Terrie's Take: Creating a New J-Underclass, Sweet Potato Fire Hazard, and Japan Fails at Tohoku Rebuilding

Terrie's Take - AkihabaraNews.com

Terrie’s Take is a selection of Japan-centric news collected and collated 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 November 3, 2014


  • Labor Law Changes to Create New Underclass?


  • Yakimo trucks a fire hazard?
  • QQE2 -- amping up Abenomics
  • Bureaucracy hobbles rebuilding in Tohoku
  • Record Japanese investment flows to SE Asia
  • DoCoMo has another dismal year

Labor Law Changes to Create New Underclass?
As we think has become obvious, Japan is undergoing a massive labor sea-change, and is creating two classes of workers -- the privileged and the rest. The events spurring these changes are both oblique, such as the transfer of wealth from the general public to the government and those close to it (Abenomics) and the establishment of special zones that will coincidentally negate traditional labor laws, as well as more obvious ones, such as actual legislation to let employers fire their staff at will.

Whether these changes are good or bad depends on where you are in the food system. If you have investment assets and savings, a full-time job with an exporting firm, or are employing others, then the economic and legal ground shift is probably going to be good for you. If you're a lower-paid but full-time Taro in a factory, then cost of living will go up and you'll be fighting to stay on the good side of your employer. At the bottom of the hierarchy, if you're an irregular worker in a service industry -- then mostly it's going to be bad news: low wages, uncertain tenure, and perpetually being an outsider.

We see a lot of online commentary about Abe's policies and how it's not all bad. His supporters say that as the nation's leader at least he is finally facing the hard choices and is accelerating the necessary legislative and social change. As an example, they point out the low unemployment rate and how the call to get married women back into employment is finally being heeded. Certainly it is true that the unemployment rate has fallen to a 6-year low recently (3.9%). However, a closer look at the stats show that most of the new jobs are irregular and that they pay far less than those for regular workers. This is the main reason why, even as unemployment falls, the inflation-adjusted take-home wages of Japanese workers is still going down. According to a labor ministry survey last year, the average full-time worker earned JPY314,700 monthly, while an irregular female worker earned just JPY173,900. (Male irregulars earned around JPY205,000.)

From the numbers and the flood of new legislation in the works, our guess is that the government has decided it needs to have an underclass in Japan, presumably to fight back against cheap-labor competition elsewhere in Asia, and thus the stance has become unofficial policy. Sure on the surface, there are a million defendable, logical reasons as to why flexible labor is needed, but in the end maybe it simply comes down to a shrinking pie and the need by the elite to preserve their position. In the West we've had a "working class" for generations. It's called market competition (for resources) and is nothing new. But for the "we're all in it together" middle class Japanese, the appearance of this income and rights gap is so shocking that most people pretend it is not happening.

As an example of the changes afoot, this last week, the Diet started debating a bill regarding the temp staffing sector, the biggest part of the "irregular worker" sector -- a disadvantaged group that, by the way, 57.5% of female workers are part of. The change being debated is whether to remove the 3-year limit on temporary jobs when someone is dispatched by a temp staffing company to an end employer. The new law will create a new type of worker category, where they can be temp staffed indefinitely, so long as they don't work the same exact job for more than 3 years.

The time-limited rule was originally introduced to encourage end employers to extend full-time jobs to promising temps. However, the reality is that most temps have simply been fired or reassigned when their 3 years was up, depriving them of any career advancement and creating the exact opposite effect desired by the law. So in one way, while the new law will officially introduce a permanent irregular worker underclass, at least it does address the reality of the marketplace.

Another set of legal changes that will redefine the work sector are to be found in the various interpretations/rules of the new special zones laws. In Osaka for example, they plan to introduce a new "Special Challenge" zone, whereby workers will sign contracts that are non-compliant with the Labor Law and which will allow the employer to fire the employee at will. Theoretically this new type of contract will only apply to higher paid workers, not low-income ones, but many suspect it is the thin edge of the wedge to break down the current inflexible employment rules. We tend to agree that it's the thin edge. The Special Zones are probably both trial policy balloons and trojan horses, created to test and condition public acceptance of the new (and harsh) reality.

There will apparently also be a new special zone rule which will remove the requirement of companies to hire on a temp worker as a full-timer if they have been with the company for five years. The new rule is contingent on the employing companies having at least 30% of their workforce as foreigners, so either it is targeted at foreign companies, or more likely the bureaucrats think that foreign firms are far enough removed from mainstream Japanese ones that it is a safe trial balloon. One wonders what other "experiments" will be tested on foreign firms before they hit the mainstream. It's certainly convenient that lack of labor force flexibility has been a long-time complaint by many foreign chambers of commerce.

That there is a ground shift in labor policy and employer benefits going on is undeniable, but what is interesting is why this is happening. Is it because as we mentioned earlier the elite is conducting a callous societal reorganization as the nation's asset base starts to dwindle? Or is there a deeper more meaningful intent, such as causing sufficient pressure on a large enough number of workers, to cause these breadwinners to realize that they have to take on more risk and more responsibility for their own livelihoods?

Indeed, this could be a chapter right out of the book "Who Moved My Cheese?" If so, and if intentional social engineering, then we predict these changes will accelerate the end of Japan's tradition of government-driven paternal benevolence to workers, and instead squeeze up a new round of competitive workers and companies who can compete internationally.

Yakimo trucks a fire hazard?
Fun article by Tokyo-based Australian motoring writer, Peter Lyon, on the potential explosion hazard of yakimo trucks which sell baked sweet potato snacks cooked on open-air fired ovens on the back of small trucks. Lyon makes the point that in rules-obsessed Japan, everyone seems to have forgotten to regulate the use of open ovens operated just centimeters away from vehicle gas tanks. His research shows that the reason is somewhat pragmatic -- in that yes it's unsafe, but no one wants to stop this traditional method of hawking food. ***Ed: At least, as Lyon found, there doesn't seem to be a recorded instance (ever) of a yakimo truck exploding while vending snacks.** (Source: TT commentary from motoring.com.au, Oct 31, 2014) - http://bit.ly/1o4RsH9

QQE2 -- amping up Abenomics
On Friday, the Bank of Japan surprised the markets by doubling down on its quantitative easing, increasing the annual monetary base from the current JPY60trn to an unprecedented JPY70trn-JPY80trn. This is almost as much as the U.S. Fed was issuing with QE3, but with an economy of twice the size. Analysts see the increase in money being created as an admission by the BOJ that Abenomics is not working and that more gas is needed. As well as creating more money supply, the BOJ also said that it would start buying certain assets such as Exchange-traded funds and real estate investment trusts. (Source: TT commentary from businessweek.com, Oct 31, 2014) - http://buswk.co/1EaY0YJ

Bureaucracy hobbles rebuilding in Tohoku
Very good Reuters report on the plight of the tens of thousands of Tohoku homeless who are stranded in inadequate temporary housing 3 years after the Tohoku earthquake because of inadequate commitment to get them into permanent housing. As the article illustrates with interviews, many elderly people are suffering depression and worse after living in cramped temporary refugee huts for 40+ months. The causes of delay in getting permanent housing built is put down to 3 factors: competition for building laborers from Tokyo (due to the Olympics), rapidly rising prices of building materials due to the falling yen, and the inability to secure suitable land because of inadequate property records and lack of administration staff. ***Ed: All circumventable problems, but vexing to desk-bound bureaucrats in Tokyo. Interesting to see how Abe stung the DPJ for their supposedly slow response to the disaster, while no one these days seems to be taking him to task for running years over schedule and billions over budget. Is there a political opposition party in Japan these days?** (Source: TT commentary from reuters.com, Oct 31, 2014) - http://reut.rs/1o4RkaC

Record Japanese investment flows to SE Asia
Good update from the Economist, highlighting the tremendous surge of investment that the Japanese are putting into Asia, doubling to JPY2.3trn in 2013. This is mostly due to the Japanese government and corporate pursuit of a China-plus-one strategy, where they are seeking to decrease their exposure to China in the light of political issues and rising costs and regulations there. As a result, China investment fell by 40% in 2013. The article also infers that the Abe government's desire to increase exports through a weakened yen is flawed by virtue of the fact that, as Deutsche Bank estimated, outbound investment in FY2012 "...reduced Japan's trade balance by as much as JPY16trn... more than trade deficit that year of JPY7trn..." (Source: TT commentary from economist.com, Nov 1, 2014) - http://econ.st/1EaXZEm

DoCoMo has another dismal year
In the seven years since Softbank entered the mobile phone business, it has risen to become a powerhouse in grabbing new subscribers. As a result, the incumbent, NTT DoCoMo, has seen its overall market share fall from 55% to 45%. The company has just announced that things are unlikely to get better soon, as it offered guidance that it expects its FY2014 operating profit to fall 23% from last year, to JPY630bn. This is the lowest income forecast for the firm in the last 15 years. The Nikkei reckons the fall is due to a botched pricing strategy on smartphone accounts, where the company introduced compulsory flat rate prices which cut power users' bills by half while scaring away lightweight users who previously had cheaper plans. KDDI and Softbank have been watching DoCoMo's pricing strategy from the sidelines and have since adeptly modified out the worst of the leveling effects that DoCoMo has suffered from. (Source: TT commentary from asia.nikkei.com, Nov 1, 2014) - http://s.nikkei.com/1wUofQP

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That was Terrie's Take. What about yours? Let us know down below!