Trump wants to cut troop levels in both Japan and South Korea

 (June 13) Richard Grennel the outgoing US Ambassador to Gemrany said that the 9,500 troop withdrawal from Germany was in keeping with Trump's position and that he also wants to withdrawn troops from Japan and South Korea.

Trump wants more money to pay for troops

Grennel noted that the withdrawal simply sends the signal that Trump thinks that US deployments are too costly and those countries where US troops are stationed need to pay more of the costs of supporting the troops that are there. The withdrawal from Germany was about 30 percent of the over 34,000 troops stationed in the country.

Grenell was quoted as saying: "This is a hotly contested issue in the United States. Donald Trump was very clear, we want to bring troops from Syria, Afghanistan, Iraq, from South Korea, Japan, from Germany. It doesn't feel like something that gives too powerful a message, other than Americans ... are getting a little tired of paying too much for the defense of other countries. And this has been a very political point that President Trump has made for a long time."

Polls show that the German populace would rather see US troops withdraw than face increased expenditures for their upkeep. Trump may end up still having to pay for the upkeep of the troops he withdraws without any extra funds whatsoever if the withdrawn troops return to the US.

US trying to get even more money from South Korea

The talk of US troop withdrawal comes as the US is also putting pressure on South Korea to increase its financial contributions to pay for the 28,500 strong force there under the bilateral cost sharing deal called the Special Measure Agreement. There have been months of failed negotiations.

South Korea offered considerably more to the US and already pays more than many countries but the offer did not come close to Trump's unprecedented demands. The Koreans are unlikely to give in to Trump's demands. Japan is also unlikely to accept Trump's massive new demands.

The enclosed video notes that Trump is asking for more money to sustain troops stationed in foreign countries.

Japan's economy stalls in 2nd quarter in spite of stimulus

In the second April-June quarter, Japan's economic growth ground to a halt. There were weak exports and shaky demand domestically.

Japan's economy failed to grow on a quarterly basis during the April-June period, with gross domestic product (GDP) growth coming in at zero and missing already subdued forecasts.There will be even greater pressure for Premier Shinzo Abe to come up with policies that produce more sustainable growth. The economic stimulus is provided based on the premier's Abenomics:

 Abenomics is based upon "three arrows" of fiscal stimulus, monetary easing and structural reforms. The Economist characterized the program as a "mix of reflation, government spending and a growth strategy designed to jolt the economy out of suspended animation that has gripped it for more than two decades."

While the program produced an initial boost its effects appear to be fading rapidly. In January-March the economy had expanded by two percent. Senior Economist at Mizuho Securities, Norio Miyagawa said:"Overall it looks like the economy is stagnating. Consumer spending is weak, and the reason is low wage gains. There is a lot of uncertainty about overseas economies, and this is holding back capital expenditure. The government has already announced a big stimulus package, so the next question is how the Bank of Japan will respond after its comprehensive policy review, which is sure to lead to a delay in its price target."

Capital expenditure declined by 0.4 percent indicating that uncertainty over the global economy and weak domestic demand combined to discourage firms from new investments. Finance Minister, Taro Aso, said: "The breakdown of the data shows that gains in consumer spending lacked strength and exports fell a lot." The slowdown is happening just after an announcement by the government of a $133 billion new fiscal measures designed to boost the economy. The Bank of Japan (BOJ) also modestly increased its stimulus measures by increasing its purchase of risky assets. It is now under pressure to do more. The BOJ has been buying assets for 3 years now. The bank has already bought a third of the countries bonds.

Japanese Economy Minister, Nobuteru Ishihara, said: "Japan's economy is likely to achieve a recovery driven by private demand though the government must be mindful of risks such as slowing emerging market growth and uncertainty over the fate of Britain's exit from the European Union." Ishihara blamed earthquakes in April for a fall in tourism that weakened domestic demand. Some economists were not surprised at the result. Mark Jolley, of CCB International Securities said: "There's been quite a lot of strength in the yen, economic uncertainty and a bounce in oil prices, so it's not surprising that [Japan] is barely growing. That's been the average growth rate for the past five years. As long as Japan is growing between zero and one percent, that's a fabulous result. From the equity market's point of view, as long as you have broad stability in the economy, that will keep people reasonably comfortable with Japanese equities, so this [Monday's GDP data] is as good as you can expect."

The inflation target is 2 percent. Marcel Thieliant of Capital Economics said:"Inflation expectations remain poorly anchored, and the prospect of a prolonged period of below-target price gains raises the risk that expectations will move further away from the 2 percent inflation target. As such, we still expect the BOJ to announce additional stimulus measures at next month's meeting, though the scale of any further easing may turn out to be disappointing."

The Nikkei stock index was down slightly 0.2 percent after the data was released. The yen has risen 16 percent in relation to the US dollar this year making exports more expensive The value of the exports are also less when converted back to yen. Global demand is also weakening causing further declines in demands for export products.

Japan plans $265 billion stimulus program

Japanese Prime Minister Shinzo Abe announced plans to spend more that 28 trillion yen ($265 billion US) in an economic stimulus package to try and revive the Japanese economy.

In a recent speech, PM Abe said the stimulus package would be compiled next week. It was not clear how much would actually be new spending. After Abe's coalition won a large electoral victory in an upper-house election on July 10, he had ordered that a stimulus package be compiled to help boost the economy.

The government will likely need to issue new bonds to pay for the fiscal stimulus. Yasuari Ueno, an economist at Mizuho Securites in Tokyo said: “Tax revenues aren’t rising, and the funds for an extra budget are limited. This is all padding. Looking at what has been reported, they’re just lining up a bunch of different things. Once we see the details, I think the reaction is going to be worse.” He claims the government is pretending to have resources it does not have. The value of the yen has weakened in anticipation of the plan.

Fiscal stimulation is one of the "three arrows" of Abenomics, the other two are monetary easing and structural reforms. Some economists say that rather than new spending, Japan needs structural economic reforms and deregulation. There is a slowdown in overseas demand that may be exacerbated by the Brexit. The yen had been increasing in value. However the recent weakness in the yen in anticipation of the stimulus may improve Japan's export competitiveness. Abe said the government needed to support domestic demand and put the recovery of the economy on a firmer footing. On Friday there is a Bank of Japan policy meeting which may result in further economic stimulus. Abe will have no trouble passing new measures through parliament since his coalition has majorities in both houses

Japan is the world's third largest economy. Abe's announcement sent the Japanese and other stock markets higher. The size of the stimulus package is larger than many thought it would be and is nearly 6 percent of the size of the Japanese economy. It will likely include spending by national and local governments, as well as a loan program. Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities said: "The amount is so large that the stimulus package is bound to have a big economic impact. It is impossible to spend this much money in one extra budget, so this may take place over the next few years. The BOJ is likely to ease policy, including increasing government debt purchases, so you could say the BOJ can absorb the new debt. It also makes it easier to show that the BOJ and the government are working together."

As part of its package the government is planning to raise the minimum wage by 3 percent in order to help revive consumer spending.The Japanese economy is also burdened with a huge debt load that cost about half of tax revenues just to service. In 2013, public debt was more than one quadrillion yen ( $10.46 trillion US), which is more than twice Japanese annual GDP. Some analysts question whether even Abe's large stimulus package will be effective beyond giving stocks a temporary boost. Kyohei Morita, chief Japan economist at Barclays Capital said: "Markets are used to this size of stimulus, so their reaction is neutral. The effectiveness of the stimulus package itself is questionable."

Japan's economy moves back into recession in spite of Abeonomics

Japan's economic performance was hurt by a recent sales tax hike and investment by business declined. The economy shrank by 1.6 percent even though predictions were that there would be growth following a large decline in the previous quarter.

The decline may increase uncertainty about global economic growth as China's growth is slowing and the Eurozone grew only by 0.2 percent last quarter. Japan is the world's third largest economy. Effects on stock markets were mixed: U.S. stocks ended mixed Monday -- with the S&P 500 managing to set another closing high -- after Japanese markets tumbled on news that the world's second-largest economy unexpectedly slipped back into recession.
The hike in the sales tax appears to have created less demand from consumers, builders and manufacturers. In April the sales tax was hiked from 5 to 8 percent. Prime Minister Shinzo Abe is using the revenue to try to reduce debt which is the worst among advanced industrialized countries. A plan to further increase the tax to ten per cent has been shelved for now. After the recent sales tax hike, investment in housing shrank by 24 percent in the recent quarter while corporate capital investment was down by 0.9 percent. Consumer spending rose by merely 0.4 percent.
As many expected, on Tuesday, Abe called for an election in December: Shinzo Abe told a televised news conference on Tuesday that he would dissolve the lower house of parliament on Friday to pave the way for an election on 14 December. He added that he would delay a rise in the consumption [sales] tax, from 8% to 10%, until April 2017, 18 months later than planned.
Abe has claimed that passage of his three arrow "Abenomics" program is vital to improving the Japanese economy and pursuing necessary reforms. He hopes the elections will give him a mandate to continue with the program which involves monetary easing on steroids, government spending, and deregulation of business. He speaks of the policy as a "three arrow" strategy based upon a Japanese folk tale whose moral is that three sticks together are much harder to break than just one. Wikipedia describe Abenomics as follows: Abenomics refers to the economic policies advocated by Shinzō Abe since the December 2012 general election, which elected Abe to his second term as Prime Minister of Japan. Abenomics is based upon "three arrows" of fiscal stimulus, monetary easing and structural reforms. When introduced in 2013 the policy sent Japanese stock markets to their biggest gain in 40 years but now the policy when combined with the increased sales tax appears not to be working as planned.
Abe has been so far unwilling to pursue some promised deregulation of business and corporate tax cuts as well as labor regulations that in larger companies guaranteed Japanese workers lifetime employment. Japan's population is aging and also declining. Household incomes have not kept pace with inflation. Japanese corporations have outsourced some production outside of Japan to countries with cheaper labor and laxer regulations. Abe has already reacted to the depressing news by adding even further stimulus to the tune of $26 billion to $35 billion. The measures may include some subsidies to low-income families which would stimulate demand. While the lower yen should help exports, many producers depend upon imported components which become more costly as the yen falls in value. Critics blame Abe for not moving faster on changing labor regulations but corporations have also contributed to the situation by not passing on to workers the gains they have had from growing profits and increased stock prices.

Japan and China able to work around sanctions on Iran and buy Iranian oil

EU sanctions on shipment of Iranian oil have not prevented China and Japan from receiving shipments. Japan says it will provide coverage for Iranian tankers as they cannot get commercial insurance. China has offered Iran its own tankers to move crude oil.

Japan has approved government insurance of up to 7.6 billion for each tanker. Next month China and Japan combined will load about 620,000 barrels a day next month..

The EU ban includes not just a ban on member countries importing Iranian oil but also EU insurance firms from covering Iran's exports. The ban comes in force July 1st.

The measure will effect not just China and Japan but also South Korea and India. Both the EU and U.S. have imposed sanctions which are supposed to force Iran to give up its nuclear program.

India won an exemption from U.S. sanctions this week. India also may give insurance guarantees to avoid the EU ban on insurance. On the other hand South Korea has failed to get an exemption from U.S. sanctions. South Korea intends to simply not import crude from Iran. For more see this article.

EU, US, and Japan challenge China at WTO over rare earth quotas

Rare earths are critical for the production of many high-tech products. Beijing has set quotas on the export of the minerals. Now a joint case by the EU, U.S. and Japan is being filed with the WTO challenging the quotas. The joint filing by the three is not only rare but the first so far!

The group argues that China which produces 95 per cent plus of the global supply is pushing up prices. China replies that it is enforcing quotas to limit environmental damage through excessive mining. Apparently China suddenly has a laudable interest in the environment! A Chinese foreign ministry spokesperson said:"We think the policy is in line with WTO rules,""Exports have been stable. China will continue to export, and will manage rare earths based on WTO rules," he said.

The 17 rare earth metals are used in many electrical and renewable energy devices. Critics claim that prices are kept low in China whereas quotas make the earths more expensive for foreign competitors.

Ivor Shago chair of mining services at Rare Earths Global said that the U.S. should have decided itself to produce rare earths many years ago."They took a deliberate decision about 20 years ago not to develop [rare earth mining] and instead to buy the completed products,""Because of the deliberate decision that was taken, in China we have developed skills and expertise that the others do not have." Nevertheless it remains to be seen whether China is taking advantage of that fact in contravention of WTO rules. For more see this BBC article.

Japan has 32 billion U.S. deficit, first in decades

In a sign of a slowing global economy and reduced export power, Japan posted a 32 billion dollar trade deficit. This is Japan's first trade deficit since 1981.

Increased fuel exports are one factor causing the deficit as Japan lost nuclear power after the disastrous tsunami. Only four of fifty four nuclear power plants are in operation. Japan's exports fell by 2.7 per cent to 843 billion in 2011.

A senior economist analyst commented on the situation:"[The deficit] reflects fundamental changes in Japan's economy, particularly among manufacturers, Japan is losing its competitiveness." The strength of the Yen also impacts negatively on exports as Japanese products become relatively more expensive relative to those of competing countries such as China.

Japan is actually facing difficulties well known in the U.S. Japanese based manufacturers are outsourcing production to countries such as China to take advantage of lower labor and other costs. An analyst noted:"It's gotten difficult for manufacturers to export, so they've moved production abroad so that products sold outside the country are made outside the country," For more see this article.

Japan's supposed lost decade!

    A New York Times opinion piece by Eamonn Fingleton points out that Japan is often used by western analysts as a cautionary tale to show what can happen if a country adopts the wrong economic policies. Analysts often even talk of a lost decade.
    Fingleton points to many facts that contradict this image. There is surely more to life than just economic growth. Between 1989 and 2009 life expectancy in Japan went from 78.8 years in itself quite good to 83 years. This is a full 4.2 years increase over that time period. The average Japanese can expect to live 4.8 years longer than the average American.
   Even in some aspects of the economy the Japanese are far better off than Americans. For example, unemployment in Japan is 4.2 per cent.  U.S. unemployment is about twice that rate. Japan has a current account surplus of 196 billion a more than threefold increase since 1989. Meanwhile the US during the same period went from a current account deficit of 99 billion in 1989 to a humongous 471 billion deficit at present. Fingleton gives many other comparisons and shows that to a considerable extent Japan's supposed economic failure is a myth. The full article is here.

Malaysia Extends Philippine Peacekeeping Mission.

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Growing Reliance on Temps Holds Back Japan's Rebound

The companies may not worry that much about domestic demand if their exports increase to make up the difference and if their cost savings through using temps increases their profit levels. If increased domestic consumption decreases their profits companies will prefer that domestic consumption not increase. If the price of increasing domestic demand is to hire more expensive full time employers with resulting lower profit margins then naturally companies will oppose this.
The article points to the problem of underconsumption if wages are too low but since the companies do not depend primarily upon domestic consumption this may not be that much of a problem. However, for companies that depend solely upon domestic consumption low wages may very well slow down growth through lack of consumption.

Hayashi, Yuka. 2008. "Growing Reliance on Temps Holds Back Japan's
Rebound." Wall
Street Journal (7 January): p. A 1.
http://online.wsj.com/article/SB119939511325465729.html?mod=todays_us_pa&apl=y&r=125968

"One reason Japan's rebound hasn't gotten traction: companies' growing
reliance on
temporary workers, who earn less -- and spend less -- than full-time
employees. The
shift in hiring can be seen at companies like Hino Motors Ltd. The
truck-making unit
of Toyota Motor Corp. is paying record dividends this year. But it also
has been
filling thousands of factory jobs with temporary workers, who start at
$10 an hour
and get few benefits."

"More than a third of the people in Japan's labor force are categorized
as
"nonpermanent" workers: part-timers, temps on fixed-term contracts and
people sent
to companies by temporary-staffing agencies. That compares with 23% in
1997 and 18%
in 1987."

"Use of temps gives companies flexibility and cost control, helping
them succeed in
highly competitive global industries like manufacturing. Big Japanese
companies have
reported earnings growth for five straight years."

"In the past decade, average wages in Japan have fallen every year
except two
because of an increase in temps and stagnant wages for full-timers.
Consumption by
working families declined on a year-on-year basis in six of the past
eight quarters.
This even though the Japanese are also saving less: A Bank of Japan
survey showed
that some 23% of households had no savings last year, compared with
just 10% in
1996."

"The result is sluggish domestic demand and growth that is supported by
exports to a
lopsided extent. In the July-September quarter, when Japan's economy
grew at an
annualized rate of 1.5%, exports were rising at an annualized 11% rate
and domestic
demand was shrinking slightly. Personal consumption is so weak in Japan
that it
accounts for only a little over half of the economy, compared with 70%
in the U.S."

"Until the late '90s, worker-friendly laws forbade temporary-labor
contracts except
for a few specialized areas, such as computer programming. A change in
1999 allowed
temp agencies to dispatch workers to many more types of jobs. And in
2004,
manufacturers were allowed to use workers sent by temporary-help
agencies."

Biofuels in Japan

I suppose this might make sense as long as waste products are used but otherwise if the rice itself is used it seems inefficient and perhaps immoral to divert a food to making fuel. I am surprised that fuel in Japan is no more expensive than here in Canada.


Reuters India

Sake may power Japanese cars in the future
http://in.today.reuters.com/news/newsArticle.aspx?type=technologyNews&storyID=2007-05-11T170043Z_01_NOOTR_RTRJONC_0_India-297764-1.xml&archived=False

Fri May 11, 2007

By Risa Maeda

SHINANOMACHI, Japan (Reuters) - Japanese motorists may one day pump
their
cars full of sake, the fermented rice wine that is Japan's national
drink,
if a pilot project to create sake fuel is a hit with locals in this
mountain
resort.

The government-funded project at Shinanomachi, 200 kilometres northwest
of
Tokyo, will produce cheap rice-origin ethanol brew with the help of
local
farmers who will donate farm waste such as rice hulls to be turned into
ethanol.

"We want to present the next generation a preferable blue print -- a
self-sustainable use of local fuels," said Yasuo Igarashi, a professor
of
applied microbiology at the University of Tokyo who heads the three
year
project.

If the project catches on with locals then it could pave the way for
similar
endeavours across Japan that will see Japanese cars running on
Japanese-made
biofuels in the future, he added.

Japan, the world's second largest gasoline consumer after the United
States,
is entirely dependent on crude oil imports and it has been hit by the
surge
in oil prices.

With hefty carbon emissions reduction targets to meet under the Kyoto
protocols, Japan is turning to biofuels. Yet motorists in Japan are
still
far behind drivers in Europe and the United States in their consumption
of
green fuels.

Some analysts say Japan is at a major disadvantage as high prices for
local
farm produce mean locally-made green fuels are exorbitantly expensive.
Added to that is a lack of support from the country's powerful oil
distributors and a failure by the government to provide policy
incentives
such as mandatory usage.

That is where Igarashi and his team come in. They hope to show that
biofuels
are feasible and inexpensive by developing a low-cost fuel and
encouraging a
local community of about 10,000 people to take part in producing that
fuel.

SWEET AROMA OF BIOFUELS

Production has just begun at the facility at a former high school field
in
Shinanomachi and a sweet, sour aroma, similar to that of unfiltered
sake,
wafts into the air.

"We like the idea," said Shigehiro Matsuki, the mayor of Shinanomachi.
"The new fuels are renewable... instead of fossil fuels which are
running
out."

Unlike spacious sugar cane plantations in the No.1 ethanol exporter,
Brazil,
family farming is dominant in Japan, with a majority of farmers working
regular jobs and growing rice, the staple food, on their weekends.

There is plenty of potential to develop biofuels from agriculture waste
and
abandoned farmland, Igarashi said.

The project will test its biofuel on a "flex-fuel vehicle", which can
run on
any mixture of gasoline and green fuels and which is gaining popularity
in
the rest of the world as the battle against global warming heats up.

But Japan has no flex-fuel vehicles even though Japanese car companies
Honda
Motor Co. Ltd. and Toyota Motor Corp. produce them for the market in
Brazil.
So the team imported a red Ford Focus from Britain for the project.

With one 1 kilogram (2.2 pounds) of rice needed to produce 0.5 litre of
ethanol, the main challenge will be creating a low cost biofuel that
can
compete with ordinary gasoline, which is now sold at around 135 yen
($1.13)
a litre, including gasoline related taxes of some 56 yen.

© Reuters 2007. All Rights Reserved.