Archive for Japan

War between Japan and China in next 20 years: Singapore PM

Want China Times
Lee Hsien Loong, the prime minister of Singapore, said at a seminar
in Tokyo on May 22 that China and Japan will probably go to war
against each other within the next 20 years according to the Nihon
Keizai Shimbun, a Japanese-language newspaper focused on financial,
business and industry news.

During the seminar, Lee said that the United States, China and Japan
will all be influential to the development of Asia over the next two
decades. Lee said that the United States will still be the world’s
most powerful nation by that time, saying that the United States is
going to stand up again just like it has always done before.

Lee said, however, that China will still be the most influential
nation in the Asia-Pacific region and that Chinese enterprises will
come to dominate the global market.

A report from the World Bank stated that China is likely to become
the world’s largest economy by the end of this year. Over the next
20 years, China’s military is set to be as influential as its
economy, according to Lee. At the same time, Japan will retain its
position as Asia’s second most important nation, he added.

With confidence in Prime Minister Shinzo Abe’s economic reform,
Lee agrees that Japan is still a major player in the Asia-Pacific
region. At the same time, he stated that there are some common problems
which China and Japan must face together. First, both nations must try
their best to increase production efficiency and secondly, more women
executives should be hired to support the economic reforms of both nations.

According to Lee, nationalism among the public in China and Japan is the
toughest issue the leaders in Beijing and Tokyo have to face. Lee said that
there are two possibilities for the future of the region, one bright and one
gloomy. If things go well, both China and Japan will be willing to work with
the United States to maintain regional stability and prosperity, he said.
China will have the stronger military but will choose to restrain itself
while Japan successfully improves its economy, he added.

The US-led Trans-Pacific Partnership can serve as the main platform to bring
China, Japan and the United States together, Lee said at the seminar. At the
same time, he said that there is the possibility of a more gloomy future for
Asian countries as well, in which China will refuse to cooperate with Japan
and other nations in the region, adding that as China begins to expand its
influence in the region, nationalism and protectionism are two major obstacles
for Asia to develop its own free trade system.

If the more gloomy predictions becomes reality, eventually, China may go to
war with Japan over the disputed Diaoyutai (Senkaku or Diaoyu) islands in the
East China Sea or other Asian countries over disputes in the South China Sea
under the influence of nationalism. For this reason, Lee said that it is better
for the United States to continue its presence in the region. With the
assistance of the United States, Lee believes that many parts of the gloomier
future can actually be avoided, which will be the only way to maintain peace
and prosperity in Asia.

The Arms Race for the 21st Century

Japan expands army footprint for first time in 40 years,
risks angering China

ONAGUNI, Japan (Reuters) – Japan began its first military expansion
at the western end of its island chain in more than 40 years on Saturday,
breaking ground on a radar station on a tropical island off Taiwan.
The move risks angering China, locked in a dispute with Japan over nearby
islands which they both claim. Japanese Defense Minister Itsunori Onodera,
who attended a ceremony on Yonaguni island to mark the start of construction,
suggested the military presence could be enlarged to other islands in the
seas southwest of Japan’s main islands. “This is the first deployment since
the U.S. returned Okinawa (1972) and calls for us to be more on guard are
growing,” Onodera told reporters. “I want to build an operation able to
properly defend islands that are part of Japan’s territory.”

The military radar station on Yonaguni, part of a longstanding plan to
improve defense and surveillance, gives Japan a lookout just 150 km
(93 miles) from the Japanese-held islands claimed by China. Building the
base could extend Japanese monitoring to the Chinese mainland and track
Chinese ships and aircraft circling the disputed crags, called the
Senkaku by Japan and the Diaoyu by China.


The 30 sq km (11 sq mile) Yonanguni is home to 1,500 people and known for
strong rice liquor, cattle, sugar cane and scuba diving. Prime Minister
Shinzo Abe’s decision to put troops there shows Japan’s concerns about the
vulnerability of its thousands of islands and the perceived threat from China.
The new base “should give Japan the ability to expand surveillance to near
the Chinese mainland,” said Heigo Sato, a professor at Takushoku University
and a former researcher at the Defense Ministry’s National Institute for
Defense Studies.

“It will allow early warning of missiles and supplement the monitoring of
Chinese military movements.”

Japan does not specify an exact enemy when discussing its defense strategy but
it makes no secret it perceives China generally as a threat as it becomes an
Asian power that could one day rival Japan’s ally in the region, the United
States. Japan, in its National Defense Programme Guidelines issued in December,
expressed “great concern” over China’s military buildup and “attempts to change
the status quo by coercion” in the sea and air. China’s decision last year to
establish an air-defence identification zone in the East China Sea, including the
skies above the disputed Senkaku/Diaoyu islets,further rattled Tokyo. Japanese
and Chinese navy and coastguard ships have played cat-and-mouse around the
uninhabited islands since Japan nationalized the territory in 2012.Japanese
warplanes scrambled against Chinese planes a record 415 times in the year through
to March,the Defence Ministry said last week.

Tapping concern about China, Abe raised military spending last fiscal year for the
first time in 11 years to help bolster Japan’s capability to fight for islands with
a new marine unit, more longer-range aircraft, amphibious assault vehicles and
helicopter carriers. Japan’s thousands of islands give it nearly 30,000 km
(18,600 miles) of coastline to defend.


Chinese SU-30 Fighter Jets Scrambled to intercept Japanese Fighters

Chinese media are reporting that fighter planes were scrambled to intercept Japanese fighter planes during the Chinese New Year.
The official media report said both sides were engaged in a dogfight
trying to establish superior air positions with craft “rising , diving , and turning left and right. At last the foreign military had to leave the scene. Japan was not named in the report, but it was strongly suggested
the “foreign military” in question matched Japanese fighter designs.


Japan explores 3 war scenorios with China amid ADIZ concerns

Japan has responded to China’s Nov. 23 announcement of its air
defense indification zone (ADIZ) over the East China Sea by
holding a television conference to discuss the possibility of
dealing with China on three fronts — Taiwan, the Miyako waterway
and the disputed Diaoyutai (Senkaku or Diaoyu) islands — within
the next 10-15 years, according to the Toyko-based Sankei Shimbun.

Commanders from the Japan Air Self Defense (JASDF) Northern Air
Defense Force, Central Air Defense Force, Southern Air Defense
Force and Southwestern Composite Air Division were called up by
the Air Defense Command HQ stationed at Yokota for the television
conference on Dec. 5, the paper said.

During the conference, the JASDF said that from the beginning of
this year, its F-15J fighters had conducted drills to test the
capability of the Chinese radar system. The JASDF concluded that Chinese
radar system is able to detect the movement of aircraft in high altitude
only. Commanders attending the conference pointed out that the Japanese
early warning radar system in Kyoto prefecture — based in the western
part of the nation — can cover the entire airspace over the disputed
Diaoyutai islands, which Japan, China and Taiwan all lay claim to (called
the Senkaku Islands in Japan and the Diaoyu Islands in China). It can
also cover the Miyako waterway, which lies between the Japanese islands
of Miyako and Okinawa, and is thus an advantage in a potential conflict
against China and its military aircraft.Realizing that this advantage will
be lost if the disputed islands were to fall into Chinese hands, the
meeting focused on three war scenarios. The first scenario examined the
possibility that China may only attack the island chain. The second
explored the possibility that China may launch an attack against both the
Diaoyutai islands and Miyako waterway simultaneously, while in the third
scenario, the Diaoyutai islands, Miyako waterway and Taiwan were all
potential targets. The meeting concluded that tensions and the risk of
conflict between the two nation’s military aircraft will increase in the
future as China will now

Japan Learning the Hard Way, Destroying your Currency is Not an Economic Strategy

Japan will learn the hard way that destroying your currency is not an
viable economic strategy.

Shanghai Daily

JAPAN posted a record 1.63 trillion yen (US$17.4 billion) trade deficit in
January as rising exports trailed surging imports of crude oil and gas due
to rising prices and the weakening yen.

The provisional data released yesterday show exports for the world’s third
-biggest economy rose 6.4 percent to 4.8 trillion yen in January from a
year earlier, the first year-on-year gain in eight months. Imports jumped
7.3 percent to 6.43 trillion yen.

A weakening in Japan’s currency over the past few months has helped boost
exports by making its products more price competitive overseas. But it has
also inflated the value of resource-scarce Japan’s imports of crude oil and
other commodities, which offset a recovery in demand for Japanese-made
vehicles and machinery.

The trend is hindering Japan’s long-time strategy of relying heavily on
exports to drive growth and adds to pressure for stronger domestic demand
at a time when the workforce is aging and shrinking and corporate investment
is feeble.

Japanese Prime Minister Shinzo Abe is expected to seek help from the US in
a visit later this week to Washington, where he plans to appeal to US
President Barack Obama for wider access to cheaper exports of US shale gas,
Kyodo News Service and other local reports said.

Abe’s office would not confirm those reports. But it did say that “the
government of Japan attaches utmost importance to the necessity of
cooperation in the areas of resources and energy, particularly considering
our current stringent energy situation,” after the March 2011 disasters.

The Fukushima Dai-Ichi nuclear accident, triggered by a massive earthquake
and tsunami, led to the closures of most of Japan’s nuclear power plants,
necessitating a sharp increase in imports of oil and gas. Abe took office
in December vowing to boost the economy by restoring Japan’s export
competitiveness, while creating demand at home with higher public works.
spending. Trade with the US and major Asian trading partners rose early
this year as the global recovery strengthened and the economic impact of
friction with China over a territorial dispute appeared to recede. But trade
with European countries was weak, with a 6 percent fall in exports from a
year earlier. Imports from Western Europe climbed 6.3 percent.
Exports to the US rose 11 percent from the year before to 839.8 billion yen
while imports rose 5.8 percent to 521.1 billion yen. That boosted Japan’s
surplus with the US by 20 percent from a year earlier to 318.7 billion yen.
Exports to China rose 3 percent but imports surged, leaving a gap of 654.6
billion yen, up 11 percent from the year before

Revolutionary Japan is suddenly the centre of world affairs

By Ambrose Evans-Pritchard,
International business editor6:00PM GMT 20 Jan 2013
The Telegraph

So Japan may not slide into genteel oblivion after all. To the
surprise of the Japanese people, their country is smack in the
middle of two riveting dramas that threaten to upturn the global
strategic landscape in short order

Newspapers may soon have to re-open their Tokyo bureaux, shut
down long ago when the investment bubble burst and one Lost Decade
stretched into another.We all watch with disbelief as China and
Japan rattle sabres over the Senkaku/Diaoyu islands, so like the
seemingly minor events that drew Europe’s alliance systems into
conflict from 1911 onwards.

Both graduated to fighter jets last week: Japan sending in F-15s;
China deploying J-10s, and mobilising the East China Sea fleet for
live ammo drills. China’s purpose is clear. It is testing the US
security umbrella, and Washington’s willingness to risk conflict
to back Asian allies. There is a minority in Beijing who think
America is a busted flush, a mistake made repeatedly by different
powers over the last hundred years. The possibility that the
world’s three largest economies could come to blows — as feared
by US defense secretary Leon Panetta — is a sobering thought.

Against this, Japan’s economic policy revolution seems tame. Yet
forces are being unleashed that could have powerful effects
through the world’s asset markets and trading system.
Premier Shinzo Abe has vowed an all-out assault on deflation,
going for broke on multiple fronts with fiscal, monetary, and
exchange stimulus. This is a near copy of the remarkable experiment
in the early 1930s under Korekiyo Takahasi, described by Ben Bernanke
as the man who “brilliantly rescued” his country from the Great
Depression. Takahasi was the first of his era to tear up rule book
completely. He took Japan off gold in December 1931. He ran “Keynesian”
budget deficits deliberately, launching a New Deal blitz before
Franklin Roosevelt took office. He compelled the Bank of Japan to
monetise debt until the economy was back on its feet.
The bonds were later sold to banks to drain liquidity.
He devalued the yen by 60pc against the dollar, and 40pc on a trade-
weighted basis. Japan’s textile, machinery, and chemical exports swept
Asia, ultimately causing the British Empire and India to retaliate with
Imperial Preference and all that was to follow — and there lies the
rub, you might say. Takahasi was assassinated by army officers in 1936
when he tried to tighten by cutting military costs. Policy degenerated.
Japan later lurched into hyperinflation. Few dispute that Japan escaped
from slump and pioneered the world’s most successful policy mix — in
strictly economic terms — from 1932 to 1936. The trick was to act with
overpowering force and combine all forms of stimulus, each leavening the
other.Monetarists say Japan’s great mistake over the last 20 years has
been to launch one spending spree after another without monetary backing,
like sending infantry over the top deprived of artillery support.
The result has been to push net public debt to 145pc of GDP this year
(gross debt is 245pc) without reaching “escape velocity”.

The Bank of Japan sat of on its hands for a decade. Only later did it buy
bonds, but in dribs and drabs, on short maturities, from the banking system
instead of the broader public, and all in a half-hearted spirit. Mr Abe has
lost patience. This time the Bank of Japan (BoJ) will do what it is told,
the first of the big central banks to be stripped of its independence, and
probably not the last. As Milton Friedman said — quoting Clemenceau —
“monetary policy is far too important to be left to central bankers”.

Mr Abe said the next governor to take office in April must be a soulmate
“with the will and ability to pull the nation out of deflation”. Leaks
suggest that the BoJ will set an inflation target of 2pc this week, to be
achieved by unlimited bond purchases. The liquidity effects of this by the
world’s top external creditor could be large enough to leak into everything
from New Zealand bonds, Brazilian equities, and Chelsea property, a sort of
`carry trade’ on steroids.

On the fiscal side, Mr Abe will launch combined national and local stimulus
worth 20 trillion yen (£140bn) or 4.4pc of GDP. No matter that the budget
deficit is already 10pc of GDP, or that total financing needs are a record
60pc of GDP this year.The IMF advises Japan not to push its luck, warning
that the country has reached the point where even a “relatively small” rise
in borrowing costs could set off havoc.”Europe’s recent experience offers a
cautionary tale. Once market confidence is lost, regaining it becomes very
difficult,” it said.Mr Abe cares not a wit about such opinions, but he is
taking a huge gamble. Japan is losing its safety buffers one by one. The
trade surplus has evaporated, and will not recover soon after post-Fukushima
closure of the nuclear industry. The savings rate has fallen to 2pc from 15pc
in 1990. The work force is shrinking every year.The state pension fund has
become a net seller of government bonds as the aging effect reaches a critical
point. Japan’s banks have become the buyers or last resort instead,
pushing their holdings to 85pc of GDP. The result is to starve small firms of
credit. Adam Posen, a former UK rate-setter and a Japan expert, says fiscal
stimulus ceased to be any help a decade ago and is now counter-productive.
The risk is not that Japan’s debt trajectory will fly out of control. The damage
is slow and insidious.” When a large country with its own currency reaches its
fiscal limit, growth ends not with a bang but a whimper of declining vitality,”
he said. Mr Posen advises Japan to rely on monetary policy alone to right the ship.
I broadly agree, though this time the kindling wood of fiscal spending may be what
is needed to ignite damp money. If Mr Abe means what he says, this is not just
more of the same.

Needless to say, printing money has its perils too. The risk is that Japan could
escape gentle but stable deflation — the Devil it knows — only to see a panic
flight from bonds that overwhelms the Bank of Japan. As Governor Masaaki Shirakawa
told the Diet through gritted teeth, “long-term yields could rise, and that would
be a problem for public finances.”

Banks hold JGBs worth 900pc of their Tier 1 capital. Their portfolios would be
decimated if long rates punched above 2pc. Japan might then face a banking disaster
as well. These are the hard choices that Mr Abe has to make.
Nor can he continue to weaken the yen without irking Washington and jeopardising
the alliance on which he depends. His rhetoric alone has already triggered a 12pc
fall in the yen against the dollar, and a 20pc fall against the euro. He seems to
be eyeing a dollar rate near Y100.

Mr Abe’s frustration is understandable. Japan is cursed with a safen-haven currency
that strengthens in times of trouble when least wanted, the cross that creditor states
must bear. Japan did uphold the G20 deal in March 2009 to refrain from “competitive
devaluations”, when others did not.

But should Japan now buy foreign bonds on a mass scale to suppress the yen, there
will be trouble. Tokyo will be blamed as the aggressor in the outbreak of currency
wars. Others will retaliate. Huge issues are at play here. The world’s trade system
is fragile. The wasting disease behind the Long Slump is a record high savings rate
of 24pc of global GDP, and too little demand to go around. Everybody wants a weaker
a currency. They can’t all have it.

Japan’s great experiment cuts both ways for the rest of us: the reflation blitz helps
lift the global economy out of the doldrums: but yen manipulation snatches market
share, incites protectionism, and takes us into the brave new world of “actively
managed exchange rates”, as Sir Mervyn King put it last month.

We will find out soon enough which is the more powerful effect.


Geopolitical Code Red: Nationalists seize power in Japan

Nationalist parties have seized power in Japan with the election of Shinzo Abe
as the country’s new prime minister.

Shinzo Abe, who returns to power after leading the Liberal Democratic Party to
victory in general elections on Sunday, said there was no doubt about Japan’s
ownership of the islands, known as the Senkakus in Japan, but the Diaoyus in
China, at the centre of the row.

“China is challenging the fact that (the islands) are Japan’s inherent
territory,” said Mr Abe. “Our objective is to stop the challenge.

He went on to say that he will defend Japanese territory with Japanese lives.

Zombie economy Japan to become largest foreign holder of U.S. debt

China remained as the largest holder of U.S. Treasuries in June,
after it slightly increased U.S. debt holdings by 300 million U.S.
dollars,however, that followed a heavy selling of more than
400 million U.S. dollars in May.

During the April-June period, China had maintained its holdings
of U.S. treasuries at around 1.164 trillion U.S. dollars. This
number has barley budget in years. Chinese trade surpluses are now
actively being funneled into buying up assets around the world as
well as importing and storing commodities. (coal, iron ore, etc)

At the same time, Japan, the second-largest U.S. debt holder,
boosted its holdings from 1.109 trillion U.S. dollars in May to
1.119 trillion in June, the Treasury Department said. Ending June,
foreign creditors held 5.2923 trillion U.S. dollars in total, up
from May’s 5.2581 trillion dollars. This is the sixth consecutive
monthly hike.

A nation that is 200% debt to GDP, has no growth , and is on the
cusp of fiscal collapse is now the becoming once gain America’s
largest creditor. Where does the money come from? They print it
of course.

Can China and Japan overcome the perils of proximity?

The impact of China’s ascent is gradually changing the country’s security
relations with Japan. In recent years, political trust between the two countries
has deteriorated rapidly due to unresolved historical arguments and sovereignty
disputes over the Diaoyu (Senkaku) islands in the East China Sea and over the
exploitation of resources in the area. The complex relations have been explored
by retired US diplomat Richard Bush in his recent book, The Perils of Proximity:
China-Japan Security Relations.

An annual survey recently published by Japanese thinktank Genron NPO and the
Beijing-based China Daily detailed how more than 80% of Japanese respondents
were antagonistic towards China, a record high since 2005, while up to 65% of
Chinese respondents expressed their dislike of Japan.

China and Japan have maintained an economic relationship of both mutual reliance
and competition. Though rivals politically, the economic strength and geographic
proximity of the two countries makes them close partners in trade.

The aforementioned survey revealed that over 50% of respondents in China and in
Japan feel the sovereignty issue over the Diaoyu islands is still the largest
potential problem in the development of ties between the two countries.

China’s economic and military ascent has caused uneasiness in Japan, which in
China’s view has yet to face up to its wartime invasion of the Asian mainland
and the atrocities the imperial army visited upon millions of civilians.

In 2004, Japan’s Ministry of Defense began assessing the possibility of an
attack launched by China on Japan over resources in the East China Sea and
sovereignty over the Diaoyu islands.

In its 2011 Defense White Paper, Japan showed its uneasiness with regard to China’s
maritime expansion and the regular patrol missions carried out by the Chinese navy
in the Pacific as far as the waters off Okinawa, by stating that it should forge
alliances with other countries regarding territorial disputes with China based upon
the strengthened foundation of the US-Japan alliance.

Internally, Japan no longer considers the development of nuclear weapons a taboo
issue and has implied it may counter China by doing so. Externally, it has publicly
and actively intervened in disputes in the South China Sea and extended its support
for the Philippines and Vietnam to promote the South China Sea problem as an
international issue.

The leaders of the two countries understand they have much to gain from a sound
China-Japan relationship and much to lose from nationalistic confrontation. As this
year marks the 40th anniversary of the establishment of diplomatic ties between
China and Japan, senior officials from the two countries have demonstrated their
willingness to cement friendship and strengthen trust. Whether they can eliminate
the perils of proximity lies in their ability to resolve historic enmity between


Ex-Soros Adviser Fujimaki Says Japan May Default By 2017

2017….They will be luck to make it that far.

From Bloomberg…
Investors should buy assets in U.S. dollars and other currencies of strong
developed nations because Japan may default within five years, said Takeshi
Fujimaki, former adviser to billionaire investor George Soros.
“Japan is likely to default before Europe does, which could be in the next
five years,” the president of Fujimaki Japan, an investment advising company
in Tokyo, said in an interview yesterday. Japanese should hold foreign-currency
products, such as those denominated in the greenback, Swiss franc, sterling,
Australian and Canadian dollars, Fujimaki said.

Should the Japanese government default, the yen may weaken to 400-500 per
dollar, and the yields on benchmark 10-year bonds could surge above 80 percent,
according to Fujimaki. “I’m buying dollars in case of an emergency,” he said.
The yen rose 0.6 percent to 78.91 per dollar as of 6:07 a.m. in London from
its close in New York yesterday. The currency touched the postwar high of
75.35 per dollar on Oct. 31 and has averaged about 103 over the past decade.
Japan’s 10-year yields were little changed at 0.855 percent. Rates on June
4 dropped to 0.79 percent, the lowest since June 2003. Five-year credit-default
swaps that insure Japan’s debt from nonpayment were at 90.9 basis points yesterday,
up from a seven-month low of 90.1 on March 27, according to CME Group Inc.’s CMA.
The contracts pay the buyer face value in exchange for the underlying securities
if a borrower fails to meet its debt agreements. A drop signals improving
perceptions of creditworthiness, while an increase suggests the opposite.

Ballooning Debt
Japan’s public borrowings, the world’s biggest, will balloon to 245.6 percent
of its annual economic output in 2014, up from 67.3 percent in 1984, an estimate
by the International Monetary Fund shows. Japanese Prime Minister Yoshihiko Noda
is struggling to gather support for his plan to double the 5 percent sales tax
by 2015 to help reduce debt. “The yen and the JGB market are in a bubble,” Fujimaki
said. “With the gigantic debt Japan has accumulated, a thin needle, or even a gentle
breeze may pop this. Events in Europe can possibly trigger this to blow up.”
Greeks vote in a general election on June 17 after balloting in May failed to produce
a coalition government. The result may determine whether Greece abides by spending
reductions imposed upon it to receive two international bailouts and stay in the
euro. The euro currency bloc may break up in the next 5 to 10 years, Fujimaki said.

Default or Inflate
“There’s no way out of Japan’s crisis,” Fujimaki said. “The only option left for
Japan is either default or print money into hyper-inflation.”
The Bank of Japan left the size of its asset-purchase fund unchanged at a policy
meeting today. The central bank kept the fund at 40 trillion yen ($507 billion)
and a credit lending program at 30 trillion yen, matching the forecasts of 13
economists surveyed by Bloomberg News.
Fujimaki’s agreement with Soros Fund Management, once the world’s biggest hedge
fund group, ended in October 2000. He has since written a book and lectured at
Waseda University and Hitotsubashi University in Tokyo. He was born in 1950.

Investors stampede from risky assets, Tokyo hits 28-year low

Tokyo’s Topix index (.TOPX) lost as much as 2.4 percent to 693.26, a level
not seen since late 1983, according to Reuters data, while the Nikkei average
(.N225) of major stocks tumbled 2 percent. The Nikkei last week marked its
ninth straight week of losses, the longest such losing streak run in 20 years.

Japan’s Coming Economic High Speed Train Wreck