#8 Entry ban, #Tiananmen 1989, #Decarbonization goals, #Digitization efforts, #Economic pact with U.K.
HIGHLIGHTS: 15th Dec – 31st Dec.
● Decarbonization recognized as the new area of cooperation in the Japan-U.S. alliance.
● In digitization of government services, Japan ranked last amongst other OECD nations.
● Japan bans entry of new foreign arrivals to block the spread of the new strain of virus.
● Japan and the U.K. signed a new economic pact.
1. POLITICS
● In an interview with Nikkei Asia, Japanese Environment Minister Shinjiro Koizumi says Japan recognizes decarbonization as the new area for cooperation in the Japan-U.S. alliance. He hoped the allies would work closely towards reducing carbon emissions under the President-elect Joe Biden’s administration and described it as a new bond between the countries. The Environment Minister predicted that global trends towards reducing carbon emissions will continue even amidst the shadow of the pandemic. Japan will work towards accelerating the goal of decarbonization by drawing up a plan this year for a carbon pricing system in cooperation with METI (Ministry of Economy, Trade and Industry), promote electric vehicles by doubling up the electric vehicle purchase subsidy, and thermal insulation of homes.
● On becoming the Prime Minister, Suga vowed to propel digital adoption in government and related services. His government is driving digitization efforts by setting up a new “digital agency”, a “control tower” for the government’s IT policies. The new Japanese Minister of digital reform Hirai Takuya says “COVID 19 exposed Japan’s half-baked digitalization”. The Economist article titled, ”Japan’s new prime minister drags government into the digital era”, cites a survey of 30 countries in OECD in which Japan was ranked last in terms of government agencies providing digital services. Only 7.3% of citizens availed government online services in 2018 compared to 80% in Finland, and also Japan fell behind countries like Slovakia & Mexico which are considered to be relatively technological backwaters. According to Goldman Sachs, in Japan government’s fixed assets, goods consisting of intellectual property such as software account only 3% as compared to 8% in the US. The Daiwa Institute of research, a think tank, estimates that by the process of digitisation of government services, GDP could be boosted by more than 1% per person.
2. COVID-19 RELATED STORIES
● A Financial Times article elaborates on the development of COVID-19 vaccine and reports that more than a dozen of the experimental vaccine shots are now in large scale clinical trials. The top 3 vaccines according to their efficacy rates as sourced from the report are 1st- BioNTech/Pfizer (95%), 2nd- Moderna (94.1%) and 3rd- AstraZeneca / Oxford University (70%). Deutsche bank research analyzed and ranked economies according to their bilateral agreements and pre-order doses with pharmaceutical companies. The research positioned Japan as 4th amongst leading economies below Canada, US and Australia. Japan has pre-ordered vaccines, four doses per capita, and is planning to source them from four companies. Nearly 50% from Novavax, 20% each with AstraZeneca & Pfizer, and 10% with Moderna.
● In the whole of Japan, Niigata prefecture becomes the first to announce grant money of 50,000 yen to coronavirus tested negative family members who cohabit with infected persons. This comes as a support system for the family members as they become burdened financially due to the hospitalization.
● With the third wave of coronavirus, Tokyo registered the highest number of daily cases among Japan’s other 47 prefectures. As on Dec 31, Tokyo had hit a daily high of 1337 infections.
● Yuriko Koike, Governor of Tokyo has asked the residents to stay at home during the new year holidays. As an extreme precaution, Koike and her counterparts from few other prefectures have asked people who are highly susceptible to infection to wear masks at home.
New year holidays being the most important holiday in Japan; the risk of spreading infection is high as businesses remain closed, and people visit Shinto shrines, gather outdoors, and visit relatives.
● Japan joined the list of nations that had placed strict entry bans and flight suspension against travelers from Britain in response to the new variant of the coronavirus which is 70% more contagious and spreading rapidly in Britain. Following this, it also placed a ban on entry from all other countries to block against the spread of a new strain of the virus.
3. ECONOMY
● As per the November reports of the Ministry of Health, Labour & Welfare, the ratio of job openings to job applicants was 1.06, 0.02 times higher than the previous month. A continuous improvement has been observed in the last two months. The Tourism & Hospitality, and telecommunication industries, were the largely affected industries and witnessed a decrease in revenue by 34.7% and 33.4% compared to the same month of the previous year.
● The Ministry of Internal Affairs & Communications announced that the unemployment rate for November was 2.9%, which had decreased by 0.2% from the previous month. This is the first improvement in the data in the past four months.
● The Japanese stock market declined for the second consecutive time due to concerns over the outbreak of new virus strain of COVID-19 in Britain and also due to rising domestic infections.
● Japan’s industrial production, which was expanding over the previous five months, flattened in November due to the resurgence of COVID-19 infections around the world.
The Ministry of Economy, Trade and Industry forecasted that production will fall 1.1% in December and has projected a rebound of 7.1% in January.
● Kazuaki Nagata, from the Japan Times, reports on how Japan’s public debt has snowballed to twice the size of the country’s GDP. “This fiscal year alone, the issuance of new Japanese government bonds (JGBs) will be about ¥112 trillion — the highest ever and more than double the previous record of ¥52 trillion seen in fiscal 2009, when the global financial crisis hit the country.” COVID-19 has led the government to spend enormously over various measures while not thinking of schemes to repay the debt. The situation has been exacerbated by the COVID-19 relief package.
● In a recent article in Asahi Shimbun, Editor-in-chief Yukako Ito discusses Japan’s huge debt, analyses the emergency budgeting and concludes that the government’s budgeting stands out to be distorted and fragile. Just like central banks around the world, even in Japan the bank bought government bonds to support expenditure. This exacerbated the debt situation, which was already nearly 900 trillion-yen - equivalent to 15 to 16 years of tax revenue - even before the pandemic.
The government under Suga had announced many emergency response packages, in addition to the recently formulated supplementary budget, which were full of trillion-yen policies. Suga, while speaking on the increasing public assistance costs said, “in the end, the country will protect it with a safety net”. While Yukako Ito cites the distribution of a uniform payment of 100,000 yen per person irrespective of their financial situation, during the pandemic as baseless. Also, he mentions that the third supplementary budget which was formulated exclusively to address coronavirus relief measures had funds allocated for the development of decarbonization technology, defense costs, and support measures for farmers.
4. BUSINESS
● A Kyodo News survey reports 40% of government recognized Japanese companies with sensitive technologies related to security are planning to shift their manufacturing bases away from China. Nearly 45% of survey respondents had hinted on the possibility of shifting supply chains to India and South-East Asian companies.
● The Bank of Japan (BoJ) plans to launch a feasibility study starting in April 2021 on its digital currency. Hiromi Yamouka, former BoJ official and current chair of Digital Currency Forum in Japan, said that he hopes that by 2023, the consortium will develop some form of ‘digital currency’ similar to Facebook’s Diem plan.
● The Brexit trade deal has made Japanese carmakers reluctant to invest and make vehicles in the U.K., as they struggle to qualify some U.K.-assembled models for tariff-free export to the EU. The accord allows a greater proportion of vehicle content to come from outside the U.K. or EU.
Earlier when Japan and Britain sealed a bilateral free trade agreement, it was a win situation for Japanese automakers as the trade deal offered low tariffs for cars made with EU parts.
5. FOREIGN AFFAIRS
● A confidential diplomatic document declassified recently projects the stance of the then Japanese government towards China following the Tiananmen square incident. Back then, G7 nations, including Japan, Britain, Canada, France, Italy, United States and West Germany, had condemned the Chinese government for the crackdown on student protesters. The documents show that the other G7 nations pushed Japan to sign on to the declaration condemning China. However, Tokyo was initially reluctant focusing on bilateral ties with China.
● The documents also revealed that in 1990 subsequent to the Tiananmen Square incident, when the Chinese vice premier, Wu Xueqian visited Japan, he had directly asked the Emperor to visit China. Wu visited Japan to attend the ceremony proclaiming Emperor Akihito's ascension to the Chrysanthemum Throne. Wu’s statement was kept as a secret by the Japanese government considering the anti-China sentiment growing amidst the public against the backdrop of the Tiananmen Square incident.
The Tiananmen Square protests were student-led demonstrations held in Tiananmen Square in Beijing during 1989. The incident came to prominence because of the military crackdown on the pro-democracy protest in Beijing in 1989.
● Japan and the U.K. signed a new economic pact on 1st Jan 2021 following the U.K.’s exit from the EU. The pact calls for abolishing tariffs on Japanese automobile exports from 2026 and establishes no new tariffs on Japan’s farm product imports. The pact also enables the governments to intervene in data exchanges for business purposes.
6. OTHER STORIES
● Yasutoshi Nishimura, the Minister in charge of Economic revitalization, who devises governments growth strategy, launched a new Study Group for Corporate Organizational Transformation. The members of the study group will perform a feasibility study for creating organizations with diverse human resources such as young people, women and foreigners.