Putin and Japanese premier Abe hold two day meeting in Japan

(December 18) Russian President Vladimir Putin has been meeting with Japanese Prime Minister Shinzo Abe. Putin said that Russia may relax rules to allow Japanese citizens to visit the Kurile Islands occupied by Russia near the end of World War II.

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Several of the southern Kurile Islands occupied by the Japanese were seized by the USSR in August of 1945. Japan has had an ongoing dispute with Russia since the end of the war:

Japan claims the two southernmost large islands (Iturup and Kunashir) as part of its territory, as well as Shikotan and the Habomai islets, which has led to the ongoing Kuril Islands dispute. The disputed islands are known in Japan as the country's "Northern Territories".Out of a total of 56 islands only 8 are inhabited. Japanese inhabitants were expelled after the war.

Putin said that a solution needed to be found to the dispute. He invited Abe to visit Russia. Russian officials said that a total of 68 agreements were signed between the two countries during the visit. These included a trading agreement between Russian gas giant Gazprom with Misui and Co. and Mitsubishi Corporation. The Japan Bank for International Cooperation and the Russian Direct Investment Fund signed an agreement to set up a $1 billion investment fund to promote economic cooperation between the two countries.

The two leaders had two days of talks ending Friday. While there was no big breakthrough on the Kurile islands issue, there were numerous economic deals. The two did agree on talks regarding joint economic activities on the disputed islands. There has not yet been a peace treaty signed between the two countries. Abe said that he and Putin had taken an important step towards a peace treaty but that concluding one would not be easy.

Abe said:"The issue won’t be solved if each of us just make their own case. We need to make efforts toward a breakthrough so that we don’t disappoint the next generation. We need to set aside the past and create a win-win solution for both of us."Putin also stressed the importance of a peace agreement:"If anyone thinks we’re interested only in developing economic links and a peace deal is of secondary importance, that’s not the case. For me, the most important thing is to sign a peace agreement because that would create the conditions for long-term co-operation."

Protesters in trucks with loudspeakers drove through streets near the talks on Friday shouting "Return the Islands" and "Putin Go Home." Abe hopes to settle the dispute and seeks better relationships with Russia to counter China's rising power. The Japanese opposition noted the lack of progress on the territorial dispute.

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."

Japanese PM halt construction work at US Okinawa base relocation

Shinzo Abe, prime minister of Japan, agreed to halt construction work on the relocation of the U.S. Futenma airbase away from its densely populated site to a more remote area of the island.

The controversy has been ongoing for some time. Japan has agreed to the relocation of the Futenma base to an area in Henoko, south of Nago city, at U.S. Camp Schwab. However, local authorities are concerned about the impact of the move on coral reefs in the area. The local authorities want the U.S. base at Futenma removed from the island entirely. The disagreement ended up in the courts with each side filing suits against the other. Abe decided to accept a court-mediated settlement. The settlement will lead to further talks between the two sides.

Japan had already begun land reclamation just offshore from Camp Schwab. Abe said his plan was still to relocate the Futenma base to Camp Schwab. U.S. bases occupy large sections of Okinawa as shown on the map here. U.S. bases occupy about 18 percent of Okinawa. Altogether, the U.S. has approximately 26,000 troops on Okinawa as part of a security arrangement following the second world war. Japan heavily subsidizes the bases and also is paying for the relocation of Futenma.

John Kirby, spokesperson for the U.S. State Department claimed that both the U.S. and the Japanese government remained committed to the plan to construct the replacement for Futenma. At a briefing, Kirby said:"It is the only solution that addresses operational, political, financial and strategic concerns; that permits the operational readiness of our forward-positioned Marine forces and avoids the continued use of Marine Corps Air Station Futenma."However, The Okinawa Governor, Takeshi Onaga, said: "I was elected governor on the platform of not allowing a new base in Henoko. ... I will keep pursuing this policy with confidence."

Governor of Okinawa withdraws permission for construction at US base

The governor of Okinawa, Takeshi Onaga, has revoked permission for construction work on a new U.S. base at Henoko Bay on the Japanese island.

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For two decades, the U.S. and Japanese military planners have been attempting to relocate the Marine Corps Air Station Futenma — now located in the middle of a crowded city — on the island to a less populated area. The plan for the relocation has faced growing opposition and many protests since Onaga an opponent of the base won over the incumbent governor last November.

The conflict has grown since Prime Minister Shinzo Abe pledged to complete the base. The deal for relocation was agreed to back in the 1990s. Abe is promoting increased military spending and military ties with the U.S. in a bid to counter China's growing military power. He has reinterpreted the pacifist Japanese constitution so as to allow Japanese forces to engage in combat missions outside of Japan.

Abe reversed a decades-old policy that allowed Japanese forces only to be use in self-defence. There was a great deal of opposition and many demonstrations against this move. Many in the Japanese public oppose Abe's hawkish vision of Japan's future. In Okinawa this opposition is even stronger. They feel that neither the needs nor wishes of Okinawans are considered in Abe's plans. As the New York Times reports: Daily demonstrations against the base by protesters encamped at its main gate, and the shouts of “Warmonger!” that greeted Mr. Abe on a visit to Okinawa last month, highlight what he is up against: a public that for decades has recoiled from anything resembling the militarism that led Japan into World War II.

Onaga, at a news conference in Naha the capital of Okinawa, claimed that there were "legal flaws" in the permit that had been issued by his predecessor, who supported the relocation, and announced that he was revoking permission. Onaga wants the Futema base moved off the island completely. Okinawa is host to about 25,000 U.S. military personnel, more than half the number throughout the whole of Japan. Polls show that a majority of residents support the position of their governor. Demonstrators outside Camp Schwab, the U.S. base at Henoko Bay, cheered Onaga's announcement. Under the relocation plan the base would be much enlarged with runways extending into the bay. Very little work has been done but even surveys have brought protests.

The Japanese government will seek to have Onaga's decision overruled. The Japanese Ministry of Land, Infrastructure and Transport has ultimate jurisdiction over the construction permit revoked by the governor. Government spokesperson, Yoshihide Suga, said:“There is no change to our plan to continue with construction in order to prepare for relocation." Experts claimed that the issue could end up in Japanese courts. It remains to be seen if construction will continue or be frozen until the courts decide on the issue. Masakazu Aharen, of Shizuoka University said that trying to overrule Onaga's decision could be politically damaging for Abe who is already facing declining ratings over security bills he pushed through parliament. Ignoring widespread opposition in Okinawa could further damage his reputation.

Liberal economist Paul Krugman worries that Japan's "Abenomics" may fail

Paul Krugman, the liberal economist and Nobel Prize winner, said that there was a growing risk of failure of "Abenomics" the policies of Japanese Prime Minister Shinzo Abe designed to boost the Japanese economy out of a two-decade slump.

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Krugman has been a supporter of many aspects of Abenomics. However, he convinced Abe to delay another planned sales tax hike. An increase in the tax last April probably reduced consumer spending and contributed to the resulting depression. Japan has been unable to come near its target of 2 percent inflation. Quite the opposite, for the third time this year in July, the central bank's measure of inflation fell to zero. Kozo Yamamoto of the ruling Liberal Democratic Party said that the Bank of Japan should expand its monetary easing program even more by $83 billion.

Abenomics is a response to the failure of the Japanese economy to grow. In 2010 China already passed Japan as the world's second largest economy. Abe insists that his economic strong medicine is necessary for national security and to retain Japan's position as a prime world economic power.

Abe won a mandate last December to forge ahead with plans that includes an unprecedented amount of quantitative easing, government spending and at the same time considerable deregulation of business. He calls these measures a "three arrow" strategy, borrowing an image from a Japanese folk tale that three sticks together are harder to break than one. At first, the measures appeared to be working. Certainly they sent Japanese stocks soaring and the situation was aided by a weaker Japanese currency that increased exports. However, a sales tax imposed in April to increase revenue and help reduce the world's largest debt burden only helped return Japan to recession. As mentioned, Krugman convinced Abe that he should not increase the rate further as planned. However, he has cut the corporate tax rate further reducing his revenue. He hopes this will encourage business investment.

Abe is also contemplating other measures to make the private sector more competitive and profitable. He wants to change labor regulations that offered lifetime employment at some large companies. He is contemplating other legislative changes that will bring him into conflict with farmers, drugmakers and utility companies. Ever since the Japanese stock market and real estate bubble burst in the early part of the 1990's, Japanese companies have concentrated on cutting their debt and shifting their manufacturing base overseas where they make more profit. Wages did not grow and Japanese consumers failed to increase spending leading to a no growth economy.

The earthquake disaster and problems with nuclear power have not helped the struggling Japanese economy. Japanese demographics are unfavorable as well with an aging and shrinking population. While many economists support the idea of the purchase of government debt as a way to stimulate the economy and fight inflation, the IMF and others claim that Abenomics could cause a spike in bond yields and make the government's already huge debt load unsustainable.

Japan is facing an ageing population with the labor pool shrinking and the number of retired people increasing. As a result the government faces increases in spending on pensions, medical expenses and social security that increases debt. Japan already faces the world's largest debt to GDP ratio at 240 percent. Thomas Piketty the French economist has suggested that Japan should change its tax structure to help a younger generation be able to afford the cost of supporting seniors. Piketty suggests that taxes should be doubled on the wealthy and large firms from 10 percent to 20 percent. Redistribution of wealth could constitute a fourth arrow in Abenomics, Piketty argues.

Okinawa governor orders work suspended on US base

Governor Takeshi Onaga of the southern Japanese island of Okinawa has ordered a branch of the Defense Ministry to suspend all work in an area where a key U.S. military air base was to be relocated.

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Onaga claimed that an anchor of concrete thrown in the sea as part of a drilling survey is thought to have damaged part of a coral reef. The governor who had preceded Onaga changed his position on the relocation and supported the agreement between the US and Japanese government for the relocation of the US Marine Corps Air Station Futenma.

At a news conference, Onaga said that the use of concrete blocks had not been authorized and that damage had to be assessed. He also demanded that the Defense Bureau cease all activity relating to the relocation or lose its license for the drilling work. This could put the entire project on hold. In November last year Onaga won the governorship from Hirokazu Nakaima who had supported the transfer. Onaga campaigned against the base relocation. Opponents of the relocation claim that the proposed replacement of Futema, a V shaped runway on reclaimed land would threaten the safety of local residents and destroy the sensitive marine ecosystem. Onaga also complained that the Japanese central government has not made a sufficient effort to appreciate Okinawa's understanding of the relocation and he urged that the Defense Bureau take the order seriously. It was unclear whether the Defense Bureau would obey his order.

Chief Cabinet Secretary Yoshihide Suga said that while officials were studying the suspension order, the survey should proceed in spite of the order. He said: "I don't see any reason why we should halt the operation. This is a law-abiding nation. It is extremely regrettable that (Onaga) submitted the document (ordering the suspension) at this stage." US State Department spokesperson, Marie Harf, also said that the US understood that construction would go ahead as planned.

Futenma is currently located in a densely populated part of the island and the projected move was meant to allay safety and other concerns at the present location. Many Okinawans want Futenma gone completely off the island. The underwater drilling had been halted before last November's election, apparently to avoid controversy that might hurt the incumbent governor. He lost in any event to Onaga.

The relocation plan was agreed to back in 1996 but has been continually stalled by protests. There are about 50,000 US troops located in Japan and almost half are in Okinawa.. The relocated Futenma airstrip would be just across another US base Camp Schwab. The government of Prime Minister Shinzo Abe has forged a strong military alliance with the US, relying on it to counter the rise of China and North Korea's threats.

Okinawa was the site of fierce battles between the US and Japanese during the Second World War. The US occupied Okinawa and the Ryukyu Islands until June 1972 but there is still a huge US presence on the islands:There are 32 U.S. military bases[14] located on Okinawa Island. In total, these bases occupy approximately 20% of the island's area, but the footprint is far greater than this statistic implies as core urban areas continue to be fragmented by the bases, which have severe environmental contamination issues and heavily disturb and disrupt urban life... The bases primarily exist to serve Japanese and US strategic interests, but are unpopular with most local residents[16] despite recent efforts to move the bases out of core areas following incidents involving military personnel and resultant protests (including 1995 Okinawa rape incident).

The economic importance of these bases has lessened over time especially since the return of Japanese sovereignty. Many locals think that the bases actually hamper tourism and investment in the islands. In 2012 the US agreed to reduce the number of troops on the island by 9,000. While there are attempts to close bases in the heavily urbanized area near greater Naha the capital, many islanders do not approve of relocation but want troops off the island. There are also a small number of Japanese bases on the island. They are not viewed favourably either but considered as part of Japanese efforts to colonize Okinawa. This is not too surprising, since whether it is the Americans or the Japanese both seem more concerned about their own interests rather than the welfare and interests of the island inhabitants. As you can see from the enclosed video, Russian TV finds it worth while to cover the protests at Camp Schwab. The new Futenma base would be adjacent to that camp.

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.