Japan - Trip Report

Ganbarou Japan

A friend of mine in Tokyo described his experience after the great Touhoku earthquake earlier this year. All trains were out of service, so he decided to walk the roughly 60km back home from Yokohama to Tokyo. He walked for about15km, managed to find a taxi to take him part way, then a train, then another taxi, then walked again. Clogged phone services were useless and he could not call his wife. By the time he arrived at his home a day later at 2:30am, his wife had assumed he was dead.

It’s hard to overestimate the trauma experienced by the average Japanese citizen after the tsunami. In some areas of Tokyo, hundreds of kilometres away from the kill zone, driveways are bent, buildings cracked, and stone lanterns at ancient temples toppled.  Fears of radiation keep many from swimming in the ocean.  Due to the Japanese feeling of belongingness, even people completely outside the quake zone were mentally affected.

In North America, news interest in the tsunami ended months ago.  In Japan, stories of the quake and its cleanup are still on TV every day, with live updates of the progress (or lack thereof).  "Nippon matsuri," a pine tree that is the only living thing to have survived in the tsunami zone, has become a national symbol of strength, though it now is in danger of dying due to an influx of seawater.  “Ganbarou Japan,” an expression roughly translated as “You can do it Japan” and “Go for it, Japan” is plastered on everything from taxis and t-shirts to the quote screen on the Tokyo Stock Exchange.

Virtually everyone says that the biggest change after the earthquake was the shift away from “Americanism;” that is, a shift away from pursuing wealth and career, toward a greater emphasis on spirituality, friends and family. A career advisor, for instance, told me that several of her top female clients had quit their jobs to get married.  Japanese economists worry that this shift away from “Americanism” will result in a decline in Japanese productivity, and a stagnant economy.

Mentality aside, the Japanese economy has several things going for it. A slowdown in China will mean better commodity prices for manufacturing. Personal savings rates are high and debt levels low. And, unlike most of the world, real estate prices are reasonable.

In the short-term, the shift toward family and maternity may slow down the Japanese economy. However, Japanese women appear just as stylish as ever, and Japanese men just as interested in drinking parties and electronics. The economic slowdown has not been enough to create shuttered businesses or foreclosed properties.

In the long-term, I suspect that the large-scale rebuilding of Northern Honshu will actually be a stimulus to the Japanese economy for years to come: and the work has barely begun.

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China's High Speed Railway

And the economic war with Japan



China’s high-speed railway serves as a reminder that China is still a single-party (communist) country, where central planning and pride can result in disaster.

A few weeks ago, one of China’s shiny new bullet trains crashed into another, killing 40 people. The story hardly made the news in North America, but for Chinese and Japanese the story was huge.

Immediately after the crash, the Chinese government took the lead rail car and literally buried it. Outraged citizens demanded that the car be exhumed and an investigation launched, though few expect that this investigation will be thorough. Later, it was found that rail employees had been warning their relatives not to use the trains, since their operators had insufficient training and the trains were being run too fast.

The question is, why did China not give their operators sufficient time to train? And, why did they run the trains so fast? The answer: Japan.

Due to an ongoing rivalry with their historical archenemy, China’s rail lines had to be opened on time and had to run faster than Japan’s - no matter what. Running the trains at higher speeds than their Japanese counterparts was seen as integral to defeating Japan’s copyright infringement claims, since China claims to have improved upon Japanese technology.

Just weeks before the crash, the Chinese government released Japan-bashing reports about how their train technology was superior to Japan’s, and how Japanese patent infringement claims were groundless. China’s ministry of railways was quoted as saying that “The Beijing-Shanghai high-speed railway and Japan's Shinkansen line cannot be mentioned in the same breath, as many of the technological indicators used by China's high-speed railways are far better than those used in Japan's Shinkansen.”

Despite being furious, the Japanese transport minister responded calmly, saying merely that “a heated verbal battle” was not advisable.

To the gross embarrassment of the Chinese government, the Beijing-Shanghai rail line has now been recalled for safety reasons.

At present, China has 13 high-speed railways in operation. At present, few people trust them enough to travel on them.

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"While responding to media questions concerning the safety of traveling on the high-speed line, he (chief engineer of the Ministry of Railways) said that he is fully confident in the safety of the travel link and that the passengers' safety is guaranteed."

Xinhua news, June 27, 2011

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For more information, see:

China's high-speed rail technologies better than Japanese Shinkansen

China denies Japanese rail patent infringement claims

Trains fly on Beijing-Shanghai high-speed railway

China recalls bullet trains in new blow to technology
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The Failure of Incubator Bank

Incubator Bank of Japan, which specializes in loans to small and medium-size enterprises, filed for bankruptcy last Friday. With it, the assumed infallibility of the Japanese bank failed as well – a profound moment.

In Japan, corporations typically partner with a bank from inception, and never change. The loyalty of companies to their banks, and vice versa, is therefore extremely high. Traditionally, this meant that a bank would give loans to its corporate partners, even when it was clear that these companies were on the brink (or over the brink) of insolvency: this was considered "dedication."

The failure of Incubator Bank is profound because the bank was actually allowed to fail. The Deposit Insurance Corporation of Japan - which protects customer deposits up to 10 million yen - was instituted way back in 1971, yet this is the first time is has ever been used.

Though Incubator Bank is relatively small, large Japanese banks will recognize this as the warning shot that it is. The Government will not allow a long recession of zombie companies - barely alive - to occur again.

The Japanese financial system is coming of age, and the “modern zaibatsu” (interconnected business-banking conglomerates), are no longer untouchable. The failure of a Japanese bank is a sign that the system has become more mature, confident, and responsible. Japan Inc. has been warned.
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"Always strive to stay one step ahead. Standing still is retrogressive."

Nomura Tokuanden
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