Post card from Kyoto

Apr 13, 2013

Kyoto is both an historic and beautiful city. Fortunately it was spared allied bombing during the last war.

When our family first visited Kyoto and other parts of Japan in the 1960’s the exchange rate was about 400yen to the Australian dollar. It  made for not only wonderful holidays, but cheap holidays as well. We usually stayed at Japanese minshuku for less than $A 10 for dinner, bed and breakfast for an adult.

Over the years, the yen strengthened considerably until it appreciated to about Yen 65 to $A1. To reverse this appreciation of the yen, the new Abe Government is flooding the economy with cash which has helped depreciate the yen to about Yen 104 to $A1.

The hope of Abe is that with the depreciation of the yen, there will be new opportunities for Japan’s export sector. But will it succeed? To combat the previous strong yen, Japan has moved a great deal of its manufacturing offshore, particularly cars to the US. Much of Japan’s manufacture of electronics and IT has been shifted to Asia. So the depreciation of the yen is unlikely to help these Japanese firms that have already shifted offshore. With labour costs in the ROK about half those of Japan, the Japanese will have a lot to make up if its manufacturing and SME sectors are to become competitive again.

The new debate in Japan, which is about the economy, has produced an unexpected benefit. In the months before Japan’s general election in December last year, the leader of the Opposition, Abe-san, and his Jimento Party were incessantly banging the anti-foreigner drum, a bit like Tony Abbott on asylum seekers in Australia. Abe and the Jimento were determined to head off the extreme nationalism of Ishihara, the Governor of Tokyo, and Hashimoto, the Governor of Osaka and seized every opportunity to beat the anti-Chinese drum. Now with a strong majority in the Diet and with Ishihara and Hashimoto side-lined, PM Abe can safely scale back his xenophobic posturing. Abe’s concentration on the economy will be a welcome change from the nationalist posturing and anti-Chinese sentiment that prevailed several months ago in Japan.

Japan has been nervous, but not particularly panicked by the dangerous tantrums of the North Korean regime. Japan has put on alert its anti-missile batteries around Tokyo and has deployed AGIS destroyers into the Sea of Japan. Even with this Japanese response, I sense that the Japanese people expect the problem to blow over quickly. They have seen these antics from North Korea so much in the past – acting belligerently and then being rewarded by the US when it starts talking and acting ‘normally’.  In the past this tactic has been a clear winner for North Korea. It obviously hopes that by being reasonable in the weeks ahead it will persuade the US to ease sanctions and increase aid.

Yet the North Korean action is to some extent understandable. After the American invasions of Vietnam, Iraq and Afghanistan, any small power could come to the conclusion that only the possession of nuclear weapons would prevent a US attack. A price is being paid for the US abuse of power in the world.

One consequence of North Korea’s erratic behaviour is that the US presence in north-east Asia is likely to be continued and possibly enhanced, particularly with its large bases in Japan. China is understandably concerned about the US presence in north-east Asia, but its failure to ‘manage’ North Korea means that it is encouraging a continuing US presence in the region.

John Menadue

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