Terrie's Take: Predictions for 2015 in Japan, the Kids got no Romance, Line Taxi, and More!
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 January 12, 2015
- Predictions for 2015 in Japan
- Line's new taxi booking service
- Half of 20-year olds yet to find love
- Freelance guides are possible
- Columbia U. to receive JPY500m for Japan studies
- New law to force employees to take vacations
Predictions for 2015 in Japan
Welcome back to Terrie's Take for 2015. We hope you all had a great break, as we did (eating, skiing, onsen, visiting temples, and lots of sleep-ins). As is our tradition for the last few years, we will make some predictions about the coming year, but with a slight departure -- all the predictions this year are about the same theme, the economy.
1. Abenomics probably is the right medicine
While we hate to say it, because Abenomics is basically using increased taxation to rob from the general population to enrich government and its cronies, their actions are probably the right medicine for Japan right now. We can think of two obvious reasons: a) the increasing hardships caused by a sinking yen will jolt more people out of their comfort zone and wake them from complacency. This may take several years, but sooner or later families won't be able to manage any more, and change will happen. It may not necessarily be in the form of protests and civil unrest, but there will probably be more popular discussion about income disparities and "selfish" companies sitting on cash piles. The average worker will start to seriously question whether he/she wants to work for a company that won't share, and will seek alternative employers. b) It will force the Japanese government to start to turn to the relatively convenient and easy "foreign connection" as a source of income -- which will manifest itself as a softening on trade and immigration. Yes, we know that this has all been said before, but until the pain is great enough, and the Japanese are really good at dealing with pain, then there will be no significant change. Will this happen this year? Probably not, but the signs will be there.
2. Increasing demand through the foreign connection
If you have a population that has been educated to "gaman suru" (put up with physical and/or psychological pain rather than try to fix the problem), then in the face of adversity everyone battens down the hatches and prepares for worse to come. We think the blame for this type of thinking can be directly laid at the feet of the Japanese education system, which avoids Socratic-style discussion and critical thinking in favor of a teacher-led dogmatic instruction and docile acceptance by students. Given that the education system is almost sacred in Japan, and teachers own the kids' minds so thoroughly, this aspect of society isn't going to change any time soon.
The effects of this type of "inbred" education are highly visible and are strong causes (we believe) of what ails Japan today, being: falling birth rate, lack of entrepreneurs, hesitation by those with money to lend to risk takers, obsession with material goods instead of intellectual causes, desire to maintain status and status quo, etc. So our prediction is that the government will do whatever it can to avoid disturbing the status quo by instead focusing on opportunities that are not owned by local stakeholders. This means foreigners. The largest opportunities open to the government are: exports, creating patron-state relationships through soft loans, tourism, and immigration. Yes, we did say immigration... see the next prediction.
3. Increased immigration
Immigration is a political hot potato in Japan. There are enough xenophobic politicians and groups that we can confidently say Japan will not in the next generation officially open its doors to foreigners. However, bureaucrats and business owners know that the nation needs fresh blood badly, so they will operate in the grey sector. Japan has essentially had an open-door immigration policy since 1990, when they changed the rules about how many foreigners a company could hire. It used to be that (unofficial policy) a company had to have JPY50m of sales for every foreigner they employed, which meant smaller companies didn't bother -- it was too much trouble. But after 1990, even smaller companies, now those under the greatest pressure, have been able to employ as many non-Japanese as they like, and that is still true today.
The real hold-back on bringing foreigners in has simply that they don't speak Japanese, and until now most openings have been white collar -- which require language skills. However, with the shortage of construction laborers, farm workers, hospital assistants, truck drivers, factory workers, etc., there will be a dramatic increase in the number of foreigners being sponsored into the country over the next 5 years.
The Special Zones legislation changes are expected to start from this year, and the example of ordinary wealthy Japanese households suddenly being allowed to hire Filipina houseworkers will be an interesting case study. We are particularly interested to hear what the restrictions on the visas will be, since the current labor laws allow equal treatment (including freedom of movement) for foreigners and Japanese alike. Therefore, if Japan wants to restrict these houseworkers to Tokyo as a Special Zone, they will need to introduce a visa category that looks more like the trainee visas -- where the visa is tied to a particular employer and where the government pretends the person is not there for work (and thus doesn't have rights).
4. Real wages will continue to decrease
Real wages declined 4.3% from November 2012 to November 2013, which naturally is inhibiting consumer spending. Abe's government is raising the straw man that selfish corporations withholding pay raises are to blame for falling wages. The real and simple reason is the government's unprecedented debasing of the yen, and thus the rise of the cost of imports. Given that Japan imports more 61% of its food, families can hardly cut back on "foreign luxuries". Much of what they buy as local foodstuffs, including for example, bread and milk, consist of foreign raw materials mixed with local. Your Tohoku high-fat milk isn't just from Japan, it probably has milk powder from other foreign sources mixed in. Then of course there is the increased cost of energy and gas, which affects transport firms and the cost of pretty much everything physical.
So why is the government devaluing the yen if it is bad for the incomes of its voters? Because of a long-term vision; Japanese companies can't be competitive otherwise. In other words, Japan is part of a global market where there are vast disparities in costs. To survive, corporations naturally gravitate to the cheapest locations, which in the last 10-15 years were China and SE Asia. But something interesting has happened recently. China and SE Asia are suddenly no longer as cheap as they were, and in fact in some cases it is now more expensive to produce Japanese products (when you factor in management costs, taxes, shipping, and quality issues) in coastal regions of China than it is in rural Japan. This is why Canon announced a few days ago that it will increase the volume of cameras and other high-tech products manufactured in Japan from 40% to 60%. We expect to see many other companies make similar announcements.
OK, then if more manufacturers returning means more jobs, and doesn't that mean higher wages will occur due to competition for labor? No, we think the Japanese government well understands that to keep manufacturing in Japan it has to lower local costs to be in line with its neighbors. It will do this by continuing the devaluation trend and by stealthily bringing in cheap labor. The decline in real wages will continue to fall until Japan feels that it is sufficiently cost-competitive with its neighbors.
Now, this doesn't necessarily mean absolute wage parity between Shizuoka and Saigon, because as we mentioned there are other non-wages costs to consider when operating overseas, but it does hint that we can expect real wages to drop another 20% (i.e., 4%-5% a year) for the next 5 years. Our guess is that the costs experienced in Singapore are a kind of benchmark for the Japanese, and already we can see wages parity coming up. Singapore wages used to be less than half that of Japan in the 2000's, and now they are only 20%-30% less.
5. Tourism will accelerate
OK, this isn't so hard to predict, given that the government has a simple tourist flow "faucet" to pep up its target numbers -- being visa relaxation. Historically the Japanese have restricted the inflow of visitors from SE Asia and China because it's been worried about overstayers. Nothing has really changed politically, so why are they not worried now? We think the new pragmatism arises from two factors: a) more tourists mean more direct spending, without the social costs normally associated with local residents, and thus it's free money, almost. b) If you think about it, overstayers are among the most obedient and least troublesome cheap workers you can have. Our guess is that the government has decided that overstayers are tolerable, and that will certainly make many factory owners in Nagoya and Saitama happy. You'll never see that printed in the news media, though.
6. Land ownership controls will be introduced
A cheaper yen and unsophisticated land market means that more foreigners will be acquiring land in Japan. This is already going on in the commercial sector, and last year was a record year for inbound property investment by foreign firms -- primarily in office buildings. But there are two other land sectors that foreigners are interested in and both of these are politically sensitive and thus likely to trigger land ownership controls. The first is the ownership of rural natural resources, such as water, forests, onsen, seafood production, and other food-related resources. The primary acquirers at the moment appear to be Chinese, natural antagonists to the Japanese rightwing, and already we have seen political uproar over the acquisition of land in rural watershed areas.
The other land sector likely to be targeted by foreigners will be in the travel sector, where the investors are anticipating the rise of repeat travelers from SE Asia and China who want to enjoy an annual dose of onsen, skiing, and high-grade food and shopping. These investors are interested in two types of real estate: high-end apartments and land in Tokyo, Osaka, and Fukuoka, and trophy properties near the coast, lakes, and ski fields. Niseko and its high level of foreign ownership is not an aberration. Already Hakuba is enjoying a mini-boom of foreign investment, and we think this will spread to other resort areas of Niigata and Nagano.
7. Continuing exodus of long-termers
So if you're in business as an exporter, Japanese teacher, tourism player, financier, or land-owner, 2015 might actually be a good year for you. If you are a regular worker in a company not involved in one of these industries, then it's going to be a tougher year than 2014, as the cost of living mounts. In that case, you might be part of our last trend for 2015, the continuing exodus of long-term foreign residents looking for a friendlier fiscal climate to work in. This exodus will be numerically offset by a surge of newcomers on the low-wages visas, so it won't be noticeable statistically, but it will certainly change the face of the foreign community and dilute the institutions that have been in place for decades to help foreigners live a bit easier here (foreign schools, supermarkets, medical services, etc.). Yes, sure, this trend has been happening since the Lehman Shock then the 3/11 earthquake. So our prediction is simply that despite an improving stock market and export surpluses, the exodus will continue, not reverse.
Line's new taxi booking service
Interesting article on Techcrunch about the massively popular messaging app, Line, launching a taxi booking service with Nihon Kotsu, the cab company. The article notes that not only does Line have huge access to the Japanese mobile population (about 50m users), it also seems to be able to hail taxis quicker than Uber can. This of course could simply be a function of Nihon Kotsu keeping spare cabs for its partner, but does indicate something that Techcrunch completely ignored -- the fact that Line may usurp Yahoo Japan as the online place to get stuff done. We say this because mobile services are all about servicing real human on-the-go needs, whereas Yahoo and other more generic web services are more infotainment based. This is why Facebook paid so much for Whatsapp. It was after the platform and time-to-market benefits, not just the users. To us this means two things: 1) Line will become the target of a takeover bid by Yahoo, and 2) other mobile apps that have large user bases and service real needs will become a lot more prominent in the next 12 months. Think train timetable apps, dining apps, proximity dating apps, ticketing, etc. (Source: TT commentary on techcrunch article, Jan 08, 2015) - http://tcrn.ch/1wNGzbI
Half of 20-year olds yet to find love
Yet another article about the lack of love life by Japanese youth. The Japan Times reports that an annual survey by marriage counseling company O-net has found that just under half of the nation's 20-year olds have never dated, and just under 20% have never fallen in love. As of the time of the survey, 74.3% of kids said that they were not currently in a romantic relationship and only 62.6% said that they were looking for a partner. ***Ed: This survey will add to the concern about the ability of young Japanese to form relationships and eventually reproduce. And, yes, the public should be concerned. The problem, though, isn't necessarily the kids themselves, more likely it's the messages and values they are receiving from the adults they are most closely connected for most of their waking hours -- their teachers. We are of the opinion that Japan will NOT solve its reproduction problem until the education system changes. Fear of the unknown, of risk, of failure, and warmth of feeling to the mothership, suffering together, and absolute trust in authority, as drummed into kids over 2 decades of intensive schooling, all serve to weaken the ability of a population to be emotionally independent and confident.** (Source: TT commentary on japantimes article, Jan 10, 2015) - http://bit.ly/1y1IY6I
Freelance guides are possible
Although there are severe penalties for non-licenced tour guides trying to operate through online market places in Japan, it appears that there are a number of unlicenced groups operating who are tolerated because they don't charge for their services. The Yomiuri has a feel-good story about one such group operating in Ginza, called "Osekkai" (translated as "meddlesome" but more meaning that they are actively concerned) Japan. The group is lead by a planning company owner who wants to help foreigners enjoy their Japan experience the same way he was shown kindness while abroad on his own travels. The group has about 40 students and adults as members, and not a mention was made of them being licenced. ***Ed: Interesting. We think there will be a mini-boom of such no-charge support groups, more than some of which will be covertly sponsored by travel-related companies hoping to turn each interaction into a sales opportunity. The Japanese do love their shades of grey when it comes to skirting inconvenient or stupid laws.** (Source: TT commentary from therecord.com, Jan 10, 2015) - http://bit.ly/1B7ZxPu
Columbia U. to receive JPY500m for Japan studies
In what could be the start of an Abe government plan to spread its revisionist views around the globe, the government will apparently provide JPY500m to Columbia University to "maintain" Japan-related courses by paying the salaries of Columbia's professors. ***Ed: Ostensibly the money is to ensure that Japan-related study maintains a high profile in the face of declining interest by students (who are no doubt opting to study China-related courses instead). However, one wonders why the money isn't being used to attract students to the courses rather than actually paying to run them? After all, as a commercial operation, if there is demand for Japanese, then Columbia U. would continue their Japan studies operations. No, this smacks of a need by the government to have more direct control over what is being taught, something easy to do if they are paying the salaries of the professors themselves. Whether this is in fact the start of a propaganda network or not will depend on how many other universities around the world receive similar funding. We expect they will, and it will be very direct, as in this case.** (Source: TT commentary from the-japan-news.com article, Jan 10, 2015) - http://bit.ly/1IhdRY3
New law to force employees to take vacations
According to a Labor Ministry survey, only 48.8% of Japanese employees took paid leave in 2013, with most volunteering to work through and give up their right to holidays for that year, instead. The government plans to get this number up to 70% by 2020, and will do this by introducing new legislation that forces companies to be responsible for employees taking leave. ***Ed: How much "force" is not yet clear, however, since the government target is only 70% and not 100%, so we assume that the new law will not carry criminal penalties -- and thus have little or no teeth, especially with desperate small and medium-size companies. The most prevalent reasons for not taking leave are: not wanting to burden colleagues, and being overworked and fearing work will pile up while they are away.** (Source: TT commentary from rt.com article, Jan 10, 2015) - http://bit.ly/1A6Nu0r
That was Terrie's Take. What about yours? Let us know down below!