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  • 2017.04.30 Sunday
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Cornered North Korea

 

 North Korea has formal relationships with Southeast Asian countries. Over the assassination of Kim Jong-nam, however, North Korea is becoming isolated. China, its patron, is also criticizing the unruly nation. If North Korea collapses, it will be a nightmare for South Korea.   

                                                           

 North Korea has official diplomatic relations with 10 countries in Southeast Asia. Where border control is loose, North Korea abuses these relationships by circulating drugs and counterfeit bills.   

                                                           

 On February 13th, Kim Jong-nam was blatantly assassinated at the Kuala Lumpur International Airport in Malaysia, which is the sole country that North Koreans can visit without visas. North Korea is insisting that it had nothing to do with the murder and criticized Malaysia. Malaysia has taken a hard stance against North Korea and is considering breaking off diplomatic relations.  

                                                           

 One of the 2 perpetrators was an Indonesian woman. Indonesia has historically had a good relationship with North Korea. The Indonesian woman claimed that she tricked by a North Korean agent posing a Japanese man for a Japanese TV show who asked her to “surprise” Kim Jong-nam as a “joke.” Indonesians felt sorry for her and the national sentiment in Indonesia has turned sour toward North Korea.   

                                                           

 For China, North Korea is just a buffer against U.S. forces. Hence, China has yearly offered a half million tons of petroleum products and grain each for free to support North Korea. However, China will never permit North Korea to own nuclear-tipped missiles that can attack Beijing or Shanghai. If China stops offering oil products to North Korea, the nation will instantly collapse. On the 18th, China announced that it would suspend the import of coal from North Korea until the end of this year. And, on the 23rd, a press secretary for the Chinese Defense Ministry commented that they were ready to deal with the collapse of North Korea.  

                                                           

 Economically, North Korea is an insignificant nation. Its demise will take hardly any toll on the global economy. And, it would be great for Japan because I believe that the abducted Japanese won’t be released until North Korea collapses. However, hordes of North Korean refugees will flood into China and South Korea.             

                                                           

 Different from Germany, the unification of South and North Korea is impossible. When Germany united, West Germany’s population was 64 million whereas East Germany’s was only 16 million. 4 West Germans had to support 1 East German. In terms of per capita GDP, the East was said to be about a half of the West’s On the other hand, South Korea’s population is 50 million whereas North Korea’s is 23 million. So, 2 South Koreans have to carry the burden of nearly 1 North Korean. In addition, South Korea’ per capita GDP is 28,200 U.S. dollar whereas North Korea’s is only 854 USD, which equals barely 3 % of the South’s. To make matters worse, South Korea is suffering from a serious economic recession and political turmoil.   

                                                           

 Some analysts claimed that China had been sheltering Kim Jong-nam as a drop-in North Korean leader after a coup d’etat occurs in the uncontrollable nation. China had historically ruled the Korean Peninsula for over 1,000 years. They are well aware how to deal with Koreans.   

                                                           

 The United Nations should form a consensus that, when North Korea collapses, it will be placed under the temporary trusteeship of China. Then, China can retain the area as a buffer zone. At least, currently oppressed North Koreans would live better lives under the Chinese regime. I believe that Japan should also give them humanitarian support after the abducted Japanese are repatriated.   

                                    

 


Prospects for the TPP

 

 On November 21st, President-elect Donald Trump released a video outlining his policy plans for the first 100 days in the White House, including withdrawing the U.S. from the Trans-Pacific Partnership (TPP) trade deal. The TPP is deadlocked unless it is modified to exclude the U.S.  

                                                           

 In order to make the TPP go into effect, there are 2 requirements they must fulfilled:                                                 

1) at least 6 out of 12 members must ratify it.                                   

2) The members who ratify the TPP must account for at least 85% of the GDP of all members’.                                                                     

As of 2014, the U.S. accounted for 62% of the total GDO, and Japan, 16%. Hence, unless the U.S. ratifies it, the TPP cannot take effect.       

                                                           

 The other presidents, prime ministers, and politicians are lamenting Donald Trump’s decision. I believe, however, his decision was quite fortunate for Japanese citizens.   

                                                           

 The TPP was intended to greatly benefit the U.S. and its large corporations even though it would hurt American workers. Intellectual properties bring the U.S. far more export revenue than cars and farm produce. Therefore, the U.S. insisted that the duration of copyright be extended to 70 years although the World Property Organization (WIPO) recommends the term to be 50 years past the death of the author. The U.S. often insists that it is the “global standard,” but is, in fact, trying to impose corporate welfare on the world.    

                                                            

 Also, the U.S. often advocates “fairness”, but, in reality, means “advantageous to the U.S.” The Investor-State Dispute Settlement (ISDS) clause is far from fair. In the case of NAFTA, American companies brought 28 cases against Canada and 19 cases against Mexico before the International Center for Settlement of Investment Disputes, and won in all the cases. On the contrary, 19 Canadian or Mexican companies sued the U.S., and were defeated in all the cases. The U.S. has always won in all 66 cases and has never been defeated. This appears to be clearly unfair.   

                                                           

 In terms of food security, the TPP is very hazardous. Most Japanese consumers try to avoid buying genetically modified foods. However, “Genetically Modified” is prohibited from specifying so that the U.S can largely export GM foods to Japan. Consumers are deprived of the right to choose what to eat.   

                                                           

 Medical treatment might face a crisis the Non Violation Complaint clause. In Japan, under the national health insurance program, all Japanese citizens can get medical treatment at reasonable prices while a quarter of Americans have no health insurance, and the medical fee is 6 times higher than Japan. In the U.S., the majority of medical fees are inflated due to excessive legal fees and lawsuits. Since American insurance companies desire to sell their insurance policies in Japan, the U.S. might sue Japan to abolish the public insurance program even though Japan does not violate any clauses.   

                                                           

 Mexico and some other members hope the TPP takes effect without the U.S. In that case, Japan should take the initiative in abolishing or drastically revising all unfair or unreasonable items because Japan is uncomparablly significant among the rest 11 members. It will be a good chance for Japan to construct a fair trade framework.   

                                                           

 Instead of the TPP, Donald Trump plans to form several bilateral trade agreements. He is such a competent businessman that Japanese politicians will not be able to compete with him. In order to avoid a supposedly “fair” agreement which is advantageous to the U.S., Japan had better exemplify a fair trade framework with the revised TPP. It will also benefit the other members to compete with the U.S.    

                                  


President-Elect Donald Trump

 

 The ramifications of the U.S. presidential election are greatly benefitting Japan so far. The yen is depreciating, which is boosting Japan’s stock markets. The Federal Reserve Board (FRB) is going to raise its rate next month, which will further fuel the Japanese economy.   

                                                           

 President-elect Donald Trump is expected to implement large-scale public investment, which is expected to stimulate the American economy. The American markets have shown their approval with record highs. Also, the long-term interest rate is on the rise in the U.S., which is expected to cause the U.S. dollar to appreciate.   

                                                           

 As a result, the Japanese yen has depreciated greatly to 110.70 yen to 1 USD. The Japanese economy is benefitting. Japan cannot thank Mr. Trump enough.   

                                                           

 The U.S. president has an overwhelming power on trade. He can decide arbitrarily to raise tariffs and to withdraw from trade agreements. In fact, former-President Nixon abruptly imposed a 10% tariff in 1971, confusing the world.  

                                                           

 Donald Trump expressed during the election campaign that he would revise or withdraw from NAFTA and walk away from the TPP to retain American jobs, which is earnestly supported by American workers.   

                                                           

 NAFTA took effect in 1994. Since then, the American manufacturing workforce has shrunk by 4 million workers. The manufacturers have relocated their production lines to Mexico where labor costs are cheaper.   

                                                           

 Mr. Trump also commented that he would impose 45% tariffs on Chinese imports. However, it obviously violates the World Trade Organization (WTO) agreement.  

                                                           

 If the U.S. imposes high tariffs on imports, it will incur retaliatory tariffs from foreign countries. Donald Trump is a very competent businessman. I don’t believe he will adopt such a stupid policy.   

                                                           

 Mr. Trump puts the highest premium on huge tax cuts and infrastructure investment. However, it will result in deeper government deficit and a stronger dollar. A strong dollar will not only curtail U.S. exports but also spur manufacturers to relocate their product lines overseas.   

                                                           

 In 1980’s, under then-President Regan, the twin deficit, trade deficit and government deficit, bulged. In addition, strong dollar caused trade conflicts.   

                                                           

 President-elect Donald Trump had better reconsider his pre-election remarks.   

 

 


A Political Earthquake

 

 The result of the American presidential election astounded not only the U.S. but also the world. Amid uncertainty, the Japanese yen predictably appreciated, and consequently Japan’s Nikkei average nosedived. The election brought new facts to light. The combination of the American election and Brexit makes for an interesting if not predictable future.  

                                                           

 Most popular media predicted a Hillary Clinton win. According to “THE WEEK,” 57 newspapers, such as New York Times and Washington Post, endorsed Mrs. Clinton whereas only 2, The Las Vegas Times and The Florida Times Union, endorsed Mr. Trump. USA Today even called on its readers not to vote for Donald Trump. Mr. Trump criticized the media for being disingenuous and corrupt, and said that voters were aware of it. The election confirmed that the media are biased.  

                                                           

 The result was quite different from surveys conducted prior to the election. Many people refused to answer honestly for one reason or another. Supporters for Donald Trump were reportedly less-educated Caucasian working-class voters. However, there were a lot of support for Trump from other demographics. Trump repeatedly made controversial remarks. Therefore, many educated people couldn’t express that they supported Donald Trump, afraid of being criticized as racist. In reality, freedom of speech is not allowed in the U.S. 

                                                           

 The next president was elected by the citizens. Nevertheless, many American citizens refused to accept the result, and rallied in at least 25 cities. More than 120 people were arrested. They defiantly oppose the result of their own democratic election. In the U.S., democracy is becoming unhinged.  

                                                           

 Furthermore, some turned into mobs, smashing windows of shops and setting fire to garbage on the streets. Such a riot does not occur in Japan.  

                                                           

 In Japan, on the 9th, the yen appreciated by 1.09 yen to 103.32 yen to 1USD, and the Nikkei average plummeted to 16,251.54 yen, a decrease of 919.84 yen. On the following day, however, yen depreciated by 2.31 yen to 105.63 yen, and the average rebounded to 17,344.42 yen, an increase of 1,092,88 yen. The next president’s policy of putting the economy first caused a surge in markets. I didn’t expect yen to get back to normal so soon.  

                                                           

 Donald Trump is straightforward. He says what he really believes at the moment. The TPP will not go into effect any more. The crucial issue for Japan is the U.S. forces deployed in Japan. I hope that he will gradually withdraw the American military from Okinawa. It’s high time for Japan to safeguard its citizens and territory by itself. The Japanese Constitution drafted by the GHQ should be revised at last.  

                                  


The 2018 Winter Olympics

 

 The current International Olympics Committee president, Thomas Bach, is visiting Tokyo concerning the 2020 Tokyo Olympic Games. I believe, however, he should be more concerned about the 2018 Winter Olympics in Pyeongchang, which proving to have a series of increasingly insurmountable problems.      

                                                           

 The 2018 Winter Olympics hosted by Peongchang, South Korea, is only 1 year and 4 months away. Nonetheless, this May, the chairman of the organizing committee, Cho Yong Ho, abruptly resigned. He is the head of the Hanjin Group, the 9th biggest conglomerate in South Korea. Its shipping division went bankrupt on August 31st.      

                                                           

 Samsung Electrics suffered the total global failure of its Galaxy Note 7. Hyndai carmaker has suffered 24 labor strikes so far this year. These 2 companies account for about 20% of South Korea’s GDP. The Peongchang olympics have been having financial difficulties and have been unable to gather sufficient sponsors. The harsh economic downturn is worsening the situation.      

                                                           

 The South Korean government announced that studium construction was about 65% complete. However, according to a South Korean reporter, hardly any citizens believe it. To make matters worse, the construct division of  Tonb Group, which was in charge of stadiums, went bankrupt on December 31st last year.      

                                                           

 In terms of climate, the Peongchang Winter Olympics is impractical from the beginning. It does not snow much. And, the temperature is not so cold: the average temperature surpasses zero Celsius. Snow-machines typically work under -2 ℃. Even at midnight, the temperature goes below freezing for only several days a year. A snow shortage is inevitable.      

                                                           

 The Seoul Olympics in 1988 was financially supported by Japan. However, Japan will host the Tokyo Olympics in 2020. Japan has to devote itself to prepare for its own Olympic Games.      

                                                           

 I hope that Thomas Bach has already prepared an alternative plan. The 2018 Winter Olympics cannot be hosted by Pyeongchang, South Korea.     

                                                             


Hypocritical Condemnation of Eating Dog

  Last month, an Italian parliamentarian insisted that Europe should boycott the 2018 Winter Olympics in Pyeongchang unless South Koreans stop eating dog meat. However, I don’t criticize Koreans or Chinese for eating dog as long as they eat in their own countries.                                                                                  According to an Italian news media, 60% of South Koreans eat dog meat, and 1 to 2 million dogs are killed every year for food. At dog farms, dogs are being kept in horrific conditions, covered with feces.                                                                                  Many Westerners condemn eating dog. In South Korea, however, dogs are raised for eating, similar to cattle and swine. There are around 1 billion Hindus, for whom cattle are holy animals. Nonetheless, they don’t criticize eating beef. Those who eat beef and pork should not criticize eating dog.                                                                                  This month, an Australian wildlife expert, Dr. Benjamin Allen, announced in a scientific paper that wild dogs currently living in the Australian outbreak should be rounded up and sent to China to be processed for food. I basically agree with him. The dog meat should be sent to North Korea where many people die from starvation.                                                                                  Lions don’t hunt when they are satiated. We should not kill animals needlessly. Nevertheless, Australia massacre 5 to 6 million kangaroos yearly, only a small portions of which are eaten. Most of them are slaughtered in vain.                                                                                  May 2015, the FAO announced that the number of hungry people in the world has dropped to 795 million ― 216 million fewer than in 1990-92. Still, in developing countries, 12.9% of the population is undernourished, and almost 1 in 15 children dies before the age of 5. Most of them die from hunger-related causes.                                                                               There are many Westerners who eat excessively and became obese, while criticizing eating dog. Eating far more than needed is legally not a crime, but gluttony is certainly a sin.                   

An honest Bigot:Donald Trump

  No election has been a hotter issue than the current U.S. presidential election. Real estate tycoon Donald Trump is catching attentions not only in the U.S. but also worldwide.                                               On July 19th, Donald Trump, who crushed 16 rival candidates and provoked controversy at every turn throughout his primary campaign, formally won the Republican nomination for U.S. president at the party's convention .                              Donald Trump publicly commented that he would bun Muslims from entering the U.S. and build a wall along the borer with Mexico to keep illegal immigrants from entering the U.S. He has a fairly negative view toward Muslims and illegal immigrants. Some American citizens feel shame about him, and even the Pope criticized him, although indirectly.                                 On the other hand, there are many Americans who like him. They say that Donald Trump is honest. In fact, a few Muslims committed terrorism in Europe and the U.S. Most Americans will never forget the 9/11 terror attacks in 2001. Mexicans illegally immigrate to the U.S. every year, and some commit crimes there.                                                  Globally, politicians are regarded as dishonest or even hypocritical. The most important thing for them is to win an election. Therefore, in order to acquire votes, they say what they don't’ believe or keep silent on what they really believe. However, Donald Trump openly states what he believes. In that regard, we must admit that he is straightforward and follows his conceptions.                                                      Most of his earnest supporters are white, but the majority are blue-collar workers. Immigrants might compete for their jobs. That is one reason that they love Donald Trump.                                           Donald Trump is a successful businessman. When he appeared on ‘The Apprentice,” ambitious men and women wanted to be just like him.                             In the business field, honesty pays, but not in politics. Donald Trump is still my hero. I hope he won’t become a politician.                                  

Rogue Powers

  On July 12th, the Permanent Court of Arbitration in the Hague rejected China's territorial claims in the South China Sea, finding in favor of the Philippines in a case brought in 2013. Nevertheless, China has been taking a obstinate position toward the judgement. Not only China but also Russia and the U.S. frequently violate international law.                                            The Arbitration Tribunal completely rejected China's "Nine-dotted Line" claim, stating, "there was no evidence that China has historically exercised exclusive control over the water or resources." Nevertheless, China will obviously not accept the judgement, which will hurt China's reputation. However, we cannot force China to follow the decision.                                             In the "Arctic Sunrise" case, Russia took a similar course to China . Russia captured Green-peace members who had climbed on a watchtower in a Russian outpost in 2013. The Netherlands filed the incident for the Permanent Court of Arbitration, in which Russia refused to participate. The Arbitration Tribunal ordered Russia to compensate the Netherlands for the illegal capture. Nonetheless, Russia refused to to follow the decision. In addition, Russia militarily annexed Crimea in 2014. As a result, economic sanctions were imposed on Russia, and it was excluded from the group of 8.                                             In 1986, the International Court of Justice decided in a case brought by Nicaragua that the U.S.'s assistance to the anti-government militia was illegal, and ordered the U.S. to compensate Nicaragua. Nonetheless, the U.S. refused to follow the judgement. When Nicaragua brought a complaint to the U.N. Security Council, the U.S. exercised its veto power against the draft resolution. The U.S. was internationally condemned.                                       It's not uncommon that China, Russia and the U.S. violate international law, and exercise their veto rights for selfish reasons. The other Permanent Members, the U.K. and France, have overlooked China's invasion of Tibet while arbitrarily interfering with domestic matters of powerless countries, such as Myanmar via economic sanctions.                                             We should realize that the United Nations is ineffectual.   

The Influence of the U.K. Referendum

  On June 24th, the United Kingdom decided to leave the European Union. I believe that the British economy will fall into decline. However, in terms of GDP, the U.K. accounts for only 4% of the global economy. And, the U.K. is not a significant market for Japan. The problem for Japan is the strong yen.               As of noon on the 24th, the exchange rate was just 99 yen to 1 USD. The Japanese yen appreciated 7.60 yen in only 1 day. The strong yen will surely take its toll on the Japanese economy, not only in terms of exports but also on domestic tourism.              Many Japanese companies are based in the U.K. as a foothold to the EU market. Toyota Motor Manufacturing U.K. produces 190,000 cars per year, 75% of which are exported to European countries. Honda also founded production lines in the U.K., manufacturing 115,000 cars annually, 90% of which are exported into the EU market. They are now considering relocating their operations.              Many financial institutions are based in London. Under the EU “Passport System”, they can easily open their branches in EU countries. However, without this benefit, they might relocate their offices to Frankfurt or Paris. Their staff will be transferred or laid-off. London might lose its status as the financial center in Europe.              Working class voters voted for independence from the EU partly because of competition from immigration. As a result of the secession, many of them might lose their jobs.              62% of Scotts voted to remain in the EU. In 2014, their referendum decided not to become independent from the U.K., predicated on the necessity to remain as a member of the EU. Scotland is going to demand independence from the U.K again.               As a result of secession, the British economy might temporarily prosper. For 2 years from a notification of secession, EU laws are still in effect, and tariffs will not be imposed. The British pound will most likely depreciate, which will increase the U.K.’s exports.              Still, leaving from the EU whose population is a half billion, not only the British economy but also the U.K.’s political clout will decline further. The IMF forecasts that the U.K.’s economic growth will fall into negative territory (-0.8%) for the first time in 8 years in 2017.               In Japan, the Nikkei average plummeted by 1,286 yen which is the greatest plunge since April 2000 when the IT bubble burst. Owing to the strong yen, prices of oil and imported commodities will probably decrease. However, after the Lheeman Shock, many workers were laid-off and graduates had difficulty in landing a job. I hope that Japan won’t fall into default again.            

The Turbulence in 2016 The Turbulence in 2016


 This year, markets have started off with turbulence and anxiety. The Shanghai Stock Market plunged on the first trading day, triggering global stock markets to plummet.

 On January 4th, the Shanghai Stock index plunged by 7%, The Chinese ‘Circuit Breaker’ system automatically suspended trading. The Dow-Jones index fell by 432.42 points, and the Nikkei average plummeted by 582.73 yen. All Asian stock markets also tumbled.

 On the 7th, China’s People’s Bank pegged its rate as 6.5646 yuan to 1 USD, the lowest in 4 years and 10 month. The Shanghai index plunged by over 7% on anxiety about consistent and accelerating capital outflows from China and the burden put on the foreign-currency debt of Chinese companies. The Chinese authorities relied on the ‘Circuit Breaker’ again.

 On the 3rd, Saudi Arabia broke off diplomatic relations with Iran. Bahrain and Sudan followed Saudi Arabia on the following day. In Iran, a mob assaulted the Saudi Arabian Embassy in protest against the execution of 47 Shiites including a famous Shiite cleric for political reasons on the 2nd.

 On the 7th, West-Texas Intermediate Crude hit its lowest record in about 12 years at 32.1 dollars, even lower than during the Lheeman Shock at 32.4 dollars. I believe that cooperation in decreasing oil production will be difficult because of the diplomatic breakdown between Saudi Arabia and Iran. Oil prices will continue to be sluggish in any events.

 I’m not surprised by the present turmoil in stock markets. However, I expected that Japanese yen would further depreciate due to the rate hike in the U.S. Contrary to my supposition, however, the yen is appreciating (118.23 yen to 1 USD as of the 8th). After the Lheeman Shock, foreign currencies depreciated against USD, with the exception of the yen. In times of economic turbulence, the yen appreciates because investors consider Japanese yen as a safe haven currency. Japan’s national bonds are also being purchased by global investors as a hedge against uncertainty.

 Japan’s economy is still robust at the moment. I basically have an optimistic view on the Japanese economy. However, Japan had suffered greatly from the strong yen previously. The current economic turbulence might incur a similar situation. And, if China collapses, the global economy will be thrown into a depression, including Japan. I’m crossing my fingers that the Chinese bubble will have a soft landing.


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