Power And Dollar

Is New Japanese Ambassador To China Sinking Your 401k?

Japan just named its new ambassador to China without much notice in the States.  But do you own Japanese companies’ stocks?  How much does China affect Japanese manufacturers who have factories in China?  Current ambassador Uichirou Niwa (丹羽宇一郎) will be replaced by Masato Kitera (木寺昌人).  Shortly after the announcement of the appointment, Euro started appreciating against Japanese Yen from 102 to 102.50 similar to US’ appreciation against Yen from 74.40 to 74.85 in 30 minutes. Although US’s currency strength maybe explained by the better than expected unemployment data.  However, USD was actually depreciating against EUR at the same time when JPY was depreciating against all currencies.

So, if Kitera’s appointment has anything to do with the JPY depreciation, what was the rationale in the market at the time?

Kitera has no diplomatic experience in China.  Neither can he speak the language.  It is certainly not an advantage for a diplomat.  However, this is also a reverse to the earlier policy of Japanese Prime Minister Noda (野田 佳彦) to use civilian (current ambassador Niwa is not a civil servant) instead of foreign ministry’s bureaucrats for Japan’s ambassador to China.  Is this a signal interpreted by the market that Prime Minister Noda influence is waning?

Kitera’s career has been mainly related to international organizations, such as foreign aid (Grant Aid Division of Foreign Ministry), Minister to UN and WTO etc.  What does say about the intent of Japan in its relations to China amid the recent controversies over the island dispute?

His skills of cooperation with many different entities are certainly valuable.  Are there no suitable candidates who have host country knowledge and diplomatic skills to smoothen the relationship?  Is this appointment part of the upcoming lower house election calculation? 

If former, then it may show some distrust of the political elite over the close relationship between the bureaucrats with China.  If latter, then this is a clear signal that Japan may become more aggressive against China over the island dispute, despite the US public announcements toward a more peaceful environment during the US election season.  As a stretch, this appointment may enlarge the diplomatic battle field since Kitera may be able to draw his knowledge in the international institution areas.

If Japan actually cannot feel confident about the diplomatic abilities among the China experienced bureaucrats, then this appointment further shows the talent shortage of Japan, now reaching a higher level of the civil servants than previously thought. 

Since 1995, Japan ambassador to China has been around 60 years old, compared to US to China around 57 and China to Japan around 54.  Japan’s labor force has aged tremendously over the two decades without back fill.  The death of Nishimiya (西宮 伸一), the Japan to China ambassador to be, certainly was an accident, although indicative of Japan’s talent pool.  This appointment may serve as an additional indication that Japan is running out of candidates to manage its complicated affairs against a rising power.

This may further affect its trading strength in its future trade negotiation against China in the China, Korea and Japan trilateral relationships.  Export heavy companies in Japan will be further negatively impact, such as auto manufacturers.

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October 5, 2012 Posted by | China, finance, Investment, Japan, opinion, politics, stock, trading | Leave a comment

What Does Your Wallet Or Your Politics Care If Japan Were Ready For Change?

The 2009 general election in Japan is the first time any opposition party won a mandate with meaningful margin.  Does it matter to the United States/Obama?  What does your wallet care about a Japanese election?

DPJ won this election with a landslide, 60% of the seats.  LDP, the incumbent who lost, still has 20%.  However, its electoral power is greatly reduced.  DPJ should have no difficulty in implementing changes it advocates. 

Election result often is a reflection on the perception of their economic lives for most voters.  This one is no different.  Challengers have no experience in governing.  And the voters do not care.  They want the incumbent out. 

Opposition DPJ promises more government checks for babies to lift fertility rates (negative population growth) and for seniors (20% for Japan vs 13% for US).  How are they going to pay for this when the labor force is shrinking and Japan has been avoiding the talk of an immigration policy?  if you think Obama is irresponsible in drowning your grand children with eternal debts or that French were crazy, then consider Japan’s public debt ratio: 162% back in 2007
and expect to be 200% in 2009.

Japan will eventually do what Obama is already doing, lower the exchange rate.  It will make the bonds they are making worth less (I do not know want to say worthless), not that they aim to cut down the prices of their products (Honda NYSE:HMC, Toyota NYSE:TM, Nissan not trade outside of Japan, Mitsubishi NYSE:MTU, Sony NYSE:SNE).  Will these companies be more profitable?  At least they will have one more factor.  Will Walmart’s (NYSE:WMT) spreadsheet make a dent (Yes it operates in Japan)?  Probably not. 

Reforms to boost productivity is obvious a step they will have to take.  However, the easiest way to score points for DPJ is to shrink the power of bureaucrats.  Opening trade barrier is not one of them.  Americans will probably continue to make most of their money through large heavy industrial sales or trading outposts in Japan.  How much can Obama lean on them? 

DPJ advocates for more fraternity in the face of US led capitalism which makes “human dignity is lost”.  Is DPJ socialist?  The NYT speaks well of Liberty, Equality, Fraternity.  Japan will be more interested at balancing itself between China and US rather than an ideological shift, although US never really helped with Japan’s ambition in the international politics (like getting a seat in UN Security Council).  After all, The NYT editorial mentions America twice and China 9 times.  All references about China are about its economic power.  And China can afford to make large inter-governmental purchase that US cannot in the near future.  Will this be a geopolitical shift?  Hardly, if Japan recovers quickly with great confidence about itself.  If Japan recovers with pace and DPJ wins re-election, then a whole new generation of voters will mature through the benefit of China trade.  That will make a shift.

August 31, 2009 Posted by | Current Affairs, Current Events, election, Japan, opinion, politics | Leave a comment

What Does North Korea’s Six-Party Talk Matter?

North Korea is the next news item after G8.  Six-party talk starts on 07.10.  This is expected to be a minister level meeting.  Therefore, some big items are to be discussed.  Bush needs to accomplish something more than Iraq and Afganistan.  North Korea also wants to cash out something out of a desperate President and then start the next round of talks.  Some results will come out before11.04.  Some real progress can be made in the next Six-Party talk.  What does it matter? 

 

This will produce a lot of long term effect.  Short terms are logistics and symbolic, such as an agreement, declaration of some sort (peace), exchanging offices, etc.

 

A minister level meeting is an indication that a conclusion is in sight.  This is not just about sanctions, economic aid or light water reactor.  They are, literally small potatoes, for a minister level meeting.  Will the end of Korean War finally be an agenda item?  Finalizing the border between North and South Koreas? 

 

If these questions are on the table, then the outcome will give us a sketch of what the unification process for North and South Koreas will be.  If the meeting will not reach to that point, then it would be interesting to see what derails since Japan has no clout in Six-Party talk; South Korea has no position against North Korea; China is generally believed to want a nuclear free Korea peninsula. 

 

Of course, if all goes well, South Korea can finally convince itself that peace is here.  Fiscal spending can decrease.  The ripple effect will be: what about the military bases?  If they will stay, who pays?  The same question can be asked about the bases in Japan.  What will China’s position be in the middle of all this?

 

What about the border that defines South Korea and Japan?  If there will be mutual recognition of the two Koreas, they need to agree to each other’s boundary.  What will North Korea’s position on the border dispute between Japan and South Korea?  Will North Korea even drag the WW2 war crime into the agenda too?  How far will and can North Korea stretch Japan?  What is the price to pay to get the Japanese abductees back to Japan?

 

Or, will the talk turn first to the commercial projects?  Does Russia want more investors at the eastern end of Siberia?  How is that Siberia oil pipeline going?  Will this be a pre-text for some Northeast Asia security mechanism or trust building exercise?  Will this bring up the border dispute between Russia and Japan? 

 

Any kind of Northeast Asia security mechanism leads to re-balancing the response time of US military.  How will Japan react to that?  Since these border disputes are created by the final days of WW2, will the end of Six – Party talk pull out a long overdue clean-up talk?  That is something Japan wants to avoid badly.

 

 

If Okinawan independence movement is an institutionalized movement, then this is the time to plot their moves.  The end of Six – Party inevitably leads to Taiwan Strait, another WW2 antique problem. 

 

If so, a behind the scene negotiation between China and America is the real determinant.  In that context, North Korea is really the pivot of a lot of things.

July 10, 2008 Posted by | Current Events, Japan, korea, opinion, politics, wordpress-political-blogs, 台灣, 国事, 天下事, 中國 | 2 Comments

Environmetal Groups Mis-focused G8

CNN’s G8 summit news story focuses on the criticisms against the emission control proposed by G8.  Both CNN (and other news sources) and environmental groups fail to recognize other more important items, some of them relevant to this climate change topic.  As a result, they misfired. 

 

While the G8 agreement is unproductvie, something else actually may have an impact.  This something else is against the interests of environmental groups.

 

Most politicians blame speculation as the greatest contributing source to increase in oil prices.  To combat this price increase, environmental groups point out that this is time for renewable energy.  This is nothing new.  The new part is this argument gets media attention, i.e. oil price increase is strengthening the cause of environmental groups.  To combat this price increase, Italian finance minister Giulio Tremonti proposed to increase the margin requirement for futures trading.  By increasing the margin, the amount of money required to speculate the same volume of commodity increases as well.  This suppresses the quantity of speculative trades.  Therefore, the oil prices will go down, if indeed speculation trading is the cause of high oil prices.  This is a very effective way to combat oil prices and working against the interests of the environmental groups because a lower oil price diminishes the incentives of renewable energy.  No money can buy this much media coverage for the environmental groups.  No money can buy (or political donation) this much air time from the politicians, even if they were committed to the cause.  On the issue of renewable energy, speculation trading is an important ally of environmental groups.  

 

G8 is, like any other high publicized event, an excellent opportunity to promote products.  Japan is doing exactly that to promote their zero emission cars and buses.  Every crisis is an opportunity to stay ahead of competitors.  Japan is trying to stretch this technology gap against America.  Will this energy crisis get America to some action?  Both McCain and Obama are still thinking about what to do with the tax money.  This is so 1980’s: supply side economics.  Commercializable solution comes when there is sufficient demand for a product.  This high price is helping the demand for the green collar jobs Obama is talking about, not refunding the consumers.  

 

The possibility that green collar jobs may be years away is the source of talks about nuclear energy cooperation While it is true that one disaster event is too many, nuclear technology is available (versus renewable energy), operational and the cost being predictable and controllable.  Environmental groups focus should not be why nuclear energy is bad.  Environmetal groups focus should be what will make the renewable energy technology commercializable and how to create those conditions.  If it is about the game rules of the market set-up (as in the case of margin requirement), then this is the prime to mobilize the organizational infrastructure, since it is election time.  

July 8, 2008 Posted by | activism, advocacy, Barack Obama, Current Events, 石油, Democrats, economics, election, Election 2008, environment, Japan, John McCain, mccain, nonprofits, obama, opinion, politics, wordpress-political-blogs | Leave a comment

What Are The Implications Of A Nuke Free North Korea?

 

CNN reports the destruction of North Korea’s nuclear facilities.  What are the implications? 

The most directly impacted nation is Japan.  The confrontation pressure in the Korea peninsula is weakened.  The need for US military presence is also weakened.  The economic incentives are there.  But Japan is not Thailand.  Japan can live without that.  The impacts will be political and military for Japan due to a nuke free North Korea. 

 

With such a hawkish new president of South Korea, it will take quite a few years for the relations between North and South Korea to warm again.  The immediate impact on the unification movement is minimal.  After all, the nuke free decision has nothing to do with unification with the South, from North Korea’s perspective.  For North Korea, warming up with the America is one step toward having a normal diplomatic relationship.  Strengthening this relationship weakens the relationship of America and South Korea.  With any luck, North Korea wants the American bases to move out of the peninsula.  All these impacts realized by North Korea are shorter term.

 

Impacts on Japan are longer term.  Japan has been having influence in Korea for centuries.  A nuclear North Korea is obvious a threat to the security of Japan.  However, it has always been a common knowledge that nuclear activity is only a bargain chip.  North Korea is perceived to be aware that they cannot keep the nuclear forever, since China does not want North Korea to have it, America does not and certainly Japan does not. 

 

With a smaller conflict, the weight of Japan will become smaller.  This nuclear free ending of the affair also demonstrates Japan has been unable to influence the outcome of the Korea peninsula affairs, or unable to influence America’s intent in the peninsula affairs. 

 

An Obama administration will be able justify a reduction of military presence in South Korea and Japan and cut some spending. 

 

If US military decreases, especially in Okiana, the negativity generated by US military in Okinawa fades.  Therefore, a weaker Okinawan independence movement will be, although it was not that a strong one to start with, more less like the Puerto Rican.   However, with the incentives by US military gone, the incentives for Okinawa to stay in Japan also go away. 

 

That will create more space for Chinese military in the area.  China will gradually gain its edge against Japan in territory dispute.  However, the dispute is fairly settled since both sides have agreed to mutually develop the area.  Again, this loss of strategic importance against Japan cannot be ignored. 

 

The fact that Japan is losing control over the development in Korean peninsula is a sign of Japan’s HR risk.  Japan had a hard filling in their chief of central bank earlier this year.  They are unable to keep themselves abreast of the peninsula, let alone influence the outcome.  Only very few international enterprises of Japan are as innovative or as quick as they used to be.  Japan is having a high turn over of politicians and an even short life span of governments.  The ageing population is showing signs of weakness in every area.  

 

With that, the six party talks now prove to be useless.  Japan is now concluded to be ineffective.  South Korea lost its edge during the negotiation.  Russia has been reduced to an attendant only.  China has become more less the notary public for the talks.  The real talk somehow happened between North Korea and America behind the curtain. 

 

June 27, 2008 Posted by | China, Current Events, Japan, korea, opinion, politics, Taiwan, wordpress-political-blogs | 1 Comment

Earthquake To Melt Ice

China is not doing only the relief work, such as moving people away from potential threats.  China is capitalizing this earthquake event on its diplomatic front (Japan) as well.  The news that Japan confirms to deliver aid through its military aircraft proves this post’s analysis is right on target: China wants to use this event to melt a 6 decade long ice with Japan.  And it is no easy task.

 

The above linked post concludes that the request from China is inconsistent with past behaviour, i.e. China did not want Japanese military to be active outside of Japan due to WW2.  However, China is requesting Japan to deliver aid through its military aircraft.  The aid can be bought elsewhere.  The aid can be delivered by someone else or even Japanese civilian aircraft. 

 

Yumimuri also confirms that the move is about melting ice.  So, the advertisement here is: this blog got to the same conclusion one day earlier than the most authoritative source in Japan.

 

Now, what is the implication?  What do we care? 

 

To Be Continued.

 

May 30, 2008 Posted by | business, China, Current Events, Investment, Japan, opinion, politics, Thoughts, wordpress-political-blogs | 1 Comment

Is A China-Japan Joint Military Exercise Next?

A relief request from China is new.  It is so 21st century of China.  However, it is a request to Japan military from Beijing government.  The announcement came from the Foreign Ministry.  The request was previously submitted to the Japanese military by the Chinese military.  The significance is Japanese military is prevented “operating” overseas.  China (Beijing or Taipei) has been against Japanese military operations overseas in different degrees.  Thus, this request originating China is very unusual.

 

In fact Chinese military first cleared out the request with Japanese military before the diplomatic request.

  

The material requested are tents, blankets, and food, which require no expertise of Japanese technology or products uniquely produced by Japan.  The same material can be supplied by US (with bases in Japan), Taiwan, or South Korea.  Chinese military wants to strengthen its relationship with Japanese military. 

 

If the motive is about strengthening the relationship and the material and the transportation are the primary motives, then the intent to strengthen this relationship is of interests to the US.  

 

To strengthen the relationships between these two military is to build trusts not only among these two militaries but also the governments.  Japan’s primary defense need is North Korea and China.  So, China is trying to use this opportunity to remove itself as a military threat against Japan, similar to China’s insistence on bringing all sides (six sides) to the nuclear talks with North Korea.  

 

Why?

 

A peaceful Korea peninsula, whether it is a unified Korea or not, is what South Koreans need to justify the removal of all American bases.  Convincing Japan that China will not avenge Japanese invasion and war crimes from the 20th century is the only thing for Japan to remove all American bases.  

 

Japan’s domestic operation only policy for the military is a result of WW2.  And as a result, Japan always feels its incompleteness as a sovereign country.  Is China passing a signal that this domestic operation only policy is negotiable?  Or is this an opportunity provided by China for Japan to earn its merit of a complete sovereign country?  What is next? A joint miltary exercise with Japan?

 

Japan has also been convincing the rest of the world that Japan deserves to be a member of the UN security-council.  China has been the main opponent for that exactly because of Japan’s role in WW2.  

 

Hu’s recent visit in Japan stressed the point that China is only asking Japan to recognize history and not to deny history and that China has no interests in retribution.  All Chinese leaders said something similar in regard to “no retribution”.  However, the difference with Hu is he stressed that Japan need not “deny” history.  Is this a move from Hu to melt the ice?

 

Or is this completely a humanitarian effort?

May 29, 2008 Posted by | China, Current Events, Japan, opinion, politics, Thoughts, wordpress-political-blogs, 中國 | 2 Comments

Headless Central Bank

A headless central bank is never a good thing.  Not good for the local equity and derivative trading, not good in terms of international politics.  Since most of these positions are decided by elected politicians, decisions are less of emotion and spontaneity.  So, in the case of Japan’s central bank, Bank of Japan, is the opposition reckless to harm Japan’s standing in the international finance world or is the Prime Minister manipulated by the all powerful Japanese public servants?   

http://www.time.com/time/world/article/0,8599,1723666,00.html 

I present the argument that Japanese Prime Minister Fukuda may have no suitable candidate outside of Ministry of Finance veterans, even prior to the second veto.  Japanese parliament system is the best argument to have the administration elected by voters rather than run by parliament, similar to UK, Canada, Australian and other monarchies.  In this case, the public servants grow so powerful (since there is never attrition) that they are able to manipulate elected officials, primary candidates, business decisions and regulatory issues.  And Japan has never prepared to cultivate its own public administrator outside of its public servants work force.  The pool for any central bank job is very small.  And after the second veto and the condition that there cannot be a public servant veteran, this Japanese political drama will have to require backroom deals not among the elected politicians of the same stripe, but opposing parties.   

Of course it will impact on the Yen’s exchange rate.  It has impact on the TSE as well.  Everyone should know it hours ago.  However, one may have to pay attention to Korean markets and stocks as well, since a lot of Korean economy is dependent on Japan.  This may have impact on HK’s market.  There are quite a few banks listed in LSX and NYSE with operations in various parts of US.   

Some suggest BOJ can offer a lot to US in regard to US’ housing meltdown.  Yes, that is true.  But the world has changed so much since Japan’s meltdown.  Japan did not have any exotic products back down.  And Japan always bail out conglomerates.  And they are still recovering their mess, 15 years already.  They may offer everything from their lessons learnt to things you do not want to do, but not solutions.

March 19, 2008 Posted by | business, Current Affairs, Current Events, economics, finance, Japan, opinion, stock, trading | Leave a comment