Published in Japan Forward January 2nd 2025
In Western culture, snakes are malevolent and duplicitous, as attested by the serpent’s role in the expulsion of Adam and Eve from the Garden of Eden. Not so in East Asia, where they are considered wise and auspicious. Cobra-like naga protected the Buddha from torrential rain after his enlightenment, and the creature’s ability to shed its skin symbolizes regeneration and transformation.
Buddhist naga
The last Year of the Snake, 2013, was a great one for Japan, featuring an explosive rally in the long moribund stock Nikkei Index and the first signs that the “lost decades” of deflationary stagnation were about to end.
Nobody is going to get excited about the policies of current Prime Minister Ishiba in the way they did about the late Shinzo Abe’s “Abenomics” twelve years ago. Nonetheless, there is every possibility that the Snake will deliver prosperity, safety and stability. Relative to many other countries, Japan will look better and better just by calmly carrying on.
Last year’s predictions once again turned out to be a mixed bag. In the Paris Olympics, Japan did even better than I expected, coming in third, not fourth, in the overall medal tally. It was notable that Japanese competitors brought home medals in the new sports such as skateboarding as well as traditional areas of strength like judo and gymnastics.
On the other hand, the anticipated strength in the yen never came to pass, leading to ills such as over-tourism but also economic benefits such as onshoring of production by Japanese and foreign companies. At the current level, Japan’s currency remains massively undervalued in relation to purchasing power parity, which the OECD calculates at 95 yen per US dollar. Such a distortion cannot last.
THE TRUMP TOWER ACCORD
In 2016, Prime Minister Shinzo Abe broke protocol and flew to New York almost as soon as Trump’s victory over Hillary Clinton was declared and visited him at Trump Tower. Subsequently, the two men were to bond over golf, and little came of the inflammatory anti-Japan rhetoric Trump had deployed on the campaign trail.
Current Prime Minister Ishiba’s favourite hobby is not golf but trainspotting, an activity unlikely to interest the president elect. On his first visit to the U.S. after taking office, Ishiba was not granted a meeting with Trump while Akie Abe, widow of the late Shinzo Abe, was invited to dinner with him and his wife.
Still, there is every reason to expect good relations between Team Trump and Japan, especially now that Elbridge Colby is to be Undersecretary of Defense for Policy. Colby is fully aware of Japan’s geopolitical indispensability in the effort to block Chinese hegemony. Meanwhile, Japan has already embarked on a doubling of military spending, and no doubt American defence companies will be looking forward to some juicy contracts.
What might Trump do to try and improve America’s industrial competitiveness? Using the threat of tariffs to make companies shift production to the U.S. is one answer. Another is to devalue the dollar against currencies that are massively undervalued, as are the Euro and all Asian currencies, with the exception of the Singapore dollar.
The last time currencies were forcibly rearranged for political reasons was forty years ago when the Plaza Accord was signed in a New York hotel, resulting in a much stronger yen and West German Deutschmark. There are many more players today, but the basic problem of a rampant dollar is the same. If a similar formal meeting were to take place today, a suitable place for it would be Trump Tower, which is just a five minute walk from the Plaza Hotel.
In such a scenario, many countries would be forced to stimulate domestic demand or sink into deflation. For Japan, austerity would be out of the window. The challenge would be to generate a high wage and high consumption economy without the asset bubble that did so much damage last time round.
Colby’s book
JAPAN’S FIRST FEMALE PRIME MINISTER
In the murky world of Japanese politics, as I forecast, Fumio Kishida did not see out the year, resigning in October under a cloud of low-grade financial scandals. As is usually the case with weak prime ministers, he was unable to shake off the influence of the powerful ministries, particularly the Ministry of Finance.
I also hinted that his replacement would likely be Japan’s first female prime minister, and that looked a sure thing when Sanae Takaichi easily won the first round of the ruling Liberal Democratic Party’s internal election. Strangely, though, in the second round, some heavyweight power-brokers unexpectedly switched their backing to Ishiba, a man who had tried and failed to become prime minister many times before.
Why? One theory suggests that it was done to placate the Biden administration, which wanted a united front of Japan and South Korea to confront China. Takaichi – populist on economic issues but right-wing on cultural issues – might have raised Korean hackles by, for example, visiting the Yasukuni Shrine war memorial. A simpler theory is that whoever took over the prime ministership would inherit the lingering unpopularity caused by the scandals, and Ishiba is perfect for the role of short-term stopgap.
Recent events in South Korea guarantee fraying relations between the two countries as President Yoon, a rare Japanophile, loses all credibility after his bizarre attempt to impose martial law. The likely upshot: the South Korean left – anti-Japanese, anti-American and pro-North Korea – take over, making any united front impossible. Meanwhile, the LDP’s financial misdeeds will eventually be replaced by other, fresher scandals. If so, the factors that derailed Japan’s first female prime minister will no longer be relevant.
President Yoon dining with then PM Kishida. He was pilloried by the Korean left for being too friendly to Japan.
THE VULTURES SWOOP
One of last year’s predictions was that Apple would make a bid for Nintendo. That didn’t happen but Canadian company Alimentation Couche Tard’s declared intent to buy Seven & i, which owns Japan’s iconic Seven Eleven convenience store chain, is, if anything, even more astonishing. That is because the would-be acquirer is significantly smaller in terms of sales and number of outlets.
In terms of stock market value though, it’s a different story. In 2006, Seven & i’s market capitalisation was twelve times larger than Couche Tard’s. Today, the Canadian company is the larger, its stellar growth record having been rewarded by investors.
The fate of Seven & i has yet to be decided – a management buyout is on the cards too – but the precedent has been created. Surely, there will be more hostile takeover bids in the Year of the Snake. It will be interesting to see how managements respond to that possibility. One approach would be to increase returns to shareholders or to go for growth by acquiring other companies.
Another approach would be to leave the stock market entirely. Being listed on the stock market has always been a matter of prestige for many companies, but now new risks have come into the frame.
Hostile takeovers have been almost unknown in Japan in the past half-century, to the extent that the very concept seemed an affront to the Japanese value of “wa” (harmony). In reality, there was plenty of hostile activity in the era before the system of cross-held shares made it impossible. The two rail and real estate tycoons who made Shibuya what it is today, Keita Goto of the Tokyu Group and Yasujiro Tsutsumi of the Seibu Group, were well known for their ruthless acquisition strategies.
Now the crossholding system is barely extant, and the way is clear for a new era of corporate takeovers featuring Japanese companies as acquirers as well as acquirees. Many sectors, from retail to autos, are ripe for “regeneration and transformation”, and many companies will wear new skins in the Year of the Snake.
Seibu Group founder Tsutsumi – he had over 100 children
ENERGY: THE ROAD BACK TO REALITY
In 2020, energy titan BP promised to cut its oil and gas output by 40% by 2030 and substitute it with renewables such as wind and solar power. In 2023, the target was chopped to a 25% reduction. Now the target has been abandoned entirely and, even more remarkably, the company is now targeting new investments in the Gulf of Mexico and the Middle East in order to boost its oil and gas output.
As Daniel Yergin, guru of the energy world, stated in his book “The New Map” , the energy transition is real but the timescales drawn up by governments influenced by activist groups are totally unrealistic. In 30 years time “oil will maintain a pre-eminent position as a global commodity, still the primary fuel that makes the world go around,” he declares, though its share of the global energy mix will be on a downward slope.
If correct, this is good news for Japan, which has a singularly unsuitable topography for renewables. It creates enough time to build the only domestic source of energy that that can provide sufficient scale – nuclear power. A recent opinion poll showed that the Japanese public support “the maximum possible use of nuclear power stations” by 55% to 31%. With all the activity around safer, more efficient Small Modular Reactors, there could be a renaissance of the dream of a nuclear-powered world, as envisaged by Osamu Tezuka, the “God of manga”.
REACHING THE PINNACLE OF SPORT
Without wishing to diminish the tremendous feats of baseball star Shohei Ohtani, it’s worth noting that his sport is a minor one in global terms, with fewer fans than cricket. The biggest global sport is undoubtedly football (“soccer” to some), which has over 2 billion fans and also boasts the largest participation. So to reach the pinnacle of the world’s number one sport is a wonderful achievement.
That is what Wataru Endo, captain of Japan and stalwart at Liverpool F.C., has achieved. Liverpool are comfortably top of the English Premier League and, after beating Real Madrid, also favourites to win the European Champions League.
Admittedly, the 31 year old Endo has had few starts this season, usually coming on towards the end of the match. Liverpool have a new manager who has a different, so far highly successful game-plan. Endo, a model professional, analyses the games from the bench, aware he may be called on any minute.
The top clubs feature star players from all over the world, which puts them on a level above the national teams. If Liverpool do triumph at both home and in Europe, it would be reasonable to call them the best team in the world. Let’s hope that the Year of the Snake sees Endo celebrating many times with his teammates.