Business, Politics and Culture in Japan, China and the USA

So unemployment in the U.S. is still at 8.2% and everything is gloomy right?   The media hasn’t reported on the inbound tourism numbers, which is up significantly and is bringing in a lot of new money into our economy.  5.7 million international visitors traveled to the USA in April 2012, a two percent increase over April 2011.  April 2012 registered the 13^th straight month of increases in total U.S. visits.  Visits to the USA by Asian visitors were up a whopping 27%.  Japan was up 28%, China up 61%, and South Korea up 27%.

Part of the continuing rise in visitors over the past year has to do with an uptick in business transactions as the U.S. economy improves.  Part is due to a general sense among foreign travels that the U.S. is safer and friendlier than a few years ago.

To see the explanation check out: http://maddowblog.msnbc.msn.com/_news/2012/06/21/12345961-that-wealth-inequality-chart-rachel-showed-last-night?lite

Ouch.  China’s soft power isn’t making any progress among Japanese. The results of a poll jointly conducted in China and Japan showed that 84.3% of Japanese and 64.5% of Chinese respondents have negative impressions of the other’s country. The 84.3% of Japanese, up 6 points from a year ago, is the highest reading since the annual survey began in 2005. Of the Japanese respondents, 54.4% said that China is behaving selfishly in securing resources and energy.

Japanese construction firms are facing increased competition for infrastructure projects from Chinese and Korean firms in third-country markets such as Vietnam.  The Japanese Ministry of Infrastructure’s solution?  Teach Vietnamese to speak Japanese and understand Japanese technology.  As the Japan Times reports the Ministry is setting up firms overseas to teach potential customer-engineers Japanese.  One has to wonder if the Ministry thought about using public money to internationalize the Japanese construction industry and teach Japanese engineers either English or the local target language?  In Vietnam, Pakistan and myriad other countries, English-speaking engineers are more common than engineers willing to spend years learning Japanese.  There’s a Japanese saying that one sells in the buyers language and buys in one’s own language.  Maybe the Ministry has not heard of it.

FTAs (free trade agreements) and TPP were in the news recently as Japan’s powerful Keidanren chairman, Yonekura supported discussions between South Korea, China and Japan on a FTA between the three.  Yonekura is pushing the FTA to become the core of an ASEAN+6-wide integrated economic zone.  Keidanren is also actively promoting Japan’s participation in TPP.

As Terrie Llyod points out, Japanese PM Noda appears to have sacrificed Japan’s participation in TPP with the appointment of anti-TPP proponent Akira Gunji as the new agriculture minister.  Clear indication that Japan continues to protect its special interest groups at the expense of the general population.

Speaking of special interests, Japan’s attempts to protect its whaling industry at the expense of both whales and the nation’s image seem to be floundering.  Despite the GOJ’s efforts to literally shove whale down the throats of Japan’s schoolchildren the meat is losing its appeal.  The semi-governmental “Institute of Cetacean  Research” has only been able to sell 303 tons of whale meat from last summer’s catch from the Northwest Pacific. That means that the remaining 908 tons are still in freezers. Public  demand for whale meat is down sharply.  A 2006 survey by the Nippon Research Centre found that 95% of Japanese people never or rarely eat whale meat.

Conflicting territorial claims in the South China Sea have again come to ship-to-ship confrontation – this time between China and the Philippines.  The Philippine Navy was summoned to an atoll called Scarborough where it found Chinese fishing boats illegally harvesting protected corals and other sealife.  When the Philippine Navy tried to intervene Chinese military ships interceded.  Both China and the Philippines claim the atoll.  Take a look at this map of where Scarborough Shoal is and decide for yourself.  Does it look like it would belong to China?

This has interesting implications for China’s soft-power projection into SE Asia and South Asia.  While not scientific, the comments at the end of this story from the Times of India are telling.

At the height of the short-lived cherry blossoms Japanese have a tradition of throwing a cover over the ground underneath the cherry trees and partying seriously.  This is often a company or group activity on the weekend and involves a lot of drinking – sometimes to the point of alcohol poisoning and hospitalization.  Hanami, or blossom viewing doesn’t have to involve a bacchanal because plenty of people (including this writer)  just go to see and appreciate the beauty of the many cherry trees.  The idea of sitting on the ground all day, drinking and making a fool out of oneself among one’s colleagues and in view of thousands has little appeal to many.

There is a general consensus in Japan that the country is falling behind in the race to compete.  When , the new head of the Japan Bank for International Cooperation (JBIC) assumed control this week his first promise was to help Japanese companies mount a charge.  Hiroshi Okuda, 79, said “the politics and the economy of Japan are two or three laps behind the rest of the world.”  Okuda, formerly president of Toyota Motor Corporation didn’t go into specifics about the causes of Japan’s lagging performance but he did point out that given the yen’s rise in value that now was the time for Japanese firms to buy companies and access to natural resources overseas.  JBIC uses government loans and investment funds to provide financial assistance to Japanese firms to help them acquire concessions for natural resources and contracts to build infrastructure abroad.

As Yomiuri points out Okada will be the first businessperson to be appointed to the head of JBIC.  The post has traditionally gone to retired Finance Ministry bureaucrats.

TEPCO is dramatically raising electricity rates on April 1 and companies in the Tokyo area are outraged.  Japan’s electricity-hungry data centers will be among the hardest hit.  As the Japan Times points out 70 to 80 percent of Japan’s data centers are concentrated in Tepco’s service area.  Already data center providers from low-cost China have been promoting their services to Japan’s corporations but for obvious reasons many are reluctant to place any portion of their corporate data in China – no matter the low cost.  This is an opportunity for U.S. West Coast data centers.   American data center service providers can offer both lower costs and reasonable protection from industrial espionage.  As Terrie’s Take points out this hot market extends to data center equipment suppliers.

Earlier this month the Obama Administration teamed up with Japan and the European Union to file a case against China at the WTO over that country’s export controls on rare earth metals.  You’ve probably read about it but what you might not have read was China’s reaction.

Minister of Industry and Information Technology, Miao Wei told Xinhua that China had been preparing for the WTO filing for quite a while and would “actively respond” to the filing.  Wei told Xinhua that China’s rare earth export policy was not designed as trade protectionism but to protect resources and the environment.  Wei said that if exports were uncontrolled that China’s supply would be exhausted within 20 years.  He also said the state policy to consolidate the industry and better control it would be carried out.  The Ministry convened a meeting of the industry in March to discuss China’s response to the WTO.  Attendees reported that the Ministry told the industry that even if China loses the case the government will take “other measures” to thwart the rare earth importers.

While cutbacks in rare earth exports put foreign manufacturers in a bind Western governments main concern is that China’s export controls may force more Western companies to move manufacturing to China to gain access to the rare earths.  That is certainly the outcome China is hoping for.  If the West wants to thwart China’s plan it will have to utilize its own rare earth resources to a greater extent – and may need subsidies to get the extraction industry restarted.

A number of contacts in both the business sector and the diplomatic world have been commenting on what they see as an encroachment by the State Department on trade promotion responsibilities held by the Commerce Department.  The rumblings had been noticeable for some months but grew to a near roar when Secretary Clinton and the State Department held what was billed as the “Global Business Conference” in Washington on February 21-22.  Secretary Clinton outlined her vision for “Jobs Diplomacy” which included promoting U.S. businesses overseas, leveling the playing field for fair competition and attracting foreign investment into the U.S.  – all primary functions of Commerce’s International Trade Administration.

The Conference in question was billed by State as “two days of dialogue and brainstorming on the U.S. Government’s role in supporting American competitiveness and creating American jobs.”  After the conference concluded State reported that it “showcased the State Department’s renewed commitment to being the most responsive and effective force multiplier for U.S businesses abroad.”  The State Public Affairs machinery cranked out a ton of promotion around the Conference and got some pretty good mileage out of it in the business media.

Several attendees noted that while Commerce Secretary Bryson spoke at the conference that the Commerce role and presence was otherwise subdued.   The same attendees reported that the Agriculture Department’s Foreign Agricultural Service was completely absent from the event.  What’s behind this grab by State to venture beyond its mandate and into other agencies territory?   There are two theories; 1) it is part of the pre-election ramp-up on high-profiling job creation or 2) job creation and the National Export Initiative (NEI) have become so sexy that State wants a piece of the show – and the money.   I think #1 is a driver of #2 but there is no denying that when homeland security started drawing the money after 911 that State got in on that largesse to the extent possible.  NEI hasn’t been nearly as sexy as homeland security nor has it attracted nearly the money that the Bush Administration literally threw at anything that sounded anti-terroristy but in these days a few million dollars attracts a lot of attention.

Reflecting State’s tendency to let policy rather than business opportunity drive the agenda breakout sessions on investing in Central Asia, Pakistan and Afghanistan urged U.S. companies to consider investing in these risky areas. It’s unlikely that had this been Commerce’s show that time and money would have been wasted trying to talk U.S. companies into investing money in war-torn and highly risky territories.  Word from the Conference is that these sessions were lightly attended by businesses.  But this just illustrates why the Foreign Commercial Service (part of the U.S. Foreign Service) was pulled out of State in 1982 and given to Commerce.  Commerce is business-focused and State is, well, diplomacy-focused.

How much money was spent by State in putting on this show?  Whatever the amount was, it should have been simply allocated to Commerce’s diplomats and export promotion programs.  That would be smart government.