Terrie's Take: Defense as a Service, Foreign Travel, Amazon Video Japan, LNG, Takeda, and Eddie Jones

Terrie's Take - AkihabaraNews.com

Terrie’s Take is a selection of Japanese-centric news collected and collated at J@pan Inc by long-time resident and media business professional Terrie Lloyd. AkihabaraNews is pleased to present Terrie’s learned perspective; we all could use another take on the news - here’s Terrie’s:

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Terrie’s Take on December 2, 2013


  • Defense as a Service (DaaS)


  • Demand for foreign travel soars
  • Amazon joins others with online video
  • LNG shipping to hit the big time
  • Takeda to get first foreign boss
  • Eddie Jones makes full recovery

Defense as a Service (DaaS) 
Back on January 27th this year, the Japanese media were focused on the unloading of nine coffins (the tenth arrived a day later) of JGC oil workers who had been killed in a terrorist attack on the Amenas oil field in Algeria. The victims arrived on a commercial flight, along with just seven survivors. In fact the Japanese death toll was the highest of all nationalities working in Amenas, allegedly because the terrorists were looking for European and American hostages and saw the Asians as being useless to them, so they simply executed them on the spot.

The irony of their actions is that it was revealed later that only the Japanese government had offered to pay ransom money, in unlimited amounts, for the safe return of their nationals. The offer was never relayed to the terrorists because of the Algerian government's policy on not paying ransoms.

At the time of the crisis, very little news was shared with the outside world, which again was revealed later to be because many foreign nationals had managed to hide away in the compound, and their governments -- particularly those of the U.S. and U.K. -- didn't want to alert the terrorists that they'd missed some people. This lack of information along with the inability to take any sort of on-the-ground action was particularly frustrating to PM Shinzo Abe's government. Despite specifically asking for advance notice of any decisive Algerian government action against the terrorists, the Algerian authorities nonetheless decided to raid the oil field without letting the Japanese know. Yes, they had good reason, because the terrorists were getting ready to blow the place up, but still, as a major investor in the oil field, Abe his government deserved some involvement. Afterwards, Abe's frustration was vented with the strongly worded statement that the loss of civilian lives during the Algerian government's operation was "...truly regrettable."

This event was galling to Abe because it was just one more demonstration of Japan's impotence in the international arena, even though the country is making substantial investments all over the world. It is therefore not surprising that last month (November), the government passed legislation that the Self-Defense Forces (SDF) can now carry Japanese and foreign nationals by land transport as well as by sea and air. While this doesn't sound like a big change, it does mean that suddenly the SDF can reach ANY crisis point, not just those serviced by an airport or sea docks. Also, the legislation loosens up just who can hitch a ride with the SDF vehicles and the scope of the weapons they can take with them.

Then last month another security crisis popped up, in the form of China unilaterally imposing a new air traffic identification zone over the Senkaku islands, effectively laying down their first step of trying to wrest control of the islands from Japan. Again, Abe is feeling impotent, and has to make do with the Americans coming in and saving the day (by flying their B52s through the zone and challenging the Chinese to do anything about it). By now, it's obvious that Abe will milk both of these events for all he is worth, to ensure that Article 9 of the Constitution is changed and that Japan be given in degrees the freedom the ability to undertake military action as and when it sees fit.

While we don't want to judge whether or not it is appropriate for the Japanese to once again become an independent military power, we find it strange that Abe doesn't take already internationally acceptable interim measures to beef up Japan's military response. Dealing with changing the Constitution and the U.N. Security Council will take time. In the meantime his interim solution could be to employ (or cause to have created) one or more Private Military Companies (PMC), working on the behalf of the Japanese government to get "sticky" stuff done.

The USA is a good example of how PMCs can be used. Apparently about half of the U.S. armed forces budget and 30%+ of its population consists of private contractors, who do everything from food and facilities, through to logistics, prisoner interrogations, and training of local fighters. Unfortunately, after a series of ugly incidents, including a massacre of 17 Iraqi civilians in Nisour Square, Baghdad in 2007, allegedly by Blackwater employees, the PMC sector has started to get a bad name for itself. As a result, some of the leading firms got together under the guidance of the Swiss government, and created an ethics oversighting accord called the International Code of Conduct for Private Security Providers (ICoC) and an association to go with it. There are now 708 PMCs who have signed this accord.

Why do we bring this up? Well, looking at the list at http://bit.ly/1hqz72D, you can see a who's who of PMCs active around the world. These companies are operating in every hot spot you can imagine, as reading some of their profiles will reveal. What's interesting is that although there are PMCs everywhere, not one of those 708 signatories is based in Japan. We find this remarkable, because there are four such companies based in South Korea alone. This either means that there are no Japanese PMCs (although, we have read several times there is at least one), or they are keeping a deliberately low profile for some reason. Normally the Japanese love to sign international good-behavior accords. ;-)

Anyway, if Abe really wanted to get things done more quickly than a constitutional change will take, there are plenty of precedents and a general acceptance of such organizations by Japan's main allies. Going back to those four PMCs in South Korea, one, IntelEdge, caught our eye, because it appears to be tailor-made for a Japanese version. The company specializes in maritime security, and is managed by ex-presidential (i.e., South Korean) secret service and intelligence agency people. It has a "workforce" of Korean and U.K. (UDT/Seal) fighters, and special land and airborne attack force personnel. This is no desk-bound organization and it is obviously able of getting stuff done that the South Korean armed forces cannot.

Taking this idea of outsourcing one's crisis handling to a commercial entity a step further, we have often wondered why the USA and Japan don't just come to a commercial arrangement to have portions of Japan's security managed and executed by the U.S. on a proper contractual basis. Already the USA is sending in drones to test China's new air identification zone. Ideally these should be paid for on a monthly basis by the Japanese, with data being sent back to Japanese analysts to digest and implement into their own strategies for the future.

It is rumored that drones cost about US$120MM (versus the commonly quoted media figure of US$5m each) to operate in a squadron of four for a year, because drones need ground support infrastructure and operations to work. Even at this number, it would be economically viable for the Japanese and would be much quicker and more efficient than for them to rebuild and replicate everything here in Japan. Yes, Japan has the technical capability, but how often will its team actually see enough action to be considered sufficiently experienced to meet a real crisis? The USA on the other hand, has extensive expertise and investment in drones already.

Without belittling the seriousness of the situation with China, we see this outsourcing opportunity as something similar to how cloud-based software is being sold to companies these days. Defense-as-a-Service would allow countries like Japan to use someone else's existing expertise and infrastructure, and to implement the solutions quickly and (relatively) cheaply. Most importantly, it would be a way to let Abe's government off the hook. It is going to take him a long time to change the Constitution, and China and other global challenges may not wait around for it to happen.

Demand for foreign travel soars
While only 15% of Japan's companies are exporters, and less than 1% are listed companies, the number of people working for such companies still number in the millions. And that is enough people benefitting from fatter pay checks to be wanting to travel abroad this year-end. Apparently a near record number of people are expected to go overseas from December 28th, possibly as many as 660,000, just 20,000 less than the peak of 1996/97. ***Ed: Thanks to the holiday calendar, this year features an exceptionally long unbroken string of nine days off, from December 28th through January 5th -- easily enough for a leisurely trip to Europe, SE Asia, or Hawaii.**
(Source: TT commentary from asia.nikkei.com, Nov 30, 2013)

Amazon joins others with online video
A tectonic shift has been going on in the Japanese market for video entertainment over the last few months, and this week Amazon Japan just announced that it will be distributing more than 26,000 video, movie, and TV drama titles online, through its instant video service. This means Amazon joins Google and Apple with similar services. Amazon's offering will be JPY100 for a 30-day window to watch the video, with two days to finish watching after the stream starts. While priced the same as Google, the window to watch is significantly longer. ***Ed: One wonders how Tsutaya is going to stay in the video business in the face of such massive competition. You can't get much more convenient than 'on-demand', or cheaper than JPY100...**
(Source: TT commentary from asia.nikkei.com, Nov 26, 2013)

LNG shipping to hit the big time
Despite tough times in the shipping industry recently, the nation's leading shipping companies see an unstoppable demand for Liquefied Natural Gas (LNG) and will be ordering as many as 90 new LNG tankers over the next 6 years. LNG consumption is of course way up for Japan, due to the many halted nuclear reactors around the country, but internationally LNG is also becoming dramatically more popular as well. Global LNG demand is now around 250m tonnes and is expected to soar to 400m tonnes by 2020. Each tanker costs about JPY20bn to buy and it's expected that they will all be built in Japan.
(Source: TT commentary from reuters.com, Nov 29, 2013)

Takeda to get first foreign boss
For the first time in its 230-year history, Japan's largest drug company, Takeda, has decided that its next president will be a non-Japanese. The new candidate will be Christophe Weber, formerly a GlaxoSmithKline executive, who was head-hunted recently. Weber will enter Takeda as its COO in April next year and is expecting to be named president in the AGM in June. The current president, Yasuchika Hasegawa, will stay on as CEO, in addition to becoming the Chairman of the company. ***Ed: Interesting to see mainstream Japan accepting the need for internationalization at the top as they radically change their makeup through foreign M&As. Obviously Takeda was put off by what happened at Olympus.**
(Source: france24.com, Nov 30, 2013)

Eddie Jones makes full recovery
Rugby fans will be happy to hear that not only is Japan rugby coach, Australian-Japanese Eddie Jones, out of hospital, but he is also expected to make a full recovery after his stroke in October. Jones reckons that he is feeling well enough to return to coaching the national team, and is apparently looking forward to preparing the Japanese side for the 2015 World Cup to be held in the U.K. (Source: TT commentary from fijitimes.com, Dec 01, 2013)nother bubble, we suppose. Question is: how long will it last?**
(Source: TT commentary from bloomberg.net, Nov 19, 2013)

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Images: Terrie’s Take; AkihabaraNews.com