a source of global capital and credit.
More than three quarters of the population live in sprawling cities on the coastal fringes of Japan's four mountainous, heavily-wooded islands.
Japan's rapid post-war expansion - propelled by highly successful car and consumer electronics industries - ran out of steam by the 1990s under a mounting debt burden that successive government have failed to address.
The 1997 Asian financial crisis, and bouts of recession, precipitated major banking, public spending and private sector reforms.
Japan remains a traditional society with strong social and employment hierarchies - Japanese men tend to work for the same employer throughout their working lives.
But this and other traditions are under pressure as a young generation more inclined towards Western culture and ideas grows up.
On the other hand, one of the biggest challenges that successive governments have faced is how to meet the huge social security costs engendered by an ageing society. Measures to increase sales tax to this end have proved a difficult issue for recent governments.
Japan's relations with its neighbours are still heavily influenced by the legacy of Japanese actions before and during the Second World War. Japan has found it difficult to accept and atone for its treatment of the citizens of countries it occupied.
The issue of "comfort women", referring to the Japanese army's wartime use of sex slaves, remains a sore point in relations with some neighbours, despite a formal Japanese apology issued in 1993.
South Korea and China have also protested that Japanese school history books gloss over atrocities committed by the Japanese military. Japan has said China promotes an anti-Japanese view of history.
Following World War II, lawmakers forged a pacifist constitution. This seemed inviolable for more than half a century, but since the beginning of the twenty-first century it has been subjected to some reinterpretation.
Twenty percent of the world's earthquakes take place in Japan, which sits on the boundaries of at least three tectonic plates. Schools and office workers regularly take part in earthquake drills, and waiting for "the big one" is deeply engrained in the national psyche.
The March 2011 earthquake unleashed a devastating tsunami, and Japan is still coming to terms with its impact - not least the question of restarting its nuclear energy programme after the closure of the crippled Fukushima plant.
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Foreigners Flee Japan Stocks at Fastest Pace Since at Least 2004
Sep 3, 2015 | Bloomberg
By Yuji Nakamura Toshiro Hasegawa Anna Kitanaka
Global investors are pulling money out of Japan’s equity market at the fastest pace since at least 2004, according to Mizuho Securities Co.
Foreigners last week sold a net 1.85 trillion yen ($15.4 billion) of Japanese stocks and equity index futures, the biggest combined outflow since Mizuho began tracking the data more than a decade ago, said Yutaka Miura, a Tokyo-based senior technical analyst at the brokerage. Investors are fleeing amid concern about China’s economic outlook and the prospect of higher interest rates in the U.S., he said.
“This is a result of investors dumping global risk assets,” said Miura. “Japanese stocks have performed well since the start of the year, so similar to what’s happening in Europe, we’re seeing people take profits.”
The Topix index is down 13 percent from its Aug. 10 high, paring its 2015 advance to 4.8 percent. The nation’s shares are among the world’s worst performers since China unexpectedly devalued the yuan last month, roiling markets worldwide and intensifying concern about the outlook for Japan’s biggest trading partner.
Foreigners dumped 1.43 trillion yen of Japanese equities in the three weeks through Aug. 28, Tokyo Stock Exchange data updated Thursday show. That’s the most for any three-week span on record, overtaking the period when Bear Stearns Cos. collapsed in 2008.
Net stock sales totaled 707 billion yen last week, and investors also reduced positions in index futures by 1.14 trillion yen, exchange data show. Cumulative flows for 2015 are still positive, with foreigners buying a net 1.1 trillion yen of equities through last week.
Andrew Clarke, director of trading at Hong Kong brokerage Mirabaud Asia Ltd., said investors who needed to reduce positions in Asia and couldn’t offload stocks in China because of share suspensions turned to Tokyo instead.
“The sell-off started in China," Clarke said. “Investors couldn’t sell there in the end so selling spread to Asia, and Japan especially as it has a greater liquidity. This eventually spread to Europe and the U.S.”
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In Jeopardy - Shinzo Abe’s sliding popularity is putting Abenomics at risk
Aug 15, 2015 | The Economist
“NO SOONER does the Japanese economy raise its head from the mat than it falls down again.” So wrote one longtime Japan-watcher last month on the news that, after zooming along at a real annualised rate of 3.9% in the first quarter, GDP may well have contracted during the second. Preliminary data will be released on August 17th.
This is the year that the economic plan of Shinzo Abe, the prime minister, should be taking wing. The negative effect on consumer demand of a rise in the consumption tax in April 2014—the economy tipped into recession afterwards—is by now safely past. Meanwhile a drop in oil prices has been a boon for household budgets.
Yet the economy’s performance has been underwhelming. The problems have been weak industrial production, thanks to a slowdown in exports to America and China, and anaemic household consumption. In a recent report on Japan, economists at the IMF attributed some of consumers’ reluctance to open their purses to their worries about how Japan’s dire fiscal position—debt now stands at 246% of GDP—could affect their future income. Companies and consumers may also doubt whether Abenomics is here to stay.
The longer-term picture, though, looks more encouraging. Average real annualised GDP growth for the first half is likely to come in at about 1.5%, which is relatively strong considering Japan’s shrinking and ageing population. Many economists are forecasting a further acceleration of growth in the second half, although this depends on a rebound in the global economy—hardly a forgone conclusion given the gloomy news from emerging markets.
Most encouragingly, GDP is on a steady upward trend in nominal terms (see chart). It was Japan’s chronic failure to grow in nominal terms over the past two decades that set it apart from other developed countries. Core consumer prices and the GDP deflator, another measure of inflation, have both started rising. And although the news on wages in June was disappointing—a 2.9% fall in real terms—they should soon rise as the labour market continues to tighten. Naohiko Baba of Goldman Sachs, a notable bear on Abenomics, expects real wage growth of 0.2-0.3% in the current fiscal year.
Adding to the momentum on pay, Mr Abe outlined the largest increase in Japan’s minimum wage since 2002 on July 29th, from ¥780 ($6.30) an hour to ¥798 an hour, a rise of 2.3%. (That will still leave it much lower than in many other rich countries.) The rise should help low-income earners most at risk from the Bank of Japan’s quest to raise inflation.
The question now is whether firms and households can start driving faster growth. Japan’s companies have slashed their debts and corporate profits are high. According to the Tankan survey, they consider business conditions to be as favourable now as they were during the most recent period of sustained growth, under former prime minister Junichiro Koizumi. For households, aggregate wage income—wages multiplied by employment—is growing.
Yet Mr Abe’s public support is now falling, because of unpopular defence legislation (seearticle). There is little sign yet of any real challenge to his position, but he may in future wield less clout. The government’s ability to demand that firms raise wages, as it did with some success this year, could wane, adds Mr Baba. A poor second quarter will increase misgivings about Mr Abe’s economic plans. But it is hard to believe that the economy would be stronger without him.
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Japan’s Economy Shrinks in Second Quarter
Aug 16, 2015 | The Wall Street Journal
By Eleanor Warnock and Mitsuru Obe
Japan’s economy contracted in the second quarter as overseas demand for Japanese goods slumped and households spent less, raising the possibility the government will act to bolster an anemic recovery.
Japan’s gross domestic product shrank 1.6% on an annualized basis in the April-June quarter, according to data released Monday by the Cabinet Office. That compared with a 1.9% contraction forecast by economists surveyed by The Wall Street Journal.
The data show that a sustainable recovery in the world’s third-largest economy has been elusive, despite efforts by Prime Minister Shinzo Abe and the Bank of Japan to stimulate growth. Japan’s economy expanded the previous two quarters, but that growth followed two quarters of contraction.
“There is no engine of growth for Japan right now, either in or outside the country,” saidYuichi Kodama, chief economist for Meiji Yasuda Life Insurance Co. “Any economic rebound would be a subdued one.”
The latest figures could spur calls for a government stimulus package toward the end of the year, though economists expect growth to pick up in the second half.
Speaking shortly after the figures were released, Economy Minister Akira Amari said the contraction is likely a temporary one, pointing to strong sales of air conditioners in July and August.
“The government is not considering immediately implementing extra stimulus measures,” he told reporters.
Exports acted as the biggest drag on Japan’s economy during the quarter, falling a worse-than-expected 16.5% on an annualized basis. Exports to China were especially weak, reflecting a slowdown in the world’s second-biggest economy. Japanese car exports to China fell more than 30% on a dollar basis in the first half of this year, according to Japan External Trade Organization.
Weaker crude-oil prices damped investment in oil and gas development, reducing demand for Japanese construction equipment such as excavators.
The export slowdown had knock-on effects on the domestic economy, reducing overtime for workers and wages, government officials said. According to the GDP data, employee compensation declined 0.2% on quarter after adjustment for inflation, after a 0.6 gain in the first quarter.
Private consumption, which accounts for more than half of economic output in Japan, fell an annualized 3% from the previous quarter. In addition to sluggish wage growth, poor weather and low temperatures in June hurt spending on air conditioners and summer clothes.
Japan’s weak yen also raised the prices for many food items—such as ketchup, mayonnaise and curry sauce—prompting households to tighten their purse strings. Economists have said households have spent less as wage increases failed to keep up with prices after the national sales tax rose to 8% from 5% in April 2014.
“Since the April sales tax increase, wage growth stayed behind inflation, keeping consumers’ purchasing power weak,” said Toru Suehiro, economist with Mizuho Securities.
Capital Economics, a London-based research house, said in a note Monday that “the slump in output last quarter should be followed by a tepid recovery in the second half of the year.”
According to an August survey of 40 economists by the Japan Center for Economic Research, Japan’s economy should grow by about an annualized 2.5% in the July-September quarter.
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China's Devaluation Becomes Japan's Problem
Aug 13, 2015 | Bloomberg View
By William Pesek
Among the clearest casualties of China's devaluation is the Bank of Japan. The chances were never high that Governor Haruhiko Kuroda was going to be able to unwind his institution's aggressive monetary experiment anytime soon. But the odds are now lower than even skeptics would have previously believed.
The real question, though, is what China's move means more broadly for Abenomics. A sharply devalued yen, after all, is the core of Prime Minister Shinzo Abe's gambit to end Japan's 25-year funk. Abenomics is said to have three parts, but monetary easing has really been the only one. Fiscal-expansion was neutered by last year's sales-tax hike, while structural reform has arrived only in a brief flurry, not the avalanche needed to enliven aging Japan and get companies to raise wages.
China's devaluation tosses two immediate problems Japan's way. The first is reduced exports. As Beijing guides its currency even lower, as surely it will, the yen will rise on a trade-weighted basis. AndBloomberg's Japan economist Yuki Masujima points out that trade with China now contributes 13 percent more to Japanese GDP than the U.S., traditionally Tokyo's main customer.
"Given China's rise to prominence, the yen-yuan exchange rate now has far greater influence on Japan than the yen-dollar rate," Masujima says.
The other problem is psychological. Japanese households have long lamented their rising reliance on China, a developing nation run by a government they widely view as hostile. But the BOJ was glad to evoke China's 7 percent growth -- and the millions of Chinese tourists filling shopping malls across the Japanese archipelago -- to convince Japanese consumers and executives that their own economy was in good shape. Now, the perception of China as a growth engine is fizzling, exacerbating the exchange-rate effect.
"To the extent that the depreciation reflects weakness in China, then that weakness -- rather than the depreciation per se -- is a problem for Japan," says Richard Katz, who publishes the New York-based Oriental Economist Report.
It's also a problem for Abe, whose approval ratings are now in the low 30s thanks to his unpopular efforts to "reinterpret" the pacifist constitution to deploy troops overseas. The prospect that Abe will enrage Japan's neighbors by watering down past World War II apologies at ceremonies this weekend marking the 70th anniversary of the end of the war is further damping support at home.
The worsening economy, which voters hoped Abe would have sorted out by now, doesn't help. Inflation-adjusted wages dropped 2.9 percent in June, a sign Monday's second-quarter gross domestic product report for the may be truly ugly.
It's an open question whether such an unpopular leader can push painful, but necessary, structural changes through parliament. "Already," Katz says, "Abe has backpedaled on many issues to avoid further drops." After 961 days, all Abenomics has really achieved is a sharply weaker yen, modest steps to tighten corporate governance and marketing slogans asking companies to hire more women.
There could be a silver lining here: China's move may catalyze Abe to act. By undercutting Japan's devaluation, China might increase Abe's urgency to boost competiveness, innovation and wages.
Already, Abe's surrogates are setting the stage for more BOJ easing. One top advisor, Koichi Hamada, told Bloomberg News that "the magnitude of China’s shock is much larger than that from Greece." China's devaluation, he added, "can be offset" by fresh BOJ action.
But Abe would be wise to react with far more than just another yen devaluation. If Japan offers a cautionary tale, it's that weaker currency alone isn't the answer. If Abe had used the yen's 35 percent plunge since late 2012 to good effect -- passing big reforms on labor flexibility, import tariffs, tax policy, supporting startups, reducing red tape -- Japan might not be facing the prospect of another recession. Unless the prime minister changes course, Abenomics will be remembered as a policy that primarily benefited stock-trading hedge funds, not average households.
Yesterday, in a rare press briefing, China's central bank downplayed fears of huge moves that destabilize markets. Yet as growth sputters, Beijing will weaken the yuan as much as it can get away with geopolitically. Depending on how Tokyo reacts, this could be the moment Abenomics gains traction or becomes a $4.6 trillion casualty of China's ascendancy.
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Japan Exports Its Way to Irrelevance
Aug 17, 2015 | Bloomberg View
By William Pesek
There's a difference between bad economic news and the devastating variety that Japan received Monday. Prime Minister Shinzo Abe might have been able to weather the second-quarter data showing a drop in Japanese consumption and a 1.6 percent decline in annualized growth. But it's not clear his government can recover from the latest news about sputtering exports, which fell 4.4 percent from the previous quarter.
An export boom, after all, was the main thing Abenomics, the prime minister's much-heralded revival program, had going for it. The yen's 35 percent drop since late 2012 made Japanese goods cheaper, companies more profitable and Nikkei stocks more attractive. But China is spoiling the broader strategy. The economy of Japan's biggest customer is slowing precipitously, which has imperiled earnings outlooks for Toyota, Sony, and trading houses like Mitsui.
But Abe needs to recognize, as China already has, that this is only the latest sign of a broader reality: Asia's old export model of economic growth no longer works.
China's devaluation last week raised fears of a return of the currency wars that devastated Asia in the late 1990s. That's a reach, considering that exports are playing less and less of a role in China. McKinsey, for example, found that as far back as 2010, net exports were contributing only between 10 percent and 20 percent of Chinese gross domestic product. The services sector is growing in size and influence to rebalance the economy -- not fast enough, perhaps, but change is nevertheless afoot.
If any major country has been relying too much on exports it's Japan. As yet another recession beckons, the Bank of Japan will likely respond with yet more easing to extend the yen's declines and save giant exporters.
No matter how cheap the yen gets, though, China will still be slowing. All the stimulus BOJ Governor Haruhiko Kuroda can muster won't change the worsening trajectory of the region's most-populous nation. That's why Abe needs to take a page from Beijing and focus more on creating new industries at home.
Tokyo seldom acknowledges it can learn anything from Beijing. Japan wrote the book on exporting your way to prosperity, one followed to great effect from South Korea to Vietnam, and eventually even China. But recent years have seen the student (China) surpass the teacher in moving past that simplistic growth strategy.
Abenomics, meanwhile, has proven to be a time machine endeavoring to return Japan to the export boom times of 1985. But even with additional BOJ stimulus, says Diana Choyleva of Lombard Street Research, exports don't offer Japan a path to sustainable growth. Europe is still limping, the U.S. consumer isn't the reliable growth engine it was a decade ago, and China's relatively modest devaluation (about 3.5 percent in total) still means the yen's value will rise on a trade-weighted basis.
Japan's only available solution is to encourage more job growth from the ground up. But the country's weak-yen policy has proven to be more effective at ensuring job protection from the top down. The government had hoped that a devalued yen would boost corporate profits, giving executives the confidence to raise wages and giving households an incentive to spend more. Executives, however, have been taking a trust-but-verify stance. Before fattening paychecks, they want Abe to implement structural reforms to make the economy more competitive and end deflation. In a sense, Abenomics is engaged in a high-stakes staring contest with corporate Japan.
If Abe realized this, he would act focus on supporting small and midsize companies and encouraging startup activity. A new survey by Dentsu Communication Institute shows about 30 percent of Japanese aged 18 to 29 have no interest in being salarymen and salarywomen like their parents.
Rather than support the Japan Inc. giants that prefer new generations of lifelong workers, Abe could use tax incentives and government-funded venture capital funds to encourage young people to form their own companies and invent products that have a chance of spearheading new industries. Tossing corporate welfare at Sony and Sharp for the past several years hasn't spurred them to come up with a viable answer to Apple's iPhone or Samsung's Galaxy line of smartphones. Instead, it's been Chinese upstarts Xiaomi and Huawei that have become global players in that sector.
That's not to suggest China sets the best economic example in all respects -- far from it. Beijing has recently put the country's economic credibility at risk by manipulating the stock market, while Chinese companies have consistently avoided all manner of basic transparency.
Nevertheless, by focusing its attention on kicking its export addiction, China has valuable lessons to teach Japan. For all of Abe's big talk of deregulation, the odds are still stacked against Japan's would-be entrepreneurs. And as long as Abe's government sticks with a decades-old export model, that's unlikely to change.
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Japan to adopt wide-ranging national identity system
Sep 3, 2015 | Financial Times
By Robin Harding
Japan is to adopt one of the world’s widest-ranging national identity numbers, spanning everything from taxation to disaster relief, in a move set to raise revenues as well as privacy concerns.
Parliament voted on Thursday to extend the so-called “My Number” system to cover bank accounts. Next month, local governments will start sending out the numbers to every citizen of Japan.
The system is a big departure for a country that prizes privacy and has never had the equivalent of a US social security number. The government hopes it will raise tax collection and even become a source of economic growth.
“The future plans are wide-ranging but the initial goal is matching the global standard of a single number that stays with citizens throughout their life,” said Shigeki Morinobu, senior fellow at the Tokyo Foundation.
To begin with, the numbers will cover tax and social security administration, but there are plans to expand them to health insurance, passports, vaccination records and even dealings with private companies.
From 2017, for example, Japanese citizens should be able to use an identity card connected with their number to send their new address to multiple utility companies and banks at the same time.
Kathy Matsui, chief Japan strategist at Goldman Sachs in Tokyo, says the new numbers could become an important part of the country’s effort to tackle its yawning budget deficit, even as the population ages.
“I think that it will take some time and better enforcement, but getting to a tax revenue-to-GDP ratio closer to the OECD median should be possible,” she said.
In 2012, Japan had a tax-to-gross domestic product ratio of 29.5 per cent, well below the OECD average of 33.7 per cent. Without identity numbers, the government has no way to check whether citizens are declaring all of their bank accounts, leaving large amounts of tax uncollected.
The difficulty of tax collection in Japan is one reason the country has high headline tax rates. Bringing down those rates is one aim of Prime Minister Shinzo Abe’s “third arrow” economic reforms.
The numbers may also help Japan to means-test welfare benefits — crucial to controlling the bill as the population ages. “The government will be able to consider assets as well as income in social security,” said Mr Morinobu.
Public suspicion of the privacy risks inherent in the new system has risen since a hacker stole 1.25m pension records from the Japan Pension Service in June.
But Shinichiro Umeya, general manager at the Nomura Research Institute in Tokyo, said those concerns were overdone. “It has some of the toughest rules of any number system in the world,” he said.
There were criminal penalties for misusing the numbers, he added, as well as restrictions on how much personal information could be held in any one system and an independent body to scrutinise where the numbers were used.
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Japan Takes Step Toward Reviving Nuclear Industry as It Restarts Reactor
Aug 21, 2015 | The New York Times
By Jonathan Soble
For more than four years since the nuclear meltdowns in Fukushima in 2011, Japan has been debating whether it should permanently abandon a technology that went so disastrously wrong but that for years was seen as essential to its economy.
Governments have offered differing answers. The public has sent confusing signals.
But on Tuesday, the country took what appeared to be a decisive step toward resurrecting the nuclear industry and ending a de facto freeze on the use of atomic power, as an electric utility restarted one of dozens of reactors that were taken offline after the Fukushima disaster.
The reactor at the Sendai Nuclear Power Plant, in Kagoshima Prefecture, was the first to return to service since government regulators introduced upgraded safety standards two years ago. Most of Japan’s 48 operable commercial nuclear reactors were shut down soon after the meltdowns at Fukushima, and none have operated since 2013.
The government of Prime Minister Shinzo Abe supports restarting idled reactors that meet the enhanced safety standards, arguing that Japan’s economy depends on the low-cost power they provide.
Japan has few domestic energy sources, and it imports virtually all the fossil fuels it uses to power its homes and factories. Electricity prices in the country have increased 20 percent or more since the Fukushima disaster, squeezing households and businesses and obstructing efforts by Mr. Abe to stimulate the economy. Emissions of greenhouse gases have risen sharply, too.
The public remains skeptical about the plants’ safety, however, with surveys consistently showing that most Japanese favor closing the idled reactors permanently. A group of 150 to 200 protesters, including a former prime minister who turned against nuclear power after Fukushima, gathered outside the Sendai plant on Tuesday as the police stood guard, the Japanese news media reported.
“By moving ahead with restarts, the Abe administration is leading a doomed country,” the former prime minister, Naoto Kan, was quoted as saying.
Mr. Kan was in office in 2011 during the crisis at the Fukushima Daiichi power plant, which occurred after a huge tsunami struck the site in northeastern Japan and knocked out its cooling systems, setting off meltdowns at three of its six reactors and spreading contamination across a wide area. More than 100,000 people were evacuated, and many have yet to return home.
But public opposition to nuclear power has not translated into victories for antinuclear politicians like Mr. Kan. Not long after the Fukushima accident, his government announced a policy of gradually phasing out nuclear power, but that foundered after his center-left party was defeated in an election in 2012.
The more conservative, pro-nuclear party that replaced it, led by Mr. Abe, has won two subsequent parliamentary elections, despite its unpopular stance on nuclear energy. Its support has recently slipped, however, amid a separate and equally contentious political battle over defense policy, so the reactivation of a nuclear plant comes at a delicate time.
“Abe has kept his focus on the economy, and the opposition is weak, so he has managed to win people’s support in spite of the fact that most don’t like his defense and nuclear policies,” Shinichi Nishikawa, a professor at Meiji University, said. “But the limits of that approach are starting to show.”
The government and power companies have certainly tried to move cautiously. Plans to restart Sendai and other reactors have been in place since the revised safety regulations were introduced more than two years ago. The plants need to be retrofitted with new ventilation systems and other protections, and operators have needed to court local political leaders for endorsements to switch them back on. The Sendai plant was declared safe by regulators nearly a year ago, in September 2014.
How extensive Japan’s nuclear revival will ultimately be remains unclear. Some of the 48 operable reactors around the country are considered too old to be worth the cost of retrofitting to meet the new safety standards. Concerns about earthquake faults found under or near others have kept them from winning approval from the government regulatory body, which was reorganized and given more independence after the Fukushima disaster.
Power companies have applied for safety certification for about half the 48 units. So far only five, including the one restarted at Sendai, have been declared safe.
The utility that owns the Sendai plant, Kyushu Electric Power, said it removed control rods from the core of the reactor at 10:30 a.m. on Tuesday, initiating the atomic reaction that will eventually produce electricity. It plans to start producing and transmitting electricity for its customers next month.
The national broadcaster NHK aired video of workers in the plant’s control room as they restarted the reactor. Tomomitsu Sakata, a spokesman for Kyushu Electric Power, said the reactor had been put back online without any problems.
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Gas Golden Age Fades as Supply Boom Meets Japan Nuclear Rebirth
Aug 21, 2015 | Bloomberg
By Ben Sharples and James Paton
The golden age of natural gas lost some of its luster this month.
Japan, the world’s biggest buyer of the fuel in liquid form, restarted a nuclear reactor on the island of Kyushu Aug. 11, re-embracing atomic power to shrink energy-import costs. A week later, a production milestone was marked at Santos Ltd.’s Curtis Island plant in Australia, a new liquefied natural gas project that’s part of a record annual capacity increase.
Japan’s return to nuclear power after the 2011 Fukushima disaster and China’s economic slowdown are undermining the demand that prompted the International Energy Agency to envision a golden age four years ago. Companies including Chevron Corp. and BG Group Plc were counting on Asia’s consumption as they sank hundreds of billions of dollars into new supply. A glut will cap LNG prices for years, according to Citigroup Inc.
“Japan is going to do very well out of this,” Christopher Haines, a senior oil and gas analyst at BMI Research in London, said by phone Aug. 20. “Australia will probably be hit the hardest, there is a lot of new capacity coming online.”
The fossil-fuel import bill for Japan, once Asia’s biggest nuclear power producer, surged after Fukushima as the nation turned to other energy sources including LNG to plug the gap. This contributed to four years of trade deficits that hit a record 12.8 trillion yen ($103 billion) in 2014.Sendai Restart
Kyushu Electric Power Co.’s No. 1 reactor at the Sendai facility is the first to come back online under new post-Fukushima safety rules as Japanese Prime Minister Shinzo Abe seeks to revive the atomic fleet. While Kyushu plans to resume operations at a second unit in October, the timing on further restarts is uncertain due to tougher procedures set by Japan’s Nuclear Regulation Authority, legal challenges and public opposition.
Utilities have applied to resume operations at 25 of Japan’s 43 reactors. Next year, 11 units may restart, according to Polina Diyachkina, an analyst who has covered the nation’s power providers for three years at Macquarie Group Ltd.
The startup of additional Japan reactors will be a long and slow process, according to Grant King, managing director at Origin Energy Ltd., Australia’s largest electricity and gas retailer.
“I don’t think the one that has started is representative,” King said by phone Aug. 20. “People are still living in a very energy constrained way” in Japan.Australian Supply
Demand for LNG will slow as the nuclear restarts continue, Citigroup analysts including Ed Morse said in an Aug. 12 research note. The price of the fuel shipped to northeast Asia has slipped about 60 percent since climbing to a record $19.70 per million British thermal units in February 2014.
“There will be a glut of spot cargoes which will put further downward price pressure to spot prices” as Australia starts up 13 LNG units over the next three years, David Hewitt, the co-head of global oil and gas equity research at Credit Suisse Group AG, said by e-mail. “We would not be surprised to see some very low headline spot price deals in the next few years.”
LNG producers are forecast to add 50 million metric tons of new capacity next year, the largest single annual increase in history and equivalent to a fifth of current global demand, according to Sanford C. Bernstein & Co.$150 Billion
The bulk of the supply is coming from Australia, where companies including ConocoPhillips, Royal Dutch Shell Plc and Inpex Corp. are spending more than $150 billion on ventures due to start in the next two years.
On Curtis Island in Queensland, the $18.5 billion Santos development sent gas into the first processing unit of its LNG plant, a key step on the path toward starting production, the company said Aug. 18. There are two other projects on the island, including Origin Energy’s A$24.7 billion gas-export venture with ConocoPhillips.
The next wave of exports will come from North America, where only six of the roughly 40 proposals so far will be built, according to a Bernstein report last month. Those facilities -- from Cheniere Energy Inc.’s Sabine Pass project in Louisiana to Dominion Resources Inc.’s Cove Point project in Maryland -- are scheduled to construct more than 60 million tons of capacity by 2021, according to the researcher.
“Japan has certainly not been positive for global LNG” even as the pace of nuclear restarts has been slower than anticipated, said Trevor Sikorski, an analyst at Energy Aspects Ltd. in London. “It looks like the market is going into structural oversupply.”
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Japan: A pacifist’s plan to arm the world
Aug 17, 2015 | Financial Times
By Leo Lewis and Robin Harding
By 8.45am on February 19, 1942, almost 50 Japanese fighters and bombers had been launched from the deck of the Soryu aircraft carrier. An hour later the planes, led by the whining Mitsubishi A6M “Zero” fighters, had begun the bombing of Darwin — a raid that killed hundreds, sank eight vessels and was the largest ever mounted by a foreign power against Australia.
Seven decades later, Japan is back — by invitation. The Australian government, as part of a $20bn programme to renew its submarine fleet, has expressed interest in buying Japanese diesel-electric vessels named in honour of the Soryu. If Japan wins the contract, the submarines will be built, at least in part, by Mitsubishi Heavy Industries.
For 70 years, Japan has been a slumbering giant in the defence sector, but it is now waking up. In April 2014, as part of his new stance of “proactive pacifism”, Prime Minister Shinzo Abe ended Japan’s self-imposed ban on the export of weapons.
Japan has sophisticated military technology, but the question hanging over Mr Abe’s plan is whether producing high-quality gear will be enough. Success in selling defence equipment depends on many other factors, such as military training, that are hard for a pacifist nation to pull off.
There are signs, however, that Tokyo has come to regard defence exports not just as a matter of industrial policy, but also as an important element of its diplomatic strategy in a region unsettled by the rise of China. With such high stakes, Japan appears determined to overcome any obstacles.
“Working with friendly countries on equipment or technology contributes to bilateral security and defence co-operation, while joint development projects can strengthen our defence industry and technological base, raising the defence capability of our country,” says Akira Sato, state minister of defence, in an interview with the Financial Times. “Strategically, I think there are many areas Japan will want to pursue.”
In theory, Mr Abe’s move opened the international market to an estimated 3,000 private Japanese companies involved in producing military hardware and its components. No longer would the ambitions and finances of those manufacturers be inhibited by the relatively small $7bn annual procurement budget of Japan’s Self Defence Forces — in effect their sole customer since the 1950s. Foreign sales would lower unit costs and, critically for Japan’s own needs, keep many small, struggling suppliers in business.
In reality, a more select group is likely to benefit from the lifting of the ban. Industry consultants estimate that fewer than 300 Japanese companies derive more than half their income from defence. One reason Mitsubishi Heavy Industries, Komatsu, IHI and other leading contractors speak so seldom about defence is that it only represents between 1 and 11 per cent of total revenues.
By contrast, the biggest US contractors draw between 60 and 90 per cent of their revenues from defence.
“Japanese companies don’t want to say they are in the war business, especially when the war business is so small for them,” says Shinichi Kiyotani, a senior adviser for the Kanwa Defence Information Center. “Even companies — for example a specialist in night-vision optics — that have received direct inquiries from the US and French militaries don’t want to speak about it for image reasons.”
But others have strong reasons to want to export, he adds. According to analysts at Deloitte Tohmatsu, the SDF’s procurement budget of $6.7bn in 2011 is only projected to rise to $7.3bn by 2019 and even that could shrink if Japanese GDP growth slows; in contrast, the Chinese procurement budget was $18.1bn in 2011 and is projected to hit $46.8bn in 2019.
“Japan needs customers that are not the SDF,” says Mr Kiyotani.
Know-how deficit
The export ban was only one of many hurdles between Japan and a meaningful export business. The others, say industry experts, may prove insurmountable. Japan’s long absence from the international market has starved it of intelligence, gossip and savoir-faire.
Japanese officials and business people have been left out of the procurement process around the world for decades, says Tate Nurkin, a senior director at IHS Defence Weekly. Although it has committed hundreds of bureaucrats and military officers to staffing its new procurement and sales agency, Japan’s defence ministry has yet to hammer out precisely how it will operate and whether it will adopt a European or US approach to defence sales. Debilitating turf wars may break out as the defence, trade and finance ministries squabble over the technicalities of each deal. Even the companies themselves admit to being confused.
JMU Defense Systems, which makes the 250m Izumo-class helicopter carrier — the largest warship Japan has launched since the second world war — should be at the centre of the action. Its amphibious vehicle could be attractive to a range of Asian countries with islands to defend. Yet according to Hirohiko Sakurai, the general manager of JMU’s sales department: “The rules have changed, but we still don’t know what we can and cannot do.”
Then there are the usual barriers to Japanese companies abroad: the country is short of executives with foreign language skills and the military divisions of big contractors have few managers with overseas experience.
Price fears
US defence equipment brokers say Japan is in for a rude awakening when it discovers that its competitors in the modern market are Malaysia, Singapore, Indonesia, Turkey and others that can build a “decent enough” version of whatever the customer wants.
“If you are a third world country, good enough is good enough,” says one industry veteran. “For many of these customers, cheapness overcomes quality and Japan is just not cheap.”
Still, the dream of spurring growth through arms exports is shared by many Japanese companies, despite their carefully crafted images as cuddly civilian powerhouses. The end of the ban was the result of many years of companies “straining against the constraints” imposed by history and convention, says Richard Samuels, director of the Center for International Studies at the Massachusetts Institute of Technology.
“This wasn’t just the trade ministry pushing for a new strand of exports, this was a coalition of Japanese industrial firms working very hard over a very long period of time. Of course there was a sensitivity for companies reluctant to be seen as merchants of death, but they seemed prepared to get over that and show the world what they have,” says Prof Samuels.
The marketing of Japanese military equipment has already begun, though cautiously and with an expectation that Tokyo is more likely to find success as a supplier of critical materials and high-tech components than of ships, planes and fully-fledged weapon systems.
In May, Japan hosted its first arms trade fair since the second world war, and in September eight Japanese companies are scheduled to attend the much larger DSEI defence and security fair in London. The focus will be on the US-2 and the P-1 — aircraft that are known to be of interest to India and the UK.
Behind the razzmatazz of the shows, however, must be an acknowledgment that Japan is coming to a market that is oversupplied, fiendishly complex and, according to one analyst, “a place that forces you to strike gentleman’s agreements with people you know are not gentlemen”.
Jack Midgley, the Tokyo-based director of defence consulting at Deloitte Tohmatsu, says the main growth in the global market is coming from South America and Africa, where China and India have already staked out their interests. And even when it comes to selling components and materials instead of complete systems, there are obstacles.
Mr Midgley says that “when you talk about exporting components, then that means them becoming subcontractors to western” companies such as Lockheed Martin.
“To do that, Japan will need financial reporting systems, project accounting techniques and other things that are basic vocabulary in the west but which the Japanese defence companies just do not have. Even for a potential supplier in the US, it takes years to get all that stuff in place.”
Becoming a contractor to western defence manufacturers could drive up costs into the hundreds of millions of dollars for each company — money they might more profitably invest elsewhere, given there is so far no sign of financial support from the government.
Companies that take the plunge will probably be those that are already burdened with the high cost of producing defence equipment for Japan’s SDF and cannot exit the business. Analysts hope that selling equipment globally will help them become more efficient.
Building relationships
The political calculations behind allowing arms exports are as unmistakable as the commercial ones. Despite Japan’s tormented relations with China and South Korea, Mr Abe has been a comparatively successful diplomat elsewhere in Asia and around the world. He is also well aware that the sale of large defence platforms such as submarines and patrol aircraft — desirable products for countries sitting next to Russia, North Korea and China — can secure deeper geopolitical relationships.
According to Tokyo-based diplomats, there has been a noticeable shift in the Abe administration’s attitude since the lifting of the ban. Initially, the move was part of Mr Abe’s wider push to normalise Japan’s status, with defence exports just another means to that political end.
Very quickly, however, Japan’s national security policymakers have come to see defence exports in strategic terms. “Procurement is what you do in place of an alliance,” says an Asian diplomat, adding that Tokyo seems less concerned with reinforcing its defence industry than building friendships.
Asked whether Japan would export military hardware even if it were not profitable, Mr Sato admitted that it was “possible on a case-by-case basis”. The critical issue, he says, is the relationship. “We have to count how much we can contribute to world peace, so it is not just a matter of price.”
That calculus could prove pivotal as Tokyo closes in on a deal that would cement closer ties with Canberra. Next week, Japan’s government and several of its leading defence contractors are due to issue an update on discussions with Australia to develop a fleet of the stealthy Soryu submarines, which are driven by lithium-ion batteries. The deal would represent Japan’s first big contract since the export ban was lifted — and a powerful calling-card for its wider defence industry.
Lance Gatling, a Tokyo-based consultant and defence broker, says such a breakthrough deal is vital. “Precedent is everything for Japanese companies in general, but in this situation particularly. That is what is going to start moving everything forward.”
But he warns that the submarine contract may be a stretch. “On joint development projects, Japan could have looked at some simpler ones to get going, but the ones they are starting with are really, really complex. Instead of crawl-walk-run, they are just jumping right off the deep end.
“There is really nothing as complex as submarines,” he says. “It takes more than just wanting it to happen to make it happen.”
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Why Is China Playing Nice With Japan?
Aug 4, 2015 | Foreign Policy
By William Sposato
t was no coincidence that when Chinese President Xi Jinping wanted to signal a willingness to warm up his nation’s chilly relations with Japan, he chose a group of business leaders as his audience.
China’s leader made a surprise visit to a lavish dinner on May 23 for no fewer than 3,000 Japanese business leaders at the Great Hall of the People in Beijing. “China has always been committed to the development of China-Japan relations as its policy principle, and it will continue to do so in the future,” he told the group, led by ruling Liberal Democratic Party senior figure Toshihiro Nikai.
Xi appeared downright chummy with Nikai — a sharp contrast to his April meeting with Japanese Prime Minister Shinzo Abe, and especially his November meeting, where he looked like he had just come from a funeral.
The more upbeat Xi coincides with what analysts say is a surprisingly low-key response from Beijing to legislation Abe is pushing that would expand the role of the nation’s self-defense force to help out allies, principally the United States. Abe is using his supermajority in parliament to push through legislative changes that would allow the armed forces to engage in collective self-defense. The notion of helping out if U.S. forces defending Japan coming under attack is not radical. Many Japanese legal scholars believe, however, that the idea requires a change to Japan’s pacifist constitution. While Chinese media has condemned the move, often quoting Japanese opponents to the idea, top Chinese officials have been largely quiet.
There has also been good news for Abe from his other big problem area, South Korea. After taking a hard-line position on Abe and cancelling a series of planned bilateral meetings, President Park Geun-hye has recently sounded much more conciliatory. In an interview with the Washington Post in early June, Park let drop that the two countries were in “the final stage of our negotiations” on the issue of forced prostitution for Japan’s military during wartime. (Tokyo refers to them as “comfort women,” while those on the other side prefer the term sex slaves.)
According to Japanese media, a possible deal would include a personal apology from Abe and money to the survivors direct from the Japanese government, rather than through a “private” fund as previously offered. Seoul would in turn agree that the gesture finally settles the issue, and would stop protesting it internationally. While no deal has yet to be announced, Park’s willingness to go out on a limb in such a public fashion suggests that she too is eager to mend relations. And in a minor victory for better ties, the two countries in early July papered over a squabble regarding U.N. historical designation for some of Japan’s first factories, some of which had used forced laborers, including Koreans, during World War II.
These improvements have come about even though Abe has shown little inclination to soften his stance on what are politely called “historical issues”: He and his supporters have stuck to their view that international investigations into comfort women, including a 1996 U.N. report, have exaggerated the severity of the crimes. They also believed China exaggerated the death toll of the 1937-1938 Japanese massacre of Chinese civilians in the city of Nanjing. And Abe himself continues to parse his words instead of presenting a grand gesture: While he remains reluctant to utter the magic word “apology” that China and South Korea seem to be seeking, he offered“deep remorse” in his April speech to a joint session of the U.S. Congress, clearly hoping that will be enough.
The change in mood may instead reflect a sudden reversal in economic fortunes. Japan, long a laggard due to an aging society and shrinking prospects, appears to be on the mend — while the red-hot Chinese economy has cooled off dramatically. South Korea, meanwhile, is also facing its own slowdown, due in part to a decline in demand from China, its largest foreign market.
Abenomics, Abe’s signature economic program, featured massive injections of cash by the central bank, depressing the value of the yen. This in turn has produced a windfall for corporate Japan since the lower currency means that overseas profits are automatically worth more when translated back into yen. Japan’s gross domestic product is now looking surprisingly perky at a 3.9 percent annual growth rate, good enough to give it top honors among the G-7 nations (admittedly a fairly low hurdle).
China’s economy has been buffeted by a crisis in confidence coming in the form of a sharp sell-off in the stock market. The Shanghai Composite Index fell more than 30 percent in just three weeks from its peak of 5,166.35 on June 12. After a recovery helped by government-backed buying, the market has again been hit hard with the Shanghai exchange dropping 8.5 percent on July 27, the biggest one-day fall since 2007.
Other warning signs abound. China’s GDP in the first half of 2015 rose 7 percent from the same time last year. While that’s pretty good shooting for almost any other country, it is China’s worst performance since the financial crisis in 2009. Industrial profits slipped 0.3 percent in June from a year earlier, suggesting tougher times ahead for big manufacturers. Closely watched PMI data, which surveys the views of purchasing managers at select companies, showed that a majority believe conditions are worsening.
In South Korea, exports have been hit by the strength in the won versus the Japanese yen, which is making it more difficult for its big conglomerates to go head-to-head with their newly invigorated Japanese rivals. And South Korean GDP grew at a sluggish 1.2 percent annual rate in the second quarter. “The Korean economy may be teetering on the brink amid sluggish exports and domestic consumption in the wake of the Middle East respiratory syndrome (MERS) outbreak, Greece’s debt crisis, and China’s stock market rout,” said the Korea Times, an English-language newspaper, in a mid-July editorial.
South Korea also fears being left out as the No. 3 player in the trilateral relationship, given its much smaller economy — 14 percent of the size of China’s and 31 percent the size of Japan’s.
Some economists say that a quiet economic rapprochement between China and Japan has been underway for some time, following a sharp downturn in economic ties in 2012 when a debate over the disputed Diaoyu/Senkaku, asmall group of islands in the East China Sea, flared anew. “Economic relations have improved significantly over the past nine months, with a lot of negotiations behind the scenes,” said Martin Schulz, a senior economist at the Fujitsu Research Institute.
There have been some tangible signs of progress. Chinese real estate investment in Japan is meanwhile on the rise, especially in big cities like Tokyo. There has also been a highly visible surge in the number of Chinese tourists — May figures showed a 134 percent year-on-year increase.
A key question is what China wants from Japan on the economic front. It is cash rich with plenty of investment capital, and with Japan’s economy showing limited potential for the long term, what is the advantage? One answer is the “soft infrastructure” where Japan now excels, according to Schulz of Fujitsu Research. “China does not need Japanese investment, but they need Japanese technology,” he said. China is also keen to gain the involvement of Japan, as well as the United States, in the Beijing-led Asian Infrastructure Investment Bank. The new public-sector bank is China’s answer to the Western-dominated World Bank. Japan and the United States were highly notable no-shows for the opening party of the lending body, initially capitalized at $50 billion, and their involvement would help lend valuable credibility. With Japan’s long history in lending to developing nations (including China, not too long ago), it could also help out in avoiding some of the inevitable mistakes.
It is of course too soon to suggest that the less frosty relations will approach the level of global warming. Abe is preparing his much anticipated mid-August speech marking the 70th anniversary of the end of World War II. There are no signs that he will risk alienating his conservative political base to extend any new apologies for Japan’s wartime actions. An approach seen as churlish by Seoul and Beijing could put relations back into the freezer.
But for now, it looks like the mantra of recent years for these East Asian neighbors — “hot economics, cold politics,” a phrase popular enough to have its own Japanese Wikipedia page — has returned.
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Japan Slips Chasing Australian Subs Deal
Aug 17, 2015 | The Wall Street Journal
By Rob Taylor
Six months ago, two Japanese companies better known for producing trains and motorcycles were favorites to win a roughly US$20 billion Australian defense contract to build submarines, launching them into the nearly US$1.8 trillion global military hardware market after an almost 50-year ban in Tokyo on weapons exports.
But secrecy surrounding the government-led Japanese bid—in contrast to public charm offensives waged by German and French rivals—might scuttle the firms’ chance to win one of the world’s most lucrative weapons deals.
The makers of Japan’s Soryu-class submarine, Mitsubishi Heavy Industries Ltd. andKawasaki Heavy Industries Ltd., haven’t made a single public appearance in Australia. They didn’t attend a government submarine-planning conference in March and declined to appear before a parliamentary hearing last month in Adelaide, the capital of South Australia, where scores of local jobs are at risk if the successful bidder decides to build the submarines overseas.
Meanwhile, Germany’s ThyssenKrupp Marine Systems GmbH and France’s DCNS Group have set up Australian offices bristling with lobbyists, defense experts, public-relations teams and technical employees to advance their bids and exploit public unease about the Japanese bid.
ThyssenKrupp last month signaled that if its Type 216 sub wins out, the company could create shipyard jobs and turn Australia into a submarine-industry hub for much of Asia. Many influential lawmakers now believe that the German company is the favorite.
Mitsubishi and Kawasaki said they support the push for the Australian contract, but each said the government’s involvement made their approaches different from the European companies’ bids.
“That is where Japan’s weakness lies. Japan is handling this project in a Japanese way and working on it as purely a case of exporting defense equipment, transferring technology and making Australian production possible,” said Yoji Koda, a retired vice admiral and former commander of the Japan Maritime Self Defense Force Fleet. By contrast, he said, “competitors are adding value with their proposals,” such as creating a submarine service hub in Australia.
The contrast underscores the challenges facing Japan as the semipacifist country seeks to enter the global weapons market after a decadeslong absence. Japanese troops haven’t engaged in any conflict since World War II, restricting their operations to international peacekeeping and disaster relief. The Australian contract is by far the largest Japan has sought since Prime Minister Shinzo Abe eased the ban in April 2014, and is seen as a test case for how Japan could reposition itself in the region as Mr. Abe seeks to use military hardware trade to help build ties with neighbors who are also wary of China’s power.
Japan and Australia deepened security ties last year amid worries over Chinese muscle-flexing in territorial disputes, a deal senior defense officials had thought would give the Japanese bid an edge. India has expressed interest in buying Japan’s US-2, a large seaplane built for the navy by ShinMaywa Industries Ltd.
Australia is one of many Asia-Pacific nations looking to modernize its submarine fleet with diesel-powered vessels. More than half of the world’s submarines are expected to be in Asia by 2030, as countries including Indonesia, Malaysia, Vietnam and Singapore look to hedge against instability by building undersea fleets, which are harder for enemies to detect than conventional ships.
Prime Minister Tony Abbott has pledged to boost military spending to 2% of gross domestic product from the current 1.8%, adding 3.5 billion Australian dollars (US$2.6 billion) a year to the current A$32 billion military budget.
Japan is confident in the technological superiority of the Soryu, the world’s largest diesel-electric submarine, over its rivals, including Australia’s aging Collins-class submarine, manufactured by government-backed Australian Submarine Co. While the Collins sub has been plagued by reliability and noise problems since its introduction in 1996, the Soryu’s stealth propulsion system allows it to operate underwater for almost two weeks, comparatively long for nonnuclear vessels. It can also dive deeper than the Collins, making it better able to evade enemies.
But several factors have inhibited a full-throated sales effort by the Japanese companies. Japanese weapons exports are still controlled by the government, and the companies have taken a back seat to government leadership in the negotiations. The government has never exported big-ticket defense technology before, and is handling the talks with Australia as a strategic matter rather than a business opportunity—making it difficult to craft a pitch that will appeal to Australian political sensitivities, defense experts said.
Japan’s foreign-affairs ministry said it plans to send technical information on the bid to Australia’s government. The ministry declined to comment further.
Toru Hotchi, director of the Equipment Policy Division of Japan’s Ministry of Defense, said Tokyo could work with Sydney to ensure a deal would satisfy domestic concerns. “If the Australian side attaches importance to industrial elements such as employment and maintenance, we will address the issues seriously and earnestly,” Mr. Hotchi said.
Several Australian government lawmakers have said that if the Japanese win, it will be seen as a politically unpalatable “captain’s pick,” in which Mr. Abbott agreed to a deal with his Japanese counterpart to build submarines in Japan, at the expense of Australian shipbuilding jobs. Mr. Abbott was already pressured in February by lawmakers to open the bidding to a 10-month competitive tender, after reports he had favored the Japanese in a handshake deal with Mr. Abe.
The Japanese side has recognized its low profile compared with the European companies might prove damaging, and has vowed to step up efforts in coming weeks to persuade Australian voters and lawmakers.
In a rare televised address last month to Australia’s National Press Club, Japan’s top envoy to Australia, Sumio Kusaka, said a 40-member Japanese delegation including trade and defense officials, as well as Mitsubishi and Kawasaki representatives, would meet with Australian industry groups this month.
“I think Japan will lose this deal unless it brings in consultants or gets some kind of help,” said Mr. Koda, the retired vice admiral. “It is like a person who doesn’t know how to dance making his or her debut in international society. You’ll need to learn how to dance, right? And the Japanese don’t know anything about dancing.”
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Japan's Peace Constitution Is the Future, Not the Past
Aug 17, 2015 | Huffington Post/Asia Today
By Emanuel Pastreich
Japan's future role in global security is the most significant question in the minds of many in East Asia on the seventieth anniversary of the end of the Pacific War. Unfortunately, the drive of the conservatives in Tokyo to develop an assertive conventional military, something they consider to be a prerequisite to status as a "normal country" has resulted in an exponential rise in political tensions in East Asia and deep questions about what Japan's long-term motives are.
Many within Japan itself question the rationale for such a rapid push to beef up the Japanese military, slough off the restrictions on military action dictated by the peace constitution and put Japan on a path to serving as a major supplier of weapons technology with a military that is activel engaged around the world.
Towards this goal Japan has embraced the ambiguous concept of "collective defense" which allows it to interpret its way out of the completely unambiguous Article Nine of the Constitution: "land, sea, and air forces, as well as other war potential, will never be maintained."
Japanese conservatives suggest that Japan needs to shoulder its international responsibilities as a member of the G-7 and become a "normal nation" that can project military force. Although, in fact, Japan, with the seventh largest military budget, has gone already far beyond any normal nation in terms of its spending.
I can certainly understand the desire of the Japanese to be leaders and play a central role in international affairs. After all, Japan has a powerful economy, some of the most advanced technology and a remarkable cultural tradition. But the Japanese need to ask themselves a serious question: will Japan be a more of a global leader if it abandons its peace constitution, or if it embraces it and enhances it?
Many frown on any suggestions that the peace constitution might be relevant to our age. Recently, Robert Dujarric, a leading Japan security expert, went as far as to write that, "Article 9...is incompatible with surviving in a dangerous world. It's a noble aspiration but is not policy-relevant."
But what exactly is incompatible about the "peace constitution" and survival? Without any doubt the greatest threat today is from climate change, which will devastate the major coastal cities of Asia, dramatically reduce food productivity and make large regions of the world uninhabitable. A recent study headed by James Hansen, the former director of NASA's Goddard Institute for Space Studies, suggests that staying within the internationally agreed goal of keeping the planet within the 2 degree Celsius temperature warming limit will not avoid the melting of the Antarctic and Greenland glaciers. The inevitable result will be the flooding of numerous major cities, like Tokyo, Shanghai and Busan, with seawater.
A "peace constitution" could be a major advantage to Japan as it works together with nations around the world to respond to this existential threat. For example, the peace constitution would force the country to dedicate its resources to emerging non-security threats, thereby making it far more prepared for the challenges of climate change because it does not spend as much on tanks and planes and other technologies that are not relevant to survival in a warming world. The result would not be a Japan that is not punching its weight in military affairs, but rather a Japan that is truly a leader for the first time in security issues.
Japan already has the advanced technologies related to climate change adaptation and mitigation, solar and wind power, electric batteries, and other systems for responding to an increasingly inhospitable environment.
Rather than trying to model Japan's security strategy on that of the United States, a country that is in serious trouble because of its military over-extension, Japan should move in a more constructive direction, focusing on the one security threat that all experts agree on.
The Self-defense forces could be transformed into organizations that fully support the import of article nine, rather than contradict it, and thereby become models for positive institutional innovation.
For example, the future Ground Self-Defense Force could focus on the global battle against desertification and mass its resources to address the degradation of land and the destruction of forests around the world.
The Maritime Self-Defense Force could focus its attention on addressing the rising temperature of the ocean and the threat posed to the world by its growing acidification. The Self-Defense Force could also give attention to humanitarian relief related to climate change and stopping the dangerous overfishing of the oceans. Finally, the Air Self-Defense Force could devote its resources to the surveying the impact of global warming from the air and addressing problems related to the atmosphere.
It is no simple task to reinvent military. But it is not the first time in history that new circumstances have forced a radical rethinking of security priorities. Better to look at this challenge as an opportunity for Japan to return to its tradition of brave innovation and institutional reform. Finally, such a security strategy requires close engagement with nations throughout Asia and around the world that could make Japan the center of a new security network dedicated to this emerging threat.
The move beyond a conventional military is not an unrealistic pacifist impulse, but rather a historic decision by Japan to address the changing nature of security directly. Although Japan did not have had full autonomy to choose the peace constitution, Japan can chose its destiny this time, positioning itself to lead as nations around the world re-calibrate to address the threat of climate change.
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