Japan To Ban More Foreign Telecom

 

 

The Japanese government will introduce new regulations for 14 critical infrastructure sectors to bolster cyber defenses, learning from the recent Colonial Pipeline hack that shut down a major energy artery in America's East Coast.

The sectors include telecommunications, electricity, finance, railroads, government services and health care, Nikkei has learned. The government will require operators of such key infrastructure to address national security concerns when procuring foreign-made equipment.

The potential for cyberattacks and information leaks has grown over the years as telecom carriers and public utilities increasingly rely on digital technologies to operate and monitor their facilities. Japan hopes to mitigate risks posed by compromised equipment and connections, especially amid growing concerns of data leaks from Chinese-made telecommunications equipment.

The government plans to amend the various laws governing each sector in one sweeping motion and add a clause requiring each sector to be conscious of national security risks.

Specifically, they will be required to look into issues stemming from the use of foreign equipment or services, including cloud data storage, as well as connections to servers located overseas.

The government will monitor companies for compliance and will suspend or cancel their license should any major issues arise. Detailed standards will likely be outlined in future government ordinances and guidelines.

Currently the government does not have a legal basis to assess national security risks when infrastructure operators upgrade their systems. 

The increased ability to remotely monitor and control infrastructure-related facilities has opened the sector up to greater cyber risks, like illicit programs built into servers, routers and other telecommunications equipment. There are growing concerns over data leaks through Chinese-made equipment and services in particular, especially since the Chinese government requires companies operating in the country to comply with information requests.

The Japanese government agencies in 2018 agreed to stop procuring equipment that could pose economic security risks. It now wants private-sector companies to follow similar standards.

The push comes after a ransomware attack this month on the Colonial Pipeline, one of the largest in the U.S., forced the government to relax rules on fuel transport. The attack was claimed by hacker group DarkSide.

Cyberattacks on infrastructure can cause major disruptions to daily life, but there is also concern that hackers could cause disasters like airplane accidents and floods by targeting air control systems and dams, or attempt to remotely shut down nuclear power facilities. 

Other countries are also imposing similar restrictions on tech-related procurement. The U.S. is requiring that companies seek prior approval to use Chinese-made technology equipment and services.

The U.K. has proposed legislation that would fine telecommunications companies up to a tenth of their revenue for not eliminating equipment made by China's Huawei Technologies from 5G networks. Sweden has told telecom providers to remove products by Huawei and compatriot ZTE from their networks by January 2025.

Nikkei

 

Cool Japan Uncool After 10 Years

Former PM Koizumi At Cool Japan Launch July 2007

It has been 10 years since the then former Prime Minister Junichiro Koizumi launched the Cool Japan marketing campaign to internationally sell Japan as not only a cool destination for vacation but exchange study, academic research, business exchange, and cultural exchange.

 

Elated by the international attention, Japan’s bureaucrats and CEOs reformulated the concept of "national cool" into a Cool Japan marketing campaign that could reach new consumers and add soft power to Japan’s manufacturing achievements. And it seemed to work ... for a while.

Leading media soon had Cool Japan columns and programs. Tourists were invited to the country for Cool Japan tours and seminars, with obligatory stops at the kawaii (cute) capital, Harajuku, and the anime-drenched district of Akihabara.

But the hoped-for revenue streams didn’t pan out.

North American manga sales peaked in 2007 and then declined, resulting in a wave of layoffs at international manga distributors. 

 

According to the Japanese Ministry of Economy, Trade, and Industry’s 2012 “Cool Japan Strategy” white paper, Japan exports only 5 percent of its Cool Japan contents – not quite one-third of US creative industries’ 17.8 percent. 

The industry created a bubble that has now burst, says Mr. Galbraith, author of “The Otaku Encyclopedia: An Insider's Guide to the Subculture of Cool Japan.” “Some say anime is dead,” he observes in Tokyo, “while others who still like it say it’s overpriced, and end up illegally streaming it.”

Even Japan’s mighty video games are losing their worldwide cachet. Legendary game designer Keiji Inafune was recently accused of having a “Charlie Sheen moment” in his calls for Japanese studios to wake up to their growing irrelevance.

The marketing of the phrase Cool Japan itself creates an awkward problem: “To call yourself cool is by definition uncool – and it defies Japanese modesty,” says Manabu Kitawaki, director of Meiji University’s Cool Japan program.

“Creativity doesn’t spring from marketing,” he continues. “The Ministry of Economy, Trade, and Industry hired Dentsu for its Cool Japan campaign. It’s become a way to funnel money to a big ad firm.”

The otaku culture (a term used to describe people with intensive interests in anime or manga) celebrated by Cool Japan can also be problematic overseas. Critics complain of the use of the popular girl band group AKB48 as cultural ambassadors. “AKB48 may represent Japanese culture,” says Yukio Kobayashi, president of Tokyo music agency 3rd Stone From The Sun, “but underage girls in sexy clothing … to me it’s basically legal child porn.”

Experts also say the country focused for too long on producing highly developed but unexportable products.  They say the sheer size of the domestic market made foreign fans of Japanese culture an afterthought – and that when Japanese contents industries did look abroad, the rush of interest in Cool Japan created unrealistic expectations. 

“It’s the boiling frog scenario,” says the Ryotaro Mihara of the new Creative Industries Division at the Japanese Ministry of Economy, Trade, and Industry (METI). “With Cool Japan the market shrank bit by bit," he says referring to Japan's domestic manga, anime, and music markets, "so there wasn’t a sense of urgency” to reach international consumers.  

By contrast, says “Japanamerica” author Roland Kelts, “The Korean government invested a lot of money in its domestic pop industry and went after overseas markets. “Places where J-pop was formerly popular, like Southeast Asia, have switched to K-pop.”

The Fukushima Daiichi nuclear power plant disaster then came along to deal a cruel blow to Japan’s image. “You can call Japan ‘cool’ all you want,” says Japanese film critic Mark Schilling, “but images of the tsunami and reactor meltdowns are stronger now in many foreign minds than any miniskirted pop idol.”

As the challenges facing Japanese soft power sink in, some say the first step to addressing them may mean ditching the Cool Japan slogan altogether.

METI’s Mr. Mihara admits there has been criticism. “A debate is needed within Japan,” he says, “to come up with a better phrase to explain Japanese culture.”

Rather than Cool Japan slogans, Japan may be better off promoting specific aspects of Japanese culture. “What you want is Cool X, Y, or Z,” says Steve McClure, former Billboard Asia bureau chief and publisher of McClureMusic.com. “Branding a cultural movement in terms of national origin is dangerous.”

This is an area where Japan should have an advantage. “Gangnam Style” may have 800 million YouTube views, but Japan produces a broader range of success stories.

Last year in North America, vintage singer Saori Yuki had a No. 1 song on the iTunes jazz chart while dance music star Kyary Pamyu Pamyu topped iTunes’s electronic music chart. “It’s almost irrelevant whether Japan is cool or not, because there is enough cool stuff here anyway that will sink or swim on its own,” says Mr. McClure.

Instead of throwing money at marketing campaigns, experts say Japan should support its struggling domestic contents industries. Japan spent just 0.12 percent of its national budget on the arts in 2008, the latest year for which comparable figures are available, whereas South Korea spent 0.79 percent, and China 0.51 percent. 

Public funds would be effective in industries like manga and anime, where young “kamikaze” animators burn out from long days and salaries that average only just over 1 million yen (about $12,185) per year.

Indeed, though Japan once dominated the industry, work is increasingly done by its low-cost Asian neighbors. “There is a culture of manga and anime that is currently in critical condition,” says Galbraith. “The manga market cannot be allowed to fail. It is the base of the contents industry in Japan.”

Public money would also be useful in helping Japanese artists make expensive trips abroad. “We get many requests from overseas fans,” says King Record’s Sayaka Yamada, who manages the international catalog of girl groups like Momoiro Clover Z. “Financial support would be very helpful,” she continues. “Japan should study Korea, which invested a lot to promote K-pop artists.”

Observers say Japan production houses should empower the “scanlators” who post pirated manga. “They need to join with other companies to make a Web presence that’s attractively priced and branded,” Mr. Kelts counsels, pointing again to South Korea, which has been much more proactive about utilizing the Internet and branding its culture.

“When a Pixar film comes to Japan, it’s branded as a Pixar film,” Kelts says. “Nobody knows Japanese anime studios like Production I.G. Cool Japan was fine in the early phases, but at a certain point distinguishing brands have to emerge.”

An initiative by METI’s Creative Industries section, which was formed just last year, may speak to new efforts in this direction. METI funded a “Harajuku Street Style” market in Singapore. “Kawaii styles are very popular there, but Japanese fashion businesses have difficulty operating overseas,” METI’s Mihara says. “We provided a budget to help them get established. Pooling their efforts, we had 13 brands available in Singapore for the first time.” 

Experts also say Japan needs to get away from stereotypes.  “We need to convey the depth of Japanese culture beyond manga and anime,” says Meiji’s Mr. Kitawaki. “Behind manga and anime there is a rich culture, for example the animism of Shinto. Or take modern Japanese design’s ability to manage extremely small spaces – this is also Cool Japan.” 

The massive worldwide outpouring by the likes of Lady Gaga after the Fukushima disaster hinted at the reach of Japanese soft power. And a recent global poll by research firm StrategyOne ranked Japan the world’s most creative country.

Mr. McGray, in his famous article, foresaw two possible futures for Japan. It could either employ its vast potential soft power to reinvent itself, or, he warned, lurch toward further uncertainty.

He leaned toward optimism, saying, "Japan's history of remarkable revivals suggests that the outcome … is more likely to be rebirth.”

 

Yet 10 years later it is certain that Cool Japan has lurched to not only uncertainty but uncool because what equates as cool to 60+ year old politicians is certain to be uncool to the rest of society.

Tokyo Gas Suggested Back Door Talks For Fish Market

Former Tokyo Gov. Shintaro Ishihara

 

A former Tokyo deputy governor said Sunday that Tokyo Gas Co. suggested backdoor negotiations on the sale of contaminated land for a new Tokyo fish market.

The remark by Takeo Hamauzu, 69, contradicts the Tokyo government's official records that state Hamauzu in October 2000 sounded out Tokyo Gas, the owner of the land at the time, about holding secret talks on the sale.

The Tokyo government's main negotiator for the purchase of land to replace the aging Tsukiji fish market told a powerful committee of the Tokyo metropolitan assembly looking into the controversial relocation plan that the gas company had used the term "behind closed doors."

Among several potential relocation sites, the city government selected the land in the Toyosu waterfront area that was formerly used as a gas production site, reaching a basic agreement on the relocation plan in July 2001.

However, Yuriko Koike, upon becoming Tokyo governor last August, decided to postpone the planned November 2016 relocation of the market, which also deals in fruit and vegetables, amid lingering concerns about soil and air pollution at the new site.

Tokyo Gas was initially reluctant to sell the land to the Tokyo government as it thought the former gas production site would not be appropriate for a market. But according to the government records, Hamauzu approached the company and began secret talks on the land deal.

Hamauzu, close aide of then-Tokyo Gov. Shintaro Ishihara, told the committee that as the gas company was originally considering using the land for a different development project, he thought the company wanted to discuss the land sale to the Tokyo government quietly as an abrupt change in the plan for the use of the Toyosu site could cause disruption.

"Since negotiations usually do not go well without taking into account a partner's demand, I said, 'We are fine to talk about it behind closed doors,'" Hamauzu told the committee.

Ishihara will appear before the committee Monday.

The metropolitan government said the same day benzene at up to 100 times the government-set safety limit had been detected in groundwater samples taken at the Toyosu site, higher than the benzene level of 79 times the allowable limit from Tokyo's ninth test results announced in January.

A former Tokyo deputy governor said Sunday that Tokyo Gas Co. suggested backdoor negotiations on the sale of contaminated land for a new Tokyo fish market.

The remark by Takeo Hamauzu, 69, contradicts the Tokyo government's official records that state Hamauzu in October 2000 sounded out Tokyo Gas, the owner of the land at the time, about holding secret talks on the sale.

The Tokyo government's main negotiator for the purchase of land to replace the aging Tsukiji fish market told a powerful committee of the Tokyo metropolitan assembly looking into the controversial relocation plan that the gas company had used the term "behind closed doors."

Among several potential relocation sites, the city government selected the land in the Toyosu waterfront area that was formerly used as a gas production site, reaching a basic agreement on the relocation plan in July 2001.

However, Yuriko Koike, upon becoming Tokyo governor last August, decided to postpone the planned November 2016 relocation of the market, which also deals in fruit and vegetables, amid lingering concerns about soil and air pollution at the new site.

Tokyo Gas was initially reluctant to sell the land to the Tokyo government as it thought the former gas production site would not be appropriate for a market. But according to the government records, Hamauzu approached the company and began secret talks on the land deal.

Hamauzu, close aide of then-Tokyo Gov. Shintaro Ishihara, told the committee that as the gas company was originally considering using the land for a different development project, he thought the company wanted to discuss the land sale to the Tokyo government quietly as an abrupt change in the plan for the use of the Toyosu site could cause disruption.

"Since negotiations usually do not go well without taking into account a partner's demand, I said, 'We are fine to talk about it behind closed doors,'" Hamauzu told the committee.

Ishihara will appear before the committee Monday.

The metropolitan government said the same day benzene at up to 100 times the government-set safety limit had been detected in groundwater samples taken at the Toyosu site, higher than the benzene level of 79 times the allowable limit from Tokyo's ninth test results announced in January.

Kohei Urano, emeritus professor at Yokohama National University, said while benzene at 79 times or even 100 times the safety limit would pose little danger to health unless the groundwater was used at the market or to drink, it might still arouse public concern about food handling at the market.

ニュースサイトで読む: http://mainichi.jp/english/articles/20170319/p2g/00m/0dm/105000c#csidxf97e61e34c06ad6aaa32833cd94a8a0
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Pokemon Go Release Delayed Again In Japan

Game-maker Niantic has postponed the scheduled launch of Pokémon Go in Japan following an email leak.

Yesterday it was reported that the game was due to go live in Japan but the companies behind Pokémon Go have canceled that plan, a source close to the launch told TechCrunch. One major reason for that change of heart is that internal communication from McDonalds Japan, the game’s sponsor, detailing the launch made its way to internet forums (including 2ch, “Japan’s Reddit”) and photo site Imgur.

An initial morning launch time was pushed back to early afternoon as the email went viral. Later, however, the companies decided to cancel today’s launch entirely due to concerns that the hype generated would overload the game, our source explained. We don’t have an immediate update on when the game will finally go live in Japan, but understand that the launch is “imminent” but unspecified.

The postponement will frustrate many in Japan who are still waiting but, on the positive side, Niantic, Nintendo and the Pokémon Company — the three firms behind the smash game — are confident that, if the game is launched right, their serves can handle the undoubtedly huge demand that Pokémon Go will generate in Japan. Ninatic CEO John Hanke previously cautioned that the company needed time to ensure it had enough servers to cope with a deluge of Pokémon addicts in Japan.

The delay means also that we will have to wait to see the impact of the first “sponsored location” in the game. McDonalds has agreed to become the first paying sponsor, turning its 3,000 stores in Japan into “gyms” where players can battle, adding a new source of revenue to the game beyond its already lucrative in-app purchases and potentially driving real-world traffic to McDonalds stores. That’ll be a partnership to watch since there are plans to offer sponsored locations in other parts of the world.

The success of Pokémon Go is unprecedented. Just two weeks after its U.S. debut, it has reportedly passed 30 million downloads and $35 million in revenue, and surpassed Twitter on active users and Facebook on engagement. That has doubled the valuation of Nintendo — yes, in just two weeks — and all without launching in Japan, the home of Pokémon, yet.

Pokémon Go is available in more than 30 countries right now thanks to a steady rollout across Europe last week. TechCrunch understands that Japan is planned as the first launch in Asia and, once the game is available there, it will be extended to other countries in the region.

Jon Russell, Techcrunch

How Abe Administration Lost Australian Submarine Deal

 

French flag flies in Sydney celebrating submarine deal

Japan, the onetime frontrunner for a $50 billion ($38.8 billion) contract to build Australia’s new submarine fleet in partnership with Australian industry under the so-called SEA 1000 Future Submarine Programme, failed in its bid to assemble the boats.

Australian Prime Minister Malcolm Turnbull announced yesterday that French shipbuilder Direction des Constructions Navales Services (DCNS) will be awarded the contract–Australia’s largest defense deal ever– to build 12 Shortfin Barracuda Block 1A  subs, a diesel-electric derivative of DCNS’ Barracuda-class nuclear attack submarine, for the Royal Australian Navy.

Japan’s Minister of Defense Gen Nakatani appeared bewildered over Australia’s decision yesterday. “We will ask Australia to explain why they didn’t pick our design,” he said, according to Reuters.

Japan with its 4,000-ton Soryu-class diesel-electric attack stealth submarine fitted with a new lithium-ion battery propulsion system was long considered to be both the Australian government’s and analysts’ favorite pick.

Why the dramatic reversal of fortune for Japan’s defense industry?

Like with any large defense deal, the reasons for picking the military hardware of one country over that of another are manifold and not only confined to technical and military considerations, but are also subject to political and geostrategic calculi.

There are five major reasons why France won.

First, Japan heavily betted on the close relationship between Japanese Prime Minister Shinzo Abe and former Australian Prime Minister Tony Abbott, who purportedly promised Tokyo a sweetheart deal in which the submarines would be domestically constructed in Japan in order to bolster the Australia-Japan strategic relationship–and ultimately lost. It was only reluctantly that Abbott eventually agreed to a competitive evaluation process in February 2015 inviting, next to Mitsubishi Heavy Industries (MHI) and Kawasaki Shipbuilding Corporation (KSC), French shipbuilder DCNS and the German company ThyssenKrupp AG (TKMS) to compete.

Once Abbott was ousted from power, Japan was merely one of three bidders and no longer received the political support it was accustomed to from the new Australian government under Malcolm Turnbull and had to revamp its strategy to win the bid. Japanese defense industry representatives were simply outmaneuvered by their French and German counterparts. Australia’s Senate Economics Legislation References Committee already rejected the Soryu-class as a suitable Collins-class replacement option once before in November 2014.

Second, picking DCNS over the MHI and KSC—both Japanese shipmakers building the Soryu-class boats—is also politically more opportune for Malcolm Turnbull at this stage. Australians are likely to head to the polls on July 2 in federal elections, in what is predicted to be a tight race between the governing Liberal-National Coalition and the Australian Labor Party. During the press conference yesterday, Turnbull said that the 12 submarines in their entirety (save some specialized parts) will be built in Adelaide, the capital city of South Australia and home base of the Australian Submarine Corporation (ASC).

South Australia is facing deindustrialization with the state’s last auto plant to be shut down at the end of 2016. As a consequence, creating new jobs will be vital for the Liberal-National Coalition to retain seats in the state and the decision to go with DCNS, according to Turnbull, will create more than 2,800 jobs. “Australian built, Australian jobs, Australian steel, here right where we stand,” he emphasized. DCNS purportedly agreed that all major work on the submarines will be done in Adelaide using domestic materials. Japan, however, initially was reluctant to build the submarines in Australia, given Tokyo’s general reluctance to transfer sensitive military technology abroad. Japan softened its stance on this issue over the last few months, but, as I have written previously, somewhat unconvincingly.

Third, Japan’s defense industry was not enthusiastic about selling Soryu-class submarines overseas. The two companies producing the submarine, MHI and KSC, currently have only the capacity to meet the domestic demand for submarines. Overall, the Japan Maritime Self-Defense Force plans to induct a total of 11 Soryu-class submarines by 2020. As of now, seven Soryu-class subs have been commissioned.  Due to the Japanese defense industries inexperience in dealing with international clients, there was also a growing concern in Australia that this could lead to a work culture clash, which would make collaboration on the project unnecessarily difficult.

Also, as The Diplomat reported previously, Japan still lacks experience in selling its military hardware including transferring sensitive defense technology to another country. Furthermore, “the Australian Defense Department appears concerned that any deal signed with Japan could be negated by the powerful Japanese bureaucracy, which allegedly [according to defense department sources] also showed ‘less enthusiasm (…) for the deal and that would undo it in the long run’” as I wrote

last week.

Fourth, the United States has tacitly been supporting the Japanese bid, but recently signaled Turnbull that its opposition to a potential European submarine supplier has plummeted. “Quiet U.S. pressure to opt for the Japanese submarines–U.S. officials allegedly indicated that the United States would not allow its most advanced weapons systems to be installed on European-made subs–has also apparently been dropped. U.S. President Barack Obama made it clear to Prime Minister Malcolm Turnbull that the submarine deal was a sovereign issue of Australia and that the selection of France or Germany would not in any way affect the Australia-U.S. alliance,” I wrote last week.

Given that the Australian evaluation team and an expert advisory panel included senior former U.S. Navy officers, it is fair to assume that the U.S. Navy will allow its submarine systems, including a tactical control system, a Raytheon combat system (if selected), as well as weapons systems (e.g., Mark-48 torpedoes, Harpoon anti-ship missiles and Tomahawk cruise missiles) to be installed on the Shortfin Barracuda Block 1A  subs.

Fifth, while it is difficult to assess any submarine bid on an unclassified level, there is a fair argument to be made that the new Barracuda-class better meets Australia’s needs than the Japanese stealth submarines, although it remains to be seen how difficult a swap from nuclear power to a conventional system will be for DCNS. “This decision was driven by DCNS’s ability to best meet all of our unique capability requirements,” said Malcom Turnbull and Australia’s Minister for Defense Marine Payne in a joint statement published yesterday.

“These included superior sensor performance and stealth characteristics, as well as range and endurance similar to the Collins Class submarine. The Government’s considerations also included cost, schedule, program execution, through-life support and Australian industry involvement.”  DCNS has built more than 100 submarines for nine different navies and its ships are sailing on all five oceans–a major advantage over Japan, which has no submarine export experience.

There were a number of very specific technical requirements outlined by the Australian government as I reported previously:

The requirements outlined in the bid including a 4,000-ton displacement, a range and endurance similar to the Collins-class submarines, sensor performance and stealth abilities better than the Collins, and a combat system and heavyweight torpedo developed jointly by the U.S. and Australia as the preferred combat system and armament, makes an off-the-shelf solution not an option.

As I outlined before, the Australian submariner community remained skeptical of the Soryu-class submarines throughout the bidding process:

Among other things, they point out that on average Japanese subs are constructed to last for around 19 years, whereas the Australian governments expects at least a 30-year active service life span. The Japanese boats also have much less accommodation space than Collins-class submarines.

Additional objections where raised over the shorter patrol range of the Soryu-class sub in comparison to the current Collins-class and the Soryu’s lower transit speed. (Japan did issue a report claiming that concerns over the submarine’s limited cruising range were unfounded.) Furthermore, I explained: “[A]nother concern is the integration of a U.S. combat system and weapons (Mk 48 Mod 7 CBASS heavyweight torpedoes) into the Japanese hull.”

There has also been repeated safety concern over the use of advanced lithium-ion batteries. A former submarine engineer explained last week: “In the life of 100,000 [lithium-ion] cells and a fleet of 12 submarines there is likely to be a failure that cannot be stopped or controlled, with a catastrophic outcome. The Boeing 787 battery fires and the burning of the U.S. Navy’s Advanced Seal Delivery System are reminders that contemporary lithium-ion is not yet safe enough for submarines.”

It is important to understand that yesterday’s announcement was just a statement in principle and did not include the signing of a contract. The next few months will be crucial in figuring out the particulars including detailed technical specifications, construction schedules, technology transfer agreements, and what parts of the sub will in fact be build in Australia.

The botched bidding process was an important lesson for Japan. Its defense industry apparently still has a long way to go after lifting a self-imposed weapons export ban in April 2014, to become a major player in the global arms market. Given that the only customer of Japan’s defense industry has been its own government, it is not surprising that Japanese defense contractors lack experience in marketing, technology transfers or that they shrug off opportunities to expand their business abroad.

Franz-Stefan Gady, The Diplomat

Japan To Be Downgraded

 

When markets open in Tokyo tomorrow, Standard & Poor will downgrade its rating of Japanese government debt, citing weak growth. “Despite showing initial promise,” Mr. Abe’s strategy “will not be able to reverse this deterioration in the next two to three years,” the ratings agency said. It was the third of the three major ratings firms to do so. 

On Friday, the Bank of Japan had downgraded its forecast for industrial output in the current quarter to “largely flat” as a result of growth slowdowns in China and emerging economies that are weighing on Japan’s exports.

The latest signs came as doubts over Abenomics, as the Japanese leader’s three-pronged growth strategy is called, are increasingly emerging among economists nearly three years after he took power. 

“The time is not yet ripe for us to declare Abenomics a failure, but we must say we are getting there,” said economist Takuji Okubo of Japan Macro Advisors, a Tokyo economic-analysis firm, who has been supportive of Mr. Abe.

Two figures underscore the urgency. Economists believe Japan will struggle to grow in the current quarter after shrinking 1.3% the previous quarter. And despite unprecedented easing by the Bank of Japan, the leading measure of inflation shows prices are flat, a setback for Mr. Abe’s efforts to eradicate deflation. Low energy prices, while generally good for a big energy importer like Japan, have disrupted the push to generate inflation, Bank of Japan officials say.

Some benchmarks are much improved over three years. The Nikkei stock average is 80% above where it stood when Mr. Abe took office, even after the recent global stock-market shudder, backed by a sharp rise in corporate profits. Demand for workers is stronger than it has been since the early 1990s, when Japan was entering the long period of stagnation. And the headline figure on prices probably underestimates Mr. Abe’s deflation-fighting efforts because it has been pushed down by a one-time fall in oil prices.

“Abenomics is still halfway along the road,” Mr. Abe said on Sept. 8 when he was re-elected as ruling-party leader. He said he would work to “deliver a virtuous cycle of a recovering economy to every corner of the country.” 

Bank of Japan Gov. Haruhiko Kuroda said Friday that while China’s slowdown would affect Japan somewhat, he believed China’s leaders would soon take steps to boost the economy and restore stable growth.

Yet, none of what Mr. Abe calls the “three arrows” of Abenomics seems equipped to pierce through the barriers keeping consumers from spending and companies from investing more.

The first arrow, monetary stimulus, hasn’t been fired since Oct. 31, 2014, when the Bank of Japan jolted markets by pumping hundreds of billions of dollars in additional money into the financial system and expanding purchases of stocks and real-estate funds.

The second arrow, fiscal stimulus, has ceased to be a force for growth. After a sharp increase in government spending to stimulate the economy in Mr. Abe’s first year, the budget for the current fiscal year, which ends in March, will reduce overall government spending if it isn’t augmented with an extra budget.

The third arrow, structural change, has included a drive to improve corporate governance and bring more women into the workforce. While those changes have won praise from foreign investors, Mr. Abe hasn’t recently proposed any major additions to the agenda. There are no signs that bigger changes—such as opening the country more widely to foreign workers—are in the works.

It is a plight Japan has often faced in the quarter-century since its on-and-off doldrums began—difficulty in emerging from a negative cycle of flat or falling prices, pessimism about a declining population and slow growth. 

“It’s hard to imagine that households would increase spending or companies decide on more investment when the medium- and longer-term prospects remain dark,” said Tatsuhiko Yoshizaki, chief economist at trading company Sojitz Corp. ’s research unit.

While some economists say Mr. Abe could boost confidence by doing more to tackle Japan’s high government debt, those close to the prime minister say such painful steps should wait until the economy fully escapes the 15 years of deflation it experienced before Mr. Abe took over.

Tokyo intends to keep pressuring companies directly to invest more and give employees bigger raises. In government-business talks this fall, “I want to give companies a kick in the back,” said economy minister Akira Amari.

For much of the summer, Mr. Abe was occupied with getting parliament to approve one of his cherished ambitions: expanding Japan’s military role overseas and boosting cooperation with the U.S.

Takashi Nakamichi

Japanese Rice Cartel Members Protest TPP

Japan Agriculture Group Execs Protest TPP

The Japanese city of Narita is best known to the outside world for its major airport that serves Tokyo, the nation's capital city. 

Narita is also a rural area of Chiba Prefecture, however, with a long tradition of rice farming. 

Toward the end of the summer, Narita's rice farmers gather to pray for bountiful harvests. They dance, play music and ride elaborate festival carts. From afar, the wagons appear to glide through a sea of lush green paddy fields as villagers pull them down Narita's placid country lanes. 

This year, some farmers feel that these traditions are in danger of disappearing. 

Japan is planning to join the Transpacific Partnership, or TPP. The government claims the country has begun to emerge from more than two decades of economic stagnation, thanks to heavy stimulus spending. It hopes that deregulation, including liberalizing trade, will help economic growth over the long term. 

But rice farmer and local activist Takeshi Ogura says entering into the TPP would be a bad deal for Japan. 

"Japanese agriculture is pretty costly," Ogura says, "so we don't want the government to treat food as a commercial business. We want it to protect our food sovereignty." 

To be sure, the issue of Japanese agriculture carries some weighty symbolism. 

But the TPP would also liberalize insurance, automobiles and other industries that employ more people and account for bigger chunks of the Japanese economy. 

The TPP includes 11 nations bordering on the Pacific, and its members account for around 40 percent of global trade. 

Ogura is very proud that he grows his own food, and that he lives in a community that celebrates this tradition. He says that joining the TPP would threaten his way of life. 

"The farmland and rice farming is at the core of our culture," he says. "They are linked to this culture through community festivals like this one. But if we stop cultivating the rice, this culture will be destroyed." 

The solidly-built, more than 60-year-old Ogura is a pretty typical specimen of Japanese yeomanry. He farms less than 25 acres of land and has to do sideline jobs to make ends meet. His children are not very enthusiastic about following in his line of work. 

In recent elections, Ogura voted for the Communist Party of Japan. 

Actually, he confides, he's no Marxist. It was a protest vote, he says, to show that he was fed up with the main political parties, because they refuse to stand up and oppose the TPP. 

"They pretend to listen to us," he says. "Especially at election time, they make sympathetic faces, and they're kind of helpful. Some of the candidates promised to oppose the TPP. But they voted for it in Parliament. They really broke their promise." 

Ogura's uphill struggle against the TPP reminds him of another local rice farmer and village chief by the name of Kiuichi Sogoro. 

In 1653, Sogoro traveled from Chiba to Edo, then Japan's capital, to petition the ruling Shogun to ease crippling taxes on local farmers. At the time, this was illegal, and the Shogun had Sogoro and his four sons beheaded for their impudence. 

But the Shogun also reduced the taxes, inspiring local farmers to build a temple in Narita and hold an annual festival to commemorate Sogoro's courageous sacrifice. 

Today, Japanese rice farming is protected by a politically powerful agricultural lobby, and import duties of more than 700 percent. 

It is also the least efficient farm sector among the developed economies. 

Jesper Koll, JP Morgan's Director of Research in Tokyo, argues that Japan can get out of this predicament by having fewer people working on bigger farms, and growing luxury food products for export. 

"If Mr. Ogura were to switch to something called 'Koshi-Hikari,' which is the Lexus brand of rice," he says, "he could sell it for eight times what he can sell it in Japan to department stores in the People's Republic of China." 

And joining the TPP, he adds, would allow Japan to import cheaper foreign rice, and that would save consumers money. 

Takeshi Ogura says grimly that maybe the government will put off joining the TPP, but he seems resigned to the final result. 

"The only reason we struggle on like this is that we have these ancestral lands. We've got to keep them in the family," he says. "But if the rice prices go down, that's the time I'll finally have to abandon the land. We're just at the brink right now." 

NPR 

Editor's Note: 

To really understand this, there is a subtext not clearly stated by NPR that you will need to know. Rice in Japan costs $20-$30 per lb. The reason for this is that the rice farmers in Japan have what we would call a cartel (known as Japan Agriculture or JA) or trust that sets pricing. This has been tolerated because Japan's rice farmers are a protected class by politicians looking to buy their votes.  Because the Japanese government supports the cartel, Japanese consumers have little choice. 

 Nonetheless, the average Japanese household has been switching to foreign rice since the "bubble burst" and Japan began allowing foreign food imports in quantity. California and other rice are now generally used for day-to-day consumption, despite tariffs that make it 7 or 8 times as expensive as it should be. I'm not going to speak to whether this is right or wrong, just sharing the background, as I think any argument, such as those making pro-organic, anti-GMO arguments, needs to understand this context. Where in the West people may contend with a price differential of 20-30% for organic vs. GMO, the Japanese are dealing with something on a completely different pricing level. 

Dallas Brincrest

Family Mart And Uny Eye Merger

 

FamilyMart Co and home goods retailer Uny Group Holdings Co are in merger talks that might create Japan’s second-largest convenience store chain by sales, as operators seek cost savings.

Uny is considering options including mergers with other companies, and no decision has been made, the company said in a statement to the Tokyo Stock Exchange. FamilyMart also confirmed in a statement that it is in talks with Uny, which has a market value of about ￥169 billion (US$1.41 billion).

FamilyMart is competing against the popular 7-Eleven chain which is Japan’s largest convenience store network, and No. 2 Lawson to keep prices down by raising volume. Japan’s convenience stores are luring customers from supermarkets and fast-food restaurants by selling boxed meals and competitively priced groceries and offering services such as banking via ATM, utility payments, international phone cards, and parcel service.

“The merger would give both FamilyMart and Uny greater economies of scale,” JPMorgan Securities analyst Dairo Murata said.

The deal might also increase expectations for further convenience store market consolidation, he said.

FamilyMart chief executive officer Junji Ueda said he does not plan to spend too much time before reaching an agreement with Uny.  "We made our offer and Uny will accept or reject it.  We do not plan to participate in drawn out talks."

Uny shares surged 11 percent, the biggest intraday gain since 2008, to ￥742, before trading at ￥724 at 11:30am yesterday in Tokyo. FamilyMart shares fell 2.9 percent.

Itochu Corp owns 36 percent of FamilyMart and about 3 percent of Uny, according to data compiled by Bloomberg.

Uny’s Circle K and Sunkus chains had 6,328 stores in Japan as of January, compared with FamilyMart’s 11,271 and Seven & I’s 17,491, according to the companies’ Web sites. Lawson has about 12,000 stores in the nation.

Daniel Rea