Workway Reform

Ⅰ.  Introduction

 Workway reform. This is the most important element of structural reform which constitutes the growth strategy of Abenomics. The package of laws which delineate the regulations and rules to promote workway reform was legislated on June 29,2018. It took more than three years to be enacted since the act has been presented to the Diet.

   In this essay, let me explain the content of the law, importance of “work way reform” for the growth strategy of Abenomics, and why it took such a long time to have been legislated, and finally evaluate the effectiveness of the legislation to realize the workway reform in Japanese industry.

Ⅱ. Workway Reform Legislation

   The package of workway related acts was legislated in the morning of June 29 at the general assembly of the House of Councilors. Since this package has passed the   House of Commons a month ealier, May 31, this package of laws have been formally legislated and put to effect.

   The package comprises of three major components:
1. Upper limit of overtime work hours
      Over time is allowed maximum 720 hours a year. Should be less than 100 hours a month. Severe penalty is imposed if violated. The regulation becomes effective from April 2019 for large firms, and from April 2020 for SME(small and medium enterprises).
  2.Same wage for same work
        Unjustifiable difference of working conditions such as basic wage and allowances between regular and non-regular employees should be abolished.The regulation will be effective from April 2020 for large firms and from April 2021 for SMEs.

   3.  Introduction of hour-unrelated wages
         The new system is to allow paying wages on the basis of performance of the worker rather than the length of work hours. A limited number of professional workers can be applied this system so that they are exempted from the existing work hour regulations.

           These workers are still required to take at least 104 days off a year. The worker applied this system of exemption can leave the system at his or her will. The system will be in effect from April 2019.

    An important defect of this legislation is that the government failed to include the crucial item of “the expansion of the category of workers to be applied discretionary work hour system.” 

  Discretionary work hour system is the system by which the worker is regarded to have worked certain hours which was determined by the employer and the worker before hand, regardless of actual hours worked afterwards. For example, if the employer and the worker determined to work 10 hours before hand, and if the worker worked actually 8 hours, he will receive overtime pay of equivalent to 2 hours. This system has been planned by the government(MInistry of Labor)to use for such workers as professional workers like designers and those engaged in planning or research.

  The reason why the expansion of the coverage was not included in the legislation this time was the trouble in the process of Diet debate. While opposition parties have been strongly against the expansion on the ground that the expansion will increase long-time work. Debating against this argument, PM Abe argued at the Diet session that there exists the data which shows that workers of this category work actually shorter hours than the ordinary workers.

   The opposition party members asked the source of the data and asked Ministry of Labor which has conducted the work hour survey to explain it. It was found then that the questions asked for the two types workers were different. The question for ordinary workers was the overtime work of the day when they worked longest hours, and the question for the focused category of workers was the average hours worked for a day. Naturally, the data obtained from such different questions are not comparable so that PM Abe’s argument was accused to be non-sense.

   Having apologized for this lousy handling of the data at a meeting with opposition parties, Ministry of labor asked them to accept the rescheduling of submission of this item for a year. The opposition party representative fiercely against such a proposal, and consequently, this important item of expansion of category of workers was not included in this package of laws for legislation this time.

  Later from mid-July, Labor ministry announced to resume the whole process of examination of this item hoping to enact for the future.

  The process of workway reform legislation took more than three years, which is  extra-ordinarily long for legislation of this type of laws. Let me review briefly how it went in the process.

   As early as April 23, 2013, prime minister Shinzo Abe appealed at the joint meeting of advisory committee of Economy and Fiscal policies and the committee of Industrial Competitiveness, the highest body to determine Abenomics, to examine to formulate the new working hour system in which reward is determined not by the hours worked but by the outcome of the work. Prime minister’s proposal was followed soon by Minister of Welfare and Labor, Mr. Norihisa Tamura on May 28 that the government launch official examination for introducing “white collar exemption” in Japan’s work hour regulatory system.

   The debate on introduction of new work hour system had to cover many items, as I will review in the follows, and took a long time. And toward the final stage of long-lasting debate, in February 2018, the trouble on the nature of the data which was referred to by PM Abe as the evidence took place. This trouble wasted a few months and resulted in dropping an important item from the legislation.

Ⅲ.  Abenomics and Workway Reform

   It was emphasized by Abe administration and agreed by many experts that the workway reform is crucial as a structural reform to promote economic growth of Japan.

   Let me explain why. Japan’s workers productivity has been one of the lowest among major advanced economies of the world for the last few decades. For example, according to the survey of Japan Productivity Center for the period of 2010 to 2012, Japan’s labor productivity in service sector was only 38.4% of that of the US. While Japan’s labor productivity has been rising moderately during the recent decade, its pace has been much slower than that of US and Germany.

The main reason for this is the poor productivity of service sector. While the delay of IT application in this sector has been dragging the productivity improvement, the outdated work system particularly of hour linked pay system is another important reason.

   While average working hours of Japanese workers as a whole has been aroung 1700 hours a year, which is more or less comparable with major advanced economies of the world. But this is the average of temporary or non-regular workers who work short hours and regular workers. The regular workers working hours remain longer than 2000 hours a year. This reflects that Japanese workers, whose majority work in a broadly defined service sector, tend to work long hours with rather low productivity. And this related critically with the out-dated work hour regulation of Japan.

   In order to understand why the current work hour regulations are outdated, we need to look back Japan’s historical development of labor standard regulations.The current labor regulations have been formulated largely shortly after the defeat of the Pacific War in 1945. Under the control of the Supreme Commander of Allied Forces(SCAP), many aspects of government regulations have been overhauled and newly determined. Labor standard regulation was one of those.

   Prior to the defeat in the war, Japanese labor regulatory system was somewhat similar to the Western model, particularly, separate treatment of white-collar and blue collar workers. Since white collar workers were regarded as reservoir of the management class, they were not controlled by the labor law which regulated blue collar workers. In other words, they were “exempted” from labor regulations, just like Western counterparts.

   This separated treatment of white-collar and blue-collar has been regarded as class discrimination which is a critical element of Japan’s quasi-feudalistic social structure which was condemned by the SCAP office which earnestly advocated “democratization” of Japan. The young bureaucrats who were also critical against pre-war militaristic and quasi-feudalistic system of Japan and adoring “democracy” worked hard to plan the new labor regulation system without class discrimination.

   They drafted the new labor regulation system under the supervision of SCAP office without differentiation by worker’s status such as white and blue-collars.  The new labor standard law, which prescribes work hour regulations, thus created was rather unique compared to many major Western countries where white and blue collar workers are treated differently. The Japanese young bureaucrats believed that this uniform treatment of workers regardless of status was “democratic.”

    This new system motivated tremendously Japanese workers, particularly of those coming from low social classes. This is because they were on the same start line with those coming from higher social classes who were always treated differently and favorably. Now, only rule of the game was to work hard and win the competition. This “egalitarianism” was not limited in the labor system but extended also to many aspects of the society such as education and land ownership. Under this new system, if you work hard and attain results you can be promoted even to the top of social structure.

    Under the new “democratic” system, the majority of Japanese workers worked hard, which was a crucial element why Japanese economy has recovered quickly from the fatal destruction of the defeat of the war and grew rapidly as was often described as “Japan’s economic miracle.” Japan grew rapidly taking advantage of ample and cheap young highly motivated workers, imported technology and expanding global trade market of the time.

    However, as Japan grew much as a manufacturing exporting country, the economy has been transformed to the structure dominated increasingly by broadly defined service industries such as trading, finance, consulting, medicine, education, research, tourism, etc. Workers working in such industries are not working along the belt conveyers. Their contribution is measured not by the hours of work but rather the outcomes of their brain work.

   Now, the conventional labor regulatory system which measures worker’s achievement by the hours of work and pays accordingly, gradually became impediments to productivity growth. Since the contribution of these brain workers were not evaluated by their outcome or performance, they were discouraged rather than encouraged. Also because the system pays workers by hours, even these white-collar workers had to stay at the office and waste their time idly to meet the target of long working hours. This is one of the major the reasons why Japanese labor productivity, particularly of service sector, has lagged far behind of major economies in the world. This is the reason why I name the current labor regulatory system is “out dated.”

    Abe administration has been well aware of this institutional defect. Prime minister Abe proudly declared right after the outset of his administration at the end of 2012 that he will initiated a comprehensive package of economic policies, often called “Abenomics.”  Abenomics is comprised of three arrows: (1) unprecedented monetary easing to get rid of deflation, (2)active and dynamic fiscal policies to support the process of major economic transformation, and (2) structural reform to enhance economic power for growth.

   And reform of labor regulation is considered as the crucial element of growth strategy, as I explained earlier. White Abe administration did not have enough time to prepare for a full-fledged growth strategy in its first year, namely, the mid-2013, the administration forthrightly tackled the task of planning the growth strategy for mid-2014.  The administration tried to prepare the ground to write the deemed reform plan mobilizing reform task forces such as Industrial Competitive Committee, and Regulatory Reform Committee.

   They focused particularly on (1) monetary compensation  for unjustifiable dismissals, (2) Pay by performance among others. Proposals of these reform task forces have been encouraged by business leaders and particularly by prime minister Shinzo Abe himself, but encountered strongly by opposition parties, labor unions, and curiously by an important segment of the government, Ministry of Welfare and Labor.

   Let me review in some detail the contents and process of debate on various topics which have been relevant to realize “workway reform” of Abe administration, and finally give my personal appraisal on this subject. Topics which have been debated include(1) compenated dismissals, (2) temporary labor law reform, and (3) pay by outcomes、particularly the issue of expanding the coverage of workers who are applied the pay by outcomes.

Ⅳ.  Progress and Failures

1.  Compensated dismissals

    Compensated dismissal is the system by which the worker who was dismissed by unjustifiable reasons as recognized by the court can receive due compensation rather than returning to the old workshop. There are two ways of paying the compensation: paid after the court decision and paid prior to the court decision.

    Since Japanese legal system of dismissal is very rigid so that it is virtually almost impossible to dismiss workers, and also the dismissed workers are victimized for loss of forgone opportunity and income, the compensated dismissal system is useful for employers to make dismissal a reasonable option, and for dismissed workers who are otherwise not reasonably compensated this is helpful to reduce economic hardship.

    For these reasons, Abe administration tried to legalize the compensated dismissals as an important element of workway reform legislation. Abe administration proposed to legalize this as early as August 2014 to make Japanese legal system of dismissals somewhat comparable with major advanced nations.

  On June 16, 2015, the regulatory reform committee submitted the report in which the committee recommended to organize experts’ committee to examine for setting up rules of compensated dismissals.

   Half a year later, on January 31, 2017 the experts committee of Ministry of Walfare and Labor finally started examine the legalization. On this issue, the management side appreciates because the cost of dismissals can be more readily assessed, labor side worries because this system may help increase dismissals, and SME employers oppose because the cost of dismissals will increase because of the rule of minimum compensation.

   After repeated discussions, the experts’ committee concluded that the legalization of compensated dismissals is not necessary though the usefulness of the system itself can be admitted. About a year later, at the meeting of Industry Competitiveness Committee held on May 28, 2018, Ministry of Welfare and Labor declared  their decision to pass this up. Consequently, the legalization of compensated dismissals was not included in the growth strategy of Abenomics.

2.   Temporary labor law reform

     Abe administration has been attempting to reform the temporary labor law which was made much more rigid during the rein of Democratic Party of Japan government.  However, the attempt to reform the law has failed to be examined at the Diet session on June 20, 2014 because opposition parties attacked severely the mistake in the sentence of the bill for amendment submitted by the government.The government was obliged to resubmit it a year later.

     The revised bill for the reform of the law was picked up in the Diet discussion for examination in the main assembly of the House of Commons on May 12.2015.This was regarded as an important agendum side by side with labor standard law revision in the comprehensive reform of labor legislation. The government viewed the reform as necessary element of growth strategy. However, opposition parties as represented by Democratic Party of Japan opposed the reform as worsening of the rule of employment.
   On September 11, 2015, the bill for the reform of the law passed the examination at the main assembly of the House of Commons and consequently enacted.
   The main points of the reform are:
1.  The employer can extend the period of employing the dispatched worker, whih
      was limited up to 3years.
2.  For the dispatched worker to continue working under the same employer, he or
     she has to shift to other sections
3.  Worker dispatching companies need to be permitted by the government.
    This reform makes it possible for employers to keep employing dispatched workers as long as they want, which helps increase the flexible adjustment fo workforce.
  3.  Pay by outcomes

   Pay by outcome is the issue which has been debated harshly between those who oppose and support. In May 14, when PM Abe was expected to join the meeting to focus on this subject, the meeting was cancelled because of increasingly tense confrontation between Ministry of Labor and Industry Competitive Committee, and the meeting was postponed.

   On May 28, 2014 Industry Competitive Committee decided to relax the work hour regulation of 40 hours a week. Prime minister Shinzo Abe stated his determination to introduce “white collar exemption.” Expansion of the types of workers broadly, who are applied “Pay by Outcome,” will be conducive to enhance productivity.
However, there are those who want to limit the scope only within a very small numbers within Ministry of Welfare and Labor.

  On July 7, 2014, Employment policy Committee of Ministry of Labor started discussion of employment reform centering around the new pay by outcome system.
On Sept. 11, Employment Policy Committee presented main points for revision of work hour reform including “white collar exemption.” Management side demands the expansion of the scope of workers to be applied the new system, while the labor unions oppose worrying about likely increases of forced overwork.

  On Jan. 15, 2017, Ministry of Labor presented a new plan for pay by outcomes  at the sub-committee of Labor Policy Commission. The ministry proposes the annual income level of at least 10.75 million yen, and suggested 5 jobs as researchers as appropriate jobs.

    On Feb 13, 2017, Ministry of Welfare and Labor officially determined to introduce “white collar exemption’ at the Labor Policy Commission. The ministry meant to submit related bills to the ordinary session of the Diet and intends to put into effect by April 2016.  This system is expected to be applied to professional workers whose annual income is at least 10.75million a year.

   On April 2017, Ministry of Welfare and Labor announced to expand the types of workers who can be applied “discretionary hour work” to include sales workers who propose new plans. It is expected that financial and IT businesses will hire such workers, and they are expected to total more than several hundreds of thousands.

Ⅴ.  Workway Reform Execution Plan

1. Nine areas of workway reform
    On August 6. upon initiation of the third Abe cabinet, the discussion on the workway reform, which Abe administration regards as the most crucial challenge, will start.

    On September 15, Mr. Toshimitsu Motegi, LDP Chairperson of Policy Research
Committee, pointed to the five major items for workway reform.
   1. Improvement of work conditions for non-regular employees
   2. Shortening long working hours,
   3.  Preparing for flexible workways,
        eg: shifting from “spouse tax deduction” to “husband and wife tax deduction
   4. Promotion of obtaining desired kind of jobs
   5.  Accepting more foreign workers.

     On September 27, PM Abe stated at the first meeting of Workway Reform Realization Committee to examine nine items.

    On March 28, 2017, at the Realization Committede ,the government compiled the execution plan consisting of 9 items.
   1.  Improvement of non-regular employees,  introduction of same pay for same
   2.   Raising wages: raise the minimum wage by 3% annually to reach 1000yen
   3.   Correcting long working hours, Upper limit for overtime with penalties, and
          introduction of interval system
   4.   Assisting changing  and reobtaining jobs, financial and information assistance
   5.    Flexible workways: Tele-work, dual job holding, and side-job.
   6.    Encouraging female and young workers, re-learning of middle aged workers
    7.   Promoting woking of aged workers: Extending retirement age and assistance
    8.   Child rearing, nursing of the aged,:  Improve conditions for care worker
    9.   Accepting more foreign workers, involving all  relevant ministries.

  2.  Non-hour linked pay system
      On July 8, 2017, Rengo(Federation of labor unions) decided to present requests for improvement to the government on the bill for labor standard law reform. Rengo means to ask improvements on items on health protection.

      On July 10, the government responded to revise “white collar exemption"prescription on the basis of request from Rengo including imposing 104 days off  a year for employers, setting upper limit of overtime, and labor management consultation on determining continuous work offs.

      On July 14, Chairperson Mr. Rikio Kohzu of Rengo met prime minister Shinzo
  Abe and requested for improvement of the reform plan. PM Abe promised to 
  accept Rengo’s request.
      On July 22, many member unions of Rengo strongly criticized Mr. Kohzu for
  him to have met prime minister Abe by showing collaborative attitude.
      On July 28, 2017, Rengo decided to withdraw their initial acceptance of
  the reform plan of Labor Standard Law. The leaders of Rengo judged that the
  opposition of member unions were so strong that the entire organization may
  have to risk the collapsing of the organization.
      Witnessing the Rengo’s decision not to affirm the reform plan of labor standard
  law made business side worry about the possible delay of legislation and the likely
  change of the content in favor of strengthening work hour regulations.

Ⅵ.  Appraisals

1.  Much differed outcome relative to the initial intent

      The final result of workway reform, particularly its legislative form, is much different from what Abe administration wanted to achieve. As discussed above,the main intent of Abe administration was to utilize the workway reform as an important device to promote Japan’s economic growth as an integral components of its “growth strategy.”
    Japan’s economic growth has been slowing down in recent decades particularly since 1990s. While there have been macro economic shock such as the collapse of the “bubble” which triggered the acute slowdown of the economy. However, Japanese economy has been suffering from long term structural impediments: one is the declining trend of population and the other is a low productivity of service industry. The latter is serious defect in the era of “service economy” of advanced nations.

    The strategic intent of workway reform has been focusing on this issue. In Japan as a service economy, in which 70to 80% of workers work in a broadly defined service sector, workers contribution to the industry is not necessarity a coefficient of hours worked like manufacturing sector but rather the outcome of creative work.
Recognizing this trend, Abe administration attempted to reform the work system in which workers can work more efficiently to utilize their talents rather than bound by work hours.

    With strong advice of business related members of Industry Competitiveness Committee of Abe administration, primie minister Shinzo Abe himself took initiative to reform the conventional regulations of workways. Main objectives have been basically two:
  (1) Introduce a new workway in which wages are paid on the basis of outcome rather than hours worked. This is often refered to as “white collar exemption” borrowing the expression of Western countries where the white collar workers who are regarded as reservoir of management are exempted from ordinary labor regulation imposed on blue collar workers.

  (2) Compensated dismissals.  This is an important breakthrough in the rigid legal regulations against dismissals in Japan. With introduction of this system, employers can have a greater leeway to dismiss workers and increase flexibility of employment, and workers can have some compensation to minimize the loss of income due to dismissals.
  This has been and still is strongly demanded by employers of foreign
companies investing in Japan because they need flexible organization of their workforce partly because their time-horizon is not long as the local Japanese companies.

   The result of the campaign of workway reform as seen in the final product of the
workway legislation achieved at the end of July 2018 reveals three major points.
(1)  Reform to “pay by outcome” or “white collar exemption” was only very partially admitted. The new labor standard law permits highly professional workers whose salary is more than 1075yen a year can be applied the system of pay by outcome. The number of eligible workers in current Japan may be around 10000.
This is much too much smaller than what Japanese economy needs and can supply to increase the efficiency of large service sector. In my view, the law should have permitted at least a few millions of workers in this category.

    In fact, prime minister Shinzo Abe attempted to introduce this system during his first administration in 2006 but failed by strong oppositions from opposition parties  labor unions and relevant government branch. The accomplishment this time may be congratulated in view of this experience. However, since the coverage of eligible workers is so small that the new system will have only negligible effect to contribute to economic growth, if any.

  (2)  Reform for dispatched worker law is effective in making more flexible use of temporary workers and hence contribute somewhat to increase the efficiency of business. The original law was invented to make use of new types of workers who wish to work but not necessarily full-time in 1985. However, under the DPJ administration in 2009, it was revised much not to allow prolonged employment of dispatched workers as a temporary status. The revision this time is useful both for employers and those workers who want to work temporarily. This amendment will have some modest effect on increasing industrial flexibility and efficiency.

  (3)  Reform for compensated dismissals has been rejected almost outright in the process of examination without much meaningful discussion by strong opposition of labor unions, small firm employers and opportunistic Ministry of Welfare and Labor.
  (4)  In contrast, a major move has been achieved in fortifying the regulation system of working hours. One is imposing rigorous upper limit on overtime.
Over time is allowed maximum 720 hours a year. Should be less than 100 hours
a month. Severe penalty is imposed if violated. And the other is same wage for same work, which means unjustifiable difference of working conditions between regular and non-regular employees should be abolished.

   Although protecting fair labor conditions and workers’ health is undoubtedly the most important pillar of labor regulation and labor policies, the fortified regulations on working hours and working conditions as described above will increase the burden on Japanese business corporations and possibly their effort to increase efficiency.

   We may compare the workway reform legislation of this time with the comprehensive reform covering both labor and welfare regulations and corporate taxes which were conducted in 2003 in Germany, often referred to as “Shoroeder Reform or Agenda 2010.” This reform has been regarded as having triggered the dramatic economic recovery of German economy in the period of Merkel administration.

   The workway reform legislation by Abe administration could be much better if eligible workers were much more widely permitted to work under pay by outcome and compensated dismissals were legally permitted, and at the same time workers basic working conditions are more severely supervised and protected as done in the legislation this time, both for the economy and for the workers.

2.  Problems of Ministry of Welfare and Labor

   In the process of examinations, discussions and debate for the campaign to legislate workway reform, I am puzzled by two conspicuous problems: one is the time spent to arrive at the conclusion and the other is the lousy handling of the date prepared for official debate by Ministry of Welfare and Labor.

   The process of this campaign has taken more than four years counting from the initial proposition of prime minister Shinzo Abe to alter the labor regulation system, particularly work hour regulations, in the early 2014 until the enactment of law at the end of June 2018.

    As the reader of this essay may well be aware as reading of my chronological depiction of the process that the meetings of relevant committees take a long time between them. Much of this time management is up to the government office in charge, namely, largely Ministry of Labor. I myself has had much experience in this kind of work, I am not sure why they wasted that much time to reach the conclusion.

   Another, and more serious issue is that Ministry of Welfare and Labor committed a serious mistake by giving prime minister “wrong data” which led prime minister Shinzo Abe lose his credential in debate, and consequently the most important item to be included in the final legislation was scrapped.

    The reason why the expansion of the coverage was not included in the legislation this time was the trouble in the process of Diet debate. While opposition parties have strongly opposed against the expansion of the eligibility of the workers on the ground that the expansion will increase long-time work. Debating against this argument, PM Abe argued at the Diet session that there exists the data which shows that workers of potential eligibility work actually shorter hours than the ordinary workers.  The opposition party members asked the source of the data.  Ministry of Labor which has conducted the work hour survey found then that the questions asked for the two types workers were different so that working hours were not comparable, and consequently PM Abe’s argument was accused to be non-sense.

   This is a serious issue in the sense that Ministry of Labor not only abused but even demised the supreme leader of the government. This is the most primitive mistake that even college students would not commit to write a report. The ministry later reported that they found 117 cases of mistakes. The fact that this kind of lousy work is done in this most critical phase of the debate would make us even skeptical of some kind mal-intent at the side of the government branch in charge.  It is curious why reasonable punishment has not been given to the ministry on this serious mis-conduct.

   The strategic intent of Abe administration is clear, namely, make Japanese economy efficient, particularly, labor market. The actions that the ministry has taken in the process seem not quite supporting or even following it. We know that Ministry of Welfare and Labor must secure the understanding and support from both management and labor sides, unlike many ministries which only need to satisfy their clients. Nevertheless, the attitude of Ministry of Welfare and Labor seems curious and questionable under the given strategic intent of Abe administration.

   The opposition party members asked the source of the data and asked Ministry of Labor which has conducted the work hour survey to explain it. It was found then that the questions asked for the two types workers were different. The question for ordinary workers was the overtime work of the day when they worked longest hours, and the question for the focused category of wokers was the average hours worked for a day. Naturally, the data obtained from such different questions are not comparable so that PM Abe’s argument was accused to be non-sense.

   2.   Too much time elapsing and Lousy job of Ministry of Welfare and Labor
       ーintentional disturbance?

   3.  Productivity and Worker Protection
      ーLimited progress for flexibility
      ーIncreased control and inspection of working conditions
      ーProductivity increase by legal reform questioned
      ーLittle or no contribution for economic growth
  ーProductivity increase is up to corporate and individual effort

The Third Abe Administration and its Tasks

Ⅰ.   Abe’s victory in LDP presidential election

   On September 21, 2018, prime minister Shinzo Abe won the LDP presidential election and obtained the position of the president of Liberal Democratic Party, in principle, for another 3 years until September 2021.

   The only contender who competed the election against Mr. Abe was Mr.Shigeru Ishiba, who served as Secretary General of Abe administration for its first term since December 2012.

   The result of the election this time was that Mr. Abe obtained 69% of all the votes. The election was conducted by voting of the National Diet members and of local members of LDP who are not National Diet members.  Mr.Abe took 329 of DM and 224 of LM totaling 553, while Mr.Ishiba took 73 of DM and 181of LM totaling 254.

    During the election campaign of two weeks, prime minister Abe indicated that he would like to obtain two third of the votes of local members so that he will win the election by a land slide victory, which would highten his political cohesive force to enhance his leadership. The result of this election that Mr. Ishiba obtained as much as 45% of local members votes has been unexpected by Mr. Abe himself and his team members.

    The fact that nearly a half of local LDP members voted for Mr.Ishiba implies the depth of distrust against Mr. Abe. Since Mr. Abe, as prime minister, has been utilizing the current political system which strengthen institutional power of the prime minister and the party system of LDP to enhance his power for the Diet members skillfully, it is not surprising that he gained more than 80% of the votes of DM. In contrast he obtained only 55% of LM votes means he was not secured the support of the members who are less bound directly by the power of the prime minister.

   Now that Mr. Abe won the LDP presidential election this time, he will in principle keep the office for another 3 years. If he will complete the 3 year term without losing the office by any accidental happenings, he would experience the longest rein as a prime minister in the history of Japanese constitutional politics.

   This has been made possible by the change of rule of the LDP as to the  limit of the length of president from 2 consecutive terms to 3 terms which extends the limit up to 9 years. The idea to change the rule has been around since the beginning of 2016 and accepted increasingly widely within LDP, and officially determined at the LDP convention in March 2017.

   Let us remind ourselves a bit about Mr.Ishiba’s rivarlry against Mr. Abe. When Mr.Abe first attempted to organize his administration in December 2012, he had to win the presidential election at September 2012. There, Mr. Ishiba gained more votes from local members than Mr. Abe although Mr.Abe won the election by the aggregate votes including the Diet members.

    Acknowledging Mr.Ishiba’s achievement in the election, Mr.Abe assigned him the Secretary General, the most important job next to president. Mr. Ishiba is known to be an expert of defense issue. But when Mr. Abe suggested him to take a job of defense minister in a later occasion of cabinet formation, Mr.Ishiba rejected it and accepted to become minister of local development. And in the occasion of the next cabinet formation, Mr. Ishiba shied away from any post of Abe cabinet and became an outsider, meaning that he had free voice against Mr.Abe if he wishes, And Mr. Ishiba organized his political faction in 2015 shortly after Mr. Abe won the  presidential election the second time.

Ⅱ.   Debate between Abe and Ishiba

   During the two week campaign period, Mr.Abe and Mr.Ishiba had opportunities to debate on many issues at various occasions including TV show, public seminar,  media interviews and a few events at the cite of local cities.

   Throughout such exchanges, the basic views of Mr.Abe and Mr. Ishiba on various policy issues became more or less clear. Let me summarize major points of their  assertions.

    Mr. Abe emphasized repeatedly and strongly the economic achievements of Abenomics, namely, his administration has successfully maintained a persistent and increasingly empowered economic growth, if not at a high rate, powerful increase of employment as reflected in a historic high rate of job offer seeker ratio,  low rate of unemployment, voluminous increase of tax revenues, and much higher stock prices compared to the previous DPJ administration.

    He also emphasized that he means to ask the Diet to pass the constitutional  amendment during his term as a prime minister. His principal idea of constitutional revision is to write the name of self defense force as an additional item next to the second item of ariticle 9. The second item writes that Japan abandons to have any means to have military. Putting the name of self defense force, which is a de facto large and powerful military, next to item 2 looks self contradictory.

   Mr. Abe strongly wishes to formally and legally admit the name of self defense force, and worries the danger of losing this opportunity of revising the constitution by trying to delete the item 2 which is opposed strongly not only by opposition parties but also by Komei party which is LDP7s political ally.

   In contrast, Mr. Ishiba emphasized the big potential of economic growth of  local regions. He also emphasized big growth potentials of small and medium-size enterprises. He made such assertions obviously to make contrast with Abenomics which, he describes, depends upon so-called trickle down view.
   That is, charging policy emphasis on the relatively powerful sector such as large firms will eventually be diffused to relatively weak segments such as far away regions and SMEs.  Criticizing Mr.Abe’s claim of increasingly powerful economic growth,  Mr. Ishida said the better performance is largely due to the recent conspicuous improvement  of the global economy.

 Mr.Abe emphasized the importance and urgency of social security reform, which he promises to complete within three years. Although Mr. Abe and Mr. Ishiba do not differ much in terms policy goals, Mr. Ishiba tends to emphasize more of the importance of fiscal reconstruction. To achieve the goal, Mr. Ishiba proposes to organize more integrated committees assembling more experts and reps. relating to such major national strategies.

   Mr. Ishiba saids constitutional amendment is not the issue we should accomplish hurriedly. There are more important things to do before actually proposing the  amendment to the constitution, that is more discussion and foster more understanding among people.

   If amend the constitutional sentences, particularly of article 9, Mr. Ishiba proposes to drop the item 2 of article 9. Item 2 states that Japan does not have any weapons or means to help wage the war, which is obviously violated by the reality. He argues that the constitution has to be consistent. Mr. Abe criticizes such attitude of Mr. Ishiba who is as much like scholars who do not worry about the reality.

   Both Mr. Abe and Mr. Ishiba are not really much different in terms of eventual goals they are aiming at such as economic growth and self reliant national security. Mr. Ishiba saids while final goals may be common there can be many different ways and processes to reach the goal. And LDP should be open, if it is democratic, to such diverse arguments to stimulate discussions.

   Mr. Ishiba does not go into details of economic policies and achievements perhaps because this is the area where Mr. Abe is advantageous. Perhaps because of this, the detailed discussions on concrete policy measures have not been heard in the process of the election campaign, which is rather disappointing. Nevetheless, the fact that Mr. Ishiba, who has no official role to play either in the party or the government, gained as much as 45% of votes of LDP local members is impressive, which reflects a deep rooted distrust of people on Mr. Abe.

   In organizing his cabinet at the beginning of October, Mr. Abe gave no official position either in his cabinet or in the headquarter of the party to Mr. Ishiba, Mr.Ishiba perhaps secured a breachhead for the forthcoming presidential election three years ahead, if not sooner, by running against Mr.Abe this time and obtained a fair amount of support from the party members. However, this does not mean that the Mr.Ishiba’s advantage for the next election is guaranteed. There will be many contenders such as Mr.Fumio Kishida, Ms. Seiko Noda or even Mr. Shinjiro Koizumi.

Ⅲ.   Legacies and Desired Policies for Abe Administration

  Abe administration will have exceeded in terms of the length of its duration all of the previous administrations in the constitutional history of Japanese politics if it completes the forthcoming three year of its rein, it has exceeded already the well remembered administrations in the postwar period such as those of Shigeru Yoshida, Ichiro Hatoyama ,Nobusuke KIshi, Eisaku Sato, Kakuei Tanaka, Yasuhiro Nakasone, Jun-ichro Koizumi in terms of the length of their reins.
    The Abe administration which has the determined destiny, in principle, of final three years. will be faced two major issues. One is that it is a sort of “lame duck” administration. The political power whose final day is determined will lose attention of people. People will be interested in the question of who will be the next rather than the ending incombent. To fight against such a natural trend of losing attention, the “lame duck” leader tends to work hard to leave legacies which people will remember.

  In the aspect of international politics, Mr. Yoshida left the legacy of San Francisco Peace Treaty, Mr. Hatoyama left Japan-Soviet Union recovery of diplomatic relations, Mr.Sato left returning of Okinawa, Mr. Tanaka left Japan-China recovery of diplomatic relations, and Mr. Koizumi left Japan North Korea Pyonyang Declaration. What about Mr. Abe?

   Mr. Kosuke Takahashi comments(Web Ronza Sep 21,, 2018) that establishment of National Security Council, determination of National Security Strategy and New Defense Fundamentals, relaxation of Three Principles of Weapon Export under Mr. Abe’s initiative of “positive peace seeking.” However, these achievements are steps to build closer ties with the US in promoting mutual defense cooperation and appear not as major achievements to be remembered as “legacy”.

   In the aspect of economic policies, Tanaka administration is remembered with the legacy of “reconstruction of Japanese archipelago,” Nakasone administration is with “privatization of National Railways” and Koizumi administration with “Privatization of Postal System.” Abe administration is known to have been advocating “Abenomics.” But what has been the outcome of Abenomics?

    Its major goals were to shift people’s mindset from “deflationary” to “inflationary” with the target of achieving 2 % inflation annually. The outcome so  far is almost none. The other is  to bring the economy on the track of powerful growth.  The outcome so far is very modest which has been helped largely by the powerful recovery of the global economy rather than the power of Abenomics, as Mr. Ishiba criticizes.

   Another objective which was announed at the initiation of Abenomics was to reconstruct fiscal balance. As is well known, Japan’s government debt as measured by the accumulated debt relative to GDP is the worst among major countries of the world and even worse compared to the ratio immediately after the defeat of the Pacific War. Japan has made an  international commitment in 2010 that the government will attain fiscal balance by 2020.

  The outcome so far is that during the Abe administration the achievement has been much worse than Japan’s initial commitment. In fact, the government has been organizing increasingly larger amount of budgets, add extra-ordinary budgets, and prime minister Abe himself has repeatedly postponed the increase of consumption tax for various reasons.
  Mr.Abe has been quite successful in winning elections. He kept winning national elections five times consecutively and won LDP presidential election three times consecutively including the most recent one. To achieve such political goals, he makes skillful use of political organizations such as political factions. Organizing various factions to support Mr.Abe, he has to make many compromises. Consequently, he cannot conduct a decisive action as has been demonstrated by Mr. Koizumi who dared to fight against the postal system, the  most powerful supportive organization LDP.

   The list of members announced in the afternoon of Oct 2, 2018 was not impressive at all. It is described as ”inventory clearance” re-organization of the cabinet. Prime  minister Abe nominated figures from the factions who have helped him winning the LDP election. It is evident that he is interested in keeping support of factions and interest groups.

   Since the forthcoming three years is the final opportunity for his challenge as a political leader. He has an outstanding political capital among all the politicians. If he would bet his political capital to achieve the most important mission of statesman, namely, to leave the best country he can think of for the next generations, he is now in the best position and in the opportunity to achieve it. By doing so, he will be able to leave a great legacy for the country which will be remembered for years.

   Let me finally suggest a concrete plan for him to consider to achieve such a goal.

Ⅳ.   Aging and Possible Fiscal Crisis

   Japan is suffering from a serious issue of mushrooming government accumulated dept. Using a broad definition of the fiscal debt, it is 240 percent of GDP, which is by far the worst among major economies of the world, even worse than Greece, and worse than the serious debt left for Japan after the defeat of the WWII.

   It is interesting to realize that at the beginning of 1990s, Japan’s fiscal performance is much better. In fact, Japan’s government debt is better than the US and many of European economies then both annually and as accumulated amount relative to GDP. But Japan’s debt grew by far worse than these countries by the end of the 1990s. It has been getting worse and worse since then until now and for the foreseeable future. What are the reasons behind?

   The reason is as follows. The rapid aging which accelerated during this period since 1990s, which coincides with the very slow growth period of Japanese economy often cited as “the lost two decades.” The aging of population increases social security payment. However, since wages did not rise or even lowered during this period, social security contribution which relates to wages did not rise. Consequently, social security account began to suffer from a large deficit. Since it has been difficult to increase social security contribution by raising the rate of contribution, the government was forced to issue bonds to finance the deficit. Therefore, the government bond mushroomed during this period.

   With the current extra-ordinary high level of government debt has many potentially serious problems for Japanese population for the future. With this heavy fiscal burden on the economy, policies to empower Japanese economy through structural reform will be seriously hampered. Also, this huge debt means a huge differential among generations on their net social account, namely, the difference between the net life-long income and payment for individuals as has been formulated by professor Lawrence Kotlikov and others.  These are long-term structural issues.

   We need to be careful about the possibility of acute and could be fatal problem of fiscal collapse which will lead to economic collapse to damage life and activities of population seriously. With the current high fiscal deficit which is more than twice the size of GDP, there is an increasing danger that any fiscal developments or shocks may trigger the collapse of finance and hence the economy. Several triggers can be thought of. Within 10 to 15 years, it is likely that the aggregate government debt will surpass the aggregate net financial asset(saving) of population, which means that Japan will have no net asset to buy new JGB. Japan will have to ask foreign investors to buy them. They will not buy JGB at the current price which is lifted artificially by BOJ’s massive purchase. Thus, the price of JGB will drop, which will drive the interest rate high. High interest rate will make the government fiscal policy and private corporate finance difficult, and could lead to economic collapse.

    There are many risks which trigger fiscal and economic collapse such as a sharp drop of exchange rate of the yen, large scale attacks by speculators, natural disasters, military conflict, confusion of politics etc.

   To protect the life and activities of people, the critical task of the government to eliminate problems or sources of problems which may trigger such a catastrophe. The most important is to restore fiscal healthy balance. There are three major ways to achieve it: They are (1) reduction of government spending by streamlining government expenditure structure, (2) enhancing economic growth, and (3) increasing tax revenues.

   Almost all the administrations in the past have tried to accomplish all these objective, but they have not been successful to restore fiscal balance. Abe administration too has aimed at attaining the healthy fiscal balance. However, on the issue of reducing government spending, it rather increased spending in order to stimulate the economy, on the issue of enhancing economic growth, it deployed a policy package of “Abenomics” but the growth performance has been only modest and much less than the level to contribute to fiscal reconstruction. On the issue of tax increase, prime minister Abe shied away to increase consumption tax two times and lost opportunities from 2014 till 2019.

Ⅴ.    Shimada’s proposal to PM Abe.

    It is my view that prime minister Shinzo Abe should now challenge betting the rest of his political career to re-construct the country in which the next generations can live much more safely being protected from the dangers of fiscal and economic collapse and from the unjustifiable social and economic differentials.

   For prime minister Abe, I would like to propose for his reference a comprehensive plan to achieve such a goal. This is a long-term and fundamental reform of tax and social security systems and services.

    On the side of tax, I would like to suggest that the government presents a long term increase of consumption tax until the tax level reaches 20%, which is the level many European countries are practicing. Every year, the tax will be increased by at most 1% so that to minimize shocks to tax payers. Since the long term plan is shown to people, they will adjust their life plan accordingly.

   Also, inheritance tax is reformed to expand broadly its tax base by reducing tax rate structure from progressive to more or less equal so that the total revenue will be increased. This should be helpful to enrich the fund for reform of Japan.

   On the side of reform of social security system and services, the system will be fundamentally reformed to expand its services from the conventional set of pensions, health insurance, unemployment benefits, poverty support, and more recently added old age nursing care insurance to birth assistance, pre-school educational assistance, job training, basic support of working conditions, old age recurrent education and training etc.

    This sort of comprehensive social services are becoming necessary to assist the life of current population whose large proportion is facing a hardship of family maintenance and reproduction.  This kind of comprehensive social security and safety net of services is necessary in order for people to accept a long term continuous increase of tax burdens. Constructing such a system and providing such comprehensive services is highly costly.

     In order to construct a country in which the worries of fiscal and economic collapse and unjustifiable inter-generational differentials of life-long net income are wiped out and people enjoy comprehensive services to support their lives, it will take some half a century by continuing the consumption tax system of the level of 20%.

    Prime minister Shinzo Abe has to realize that the nature of the crucial issues that Japanese population is now faced after having enjoyed the two decades of postwar rapid growth and has been annoyed by the “lost two decades,” is something like this. This is a major challenge for Mr. Abe, but this is the challenge, perhaps, only such an outstanding political leader as Mr. Abe who will lead the country for the longest time in Japan’s political history can tackle. And it is worth challenging for him if he wants to leave the legacy of historic achievement.

Abenomics: A Critical Assessment of its 5 Years

Ⅰ.   Introduction

   Just about five years have passed since the economic policy package of Abe administration of Japanese government, often called “Abenomics” has been launched. Abe administration has been enjoying the one of the longest rein of Japanese history of politics. It started in December 2012 and has kept its operation for 5 years and 4 months by March 2018.

   The administration, soon after its formation, announced that it will deploy comprehensive economic policy package consisting symbolically by three arrows, namely, monetary policy, fiscal policy and growth strategy. The main objective of this package was to salvage Japanese economy from the long lasting period of deflation which has been continuing since the beginning of 1990s. The first arrow, the monetary policy, was the most symbolic to show this strategic intent of the administration. The main content of the monetary policy was disclosed dramatically in the first press conference of Mr. Haruhiko Kuroda, the newly appointed governor of Bank of Japan, which was held in April 2013. If we interpret this event as the initiation of Abenomics, just about 5 years has passed from its launch.

   In this essay, I would like to review the main contents and outcomes of Abenomics during these five years. I will first review the first stage of Abenomics from 2013 to 2015 consisting of the three arrows and then review the second stage of Abenomics from 2016 till now(March 2018), and evaluate the performance and outcomes of Abenomics for the five years.

Ⅱ.   Abenomics: the First Stage

    Shortly after the onset of Abe Administration, we, the members of Shimada-juku, a study forum of business leaders, had a luck of having been able to invite Mr. Yoshihide Suga, Minister of the Chamber, to our meeting. His following message was very impressive: he said that Japanese economy has suffered seriously by so-called “the lost decades” (20years of the1990s and 2000s)of extremely low or none growth and persistent deflation. He regretted that during this period political leaders really did not take initiative to fight the deflation. They  simply delegated their authority of monetary policy to Bank of Japan and fiscal policy to Ministry of Finance. Now, this is the time for political leaders to take initiatives to fight against deflation, and this is the prime objective of Abe administration.   

   To achieve this goal, Abe administration formulated a comprehensive economic policy package comprising of three major policies, namely, arrow 1: “extra-ordinary dimensional monetary policy, arrow 2: active and dynamic fiscal policy, and arrow 3: growth strategy pursued by structural reforms of the economy.

   Now, let me explain briefly what each of these three policies means and attempts to accomplish.

Arrow 1:  “Extra-ordinary dimensional” monetary policy

 Mr. Haruhiko Kuroda, the newly appointed governor of BoJ(Bank of Japan) declared at the first major press conference in April 2013 that within 2 years, BoJ will attain the normal pace of 2% inflation, and to achieve this goal, BoJ will double the supply of the base money for the coming 2 years, namely, the stock of the base money will be increased from the level of about 130 trillion yen in spring 2013 to about 270 trillion yen by the end of 2015.

  By this extra-ordinary monetary easing, he meant to brew up inflationary expectations among people to stimulate investment, side by side with the decline of exchange rate of the yen expecting the consequent increase of export which will help increase economic growth rate.

   Responding Mr.Kuroda’s declaration, major speculators sold the future yen expecting the decline of the exchange rate which indeed accelerated the decline of the yen. Within a few months, the yen rate declined as much as 20%. This stimulated the expectation of increase of sales and thus profits of Japanese export oriented companies. Major investors and speculators of the world invested huge amount of funds into stocks of such companies which drove up stock prices of Japanese market acutely. 

   Within half a year, average stock prices of Tokyo exchange increased by 80%. The stock prices have fluctuated since then. However, they followed basically the upward trend to reach more than 20000 yen recently from the level of 8000 yen at the end of 2012. Side by side with this trend, corporate profits increased markedly, which seemed to have given a confidence for business leaders and momentum for Japanese economy for a long awaited recovery. This is an appreciable success of the first arrow of Abenomics.

   Aside from this successful result, the basic intent of the first arrow has not been accomplished. The basic intent of the first arrow has been to promote inflationary expectations on the part of business and the public by attaining on-going pace of 2% level inflation, and thus expect them to consume and invest more which will lead to higher economic growth.  The prices seem to have increased somewhat during the first half of 2013, but then the movement became only sluggish and from the mid 2014 price levels began to decline, suspectedly reflecting the sharp decline of crude oil prices, and did not show upward movements  until 2016, making the inflation target of 2% look practically hopeless. Since 2017, prices began to show some upward changes, perhaps reflecting general upturn of global business trend. Although BoJ’s target seems to have been disturbed by external factors. it is undeniable so far that the most important aim of the first arrow has not been achieved so far.

   Another serious issue is the exit strategy. Due to repeated purchases by BoJ of JGB under BoJ’s extra-ordinary, the outstanding accumulated government debt in the form of JGB is  almost as equivalent of Japan’s GDP. How to exit from this situation is a very large and pressing issue for the management of Japan’s economy in the medium and long term horizon. The US has promoted extra-ordinary easing of money supply up to 2012, it is still carefully promoting the exit from the aggravated balance sheet of FRB even though the  accumulated debt was as much as 20% of US GDP at its peak time. The outstanding monetary base is just about the size of Japan’s GDP. It may well take as long as even  40 to 50 years to finally normalize the expanded BS of BoJ. The course to reach the  goal will not necessarily be smooth. This is much too much bigger cost for the policy of  trying to attain 2% pace of inflation which, though, has not been attained. Viewed in this way, the first arrow of Abenomics attained only a “mixed success.”

2. Arrow  2:   Active and dynamic fiscal policy

   Abe government kept large scale fiscal spending both as usual annual budget as well as extra-ordinary budget with special purposes as helping the recovery of flood hit North-east Japan or mitigating the negative reaction of increasing consumption tax rate etc. The large scale and “dynamic” fiscal spending has had some positive effect of supporting the stable performance of the economy during rampant economic changes stemming from external forces. However, it is becoming increasingly evident that achieving the target to attain normal fiscal balance is difficult, one of the primary objectives of Abenomics side by side with terminating deflation. Japanese government has committed as an international promise since 2008, at the time of the administration of Mr. Naoto Kan, to achieve fiscal balance by 2020. However, as even recent government reports predict, this objective will almost certainly not be achieved.

   More recently, there emerges within the Abe government new arguments that attaining fiscal balance is not an important policy objective, or the current objective as defined by the “primary balance” might be changed by a new index of the government debt relative to GDP, which can be improved with economic growth. This seems to reflect the weakening of the will of government leaders to tackle the issue of controlling the growth of fiscal debt. Such attitude of political leaders may well lead to a serious issue of fiscal collapse as I  discussed in the earlier essay of this blog entitled “Aging and Possible Fiscal Crisis: Are There Remedies? “

3. Arrow 3:   Growth strategies: structural reform

 Arrow 3 is growth strategy.  The growth strategy has been formulated in the form of a comprehensive package and announced three times consecutively, in 2013, 2014 and 2015. Let me briefly depict gists of the packages.

(1) The 2013 package. This package was admitted by Abe cabinet in June 2013, which consists of 3 plans, namely, 1) industry recovery plan which aims at renewal of industry and human resources. To achieve the goal, industrial competitiveness act was enacted, for example. 2) strategic market creation plan which means to foster industrial activities to promote health, energy, future generation infra-structure, and regional development to enhance regional earning capability, and 3) international development strategic plan which means to increase the proportion of Japanese trade which is covered by free trade agreements from 19% as of 2013 to 70% by 2018.These plans look nice. However, these plans are more of slogans rather than  substantial policy prescriptions, and have not been really well implemented.

(2) The 2014 package was revealed in June 2014 by the cabinet. In order to propel economic growth, prime minister Shinzo Abe took a strong initiative to organize a comprehensive package consisting of many concrete policy prescriptions. Foreign observers commented this package as “1000 needles” rather than an arrow. 

   Out of such many policies, let me list a dozen of major policies: 1) corporate governance and reform of capital market, 2) strengthening competitiveness act, 3) participation to TPP, 4) agricultural reform, 5) regulatory reform of work ways, 6) encouraging female workers to work, 7) renewing regional development, 8) social security reform, 9) medical reform, 10) designation of national strategic economic zone, 11) wage hikes, 12) reduction of corporate income taxes.

   Of these items, such items as 1), 2) 3) and 4) achieved some appreciable results, while most of others went a half way or ended up with negligible results. We need to understand, however, that structural reform takes time to yield any visible results unlike such macro economic policies as monetary and fiscal policies.

(3)The 2015 package was announced in June 2015. It consists of some major policies such as productivity increase, innovation, development of service industries, and local Abenomics, employment reform and strategic use of universities etc. which somehow resemble the content of the 2013 package although he naming is different. Frankly speaking, I was disappointed by reading carefully the package document. The content of the package did not seem to bring about the progress relative to the proceeding 2015 package, and if fact much of the policy prescriptions did not have concrete steps for execution.

   One of the members of the committee told me that it was difficult to write prescriptions which go beyond the statement of previous report because the previous prescriptions have been in the process of legislation. But this is an excuse for not writing something which go beyond the previous ideas. 2015 was the year prime minister Shinzo Abe spent much of his attention and energy to legislate “new National Security Law” by which to authorize the use of weapons to protect American force under special cases. Perhaps, Mr. Abe’s  interest and passion toward economic policies may have been weakened.

4.   Interim evaluation of the result of Abenomics

   What has been described above is the first phase of Abenomics which covers three years since the end of 2012 to the end of 2015. Before explaining and discussing about the second phase of Abenomics, let me evaluate the performance of Abenomics at this stage.

   On economic growth, the performance of Japanese economy has been very slow except until mid-2013 when the impact of Arrow I, extra-ordinary monetary easing,  jerked up corporate profits and promoted investments. Toward the latter half of 2015 the economy slowed down and at a point statistically recorded  minus growth, which was quickly corrected for the reason of statistical error and the record of the non-negative economic growth has barely been maintained.

   On real wages, the performance has been pessimistic for the most part of the first phase of Abenomics.  From the latter half of 2013, wages increases lagged behind price increases and real wages have been eroded. After the increase of consumption tax in April 2014, real wages have been further eroded by the amount of tax increase. It is amazing that workers and population in general did not quite accuse the government on this score.

   On fiscal balance, the targeted restoration of fiscal balance seems to be getting increasingly hopeless due to rather massive fiscal spending as discussed earlier in this essay, and also more deeply in the previous essay of this blog, entitled “Aging and Possible Fiscal Crisis: Are There Remedies? “

Ⅲ.   Abenomics: the Second Stage

  In November 2015, Abe administration put forth a new concept by the name of “100 million population all active.” This is a comprehensive social campaign of the Abe administration. The concept is defined as to make a society in which all people, men and women, young and all, normal or disadvantaged, can be all active and spend a good life of their own. To create such a society, the following 3 objectives are pursued 1) encourage people, particularly females, to raise kids while working in the market with public support of child care, 2) abolish discrimination and squeeze differentials between regular and irregular workers, 3) enrich public services for old age nursing so that relatively aged people will be liberated from family care and thus can participate to market work. 

   These objectives can be fulfilled by integrated actions of plural number of government branches. Mr. Katsunobu Kato, the closest and long time aide of Mr.Abe in prime minister’s office, was appointed as minister in charge of this inter-ministerial campaign. Under this umbrella of the campaign, three new arrows have been decided by Abe cabinet in June 2016, and this signifies the launching of the second phase of Abenomics. Let me explain each of the three new arrows.

    1.  Arrow 1: Strong economy

   Arrow 1 intends to create a strong economy which can grow up to the GDP of 600 trillion yen by 2020. To achieve such a goal, comprehensive policies to enhance productivity of many industries by utilizing the merit of advanced IT technologies.

    2.  Arrow 2: Supporting child rearing

   By enriching public services for child care which make child rearing easier than before, help and encouraging young mothers having children to participate to work in the market so that labor supply will be increased. Abe administration adopts an objective to increase TFR or total fertility ratio up to 1.8 from the current level of 1.3.

    3.  Arrow 3:  Build safer social security services

   By enriching public services for old age caring, liberate relatively old family members from in-house old age care so that they can participate to the labor market as experienced workers. This system will provide the society a  social safety network that they can rely on.

    4.   Emphasis of supply side: labor force and productivity

   Primary emphasis of the second phase Abenomics is on 1) expand and empower the supply side capability of the economic, the most important is quantity and quality of labor force, and 2) increase productivity of the economy by introducing advanced technologies such as AI, IoT, big data, robotics etc and create “society 5.0” where new and advanced technologies will be organized together to provide a distinctively nice and friendly social and economic conditions for people to enjoy their lives.

   The second phase Abenomics is the focus of attention of some international experts such as economists who are interested in knowing whether Japan will succeed in this challenge of increasing labor supply in a matured economy suffering from decline of labor force as well as population, a phenomenon  commonly experienced by matured advanced economies in the world.

Ⅳ.  Interim Evaluation of Abenomics after 5 Years

   Now, let us review the performance of Abenomics for its five year experience.

     1.  Stock prices and corporate profits   

   Stock prices are perhaps the indicator which shows the most successful achievement of Abenomics. Average level of stock prices increased from the level  of around 8000 yen at the end of 2012 when Abenomics has been launched, The level increased sharply afterward and has been staying at the level somewhat higher than 20000 since 2015. This sharply increased stock prices reflect the improvement in corporate profits and increased spending of luxurious consumption items.

     2.  Economic growth

   As noted above, economic growth has been very sluggish for 2013 till 2015. However, the growth performance began to be positive markedly from the mid-2016. One may say that this is a lagged effect of growth strategy of Abenomiccs, but more fundamentally, this is a spillover effect of the general up turn of the economic performance of the world economy for the recent few years.

     3.  Prices: inflation target

   Attaining 2% level on-going inflation has been a primary objective of Arrow I,an extra-ordinary easy money policy proposed by BoJ. This target has neither been attained or even has become closer until 2016. Only after 2017, prices began to show some positive movement. It is too quick, though, to interpret this recent movement as a sign of the success of Kurodanomiccs.”

     4.   Employment and wages

   Employment has been increasing markedly for the last few years. Unemployment rate has been kept extremely low. Strange is the fact that in spite of very tight and ever tightening labor market, wages have not increased appreciably except for marginal workers such as part-time workers and those for casual jobs. This rather puzzling phenomenon reflects the fact that large part of recent increase of employment is not for regular full-time workers but rather for irregular part-time workers.While Abe administration asks strongly with even some tax incentives employers to increase wages of their workers, it is more important for the government to squeeze differentials and abolish discrimination among workers of different employment status such as regular vs. non-regular by legal and institutional regulations.

Ⅴ.  The Appeal of the 4th Abe Cabinet

     1.   Human resource development strategy—Free education

   In October 2017, general election of the House of Representatives was executed. The result was an overwhelming victory of LDP or Abe’s party in power. LDP has been emphasizing the importance of human resource development strategy from the time of election campaign. This was shared generally by opposition parties. One concrete slogan which was shared more or less by all the parties was “free education.” 

   In Japan, education for elementary and junior high school students is compulsory.As far as you attend publicly financed schools, fee is free. This means that the slogan of “free education” is to make education for the very young prior to the age of elementary and for senior high and college students as cheap as possible.

   The 4th Abe administration, organized immediately after the election quickly formulated policy plans to reduce fees and tuitions for nursing schools, kinder gardens  and senior high-schools without much research and analysis of the new system. I personally feel worried that this policy will end up with simply a waste of precious tax revenues without intended effect of helping young people to receive education more universally.

      2.   All generation social security system

   Another outstanding policy proposal of Abe administration is to develop an “all generational social security system.”  It is true, as I discussed in some detail in my previous essay of this blog, Japanese conventional social security system is becoming increasingly deficient in satisfying much diverse needs of the current complex society with rapidly aging population. However, the “all generation social security system” as advocated by LDP and the new Abe administration is more of a slogan than a substantial concept. We need to think and discuss the desired new system of social security much more widely and deeply incorporating not only politicians but also experts and commoners of the entire society,

Aging and Possible Fiscal Crisis: Are There Remedies?

This essay is the summary of main gists of my recent book “How to Save Deadly Disease of Japanese Economy(Japanese language book) published by Gentosha Inc. at the beginning of March, 2018.

Ⅰ.     Introduction

   Japanese government’s fiscal debt has been accumulating acceleratedly for the last decades. The level of the debt relative to GDP reached recently around 240%. This is the worst of the countries in the world, and is much worse than the ratio Japan has experienced right after the defeat of Pacific War in 1945.

    The basic reasons behind this mushrooming fiscal debt are (1) aging of population which increases social security expenditures, and (2) slow or none growth of the economy since 1990s, often called, Japan’s lost two decades. The population aging is expected to continue for about another half a century, and to accelerate around the mid-2020s, and the economic growth is expected to be sluggish in the long run because of the decline of workforce, and consequently, the fiscal debt is expected to grow more.

    Unless major and fundamental changes take place in policy management in economy and society, this dangerous trend would continue. In fact, there are on going trends in government fiscal debt and aggregate household net saving leading to squeezing the net national saving within a decade or so which is the basic source of purchasing government bonds.

   Under such circumstances, in order to issue new government bonds to finance the government budget, Japan will need ask foreign investors to purchase Japanese government bonds(JGB). The foreign investors, however,  would not purchase JGB at the current rate which is artificially lifted by massive purchases by Bank of Japan(JoB). If they purchase at lower prices, the result would be substantive reductions of JGB prices, and hence sharp rises of interest rates. This would jeopardize government fiscal management as well as corporate financial management, and may well lead to fiscal and business collapse of Japan.

   The basic way to avoid such a crisis is to realize fiscal reconstruction which can be achieved by the three major ways: (1)reduction of fiscal expenditure, (3) enhancing economic growth by which to increase tax revenue, and (3)increases of taxes. The Japanese government has been attempting such measures for the last decades. However, many administrations have not been able to achieve desired results. The current Abe administration seems to have weakened its will to keep fiscal discipline.

   In this essay, I will describe the nature of the problems, and attempt to show possible remedies to overcome this issue hoping to provide a better country to the next generation.

Ⅱ.   Dangerous Accumulation of Government Fiscal Debt

1.  Rapidly growing fiscal debt: globally and historically worst

   Let us first take a look at what the level of accumulated government debt. Figure 1 shows the levels of the accumulated government debt for the recent half a century. The figure shows the data from 1965.

    Figure 1.   The secular and accelerated increase of accumulated government debt
    The fiscal debt prior to 1965 had been negligible because Japanese government followed faithfully the rule of stringent “fiscal law” enacted in 1947 which prohibits rigorously the issuance of government bonds without the legal commitment of redemption. The government issued a bunch of JGB for the first time after the war in order to support the economy which suffered from an acute recession in the wake of Tokyo Olympics of 1964.

    The amount of JGB issuance has increased secularly and the accumulated amount increased somewhat acceleratedly since then until now. Recently, the accumulated outstanding JDB amounts to as much as twice the GDP. This figures shows the data of JDB in a narrow sense. The data for more inclusive definition of the fiscal debt is currently around the level of 240%.

    Now, let us take a look at how the pace of accumulation of JGB as compared with other advanced economies in the world. Fig. 2 shows the data. We can see from this Figure that Japanese government debt was not as bad until the beginning of 1990 as today. During the 1990s, the level increased sharply and exceeded by an increasing margin the other nations.

     Figure 2:  Accumulated government fiscal debts: International comparison
    The 1990s is the first half of so-called “lost decades” of Japanese economy when the economy suffered from very low growth with perpetuating deflation, and when Japanese population was being aged much faster than other countries.

   Still, let us take a look at the data of Figure 3. which compares the changes of accumulated government debt relative to  GDP for two different periods: one is post WWII period and the other is pre-war period up to the end of WWII.  Surprisingly, the ratio for the recent year such as 2016 is much higher than the ratio immediately after the war when Japan was defeated in the war and the economy was fatally devastated. This fact shows how dangerously high the current level of accumulated government debt.
2.  Why and how the fiscal debt mushroomed?

   There have been two main reasons why the fiscal debt has been accumulated this much for the last few decades. One is the period of prolonged very slow or none growth and basically deflationary period since the beginning of the 1990s, which is often called as “ the lost two decades.” 

   During this period, since the economic did not grow and prices have been rather declining, wages did not increase or in many cases declined. Since the employee’s prescribed contribution to the social security is linked to their wages, the contributions from the insured people did not grow during this period.

   The other is rapid aging of population during this period. This is the period in which “baby boomers” who were born shortly after WWII have been aging from the middle to senior age brackets and their social security payment has kept increased somewhat accelaratedly. 
    The no increase of contributions on the one hand and rapid increase of social security payment on the other enlarged the gap between income and expenditure of social security fiscal account increasingly large, and increased the deficit of social security account. To the extent that this deficit could not be financed by contribution revenues from the insured people, the government had to make up the gap by deficit financing, namely, issuance of government bonds unvouched by legal redemption, which ended up increasing the accumulated government debt.

    Even in subsequent period such as 2010s, which presumably after the so-called  “lost two decades,” the economic growth has been still sluggish, wages did not increase and the populations aging is proceeding continuously rapidly. Therefore, the increasing trend of the deficit of social security continues, and the government is obliged to issue greater amount of JGB to finance the debt.

3.  Possible dangers of fiscal collapse
   The higher the level of accumulated debt to GDP, implying the higher risk of repayment incapability, the greater the risk of fiscal collapse.  There is a reason to believe that the level of accumulated fiscal debt will increase much more sizably  during the 2020s than now. This is because the postwar baby boomers will get older beyond the age mid-70s, when the medical cost per person will increase unproportionately after the threshold of the mid-70s, and will boost the increase of  medical cost, and consequently, the government fiscal debt.

   On the other hand, with the aging of population, the household saving ratio tends to decline because the aged people tend to dis-save rather than to save. The figure 4 compares the changes of the level of the aggregate net saving of households on the one hand, and the accumulated government debt on the other.

   Figure 4:  The changes of aggregate household net saving and the accumulated government debt
   Conspicuous is the fact that the margin of the excess of household saving compared to the government debt has been narrowing for the last few decades for natural reasons as stated above. And it looks that the excess of saving to the government debt will approach to zero around 2020s and is expected to be negative after a certain point of the crossing of the two orbits.

   This suggests a serious problem. It means that the basic funds for purchasing new government bonds run out. Under such circumstances, the Japanese government will have to ask foreign investors to buy JGB. Foreign investors will most likely be reluctant to buy the JGB at the recent price level since it is lifted artificially high by massive purchases of the Bank of Japan. Foreign investors  would purchase JGB at much lower prices, and this will cause serious problems to Japanese economy. 

   Since Japanese government relies heavily on issuance of JGB to finance its budget taking advantage of current extremely low interest rate, the substantive increase of interest rates would make it difficult for the government to finance its budget. Unless, Bank of Japan provides extra-ordinary lending directly to the government, the government will not operate normally. Business corporations would suffer from the similar problem since they have been used to rely on extremely low interest rate.   

   Unless, swift, effective and powerful rescue measures are executed, Japanese economy may well suffer from serious problems of fiscal collapse and consequently economic collapse which may destruct economic operations of both public and private sector victimizing the life and activities of the population.

   Given the current extra-ordinary mushroomed structure of accumulated fiscal debt, the risk is quite high that the economy will be led to collapse by impacts of any major stimulus or  so-called “triggers.”  For example:(1)the government debt   surpasses aggregate net household financial asset as mentioned above, (2) continuation of current account deficit which tends to lead to lowering exchange rate of the yen, (3) actions of major speculators taking advantage of market expectations for lower JGB prices, (4) military conflict, (5) political turmoil etc.

   Some argue that the government debt issue in Japan is over-emphasized. They say that the Japanese debt is not that much serious. They point to Japan still has much saving, most of JGB is owned by the Japanese, Japan has an economic viability etc.   

   However, one has to be aware of the fact that Japan is not an exceptional country.  Economic collapse or bankruptcy is not a rare phenomenon in the world. There have been ample experiences of economic bankruptcy in recent decades only to mention, for example, Venezuela in 2017, Argentine in 2001, Russia and Pakistan in 1998, South Africa 1985, Philippines and Brazil in 1983, Mexico in 1982, and Turkey in 1978 etc. 

   In fact, Japan has suffered the most serious case of quasi bankruptcy in 1946. In this case, Japan somehow avoided to be caught in the default by the incredibly large and painful expense of sacrificing people’s financial and non-financial assets.

   To the extent the risk is evident, it must be the task and duty of political and economic leaders as well as the public to try their best to avoid the risk and try to construct better economic and social structure to minimize such risks of sacrificing innocent people, particularly for the next generations.

Ⅲ.  Are There Remedies?

1.   Three main measures: spending cut, economic growth, and tax hike
     The single most important way to avoid such risks is to promote forcefully to reconstruct the healthy balance of the national finance. One may call such effort as strengthening fiscal discipline. There are basically three main measures to pursue  that goal.

   One is reducing the unnecessary expenditures of the government. One may put it as “stream lining” the government expenditure structure. This has been referred to and attempted over and over again by many administrations of the Japanese government for decades. One outstanding challenge has been attempted during the DPJ(Democratic Party of Japan)government in 2009. The administration claimed to carve out a few trillion yen of funds by stream lining government expenditures. But the result was not even one tenth of the target. 

   The most important area of spending cut is the area of entitled spending、most notably social security spending. Since social security expenditure is the single largest area of spending, many plans have been proposed to stream line the expenditures. Just to name a few: long-term reduction of pension payment, increase of the eligible age of receiving pension payment from the current age of 65 to higher ages, reduction of designated official prices of drugs and medical services and  promoting efficient operation of nursing houses etc.   

   Although one can propose many plans, there are certain limits of reducing costs in social security areas since social security services provide basic support for lives of people, and therefore they cannot be easily reduced since it may well hurt the basis of their life.

   The other is economic growth. If economic growth rate can be increased, it would certainly increase the tax revenue and contribute to promote healthy fiscal balance. Contemporary Japanese economy is, however, suffering from steady decline of labor force since the end of 20th century and recently of population as a whole. Since labor force is the basic factor to support the growth of the economy, declining labor force and population is a serious negative factor to reduce the potential of economic growth. Many economists estimate that the potential growth rate of Japanese economy for the coming decade or two would be around 0.3 to 0.5 percent. This is much too low for helping to restore fiscal balance.

  The third is tax hike. This is the most straight-forward and powerful means to restore fiscal balance. However,  tax increase is perhaps politically the most unpopular option in any country. Let me explain my proposal of tax increases in the next section.

2.   Recommendation: 1% annual consumption tax increase up to 20%

   There are several types of taxes to be possibly used to restore fiscal balance: individual income tax, consumption tax, inheritance tax and corporate income tax. Among them the most equitable tax which has a large tax base is consumption tax. Let me therefore focus on consumption tax as a strategic policy measure to restore the fiscal balance.

   Japan’s current consumption tax rate is 8%, which is much lower than many of European countries where indirect tax which is comparable to Japan’s consumption tax, commonly referred to as “value added tax,” ranges at the rate of 20 to 25 %.

   In 2010, Mr. Yoshihiko Noda, the then finance minister of DPJ government promised publicly in G8 finance minister conference to increase consumption tax rate from the then 5% to 10% in order to show the commitment of Japanese government to strengthen fiscal discipline. In 2020, three major political parties: DPJ, LDP(Liberal Democratic Party) and Komei party agreed to increase the consumption tax rate from 5% to 8% in  April 2014, and in October 2015 to 10%.

   In April 2014, prime minister Shinzo Abe increased consumption tax rata rate from 5 to 8 percent as scheduled. While the first quarter of 2014, prior to the tax hike, recorded 4.9 percent annualized increase of GDP by rush in consumption, but for the second quarter dumped as much as 7.1 percent. Perhaps because of this trauma, Mr. Abe postponed the scheduled consumption tax hike as scheduled in October 2015 till April 2017, and then he also postponed this scheduled tax hike till October 2019. 

   And more recently, he called abruptly a general election in October 2017 for the reason of shifting the usage of 4/5 of expected increase of revenue accruing from tax hike scheduled in October 2019 to provide free education rather than to spend for restoring fiscal balance as previously planned.   

    Such choices of PM Abe seems to suggest that he has (1) a strong trauma about the negative effect of the consumption tax increase for dampening economic growth, and (2) strong interest to buy the “browny’s point” of the voters by sprawling government money rather than to restore fiscal balance to create a more sound and strong economy for the future generations.

   Under such circumstances, I would like to propose the following plan of increasing consumption tax. Thai is, to raise consumption tax rate very gradually such as 1% or even less every year until it reaches the level of 20%.   

   By doing this, the shock effect that the increase of a few percentage points such as 3 or 2 will be minimized.  Since, also, the long-term plan of tax increase is given, people have to and will be likely to adapt their life plan accordingly. In other words, people will not rush to buy before the tax hike and dampen their consumption afterwards, they would rather try to adjust their life plan for a long-run.

   One percentage point increase of consumption tax will bring about, under the current economic structure of Japan, approximately 2.5 trillion yen tax revenue. When the tax rate is 20%, consumption tax revenue would be 50 trillion yen per year. If this tax rate is continued for 26 years, the current accumulated government debt will be absorbed by the consumption tax revenue alone. Since, it takes at least 12 years to reach this level starting from the current rate of 8%, it would take longer time to absorb the outstanding government debt.   

   But to the extent that there are other  tax revenues such as income taxes and inheritance tax, this time span could be shortened somewhat. In fact, in a aging society like Japan, inheritance tax will be an important tax revenue for the country for sometime. I urge to recommend to change the current acutely progressive tax rate structure of inheritance to reduce the general rate and expand the tax base so that greater number of people will be levied lower taxes and consequently total tax revenue will be increased substantially.

   If Japan can adopt this kind of long term tax increase plan, Japan will be able to get rid of the extra-ordinarily heavy burden of huge accumulated fiscal debt and establish a much more healthy and stable economic structure for the future generations.

    Also this will alter the current extremely unfair intergenerational differentials of life long net value of individual social account, namely, the gap between life long contribution and payment of social security and taxes, as formulated by professor Laurence Kotlikoff some years ago.   

3. Need to compensate high burdens by comprehensive social security services

     The story so far has been only one-sided. It was simply the story of increasing the burden on the tax payers in order to absorb the current huge accumulated debt of the government. People will definitely not accept this kind of one-sided story. People will begin to listen only when the other side of the story that such high burden will be offset and compensated by good and reliable social services to protect and stabilize their life for life-long period will be presented.

    Here, I would like to propose a new thoroughly comprehensive social safety plan. The conventional social security program covers only pensions, medical care, and  unemployment benefit. It was only 2000 when old age nursing care insurance was adopted. This kind of conventional social security system worked well for Japanese society during the high growth period of 1960s and 70s, and reasonably well until 1980s, when most of the people enjoyed stable employment as regular employees and secured married family life.

   Japanese economic, social and family structure changed drastically since then. During the so-called “lost two decades” from the 1990s and afterwards, the economy suffered from extremely low growth, nearly 40% of workers cannot enjoy stable full-time life long employment, and the family with parents and children living together became less than half of the entire families. Under such circumstances, the capability of maintaining stable life and family reproduction itself of relatively poor and disadvantaged people is jeopardized. The conventional social security services do not work effectively to meet the demands of these people. 

   People need helpful and powerful services ranging from assisting marriage, bearing babies, fostering children, schooling, providing appropriate vocational training, protecting working conditions and against status discrimination, in addition to conventional services of unemployment benefits, medical insurance, poverty assistance, and old age nursing. The comprehensive social safety program I am proposing will provide all these services effectively and seamlessly throughout the life cycle of a person.

   This kind of comprehensive social safety system is obviously highly costly. However, in order to secure the support of the public about the heavy burden of 20% consumption tax system, providing this kind of comprehensive social safety and security system is inevitable.   

   The most important  political agendum we are faced in order to construct a new country where future generations can live safely and comfortably is precisely to examine, discuss and choose the new model of our country for the future.

Ⅳ.   Political Leadership and Public Support

   There are some political leaders who think about the need and importance of such major reforms of our country. However, critical  for them is whether the public, particularly the voters, understand the importance of such agenda.  Voters are alert and sensitive about the issues of gains or losses in front of them but tend not to be aware of such major issues with a long time horizon. And with the absence of  voters who understand the major and long-run issues of the country, alert politicians cannot propose important policies because they will not secure votes.

   Such major issues need basic knowledge and relevant information to understand the meaning of the issue. Not only insufficiency of understanding on the part of the people, but often critical information is not provided to people nor even disclosed.

   For example, social security system is a complex entity. Ministry of welfare and labor maintains, for example, that Japan’s public pension system is durable for 100 years without convincing evidence. Also, Japanese government bonds are priced high largely because massive purchase of BoJ. The “Primary Dealers system” tied closely with the guidance of Ministry of Finance conceals the potential signal of more natural pricing.

   The general election held in October 2017 was a good opportunity to discuss such issues. However, the time was only a few weeks between the announcement of the election and the day of voting. Most parties quickly prepared shallow policy agenda  and voters hardly had time to think about them. 

   Under such circumstances, prime minister Shinzo Abe declared to spend 4/5 of increased tax revenue arising from2 percentage point increase of consumption tax schedule in October 2019 to provide free education for children and youths before and after the compulsory education age bracket. Whether such a proposal is meaningful for current Japan has not been carefully examined, and its obvious consequence is to delay the schedule for restoring healthy fiscal balance for the country.

   Important is political leadership on the one hand, and public understanding on the other. These two must be connected by full disclosure of information and serious and sincere dialogue between the two. We need to work for it together since the critical mission for political leader is to inherit a better country for the future generations, and it must be the desire of us, namely the voters of the current democratic society.

Sonjuku Okinawa Study Tour

「Sonjuku Okinawa Study Tour」November 11 to 13, 2017

  Some members of Shimada Sonjuku and myself went on to study tour of Okinawa for the period of November 11(Saturday) to 13(Monday), 2017.

   Study tour to Okinawa is the compulsory subject of Shimada Sonjuku for the following reasons. Okinawa is the place where we can learn an important aspect of Japan’s history, feel an unique culture different from cultures of Japan’s mainland, the history of miserable war symbolizing the end of World War II in  which Japan was defeated by the United States and also learn the current front guard of Japanese archipelago working with the US military stationed in Okinawa.

   Since main objectives of Shimada Sonjuku are to study history and cultures of major cultural zones of the world including Japan, Okinawa is an indispensable place and subject of our study. It is because Okinawa is the place where we can learn both the contemporary history of Japan of which the experience of war is the most important, and also Okinawa’s unique culture which suggests that Japan is the country of cultural heterogeneity.

   Okinawa is an island which occupies about 2% of the width of Japanese archipelago and inhabited by1.4 million people. On this small island, 70% of entire American military bases on Japan is located. Therefore, the existence of American military bases is the prime issue and feature of Okinawa: an issue in the sense that Okinawa people take it as an unfair burden imposed on them relative to the people of the mainland, and as an outstanding feature in the sense that it symbolizes the strategic importance of this island for the US-Japan security arrangement.

   For these reasons, the Shimada Sonjuku makes it a rule to visit a large base of American airforce located in the area of Kadena-town when the sonjuku makes a study tour to Okinawa. In fact we have visited the airforce base twice in the past. Each time, the airforce base has accepted our visit rather smoothly and promptly. However, this time it was somewhat different. It took considerable time to get their acceptance.

   It took longer time partly because our initial proposal of the date conflicted the holiday of the base, but perhaps also because there were other reasons. An increasing threat of missiles of North Korea has changed the entire geopolitical situation of this part of the world. Finally, the airbase office proposed another date and our visit was made possible. We are very thankful for the decision of the air force representatives and also for the earnest support of Mr. Nakajima, Koichiro, Director General of  Okinawa Defense Bureau, Mr. Morita, Haruo、Mr. Jyomura, Nobuyoshi of the Ministry to get approval of our visit.

   November 11(Saturday)

  The number of the team members has been 15 to 18. The number changed from time to time because of their own plan of the trip. We arrived at Okinawa Naha AP shortly before noon of Saturday. We took a bus to visit a nice traditional Okinawa restaurant, named “Yagiya”. The humble house of the restaurant was located in the midst of farming field. Dishes were delicious.

   Having finished lunch, we went on to visit Peace Memorial Park. This park was built in the mid-1970s for the purpose of reposing the soul of those who lost their lives in Okinawa war of 1945 whether they are civilians or soldiers. The park is located at the edge of Itoman city which is at the South end of the main island of Okinawa. 

   This was the final battle field of Okinawa war which ended on June 23, 1945. This was the most fierce fight between the US and Japanese military on the island of Okinawa. In the park, there located many rows of low memorial walls made of black granite on which names of those who lost their lives are carved. The total number is about 240000, and is increasing from time to time even now as the new names of the dead are identified.

  Beyond the park is the sea of East China sea. It was breezing. Watching from the cliff top, the bottom of which is washed by the waves of the ocean, I imagined many Japanese civilians jumped from the cliff edge to escape from the merciless attacks by the US force. Having spent some time there, we moved on to “Himeyuri no Toh” or the Tower of Young Lilies.

  The Tower of Young Lilies was located nearby. This is the memorial spot to commemorate those young female high school students who lost their lives during Okinawa war, mainly during the fierce battle fought in the Neighborhood of Itoman area in mid-June, 1945. These were the students of Okinawa prefectural No.1 Female High School. Some 300 students, teachers and staff were mobilized to help taking care of wounded soldiers. In the fierce battle, some 200 students lost their lives.

   In the memorial hall of the tower of lily, there displayed pictures of the students, their left over articles, and their notes of experience at the last minute. Watching these items makes us painfully feel the dreadful and desperate situation they were in.

   At the side of a display case, there was an old lady who spoke to the visitors as a story teller of war experience. Having listened to her story sometime, Mr. Yoshiyuki Goto, our member, asked her a question as to when and how she realized that the war was over.

  She replied slowly reminding of the moment when she felt that the war was over, saying, “An American nisei(2nd generation) officer came to us and asked if we were hungry. I noded. He said to us to wait there and said that he would come back to bring us food. Sometime later he came back to us with a basked full of foods of various kinds. Since I was very hungry, I thanked him and waited for the rest of our group came back.

   A moment later, other members of our group came back. A senior student among them asked me what this food was and who gave it. I explained all what happened. Then she got very angry and ordered strongly that I should dispose it. I felt very sorry but disposed the precious food in a drum can nearby.

   Some day later, again that nisei officer came to us and advised that we should move us to a safer place because the place we were was dangerous. We got on a truck he drove. It took some hours to get to the place. He said that this place was much safer. This was all what he could do for us. He told us that since we must have family, relatives and friends, we should go to find them on our own. He was very kind to us. I realized that the war was over.” I suspect that the  place she referred to must have been at or near the refugee or victims camp in Ishikawa-cho area.

   The lady was behaving very well and elegantly. The memory was precise and expression was thoughtful. It was hard to believe that she was age 89. She must have been age 17 when she was mobilized to join the rescue team for Japanese soldiers. Listening to her was a very special experience.

   We then moved on to “Kaigun-go”(Navy Resistance Cave) in the suburb of Naha-city. This was the cave digged using only hand shovel and pickax. The cave was digged amazingly long and functionally under ground. Toward the end of the Okinawa war, a navy troop who lost their ship in the battle escaped to the land and digged the cave in the rocky hill. Soldiers often attacked US military camps in the midnight. 

   When they finally realized that there could be no hope to win nor survive, the commander, a rear admiral, Mr. Minoru Ohta, sent a telegram to the Imperial Navy commanding headquarter. In the telegram, he wrote rather in detail how Okinawa people fought together with Japanese troops in the extreme hardship, and concluded the telegram saying, “Let us wish that a special consideration be given to the Okinawans in the future.”  After sending the telegram, Admiral Ohta and his fellow officers and soldiers all killed themselves.

   Admiral Minoru Ohta is one of a very few Japanese military officers who have been respected by Okinawa people. Walking through the underground caves, and watching the displays of hand shovels and pickax, chairs and tables, pictures of battles which were mostly one sided destructive attacks by US troops, tanks, ships and planes, we were caught in a special feeling. That is, why Japanese soldiers and civilians had to fight this kind of hopeless war sacrificing their lives.

  In the bus on the way from Kaigun-go to Kanutcha Resort hotel where we planned to stay over the night, we talked about this issue. It is known by now that many people including the high rank military generals and officers knew in those times that Japan would surely be defeated by the US which had ten times more productive capacity. The question is why then Japan plunged to wage the hopeless and desperate war against the US.

   We discussed that it must be due to the mal-functioning of  the decision making system of Japanese military, government and even the society which is influenced one-sidedly by the biased media. The Mal-functioning of Japan’s decision making was not only the case os the WWII time, but also often observed in many important organizations of Japanese society, government or even businesses alike. Then our discussion proceeded to the question of how Japan would react when North Korea finally succeed to develop and deploy nuclear headed ICBM. It is certainly a nightmare. But we unfortunately know that we are not prepared to think soundly how we should recognize and react or proact to such a serious situation.

   We arrived at Kanutcha Resort hotel in late evening. Mr.Eiichiro Nakamura, chief chef and general manager of the hotel had prepared a gorgeous dinner arrangement in the nice garden overlooking the sea. Incidentally, over a couple of hundred meters ahead of the sea, there locates Amrican Marine Corps Camp “Schwab.” On the coast of the camp Schwab, Japanese government plans to build a Marine Corps helicopter base. The project has been on the deadlock because of the strong opposition of the governor of Okinawa, Mr. Onaga.

   The dinner was delicious, the service was splendid, and the atmosphere was almost a royal dinner, thanks to dedication of Mr. Eiichiro Nakamura. We talked, enjoyed wines and ryukyu Awamori, local liquor representing Okinawa, and eventually sang songs. In the mid-night, we went back to our hotel rooms.

November 12(Sunday)

  We left Kanutcha Hotel at 9 am. We headed at a hill park at the side of  Futemma Marine Corp Base. When we arrived there, it started  to rain slightly. This is unusual because wherever I go, I usually encounter no rain. Something must be wrong! We walked up to the top of the hill from where we can have an overview of the runway of Futenma helicopter base. 

   The runway is surround densely by houses of Ginowan-city people. In fact, these houses have been built during the years of Okinawa recovery and development after the base was constructed in this area. Whatever the reason, the fact that the runway is closely surrounded by people’s houses makes the danger of any accidents serious. This is the reason why Okinawa people and Okinawa political leaders have been demanding strongly to move the base somewhere else.

   We were able to see the runway fairly well from far away. There were a couple of dozens of helicopters. There were no Osplays, which has been the target of citizen’s recent anti-base campaigns. 

  In 1996, in the wake of the citizens’ uprising accusing the rape of 12year Okinawa girl by Marine Corp soldiers. the then Prime Minister Rytaro Hashimoto flew to see President Bill Clinton at Pebble Beach in California to meet and negotiate directly with the president to relocate this base which is more dangerous than other bases because of the above reasons. President Clinton amazingly compromised to relocate the base. 

 Then the ball was on Japan’s court. The Japanese government had to find the alternative plane for the base. They located the new place at the side of Camp Schwab, which is in the area of Henoko village at the suburb of Nago-city. However, it took a long time to get agreement of Okinawa prefecture because of strong resistance of citizens and politicians of anti-base organizations.This anti-base campaign was aggravated by an unbelievably irresponsible message ofMr.Hatoyam in 2009, the then prime Minister of Japan.

  Mr.Hatoyama said that he would promise to move the base out of Japan or at least out of Okinawa. Given the official message of the prime minister, the anti-base groups have been extremely empowered. This irresponsible message left a serious scar afterward in spite of the earnestly positive attitude of Abe government to relocate the baee from Futemma to Henoko area.

  From the top of the hill overlookng the base we spent sometime watching the runway of the base, which is the focus of the most difficult problem which the Japanese government faces in relation with the US.

  We then headed to Ryukyu-village theme park. This park is managed by Uechi family. I have had a luck of having a close friendship relation with the family, particularly, Mr. Toshio Uechi, ex-president of the Uechi group company. The Uechi group manages several businesses in addition to this theme park at various locations of Okinawa mainland and also Ishigaki-island. Mr.Toshio Uschi is the brother of Mr.Choei Uechi, the head of the Uechi group. The Uechi brothers have been awarded “Tourism Carisuma Award” from prime minister Junichiro Koizumi. They were recommended by the award committee which I headed.

  The unique feature of Uechi group is, in addition to tourist attractiveness of their business, close cooperation of entire Uechi families which is rather unusual for many small business families of Japan and elsewhere. Thanks largely to this family culture, they and their employees work hard in good cooperation, which apparently contributes a lot to make their business uniquely successful in Okinawa.

  Mr. Uechi and his staff warmly welcomed sonjuku members from the moment of stepping out of the bus. They showed them around the park for about an hour. The park is constructed by old houses collected from various parts of Okinawa islands, and a whole set of amusing shows and activities are given to the visitors. Sonjuku members enjoyed traditional Okinawa cultures in the park. 

  They arranged a garden lunch, where they showed us special performances of traditional dances and songs. Stimulated and encouraged by such performances of Okinawa professional entertainers, Sonjuku members got excited and started sing songs by themselves.Their performance was amazingly good. Mr. Uechi and Okinawa staff were so much impressed by such performance of Sonjuku members’, which made this visit very hot and excited.

  We then returned back to Kanutcha resort hotel, where I gave a lecture for about an hour and  a half on such topics as the history of Okinawa, sad experiences of Okinawa war, post-war experiences of Okinawa people, Japan-US relations in the post war period particularly during the cold war,  Japan-US security arrangement, problems of US military bases in Okinawa, etc.

  I spent some time to talk about somewhat in detail about my own involvement in Okinawa as chairperson of Okinawa problem committee. Its full name is long, namely, “the committee serving to Cabinet minister, Mr. Kajiyama, to examine to give proposals on the question of the development of Okinawa”. Since the name is too long, this is usually called by a short name, ”Shimada Committee. ” And in Okinawa even shorter as “Shima Committee, sounding in Okinawa as the Island Committee.

  This committee was organized by the government in the wake of a sad criminal incident that three Marine Corp soldiers raped a 12 year old Okinawa girl in Kin-town in fall of 1996. This case was not made open by her family and close friends for a while considering of the shock of the girl. But soon afterwards, the case was known publicly, and made Okinawa peple angry against the US military and also against Japanese government. Hundreds of thousands of Okinawa people demonstrated around the US bases and surround the bases by their  human chains. They also went to Tokyo to protest. The then prime minister Mr. Murayama、Tomiichi of Socialist party and high officials of his government did not know what to do, and Mr. Murayama resigned from his position, which was succeeded by Mr. Hashimoto, Ryutaro, who took this case seriously. On the US side, president Clinton, Mr.William J.Perry, Defense secretary, and Ambassador James Forley took this incident very seriously.

  Prime minister Hashimoto, Ryutaro thought it extremely important to take care the anger of Okinawa people and give them some sensible relief. For this purpose,  he did three things immediately. First, he flew to the US to meet President Clington at Palm Beach to negotiated directly with him to move the Futemma Marine Corp base which is surrounded by citizens’ houses to somewhere else where population density is much lower so that the damage of an accident would be much smaller. He knew that Okinawa people are most nervous about the danger of Futemma base accident. Second, he set up a committee to examine and discuss possibilities of amending the agreement of the status of US military stationed in Japan. And third, establish the ministerial committee to provide special aid to promote economic development of Okinawa.

  In addition, Mr.Kajiyama, Seiroku, the cabinet minister of Mr.Hashimoto’s administration, proposed to organize a committee consisting of experts and local representatives which is to propose good plans for Okinawa people to have hopes for the future to develop their communities getting rid of the past practice of one-sidedly dependent on the subsidies of the mainland government. 

   Mr.Kajiyama emphasized that this committee examines and decides the plans from the viewpoint of Okinawa people and not from the bureaucratic eyes of the mainland government. This idea was suggested to Mr. Kajiyama by Mr. Okamoto, Yukio, an advisor to Mr. Kajiyama and also my good friend. Because of earnest request of Mr. Okamoto, I finally accepted to take a job of chairperson of this committee, which later became known by the name of “Shimada committee”.

  In order to fulfill the requirement of Mr. Kajiyama to make the committee determine things from the viewpoint of Okinawa people, Mr. Okamoto, committee members and myself went around the Okinawa island to visit some 50 sites where US bases or military facilities are located to examine the situation and talk to people and listen to their views and demands as carefully as possible. Having visited Okinawa a couple of dozen times within two months, I finally became reminding various site scenes of Okinawa even while I am sleeping. 

 After having learned the situation and wishes of people, we carefully planned projects which would encourage Okinawa people and give them hopes for the future. Since the projects proposed by this committee would be given the budget only once and never repeated, the projects must be successful. To make the projects successful for people, I went around the island to visit communities and persuaded young local community leaders with various professions to organize a team to do PDCA for each project. I named it, “Team Future.” Eventually for each of some 40 projects, a Team Future was organized. 

  The largest of these projects was the redevelopment project of Kadena-town. This is the town which was first attacked most severely by the US troop which landed on April 1, 1945 Okinawa main island, namely, Kadena shore and was later developed as the strategic airport for B29 bombers to bomb mainland cities. 

   When inhabitants returned to their hometown after the war, 83% of their land was taken away by the US occupancy troop as their military base. The inhabitants who lived there before the war had to live densely in the narrow area of 17% of the old town area left for them to live.

   Because of this situation, the town after the war has been extremely narrow and congested. The living conditions in the town were poor and business opportunities in the town were very scarce. Having listened people’s voices of all the areas where US bases and military facilities were located, we judged that the conditions of Kadena-town were the worst and needed to be taken care of most urgently. We proposed a major plan of reconstructing the central part of the town thoroughly.

   Mr. MIyagi, Tokuichi, the town mayor, and his staff and town people worked very hard to reconstruct the town by their own planning and work. The budget was large but they accomplished the project marvelously mostly by their own initiative of “Team Future”.

  At the end of their work, Mr. MIyagi, Tokuichi and his staff proposed to display the copper relief of portrait of Mr.Kajiyama, Mr. Okamoto, and myself at the entrance hall of the newly built large town hall to thank our effort to contribute to the town. It was an unexpected honor. 
   We plan to visit Kadena town tommorow and surely visit the town hall in which Okinawa bureau of Defense ministry has its headquarter. On the way, Sonjuku members must pass by the copper relief of my portrait. I finished my talk on Okinawa finally referring to this copper relief episode in order to not let them surprise when they see it.
   After my lecture on Okinawa’s history and its role on contemporary defense, we had a wonderful Chinese dinner at Kanutcha hotel restaurant.

November 13(Monday)

 Early in the morning at 8:45am, we left Kanucha resort hotel heading at Kadena US Airforce Base. The driver of the bus predicted that it would take an hour and probably 15 minites. Amazingly, the bus arrived at the gate of the base almost exactly at 10:00 am, the timing that the airbase office advised us to arrive.

  At the gate, one of the sonjuku members, Ms. Mayuka Matsui joined us. She has had a different trip plan in Okinawa until today. Ms. Higa, Sayaka、who works for the base kindly guided our bus to arrive at the entrance of the office building of the base. Mr. Nakajima, Koichiro, Director General of Okinawa Defense Bureau was waiting for us at the entrance. It is unusual that such a high official of Defense ministry escort us. We were very thankful for hie earnest and kind support to make our visit of the base possible this time.

   Several US airforce officers have welcomed us. I learned later that they were Colonel、Oldham,Paul M, commander of 18th Mission Support Group, Mr.Townsend、Paul P. Lt.Colonel, commander of 18th operation support squadron, and Mr. Potter, Donovan K. Public Affairs, 388th Fighter Wing.

  They guided us to enter a conference room. We sat around the big table in the center of the room. Mr. Oldham gave an opening remark to welcome us representing the 18th Wing of US airforce. They received us very friendly. Then, a lady officer gave an introductory briefing on the history and basic missions of the 18th Wing troop in Okinawa using projected pictures of various aspects of the base. This briefing was followed by the explanation by Mr.Townsend on various functions of the troop stationed in Kadena base.

   Of their speeches and presentations. there were several points which are particularly interesting for me. The 18th Wing troop has a long history even before the WWII. The members of this troop seem all proud of the achievements and glorious tradition of this Wing. Having been stationed in Okinawa, they played integral roles in some of the major wars like Korean War in the early 1950s and the Gulf war and subsequent wars in the middle East around the end of 1990s and the beginning of 2000s.

   The 18th Wing troop has many functions in addition to fighting and reconnaissance in the air, but also many supportive actions such as delivery of needed items, rescue and medical cares etc. Impressive was the fact that they spend much effort at various occasions to associate with local people to enhance mutual understanding and respect with each other.

  Having spent about an hour by listening to briefing and enjoying Q and A session, the officials suggested us to move on to a brief tour of the base. We stepped on a bus the base prepared for us. We soon arrived at a space in front of hangers for jet fighters. Several F-15 jets were staying in the hanger designed to accomodate one hanger for each jet plane. Stepping out of the bus and we went much closer to the jet. 

   Mr. Townsend gave us many interesting and eye opening explanations. F-15 is one of the most cherished models of jet fighters by airforce pilots. The basic model of F-15 was created almost 40 years ago. Since then, F-15 jets, with some occasional improvements,  have been heavily used by the airforce as the most usable plane. Mr.Townsend has a record offlying on F-15 for some 1800 hours which took 20 years. He occasionally teaches and trains young pilots. In fact, training is, in his view, perhaps the most important to build war capacity. Human resource management is critical to keep and enhance fighting capability of the airforce. 

  We moved on further along the row of hangers. We passed by the jets which look much different from F-15. They were F-35. F-35 is the latest model of jet fighters which has the non-detectable feature. Unlike a crane looking good shape of F-15, F-35 has a rather fat and low body. Watching F-35, the senior looking gentleman who has been on the bus with us gave us useful knowldege about the get. He is Mr.Potter, a PR officer of F-35 having travelled together with F-35 from the main base of F-35 in the US mainland. 

   The unique shape of F-35 is perhaps because F-35 is equipped with many complex devices of information handiing. In fact, F-35 has the most advanced capability of surveilance, detection, and communication. Its main function is not fighting but rather giving useful and necessary information to other colleague jet fighters to make their fight more advantageous and efficient by providing useful information on time. His explanation made me imagine that the air fight nowadays is more like a TV game rather than a real fight as represented by “dog fight” in the past.

  About a dozen of F-35s are now on duty at Kadena airbase. They have flown from the main base in the US mainland and plan to stay at Kadena for some period with relevant mission. This must be a special case. Although none spoke about the relation to North Korea issue, we imagined that this was probably the case. It was the time that US military has been carrying out the major drill operation working with South Korean military vouched by three major aircraft carriers deployed in  the area of Japan Sea.

  Having watched F-15s and F-35s in the hangers and driven around some area of the base, the promised  time of leaving the base came closer. When we stopped by the office before leaving the base to thank for the cordial reception and guidance they provided to us, Mr.Oldham came out to see us off and handed me his medal. I found later that this was a special medal given to him from the 18th Wing. I was deeply felt by his goodwill. We left the base almost punctually at noon as planned.

  We then moved to a nice and cozy restaurant at a beach where they serve thinly sliced pork meat. We eat it dipping briefly in hot water tother with vegetables. This local dish is tasty and also healthy. Since we had time, we strolled along the beach and took some rest on benches, then, we went to the town hall of Kadena-town which is quite near from the restaurant. In the town hall, Okinawa bureau of Defense Ministry is located.

  Since we arrived at the hall somewhat earlier than our promised time of arrival,  I brought the members to the entrance hall of the town hall. On the wall of the entrance hall, copper relieves of portraits of Mr. Seiroku, Kajiyama, Mr. Okamoto, Yukio and myself were hung. Sonjuku members were astonished as well as apparently impressed by looking at directly my copper relief portrait which I referred to last evening in my lecture.

  We then went up to the office floor of Okinawa Defense Bureau. Mr. Nakajima, Koichiro, Director General of the Bureau, cordially welcomed us to the meeting room. He prepared a set of information sheets for each of us. He explained briefly history and the locations of US military basis in Okinawa.

   Okinawa bureau seems to perform a complex of variety of jobs. In addition to the liaison function with main office of Ministry of Defense and other relevant government offices, it takes care of on the spot questions of Self Defense Force, US military stationed in Okinawa, and perhaps most importantly, prefectural government and people of Okinawa.

  When we referred to F-35s we saw this morning in Kadena Airbase, Mr.Nakajima told us about the complaints and demands given to the Okinawa Defense Bureau. They complained strongly about abnormal noise given most likely by F-35. Mr.Nakajima told us many different cases and instances of such complaints given to the bureau. The job of the bureau is to transmit such complaints or demands carefully to the US military office and return answers or responses, if any, of US military back to them. We imagine that this kind of job sometimes becomes pressing and nerve breaking.

   When talking about the return of the land of the military base to the owners, which takes place time to time, he told about some curious practice. Incidentally, the following kind of problem is rather unique to Okinawa. This is because in Okinawa, US military bases have talen much of their land from private land owners, while in mainland Japan military bases use mostly nationally owned land. 

   The story is that, when the owner loses the opportunity to get rent payment from the Japanese government because of the return of his land from US military which he had been renting to the government for US military use, the Japanese government usually keeps paying some amount of money almost equivalent to the amount of rent which he was getting earlier for quite sometime until he will find someway to gain income from the returned land. It sometimes last several years. The government does it in order to mitigate the impact of drastic change for the landlord. We were particularly impressed by an extremely good care given to Okinawa people by the government.

  We then walked to town office of Kadena-town. We were cordiary welcomed by Mr. Tohyama, Hiroshi Mayor of the town, and a few town executives. They talked about how helpful the Shimada committee was to reconstruct the town to make it look as it does now. I am glad that they appreciated the job of our committee.

  Since time was limited, we did not have enough time to talk about many topics. Within the limited time, they talked mostly the problem of noise given from F-35 which arrived recently at Kadena airbase.  They said that they have kept measuring the noise for some time in order bring the data to Okinawa Defense Bureau asking them to transmit their complaint to the relevant office of US military. We realized that the noise of F-35 has been the major issue in this area of Okinawa.

   Thanking their hospitality, we left the town office, and headed for Naha AP to return to Tokyo in the evening.

2017 General Election and Japan’s True Agenda

   General election will be held on October 22 in Japan. Calling a general election is the sole right of the prime minister.

  Prime minister Shinzo Abe asserted as the reason for calling general election as follows. Japan plans to increase consumption tax rate from the current level of 8% to 10% in October 2019. It is presumed that out of 2 percentage points of increase of consumption tax, 80% is to be used to reduce the outstanding government fiscal debt, and the rest is to be used to enrich social security and education. Prime minister Abe wishes to change this balance of using the increased tax revenue accruing from the 2 percentage point increase of tax rate. He means to spend greater proportion of increased tax revenue to enrich social security and education. Since he proposes to change the pattern of use of the increased tax revenue from the planned pattern, he would like to get agreement of people by general election.

   While his formal reasoning has a certain cause, his real reasons behind seem more or less evident. There are two reasons.

   The first is the reason to seek great victory by choosing a timing when the opposition party which just changed its top is not yet ready. Since the largest opposition party, Democratic Party of Japan, has just elected new head, Mr Seiji Maehara, at the end of August, and the party is not yet quite ready to act full-fledged way partly because of suffering from some problems as a scandal of prospective executive member, Mr. Abe judged it a nice timing to call a snap election to gain a larger turf for the parties in power, namely, Liberal Democratic Party(LDP) and Komei Party. And with this strengthened political basis, seeks to empower the drive to change the constitution, primarily to add the name of Self Defense Force along with the oft cited no war promise prescription of article 9.

The second  is the reason to recover sharply dropped popularity rate by the general election. The approval rate of Abe cabinet has been dropping sharply in recent few months. While Abe administration has been achieving appreciable results in major policy areas such as economic policies, international relations and security policies, its approval rate has been dropping sharply by a series of minor scandals such as providing special benefits to Mr. Abe and his wife’s close friends who are running schools, inappropriate expressions of some inexperienced cabinet members and scandals of some new members of LDP. While Japanese public do not appreciate or care about Mr. Abe’s contributions on major policies, they are very keen to individual and minor scandals. They are so curious to know whether Mr.Abe himself is involved in providing benefits to close friends which the cabinet has kept denying.

   On Sept 28, the first day of the new diet session, prime minister Abe declared at the beginning to dissolve the Diet without having any policy speech nor debate, the action which is unprecedented in the recent history of the national Diet. It was announced that the election will be called on October 10, and voting day will be October 22. Opposition parties criticized that this dissolution has no legitimate cause, and denounced that this dissolution means to hide and erase the scandals which Mr. Abe must be involved by the election.

   Opposition party politicians criticized that Mr. Abe’s dissolution of the assembly has no due cause. In stead, they accused Mr.Abe that he called for the election in order to hide or nullify his political scandals by the election.

   Given the circumstances, many expected that parties in power represented by Mr. Abe will easily gain a major victory. However, the situation changed dramatically toward the end of September by an unexpected bold action of Mr.Yuriko Koike, the governor of Tokyo.

   Let me explain a bit about recent actions of Mr.Yuriko Koike. In July last year, 2016, she dared to run for Tokyo governor in spite of a strong opposition and criticism of the top executives of LDP against her. By that time the relationship between Ms. Koike and Mr.Abe has become one of the worst. Ms.Koike has been given earlier an important position of Abe’s administration such as minister of defense. She quitted the position shortly and later ran to support the campaign of  Mr. Ishiba, Shigeru, an apparent contender of Mr.Abe of prime ministership. Since then, Ms. Koike has been left without any meaningful role within LDP. With this background, she opted to run for Tokyo governorship.

   LDP accused Ms.Koike and nastily disturbed her, for example, by ordering all the members and their families of Tokyo district LDP not to support Ms.Koike in gubernatorial election with even punishments. This kind of order could not have been issued without the endorsement of Mr. Abe himself.  Even under such circumstances, Ms.Koike dared to run for election keeping her LDP membership without formal recognition by LDP. And she won the election by the land-slide victory against the LDP supported candidate. After the victory she gave her LDP membership away.

  She started Tokyo metropolitan administration faced with the assembly which was dominated by LDP. LDP members have been antagonistic against Ms.Koike.Ms. Koike kept criticizing the untransparent behavior and behind the scene deals of old assembly bosses of LDP. Preparing for July 2017 Tokyo Metropolitan assembly election, she established a new party entitled “Tokyo Citizens First, “ and achieved a land slide victory occupying the majority of the assembly by this new party. In contrast, the so far majority party of LDP tumbled down to a minor opposition party.

   Some of her close supporters in the national Diet have been attempting to create a national level party, temporary called “Japan First Party.” This campaign attracted a few Diet members who included members of Democratic Party of Japan. Ms. Koike participated to the campaign as an advisor. On September 24, Ms.Koike arranged a press conference and gave a surprising declaration saying that “I will reset the movement for the new party. I will establish a new party, named “Hope” and will be the leader of the party.”

   Her declaration gave a powerful impact to political community, particularly, DPJ. Following her abrupt statement, Mr. Seiji Maehara stated in general meeting of DPJ that DPJ will join the movement led by new party “Hope” and asked the members to agree the resolution to join. The resolution was unanimously agreed.

   Ms. Koike welcomed the resolution of DPJ. But said that she will not necessarily welcome all the members of DPJ and added that she will only accept those who will agree with the basic policy stance of “Hope” party. She said she will prepare a “rejection list” and will reject those DPJ members who will obviously not join the basic policy stance of Hope party. The rejected members are known leftists. Because of this distinction or discrimination, DPJ had to dissolve automatically.

  This action of Ms. Koike shocked not only those DJP members who were discriminated against, but also the general public. The leftist members, having lost the place to go, decided a few days later to establish a new party entitled “Constitutional Democrats,” led by Mr. Edano Yukio. Within the following few days,  some 50 Diet members got together. The new party declared to go together with Communist party and bring together those who oppose against conservatists and change of the constitution. The new party of leftists has reportedly attracted unexpectedly broad attention and sympathy of the public.

   Toward October 10, the opening day of election campaign period, Ms.Koike attracted nation-wide attention as to whether or not she will run for the national election. If she does, she will have to give up the governorship. She kept saying that she will continue to serve as the governor. But some observers have kept predicting that she would run for the national election on the ground that she saids clearly the critical motivation for her current campaign is to terminate “Abe only one politics.”   

   Mr. Shinjiro Koizumi, a young leader of LDP and a son of legend ex-prime minister Junichiro Koizumi, criticized Ms.Koike saying that she is irresponsible in dual senses in either way. Irresponsible to run for the national seat because she will have to abandon Tokyo, and irresponsible to remain as a governor because she will keep the position of national party leader to split her energy.

   I have a view that Ms.Koike did a great job to give an awakening shock to members of opposition parties because opposition politicians and parties have been only criticizing for years Abe administration for very low level personal scandals or trifle drawbacks of politics, and have never proposed substantive and creative alternatives. As a result of the blow by Ms. Koike, DPJ has been virtually cut into two parts: more conservative and more left wing. In Japanese media, left wing politicians are called “liberals,” which is totally inappropriate. They are not liberal in any sense of its true sense of the word. They are simply outdated leftists.

   Thanks to Koike’s impact, the land scape of Japanese politics has changed drastically. It used to be the bi-polar structure of a single overwhelmingly powerful segment led by LDP together with Komei party and a group of weak and small opposition parties. Now, the picture consists of three groups: one is the group of parties in power consisting of LDP and Komei, next is the second conservative group consisting of “Kibou” and “Ishin” parties, and the third is the leftist group consisting of Communist party and Constitutional Democrats. The real landscape will be determined by the result of the forthcoming election of October 22.   

   I would like to discuss here about a very important challenge that Japan will be faced especially in the aspect of economic policy.

   Abe camp claims that, after the victory of the election, the administration will make use of increased tax revenue of additional 2 percent of consumption tax, which is estimated to be about 5 trillion yen a year, enrich social security and education. More specifically, enrich the social security system to cover not only the traditional beneficiaries of aged people but also to take care of basic needs of all the generations of the society, and provide free education for those who need financial assistance covering from kindergarten up to high schools, including private high schools, and provide grant-type scholarship to college students. Such policies are certainly meaningful and necessary for Japan for the years to come. However, these are only parts of more comprehensive policy system which needs to be constructed for the future. I will comment on this point later.

  The second conservative group consisting of “Kibou” and “Ishin” parties claim that they will freeze for sometime the increase of consumption tax rate because people are not confident enough to accept such increase of their burden, instead of increasing consumption tax, they propose to levy tax on huge amount of internal reserve of business companies which is estimated as much as 300 trillion yen,  abolish nuclear power generation for obvious danger, and introduce “basic income” system.

   These proposals look certainly catchy and may well attract attention of voters. However, the critical question is how to finance such policies. Postponing consumption tax increase will cost huge amount of increase of fiscal debt every year. Imposing a tax on internal reserve may not yield desired tax revenue, and if imposing a very heavy tax, businesses may shift their resources out of the country. Introduction of basic income will also cost a lot. In addition, although I personally agree to abolish nuclear power generation, the abolishment will also cost a lot both the abolishment itself and generating alternative energies.

   Even though the time for planning policies this time has been extremely limited, the problem is that there seems to be little effort to locate all these policies in an integrated system to examine the total feasibility and outcomes of operation of all such policies. Lacking the check of internal consistency and cost accounting, voters may not feel confident to rely on such catchy policy proposals.

   Leftist group criticizes political posture of prime minister Shinzo Abe harshly, and oppose any changes in Japanese constitution. However, they criticize the administration for the sake of criticism and offers no positive alternatives.

   Let me get back to the point that the outstanding new policies proposed by parties in power of LDP and Komei are just a part of policies which need to be located in a more comprehensive social system of Japan in the near future. All the generational social security system and free education are certainly useful and necessary policies. But they are part of an integral total societal system to support life of entire people in the near future.

   Let me explain why it is so. The current social security system composing of old age pension, medical care, unemployment benefits, and poverty support system was constructed in the early 1960s. It was the time when Japanese economy was growing rapidly, it also was enjoying rapid population growth, a large pool of young labor force, most of families were composed of parents and a few children. With rapid economic growth and a abundant supply of cheap young labor force, corporations increased production by employing young workforce, train them within the firm and increased productivity. Such practices gave rise to de fact life long employment for all workers and length of service reward system, known by “Japanese style” employment system.

   Under such circumstances, earners of families were full time employees and wives are basically concentrated in raising children. To support such a society, the conventional social security system which comprised of old age pensions for the retirees, and medical care for those who need it, and unemployment benefits for whom just lost jobs temporarily, and poverty support for those who are disadvantaged for some reason does just suffice.

   The structure of Japanese economy, society and families, however,  have changed drastically, particularly during the 20years lost decades for 1990s and 2000s when Japanese economy has not grown in any substantive degree. Business corporations, which were not vigorous enough to keep all the employees full time increased proportion of part-time and subcontracted workers. The proportion of non regular workers was about 10% of total workforce in 1990 increased up to nearly 40% in 2010s. The proportion of families with parents and children was about 2/3 is now less than 40%. Since house wives of most families now have to work to earn the living, they cannot take good care of education of their children. In other words, Japanese society is suffering from serious weakening of the capacity of reproduction of population.

   Given such circumstances, the new type of much more comprehensive social security system covering not only aged retirees, sick people, unemployed but such phases of people who badly need help such as young males and females who wish to marry, those who want to have children, those who need child care, those who foster and educate children, those workers who need to have employment benefits and protection. Election slogans of LDP such as all the generation social security system and free education need to be located, examined and discussed in these contexts. Unfortunately, almost no serious policy discussion of in such context has ever been heard in this election.

   On the top of this, the most critical question to be discussed in election is how to finance such a system. The new comprehensive social security system will need at least twice as much budget to run the system compared to the conventional system. How to finance it? 

   Japanese administrations including Abe administration have been relying on issuing ever greater amount of government bonds, which mushrooms accumulated government debt as much as 242% relative to GDP, an unprecedented level in the human history. Such a monasterial accumulation of government debt may well incur fiscal and economic destruction with any external shock. Moreover such debt created by a massive borrowing by government bonds is an extremely unfair burden on future generations. Sadly and curiously, no serious discussions were heard of these issues in the policy debate, if any, in this election.

   In order to reduce the unfair burden on future generations, we may think of increasing income tax, social security premiums or consumption tax. Increase of income tax will squeeze ever shrinking working population, increase of social security premiums will also suppress declining work age population, which will end up weakening and wrecking Japanese economy. Perhaps the only less damaging means is to increase consumption tax which is fairer than other taxes  and also increase tax base widely for inheritance tax. In my judgement, Japan needs to increase consumption tax up to 20% and keep it there for half a century to finance such a comprehensive social security system and reduce government accumulated debt. People may accept such tax burdens only if they can trust the government, country and community that they provide complete care and security of their lives for free in turn for their tax burdens.

   Abe administration’s tax scheme is much too much meager relative to the need of the nation. The “Kibou” ’s proposal to freeze consumption tax increase is reckless in this context. Am I the only one who feels very sorry that discussion of the most serious and pressing issue which the country will face is lacking in the policy debate of this election?


Sonjuku Visit to Shanghai and Begin

   Some members of Shimada son juku and myself visited Shanghai and Beijing briefly for the period of Sept 15 to 18. It was a wonderful trip. We enjoyed it very much. We saw and heard many things of current Shanghai, Beijing and China, met important people, enjoyed delicious food. Above all, our nice reunion and  association with two of my students who studied at Shimada “zemi”(specialized workshop) of Keio University  a quarter of century ago was the most wonderful and specutacular experience.
   The idea of this trip was coined when the two old students visited me some day in March 2017. They contacted me wishing to see me after a rather long time since we spent together at Keio university. I of course gladly accepted their wish and suggested to have lunch together at International House of Japan at Roppongi.
   They are, Mr. Hong Tao and Ms. OuYang YanJung. They contacted me after having talked with their common friend, Mr. Chin. I happened to get to know Mr.Chin a year or so ago. Mr.Chin is a quite active independent entrepreneur promoting his business  in providing services for wealthy customers. We happened to talk about Mr. Hong and  Ms Ouyang. Mr. Chin asked me if I met them recently. Having heard that I have not had an opportunity to meet them for about twenty years. Mr.Chin told me that he would ask them to contact me immediately, and they did.
   At the dining room overseeing a beautiful garden of the International House, Mr. Hong and Ms.Ouyang talked about many things. We had a lot of topics to talk just to cover our twenty year experience. Besides, Mr. Hong is an established  businessman running a  machine tool company, and Mr. Ouyang is a successful venture capitalist so that the coverage of topics had to be broad. In addition, I told my recent effort to try to learn Chinese language which led me to challenge to write  Chinese blogs, and my activity which I spend much of my intellectual energy, namely, Shimada sonjuku. They were particularly interested in Sonjuku activity.
   An idea just happened to have emerged in my mind that letting sonjuku members meet these nice Chinese young entrepreneurs would be a great stimulus with each other because they are active young business people of the two countries. They were delighted to hear my idea. They solicited that I will bring a small group of  sonjuku members to Shanghai where Mr. Hong locates Hq of his company, and  to Beijing where Ms. Ouyang works as a financial specialist. They said when we visit their land they will take care of all the cost while we are in their turf. This is the  origin of the plan of our trip.
   My wish was that young entrepreneurs of about the same generation of the two countries see and learn the informal life and work and their frank view about their countries, particularly the Japanese side learn the real China by seeing and talking with Mr. Hong and Ms. Ouyang.
   A few months later, exact plan was made by interactions between them and us. The  time table was as follows:
  Sept. 15, 2017(Friday) Lv. Haneda for Shanghai
        Lunch and talk with Mr. Hong, Tao
        Dinner invitation by  Consul General Mr.and Mrs. Kazuyuki Katayama at Shanghai
        Consulate Genral.
  Sept. 16, 2017(Saturday)
        Lunch and talk, and city tour with Mr. Hong Tao
        Dinner party by Mr. Hiroyoshi Ikeda, CEO of MYTS Co.Ltd.
        at a historic restaurant Su Nan Jan Yen
  Sept. 17. 2017(Sunday)
        Lv Shanghai for Beijing, received by Ms. OuYang YanJung
        Sight seeing of Zijincheng
        Talk with Ms. OuYang Yan Jung at her office
        Dinner with Ms. OuYang Yan Jung
  Sept. 18. 2017(Monday)
        Visit and conference at Chinese Institute of International Studies
        Lunch with Ms. OuYang YanJung
        Lv. Beijing for Tokyo, Haneda AP
     During the process of planning the trip, we had a special luck to have wonderful oppourtunities to be invited to a formal dinner offered by Consul General and Mrs.
 The sonjuku participants were:
     Mr. Shimada, Haruo:  president of Shimada son juku
     Mr. Yamagishi, Yo: Lawyer, Miyakezaka law firm
     Ms. Ito, Ayako: Lawyer, Miyakezaka law firm
     Mr. Kuramochi, Shigemichi, Meisei Co. Ltd. CEO
     Mr. Miyazawa, Nobuyuki: Laynia Co.Ltd. CEO
     Ms. Akiyama, Yuki: Millenium Capital Management Asia Ltd. Portfolio Manager
     Mr. Azakami, Masaharu: Independent Invester
     Mr. Kurokawa, Mitsuharu: Toraya Co.Ltd. Executive Director
     Mr. Tan, Hao: Coach A Co.Ltd. Coach
   In what follows, whenever I refer to son juku members I will refer them by their first name. Also, I will focus mostly  on the contents of conversation and discussions much more so than describing other things.
Day 1.(September 15 Friday): Shanghai:
    Mr. Hong welcomed us at Jian qiao airport. He kindly arranged a middle size bus for us. On the bus to the center of the city, we already started active Q and A. Someone asked Mr.Hong about the wages particularly of beginning wage of college graduates. He explained that there is a wide variety ranging from 100Yuan a month to as high as 1000yuan depending upon the skills and school grades. 
   Others asked about housing prices of the area. He explained they are very high nowadays as much as 10~15times of annual salaries. Someone asked about Chinese perception of Japanese and Japan. He said that in spite of government and media information about Japan, common Chinese people like Japan particularly of high and reliable quality of commodities, hot springs, and traveling. In contrast, he emphasized that the cumbersome process of acquiring VISAs to enter Japan now works against interest of Chinese tourists.
Talk with Mr. Hong during Lunch and afternoon tea
   He brought us to a gorgeous and wonderful Chinese dish restaurant close to the center of the city. It was about 2:00 in the afternoon. Food was splendid and delicious. He treated all of us on his account.
   Responding to questions, he talked about his career after he graduated from Keio  University. Before getting to his story, I would like to make some note about his college life and the process of job hunting. He began studying in Japan somewhat late so that he was about age 29 when he graduated. He spent his time energetically in studying and work to earn his living. Since he was a somewhat matured student, he taught and assisted some of his fellow “Zemi” members, and acquired skills to work in various shops and restaurants. During the job hunting, he passed many tiers of exams of  many good Japanese companies. But he kept failing to pass the final screening. One day he came to me and confessed that he feels so sorry to have been born as a Chinese. This is perhaps because his fellow students who he taught got jobs in top Japanese companies.   
   One day, Mr.Tajima who runs Tajima tools visited me asking my evaluation of Mr. Hong. I gave him my honest view that he is excellent both in academic work and  personality. Mr. Tajima decided to hire him. Mr. Hong visited me asking how I think about Mr. Hong taking a job of Tajima tool which is obviously not a top rank Japanese companies. I encourage him that work is meaningful for not where he works but what  he does in his work. I told him that he could have a great future working in Tajima tools.
   Tajima tools paid hime the beginning wage which is the same with his Japanese colleagues even though he was sent to Shanghai where Tajima tools was planning to build a new plant. His wage was about 20times of average starting wage for Chinese  college graduates in those years. 
  The story he told is what I did not know. His mission is to build a new plant and  manage its operation including manufacturing tools and selling them in the market. He was assigned as the job of the boss of the total plant. A few dozens of other employees were all Japanese. It must have not been easy for an inexperienced Chinese young leader to manage a group of experienced Japanese workers. In fact all except one were almost enemy against him.
   He worked hard to get the tools be sold well in the market. The most important is to reduce cost of production while maintaining high quality. It was a tough challenge to  use Japanese parts and yet sell the final good at a cheap price to meet the taste of Chinese market. There were 6 shops in China. Within one year, the company(plant) attained a slight surplus. Within 5 years, he earned through sales the total accumulated cost since the launching the plant which was some what 1 billion yen.
   Having achieved such successful results. he had higher aspirations. He had confidence to achieve even higher performance. By working hard, and earning a lot, he wanted to buy BMW as a young business leader. He talked this to higher managers. But they did not agree to increase his salary. He learned that Japanese company does not pay for individual performance. His salary of Tajima Tools was about 4 million yen at the time, while, BMW costs about 15 million yen. At that time, some of the capable  subordinates quitted the company one after another.
   He concluded to quit Tajima tools after 5 years of service. He was age 35. Mr. Tajima, the corporate president told him that they will increase the salary 3 times if he would  continue to work in Tajima. It was too late. For him, this was the final opportunity to jump into new life as a president of his own company.
   He started out his company with only 5million yuan cash. He had 3 Japanese employees. Currently, his company sells 250 million yuan. The products are mostly electric machine tools. He thinks that the quality of the products is no.1 in the world. His company spends more than 100 million yuan a year for R and D.
   He talked about the impact of IT revolution. Before IT revolution, one leader was able to manage about 8 workers. Now he can manage 1000 employees using WeChat cleverly.  With the development and diffusion of WeChat, for many people, there is no ned to visit banks, because you can do your transaction on the smart phone. Mobile deliver service and sharing economy are rapidly covering large part of business and  people’s life. Banks perhaps will have no future. Many people use WeChat and Alibi. Bank deposit may give you 1% yield, while you can earn 5 % yield by net transactions.
   The government imposes 200000yuan limit on bank deposit. You cannot identify whereyou store your money when you use WeChat. They locate their operations centers where power price is low because the operation uses a lot of electric energy. Chinese politics is getting narrower and narrower to control people. But business activity has to be open and mobile. I am somewhat scared of the gap between political regulations and economic activities.
 Large part of population who do not have much information or knowledge support the Communist Party. They hope the Communist regime brings about “equality.” Relatively wealthy people are scared of the current political climate. Ten years ago, he said that he would be willing to challenge a big project collecting a huge sum of money. But now he would not dare to do so because he is worried about a suppression which may be imposed on him anytime.
  Li ke qiang understands the economy. We understand what he saids. However, the general public would not understand him. They support and follow Xi Jin ping. Mr.Xi helps to make national corporations even bigger nowadays, which in turn will suppress private companies. 
   One day, my bank asked me to reduce their loans to my company as much as one million yuan. They obviously are required to give as much money as possible to national corporations. National steel makers, for example, are struggling to survive. Prices of their products remain the same as even 30 years ago because of prolonged deflation.
   Chinese laws are pretty stringent. But people are doing their business regardless of legal regulations because they cannot survive unless they violate such tough regulations. However, this gives the authority good opportunities to punish such violators anytime they want.
   Nevertheless, Chinese ventures are resourceful and energetic. Many young people wish to become ventures. The way they start up nowadays is to appeal and solicit venture partners using net communication. They produce commodities and try to return to those who financed them  with a bulk of money, Young ventures challenge with their ideas. Many venture capitals and funds are gathering to finance good  prospective ventures.
   Taxes are pretty heavy.  Income tax rate is 25%,  In addition, we have to pay for  “increased value tax” as high as 17% which is included in the price of commodities similar to VA tax in European countries.This tax has been low in the past but now this tax presses us heavily.  Also corporate social security contributions are quite heavy. When we hire an employee, we have to pay 1.5 times of the wage we pay directly to the employee.
  Shanghai is good for ventures. The society permits and gives another chance to those who try to challenge. Japan is not like this.
   I now employ 400 workers. By increasing productivity, I have reduced employment by 150 to 160 workers recently.
   Jian zen ming is quite popular among the public. This is nationwide, not Shanghai alone. This is the reason, I believe, why capable leaders follow him.
   Asked what he thinks about Taiwan, Mr. Hon said that he personally wish to admit independence of Taiwan. This is because he does not want to impose things he himself does not like to be imposed. 
   On the question of “Chinese Dream,” he thought that Mr.Xi literally means to make China and Chinese great having gotten rid of humiliated history of China for about 170 yeas since Opium war. But nowadays, he wonders if Mr. Xi really tries to accomplish this goal. It appears now that the Chinese dream for Mr. Xi is that he becomes the Emperor of China.
Dinner at Consulate General
   In the evening of Sept 15, we were intimated by honorable Consul General Mr. and Mrs. Kazuyiki Katayama for their splendid formal dinner at their official house. This  invitation was notified to us after my good Chinese friend professor Duan yue zhong , who published recently by his publishing company the great book of Mr. Katayama entitled ”The Impasse of Japan-China Diplomacy”met and talked about  our visit to Shanghai. We owe much to Mr. Du an’s kind introduction of Sonjuku activity.  Prior to our trip, I had an opportunity to meet Mr. Katayama at a lunch party organized by Mr. Duan to commemorate the publication of Mr. Katayama’ great book. I read his  book with great interest. It is a detailed description and analysis of a dozen or so of eminent diplomats who worked during prewar period in Japan-China relations. The book regrets that the war was not avoided inspire of much efforts of these diplomats.
   We went to Consulate General by 18:30. It started raining. We were cordially welcomed by the staff of the consulate. In the hall next to the dining room, we were provide champaign and we enjoyed conversation. Mr. Katayama arrived somewhat late. He was obviously disturbed by heavy traffic under the rain. We introduced ourselves to Consul General and  all thanked him for his very special invitation.
   The dinner started by “Kanpai” of Japanese sake “Dassai”. During the dinner we talked many topics. Consul General Mr. Katayama seems to have been particularly interested in our activity of Sonjuku. Consul General started the conversation by introducing  the history of the Consulate General in some detail. Then the focus was on Sonjuku, its objective, organization, management and what the members study. We talked about various countries where the son juku visited for the rencent years.
  During our conversation, I tried to introduce about the members, their jobs and personalities. Following the conversation about Israel where sojuku visited twice, Mr. Katayama introduced the historical experience of Israelis who lived in Shanghai during the war. Mr. Katayama said that there was a bias in they way the Jew refugees were treated during the war under the control of Japanese military. The bias seems inevitable as far as history is written by the winner side of the war. He said that he tries his best to correct the erroneous interpretation of the history. This must be a hard but important job.
  On the topic of the future of China, Mr. Katayama hopefully predicts that China will reform a better direction sometime to come although currently it has many major internal contradictions. Mr. Hon followed the topic saying serious contradictions of  current China are certainly disturbances in business environment, but, he added, that nevertheless many ventures are quite vigorous and active.
   Mrs.Ambassador commented, based upon her experience of stationed in UK and US with her husband, that in England the precise correctness in language is  required whereas in the US anything is accepted.
   Mr. Tan commented based on his experience of working as a coach to business people in Shanghai for half a year that the direction of coaching is changing in the sense of making people to think and act rather than just follow their noses. This change is getting crucial as the number of managers are declining because of rising their costs.
   Conversation went on to many other topics. Dinner party adjourned fairly late. It was a very special experience for Sonjuku members.
Day 2(September 16, Friday)
  We left the hotel late in the morning. We took a walk along the path of Shin Dian Di to enjoy a cozy and comfortable atmosphere of the newly renovated sector of the old town and had a nice lunch at a traditional Chinese restaurant and enjoyed coffee and delicious cake at a famous coffee shop. The weather was nice. The breeze was particularly comfortable. It was perhaps the best timing of the year in Shanghai. We then got our  bus to get around the tourist spots of the city such as Mori Bldg in Pu ton district. Since we had some interesting discussion with Mr. Hon at the lunch restaurant, let me introduce some of the points of discussion.
Discussion with Mr. Hon at lunch and afternoon tea
   At the restaurant, we talked about management style. Mr. Hon said that in China management style a la Mao ze Dong is getting popular. I talked about my experience of getting deeply impressed by Mr. Shoichiro Toyoda’s management style of “Jintoku” (human virtue). Mr. Tan introduced an example of successful management of supervisor-subordinate relations. In that example, the supervisor takes care of his sub-ordinates just as the parent takes care of children. The lesson one can learn from this example is the importance of communication. 
   In a survey of international practices, Mr.Tan quoted that the worst case is China, then Taiwan. Japan is much better. In China, the supervisor keeps talking without giving sub-ordinates opportunities to express themselves. Mr Hong, referring to his own experience, said that when he was assigned a job of the plant head at age 29, he was often angry and kept scolding. But when he established his own company at age 35, he changed his mode not to be angry. And in the latter case, the performance has improved much better.
   On the issue of environmental protection, he told us the way the Chinese government imposes the regulation. The government suddenly ordered to stop production activities
for two weeks starting the X day toward the end of August. We can understand the reason for it. But the way they do is so abrupt and authoritative.
  Dinner Party with Mr. HIroyoshi Ikeda at restaurant Su Nan Jan Yen
 Mr. Ikeda, president of MEIZ Group, arranged a wonderful dinner gathering at a  historic restaurant by the name of Su Nan Jan Yen. This is historic in the sense that the eldest of the three famous sisters of Son family lived in the 1930s. Three sisters of Son family are so well known in Chinese history in that the first sister serves for Sun Weng, the second sister married with Sun Weng and later became a top rank leader of Chinese Communist Party, and the youngest sister married Jiang Jie Shi, the head of Chinese National Party. The old distinguished restaurant building kept many historic pictures of Son sisters and Jan Jue Shi. 
   Mr. Ikeda is a good friend of mine whom I respect a lot. He is a CPA by training and  after having developed an established company in Japan, he opened his business in  Shanghai some 30 years ago and currently provides critical services in such areas as finance, accounting, labor problem, and management consulting to many Japanese companies who wish to invest in China or to withdraw from China. His group organizes more than 3600 such clients. 
   We had a nice dinner and active conversation.Some time later, Huan Huan, the elder daughter and young mother of Xiang family who lives in a gorgeous house in the suburb of Shanghai who wonderfully took care of me for four days as a “host family” two years ago for me to learn Chinese, joined us.
   Mr. Ikeda talked about the Communist Party convention which will be held in mid-october, which is just next month. He posed a question as to if Mr.Xi will ascertain  in the convention to perpetuate the period of his ruling beyond 2022 referring to  observations of politics hinting that Mr. Xi has been trying to enhance his position from a sheer president to “He Shin”, the super president which has been only admitted for Mao ze Dong.
  Mr. Hong hints that he must do it. If he fails to get that special status, he would be politically finished and may well be jailed Once he failed to secure the position, he will be accused and attacked because of many serious scandals which many people already know that Mr. Xi is deeply involved.  This is more or less common to many “dictators” in the world history. 
  Mr. Ikeda pointed out that Mr. Xi wants to attain historic achievements both in 2021, the 100th anniversary of the establishment of Chinese Communist Party, and in 2045, the 100th anniversary of the establishment of the People’s Republic of China. 
  Mr. Hong hinted that  Mr. Xin may want to integrate Taiwan because he may very well wish to surpass Mao ze dong.
  Mr. Kuramochi asked about the prospect of working with India. Mr. Hong had a clear view about India because he has had an experience of running his plants in India. He said that he once thought that India is a good place to invest because wage level is almost one tenths of China. Having started operation there, he was astonished to learn that delivery is often delayed easily two to even four months. The cheap prices and wages are well offset by their inefficiency. 
   Since he achieved much higher productivity in China, he decided to withdraw his operation in India. Mr. Kurokawa, who married an Indian lady, told us that his father in law is a global businessman doing business at various places in the world such as Singapore, Dubai, etc. But he dares not to do business in India for obvious reasons.
  Mr. Ikeda pointed out that many Japanese businesses are interested to go South, away from China toward South and South east Asia. Take a case of Cambodia. Even though the wage level there is a half of China, if you take into account of productivity difference, Cambodia is not a cheap country relative to China.  On the other hand, North Korean business seems to have high competitiveness.  North Korean workers working in Chinese industrial site are paid normally 2000 Yuan, of which 90% is taken  away by North Korean government. Nevertheless,  North Korean workers work hard because working itself means something to their life. 
  Mr. Hong added that if you go to North Korean restaurants operating in China or elsewhere outside of North Korea, you will be satisfied because food are fresh, tastes well and  services are excellent. At least 30000 Korean workers work outside the country.
  Mr. Kurokawa introduced his interesting experience in the US. His generation is not at all involved in wars but he had an interesting experience when he joined the audience of a movie in the US which showed about brutal massacre in Nanjing done by Japanese military during Japan-China war. After the movie, there was a debate about the issue. He was impressed by witnessing heterogeneous views about the incidence.
  I took up his story saying that it has many important implications. I went on to explain  what has happened during the war time, and emphasized the importance of keep  teaching the historical experience of regrettable wars to young generations. Following this, Mr.Hong said that the attitude and actions that Germany took for Jews and other  countries which Nazis invaded can be a good reference for Japan. If Japan takes the similar attitude as German did for Jews in the case of Nanjing incidence, there would have been no problems between China and Japan. Since in Japanese history textbooks only a very little is written about such incidences, Chinese and foreigners tend to get an impression that Japanese authority tries to avoid taking responsibility of what Japan did to China and other countries where Japan invaded.
  After the dinner, I met Huan Huan’s son  Lin Lin, and her younger sister Fan Fan. I have once advised Fan Fan as to her choice of future career. She was interested in design and was interested in going to UK a year ago. Now she told me that she will apply a good university in the US, which I thought was a good idea.
  Some members of son juku and Mr. Ikeda went to Karaoke shop together. This was my request to Mr. Ikada. He is specially talented to sing Chinese songs in Karaoke. Amazing is that he sings very well Chinese recent pop sings. He told me once that he has memory of several hundred Chinese Karaoke songs in his smart-phone. As expected he sang many songs with admirably “young” and powerful voice. The rest of us sang songs of their choice. We enjoyed fully this nice occasion in the night of Shanghai.
Day 3(September 17, Sunday)
   We meant to leave Shanghai Hong giao AP for Beijing. Since the plane wasted nearly an hour on the runway of the AP, we arrived in Beijing nearly 13:00.  Stepping out from the plane, we found that the sky of Beijing was completely blue without any clouds. It was surprising because we were advised just last night that we need to wear thick masks to protect ourselves from the heavy air pollution. Sonjuku members said that this is again a miracle that I brought with me because of my name, “fine weather man.   
   Ms. Ouyang Yan jung was waiting at the parking lot of the AP. She brought a good size bus and lunch box and cup of warm soup for all of us. She suggested that we better go first to Zijincheng(the purple palace) since the palace will be closed by 16:00. 
   On the way she told about recent situation in Beijing. On Sept.15, the government issued an order to manufacturing plants to stop production totally for the period of Oct 1 through 30 during which the Communist Party will be held. The government does not care any confusion such order will give rise to the business and the life of people.
   Ms. Ouyan stayed in Japan for 1991 through 1999.  After graduating from keio University where she studied during 1992~1995. She joined Nomura Security House. Then she went to the United States and spent at Silicon valley for 4 years. She acquired  MBA at Santa Clara. Returning to China in 2004, she joined NEC and worked there for 2 years. In 2005, she took a job at New Horizon Capital headed by Mr. Kitao and his partner.   
  She told about a fad of Bit coin. In Shenzen-city, the business of bit coin is booming. Shenzhen is like a Silicon Valley in US. There exist many net currency companies there including a Bit Main co. In terms of trading “Bit Flyer” of Japan is the best to use.  The recent ban of Bit Coin trading in China was an abrupt shock! The government  (regulatory authority) must have thought to cut the link between China Yuan→Bitcoin →foreign currency in order to suppress capital flight. Government is highly nervous about net communications in ICT media. They keep watching exchanges of views and  arrests leaders with more than 500 followers in WeChat or whatever SNS communication network.
   We visited Zijincheng. This is a big palace and it took more than a couple of hours just to walk through. Since I want to focus on what we learned through talking with Chinese friends such as Ms. Ouyang, I will skip explaining about our experience of walking through and watching about Zijincheng.
   After touring through Zijincheng, we went to her office which is close to Zijincheng and spent about 1.5 hours to listen to her story first and then my  briefing  about political and security issues between Japan and China in recent years. I did this as a part of preparation for our discussion with the staff of CIIS(Chinese Institute of International Studies) which is scheduled tomorrow morning.   
   Ms. Ouyang told about what she has been doing lately. She is concentrating in investing early stage ventures in prospective growing industries such as softwares, electric games, new drugs, AI, Bit Coin etc. She saids that there is a huge boon in whole China in promoting start-ups. The key word is innovaiton. With respect to Japan robotics and factory automation, creating the next generation tips are attracting attentions. Recently, China makes a huge step forward to produce advanced models of chips. In fact, Faraway is leading the world in this area. She is investing in Bit Coin,  data mining technology and AI chips.  In fact, face recognition using AI chips is becoming a boom. She is also investing in other new areas of finance.
   Since she started in working in New Horizon Capital in 2005, she has experienced three stages of development of the company. The first stage was 2005 to 2006 when the company was investing as a fund led by Mr. Kitao and his partner with the fund amounting to approximately 100 million dollars.  This was followed by the next stage of working with other major foreign funds, and reached to the most recent 5th stage when the company concentrates on the one hand in early stage AI, healthcare etc under the flag of “Advantech” and in EV business by Red View Capital. The former recently invests into battery industry and the latter in new energy including wind power, solar power in addition to EV.
   New Horizon Capital started out of a very small company with only a few ventures. In early days the son of Wen Jiabao was working with Mr. Kitao. Currently, the amount of payment of the company reaches at the level of 60 trillion Chinese Yuan.
   Having listened to her story, I spent half an hour explaining about political and security aspects of Japan-China relations in recent years including such issues as Diao Yu islands and South China Sea problems. I meant to give a minimum basic  knowledge for Japanese participants who will join the dialogue tomorrow with  researchers and officers of CIIS tomorrow morning.
   We then moved to a gorgeous restaurant nearby which Ms Ouyan arranged for us. To the dinner table, she invited Mr.  Takeshi Jingu, who worked with her as a supervisor and an advisor when she started her job in Nomura Research Institute. Mr. Jingu then moved to Hongkong office in 2001 and then to Beijing office in 2004. Since 2010, he has been associated with Nomura Institute of Capital Market Research, and he has spent altogether more than 20 years in China. Ms. Ouyan told us that Mr. Jingu knows about China and Chinese economy than most people she knows of.
   During the dinner, we enjoyed conversation. Mr. Jingu emphasized that in China what is called “internet plus” is developing very rapidly and is getting far ahead of Japan. This technology has an amazingly broad range of applications. I was much impressed by his  observations and insights.
Day 4(Sept. 18 Monday)
  Prior to our departure from the hotel, Mr. Yamagishi, Yo called me and then visited me in my room. He came with several pages of handwritten memo which depicts four important and interesting issues of Japan-China relations, and asked me if it would be appropriate to ask these questions with his comment in the meeting with CIIS(Chinese Institute of International Studies). Since I was still at this moment not sure as to how to lead the discussion at CIIS, his proposal looked to me quite appropriate and useful to make our forthcoming discussion meaningful and interesting. I fully accepted Mr. Yamagishi’s proposal.
  In the early morning, Ms. Ouyan kindly came to the hall of the hotel we were staying even though she had a busy job at her office throughout the whole day. She was kind enough to guide the driver of the bus to bring us in time and safely to the building of CIIS. The CIIS building is in the midst of Beijing not far from Tianannmen Sq.But the access to the building is through somewhat complicated narrow street. I realized the kindness of Ms.Ouyan to have offered her guidance to the driver to get us safely to the campus of CIIS.
   The CIIS is located in a distinguished looking building which stands in the center of campus with green pine trees. We were told later that this building has a special history of having used as a place for preliminary diplomatic talk paving the way for resolution of China-Russia border conflict and also a place for the preparatory negotiations for  determining the status of Hong Kong prior to its return to China.
   At the entrance, Mr. Rong Ying, vice president of CIIS was waiting with full smiles in his face. It is he who accepted our visit of CIIS this time. I met him a couple of times in Tokyo at Japan-China business talk on developing research collaboration between the two countries. When I asked him if it would be possible for his institute to receive our visit when we come by Beijing in September. He gladly accepted. After coming  home he asked me which language to be used in our meeting. Both of us quickly agreed to use English. This was the first time for us to meet since then.
  He guided us to the conference room in which the table for discussion was formally arranged just as though there would be a formal meeting of diplomatic delegations of the two countries. He was joined by several researchers of CIIS.
  I made an introductory remark representing our team. I told that our team consists mostly independent entrepreneurs who are not by any means specialists  of international affairs, the kind of people CIIS researchers are usually faced with.But it is these people who consist of public views and opinions in Japan just like in China.  I emphasized that this meeting in this sense must provide an unique opportunity to  CIIS international specialist. By the same token, this meeting will be a very unique and  important opportunity for Japanese common people to talk with such group of international experts in China.
  Mr. Ron Ying opened the meeting by introducing what CIIS is about, about himself and his colleagues. He said that CIIS is a think tank specialized in foreign affairs. It is Non Government organization.It is the oldest institute of this kind established in 1956 in China. Mr.Rong Ying has served 5 years in Chinese embassy in Tokyo. In 1980s he also served as a diplomat in Tanzania. 
  There are 7 research department in CIIS such as specialized on US, Asia, EU in  addition to ones on international politics and world economy.  Approximately 100 researchers are woking in the institute. They include both young scholars and senior researchers often with diplomatic experience. Mr.Ying then introduced 5 researchers one by one who joined us this morning discussion. They are:
Mr. Rong Ying: Vice President of CIIS
Mr. Song Junking: Deputy director, Associate Research Fellow
Ms. Sun Wenzhou: Assistant Research Fellow
Mr. Zhang Weiwei: Assistant Research Fellow
Mr. Wang Jape: Master of Law, Research assistant
  Mr.Yamagishi opened the discussion by posing a major question. He described about what China is doing recently to expand its activities broadly such as exemplified by the huge project of “One Belt One Road.” This projects necessarily touches upon many  sensitive international areas such as Russia, Turkey, Southeast Asia and India etc. Such projects necessarily expand China’s reach to various such areas. He adds that  he understands the rising feeling of “nationalism” held by the public. But he suspects that with this expansion there may be various types of troubles, some of which might provide even negative effects to the interest Chinese government. He asks what CIIS experts think of such effects. 
Mr. Rong Ying responded. I understand that different people have different views on such a major initiative of China. Mr.Xi Jing ping made it clear that One Belt One Road is  not a geopolitical game in his recent speeches in Kazakstan and Jakarta. What this initiative aims at it common development of all the countries involved by which to enjoy benefits and share them. China held a first major conference of involved and related countries, which was well attended. This initiative is an on-going and open process.   
  We seek win win relations. We welcome all countries to join us, including Japan, if they are interested. Recent positive acknowledgements on One Belt One Road inititiavie by PM Abe and Mr.Nikai are well received. This is not a “strategy.” Past four years we tried to disseminate our idea and tried to get understood by related countries. With the success of 2016 summit, we plan to have another major summit, say, in two years.
   We know that Abenomics is gaining a certain success. Japan’s major challenge is  how to cope with the major demographic change. Japan needs to restructure itself. China also is in the process of major structural transfourmation. China has a huge potential. China and Japan can work together. In fact, Chinese and Japanese businesses have much complementarity particularly in service and technology.
Mr.Kurokawa said that he has his relatives and some family relations in such areas as  Beijing, Shanghai, and the US so that these areas are not really “foreign” to him. And he posed a question that many young people get information from various types of media, but they seem not necessarily have good knowledge about many important facts. Mass media gives bad impressions about Japan to Chinese people and perhaps vice versa. He wonders if we could not mediate this gap between people and superficial   
  Since I thought that his question has a profound meaning, I added some factual  information that much of the facts in the modern history of Japan-China relations are not taught in Japanese schools. I referred to the attitude of post-war German government to provide as much information as possible to the public to understand the  unjustifiable actions taken by Nazi government. 
Mr. Rong Ying commented that we cannot keep our eyes closed. If we work for few years to promote intensive interactions we may obtain a balanced and matured perspective of history. At and after the end of war, Chinese government took the  position to distinguish between Japanese common people who were actually victimized and the military who invaded into China. Education is very important. The recent NHK program on “731 troop” is well received in China. There are debate between Chinese and Japanese proponents as to how many were victimized in Nanjing incident. On the other hand a flood of Chinese tourists visit Japan recently. We need more communication and interactions. 
Ms. Wenzhu posed two questions to all Japanese paticipants, who are intellectual  citizens: 1. How a Japanese views the world. 2. How a Japanese view Mr. Trump.
Mr. Miyazawa responded that we, people of the private sector, would like to be a good friend with people of other countries. And he believes that they in fact are good friends mutually.
Ms. Ito said that we need to recognize both good virtues and shortcomings of ourselves, and try to contribute to the world to the extent we can making use of our own capacity.
Mr. Kuramochi said that he was born in 1974, and has not been educated well relative to parents’ generation. His generation has been taught mostly bad things about the country. He has a strong opinion that they should voice more about their recognition and opinions. Currently, history is taught with a strong favorable bias toward the whites. We need to learn more about peace from both Japanese and Chinese viewpoints.
Mr. Kurokawa told that his family has members coming from foreign countries. Since he was brought up in an international atmosphere so that he does not care about nationality as such.  Japan is an island so that it has some unique way of thinking. We need to focus more on international affairs and develop unique skills and technology.
Mr. Tang spoke in Chinese meaning that he can observe generation gap both in China and Japan, but the diversity of individuals is much greater than aggregate characterization.
Ms. Akiyama told that she spent 4 years in HongKong working in an American company. In HK, there are almost no “pure” Chinese. Many Chinese are born in the US, Canada and so on. Nevertheless they are good Chinese workers. Japan rely too much on US and so much dominated by US. Japan news to collaborate more with China.
Mr. Yamagishi said that we need to promote interactions of private sector people more. Since the 2005 incident, US has been hostile to Yemen, but Japan is friendly to Yemen. Japanese products produced by Toyota, cameras etc are everywhere. Japanese private sector is promoting economic and peaceful contribution. Chinese government seems to seek “hegemon.” We need to promote joint venture between   
Mr. Jiapei expressed his view of Mr. Trump. Mr.Trump is insensible US leader. There are opinions that China should take leadership in the world. He thinks  that China has not grown enough to take the lead. For China to take leadership, the  state has to foster internal strength, institutional and economic strength, and should be capable of promoting self reform. Unless China have such virtues, China is not yet to take a global leadership.
Mr. Junying confessed that the choice of Mr. Trump as the president was a surprise.  We may understand such a choice if we study carefully the US . There are specialists who predicted the wining of Mr. Trump. With the choice of Mr. Trump as the president, we feel that we saw a bad aspect of the US. 200 years ago, those who did not have rightful jobs came to America and dispelled away those earlier inhabitants who they named “American Indiansl” and robbed the Indians’ land. Then they developed capitalism and became hegemony country having experienced two world wars.
   The US always has cotradictions: one is the civilized way, and the other is the rogue way. Trump represents the rogue way of the such low level rogue spirit of the white and their traditions. Mr. Trump and his supporters seek a society which clearly differs from the society with freedom, democracy and openness which the postwar American has been working for.  They try to break the established rules of the previous society and  create a new set of rules which only serve to secure their profits.
   With the decline of the leadership of the US under Trump administration, Japan and  China can now raise their voices which have been contained so far. Japan has always been under the strong influence of the US, and has China also been to some extent. China and Japan should work together to raise their voices to counteract the US. “One Belt and One Road” is a good opportunity. Japan viewed this earlier with a negative impression, but seems to view it more positively recently.
   “One Belt and One Road” is not China’s strategy. This is a place to consult with each other, construct together, suggest solutions and share outcomes together. This is an opportunity tp work together in a global community thanks to the suggestion and  solicitation by China.
  China has some difficulties in political sphere, but steadily making progress in business overcoming troubles and challenges always reviewing ourselves. China has not yet grown and accustomed enough to be a regional nor global major country. And other countries surrounding China has not yet used to the rise of China. We think that China along should not be blamed for troubles. China recently has paid more attention to  regional countries. The troubles in South China Sea are being well controlled. This is an unprecedented challenge in the world history. 
  Japan once attempted to become a regional and a global leader, but has failed. However, we can make use of such experiences by learning lessons from the experience.
Ms.Wenzhu pointed to Chinese feeling of concern in recent developments in the world. Even though Mr. Trump is problematical, there seems to exist a check and balance mechanism within the US politics. However, in world politics, there does not necessary seems to exist “check and balance.” Once trade conflicts occur, they could develop into trade wars. China has received benefits from free trade system for 20 years. Many countries share goals with China including Japan.
Mr. Weiwei, who has been devoting himself in African studies for recent years, gave comment on Mr. Trump. He said Mr. Trump is interesting. He has a great appeal to American commoners.  He is a successful businessman and has a beautiful wife.  His business is successful. He is only bluff in foreign policy. Bluffing has been used a
lot in the cold war era.
Mr. Ying gave a substantive closing remark starting from his comment on Mr.Trump phenomenon. Both Chinese and Japanese have surprised to see Mr.Trump elected as the US president. Losers of globalization express their anger and frustration. But anger and frustration cannot be a policy. This is a US problem.
   US is a super power. We need to work with them. We need to work to arrive at a consensus. China and Japan are close countries and  have to deal with Trump together.Our trajectory is that we try our best. Mr.Trump expresses his wish to establish a stable system in his summit with our president at Mala lago. Put a framework and a mechanism.
   China and Japan can cooperate closely in this area even with the presence of North Korea. Trade issues can be controlled. We, China and Japan, can cooperate together to develop stable relationship with the US. 
   With this remark of Mr. Rong, the conference was concluded.
  Shortly before 12 o’clock, Ms. OuYang YanJung kindly visited CIIS campus to pick us up by a bus. She brought us to a wonderful restaurant where we took the final gorgeous lunch in China this time.  We then went to Shanghai Jian qiao airport to leave Shanghai heading at Tokyo Haneda AP.
   This trip was short taking only four days including the weekend. However, it has had an extra-ordinary rich content as I have described in some detail. Most impressive was  the fact the the two alumni of my seminar of Keio University who graduate about a quarter of century ago gave us an incredibly warm reception and care for all of us and gave us very frank and candid view of what they feel and think about the current situation of China and their life. This has been a very special and valuable learning for us. I would like to conclude this report with our special and profound gratitude to such people as Consul General Mr. and Mrs. kazuyuki Katayama, Mr. Hiroyoshi Ikeda, CEO of MYTS Co. Ltd. Dr. Rong Ying and his colleagues of Chinese Institute of International Studies and above all Mr. Hong Tao and Ms.OuYang Yan Jung.

Report of Shimada Sonjuku Visit of Germany

  We, the members of Shimada Sonjuku visited Germany for the period of July 15 to 23(including the trip between Japan and Germany). This was a wonderful, spectacular trip in which we learned a lot and received many and useful stimulus.

  This splendid trip was organized by an incredible effort of our respecting friend, Dr. Franz Waldenberger, director of German Japan Institute. Thanks to his effort and well thought out arrangement, we were able to visit important places, business corporations, public organizations, and met important and highly knowledgeable people.
  Since this report is going to spend many pages, I will focus mostly on what we have learned by visiting people and organizations. Since we have learned a lot by listening to presentations and discussion with German people such as statesman, business leaders, organization officials, I will try to summarize the gist of such exchange of information and discussion in a rather detailed way. 

  On the other hand, I will cut explanations of historical background, economic and political background, on the spot impressions which I usually describe in detail in this kind of report of Sonjuku trips. It partly because Germany is a highly developed economy and society representing the most developed country in the world so that much information is available elsewhere.

  However, my basic understanding of Germany particularly in comparison with Japan is expressed in my speech manuscript which I presented in the morning of July 19, 2017 at “Asa no Kai”(morning meeting) of German Japan Business Association which is attached at the end of this report.

  In this report, I try as much as possible to describe the discussion of meetings. In it, I refer to the nickname of sonjuku members. In order to identify who is who, I attach here the list of names of sonjuku participants with their given names.
1. Mr. Shimada, Haruo: "School master of Shimada sonjuku. President,
      Chairperson of the board, Tokyo metropolitan university."
2.   Mr. Yamada, Yu Yipsilon Co.Ltd. CEO
3.   Mr. Yo Yamagishi Miyakezaka Sogo Law Office. Lawyer, Managing Partner
4.   Mr. Kuramochi, Shigemichi Eisei Co.Ltd. CEO
5.   Mr.Suzuki Tomoya Lead Capital Management Co.Ltd. Partner
6.   Mr. Isono, Ken Natural Electric Power Co.Ltd. CEO
7.   Mr. Tatsuno, Mitsuhiko Tatsuno Co.Ltd. Board member in charge of management
8.   Ms. Matsuda, Rina Kowa Manufacturing Co.Ltd. CEO
9.   Ms. Matsui, Mayuka Free-lance business planner
10.  Mr. Azakami, Masahiro Investment specialist
11. Mr. Jinnai, Yuhta GI Co.Ltd. CEO
12.  Mr. Iwasaki, Kenjiro Sony Life Insurance Co., Ltd. Life plannner
   My report is made in a chronological order from the Day one to Day 9. Please enjoy the report of our trip to Germany.

Day 1(July 15, 2017 Saturday)

  Most of the members of Shimada sonjuku left Haneda International AP at 12:30 by NH 217.  The flight was good. I slept about half of the flight and the rest kept awake to read b
ooks and materials so that I would be tired enough when we arrived at Germany.

  At 17:20, the same day, we arrived at München Franz Joseph Strauss AP. Airport and the
streets are clean as typical in Germany. We were welcomed by Ms. Mihoko Kokubo, a Japanese guide. She introduced herself as “old fox.” She has lived in München just about 40 years. She knows a lot. She told us many useful things. Unfortunately, I have no space to introduce them here.
  We arrived at Maritim Hotel München. After taking some rest, we went to a popular beer hall, Augustines Keller. The hall was crowded with many customers. We stepped down to the cozy basement room where we were met with Franz and his friends, Beer, food, atmosphere were all good.
Day 2( July 16, 2017 Sunday)
  We left hotel at 9.15 and drove to the city of Dachau by bus. In Dachau we plan to visit the notorious Dachau concentration camp. On the way, Ms. Kokubo told us many stories about the city of München and the back ground of Dachau concentration camp such as Hitler and German political situation at the time. Unfortunately, I have no space to introduce her stories.

Dachau Concentration Camp

  We arrived at Dachau concentration camp at 10:00am. At the gate we were received by a guide, Lucia. She is a Chile young lady. She came to Germany as a student 14 years ago. She started introducing to us Dachau concentration camp earnestly.
 Dachau concentration camp was built as early as 1933 when Hitler’s Nazis party became the party having the largest seats in Federal Assembly. The objective of the  camp was to enroll all of the undesirable kinds of people for the “Third Empire” proclaimed by Hitler. He wanted to establish his Germany “the Third Empire” purely by the population he believes to be qualified people to consist the nation. They are pure Germans with white skin, blue eyes, blond hair and firmly believe the propaganda of Hitler and support earnestly his empire.

 The people, according to Hitler, who should be eliminated or excluded from the Empire were Jewish, Communists. Socialists, political prisoners, namely, those leaders who criticize or opposes against Hitler and Nazis both within and outside the Germany, handicapped people, homosexuals etc. 
   The camp was built 3.5km away from the station. Those who were arrested were forced to walk from the station to the camp with heavy burdens to make them realize that the hardship was waiting for them.The first director of the camp was Himmler,  the Muncher Police head. The camp was originally used as the training school for SS(Schutz Staffel) special force. 
   The number of prisoners increased from a few thousands to 42000 at its peak. There, prisoners were forced to work heavy labor, tortured, insured. Many prisoners suffered from such hardships and lost their lives. Common tortures were hanging from the ceiling or pole for a long time, hit by canes harshly for dozens of times, and squeeze in a very narrow walls which press the victim’s body from both sides and the prisoner was kept in such conditions for several days without food or water. Many of them died because of such cruel treatment and hardship. At times, prisoners were used as objects of live experiments such as surgery, test of endurance against deadly cold or burning hot conditions etc and many of them died as a consequence.

  This camp is said to have become the model for many such camps within or outside of Germany such as in neighboring countries like Poland. The camp kept victimized  prisoners until it was liberated by American troops at the end of the war, namely, April 29, 1945. This operation of American troops is said to include Special Force 442 consisting of 2nd generation Japanese born in the US who and whose parents have been obliged to stay in American concentration camp in California at the beginning of Pacific War in 1941.
   Lucia brought us around and earnestly explained what have been done in every building where prisoners were kept and a large empty ground where prisoners were forced to stay overnight in a freezing winter. She explained us about many cases of tortures and murderous treatments. We spent about a couple of hours.
    I usually feel not that much affected by explanations or guide of uncomfortable and dreadful treatments of victimized people as in various incidents which took place during the time of WWII. But this time, perhaps because of Lucia’s earnest explanations trying to convey to us the most cruel treatment of victimized prisoners by Nazi officers, I felt extremely uncomfortable and asked her to stop her explanation. She understood my request and stopped her explanations toward the end of the camp tour.
   We left Dachau concentration camp around 12:30 and drove to a beautiful lake side Stamberg resort. The weather was fine. It was indeed a beautiful environment. The bus stopped at the entrance of lake side trail. We walked a while and arrived at a cozy nice restaurant in the wood, Gasthaus Sum Fischmeister. We were welcomed by Franz friends, Mr. Walter W. Sawallisch and Mrs. Tomoko Sawallisch, a pianist,  and their boys. We enjoyed beer, late lunch, relaxation and above all nice conversation. When we left the lake side the sun was already half down to the west.

  We arrived at the hotel late, and went to the reserved cozy Italian restaurant in the residential area. We were still pretty much full. But once dishes were delivered we enjoyed the meal. One of our members, Masahiro, having overslept and joined us about an hour late. It was amazing that he walked to the restaurant following the  smart phone guidance.

Day 3(July 17, 2017 Monday)
Visit of Munich Re
 We left the hotel at 8:30 and arrived at Munich Re, a world second largest re-insurance company at 9.00. The headquarter building of the company in the business district looks distinguished and calm. We were welcomed by Mr. Christian Kraut and his colleagues. They guided us to various parts of the building, which was a very impressive tour. The walls, ceilings, collidors are all artistically designed and illuminated. And there were good pictures at right places. The whole interior of the building is just as dream like art museum which makes people feel relaxed and viable. They invited us to a conference room and a serious presentation and discussion started.
Part I: Lecture by Dr. Peter Hoppe
   Dr. Hoppe is a renowned specialist of natural disasters. He is head of Geo Risk Research on Current and Future Natural Disaster Risk and Risks of Climate Change.  He gave us a very comprehensive and systematic explanation of natural disasters in terms of historical and regional incidence throughout the world. He analyzed such disasters by types and reasons of occurrence, and estimates of damages to society and economy, and how insurance industry try to insure against such losses.

  He described critical aspects of climate change and commented on strategic topics for insurance industry such as represented by Munich Re. For insurance business, there are three major pillars: 1. risk assessment, 2. risk transformation, and 3 asset management. He pointed out that less developed countries lose more by such disasters partly because of lack of insurance coverage. This underlines the basic relation that higher insurance coverage actually lead to better economic performance.

  He pointed out that from the viewpoint of re-insurance, insurance coverage of different types of disasters makes a lot of difference to the efficiency and stability of global insurance. For instance, a major disaster like serious accident of sea-bottom oil wells makes re-insurance business inefficient. In natural disaster prone areas like Japan and east Asia are well insured, the efficiency and stability of re-insurance is enhanced and contribute to increasing control of losses in the world.

  I asked what about the effect of denial by Mr. Trump of Paris climate accord of 2016. He responded that the decision of Mr. Trump certainly disturbs global efforts of reducing emissions gases and enhancing the global capacity to control climate changes. However, the effect of his negative attitude will not be much. The global community can endure for some years while Mr. Trump will be in office.

  Tomoya asked about the effect of AI on insurance. Dr. Hop pe replied that AI will have little effect on climate change itself but is a big thing for Munich Re. Someone else asked if experts like Dr.Hoppe could use AI for research. He replied they  will not use AI. They will use Intelligence. 

  Yo asked how insurance business deal with terrorism and cyber attacks. He replied that terro is not quite insurable because it is difficult to assess the psychology to forecast is difficult. Cyber attack is an important object of insurance. Japanese language may probably be a big natural barrier against cyber attacks.
Part II:  How to enhance SME earthquake insurance.
Part lll: Discussion on Earthquake Risk Management  and Japanese SMEs
Dr. Franz Waldenberger: Now that we have learned about facts of natural disasters and insurance business against them. A peculiar phenomenon is that in such an earthquake prone country as Japan, SME coverage is very low. They are most vulnerable to such disasters. Why not they insure themselves to such hazards ? How can we increase their insurance. The US hurricane damages are too big. Munich Re actually not want to cover the damage. Japan has many midsize disasters such as typhoons. If Japanese insure themselves more, they will even out the global insurance coverage. It is not only good for Japanese people and business but also contribute a lot to the world.
Yuhta: Japanese SMEs many not know about earthquake insurance?
Tomoya:  Japanese SMEs are well organized by industrial associations. If association leaders join earthquake insurance, many of the members will follow. This is a typical behavior of group oriented Japanese.
Yo:  I have been associating with many SME bosses as a lawyer. They do not logically calculate. When they encounter hazards, their natural response is to keep as much  cash as possible. When the economy is damaged, say by earth quake, production goes down, supply goes down and trade goes down. 
Shimada:  In such situations, the government supplies cash as in the case of East Japan Earthquake.
Franz:  When Japan is hit by next alleged super earthquake as Nan kai or Kanto earthquake, can Japanese government take care?
Kenjiro pointed out that on the basis of his experience of having worked in SONY insurance. SONY insurance is a commodity to save taxes. Why not making earthquake insurance a type of tax minimizing commodity? Life insurance is purchased by customers thanks to effective and powerful sales by “sales ladies.” Question is how to foster such sales ladies for earthquake insurance.
Yo:  SME do not trust insurance companies.
Shimada:  In the case of fire insurance, I know many cases that small shop owners do trust insurance companies.
Franz:  How about making the guideline of FSA explicitly adopt insurance clause as saying insuring your company with earthquake insurance is highly recommended.
Shimada:  The current president of FSA, Mr.Mori, is dedicated to help SME develop. To get the thing move, we need politicians. Why not write names of relevant  government officials and influential politicians? We need an action plan. And It is important not make Mr. Mori stand out alone.
Mr.Kraut:  Insurance businesses and FSA leaders are closely tied and worked together.

  After intensive learning and discussion at Munich Re, we walked for a while to reach a nice and cozy garden restaurant at the side of English Garden. We enjoyed a typical German dish with sausages, salad and potatoes. Munich Re kindly invited us to this  nice lunch. Then we drove for a while to visit BMW Research Center.
Visit of BMW  Research and Innovation Center
   We visited BMW Research and Innovation Center for 15:00 to 17:30 in the afternoon of July 17. We were welcomed by Mr. Felix Zimmerman.  Mr. Zimmerman is a young leader of BMW  research and innovation section. He was a student of Professor. Franz Waldenberger at University of Munich. He then studied at London School of Economics.
There, he majored macro economics. He then went to Japan to gain work experience in Matsuda, particularly in production management. He joined BMW  in 2004. He experienced various areas of auto business such as production management, R and D, sales and corporate strategy, market research etc. These are necessary to become an executive of the company.
   Mr.Zimmerman guided us to a conference room and gave us a systematic and informative briefing about the current as well as a future perspective of auto industry from the view point of BMW  . He first explained the current state of technology and then explained the next generation technologies, which BMW is developing partly cooperating with Toyota.

  He emphasized that the future car is an ultimate driving machine which provides a seamless mobility to users. BMW  is currently produce 2.3 million cars in Germany and 4 million cars worldwide which covers 150 countries. Currently, China is the largest market and is growing rapidly. Trend of car purchasing is changing significantly reflecting demographic changes of customers. Younger people are no longer interested in large expensive cars.

  Future cars will be increasingly digitalized and autonomous. We need to develop a completely different product. Another development is SUV, which has been developed mainly in the US and is now spreading into Europe and China. Younger people are reluctant to buy their own cars but they need mobility. Consequently care sharing services will develop. Digitalization and electrification will develop to provide “seamless mobility” to  consumers. Energy efficiency and anti-pollution technology will develop greatly.

   Having given to us a comprehensive and systematic briefing about the future of auto industry he guided us to a newly developed R & D center where work is organized  flexibly by projects rather than traditional demarcations. In the center, he said that some 10000 people are working.
Networking Dinner with Young Potential Leaders
   In the evening of July 17, We were provided with a unique opportunity of a networking discussion with a group of young potential leaders who were organized by Dr. Herbert Henzler, former McKinsey head of Germany. He is a “legend” in a management community in Germany. One of his recent publication is Herbert Henzler “Pushing the Boundaries: Recollections of a McKinsey consultant” 2016, LID Publishing Ltd.

  The discussion forum was held in a recently increasingly popular Kafer Shenke in the evening of July 17 for 18:00 to 20:00. On their side, 8 young potential leaders of heterogeneous careers such as McKinsey consultants, financial specialist, insurance  planner, journalist, graduate student, etc attended organized by Dr. Herbert Henzler. In addition, Mr. and Mrs. Walter Savallish joined the discussion whom we had a wonderful lake side lunch yesterday afternoon. On our side, 9 Shimada sonjuku members and myself.

  The forum started by the introduction of Dr.Franz Waldenberger, who kindly organized this whole event, by introductory remarks by Dr. Herbert Henzler, and myself. The common topic suggested by the organizer was “leadership.”  At the beginning, all the participants are asked to introduce themselves by a few words. Then, a couple of members from each side are solicited to make a few minutes speech on their experience or thought about leadership.
  First, Sara, working for Aliens, introduced three types of leadership whom she encountered during her career, 1. what may be called “energy management”, i.e. to lead people with a lot of work, 2. leadership by “trust” and 3. leadership by care and honesty.

Sophia: a journalist, talked honestly that there is a serious leadership problem  even in an intellectual world in the sense that the leadership positions are defined by hierarchical structure and occupied by “silver heads.” She emphasized that major changes are necessary in established  organizations.

Mitsuhiko talked about leadership on the basis of his experience of spending three years in high school in Germany, his sport life and business life in Japan that important for leadership are three elements: showing direction, having a vision, and lead people with trust.

  Ken spoke about leadership on the basis of his experience of receiving education in the US until high school, and his career as a venture business experience in Japan. He sees Japanese society as being led by Silver back people. Witnessing Fukushima nuclear accident, he was shocked by the lack of responsibility. He plunged then into the business of renewable energy. He realized there to make use of “silver back” people who have a lot of experience. Their experience is useful in a highly structured and organized traditional power industry.
Dr. Henzler pointed out that organizations can change only slowly, and so are people. He suggested that one needs to choose the organization to work for and the people to work with.
   He also pointed out that in a gathering in a famous Japanese hotel, women never talk, only men talk. He said that Japanese society is men dominated society. I commented that this is a scene you observe only in formal side of the society. In an informal and more substantive aspects of society, say, home life and SME which occupies major part of Japanese industry and society, women have dominant roles and power.
  Herbert asked what the effect of Mr. Abe’ leadership who advocates earnestly the importance of female roles. I commented that Mr. Abe talked beautifully his slogans. However, in reality how much he really respect women’s role is somewhat mixed as in the case of having disturbed the challenge of Ms. Yuriko Koike in Tokyo gubernatorial election.
Joe Eisner, a young McKinsey consultant who basically planned this networking discussion, asserted that Japan is much delayed in terms of the progress of female roles in society, which has been internationally recognized. I commented that it is true in a formal part of the society. However, one needs to understand the major roles played by women in SME which occupies a large part of Japanese society in order the  understand Japanese society.
   Herbert asked about Japan’s relations with China. I commented that there exist a large vacuum of non-communications between China and Japan particularly on the question of how to recognize contemporary history, particularly, the early half of 20th century, of Interactions between China and Japan, most symbolically, Japan-China  war experience. To promote mutual understanding and foster constructive relations between the two countries, I emphasized that Japan should learn from the wisdom and courage of German experience in an attempt to foster constructive relations with  Israel and many Nazi invaded neighboring countries after the war.

  Following this interactive discussions, both German and Japanese young entrepreneurs who are or wish to be leaders informally get together in small groups  to enjoy eating and talking with each other. This stimulating and enlightening session of networking discussion continued till about 21:00 at night.

Day 4 (July 18 Tuesday)
Invest in Bavaria
   We visited Invest in Bavaria office in the morning of July 18, for  9:30 to 12:30.
Ms. Huber cordially welcomed us and started explaining the activity of Invest in Bavaria. The office is light with large windows through which we can see woods even thought this is located in business district.

  This Invest in Bavaria office is under the supervision of Ministry of Economic affairs. The office provides one stop total services to those who are interested in making investment in Bavaria. Services cover such areas as providing information, site search, contents consultation. The office has a support team also in Japan in order to solicit Japanese companies invest in Bavaria.
   Bavaria is a large state in Federal Republic of Germany. It occupies 1/5 of the land of Germany. Population is 13 millions. GDP is 170 million Euro, which is no. 7 of EU. Thinking of the economic conditions of Bavaria, which is a highly advanced industrial area where wages are already quite high, I wondered what would be the incentive or motivation for potential investors like Japanese companies to invest here. I asked if the state of Bavaria would give some special incentives such as tax exemption to  invite foreign companies.

  Ms.Huber answered that state of Bavaria does not provide tax incentives or other pecuniary incentives. She emphasized that attractiveness of Bavaria are (1) employability, namely,  in some areas of Bavaria, employees are relatively more available than other places. (2) technological development, namely, those incoming companies can learn from or can jointly develop technologies with local German companies, and (3) innovation possibilities.
   They pointed out that currently already many good Japanese companies are operating in Bavaria as the cases of foreign direct investment. Japanese working  in Bavaria are as many as 9000.

  They then invited Mr. Engelman to explain to us the German system of vocational education and training which is well known by the symbolic name of “Dual System” of vocational education and training. This system is a multi-tier system of different levels of vocational education and training run by the close coordination of schools and businesses. 

  There are currently 327 training programs. Such programs provide vocational education and training for about 15000 professions covering wide range of industries including manufacturing to various service industries. Trainees of manufacturing industries are about 60% of all the trainees, handicraft 27%, liberal professions such as accountants and legal jobs 8%. 

  In Germany, schools are stratified as primary, secondary, intermediate and Gymnasium(Grammer school). At these levels, opportunities are openly provided to take vocational training. Much of the training on the job is provided at business companies. Business companies provide some 80% of the cost of training. After taking training, while quite a few students take a job  at the company where they are free to choose any professions. Companies’ financial contribution by bearing the cost of OJT may therefore be interpreted as social contribution to public investment in human resources. SMEs are relatively more reliant on this dural vocational training. 

  The origin of this dual vocational training goes far back to the era of Bismarck who established the base of current Federal Republic of Germany in 1871. The modern vocational training system was developed on the basis of traditional training system of craftsmen such as guilds and mei ste rs. In the early 20th century, German industries developed remarkably which became the industrial leader of the world. This remarkable industrial development has been vouched by wide spread  development of capable SMEs. Public vocational training has been an important instrument to support such  industrial development.  The substance of such public vocational training has been constructed by 1920s. However, the current system of dual vocational training was formalized by national training act of 1967.
 After the session at Invest in Bavaria, we visited a historic district of the city of München. Dr Franz Waldenberger left us there. We were so much indebted to him for his well planned arrangement of the trip and very careful guide for us. After seeing him off while he was walking to the station with knapsack on his back.   we dropped by a popular restaurant in the basement to have a typical German dish. 

  We spent sometime to walk around the old town of München, and then drove by bus to see around some historic sites and buildings of the city. In the evening, we  left  München AP at 19:00 via LH2030 for Berlin. In Berlin we arrived at Hotel Intercontinental Berlin where we planned to stay two nights.

Day  5(July 19 Wednesday)
“Asa no Kai” in Berlin
   In the morning of July 19, Wednesday, we joined the study meeting of what they call  “Asa no Kai(morning meeting)” which was held in hotel Intercontinental Berlin where we stayed from the previous night. The meeting was planned to go from 8:00am to 10:00am.
   This Asa no Kai has been organized by DJW(Deutch Japanischer Wirtshaftskreis)which provides an opportunity and place for Germans interested in Japan and Japanese working in various ways in Germany to meet and share information together and develop networking among them. I was supposed to give a speech in this morning to provoke ideas and questions to be discussed for the meeting. When we arrived, we were cordially welcomed by Mr. Wilfried Schmidt, and Ms. Julia Münch, Mr. Schmitdt is member of the board of DJW.

  The topic I chose was ”Economic Development and International Leadership: A Comparison between Germany and Japan.” It was our honor that Japanese Ambassador in Germany, Mr. Takashi Yagi kindly jointed our morning meeting.

   Having taken light breakfast bringing by themselves meals from the neighboring cafeteria, the meeting started. At the outset, we all listened to ambassador Yagi’s opening remarks. Mr.Yagi emphasized that Germany is a very important country economically, politically and in security. On the sphere of security, Germany sends military to critical areas of conflicts in the world to promote and keep peace. Japanese may have been somewhat biased to look more to UK and France, have not paid much attention to Germany. We, Japanese, need to pay more attention to Germany.  Sonjuku people visited Germany in a good timing in the sense that the weather is fine, G20 summit held in Hannover is just over, and the social turmoil there was over, G7 summit held in Italy has been concluded successfully recently and we will soon have Bundestag election in September. There will be many interesting discussion in Germany particularly at this timing. I hope sonjuku members will have accurate image of both Germany and German perception ofJapan.
   After his introductory remark, I had to start my speech. When I was asked if I would be willing to give a speech in Berlin by Franz a couple of months ago, I gladly accepted his solicitation. The time allocated for my speech was at most 30 min. Starting to prepare for my speech I realized that I wanted to talk many topics under the title as noted above. I wrote up as briefly as possible those topics in my manuscript. Not unexpectedly, it was long. If I were to read all of it, it would take easily 1 hour. Franz warned and advised me to focus mostly on Abenomics for (1) this is the topic most Germans are more interested than other topics, and (2) I can speak within the limit of 30 minutes. I accepted his advice. 
   On the day, I concentrated  much of my time to speak about Abenomics but also mentioned most of the topics I wanted to discuss such as politics and security. The full text of my manuscript can been seen in my blog or DJW net newsletter which is linked with my blog on this theme. And I was able to conclude my speech in about half an hour. I was impressed by the serious attention of audience to me all through my speech.
   After the speech, several participants raised their hands and asked me interesting and important questions. Let me introduce  briefly three questions and my response to them.
(1)What about relation of Japan toward Korea and Russia.
    I commented that Korea has had unfriendly attitude against Japan for most of the postwar period for some understandable and other non understandable reasons. I said Japan can learn from Germany the wisdom in the postwar era in fostering friendly and constructive relations with Israel and Nazi invaded neighboring countries.
   On the question of Russia, Japan and Russia historically has had rather futile relations including the question of Japan’s northern territories(four islands). Prime minister Shinzo Abe is earnest and hopeful to get those islands returned to Japan. His enthusiasm may reflect the conviction of his father. I personally thinks hoping to get the islands back is hopeless and not very meaningful although Japan should continue to insist.  Currently, Japan and Russia seek to find areas where both countries can cooperate for economic development of North-east Russia under the hopeful thoughts of Abe administration. Japan can contribute only to the extent such cooperation will provide profits, if any, to Japanese businesses who participate.
(2) Why Japanese government debt is a problem?
   I explained that the government debt is increasing as much as 240% of GDP,  a dangerous zone where it will exceed the total amount of net financial assets of the household sector. This means that the government can no longer issue JGB. Another worrisome phenomenon is that given the current pace of BOJ’s purchasing of JGB, the existing stock of the JGB will be totally absorbed by BOJ within a decade or earlier. Under such circumstances, Japanese economy may well suffer from financial crisis, economic crisis and possibly national collapse. This makes a sharp contrast with German fiscal situation where the government has been reducing the outstanding debt to GDP down to 60% of GDP.
(3) There are many areas where Japan and Germany can cooperate such as trade, technology and cyber security etc which will bring about merits not only to the two countries but also to the world. The fact that Japan and EU recently basically agree to have FTA is highly appreciated. Will and can the two parties agree on dispute settlement scheme using tribunals as attempted by EU-Canada agreement?
  I responded that Japan and Germany can cooperate in many areas such as trade, technology and even the global politics particularly after the emergence of Trump administration which basically denies global cooperations both in economy and security, and the eruption of Brexit.
On the question of dispute settlement mechanism, I wish you ask directly honorable ambassador Takashi Yagi who has a professional understanding and authorized judgement.
Berlin Partner
 We visited “Berlin Partner” which is located in Federal Ministry of Economy, and listened to lecture of Mr.Christian Treichel and enjoyed Q &A for 10:30~12:00.In Berlin Partner, it was planned originally to listen to the lecture of Mr. Stefan Frantzke, COO, and then to listen to the lecture of Mr. Treichel. But since  Mr. Frantzke was unable to join us for emergent reason, we listened to a more  detailed explanation of Mr. Treichel about activities of Berlin Partner.
  Mr. Treichel is a program manager of international service. He had experience of working in Gulf area and Turkey. He travelled to Japan in 1992 to visit JETRO.  The main activity of Berlin Partner is to appeal Berlin to prospective investors and provide necessary services to help such investors to promote business in Berlin. Berlin city alone is one of the 16 states of Federal RepublicBerlin Partner wishes to develop network with strong partners to make Berlin strong city. The objective and activities of Berlin Partner resembles that of JETRO, Japan External Trade Organization. Incidentally, Berlin and Tokyo are sister cities.

Berlin Painter is interested particularly to assist future oriented businesses with high skill and technology contents. Currently Berlin Partner supports 6000 projects, help assist networking venture companies and people.
   Mr. Treichel spent some time explaining the historical background of Berlin after WWII. Sometime after the end of the war, Berlin was subdivided between East and West. East was controlled by Soviet Russia, while West was supported by the US, Uk and France. While West Berlin was assisted by Western allies, East was not. Therefore there developed a huge differential in post war development. Many people fled from East to West Berlin. To stop such exodus, the wall was built in 1961. Many companies moved from Berlin to other places where they can take advantage of free environment such as Munich. 
   Recently, Berlin has become a completely different city, where venture people come in and get together from various parts of Europe and other areas. Berlin became the center of cross cultural communication. From such communications, seeds of innovation develop.
   Mr. Treichel emphasizes that Berlin Partner distinguishes new companies and “start ups.” Recently, some 40000 new companies were created. They are just new companies. Berlin Partner recognizes 2400start ups. Start Up companies are those who grow fast. They grow fast and within 5 to 6 years, 90% of them create  new products or services. Berlin currently provides a place for 5th largest employers in German cities.   
  Berlin accommodates many Eco Systems. Its ranking was 70th in the world in 2014, and is 7th in 2017, only next to Tel aviv, London, NY, Silicon Valley, and Shanghai. etc. Berlin accommodates more than 50 incubators and accelerators, provides more than 100 co-working spaces, and foster more than 7500 start ups.

  Mitsuhiko commented that Berlin had almost nothing in 2000 when he was studying as a high school student in Leipzig.He asked what made Berlin change as much. Mr. Treichel explained that conditions of Berlin today which attract many ambitious people from the rest of Europe and the world are: cheap living cost, cheap housing  cost, openness of the society, using English as a common language, relatively high quality of life, rents are much cheaper than, say, in London. Recently critical mass of ventures are concentrated, therefore, both incumbents and new comers can enjoy cross cultural interactions and stimulus.

  Mr. Takeda who knows a lot about ventures in Berlin said that the city is very  young. For instance, 25% of city population is younger than age 25. English is  certainly a second language in this German city. However, it is the common official language. Berlin initiated recently a global “Start Up Alliances” soliciting  Tel-aviv, Paris, NY, London, Shanghai and LA.
Federal Ministry of Economy and Energy.
  We visited Federal Ministry of Economy and Energy for 13:45 and 15:00.  We were welcomed by Dr. Malte Hauschild and other officials who kindly gave us comprehensive lectures on major issues which EU faces ranging migration,  terrorism, and economic performance and its challenges.

  On the question of migration, in 2016 some 160000 migrants entered Germany. In 2017, the number of migrants was reduced remarkably. This decline reflects some considerations behind the general election in September 2017. Although the  number of migrants was reduced, social pressures remain high. The main route for migrants to come to Germany or other European countries is through Turkey. Recently,  migration through Mediterranean sea. 

Terrorism is still an increasing threat. Paris, Berlin and London have suffered from it. In two years, EU nations develop stronger border control. Pre-registration ESTA system like US is being prepared.
  Economic performance: For this past year, economic performance has been improved in many areas of Europe, EU and Germany. ECB’s financial policy is costly. Unemployment is still high. EU areas as a whole suffer from 10% unemployment, although it is much lower e.g. 3% in Eurozone. Youth unemployment reaches 20% in  Spain. Debt crisis is still serious in Greece and Italy.

    The second round of negotiation started last week. British side is not prepared. Here, the office staff circulated around a picture reported in FT in which negotiators of both sides sit around the table. While EU negotiators have a bunch of materials, UK negotiators had no paper at hand at all.    Problems and Challenges:    On the question of migration. EU has been pursuing a special arrangement with Turkey. EU is searching for strengthening border control. Economy is moving fast in the wave of “digitization.”
   EU is celebrating 60th anniversary since Rome Treaty which initiated the formation of EU. However, in recent years, in many countries like France, Netherlands, etc, political parties which accuse EU increased their influence although they were unable to get the support of majority people. The US is inclining to protectionist under Trump administration. EU should stay together. Togetherness is power. We also need to reform EU for stronger integrity and prosperity.
  Mitsuhiko asked about debt problem of some EU members such as Italy, Greece.
  Dr Hauschild , having explained a complex structure of European banking system and the  complex processes to improve the situation, emphasized that the decision to create EURO was political that the creation of a single currency would strengthen EU, and added that there have been exceptions like Britain and Norway.
  Mr. Schultz added that EU banking system can be more resilient with improvement of deposit protection system.

I commented about Mr. Macron and the burden reduction of Greece. Mr. Macron seems to propose a Euro fund or even to promote federalism in EU.  In fact, federalism has been earnestly proposed by one of the founders of EU, M.Jan Monet, at the time of formation of EU. This was not realized because of a strong opposition of Charles de Gaulle. The question of reducing the fiscal burden of Greece has been proposed by some people as the suggestion of “hair cutting.” However, parties involved such as Germany and other major members of EU and lending organizations have been of the  position to ask Greece to do their homework of reforming its fiscal and structural  reforms.
  Mr. Schultz pointed out that EU members fully appreciate integrative process. However, Germany may be somewhat different. Although Germany makes full effort to cooperate with other EU countries for European integration, German attitude is more inclined to maintain nation state.

  Germany suffered a fatal defeat in WWII. Japan’s cost of the defeat was Okinawa and northern small islands. Germany lost a large territory east of Eder River currently added to Poland. Because Germany fully recognize the guilt during WWII, It worked for European integration and establishment of Euro zone. Eventually Germany found again a place in European community. EU integration carries on, but the idea of nation state still prevails strongly in Germany.

  Yo asked about the cost of receiving migrants.
 Dr.Hauschild responded that to keep the country open is important. After the WWII, many  Germans fled to other countries and they were accepted. It is the time for us to return such benefits to Syrian refugees.  In the aging of society, accepting migrants may help supplement the supply of labor force. We will see. However, we need recognize that we have cost now. We don’t know what the end result would be. Receiving young generation may help, but we don’t know. We close some routes of migration but open others to keep some balance.
  On the question of Brexit, Brussels are all worried.  As we have shown in the picture of negotiation, British negotiators come without papers. What we worry is that we lose the ability to foresee the future. Brexit is a “wake up call” for Europe. Unpredictability of the course of Brexit as to where it would lead us is a serious concern.
IXDS visit:
   We visited IXDS, Io T related industrial design and engineering lab for 16:00 to 17:15. IXDS is a pioneering venture company developing its activity in I or T and  various types of designing. We were welcomed by Mr. Retto Wretch, the CEO of  IXDS. 
   The office itself is designed in an unique fashion. It is open, just like a cafeteria. Staff are working anywhere they like. They work under flexible time arrangement.  The office often provides open house day with interested visitors. Any people who are interested in activity of IXDS can participate.
   Mr. Wretch emphasized that their design is user experience oriented. They provide service design and solutions.

  Mr. Wretch has worked sometime ago in SONY design center. It was good but the problem there was that the center was not quite open. Openness is the key. IXDS often holds open house where anyones can join and exchange ideas openly.
  We emphasize “service design.” We believe technology provide service. For instance, selling a car essentially should mean selling “mobility.” This is the essence of user experience service. What is important is to provide “good experience” to users. We promote “user centered approach.”

  We will face in the future shortage of skills. We need to make use of skilled and  unskilled workers together. Here, machines and IT should be integrated. Huge  business opportunities behind B to B services. Manufacturing organizations can  now provide new services using IT.

  Start up is important. We encourage them to exit as soon as possible even though  their businesses are not complete. Providing new services is important.

  The process of innovation may be explained as consisting of three stages of  development : 1. Understanding, 2. Systematization, and 3. Creation. We work with partners. They are ambitious companies, teams, individuals. They all share values with us. BMW for instance attempts to change society by mapping facilities. Block chains, self inspiring entrepreneurs provide constant challenges.
   Education should be user centered. Need evangelize creative design. SONY was unfortunately not open. They thought that design should be kept secret. Why not open? We should seek “open innovation.” 
   In our lab, staff work 4 days a week. We need rest, We need change of pace for concentrated work. 
   We then met a venture entrepreneur who came from Japan and has been working to construct Ecosystem to build new business communities. He  combines large companies, research institutes and start ups to create innovative incubator. Currently, 9 companies of electric power, water supply, gas supply, public transportation, etc are organized together trying to create a “smart city.”

  Dialogue among the companies which have expertise of providing infra-structure facilitates important synergy among them. They are integrated together by I o T.  Digitalization is critical. Integrating electricity and mobility creates “e-mobility.” 

  He has been for long in the field of real estate business. He wished to create a smart city with the taste of Japanese traditional culture.   
  His basic objective is to creative “incubation hub.” Germany is extremely stimulating in the sense of providing environment for ventures to create “start ups. Berlin is a highly conducive place. Land prices, and rents are cheap. In every weekend, some 15000 youngsters get together who come from all over Europe and other areas to enjoy  free atmosphere, cross cultural communication and play.   
   Brexit will accelerate this phenomenon. The importance of UK market will decline. European continental market will be much more important. Germany will necessarily be the center. Prices are cheap in Berlin. Many talented young people come together in Berlin. 
   After this meeting, I and some members went back  to our hotel to have dinner and rest. But the rest of the members continued to enjoy other venture capitalists for further conversation, and they went to join gathering of young and resourceful ventures who gathered together in Berlin from various parts of Europe and other places of the world till late, as late as even early morning. The Sonjuku members who took part in this night meetings and gatherings told me that I missed an important part of real business life of Berlin. I am glad to learn that young and vigorous Sonjuku members actually experienced a part of exciting life of young ventures in Berlin. 

Day 6(July 20 Thursday)
Mr. Mark Hauptmann MP Meeting
  We visited Mr. Mark Hauptmann at the Deutsch Reichstag(German Parliamentary) Bldg. Mr. Hauptmann is a young and active CDU member. He is currently 33 year old, and is looked after as the most promising young political leader of the country. We had a meeting with him on July 20 for 9:50 to 12:00. 
  Mr.Hauptmann kindly received us at the busiest moment for politicians when general election is only two months ahead. He said that most of his colleagues are now devoting themselves in grass-roots campaign for the forthcoming election, but he kindly spared his most precious time to see us in the Reichstag Bldg.   

  He has been a parliament member for four years. When he was young, he spent time in Japan staying Osaka and studied at Kannai Gaidai(Kannsai College of Foreign Language). He has been interested in politics since much younger age. His home town is Turing, green heart of Germany, where you can enjoy skiing all year around. 
   He said that German-Japan relations are good. Mr. Abe and Ms. Merkel have good relations. Mr. Abe attended Hanover IT convention where 120 Japanese companies displayed their products.  Recently, Japan and EU agreed basically to have FTA agreement, which will boost mutual trade remarkably. EU-Korea FTA has increased trade between them as much as 55% in 2years. one plus one is three. This is the merit of FTA. 
  If Japan-EU FTA is put into practice, SME will be particularly helped. Large companies already have knowledge and experts which SME do not have. Japan can take advantage of fully enjoying the merit of large EU market having 500 million people. 

  Germany and Japan are closely tied up by advanced technologies and entrepreneurship such as robotics, I o T, auto drive, start ups, young entrepreneurs. Berlin is start up hub of the world. After Brexit with relative decline of London, Berlin will be the center of Europe. Under Ms.May, soft Brexit will not be pursued. Hard Brexit will have huge impacts. Germany will be ever more important.   

  Currently, economic figures are excellent for Germany. Employment is increasing. Unemployment is lowest in decades. one million open jobs are unfilled. Large companies’ performance is excellent. SME is strong. There are approx. 1600 SMEs leading the world business in their area. In Germany 1/4 of jobs are related to export. We have global export companies in such areas as machines, cars, chemicals etc. 

  Germany and Japan have similar challenges. Perhaps the largest is aging and declining population. We need to cement the gap between demand and supply of workforce by robots. We are impressed by a Japanese company, Cyberdine, to enable older people to be good workforce by their device. 
   Social networking is developing rapidly as seen in the development of Facebook,  Amazon or e-Bay. Digital technology links between parts of traditional industry to create new industry. The 4th industrial revolution facilitated by digital technology is amazing.  Autonomous driving is developing remarkably. We look forward to see its progress and achievements in Tokyo Olympics.  We can drive autobahn at a speed of 170km/H. In a mega city like Tokyo, this is difficult. While autonomous driving is developing, we need to legal regulations and also insurance protections. 

  Germany and Japan are partners rather than competitors. We share similar values such as democracy, rule of law and freedom of speech. Japan’s neighbor, China, has a great economy but in some aspects they have problems such as unfair business and trade practices, regulations on foreign investors as always they need to accept 50% partners, hidden subsidies in many aspects of business activities etc. 

  US role of agenda setting in global trade is diminishing especially they walk out of  TPP. Now Germany and Japan need to work closely together to keep the order of the global market.   
   Berlin is fascinating for ventures and venture capitals. Businesses grow rapidly, particularly, start ups are vigorous. Venture capital funds, private investors are  gathering to invest into start ups. State provide matching funds up to 20% of start ups. High tech funds, investment funds abroad are gathering more in Berlin. Berlin is becoming an European and global center for start ups. It attracts sophisticated IT specialists even from such countries as Ukraine and Russia. 
   Berlin is becoming the center of creative minds, creative thinking people in Europe. It is easy to come and join such community of Berlin. Rents and land prices are cheap. 
   Tomoya asked that in Berlin living cost and hiring cost seem to be much cheaper than in Tokyo thereby attract young ventures. Mr. Hauptmann responded that Berlin attracts young and creative people. We take advantage of free labor mobility thanks toSchengen agreement. We need skilled labor force. We welcome them. 
   Yo commented that he has been watching and accustomed to the German conventional political scene as symbolized by the rivalry between CDU and SPD and asked if there are any changes in the scene and also if German capitalism different from Anglo-Saxon capitalism.
   Mr.Hauptmann commented that Germany is of social market economy, that is a capitalism with social conscience. 51% of government budget is spent for social matters such as education, pensions, childcare etc. Companies have freedom to make money but at the same time need to take care of those who need assistance. We think social benefits are important even though they are not productive. In this sense we are different from US.   
  On the question of rivalry between CDU and SPD, we admire that Ms.Merkel has been Chancellor for 12 yeas. Her approval rate is high. In Hamburg G20, many world leaders  trust her. There have been many problems such as migration, Russian aggression to Ukraine, Libya issues etc. Merkel handled them well. SPD emphasizes social equality, benefits to workers etc. There are three major wings in German politics: namely, conservative wing, Social Democrat wing, and Liberal business friendly wing. 
  Yuhta said that he has been impressed by flourishing activities of ventures and venture capitalists in Berlin and asked if Berlin will become a venture hub like Silicon  Valley. He also asked Mr. Hauptmann’s view on Berlin new AP.
  Mr. Hauptmann responded that Berlin will not be the next Silicon Valle. We will not copy others. We try to provide the best place for start ups. In US and UK, huge money come from pension funds etc. We have not yet come to the stage.   

  Referring to the influence of Brexit, he said that Singapore has been investing heavily in UK, and only low in Germany. Singapore now has to diversity its strategy.  London, living cost is high. Today, good human resources move increasing away from London and move to other European countries and Berlin.  UK’s economic power and influence will decline. Europe will lose too. British global service will decline. Germany will also lose partner. 

  Refering to the question of AP, he said Berlin is not the perfect place. AP is a disaster. Hope right decisions will be made to open AP as soon as possible. Local government invest in education and social infra-structure.  400000 Turks live in Berlin. They have a big potential. Berlin is a global city. We would like to make Berlin more attractive. We would like to make investors more easier to invest. In Berlin, no need to talk in German. Everybody talks in English. 

  Mitsuhiko asked two questions: 1. what is the effect of aging on small and large cities, 2. how is the industrial progress.
   Mr. Hauptmann responded that we are trying to enhance attractiveness of local towns. While workers tend to move from rural small cities to urban large cities, with the development internet connectivity, people can explore whatever they wish. The birth rate has been declining in Germany after reunification. In addition, we experience of a second wave for even lower birthrate since females born after 1995 have tendency not to have babies before age 25. The most critical industrial progress, namely, digitalization seems to fill the gap between small and large cities. 
   Ken asked a question about mindset of Germans. He argued that while German people seem to adapt to 4.0 industrial revolution, he suspects that established corporate managers in Japan cannot change their mindset that easily. He also  asked the role of decentralization in Germany. 
   Mr.Hauptmann commented that he does not think that Japanese established companies’ managers do change. Robots, for example, are far ahead in Japan relative to other countries. I know many excellent Japanese companies which  adapt to new technology. There is a tendency in Germany that Germans love data protection. 
   As for decentralization, there are some 1600 SMEs in Germany which have high shares in the global market, and many of them locate in various cities and local towns. German strength stems partly from its decentralized structure of federalism and local initiatives. For example, Dusseldorf is famous for Japanese community, Frankfurt is  a financial centre, and Berlin is a start up city, etc.
   I asked what will be his plan to develop German-Japan relations. He replied that he has many ideas and plans. However, the most important is to get elected in the forthcoming election.

  After the meeting with Mr. Mark Hauptmann MP, we took a nice lunch at a restaurant “Offennungszeiten” on the roof floor of Deutsch Reichstag Bldg. After a leisurely dinner we went to Berlin Central Station where we planned to take a long distance train ICE no. 693. Shortly before we got on the train our Japanese guide, Mr. Ryo Kawanabe gave us some cautions not to miss the train because train sometimes starts from unreported platform. He gave each of us paper strip telling us this is a ticket.

  The train ride was cozy. In the train there was a dining car which now does not exist any more in Japanese bullet trains. I enjoyed typical German dished on the train with one of the members, Shige. After relaxing in the dining car I went back to my seat in the designated car. Then a problem happened.  A conductor came to me and asked to show her my ticket. I showed the paper strip given to me by our guide. She was puzzling. She said it was not a ticket. I insisted that this is the only paper I have. Then several conductors came to me a few times and insisted that this is not a ticket. They said that this is simply a reservation certificate.

  One of them ordered me to come to the conductor’s room. I rebutted saying “on what capacity can you order me to do so” I argued strongly that we are honest travelers and I show them all I have. They insisted that since we do not have legitimate ticket we need to pay all the cost of the tickets at the railway station and then we could reimburse them when we find legitimate tickets somewhere. I rejected to do so. We had some debate. After a while, one of the conductors came to me and gave me a signal that we can go without saying a word. This was a terrible experience.  A few days after our arrival back to Japan, we learned after our strong inquiry to Japan Travel Bureau that it was due to the mistake of our Japanese guide in Berlin. He in fact failed to give us legitimate tickets. 
Upon arriving at Frankfurt Central Station, we sat on benches in front of the station and enjoyed beer because it was so nice and cozy in the early evening of the town. We went to our hotel Steingeberger Frankfurter Hof. This is a traditional and quite distinguished hotel.

Day 7(July 21 Friday)
In the morning we met in our hotel lobby our guide Ms. Yayoi Aihara. She said she has been living in Frankfurt more than 15 years. She is very knowlegeable and told us many things about the city of Frankfurt am Mein and neighboring area in our bus on the way for us to visit the natural renewable energy company Juwi. Unfortunately, I have no space here to introduce her interesting stories.
Juwi visit
   We arrived at the gate of  Juwi at 10:00 am. Juwi is the world second largest renewable energy company with its headquarter located in the neighborhood of Frankfurt, Germany, and has offices and operation sites all over the world. Ju wi was introduced by an active member of Shimada sonjuku, Mr. Ken Isono. Mr. Ken Isono is a highly prospective venture leader who manage a renewable energy venture “Natural Energy Corporation.”  He successfully made a remarkable joint venture contract with “Ju wi” recently and solicit our group of Sonjuku to visit them when we  visit Germany this time.  Mr. Isono told us that he is contributing significantly this year to increase the business income of Ju wi by promoting jointly construction of solar energy plant in Japan. When we arrived at the entrance of Ju wi, we were welcomed by the top executives of the company: Mr. Stephen Hansen CEO, Mr. Michael Harr, and Mr. Mike Class. 
   Mike started his comprehensive explanation of the policy environment of renewable energy business in responding to the question of Ken on EU policy for renewable energy industry. He said that it is in the process of major transformation. It is a change of a highly complex interactions of EU member states, competition in energy markets, involving power generation, power distribution and grid technology etc. Pricing of energy is the result of such highly complex political interactions of the players of the business taking advantage of constantly evolving technology. Having learned and discussed this complex structure and processes of energy policies of EU and in Germany for about an hour, we shifted our focus to learn about what Juwi has been doing.
Juwi was founded in 1966. The name of the company, Juwi, was taken after the names of the two founders of the company, Mr. Fred Jung(Ju) and Mr.Matthias Wilenbacher(Wi). Currently, Ju wi is operating with the capacity of 4300 megawatts using 2500 systems. It produces 7.2 billion KW/h which is good enough to supply power to 2.3 million households. The company has about 1000 operating sites in the world. The sales was 777 million Euro in 2016.

  Following the comprehensive lectures, we enjoyed a lunch at a nice cafeteria. Foods are highly healthy oriented and much of it is produced in farms nearby run by the company. 

  We then made a site tour of power generation of solar panels and wind mills. This  was a highly useful learning experience to see an important example of renewable energy production of Germany which is shifting rapidly to conventional fossil and nuclear energy to natural renewable energy.

  After visiting Ju wi, we went back to the central area of city of Frankfurt to visit the oldest bank in Germany, Metzler Bank.
Metzler Bank Visit
   We visited Metzler Bank for 15:00 to 17:00 in the afternoon of July 21, Friday.
Mr. Gerhard Wiescheu warmly welcomed us. He told us that he is a good friend of
Dr.Franz Waldenberger and offered this opportunity responding to the request of Franz.
He is one of the 5 partners of the bank.
   He started his presentation by telling us the history of Metzler bank. Metzler bank  was founded in 1974. Ever since it has kept its business for 340 years. It is rare that the banking business lasts this much. We have 800 employees, 5 partners. Metzler family was running a trading house in early years, trading of spices, clothes etc. and served the needs of King and Dukes.
  Frankfurt was a free city. There was no boss at the top. People played the role of parliament. People decide their fate. Frankfurt geographically was the center of Germany and Europe. All come here form other countries. Most of them are merchants and in finance trade. Many coins of many countries were traded in Frankfurt. Metzler evaluated the values of the coins. It developed step by step to investment bank. Proisen led by Friedrich the Great needed money to expand its power. Metzler served them as bank. Then Metzler expanded its business from handling money to bonds.
   In 1750, Metzler family had no male successor. Christina, female CEO,  took the office as early as 250 years ago. Metzler family is flexible. Napoleon conquered Frankfurt. He controlled almost entire Europe. We went through WWI and WWII. We survived all such major changes. Why Metzler survived? We believe because Metzler never exposed to excessive risks. We were good at risk management. 

  Metzler family continued to the current 12th generation. We have good people, good technology, we can compete in evaluating businesses and advisory business.

  We have 5 partners. They all have liabilities. If the bank has any problem, we all lose assets.  50years or 100 years ago, there were businesses of such type. Now such institution is very few. We cannot even insure the loss. We need to be very cautious.
   In 2007, Deutch Bank appealed to target 2.5% of ROE. Metzler did not need to take risk and stayed away from such solicitation. Metzler is interested in long run business. Even though return may not be high, if interesting, we do the business. We need not depend on anyone like “analysts.”
In 1945, mayor of Frankfurt said it would take 100 years to reconstruct. Metzler did much earlier, like Japan.  We do business of pension management. Of 800 employees, 198 are programmers. We do modern banking. We invest a lot in ICT and computers. We have programs working with financial professors of Goethe University.
  We trade on behalf of clients. We trade not on our own book. We conduct corporate finance business and M&A. Germany and Japan have many things in common, for example, the role of SME. We have powerful SMEs in Mittelland. Many of them are not listed but globally strong. German and Japanese companies will have much merits by working together. We wish to promote Japan-Germany business.
  In October 2, 2017, we hold German-Japan symposium on Hydrogen and Energy industries at Kogyou Club in Tokyo.  We have German Japan center in Berlin initiated by the agreement of PM Nakasone  and PM Helmut Kohl in 1985. I am chairman of the board of the center.
   Now, take a look at European situation. German worked hard with France and others to create Euro zone. The common word is “Let’s do it together.”After UK joined EU, both UK and EU member countries benefited a lot by increased business with UK. The complaint behind UK which led UK to choose Brexit is EU has no favorable treaties for UK. In the Brexit negotiation, UK seems too optimistic. UK will not get favorable result. Many financial businesses will come to Frankfurt. 
  Japanese banks and financial organizations cannot wait until EU and UK reach some sound agreement. Daiwa, Mitsubishi, Mizuho, Nomura all decided to come to Frankfurt. Others may go to Paris  and Dublin. 
   Brexit was the result of Cameron’s wrong decision to call for national referendum. Timing was wrong. After the Brexit decision, there arose many demonstrations against the choice of Brexit in the referendum. Many young people did not go for referendum voting because they believed that the result of the referendum should be “stay.”
   I asked how he views Macron’s reform proposal.  He was wondering what kind of  reform Macron really seek to realize. To him, the picture is not clear enough. And it is hard to expect French will work together to realize such reform. 
   ECB’s dilemma. ECB realizes that it should increase the policy interest rate. However, many EU member countries still need low interest rate for economic recovery.
  It is not clear what UK really wants to pursue. Canadian or Norway model? Whichever the case, Brexit will make everyone lose. This is the disaster in EU history.
  Ms. Merkel comes to Metzler Bank once a year. She listens to 7~8 people. I accompanied her to China and Japan. Mr. Abe gets along with Ms. Merkel very well. They talk in detail international issues. Japan and Germany share common values. We can cooperate well.

Ms. Merkel needs Mr. Macron. They discuss Brexit profoundly. It is obvious that Mr.Trump does not care of Europe. Europe needs common military to defend themselves. Decision making process of Europe will change. This is the first chance for Europe that Europe decides its own fate. Ms.Merkel is determined. Mr. Macron has a good sense of economy.

  French labor market is inflexible. Macron needs to reduce military spending. He needs to pursue military reform, labor reform and pension reform. If you do not press more, you cannot attain results. Germany will help Mr. Macron’s effort by increasing fiscal spending.
   Hard Brexit is a major problem. Take a case of BMW. BMW bought Rolls Royce, and Mini Car. They are mini-assembled in UK. After hard Brexit, that assembling is  taxed every stage. Then, BMW will not be competitive.
   Ms. May is zombi. She is politically weak. She cannot be a good negotiator.
One could pursue some scenario. If it does not work, you can have another option.That is, ask the public to vote again. There could be a second referendum. UK is a country which always has had problems. Referendum for Brexit. Scotland wish to be independent and remain in EU. Ireland has also a conflict. There could be another referendum.
    This was an incredibly fantastic meeting. We were so much impressed by the knowledge and experience of Mr. Wiesheu and his warm hospitality and kind care. After this wonderful session with him, we went back to hotel. In the evening we had a nice dinner at a cozy restaurant at the river side Main Nizza. Again we fully  enjoyed the typical German dish of meat,  sausages, cabbages, potatoes, beer and excellent German wines. This is the final German dinner in this trip.
   After the dinner, most of Sonjuku members continued to enjoy beer and also had nice time in night clubs. This must be a good and learning experience for them.
Day 8(July 22 Saturday)
  I enjoyed a  nice breakfast in an outdoor table of the hotel restaurant with Tomoya, and had some walk to take a look at a business district of Frankfurt, we left the hotel to go to Frankfurt AP. We left Frankfurt AP at 12:10 heading for Japan via NH204.

Economic Development and International Leadership : A Comparison of Germany and Japan

This paper is the manuscript for my speech which I will deliver in Berlin in the morning of July 19, 2017 for the audience of German-Japan Business Association. My presentation is a part of our program of visiting Germany by a group of Shimada sonjuku who visit Munich Berlin and Frankfurt for the period of July 16 through 23 to meet various people and see various places to learn about current situation of Germany. This trip was arranged by our friend, Dr. Franz Waldenberger, Director of German Institute for Japanese Studies. I would like to thank specially for his effort.

Economic Development and International Leadership: A Comparison of Germany and Japan
Haruo Shimada

Chairperson of Board of Trustees
Tokyo Metropolitan University
July 19, 2017
German-Japan Business Association
Berlin, Germany

Ⅰ.   Introduction
  It is my great honor and pleasure to have this special opportunity to share views and enjoy frank discussion with distinguished members of Berlin business community interested particularly in Japanese economy and German-Japan relationship.

     I visit Germany this time with some members of Shimada sonjuku, or literally translated Shimada village school, which organizes some 20 active and resourceful young business entrepreneurs for two year study program. We learn together histories, religions and cultures of major cultural zones of the world with a hope to equip themselves with relevant knowledge to become global business leaders. We make it a rule to visit a few countries in a year which are particularly interesting to understand the prospect of the world. We chose to visit Germany this time for this reason.

   Taking advantage of this opportunity I would like to thank particularly Dr. Franz Waldenberger, Director, German Institute for Japanese Studies, for his earnest support and careful and comprehensive arrangement to make our trip possible.

Ⅱ.   Historical Similarities and Differences

  1. Historical similarities

     Germany and Japan have many commonalities such as diligent people, industrial  state, strong family ties and so on. To single out perhaps the most important is our common historical experience of fighting in WWII, completely defeated, but reconstructed their economies remarkably, and are now facing many complex challenges in international community.

  2. Differences

(1) Defeat and reconstruction:

    Given this commonality, there are some important differences. After the defeat, Germany was governed directly by the four powers, the US, UK, France and Soviet  Russia. And consequently, the country was sub-divided in accordance with the  jurisdiction of these ruling powers. With a creep of the cold war, the division of the country between Western bloc with is governed by US, UK and France alliance,   and Eastern bloc governed by Soviet Russia grew increasingly sharp and rigid.   Disliking the Soviet way of control, many German citizens escaped from Eastern  bloc to Western bloc through Berlin. However, in August 1961, a wall was built in  Berlin which rigorously separates between the East and West making it impossible  to escape from the East to West until the fall of the Berlin wall in November 1989.
    Japan surrendered by accepting Potsdam declaration, and luckily was able to  reconstruct the country with the existence of Japanese government although it was  entirely controlled by SCAP, General Douglas A. MacArthur. Since almost all the  urban areas had been thoroughly destroyed by air raid, the economy was chaotic  and suffered from acute inflation. The US government sent economic advisors to  redesign and recover the economy. In order to suppress acute inflation, they forced  the government to adopt balanced budget which drove the economy into serious  depression. The economy eventually escaped from this pitfall thanks to a wind fall  demand due to Korean war in 1950.

(2) Economic Recovery and Reconstruction:

     Under the incredibly difficult conditions, German(West) economy started remarkable recovery. There were several helpful reasons: there remained  in many places workable industrial facilities,  economic aid by Marshall plan, and diligent German workforce. In contrast, the recovery of the East bloc was   much delayed largely because Soviet Russia’s merciless deprivation of remaining   productive capacity which was sent to Soviet.

     Japan achieved remarkable industrial recovery from 1950s in the wake of  Korean war. In addition to the boosting war demand, the 180 degree change of US strategy to deal with Japan from a possible enemy to an important ally in the face of rapidly growing cold war confrontation with the Soviet Russia. With the  strong support and aid, Japan developed rapidly industrial capacity. By the end of 1950s, Japan was equipped with the most advanced productive facilities in basic industries such as steel and shipbuilding. On this basis, Japan exhibited two decades of rapid economic growth which attracted international attention.

Ⅲ.   Postwar Economic Development

1.  Remarkable development of Germany and its problem

    (1) US pressure on exchange rate
     In 1960s West Germany became a growth center of Europe. Powerful manufacturing companies led vigorous development of German economy.  Disturbed by increasing trade and fiscal deficits, the US forcefully demanded Germany and Japan in mid-1980s to raise exchange rate. Unlike Japan, Germany kept its policy stance solidly and avoided erratic confusion.

   (2) Re-unification of Germany and the birth of EU
     In 1989, dramatic mass movement took place in Eastern Europe to criticize the pressive governments and go beyond borders. That wave reached East Germany in November and people broken the Berlin wall. Taking advantage of this epochal change of world history, Chancellor Helmut JM Kohl dared to propose a long desired plan of re-unification of Germany. The reunification was admitted by European countries, most notably France, together with a mega-transformation of Europe, namely, the formation of EU. The reunified Germany pledged that it will belong to EU and contribute to the development of EU.

    (3) Schroeder reform: Agenda 2010
      While Germany has grown to be a major economic power, it began to suffer in 1990s a social symptom of what may be called “German disease.” Workers enjoy high income, long vacation, good pensions and well protected employment security, German economy began to suffer from rigid labor market and high labor cost. Germany was often called “sick man” of Europe. Chancellor Gerhard Schroeder who succeeded office from Chancellor Kohl challenged this deep-rooted structural defect courageously. His challenge is known as “Agenda 2010.”  He altered dramatically rigid rules of employment to flexible and efficient system,  for example, shortened eligible period to receive unemployment benefits, a new scheme to reduce pension payments by raising eligible age to receive benefits and fixed term employment etc. These reforms had been proposed in the past by CDU and business friendly political leaders but not realized. It is amazing that Mr.  Schroeder, the head of SPD, the social democratic party, dared to propose such policy package which would strengthen business competitiveness by making labor cost burden more flexible, and realized such reforms. While Mr.Schroeder was unpopular because of such reforms, German economy revived thanks to such  flexible system of labor market and welfare payment.
   2.  Remarkable development of Japan and the lost decades

    (1) Industrial development strategies of the government and business
       The postwar rapid economic growth, which was admired as “Japan’s economic miracle” has been promoted by industrial development strategies of the government as well as of businesses. The government constructed a  hierarchical structure of financial system by which the scarce financial resources are effectively mobilized to export oriented industries, and an industrial structure which constitutes an effective input-output structure to by combining basic input industries to those of final outputs, thereby empowering export competitiveness.
       Businesses developed intra-company systems of training, career development, and quality control. While they learned QC from the US, Japanese companies developed QC further by creating quality control circles utilizing the merit of team work at the workshop. Large firms developed multi-tier supply chains organizing small and medium sized companies. All this helped Japanese industries develop export competitiveness.

   (2) US pressure and the Plaza accord
     Faced with increasing competitive pressure from trading partners particularly of Germany and Japan, the US government represented by Treasurer Mr.James Baker urged those countries to raise exchange rates. They somehow agreed to the  US demand in the form of the Plaza accord in 1985. In the wake of the accord, Mr.Baker further requested Germany and Japan to expand their domestic demand to reduce their trade surplus to the US. Germany responded to it following its basic policy stance. Japan swallowed the US demand. However, worried about the depressive effect on its export revenue by higher exchange rate, Japanese government adopted drastic expansionary policy by both fiscal and financial  means.

(3) The bubble and the lost two decades
      Since Japan adopted a much delayed policy to dump the bubble which had emerged by the preceding expansionary policy, Japanese economy started  to suffer a long stagnation, which later has been called as the lost two decades which lasted until Abe administration launched “Abenomics” from 2013.

Ⅳ.  Current Economic Performance: Germany and Japan

  1.  Germany:

    (1) Remarkable growth of German economy
       German economy has been enjoying a powerful growth recently, particularly since around 2010. Germany is currently seen as Europe’s power center. While the economic policies of Ms.Angela Merkel’s CDU government is certainly  appreciated for the success, much of the success should also be credited to the courageous and thorough reform conducted by Chancellor Gerhard  Schroeder. By the name of his reform, “Agenda 2010,” Mr.Schroeder meant  that the effects of the reform would be real by 2010. Thanks to his drastic reform  to increase labor market and welfare flexibility, German economy revived its vigor since around 2010, 5 year after Mr.Schroeder’s stepping down from the  office. 

   (2) Advantages of expanded EU and joining EURO economy
       Looking more broadly and with a longer perspective, the formation of EU and its development to include many central and eastern European countries as its members, and constructing and joining the Euro zone economy contributed importantly to facilitate powerful development of German economy. By utilizing relatively low wage members of the expanded EU as Germany’s supportive  production basis, and taking advantage of the common currency EURO which  should be much lower than “would be Mark,”German economy secured strategic advantages for remarkable development even with the heavy economic burden of  reunification of the country.  Noteworthy is that these great strategies were adopted and carefully promoted by the courageous and sensible political leadership of Germany.

  (3) Two speed economy and widening differentials.
      Recent performance of German economy is outstanding. Growth hit a five year high in 2016. Exports are flourishing which resulted in a biggest trade surplus in the postwar era. Unemployment is lowest since reunification. Chancellor  Angela Merkel described the situation saying, “you have never lived as good.” This is, however, a shining aspect of booming sectors of the economy. At the  other end, low wage workers are increasing significantly who have only sub-standard employment conditions. Great influx of refugees and immigrants since particularly from 2014 largely from middle east amplify worries, anxieties or even fears of less protected workers in the society, which result in instability and disintegration of the society possibly having important implications for politics of Germany.
2.   Japan:  Abenomics and its performance

    (1) Attempt to get rid of deflationary economy
        Having been annoyed by the prolonged deflation without any substantive growth for more than two decades, the new administration led by Mr.Shinzo Abe was organized toward the end to 2012. The principal objective of the new cabinet was to get rid of chronic deflation. To get out of the spell of deflation and to initiate substantive growth of the economy, Abe administration launched a new policy package which later became known as “Abenomics.”

   (2) Launch of Abenomics: three arrows
        Abenomics consists of three arrows: (1) arrow of monetary policy, (2) arrow of fiscal policy and (3) arrow of growth strategy. These arrows have been launched one after another successively. 
     (3) Mixed success of the first arrow: monetary policy
         The gist of the first arrow, the monetary policy, has been that BoJ increases the base money as much as 130 trillion yen within 2 years so that the stock of base money would increase to 270 trillion. With this “extra-dimensional”easing, BoJ governor Mr.Haruhiko Kuroda promised to increase prices by 2 percent within 2 years. Incidentally, the stock was planned to increase up to 350 trillion in the subsequent year, and is now expected to reach to 500 trillion, just as much as the size of GDP.
        Expecting  a huge increase of base money, the yen devalued by 20% in a few months, which in turn drove up stock prices by 80% within half a year. Namely, stock prices increased from 8000 yen in December 2012 to 15000yen in May 2013, which has increased less rapidly to reach the current level of 20000 yen.  Thanks to a large increase of stock prices, corporate profits increased sizably  which changed the business climate visibly. In this respect, the first arrow can  be evaluated as an appreciable success.  On the other hand, the genuine objective of this monetary policy, namely by increasing prices by 2 percent alter price expectations of people from deflationary to inflationary was not achieved as expected. Except for the first half a year, price increases have been negligible or stagnant until recently. While prices began increasing only modestly recently, its pace is far from what was expected by the “extra-dimensional” easing.  Thus, the first arrow as a whole may not be evaluated as “success.”

    (4) Active fiscal policy: the second arrow.
          Abe administration declared to adopt active fiscal policy, namely, the government does not hesitate to resort to large spending whenever necessary. In addition to unprecedented large amount of regular annual budget, the  government also injected extra-ordinary supplementary budgets almost once a year, for example, to help reconstruct devastated northern region by earthquake or to offset the negative reaction in the wake of an increase of consumption tax  etc. Although such active fiscal spending has been useful to prevent the economy from down swing, it made the government difficult to restore fiscal  balance by 2020, the international commitment. Thus, the second arrow may not be evaluated positively.   
    (5) Growth strategy by structural reform, the third arrow.
          The most important of Abenomics is growth strategy because Abenomics after all aims at achieving steady growth of the economy in the long-run. Abe  administration has been issuing a package of growth strategy every year since 2013. The 2013 package was a set of largely wishful ideas. The 2014  package, in contrast,  focussed seriously on many critical issues of structural reform such as agriculture and labor practices. However, the reform met  strenuous resistance so that unable to reach the core of the issues. The 2015 package was discouraging because it is abstract and not substantive for some reason.
           May it be the result of this or not, the overall performance of the economy has been rather disappointing: growth has been minimal and real wages have  been declining since shortly after the onset of Abe administration until very recently. Growth strategy of Abenomics, therefore, may not be viewed as success.
    (6) The second stage of Abenomics: inclusive growth for all
        Since from the end of 2015, Abe administration began to advocate a second stage of three arrows under the new umbrella slogan of “100 million all active strategy.” The new first arrow is strong economy which attains 600 trillion yen GDP by 2020. The second arrow is a hopeful society by which much more young mothers can work while leaving their kids at nursery. The third arrow is  a secured society where the aged can work more with greater care services for their helpless old family members. All this means is to enrich social infra-structure to help increase labor supplies in order to increase the growth potential of the economy, which has been dwarfed by the declining trend of population. It may be too early to judge success or failure of this new strategy.

    (7)  Labor shortage but sluggish wage increases.
        The growth performance of Japanese economy has been improved modestly since about a year ago in a conducive environment of global economy. The annual average grew to low 1%, which is considerably higher than the estimated growth potential. The labor market is extremely tight. Strangely, however, wage increases have been incredibly sluggish, perhaps reflecting increasingly polarized labor market structure with full-time high payed workers  vs. increasing proportion of part-time and low wage earners.
    (8)  Mushrooming government debt and possible fatal bankruptcy.
         A serious risk is sneaking into Japanese economy in a medium term. It is the issue of mushrooming government debt and a risk of possible fatal bankruptcy of the economy as its consequence. Currently, the accumulated  government debt is 240% of GDP, the ratio much worse than the worst EU member such as Greece. The aggregate net financial assets of households  has ceased to increase while the total government debt has been increasing. Within 10 to 12 years, the government debt will be greater than the aggregate household net financial assets. 
         Such an economy is very vulnerable to any external shocks which trigger catastrophe. Once triggered, bond prices fall down, interest rates jump up, which makes the government difficult to organize budget, difficult for business to borrow and invest, leading to catastrophe of the economy. The government  debt has been mushrooming due largely to rapid increase of social security  expenditures since mid-1990s. The most effective way to minimize the catastrophic risk is to decrease the social costs of aging. Abe administration  is timid to address itself forthrightly to this serious issue because it seems to recognize itself as very susceptible and vulnerable to the demand of aged  voters like many other countries. We need to learn from the wisdom of German  courageous Chancellor Gerhart Schroeder.

Ⅴ.    International Leadership: Issues and Challenges

   1.  Can Germany lead European integration?

     (1) Greece:
        Germany faces many challenges in international relations. Debt crisis of Greece has been a headache for Eurozone for the last few years and still is.  Germany has worked hard to facilitate financial arrangement with other member countries, ECB and IMF to lessen consequent damages to financial organizations,  but the fundamental debt problem of Greece still remains serious. The problem  potentially can develop to collapse of Euro zone.  The new French president, Mr. Emmanuel Macron’s proposal for reforming Euro system addresses on this issue. The world is watching how Chancellor Angela Merkel reacts to his proposal, and    offers her own positive plan for the zone.

    (2) Brexit:
         Brexit is another serious challenge. Prime Minister ○May declared “hard Brexit,” but at the same time requires Ms.Merkel and other EU leaders to provide special treatment to UK considering its unique importance to the  rest of EU. Many, many questions are yet to be negotiated and resolved including the issue of break away payment. Since the way Brexit is treated  by EU and its economic consequences are the matter of serious concern for the global community, here again the judgement and leadership of Mr.Merkel is keenly watched.

     (3) Eurosceptism:
         Not only UK, but also in many other EU countries such as Austria, Poland, Italy, Netherlands, Hungary, France and even Germany, Eurosceptic and  nationalistic political parties and social movements have aroused rapidly partly reflecting popular resentment and fear against dramatic increase of refugee immigration and terrorism. This is a serious challenge against the basic motives for integration and cohesion of EU itself. The role of Germany, which has  founded and defended EU working with France is watched seriously by pro-EU countries and people in international community.

      (4) Trump:
         In addition, Mr. Donald Trump has been posing problems against Germany and EU. He denounces Germany for imposing intolerable trade deficit to the US and paying much less than it should to contribute to NATO. Without knowing the history and understanding the roles of EU for global economic development and security, he dismisses its importance. Perhaps, disgusted       with his outrageous attitude and ultra self-centered assertions at G7 Summit held in Taormina, Sicily, Ms. Merkel said a few days afterwards in a beer tent in Munich that “the times we can fully count on others are over.” “Europeans must really take our destiny into our own hands.” This statement called forth broad repercussions in international community.

    (5) Leadership for  European integration:
         The critical question is whether Germany can and will take leadership in Europe. Whether it can take leadership, the answer is obviously yes. Germany  is certainly capable both economically and politically, leadership in Europe. Whether it is willing to take leadership is another question.  Historically, Germany has been very cautious on this question for various  reasons, particularly, of historical liability of WWII. Under this constraint,  however, Germany has worked well to integrate European community working patiently with other partners such as France.  However, given the current extra-ordinary happenings to alter political alignment of the world, perhaps, it may be time for Germany to think more positively to take leadership, recognizing that it will require Germany to bear due burdens as a European and necessarily a global leader.

   2.   Can Japan lead regional cooperation?

     (1) Trump, North Korea, China, South Korea
          Mr. Trump kept criticizing during the presidential campaign that Japan is free-riding on security arrangement with the US saying that if Japan does not pay enough, the US would withdraw its troop from Japan. He also declared that the US will pull out of TPP(Trans Pacific Partnership) on the first day in  his office. Mr. Trump’s accusation against Japan’s free-riding was groundless because  Japan pays 73%, the highest among US allies,  of staying cost of US military on Japan’s territory. General James Mattis, Defense secretary, quickly corrected the wrong image faked by Mr.Trump when he visited Japan as early as in   February. General Mattie even praised Japan’s burden sharing as “the model”  for other allies.

    (2) TPP:
         On the question of TPP, Mr.Trump ordered to pull out on his first day in the office. He did it inspite of the fact that it was his predecessor, president Barack, who solicited Japan to join. Japan now is seeking to start TPP working with 10  other countries without the US. Instead of TPP, the US wishes to have a bilateral trade agreement with Japan. Since TPP is the most advanced agreement of trade rules encompassing not only trade of goods but also a wide range of items including services, investments, government interference and intellectual property rights. The content of Japan-US bilateral agreement will in large part have to depend upon TPP agreements.

    (3) North Korea problem:
        Continuous and escalated experiments of long-range missiles and nuclear  weapons by North Korea led by Kim Jon-Un began to give substantive threats to the US. Mr.Trump reacts with stern will not hesitating to resort to military  means to denuclearize North Korea. After his summit talk with Xi Jinping,  President of China, US requires China to put pressure against North Korea to refrain from such dangerous and provocative actions. In return, Mr.Trump dropped all accusations he had been directing loudly against China, as a “deal.” Some argue that pre-emptive attack could be effective to make North Korea powerless. This argument is extremely reckless and unrealistic because North Korea would certainly destroy Seoul, Tokyo and US base in Okinawa quickly before they are fatally attacked. What is needed is close cooperation of China,  US, Japan and South Korea to persuade North Korea. However, North Korea so far has shown no sign to listen to such voices, and contrary kept developing catastrophic weaponry earnestly. At the end of the day, North Korea may well be equipped with the most advanced and powerful destructive weapons. To protect from such threats, countries in this region including Japan may have to arm     themselves with nuclear weapons.

   (4) China :
      While China and Japan are closely tied together in trade and investment, political relations have rarely been close. In recent years, particularly after the  incident of Senkaku islands, the relationship has been tense and often hostile.  China has been accusingly Japan more fundamentally as having wrong  interpretation and consciousness of history. Their criticism has a certain    elements of truth, although their propaganda and education often exaggerate historical incident too much. More regrettable, in my judgement, is that  Japan has not educated its public the basic facts of the relationship between  Japan and China and other Asian countries during the war ridden period of  early half of the 20th century. Without sufficient education of modern history     of this era, we could not cultivate reasonable mutual relations among neighbors.

   (4) South Korea
        Korea has been continuously hostile and antagonistic against Japan throughout the postwar era except a few cooperative instances at the level of government and business. With newly elected president, Mr. Moon Jae-in, an alleged Japan critique, the relationship will be unfortunately more hostile.
         This makes a sharp and curious contrast with German relations with Israel and some European countries. Japan has annexed Korea for about half a century after Japan-Russia war. With this experience, Korea hated Japan even since and and has kept been accused intolerably as exemplified by the case of “comfort women.”  In contrast, Nazis killed more than 6 million helpless Jews in Europe and destructed and destroyed many parts of neighboring countries during WWII,  but Germany has successfully cultivated mutually understandable relations with them. Japan may well need to learn wisdom from Germany to handle this issue.
   (5) Regional leadership issue:
       The problem and challenge Japan is faced on this question is quite common with Germany. Because of historical liability of wars, Japan has been very cautious about the regional leadership. While Japan has much industrial, technological, educational, cultural capabilities to contribute to the region, Japan is severely limited politically. So far, Japan has earnestly contributed in     the form of official development aid using its capability, but refrained from any  political leadership.
         The Japan-US defense alliance, which Japan has been totally reliant for more than 60 years since the beginning of the cold war, adds another factor of dis-trust from countries like China and its regional allies. Japan is often accused for not clarifying war responsibility. Unlike the case of Germany, which was led by Adolf Hitler to wage the war, Japan was crowned by Emperor Hirohito who officially headed the country but has had very limited leadership so that the  issue of war responsibility cannot be clarified as evidently as in the case of  Germany. Besides, it was General Douglas MacArthur, the SCAP, who protected the emperor system as an instrument to administer his occupation, which makes it difficult to clarify the issue of war responsibility.

Ⅵ.    Lessons and  Mutual Learning

   1.  Lessons for Germany

       Let me point to some lessons for Germany in the current and foreseeable  future which emerge in my mind by comparing experiences of the Germany and Japan.

(1)  Leadership to strengthen EU integration and stabilize EURO zone
      Given various events which took place in Europe recently such as fiscal crisis in Greece, Brexit, drastic influx of refugees and immigrants from Middle East, uprising of nationalistic political parties and movements in many European  countries, and also antagonistic attitude of president Trump against EU, EU seems to be suffering from instability and possibility of disintegration. It seems that it is primarily Germany which can and should take leadership to work together with other European countries to deepen mutual understanding and cooperation for the direction of strengthening European integration.
        Of many tasks and challenges which Germany and other cooperative European countries are faced to work for this direction, I would like to point to the problems of Greece and Brexit. Problem of Greece seems to be more of fiscal than financial. Although the problem was created largely by the lack of fiscal discipline of Greece, it seems to be meaningful and useful for lending  side as led by Germany gives some fiscal leeway such as lessening Greece fiscal burden for a certain limited period so that they can reform their system which they have been living with for a long time thanking the tentative rescue  of the lending side led by Germany.
       Brexit is needless to say the problem which UK is fully responsible.  It is hard for outsiders like us, though, to understand where UK is heading at by  sticking to the principle of hard Brexit as Ms.Theresa May advocates and  also claiming to create an entirely different set of relations with other countries and regions including EU. UK seems to be trapped in an unfortunate confusion.  We hope EU led by Germany and UK facilitate some new format to promote discussion with more open and mutually deeper understanding to find a constructive breakthrough.

(2) Construct fiscal federation or Euro bond.
        It is recognized by many experts that Euro zone is structured in a hampered way, meaning that the economic zone with integrated single currency but without integrated fiscal relations. Given this hampered structure, it is basically unavoidable that the system cannot have self-reinforcing momentum to keep strengthening the integration of the system as in a single country or a federal system.
        The proposal of new French president M. Emanuel Macron is well taken to  find a fresh breakthrough to redesign the precious system of Euro zone to foster self-reinforcing momentum to keep integrating the system. Currently, M.Macron  is reportedly suggesting to create a new Euro bond or design a quasi federal system. Germany has a unique and historical role to work together with  France to design and construct a more robust Euro system for Euro members  as well as the rest of the world.

   2.  Lessons for Japan

     (1) Learn German fiscal discipline
         Japan is suffering from by far the largest fiscal debt relative to major economies in the world. The outstanding government fiscal debt is as  much as 230% of GDP, which is much higher than that of Greece.
         In contrast, Germany has been reducing fiscal debt remarkably in recent years. From 2009 to 2014, Germany has successfully reduced federal fiscal debt as much as 96%. Germany is steadily improving its fiscal balance to satisfy  Maastricht agreement, namely, confining the debt ratio to GDP less than 60%,  the only country in EU.
         Extra-ordinarily large debt of Japanese government may well suffer from a fatal fiscal collapse in the sense of drastic reduction of JGB prices and  hence abrupt sharp increase of interest rates which makes it difficult for the  government to organize annual budget and for businesses to finance themselves.  Given the ever increasing abnormal debt burden, the fiscal condition is vulnerable to any major shocks to trigger the collapse of the economy.
          Germany has attained this remarkable improvement in its fiscal balance by successfully increasing its economic growth rate in recent years which increased tax revenues in spite that tax rates themselves for businesses and  individuals have been reduced. Germany achieved such improvements during the last decade by committing firmly to the fiscal discipline by even stipulating in its Basic Law to prohibit public borrowing greater than 0.35% of GDP. Japan needs to learn much from the wisdom and the determination to restore and  maintain healthy fiscal balance of the country.

       (2) Learn from Schroeder reform: Agenda 2010
           Although Schroeder reform seems to be not very popular in the current German society where people are getting increasingly nervous about increases of low wage workers and widening income differentials among social strata, it is undeniable that his reform has been a prime force to change the rigid social structure of Germany and gave economic flexibility for German  businesses to regain their vigor and competitiveness.
             Indeed, this is the type of structural reform which Japan badly needs to promote. Prime minister Shinzo Abe has been advocating to promote  structural change as a means to materialize the growth strategy of  “Abenomics.” However, labor reform to increase flexibility of payment and employment has not attained substantive progress, and Abe government has failed to reform public pension system to reduce the fiscal burden by means of, say, increasing the eligible age to receive benefits which Chancellor Schroeder forcefully attained. Japan needs to learn from Germany the wisdom, courage and the determination to execute necessary reforms.
       (3)  Learn from German education of history of wars with neighbors.
           Since 1939 to 1945, Germany led by the Nazis invaded many neighboring European countries, destructed the economy and society and killed many  people. German massacre of more than 6 million Jews is the most dreadful and shameful deed which should be remembered eternally in human history as a lesson not to ever be repeated again.
           After the war, German government and schools kept teaching young people of this sad experience. German attitude to share historical facts open with  both German and other peoples acquired some understanding among the  countries and peoples who were victimized by the Nazis aggression. With this effort, Germany somehow secured understanding by European partners and  even Israel to construct new cooperative relationship such as EU and Euro zone.
           Compared with such German experience, Japan has not successfully gained good understanding from some neighboring countries as China and Korea.  They keep criticizing that Japan has not learned from the history, and has not apologized the sin Japan has committed during the war. When it comes  to the question of war responsibility, German and Japanese experiences can  not be compared easily. It is because Adolf Hitler and Japanese Emperor are  totally incomparable even though they are formally top leaders. Hitler is a  cruel and greedy dictator who obviously and substantively ordered his military to invade and destroy victimized countries. Emperor is a highly respected holly leader of the nation, and his life and rein has been saved and protected by  the supreme commander of allied forces himself, General Douglas MacArther.
           However different the question of war responsibility of the top leader of  Germany and Japan, an undeniable fact is that Japan has not taught well to the people about Japan’s wars against other countries after the war even until  today. In contrast, in China and Korea, aggressions and destructions by Japanese military during the war are in many cases are taught in schools and broadcasted by media broadly and persistently in much exaggerated and distorted ways.
            Although there have been ample research results compiled by serious Japanese scholars and experts on facts of war, very little of such knowledge  and findings is shared by the public because of absence of serious education  in the postwar era. This non symmetry is a pity. Japan needs to learn from Germany at least to educate and keep educating the public about the facts of  wars in Japanese contemporary history particularly with neighboring countries.

Sonjuku Trip to Israel: May 4 to 9, 2017.

   A dozen members of Shimada sonjuku and I visited Israel from May 4 to 9, 2017. It was a wonderful trip. We enjoyed the trip very much and learned a lot by seeing Israel and talking to Israel people during our visit.

Why Israel?
   First, let me begin the report of this trip by telling why we chose Israel to visit. Israel is an unique country which is involved with, I would say, more than a half of the problems of the world during its long history encompassing both the ancient and the modern Israel of today. Its experience may be said to be the warp that weaves the cloth of world history. Also, Jerusalem, the current capitol of Israel, provides the space for Jewish, Islam, and Christian religions to coexist within a narrow area with each long historical courses. Given these features, Israel is a very important subject of study for Shimada sonjuku.
   Another reason is that while sonjuku class 1 visited Israel, class 2 was unable to visit largely because Israel was involved in conflicts with surrounding areas such as Gaza during the period of class 2. Since Israel is important for sonjuku studies, we meant for sonjuku class 3 should visit Israel this year when Israel is not involved with violent conflict with surrounding areas as in the recent past.
Planning of the Trip
   This trip was made possible largely by the earnest solicitation and kind arrangement by Mr. and Mrs. Elchannan Harel. Mr.Harel is an outstanding business leader and renowned intellectual leader who has been contributing immensely to promote mutual understanding and interactions between Israel and Japan, and because of his contribution he was granted a high medal from Japanese Emperor. He has a marvelous family. His son has studied in Japan more than a  decade ago in Keio University in my seminar. Since then we have had close relations with the Harel family.
   The sonjuku class 3, which studies the two year course from Sept 2016 up to August 2018, started to prepare for this trip several months ago. The planning was largely done by Mr. Elchanan Harel working with Israel travel company, “Dirigo, “ and a Japanese concierge company, “Ypsilon,” which is run by Mr. Yu Yamada, who is the member of Shimada sonjuku, class one. Mr. Yamada meant to join this trip, but unfortunately, because of mishandling of his ticket booking, he was unable to join this time, which was a pity for all of us.
    We planned the date of the trip from May 4 to 9, largely because of the consideration of Mr. Harel that we can minimize the loss of working days for son juku participants by using as much as possible Japan’s May holiday season. The participants have been finalized to 14 including two non-sonjuku participants and myself.
The Itinerary of the Trip
   We left Tokyo Narita AP in late evening of May 4, 2017. Arrived at Ben Gurion AP in early morning of May 5. The flight from Tokyo, Istanbul and to Telaviv was as long as 19 hours from door to door. The flight by Turkey Air was comfortable with good service and facility. Upon arrival, we were escorted by the special service which was prepared by the request of Mr. Harel to make the process of entering the country smooth, which was very helpful.
May 5 Friday
   On May 5, immediately after arrival, we started the program of visiting important and interesting sites. We were welcomed by an Israel tour guide Mr. Nimrod Besor, who spoke good Japanese and has great knowledge. Our bus, a medium size black color Benz, drove up North to Haifa. On the way we passed by the statute of Mr. Theodor Herzl , who advocated Zionism at the end of 19th century. On the way we visited a detainees camp at the shore, Camp Atlit, and also visited Bahai Hq in Israel and its beautiful garden. We then visited Caesaria national park and took lunch at a seaside restaurant, and went back to Telaviv. We took a brief rest at Mendeli Street Hotel, which is a nice cozy boutique hotel in the midst of residential area. Then from 19:30 we joined Mr. and Mrs. Elchanan Harel at a busy but cozy outdoor restaurant, Vicky Cristina, to enjoy reunion and conversation. This was a long day.
May 6, Saturday
   On May 6, we left the hotel early at 7 O’clock. We drove to the south heading at  Dead sea. We chose to visit this sightseeing area on this day because it was Saturday, namely the Jewish Sabbath day, when all business activities are ceased.  On the way, we visited Qumran national park which was established to cherish the site where the oldest copy of the Bible was found, visited Masada fortress and Herods place to watch and learn of the sad history of the final days of ancient Israel, and had a late lunch at Hanokdim Village where we  enjoyed watching and enjoyed dancing with a Bedwin belly dancer, and ride on Camels. In the evening we arrived at hotel Isrotel Dead Sea Resort and Spa, which was located at the shore of the Dead Sea. Our members enjoyed floating on the Dead sea, mud wrap treatment, and late dinner. 
May 7, Sunday
  On May 7, we left the hotel early at 7 O’clock. We drove to Jerusalem. We visited
Yad Va ‘Shem holocaust Museum, visited the new city and Manor Haknesset near the
building of National Assembly, took lunch at “Azura” restaurant, which is popular as
a local commoners’ dining in the market place. Tried to travel to Olivet Mountain in order to enjoy a bird’s eye view of the old city. But the street was closed by the police temporarily perhaps because it was the time when German president was visiting Jerusalem. We went up to the hill top nearby to take an alternative overview of the old city. Toward the evening we went to visit the Western Wall, and on to walk through the Western Wall Tunnels. We drove to Tel Aviv, and went to Kitchen Market restaurant where Mr. Elchanan Harel was kindly waiting for us to enjoy a nice dinner and enjoy conversation. We arrived at Mendeli Street Hotel nearly mid-night. This was a long day too.
May 8, Monday
   On May 8, we left the hotel shortly before 8 O’clock. We visited in the morning WEDEA Center for Innovation, the College of Management Academic Studies(COMAS) where Mr. Harel served as a board member. We enjoyed a good and rich program organized by professor Jacoby Volk, Carmella and Mr. Moti Shatner. They gave us presentations on interesting topics such as “the Online Credit Revolution” by Mr. Shatner, “the Future of Bitcoin and Blockchain” by Mr. Ruschin, Gad, “Robo-Advisors and and Mirror Trading” by Mr. Eyal, Gil, and presentations by student groups who are studying in the Wedea’s Entrepreneurship Program and the Start-up Nation Eco System. After having light lunch, we went to visit Weizmann Institute of Science in Rehovot. This is the glorious and very active science and technology innovation center of Israel named after the honor of the first president of the Israel Republic, Dr. Chaim Weizmann. Mr.Elchanan Harel kindly guided us of the tour of the Institute. Incidentally, father of Mr. Harel designed a large part of the institute architecture. After the tour we spent sometime in the business center of Tel Aviv to enjoy brief town walk and shopping. We left Ben Gurion AP at 21:45 for Japan through Istanbul AP. We arrived at Tokyo Narita International AP at 19:30 on May 9.
   On this short but dense trip, we encountered many interesting scenes and impressed by and learned many things. Let me make some notes in what follows on  some of such experiences and observations.
Israel Population and their Diversity
   Israel is a country of rather narrow land as wide as Shikoku island of Japan which is inhabited by some 8 million population of highly heterogeneous people in terms of racial and religious backgrounds as well as regional backgrounds as they or their ancestors come from.  The population consists of  77% of Jews, 20% of Moslem, and 3% of Christians. The country developed since the declaration of its independence in 1948 by incorporating Jewish and other people who came from various parts of the world as many as more than 100 countries. 
   Those who came from northern areas such as Russia, Poland and many European countries tend to look taller and white skin and those from the south such as northern Africa and Arabian countries look with browny skin and relatively short. With all these heterogeneous backgrounds and outlooks, as far as they recognize themselves Israel nationals certified by the country, they are Israelis.
   Among them, there are some devout Jewish people, who is identified in outlook usually with wearing black suits and black hat and with long black beard and always put Kipa on their heads. These people now occupy some 15 % of the total population and is gradually increasing. Particularly in Jerusalem, their proportion is getting as high as 40% recently. They are faithful observants of Judaism precepts. They spend their life in rigorous learning of Judaism teachings. They rigorously preserve Kosher precepts of food. Since they do not earn their living because they devote all their daily life in learning Judaism teachings, the Israel government provides subsidies to support their life. 
   This spending must be a significant portion of the government expenditure. These people are firm believers of “Messiah” belief. They believe that some day the Messiah will save Jewish. This belief means that the current Israel is not the eventual  form of Israel because Jewish people still have to wait for the Messiah to save them. This must be a very important religious contradiction of the definition of Israel as a country.
Food, Life-Style and Land-Scape
   On our way of traveling, we happened to talk about the menu of breakfast of the hotel we stayed with our tour guide, Mr. Besor. We pointed to the fact that there were no meat on the meal shelf. Mr.Besor started a long story of explaining the habit of food taking which is much constraint by the teaching of the Bible. For example, it is not allowed to eat together parent and kid, say, chicken and egg for devout Jedaism believers. For not much devout religious Israelis like himself, this teaching is not so much restraining. He in fact likes to eat a popular Japanese dish Oyako-don, a rice bowl topped with boiled chicken meat and egg. Since at an ordinary dining room or restaurant milk is served at breakfast. This is the reason why meat of a cattle is not provided there, while at dinners meat is supplied because milk is not supplied together. 
   Likewise, there are many rigorous rules to regulate the kinds of food you can eat. For instance, there are severe restrictions on the type of animal whose meat you can eat. For example, when you eat meat, you can eat meat of such animals who do ruminate, and also whose foot nail is separable. According to this rule, you can eat cow but cannot eat horse.
   We talked about the practice of not working on the rest day, which is determined religiously on Saturday. To put it more precisely, they stop working after identifying three stars in the sky in the evening of Friday until they find three stars in the evening of Saturday. During this full one day rest in a week, most people stop working. Therefore, on the rest day most buses, trains and commuting airplanes are not available. Some hostile countries surrounding Israel attacked Israel taking advantage of this practice of the rest day at the time of the second middle-east war.
   Within a few days, we drove a round trip of much of the Israel land starting from Tel Aviv to up north to Haifa and also down to the south to the Dead Sea area and finally came back to Tel Aviv. This implies that we drove through much of north to south areas of Israel. We found that to the north of Jerusalem much of the surface of the land is covered by greens either of trees or of grass or vegetables. To the south of Jerusalem, to the contrary, land is extremely dry and mostly desert.  Since Israel as a whole is a land where rainfall is extremely limited, it is amazing that a large northern part of Israel is covered by green trees, grass and vegetables. 
   This is made possible and supported by the splendid invention and development of the agricultural technology, ”A drip irrigation.” This technology can minimize the amount of water to be siphoned by the plant and yet maximizes the growth potential of the plant by its extremely efficient use of water. This technology has not only helped Israel dry soil covered by green plants but also help such dry countries to grow plants by being exported.
   The land of Israel is quite hilly. The location of Jerusalem is some 800m above the sea level, while the Dead Sea is more than 400m lower than the sea level. Water of rail falls in Jerusalem area gradually runs to lower areas. This flow of water has helped such isolated fortress as Masada, which I will discuss more later, obtain and reserve the water to support the life of soldiers and their families on the top of dry rocky hill.
   On the way from Tel Aviv to Dead Sea, we drove often by walls and fences which are spanned from the north down to the south of Israel land to divide the areas lived by  the Jews and those for Palestines. Since modern Israel was created in the Palestine area where Palestines have been living for years. The establishment of modern Israel in this area almost automatically gave rise to creation of refugees living in camps, and accelerated bitter antagonism and confrontation between them and Israel. Since then there have been many attempts of terrorism by Palestine radicals and their comrades.
   The wall was built around the beginning of 21st century extending for a long distance from the north down to the south separating the area of Jewish living from where many Palestines are living for the purpose of protecting Israel population from such horror of terrorism. In the area where population density is his such as in the neighborhood of Jerusalem, the wall is as tall as 20m made of concrete, whereas the wall is often low fences in the area where population density is sparse such as desert. The scene of such walls remind us of painful and difficult issues Israelis and their neighbors are faced.
Start-up Nation and a COMAS Seminar
 Israel is known in the world as “start-up nation”by which it is meant that Israel people, particularly of young and creative people, start us their businesses most actively and vigorously than any other major nations of the world. The expression “start-up nation” became widely known in the world by an eye-opening book entitled “Start-up Nation: The Story of Israel Economic Miracle” written by Dan Señor and Saul Singer published by Council of Foreign Relations in 2011. 
   To illustrate what the start-up nation means, let me quote some of the relevant date edited by Mr.Miyauchi, Makoto, who was the member of class 1 of sonjuku and visited Israel four years ago. He was so much impressed by Israel and kept learning about Israel while managing his own company “B-Lot”, in the real estate finance business. To help the sonjuku members of class 3 learn efficiently about start-up aspect of Israel, he kindly prepared the concise data set. Therefore let me quote some of his data to  show briefly Israel’s outstanding features of start-up nation.
  Start-up companies have amounted to 4000 in a country of only 8.5million population. The start-ups relative the size of population implies that one company starts up for 1844 population, which is the highest ratio among countries in the world. Tel Aviv is  ranked 5th in the world in terms of start-up ecosystem following Silicon Valley, NY, LA and Boston. Israel is often called “the Second Silicon Valley” of the world.
  Strength of Israel high-tech companies is found particularly in such areas as cyber security, water technology, new media and internet, health and life science and technology, financial technology and automotive industry. Some 300 global high-tech companies locate R&D centers in Israel such as Google, IBM, Microsoft, Intel, Philips, Siemens, GM, Apple etc. As we have driven along the main street heading at Haifa on May 5, we have seen from the window of the bus many offices of these companies located at the side of the street.
  In planning our trip to Israel,  Mr. Elchanan Harel kindly thought of an idea that we will have an opportunity to meet and discuss young people who are working aiming at starting up companies. Mr.Harel consulted with professor Carmella Jacoby Volk, vice president, innovation and interdisciplinary development, Coleman college and Weed Institute, COMAS academic studies. Incidentally, COMAS stands for college of Management and academic studies, which is a large business school located in Tel Aviv. She agreed with Mr.Harel and kindly proposed a one-day workshop for Shimada sonjuku.
   The workshop begins in the morning by the opening lecture of professor Carmella Jacoby-Volk, which is followed by lecture of  Mr. Moti Shatter, head of Wedea Finch Accelerator. After the lunch, Mr. Gil Eyal, president of Tradency gives a lecture on the recent experience of his company, Traddency, which is followed by the presentation of cases of venture start-up by students supervised by Mr. Moti Shatter.
   It was a bright and shining morning of the final day of our visit to Israel, we arrived at the campus of COMAS in the morning. It was a cozy and nice campus. Prof. Camellia kindly welcomed us at the gate. Soon afterwards, she gave a well-prepared lectures on  Israel venture companies, particularly, the mindset of ventures,  the back ground factors which fostered such venture businesses. Her explanation was systematic, comprehensive and persuasive. 
   She particularly emphasized as driving forces of Israel entrepreneurship the following four factors. (1) the role of military. During the military service, brilliant young officers learn knowledge and skills of handling high technologies which is useful for them to develop ideas of marketable business models.(2) technology education during the period of compulsory education, 3) Government support for incubators ranging from hard to soft technologies, and (4) as many as 300 global high tech companies locate their R&D center in Israel which encourage Israel young ventures to develop their business since they purchase successful business of such ventures.
   Quoting the data of Mr. Miyauchi,  Israel military is counted as an important background of the “eco-system” to foster start-up ventures, and  even during the compulsory education period, students are given intensive education on English, programming and various fields of science such as  robotics, astronomy, space and computer sciences etc. Such basic education of IT and science is highly useful to equip young people to build their capability in new business.
   Since her institute develops an eco-system and an accelerator to foster start-up ventures. She explained the basic concepts of such arrangements. Again, quoting Mr. Miyauchi, the start up eco-system comprises such elements as accelerator, technology development center often run or supported by the government, military experience, global network of skilled human resources such as legal, tax, and financial advisors, venture capitals, university, stimulus given by global businesses located in the region, relevant research institutions which can help the vententure.  Also, the accelerator is provides selection of good candidates, assisting the venture in its early stage, helping to appropriate funds, assist to develop workable business models.
  Her excellent and systematic lecture was followed by the lecture of Mr. Moti Shatter、on the topic of Fin-tech. He gave a broad picture encompassing various aspects and branches of Fin-tech, and more focussed discussion on critical technologies which help develop Fin-tech and application of Fin-tech. Stimulated by his discussion several members of son juku gave questions which developed interactive discussions actively and insightful.
  This was followed by the lecture of Mr.Gil Eyal, the president of a company named Tradency. This company is a global leading company in the area of providing high tech services to facilitate trading using robotic advisory capability. He spent much effort in cultivating his business in Japan working with major companies which provide financial as well as trading services such as Rakuten. He explained in detail his experiences of how to cultivate relations with business partners. He emphasized the importance of finding a good and influential advisors in Japan who can develop business relations workable,  which is quite interesting for us.
   In the afternoon, Mr. Shatter introduced two student groups who he teaches and assists. They are developing business models of new venture businesses, one is focusing on providing services to reduce risks for landlords by using information network system which enlist many tenants of rooms. Another is developing a business model to help  travelers to get cash more easily in various countries which they visit using a handy device “Change It.” It is educational for us to see how these young students learn to develop their new business model to make them useful in the real world with relevant advices and assistance of experts such as Mr. Shatter in the university accelerate.
Atlit Detainees Camp
    Atlit detainees camp is located at the shore facing the Mediterranean sea near the city of Haifa. This is the camp was managed by British authority toward the end of the era of delegated ruling of this area by the British government.  In the wake of the WWI, UK, France and Russia together agreed to govern the land of defeated Ottoman empire with the so-called Sykes-Picot Agreement. Following this agreement,  which was subsequently over-ridden by other agreements to govern the area, UK was delegated the responsibility to govern this area. 
   Toward the end of WWII, many Jewish refugees dared to come to this area seeking survival from the suppression by the Nazis and the destruction of warfare no matter how hard to reach here. With the intensification of Nazi suppression as symbolized by holocaust massacre, the number of refugees has increased. British military government tried to limit the number of refugees within the level agreed with Arab countries around this area. Consequently, many of disparate Jewish refugees who barely reached the sea close to Atlit have been chased away  and consequently many of them lost their lives.
   Those refugees who were luckily accepted by the British authority to the camp were separated into men and women sections and then disinfected by DDT and sent to shower room to clean their bodies. To some this process reminded themselves of the nightmare of deadly treatment of Nazis mass killing facilities. But to the contrary, they were treated as human beings and eventually families were allowed to get together. This camp presumably received about 40000 refugees. Many of them left the camp after a certain period to join the Jewish inhabitants who arrived the area earlier and worked together to build the new country of Israel after the declaration of independence in May 1948.
   Some of the basic facility is being kept to show the historical experience to visitors like us. Shabby camp buildings and fences to contain the refugees in a lonesome campus make us imagine the hardship of Jewish refugees who strived to arrive here hoping for survival. There remain a wrecked ship on the shore which conveys the hardship of the time. On the other hand, a renewed ship of the time is displayed to show us bitter experiences of the refugees by movies and exhibitions inside. Recently a renewed cargo plane is set to be displayed which carried a hundred of so refugees from devastated areas at the time. This whole exhibition tells us bitter and cruel experiences of Jewish people shortly before the establishment of modern Israel.
Masada Fortress
   The remains of Masada fortress is located on the top of the sharp rocky hill facing the Dead Sea. This is the fortress where a few hundred soldiers and their families defended the country against attacks of overwhelming size of Roman soldiers who surrounded the fortress for a few years.
    It was AD 68 when Roman troops attacked the capitol city of ancient Israel, namely, Jerusalem. Under the fierce attacks by the Romans, all the buildings of the city including the huge and magnificent Heroes Shrine were destroyed and the entire city was burnt down to ashes.
   Some 800 soldiers and their families remained in the Masada fortress and defended hard against repeated attacks by Roman soldiers who amounted to 10000. The roman troops built several camps around the Masada fortress. They constructed huge facilities to throw rocks toward the fortress, to shoot fires, and also forced Jewish prisoners of war to pile up rocks and mud to build a big slope to reach the top of the Masada hill so that the big troop can run up to the fortress.
   While the Jewish solders and families fought hard to defend the fortress, which is the only Israel site remaining after the massive attacks by the Romans who virtually destroyed the entire ancient Israel, the commander of the Jewish soldiers on the fortress judged one day that it would be hopeless to survive the overwhelming attacks by the Romans. He ordered soldiers in the night to kill their families and ordered the selected sub-leaders to kill the soldiers. Then gave them pieces of broken potteries with names of them which tell them to kill with each other orderly.
    Early next morning, when the Roman commander arrived at the fortress climbing the slope they forced the Jewish prisoners to build, he was astonished to find all the jewish resistance troop and families already dead in the fortress. This story was later told by a few women who miraculously survived by accidental neglect, and was written as a critical memoir of the event. Since the suicide is prohibited in Judaism because of the religious rule that  life and death can only be determined by the will of the god, this episode has not been played up for a long time. However, this story is now viewed as respectful deed of the brave soldiers and their family not to survive as slaves of the conquerors. They view this action a kind of victory rather than the defeat.
   The ruins of the fortress is kept amazingly well. This fortress was originally build as a separate palace of Herod the Great. He constructed three tier building on the top of the steep rocky hill. The facility contains living rooms, guest rooms and floors, warehouses to store food and valuables. Amazing is that the facility contains huge baths of Sauna, hot and cool water baths, and has a dozen of water reservoirs. Curious is how they secured such a huge volume of water on the top of steep rocky hill where almost no rain falls usually. The gimmick is that they skillfully siphon the rain water which flows from higher area such as Jerusalem down to this area and skillfully direct it to the drain carved against the rocky wall of the hill up to the reservoirs. How great the wisdom and skill of ancient Jews.
   It was a hot day when we visited the Masada fortress. We used a cable car to climb up the slope. Walked around the facility to take a look and walked down the slope constructed by the Jew war prisoners in ancient days. We learned that it is a required practice of young Israel military service officers and soldiers to walk up the hill regularly to pay respect to the bravery of their ancestors.
The Dead Sea
   The Dead Sea was shining reflecting the west inclining sun shine later in the afternoon when we arrived at its shore. On the other side of the sea is the shore and hills of Jordan. The Dead Sea is located at an incredibly low place of the earth, indeed, some 430m below the sea level.
   Since the inland sea is isolated surrounded by dry hills and mountains, this unique situation was kept for a long time. However, as time passes the amount of water kept in the sea has been decreasing due partly to the strong sunshine and heat which evaporates water and partly by tapping water for industrial use of extracting minerals contained in the salty water. The salt containment ratio is said to be more than ten times of the ordinary sea water.
   This extra-ordinary high salt density provides a gimmick that a person can lay on the water and read a newspaper. The young members of Shimada son juku who experience this miraculous magic for the first time got excited. They enjoyed this and took many pictures. They had to be careful, though, that not to drink the dangerously salty water, not expose wounds, and protect foot heals because the bottom of the water is often covered by sharp crystalized salt blocks which hurt foot heals easily. Playing with this unique salty water provided a joyful and unforgettable memory of Israel for them.
Yad Va ‘Shem holocaust Museum
   Yad Va ‘Shem holocaust Museum was standing still on the hill of Jerusalem which is surrounded by woods. This is the place which exits a sad and painful experiences of Jewish people who were victimized in Europe during the period prior and during the WWII. This is my third visit. For most of the sonjuku visitors, this was the first time. I planned this visit to the museum because I thought it is very important to know the facts of incredible suppression which Jewish people suffered during this time, and also learn how the war can drive people, the Germans led by the Nazi in this case,  to conduct such incredible actions to kill millions of nonresistant victims. The war certainly can and will drive people crazy and unbelievably cruel. I wish we all learn firmly by watching this sad historical fact that we should never resort to war by any means.
   The museum was renewed some years ago. The current new museum puts more emphasis to show us Jewish people and families in their ordinary life before the crazy and cruel Nazi suppression starts in Europe. The Jewish life in various places and occasions are happy and joyful: wedding, family and friends get together, sports, residential areas and town scenes. 
  Such peaceful world was distracted by targeted harassment and violent suppression by Nazis. Adolf Hitler took the overwhelming power to rule Germany ironically by democratic means of repeated elections in the early 1930s. Within a few years he gained an absolute supreme power to conduct whatever policy actions after having been empowered by the enactment of All Rights Delegation Law to him. He has had an awful prejudice against the Jews before hand, and after this stage started to order all kinds of racial harassment against Jews in may European countries.
  He ordered that all righteous Jews in any European country put yellow ribbons or medals to show that they are living there lawfully and properly. Amazing or incredible is the fact the his order was transmitted to every European country except a few countries such as Belgium and executed by the local police or relevant authority and not by the Nazi directly. They did it probably because they afraid or fear  the subsequent retaliation or suppression from the Nazi Germany. This fact makes us imagine how fearful the power of Nazi Germany was in Europe at the time.
   The Nazis then ordered that the Jews be pulled to and confined within the Ghetto circumscribed by walls in each city and each country. While many ghettos were built in Germany, the largest ghetto created in Europe was the one in Warsaw. The order given for the Jews to put yellow ribbon or medals was in fact the means to find and identify the Jews more easily.
   The poor Jewish de facto prisoners were not given enough foods nor clothes. Many of them got weakened, got sick and many of them died in cold weather of Northern European countries. As the war developed in many European countries where the Nazi army promoted drastic attacks, the Nazi started horrible outrageous actions to kill the captured Jews in many places and many ways. In early stages, the German officers let the captured Jews dig holes by shovels and order them to stand at the edge and shoot them from behind so that they fell into the hole, which turned out to be their grave.
   Later, the German military leaders, such as Adolf Otto Eichmann, reconsidered the means to kill the Jews. Killing them by guns meant too costly and not very efficient. They estimated that there were altogether 11 million Jews in Europe. They thought that they need to employ more efficient and massive way of killing Jews, which was to kill many of them at once by poison gas.

   They urged the weakened and desperate and victimized Jews in Ghettos to leave the ghetto, and get on the freight cars to go somewhere else. Many Jews may well have thought that they can now get rid of terrible and desperate situation in the ghetto and followed the order of German officers and soldiers to get on the train. After a few days, they arrived at a plant looking facility, which was the gas room to kill all of them at once. After they were killed, many bodies of the victims were pushed and mounted by the bulldozer and bellied with mud on them. At the end of all this massacre, it is estimated that well over six million Jews were killed.
   Finally, the German led by the Nazi was defeated in May 1945 by the allied forces of united nations. Victimized Jews were finally liberated. This must be a victory for them too, and can be celebrated. But many pictures of the Jews in various places at the time were mixed. Many of them were so depressed, weak and sick. Having lost parents. friends, all the fortunes they have built in their lives, and left alone, and helpless, perhaps they did not know what to do, what they can do. Under such circumstances. some of them who had some means to travel tried seriously to reach Palestine area where they know that their ancestors had their home country. Out visit to Atlit detainees camp exhibits a part of their experiences.
  Toward the end of the hall, there is a room where many name plates are placed against the wall and the ceiling. This is however only a very small proportion of the victims who could be identified. In the center of the floor, there is a pond looking hole way below, where people threw coins probably praying for the repose of the soul of the victims. This is no longer practiced. Out side the museum, there exist a smaller building which is totally dedicated to pray the repose of the soul of victimized children. The children who lost their young lives are said to be as many as a quarter of all the dead victims.
  In the woods nearby these buildings, there were memorial stones or plates for those courageous people who worked hard to save the lives of the Jews at that difficult time. Among them was the memorial plate at the foot of the wood, named, Sugihara Senpo. the Japanese diplomat, councilor general stationed in Lithuania at the time. Mr.Sugihara courageously issued visas against the rule of Japanese government for some 6000 Jews, who would otherwise be captured by the Nazi and would most likely be killed,  to flee from the area controlled by the Nazi to reach to Japan and later to other countries such as the US. His formal name is “Chiune” but is carved as “Senpo” perhaps because of alleged difficulty to read his name correctly.
   Yad Va ‘Shem holocaust Museum is the place all of us have to see and learn how the most dreadful actions in human history have been executed in Europe before and during the period of WWII. This sad fact should be remembered all the people to teach and warn them that we never should repeat such a terrible action of war which cannot be justified by any reasons. Jerusalem: Old City, Herods Place, the Wall, Tunnel Below the Wall
 While driving in and around the city of Jerusalem, our tour guide told us pointing to the building which is at the top of the hill of the old city, “That is the Supreme Court, and at somewhat lower place is build the National Assembly Hall.”
   The city of Jerusalem has been developed certainly on a much hilly area which is relatively high land of the territory of Israel. This was so even at the time ancient era. After the exodus from Egypt, ancient Israel had famous three kings: David the Great, Solomon the Great, and Herod the Great.
  King Solomon built the first major shrine at the center of Jerusalem. Unfortunately, however, there remains no ruins of the shrine. In the subsequent years,  Israelis were  forced out of the country for a century to serve as a sort of slavery in the then powerful empire of Babylon. Having returned from Babylon, King Herod built the second major Shrine. This shrine was a huge construction to symbolize the glory of ancient Israel. This shrine was unfortunately totally destroyed by the Romans when the Romans attacked Israel and burnt down the entire city of Israel in AD 68. However, there remains now a portion of the wall facing the West of the base of the shrine.
   The area where King Herod wanted to build the shrine was quite hilly. Therefore, King Herod conducted a great ground work. He constructed a wide high flat base on which to build the shrine. The shape is rectangular quite close to the square. The longer side is about 448m. And the hight of the wall was 15 to 25m. The difference of the hight of the wall reflects the hilly shape of the ground. On this flat surface which is elevated quite high from the ground, he constructed the shrine, and also another rather big building at the other end of the flat, which was built to worship his soul after his death.
He constructed such a building because King Herod became the King of Israel after marriage, and he himself was not a genuine successor of Israelis blood.
   Jerusalem has always been the focus of religious confrontation and conflicts. Currently, the inner old town of Jerusalem is resided side by side by four religious groups within a narrow space: the Jews, Moslems, Christians, and Armenians. During the past centuries, the occupants and the ruler of this area have changed many times. In the modern era, up to 1967, this area, the central section of the old city of Jerusalem, was controlled by Jordan.
   As a consequence of the third middle-east war, or more commonly called as “Six day war” by Israelis, this area belonging to Jordan was secured by Israel. The area Israel obtained after a long time in the history include the area of the wall facing the West. Since this wall is the only remain of the wrecked Second Shrine built by Herod the Great, many Jewish go there repeatedly and pray for fortunes for their life.
   After capturing this area and put the whole area under the control of Israel as a consequence of the victory of six day war, Israel government decided to dig a tunnel underground along the line of the West wall. They aimed at realizing the original shape of the wall of more than 2000 years ago. Since the length of the West wall is said to be 448m, the tunnel below the wall is deep and long. Israel started the construction of the tunnel shortly after the end of the six day war in 1967. The construction is still going. Just about 50 years have passed since the launch of construction.
   We got into the tunnel to see and learn about this long lasting project. The tunnel goes through quite deep in the ground, perhaps 10 to 20m depending on the surface of the current ground. There were many tourists walking along the tunnel and watching the inside wall and some exhibitions of explanations posted here and there. It was interesting experience in walking through such a tunnel. The tunnel starts nearby the tourist spot of the wall, and ends up at the other side. At the other side is a spiral stairs to get out to the surface of the ground, which is within the residential area of Moslems.  It was impressive that Israel dared to dig a long tunnel in the wake of the victory of the six-day war even this was to dig underground of the Moslem inhabiting area. We are reminded again of the complexity of racial, religious and historical issue of the old and historical city of Jerusalem.
Security Consciousness
   The advice or story which I was told when I visited Israel for the first time about a decade ago has remained persistently in my mind that Israel authority pays special attention to Japanese tourists who try to enter the country with a special suspicion that every Japanese man could be as dangerous as Okamoto Kozo, a radical extremist, who shut a machine-gun at Tel Aviv airport some 40 years ago and killed more than a dozen people. This horrible precedence is kept cautionary as an institutional memory by such authorities as police and entry examination office. At the time of my first entry, my influential friend has made special effort to prepare some documents to  endorse the credential of myself.
   In this trip, when we visited Manor Haknesset near the building of National Assembly, we saw many elementary school students who were also visiting there and National Assembly building. We realized then that each of the teachers leading those students wore a gun(pistol). This scene was somewhat shocking or beyond imagination from the view point of we, Japanese. This is because the gun and children, in our notion, should be mutually totally unrelated. Teachers may be wearing guns in case it was necessary to protect children from attacks of terrorists. In such cases, we wonder if teachers inexperienced in handling guns could protect children effectively with their guns. Nevertheless, protecting yourself by any means may be the strong norm of Israel. This seems to reflect the Israeli sense of security which is beyond Japanese imagination.
   Another episode we were impressed was the rather severe examination imposed by security officers at the airport when we are in the process of departing the country. The examination often appears to be severer than the examination at the time of entry. This is queer and not seems logical. I asked on the officers why Israel authority examines departing people that closely, the practice I have never encountered in any other countries. The officer told me that they do this because Israel was surrounded by enemies. His statement was not quite convincing. Then, someone advised that consider the case of terrorist attack of 9.11, or many other incidences when planes in the air were attacked by terrorists on board. Then, I understood the reason. All these episodes  reminded us of the tough and dangerous situation which surrounds Israel, and it is only natural that Israel people, may they be private or government, must have a sharp awareness of the importance of security.

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