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Japan in the Asian Century

Japan was the first “Asian miracle” economy. It rose from the ashes of World War 2 to become the world’s second largest economy. Its development was led by exports from Japanese enterprises which conquered world markets, especially in the automobile and electronics sectors.

A financial crisis in the early 1990s led to two “lost decades” of weak economic performance. During the same period, Japan’s manufacturing industry was “hollowed out” as Japanese enterprises invested substantially in both Western and Asian countries. The total GDP of the Chinese economy has now overtaken Japan.

Today, Japan faces a vast array of challenges like its aging population, large public debt, and sluggish economy, as well as the effects of the current global financial crisis and of Japan’s “triple crisis” (earthquake, tsunami and nuclear meltdown). The Japanese experience provides many lessons to other countries, which are now confronting some similar problems, or will do so in the foreseeable future.

Japan’s leading electronics companies (like Sharp, Sony and Panasonic), which once dominated world markets, are now struggling in the face of competition from companies from America (like Apple), Korea (Samsung), Taiwan and China. But Japan’s automobile companies are still successful, with Toyota leading the world’s automobile market. A new generation of Japanese enterprises is achieving great success, such as Softbank, Uniqlo and Rakuten. And Japan has become an important exporter of “cultural products” like anime, manga and computer games.

The arrival of the “Asian Century” presents Japan with many challenges, especially competition from Asia’s rising giants of China, India and Korea. But the Asian Century also offers Japan many new opportunities in emerging Asia’s fast growing markets, including tourism from Asia’s rising middle class.


1. Introduction to Japanese business and economy.


Introduction to course.

Evaluation:

1. Two 4 page papers. Each worth 35% of the total evaluation.

Topic 1. What is your impression of Japanese business and economy? What are the strong and weak points? Due Thursday 19 January.

Topic 2. Please examine Japan's business and economic relations with your country. Alternatively, please compare Japan's business and economy with your country. Due Tuesday 31 January.

In both papers, feel free to highlight issues that are of greatest interest to you, and of greatest relevance to your main studies.

2. One 5 minute class presentation (10% of overall evaluation). You are encouraged to do this in a group with other students.

3. The remaining 20% of the evaluation will be based on class participation.

Topic of first class -- in search of Japan's roots:

Geographical isolation. Where did the Japanese come from? Japan as a borrowing culture. Japan resisted Western colonialism. Meiji Restoration in 1868. Japan as a rising power. Post-war Japan. Japan is resource poor and prone to natural disasters. Japan's economic roller coaster.

Is Japan cool?

REFERENCES:
- In search of Japan's roots. ACI.
- Is Japan cool? Youtube.
- Uniqlo interview
- Muji ad

2. Japan's postwar resurgence


Japan was virtually destroyed by World War 2. Amazing resurgence. Benefit of backwardness.

1950-73 -- averaged 8.1% economic growth (like China more recently).
1973-90 -- solid growth of 3.0% (a slowdown, like China now).

By 1990, Japan’s GDP per capita reached 80% of US level. But Japan also transformed from low tech to high-tech, from agricultural to manufacturing to service based economy, and from rural to urban society.

Explaining Japan’s resurgence.

How do economies grow? Investment. Labour (workers). Productivity (efficiency). Governments can help foster that by creating a business friendly environment, and investing in education and infrastructure. An open and growing world economy can help too by providing markets for exports.

Role of education -- PISA data.

Role of infrastructure.

Role of demography.

Ease of doing business.

Rule of law.

ICT Development Index.

REFERENCES:
- Angus Maddison. The World Economy : A Millennial Perspective (data)
- OECD. Programme foir International Student Assessment.
- Juku or cram school in Japan
- World Economic Forum. Global Competitiveness Report 2016-17.
- Bridges to nowhere in Japan
- Japan's working age population
- Doing Business -- economy rankings
- Rule of Law Around the World -- World Justice Project
- ITU -- ICT Development Index
- Japan's economy -- from miracle to mystery to pious hopes

3. Japan's post-war resurgence continued


Role of trade and companies in Japan’s resurgence.

Free and open trade is good for economic growth and prosperity.
For Japan with few natural resources, exports provide finance for imports.

Specialise in what you are best at. Three country examples:
(i) country with lots of natural resources;
(ii) country with lots of low cost labour, and low technology;
(iii) country with high skilled, high cost labour, and high technology.

In 1945, Japan was country (ii). But it wanted to become country (iii). So it decided to protect its economy to give industry time to upgrade to higher level. Imports and foreign investment were restricted. Subsidies were granted and industry was given privileged access to bank finance. The exchange rate was kept artificially low (manipulated).

But manufacturing companies were encouraged to export. By competing on world markets, companies were incentivised to meet international product standards.

Combination of protection in home markets, and competition in world markets saw Japanese motor vehicle and electronics companies become world leaders. Japanese industry had a jump-start, breathing space for ‘learning by doing, for exploiting economies of scale.

Not every protected industry succeeded, but there were more successes than failures. And this policy was key to Japan’s success in upgrading the Japanese economy from low-skill to high-skill, and low-tech to high-tech. This development strategy was engineered by the "iron triangle" of business, bureaucrats and politicians.

Japanese companies:

Japanese companies were on a catchup path to the West, copying many things from the West. But they were also unique in their own way. Toyota’s kaizen

During high growth period:
Japanese companies offered high degree of job security, with lifetime employment common in big companies.
High degree of inhouse training. Workers were “company men”, and companies held onto them. Sempai trains kohai.
Seniority-based pay. Regular job rotations.
Loyalty, cooperation and family-like atmosphere.

Japanese male workers -- “salarymen” -- white-collar worker..
Working excessively long hours, demonstration of loyalty. Japanese productivity low by Western standards.
Karoshi. Drinking with male colleagues after work for team-building. Nomunication.
No place for professional women. Mainly “OL” doing “pink-collar” tasks.
Arranged marriages.

Retirement can be a drama for Japanese men.
They find their family again after 30-40 years of marriage to the company.
His wife enjoys going out with girlfriends.
She then calls him “industrial waste”.

Performed an outstanding task in high-growth, catchup period.
But need to become more flexible, adaptable and international in 21st century.
Modern corporate ideal is the globally integrated company -- which operates on a global basis, with staff globally sourced -- like Microsoft, Google, Pepsi. Most Japanese companies are still very Japanese.

REFERENCES:
- Japan's economy -- from miracle to mystery to pious hopes
- Toyota’s kaizen
- Japan's electronics companies
- Carlos Ghosn on leadership
- Donald Trump Meets With SoftBank Chairman Masayoshi Son
- SoftBank's Masayoshi Son speaks about the exclusivity on iPhone in Japan
- The Incredible Journey of Chef Nobu and His Restaurant Empire With Robert De Niro
- Short Japan Over Its Business Culture: Ex-Olympus CEO
- Kobo in Conversation: Hiroshi Mikitani. Youtube.
- Japan's business world

4. Japan's bubble economy


See article below -- "Japan's economy -- from miracle to mystery to pious hopes" -- especially sections "From export miracle to bubble economy", "Japan's perfect storm", "Responding to the storm".

Lost decades:

Slow growth since 1990 -- just 1%. Weak productivity. GDP per capita slipping back vis-a-vis world leaders like US and Germany.
Rising public debt -- now almost 250% of GDP.
Deflation -- falling prices.
Outsourcing, hollowing-out of manufacturing sector.
Ageing and declining population.
Rising inequality and poverty. Rising non-regular employment.

Old Japan and new Japan co-existing.
Old companies -- Toyota and Sony -- and new companies -- Uniqlo and Softbank.
Conservative Japan and youth culture, zentai.

REFERENCES:
- Japan's economy -- from miracle to mystery to pious hopes.
- Banking Crises and "Japanization": Origins and Implications. Asian Development Bank Institute Working Paper No. 430 -- see page 8.
- This is zentai community in japan
- Tadashi Yanai owner of UNIQLO "Rules to Success"
- CNN: Uniqlo boss, Tadashi Yanai - Government lied to us

5. The womenomics solution


If women participated in economy as much as men, this could lift Japan's GDP per capita by over 15%, and solve much of Japan's ageing population problem.

First, is Japan really a male-dominated society? Or does Japan just have a strict division of labour. Men at work, and women at home. After all, Japanese women run the household finances.

Global gender gap index:
But women who would like to work in business, government or politics face great difficulties. Japan ranked 111th out of 144 countries. Well below other Asian countries like Philippines (7th), Lao (43rd), Singapore (55th), Mongolia (58th), Vietnam (65th), Thailand (71st), Bangladesh (72nd), India (87th), Indonesia (87th), China (99th), Sri Lanka (100th), Malaysia (106th), and Nepal (110th).

Not only are women deprived of opportunity to work. Japanese economy and society are deprived of a valuable resource, the best educated resource. Increasing female employment can help avoid looming labour supply shortages. See OECD reference.

TEDxTokyo - Kathy Matsui - Womenomics.

Under government’s Abenomics program, womenomics is one component, eg:
-- Establishing new targets for the participation and advancement of women in the workforce.
-- Increasing the availability of daycare and after-school care.
Encouraging the private sector to promote more women and provide data on the advancement of women.
-- Recruiting and promoting women in government.
-- Expanding child care leave benefits.
-- Reviewing the tax and social security system.
-- Allow foreign housekeepers in special economic zones.

Targets not being achieved and being revised down.
The goal was to fill 30% of senior positions in both the public and private sectors with women by 2020. However, within two years this target has been cut to just 7% for senior government jobs and 15% at companies.

Mentalities not changing.

Given the lack of flexibility of big Japanese companies, entrepreneurship may be a more effective path for women.

Breaking the glass ceiling:

Yuriko Koike. Tokyo's first female governor.

Renho Murata. Female head of Japan's opposition party, Democratic Party of Japan.

REFERENCES:
- Why male Japanese wage-earners have only 'pocket money'
- Trading Success Stories - Japan's Forex Trader housewives Mrs Watanabe
- World Economic Forum. The Global Gender Gap Report 2016
- OECD. Economic Survey of Japan 2015 -- pages 15 and 16.
- “Womenomics” in Japan: In Brief. Congressional Research Service.
- TEDxTokyo - Kathy Matsui - Womenomics
- The New Japan Inc: One woman’s burden, another’s opportunity
- Female entrepreneurs: Different options and different styles
- Yuriko Koike. Tokyo's first female governor..
- Renho Murata. Japan's opposition picks first female leader.

6. Japan's demographic drama


In 1990, Japan's potential economic growth over 3%. But slowing productivity growth, and since late 1990s, declining work force due to population ageing dragged potential economic growth below 1%. Adverse effect on innovation?

Also hitting GDP per capita as declining share of population is working, and Japan's population now falling. Health, long-term care and pensions are eating a large share of public budget. Difficult to change, as Japan is a silver democracy. Decline in national GDP also results in decline in national power, at a time when China's power rising.

What is happening and why?

Japan has experienced, like all countries, demographic transitions.

In pre-modern world, high birth and death rates, with little change in population.

First transition, decline in death rates, especially for children, led to population explosion, due to improvements in nutrition, sanitation, education and health care.

Second transition, a fall in fertility rates due changes in status of women, education, industrialization, urbanization and advent of contraception. Japan's fertility rate plunged from over 4 per woman during the 1930-1950 period to around 2, until 1970s. Then plunged again to less than 1.5, well below "replacement rate" of 2.1 children per woman. Ultimately, Japan's population began falling. Japan's life expectancy continued to rise, a positive development.

Japan not alone in having low fertility rate -- other advanced countries like Germany, Italy, Spain, and Poland do too. Other East Asian countries like Hong Kong, Korea, Singapore and Taiwan also have very low fertility. But fertility rates are close to replacement in Australia, France, Norway, Sweden and US.

For evolutionary biologists, low fertility is strange. Normally natural selection produces individuals who are good at converting their resources into lots of fertile descendants.

Why is Japan's fertility rate so low?

Japanese women now more educated, and more interested in working. In Japan, difficult to combine work and family life. Some choose career, and forego family. Some settle for one child. Others choose family, and leave work. M-curve. Women usually pushed to resign when fall pregnant. "Mata-hara" (cf sekuhara and powahara).

Other factors pushing down birth rate -- cost of housing, education (night school), shadow of earthquakes. Rising poverty and non-regular employment discourages marriage. Hypergamy by Japanese women.

Sociologists talk of Japan's celibacy syndrome, decline of arranged marriages, womb strike, changes in Japan's younger generation, hikkikomori.

Compared with Western countries, Japan's demographic drama is exacerbated by reluctance to accept migrants. Homogeneous society. Marriage and ethnic migration. Migration intern programme.

Womenomics a partial solution. Seniors can work longer. Improve productivity.

Benefits of demographic decline -- Good for environment. Silver economy. Possible geriatric peace in East Asia.

REFERENCES:
- OECD. Economic Survey of Japan 2015. See pages 4 and 13.
- Japan's fertility rate.
- Japan's life expectancy
- Japan's demographic trends
- The Japanese Celibacy Syndrome
- Japan's Herbivorous Men
- Japan: Looking For Love - #AsiaLive -- from 2.30.
- Japan's demographic drama, ACI
- Japan's immigration phobia, ACI
- The Worst Internship Ever: Japan’s Labor Pains

7. Taking stock and populism


Japan's story. Dramatic postwar rise. Financial crisis. Slow response by government.

Other challenges -- population ageing, rise of competitors in Asia, globalisation.

State of Japan.

-- GDP per capita below world leaders like US and Germany, and Hong Kong and Singapore. But ahead of Greece and Portugal, and Malaysia and Indonesia. Overall, good but not great.

-- Labour productivity performance even worse.

-- For centuries, Japan was Asia's leading economy -- now overtaken by China. But still world number three.

-- Productivity in services sector half that of manufacturing sector. Agriculture even worse.

-- Poor demographics -- potential growth now less than 1%. Japan suffering from labour shortages.

-- World record public debt -- because of stimulating economy, weak economy and ageing population. Risk of destabilising loss of confidence.

-- Debt will continue to explode -- no plan to bring debt under control. Social spending now accounts for more than half of government expenditures.

-- Deflation -- falling prices -- impact on economy and public debt.

-- With weak domestic economy, Japan's economy reliant on exports, especially to China (one-quarter of Japan's exports).

-- Rising poverty and high inequality.

-- Many good companies -- Toyota, Nissan. Some electronics companies struggling. But new companies doing well -- Softbank, Uniqlo, Muji etc.


Japan’s vulnerability to populism

Could we see a Japanese Donald Trump arrive on the scene? At this stage, Japan does not seem to be vulnerable to populism like US and Europe, even though victims of globalisation, technological change, financial crisis, badly managed natural disasters, and decline relative to China. True? Why?

Low level of migration? Virtually no refugees? Low imports? Suicide? Hikkikomori? Passivity? Hierarchical society? Abe’s nationalism? Safe society? Government control of public opinion through press controls?

Although inequality is a problem, CEOs are not extremely rich as in US. No liberal, progressive, international elites, like US.

No alternative presented itself? Maybe will come? Is Japan a stagnant society?

REFERENCES:
- OECD. Economic Survey of Japan 2015.

8. Abenomics


-- Shinzo Abe's LDP elected in December 2012.

-- Abenomics programme. Three arrows. Monetary easing. Fiscal (budget) stimulus. Structural reform.

-- Monetary easing to kill deflation. Bank of Japan's goal was 2% inflation within 2 years.

-- Kuroda Bazooka's massive monetary easing. Pushed down yen exchange rate. Improved profits for big exporting companies. Workers' incomes not increased.

-- Inflation has increased a bit. Affected by oil prices. But monetary easing has not succeeded.

-- Second arrow. Fiscal stimulus (more infrastructure!), to be followed by increased consumption taxes. Consumption tax increased from 5% to 8% in April 2014. But pushed economy into recession. Another increase to 10% scheduled for October 2015. But postponed until April 2017, and postponed again until October 2019.

-- No serious plan to bring debt under control. Government continued with stimulus packages in 2016. Challenges -- silver democracy and weak economy.

-- Third arrow. Structural reform. Means deregulation and liberalisation of markets. Necessary to boost productivity and potential growth.

Key elements:

-- TPP -- now a question mark because of Trump. Abe still pushing on TPP.

-- Corporate governance -- opening up iron triangle to transparency and accountability, outside directors -- limited progress.

-- Womenomics -- more talk than action.

-- Increase foreign direct investment -- some progress. Sharp bought by Foxconn. But weak economy means that greenfield investment not attractive. Mergers & acquisitions a challenge because of difficulty of doing business.

-- Break down labour market dualism by improving social insurance and training for non-regular workers and reducing protection for permanent workers.

REFERENCES:
- OECD. Economic Survey of Japan 2015.
- IMF urges Japan to implement “bold” reforms
- Japan’s Experiment with Abenomics: Time for a Reload?
- Has Abenomics Been Good for Japan?
- Further Evidence of Abenomics Failing
- Average age of Japanese Farmers is 65 years old.... who will rice farm in 10 years? Youtube.
- Abandoned Japan. Stately old abandoned house in the Japan countryside. Youtube
- Japan backs Toyota over Trump

9. Japan's fading middle society


Poverty, inequality, and a declining labour share in national income. These trends are evident in most advanced countries.

Technological progress, outsourcing and globalisation are driving these trends. And as economic power is increasingly concentrated, power leaders can exert influence over political decision making to stack the system in their favour. Tax cuts for the rich, and soft regulation of the financial sector are just two of such symptoms.

During Japan's high growth era from 1945 to 1990, most workers enjoyed great job security, seniority-based pay rises, and corporate training. The downside was long working hours, nomunication.

When economic crisis hit in the early 1990s, most Japanese companies suffered "three excesses" -- excessive debt, capacity and workers. Over time much of these excesses were gradually worked off. Japanese companies also outsourced much of their lower-cost, labor-intensive production to elsewhere in Asia, especially in China and Southeast Asia.

During the "lost decades", the work situation has changed fundamentally. Japanese companies now search for greater flexibility. The share of workers with job security has declined sharply. Now some 40% of Japanese workers now have non-regular status (part-time, casual, short-term contracts, or dispatch workers) -- up from 20% two decades ago.

Thus, Japan has also seen growing poverty, inequality, hikikomori, and suicide. The share of national income going to workers has declined, while that going to the corporate sector has increased.

This is not only fracturing Japanese society, it is weakening the Japanese economy.

REFERENCES:
- OECD. Inequality
- How Should Japan Address Socio-economic Inequality and Poverty?
- Japan's poverty rate hits record high
- Living Below The Poverty Line | Get Real | Channel NewsAsia
- One in three single working Japanese women living in poverty - Press TV News
- Working Poor In Japan
- Homeless in Japan
- How Japan’s Economy Is Destroying Its Youth
- Suicide. Take time to listen: Rene Duignan at TEDxTokyo
- SAVING 10,000 - Winning a War on Suicide in Japan

10. Japan's corporate scandals


Corporate governance -- the way that companies are governed and managed -- in Japan has always been different from other advanced countries, and not up to international standards.

It is a system of cosy backscratching, some might say collusion, among the management of Japan's large industrial companies, financial institutions and the government bureaucracies. Close relationships between the main banks and large corporations provided long-term stability, as did cross shareholdings within corporate groups. Company board members were typically insiders, coming from a main bank, the corporate group and the corporation itself. This meant that management was weakly supervised, and companies were substantially protected from mergers and acquisitions, especially from overseas.

Japan's corporate governance system seemed to serve the country well during its high-growth period. In reality, poor corporate governance probably contributed to some of the bad lending that led to the crisis, and to the sluggish response that followed – as well as to the chronically weak profitability of the country's corporates over the past two decades.

Reform of Japan’s corporate governance – particularly in disclosure, transparency and accountability – has been on the agenda for more than two decades. And the need for reform has only been highlighted by incidents such as accounting scandals at Toshiba and Olympus.

As part of Abenomics, the government is implementing corporate governance reforms, notably for bringing outside directors to corporate boards. But reforms have been mainly legal and institutional reform, rather than a fundamental change in the management mindset.

Reforms are necessary to improve the country's business climate for foreign and domestic investors alike. This is necessary because Japanese companies have lower productivity than their Western counterparts (about 30% lower, on average, than those in the US).

We explore the scandal at Toshiba.

Toshiba is a massive, sprawling conglomerate like many Japanese companies. It is active in IT, nuclear and other energy, semiconductors etc.

But a few years ago, Toshiba’s management was found guilty of “cooking the books”.

REFERENCES:
- Japapan calls its corporates to account
- Toshiba scandal: Why did the boss resign? BBC
- Toshiba's accounting scandal:
- Toshiba scandal shakes corporate Japan.
- Toshiba boss resigns over accounting scandal
- Toshiba Executives Get Free Pass In Accounting Scandal
- Toshiba CEO Expected to Resign After Huge Westinghouse Writedown
- Endless Pit of Opportunity for Scandal in Japan
- Start 1.50 -- Ex-CEO of Olympus blows the Whistle on Fraud and a Culture of Dysfunction in Japan

11. Japan, China and Asia


Deng Xiaoping's visit to Japan in 1978, and above all his visit to the Panasonic factory in Osaka instigated Japan's colossal business investment in China.

Following 1985 Plaza Accord, which pushed up the value of the yen, Japan progressively offshored the labour-intensive parts of its manufacturing sector to its Asian neighbours, especially in China and Southeast Asia. This "hollowed out" Japan's manufacturing sector at home. But it also laid the foundations of the global value chains that now criss-cross Asia, and which have driven Asia's development these past few decades.

Overall, Japan has a stock of $1,259 billion outward foreign investment, with $359 billion in Asia (China $109 billion, Thailand $51 billion, Singapore $50 billion, Korea $31 billion, Hong Kong $25 billion, Indonesia $24 billion, and Malaysia $14 billion). Investment in the US is $419 billion and in Europe $302 billion.

In more recent years, Japanese companies have lower investment in China, as its wages have increased and as political tensions have arisen between the two countries. They have been swtiching to Southeast Asia (JETRO chart).

China is also undertaking some investments in Japan, although the amounts are still small. Chinese companies are motivated by the desire to acquire Japanese technology and brands.

Japan has experienced a dramatic increase in inbound tourists these past years. In 2016, 24 million people visited Japan, a record high, up from 8.4 million in 2012. Factors driving increased tourism have been the depreciation in the yen exchange rate, easier visa requirements, and Asia's rising middle class. China, South Korea, Taiwan and Hong Kong are the main sources of Japan's tourists.

Japan also has a growing nmber of international students. On May 1, 2015 there were 208,379 persons, and increase of 13.2% compared with the previous year. China accounted for 45% of Japan's international students, with the other important sources being Vietnam, Nepal and Korea.

Asia has also become Japan's most important trading partner, accounting for 53% of exports and 49% of imports in 2015, with China accounting for 18% of exports and 25% of imports.

Japan is suffering from labour shortages, and would benefit from a substantial increase in immigration. Some of its Asian neighbors like the Philippines, Indonesia and India have surplus labour who benefit from the opportunity of migrating to Japan.

But Japan has very restrictive immigration policies because of a cultural aversion to immigration. While immigration to Japan has increased in recent decades, foreign residents in Japan only number 2.2 million, or 1.75% of the population. Japan's major recent initiative to admit more migrants is a "trainee program" which has been called a de facto "guest worker program", which suffers from human trafficking and forced labor.

REFERENCES:
- Deng Xiaoping visits Japan -- Shinkansen
- Deng Xiaoping visits Panasonic in Osaka
- JETRO White Paper and JETRO Global Trade and Investment Report, 2016
- Investment builds bridges between China and Japan. ACI
- Japan and China -- a valuable economic partnership
- Japanese tourism statistics.
- International Students in Japan 2015
- Japan's International Trade in Goods(Yearly)
- Japanese migration data at end
- Japan’s Immigration Imperative

12. Japan, US and Trumpnomics


During World War 2, Japan an arch-enemy of US. In winning war, US destroyed Japan's economy. Then, US remade Japan as a democracy.

US then helped rebuilding of Japan through financial assistance, and its open markets facilitated Japan's export-led development. Japan also benefited from postwar economic system involving UN, IMF, World Bank and WTO (formerly GATT) which fostered peace, open markets and development.

Since war, US and Japan have security alliance which gives US right to have military bases in Japan in exchange for a US pledge to defend Japan in event of an attack.

US and Japan have since had very close relationship.

But some ups and downs, notably during 1980s when Japan seemed to be challenging US as world's leading power.

During Obama presidency, US and Japan were closest of allies. Alliance seen as necessary in light of North Korea's volatile behaviour and China's challenge to US's position in Asia. US still has some 50,000 military staff in Japan.

Japan's membership of US-led TPP, a proposed free trade agreement, key element of Abenomics.

In 2016, President Obama visited Hiroshima, first such visit by an American President. Again in 2016, but following Trump's election victory, Prime Minister Abe visited Pearl Harbour.

Arrival of Donald Trump to US presidency promises big impacts on Japan's business, economy, and politics.

Abe very happy to be first foreign leader to meet with Trump following his election victory. Abe very keen to impress on Trump importance of security alliance. Last week Abe said "The Japan-U.S. alliance has been, is and will be the cornerstone of our country's diplomatic and security policies. This is an immutable principle."

During election campaign, Trump savaged Japan, saying all the Japanese would do is 'watch Sony TVs' if US is attacked and threatening to 'walk' away from treaty.

Japan is affected by Trump's promise to withdraw the US from TPP. Abe said TPP makes no sense without US. Abe trying to convince Trump change on TPP. Japan first country to ratify TPP.

Trump named Japan as one countries contributing to US trade deficit. Japan could be hit by trade protectionism. US Japan's biggest export market.

While China is more exposed to trade protectionism, Japan would be indirectly affected by any US protectionism against China, because of Japan exports to China.

Trump also criticised Japanese companies like Toyota for investing in Mexico, and using NAFTA to export back to US. Japanese companies have massive investments in US, create 800,000 jobs.

Trump complained US Allies like Japan not paying enough for Alliance. Japan only pays 30% of US military's expenses in Japan. But Japan's spends 1% of GDP on "Self Defense Forces". Trump suggested Japan could get nuclear weapons.

Still early days. We do not know what Trump will do. But it is likely that Trump will change the world in which Japan has lived for 70 years. Time for Japan and China to move closer.

REFERENCES:
- The “Trump Burger” – Japan ushers in America’s new president with a 5,800-yen meaty extravagance
- WHAT WOULD A PRESIDENT TRUMP MEAN FOR JAPAN? By Alex Sturmey
- The Netherlands welcomes Trump in his own words
- Youtube -- Why Trump's Wall Won't Work - 'Intelligence' From Australia

13. Japan, trade and development


Trade only became important with "first unbundling" which started from 1830s and accelerated in 1870s.

Until then, each village produced most of what it consumed -- production and consumption were "bundled" together geographically in each village. Transport costs were so high that most trade even between different villages was not profitable.

The steam revolution, especially railroads and steamships, made it profitable to spatially separate ("unbundling") production and consumption.

Factories developed in cities. Workers flocked to cities from the countryside. Great efficiencies were generated as factories specialized and exploited comparative advantages, economies of scale and economies of agglomeration.

Cost efficiencies of first unbundling led to a boom in trade both within and between countries. Now profitable for one town to sell its products to people in other towns and even to other countries.

First unbundling drove industrialization and economic takeoff in the US, Europe and Japan. But while lower transport costs drove the first unbundling, it resulted in coordination costs. To facilitate production coordination, all stages of the production process needed to be in close proximity, and usually under the one factory roof.

Second unbundling

The ICT revolution from 1980s reduced the costs of coordination. Now possible to coordinate complex industrial processes at long distances. This enabled Japan, a "headquarter economy", to "unbundle" its factories by offshoring labor-intensive stages of its manufacturing to "factory economies" like South East Asia and China, thereby creating Asia's global supply chains.

Following the second unbundling, 21st century trade involves several intertwined elements:

-- substantial trade in parts and components;

-- international investment in production facilities, training, technology, and long-term business relationships;

-- infrastructure services to coordinate the dispersed production, especially for ICT, transport and logistics; and

-- cross border flows of know-how such as formal intellectual property, and more tacit forms such as managerial and marketing know-how.

Third unbundling

Offices have also been unbundled, as labor-intensive, electronically deliverable services have been outsourced. India and the Philippines have become leaders in "business process offshoring", especially as call centres, accounting, para-legal, software development.

Conclusion

This advent of global supply chains has ushered in a new way of doing business and opened a new fast track for development. Needs facilitation by regional trade agreements which cover not only trade, but investment, competition policy and intellectual property rights (like the TPP).

Now under threat from Donald Trump.

REFERENCES:
- Asia's fast track development

14. Cool Japan


Japan's GDP per capita is some 30% lower than that of the US or Germany. Could better exploitation of Japan's cultural and creative industries ("cool Japan") provide an important boost to the economy? Or is Japan's "cool" losing out to Korea and the "Korean wave" and "Gangnam style"?

There are still severe tensions between Japan and neighbours like Korea and China. Could Japan's cultural and creative industries be a source of "soft power" that could foster better relations?

REFERENCES:
- Cool Japan / Creative Industries Policy. Ministry of Economy, Trade and Industry.
- Is Japan cool? Dreams
- Is Japan cool? Youtube.
- Joseph Nye on soft power. Youtube.
- Global attitudes and trends. Pew Research Center
- Japanese Government Establishes “Creative Industries Internationalization Committee” to Strengthen the Proliferation of Japanese Anime, Manga, Fashion and Culture Throughout the World
- How Korea became the world’s coolest brand
- AKB48 Sakura No Hanabiratachi 2006 PV/MV
- Japan's gross national cool.
- Culture of Kawaii. Youtube.

15. Softbank, Japan's most dynamic company


Masayoshi Son created SoftBank in 1981. It is now in the top 5 companies on the Tokyo Stock Exchange, and Mr Son is Japan's richest person.

For 3 days before the 2000 bursting of dot.com bubble, Mr Son was the world's richest person. He then lost more money than anyone else in the history of the world.

He rebuilt the company, using strategic investments and partnerships. He acquired exclusivity for bringing the i-Phone to Japan, bought Vodaphone Japan, wisely invested $200 million in Alibaba over a decade ago.

Mr Son's new investment targets are the US and India.

REFERENCES:
- Mr Son, the world's richest man for 3 days.
- Mr Son and iPhone
- Mr Son and Steve Jobs
- Mr Son and Alibaba
- Son and Jack Ma
- Mr Son on US broadband
- Roots of Mr Son

16. What next for Japan?