Naoto Kan has been elected head of the Democratic Party of Japan (DPJ).
He is now in line to become Japan's ninety-fourth prime minister later in the day.
(He received 291 votes compared to Tarutoko Shinji's 129 votes.)
Thursday, June 3, 2010
JAPAN: The Wrath of Kan: Can this man clean up Japan's mess?
Kiyoshi Ota/Getty Images
JUNE 3, 2010
BY ABRAHAM M. DENMARK, DANIEL M. KLIMAN |
Should Finance Minister Naoto Kan become Japan's next prime minister on Friday, as most observers predict, it won't be the first time he will have shouldered the responsibility for cleaning up after Yukio Hatoyama. Kan succeeded him as party chairman back in 2002, when Hatoyama resigned over talks he had held with the rival party. Now, Kan seems to be swooping in again in the wake of Hatoyama's sudden resignation, hoping to limit the damage from the outgoing prime minister's disastrous nine months in power. Then as now, Kan boasts more experience in government than his predecessor and a style that could hardly be more different. His hot temper and self-made expertise might be just what Japan needs if it hopes to keep a prime minister for a period of longer than a few months.
Japan urgently needs a strong leader. Less than a year after Hatoyama and his Democratic Party of Japan (DPJ) swept away half a century of nearly unbroken rule by the Liberal Democratic Party (LDP) in September, their coalition today looks frayed and tired. Hatoyama got bogged down in a disagreement with the United States over where to relocate Futenma, a strategically important U.S. Marine air base on Okinawa. In late May, after months of painful public dithering, he finally signed on to a 2006 agreement hammered out by the previous LDP government -- which provoked a revolt in his governing coalition and deep shock among an unprepared public. With his party in disarray and an approval rating headed for the single digits, Hatoyama resigned Wednesday, along with the DPJ's powerful party secretary, Ichiro Ozawa.
Enter Kan. He is a figure already well known to investors and analysts as the fiscal conservative who has spent the last six months trying to relieve Japan's stifling debt burden (roughly 200 percent of GDP) and reinvigorate a stagnant economy. While he has actively called for Japan to follow the path of fiscal responsibility, and pointed ominously to Greece as a direction Japan might follow if his reforms are not implemented, his short time as finance minister has not seen considerable progress in this direction.
Kan is also known as a pacifist in line with Japan's old left tradition. While serving in the Japanese legislature, he advocated a greater role for the Japanese military under the banner of the United Nations and opposed sending the country's troops to Iraq, as the United States has hoped Japan would. After meeting with Japan's then-Prime Minister Junichiro Koizumi in 2003, he commented, "The decision to send troops to Iraq is based on a fundamental miscalculation." Still, unlike Hatoyama, Kan is unlikely to fumble matters of foreign policy and relations with the country's most important ally, having watched and learned from the Futenma debacle.
Kan's upbringing could be a key asset. Hatoyama's entry into politics was lubricated by family connections (his father was also prime minister). Kan, on the other hand, is a rarity for Japanese politicians -- a self-made man. His path to power was neither direct nor easy. An aspiring scientist in his youth, Kan majored in physics at the Tokyo Institute of Technology and opened his own patent office in 1974. He made his political debut shortly thereafter as a civic activist and entered the Japanese parliament in 1980 as a member of the lower house. It was after exposing a massive scandal, however, that Kan truly burst onto the national scene in the 1990s, as health minister in the LDP government. HIV-tainted blood was entering the country's blood supply, and the government had been covering it up. Kan exposed the details to public acclaim.
But Kan soon faced his own series of scandals. In 1998, he resigned his post after his affair with a television newscaster went public and he simultaneously admitted that he had failed to pay into the national pension fund. Just five years later, Kan was forced to resign from his leadership of the DPJ over another failure to pay. This time, Kan made formal penance: He shaved his head, put on a Buddhist monk's robes, and traveled to the traditional pilgrimage destination of Shikoku island and its 88 temples. It worked. Japan's comeback kid, he remained a senior figure inside the DPJ and served as deputy prime minister and finance minister in the Hatoyama cabinet.
Behind the scenes in Tokyo, he is known as "Ira-Kan" or "Irritable Kan" for his quick temper (cue the Wrath of Khan jokes). He has also cultivated a reputation as a serious policymaker with a popular touch and has built good relationships with politicians both within the DPJ and across a broad ideological and geographical spectrum.
How did Kan manage to survive? Even amid the scandals, he projected an image of probity and sincerity. As China's People's Daily put it,
"In an era of bureaucrats and back room dealings, Kan's transparent politics were completely unprecedented and his honesty was enthusiastically praised by the public and the media."
That jives well with the sentiment that brought the DPJ to power in the first place -- a vow to take power back from unelected bureaucrats and shake up Japan's stultified politics.
Hatoyama made little headway on this reform agenda. But a Prime Minister Kan would require less on-the-job training, allowing him to avoid his predecessor's rookie mistakes and take on entrenched interests within the bureaucracy, while navigating the divides within his own party.
He'll need all the political savvy and strength he can muster. With the loss of its two most prominent leaders, Hatoyama and Ozawa (the real force behind the party's successful rise to power), the DPJ is in turmoil. The party's junior lawmakers -- who were largely sidelined for the past nine months -- are hungry to wield more authority in the next administration. Kan is no acolyte of Ozawa's, but he is one of the party's founders and is still a member of the old guard. The other probable contenders for prime minister -- which include Foreign Minister Katsuya Okada, Transport Minister Seiji Maehara, and chairman of the lower house's environment committee Shinji Tarutoko -- carry the banner of an eager, younger DPJ generation that is dissatisfied with the old guard's penchant for backroom negotiations. Kan is likely to prevail in the short term, but he will be harried by the next generation of lawmakers after a July upper-house election that is looking disastrous for the DPJ, and certainly at the party's September conclave.
Ozawa's fall will also pose a more direct challenge to Kan's leadership. In resigning, Ozawa has freed the DPJ of its biggest public relations albatross -- he has been accused of accepting questionable campaign donations. But his departure is also a huge loss, as Ozawa's almost mythic power within the party served as a unifying force. Since taking control of the DPJ, Ozawa has relentlessly pursued the destruction of the LDP (his former party) and would use his clout and his political genius to cultivate and aid loyal candidates. Many saw Ozawa as the only man who could lead the DPJ out of the wilderness to power, and his success in 2009 only solidified this reputation. It would be naive to think that Ozawa's exit is complete, given that his loyal lieutenants will continue to wield significant power. Still, without his commanding presence, today's DPJ looks like an uneasy amalgam of aging former socialists, young pragmatists, and refugees from the LDP.
Then there is the job of actually running Japan. As prime minister, Kan will likely move to trim government spending -- no easy task, as he has surely learned in the finance ministry. With Japan's population aging rapidly, social outlays for health care and pensions are set to increase, and Kan might be tempted to make his cuts from Japan's defense budget. But that looks harder to justify after North Korea's sinking of the South Korean corvette Cheonan and the growing military assertiveness of China, which conducted a provocative naval exercise near Japan this spring.
And then there's Futenma, the U.S. base issue that unseated Hatoyama. Although the U.S.-Japan joint statement issued on May 27 defused bilateral tensions for the short term, the game is far from over in Japan. After the July election, the DPJ will have to persuade the Social Democratic Party -- which bolted from the ruling coalition after Hatoyama signed the base agreement with the Americans -- to rejoin the government. Okinawans will likely seek to foil any attempt by Tokyo to actually implement the Futenma deal, and the United States exhibits no willingness to reopen negotiations. Hatoyama's hasty exit has vividly demonstrated that the Japanese still judge their leaders in part on their ability to successfully manage the alliance.
Tough as the coming months may be, Hatoyama's and Ozawa's departures herald the end of the beginning in Japan's political transformation. In fact, these resignations are a sign that the change heralded by the DPJ's rise to power is continuing. It was the failure to live up to the DPJ's promises that caused Hatoyama to resign -- not the DPJ's reform agenda itself.
Still, don't bet on political stability in Tokyo. Of Japan's 13 prime ministers since 1991, only three have lasted more than two years. Kan might be of a different breed, but the hostile environment he faces is essentially unchanged. So unless something unexpected happens, get used to more resignations and more new prime ministers.
Abraham M. Denmark is a fellow and Daniel M. Kliman is a visiting fellow at the Center for a New American Security, which is hosting a major conference on the U.S.-Japan alliance on June 17 and 18 in Washington, D.C.
CHINA: World's top 10 military spenders
Chinese militia take part in a military drill in Taiyuan, China, in July 2009. Reuters/FILE
CHINA - $100 billion: Beijing regards its military expenditures as a state secret, but SIPRI estimates that China spent $100 billion on its military in 2009. While this is less than one-sixth of what the US spends on its military, it is still a 217 percent increase from a decade earlier.
A Japanese Maritime Self-Defense Force officer monitors screens at the Pacific Missile Range Facility on Kauai, Hawaii, during a Japanese missile defense test in the waters off the island in December 2007. Japan Maritime Self-Defense Force/AP/FILE
JAPAN - $51 billion: The world’s second-largest economy is focusing revenues away from military, decreasing such spending by 1.3 percent over the past decade. That’s less than 1 percent of total GDP, whereas the US spends 4.3 percent of GDP on its military, and Saudi Arabia spends 8.3 percent.
Russian army fighter jets fly over Moscow's Kremlin during rehearsals ahead of the upcoming Victory Day Parade on May 6. Ivan Sekretarev/AP
RUSSIA - $53.3 billion: The Russian bear’s military spending saw a 105 percent increase from 2000. Strong oil revenues over the past decade helped Russia beef up its military, though the rate of increase has slowed in the past year because of falling gas prices.
Marines and sailors line the deck of the US Navy amphibious assault ship USS Iwo Jima as it passes the Statue of Liberty in New York on May 26, as part of Fleet Week. (Peter Morgan/AP)
Despite a global recession, worldwide military spending increased in 2009 by its fastest pace since 2003, according to a new report by the Stockholm International Peace Research Institute. Chad boosted spending by 663 percent. The US still has the biggest defense budget.
posted June 3, 2010 at 1:55 pm EDT
By Stephen Kurczy, Correspondent
Worldwide military spending jumped 5.9 percent in 2009 to $1.5 trillion, according to a new report that underscores the long-term decision of many countries to prioritize defense. This is despite a recession that shrunk the global economy 2.2 percent.
The US remains by far the biggest military spender, followed by China, the Stockholm International Peace Research Institute (SIPRI) said in its annual report on worldwide military expenditures, released June 2. Last year saw the steepest jump in worldwide military spending since the start of the Iraq War in 2003.
See the full list: IN PICTURES: World's Top 10 Military Spenders
But, as the world’s military spending increased nearly 50 percent over the past decade, the biggest military budget increases were seen in small, oil-rich countries flooded with new wealth.
From 2000 to 2009, Chad increased its military budget 663 percent, Azerbaijan increased 471 percent, and Kazakhstan increased 360 percent.
“It creates potential dangers,” Sam Perlo-Freeman, one of the report’s authors and the head of SIPRI’s military expenditure project, said in a telephone interview from Stokholm Thursday.
“Although there is nothing inevitable about arms races leading to war, it can potentially be a warning sign.”
Turning oil into arms
Oil discovery often increases military spending, Mr. Perlo-Freeman says, because – unlike taxes – the revenues carry little political cost, the oil and gas infrastructure justifies increased protection, and the development of natural resources tends to exacerbate tension and conflict.
In Nigeria, for example, SIPRI found that “the massive environmental damage caused by oil extraction and the lack of benefit to oil-producing regions has generated grievances.” Chad, as well, has increased military spending in an attempt to quell domestic conflict. Chad’s oil infrastructure was built up with cheap loans from the World Bank. The global lending agency pulled out of the project when it became clear that the government was spending oil revenues on defense instead of development, says Perlo-Freeman.
In Central Asia, Azerbaijan has used oil revenues to beef up forces along its border with Armenia, which has traditionally had a stronger army and enjoys strategic terrain advantages. The International Crisis Group said in a report last year that Azerbaijan's stronger military could put the fragile truce with Armenia under threat.
“Azerbaijan has been playing catch-up with Armenia,” says Perlo-Freeman, noting their conflict over the disputed Karabakh region.
US and China top spenders
In absolute terms, the US and China increased military spending the most over the past decade.
China, which regards its military budget as a state secret, spent an estimated $100 billion on it in 2009, a 217 percent increase from 2000, according to SIPRI. The only other Asian country in the top 15 was India, which spent $36.3 billion on its military in 2009.
The US spent $661 billion on its military in 2009, a 75.8 percent increase from 2000. While current US military spending is still a carryover from the years of George W. Bush, President Barack Obama shows no signs of cutting spending. The Nobel Peace Prize winner excluded security-related expenditure from a planned three-year squeeze in discretionary expenditure. At a recent hearing before Congress, Secretary of Defense Robert Gates talked about efforts to trim the fat but the proposed Defense Department baseline budget for fiscal 2011 is $708 billion.
Engaged in two wars, the US led the decade of increases, but it was joined by 16 additional nations in the G20.
In 2009, Timor-Leste led the world with the biggest increase in military spending, upping its budget 54 percent. Uruguay, Cyprus, and Lebanon were also big spenders, with each country upping their military budget more than 20 percent this past year.
Biggest drops seen in Iraq, Georgia
While oil-rich countries saw big budget increases over the decade, 2009 saw a decrease in gas prices and therefore reduced military budgets in oil-dependent economies. The fall in oil prices in 2009 severely affected the military spending of oil producers Iraq (down 28 percent), Venezuela (down 25 percent), and Oman (down 16 percent), according to SIPRI.
The downturn in oil and commodity prices in 2009 somewhat slowed the rising trend in military spending in some countries with a high level of resource dependence. Some countries, such as Iraq and Venezuela, reduced their spending in 2009 as a result of lower revenues; others, such as Nigeria and Russia, increased spending, but at a much slower rate than in recent years. But the long-term trend of oil and other natural resource revenues driving increased military spending in many developing countries seems set to continue.
But the largest relative real decrease in 2009 was in Georgia, whose military spending fell 39 percent from exceptionally high levels in 2008 due to the conflict with Russia in South Ossetia. Until then, Georgia had one of the most rapid increases of military spending.
“Their rapid expansion was building up to a conflict,” says Perlo-Freeman. “Essentially having failed in the war, they would appear to have decided that the military option isn’t going to work anymore.”
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TRAVEL: Delta drops last-minute booking fee for frequent-flier award tickets, but raises another
A passenger walks past a Delta Airlines 747 aircraft in McNamara Terminal at Detroit Metropolitan Wayne County Airport. By Paul Sancya, AP
By Ben Mutzabaugh, USA TODAY
Delta Air Lines is doing away with its redemption fees for SkyMiles award tickets booked at the last minute.
In an e-mail sent out to SkyMiles frequent-flier members today, Delta says
"this means you will no longer pay a redemption fee of up to $150 when you book an Award Ticket within 20 days of departure. Award Tickets booked 21 days or more prior to departure will continue to have no Award redemption fee."
"We are actively listening to customers' concerns about the SkyMiles program and are responding," Jeff Robertson, Delta's vice president – SkyMiles, says in a press release announcing the change.
It's not all good news, though. The Atlanta Journal-Constitution writes
"Delta is increasing another fee: Its redepositing and reissuing fee for customers who change frequent flier award flights is going up to $150 from $100." But, the newspapers notes, Delta "will still waive the fee for its elite diamond and platinum level frequent fliers.
As for the end of last-minute award fee, Delta's move matches a similar one made by United in 2009. This past July, United announced it would no longer charge fees for frequent-flier award tickets booked on short notice. United had charged $100 tickets for award tickets booked within six days of travel and $75 for tickets booked within seven and 20 days of travel.
RELATED LINKS: Study: US Airways, Delta stingiest with frequent-flier tickets | Your frequent flier mileage may vary (Minneapolis Star Tribune)
THE KOREAS: North Korean envoy warns war could erupt soon
A North Korean soldier keeps watch over South Korea while wearing a battle helmet at the truce village of Panmunjom in the demilitarised zone separating the two Koreas, in Paju, north of Seoul, June 2, 2010. Credit: Reuters/Lee Jae-Won
Thu Jun 3, 2010 12:33pm EDT
GENEVA (Reuters) - A North Korean envoy said on Thursday that war could erupt at any time on the divided Korean peninsula because of tension with Seoul over the sinking of a South Korean warship in March.
"The present situation of the Korean peninsula is so grave that a war may break out any moment," Ri Jang Gon, North Korea's deputy ambassador in Geneva, told the United Nations-sponsored Conference on Disarmament.
North Korea's troops were on "full alert and readiness to promptly react to any retaliation," including the scenario of all-out war, he told the forum.
Ri, departing from his prepared remarks, said that only the conclusion of a peace treaty between the two countries would lead to the "successful denuclearization" of the peninsula. The 1950-53 Korean War ended with an armistice but no formal peace treaty.
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Communist North Korea, hit with U.N. sanctions after testing nuclear devices in 2006 and 2009, is still under international pressure to dismantle its nuclear programme.
Ri repeated Pyongyang's assertion that North Korea had nothing to do with the sinking of the Cheonan warship which killed 46 sailors -- the deadliest military incident since the Korean War.
South Korea has accused North Korea of firing a torpedo at the vessel and said it will bring the case to the U.N. Security Council. A report by international investigators last month also accused North Korea of torpedoing the vessel.
Ri accused South Korea of trying to create a shocking incident in order to ignite a campaign against the Democratic People's Republic of Korea (DPRK), North Korea's official name.
South Korean ambassador Im Han-taek took the floor at the Geneva forum to voice regret at Ri's remarks, adding:
"We believe it is only for propaganda purposes."
U.S. disarmament ambassador Laura Kennedy also rejected Ri's accusations that Washington had backed Seoul in "groundlessly" blaming the sinking on a North Korean submarine.
"I agree that the situation on the Korean peninsula is very grave but I disagree with the statement made and reject those allegations against my country," Kennedy said.
"The investigation carried out was scrupulous and painstaking and we certainly accept without doubt the results which clearly indicated where the blame lay," she added.
(Editing by Jonathan Lynn and Angus MacSwan)
CHINA: Gates criticizes Chinese military for blocking talks in Beijing
Thursday, June 3, 2010; 12:17 PM
By Craig Whitlock, Washington Post Staff Writer
SINGAPORE -- Defense Secretary Robert M. Gates on Thursday accused China's military of impeding relations with the Pentagon, taking exception to its unwillingness to invite him to Beijing during his trip to Asia this week.
Shortly before he arrived in Singapore for a regional security conference, Gates told reporters there was a clear split between China's political leaders, whom he said want stronger military ties with Washington, and the People's Liberation Army, which he said does not.
"I think they are reluctant to engage with us on a broad level," he said. "The PLA is significantly less interested in this relationship than the political leadership of China."
Beijing's political and economic relations with Washington have gradually improved in recent years, as the emerging global superpower and the established one have tried to come to terms with each other. Last month, Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy F. Geithner led a delegation of 200 U.S. officials to China. President Obama also visited Beijing in November.
But military cooperation has lagged, a source of frustration for Pentagon officials. They say that communication with the People's Liberation Army needs to improve to deal with regional crises -- such as South Korea's accusation that one of its warships was torpedoed by a North Korean submarine last month -- to broader strategic issues such as the long-term buildup of China's military forces. Washington has also been seeking China's support -- without much success -- in trying to deter Iran from developing nuclear weapons.
The primary obstacle in the relationship, according to officials on both sides, is the continuation of U.S. arms sales to Taiwan, which China considers a breakaway province.
Gates visited Beijing in November 2007 as defense secretary under former president George W. Bush's administration. Shortly afterward, the Pentagon announced that it would sell Patriot missile upgrades to Taiwan, prompting China to cancel a scheduled port call by a U.S. aircraft carrier and cut other military ties.
After a gradual warming period, Gates had been hoping for a return visit to China this summer. But after Washington in January announced the sale of another arms package to Taiwan, this one worth $6.4 billion, Beijing objected again and decided to give the stiff arm to Gates on his Asia trip.
On Thursday, Gates told reporters that China needed to get over its attitude, noting that U.S. arms sales to Taiwan have been a cornerstone of U.S. policy since Washington normalized relations with Beijing in 1979.
"It's been there for over a generation," he said.
Beijing has not closed the door entirely with the Pentagon. Last month, Adm. Robert Willard, commander of U.S. forces in the Pacific, joined the U.S. delegation to Beijing and met with Lt. Gen. Ma Xiaotian, deputy chief of staff for the People's Liberation Army.
But in a sign of how cool relations remain, Gates will not meet with any Chinese officials this weekend at the Shangri-La Dialogue, a major annual security conference in Singapore. He will, however, meet with military and political leaders from South Korea, Vietnam, Japan, Indonesia, India, Singapore and New Zealand.
JAPAN: Why Hatoyama - and many Japanese prime ministers - stumbled
Japanese Prime Minister Yukio Hatoyama speaks to reporters upon his arrival at his official residence in Tokyo June 3, 2010. Japan's ruling Democratic Party was scrambling on Thursday to pick a new leader, and hence premier, after fiscally conservative Finance Minister Naoto Kan threw his hat in the ring to replace unpopular Prime Minister Yukio Hatoyama, who resigned a day earlier ahead of a looming election. REUTERS/Issei Kato
posted June 3, 2010 at 8:37 am EDT
By Gavin Blair, Correspondent
Tokyo — When Japan’s next prime minister takes office following Yukio Hatoyama's resignation announcement on Wednesday, he will be the 15th occupant of the office in the past 21 years.
Take the unusually long tenure of Junichiro Koizumi (2001-2006) out of the equation, and 13 prime ministers have lasted a total of 16 years.
Mr. Hatoyama himself was the fourth consecutive leader who failed to last even a year in the job. For all the hopes of meaningful change borne in last year's historic election victory by his opposition Democratic Party of Japan (DPJ), to many it now looks like simply more of the same: another scion of a powerful political dynasty who turned out not to have the mettle to handle the pressures of the nation's highest office.
The strength of Japan’s political dynasties is a major driver in the almost annual procession of weak, mostly forgettable figures in and out of the country’s highest office. Because many politicians inherit their positions, they are not forced to cultivate leadership skills or learn to win popular support.
Out of touch?
The Japanese refer to the sons of the rich as obo-chan – and it’s a phrase that’s been thrown at the most recent quartet of short-lived prime ministers, who many felt were out of touch with ordinary people.
“I voted for Hatoyama, and still support the DPJ, but he turned out to be obo-chan, too,” says Hitomi Mizune, a small-business owner in Tokyo.
“The problem is that they don’t gather public support and then become leaders. They inherit their constituencies from their families,” she continues, referring to the common practice of political fiefdoms being handed down generation after generation.
When Hatoyama defeated then-Prime Minister Taro Aso’s Liberal Democratic Party (LDP) last summer, ending more than half a century of nearly uninterrupted rule, much was made of the fact that both men’s grandfathers had been political rivals in the LDP’s formative postwar years.
“The electorate has changed rapidly over the last few decades, and the political parties are still essentially stuck in the old fashioned status quo of the bureaucrats-politicians-business trinity governing,” says Takashi Inoguchi, professor emeritus at the University of Tokyo.
“The thing that attracts the most focus, though, is the lack of leadership shown by recent prime ministers,” he says.
Media shapes public opinion
Leadership – or lack thereof – has become a recurring theme in the media as one prime minister after another has found his popularity diving to untenable levels.
In recent years the press has “shifted focus from prime minister’s policy to the issue of leadership,” says Professor Tetsuro Kato of Waseda University in Tokyo. “The media has a huge role in building up and knocking down prime ministers,” he says.
Japanese newspapers in particular, whose journalists work closely together in press clubs, often speak with one voice on major issues. Reporters from different newspapers will compare notes after press conferences and events, deciding on a common angle, in a process known as memo awase.
Once the press has decided a prime minister has been indecisive or wavered on an issue, the criticism will be unified, and relentless. And their viewpoint has broad influence: Japan has some of the highest newspaper readership on the planet – seven of the world’s 10 largest papers by circulation are Japanese – and 90 percent of Japanese polled say they trust what’s written in them.
Ratings plummeted
During Hatoyama’s eight months in office, the press corps became increasingly hostile toward him, as did public opinion, particularly after he appeared to go back on his commitment to move a controversial US Marine base off Okinawa island. Though he entered office on a wave of optimism last September with 70 percent approval, by the end of May his ratings dropped below 20 percent.
Hatoyama’s likely successor, Finance Minister Naoto Kan, has the advantage of not having inherited political power, as well as a positive reputation for battling bureaucratic cover-ups and being a straight talker. He also has an infamously short temper, which could hurt him at the daily press conferences he’ll be expected to attend.
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CHINA & JAPAN: Honda's China strike a lesson for Japanese exporters
Workers place an engine in a Honda Accord at an assembly plant in the southern Chinese city of Guangzhou. After an unprecedented strike logjammed Honda's China production line, Japanese firms in the country may need to redraw their plans in a growing market that has emboldened low-wage workers, analysts have said.(AFP/File/Peter Parks)
by David Watkins David Watkins Thu Jun 3, 5:57 am ET
TOKYO (AFP) – After an unprecedented strike logjammed Honda's China production line, Japanese firms in the country may need to redraw their plans in a growing market that has emboldened low-wage workers, analysts say.
As China's economy surges, demands for higher wages are posing a headache for Japanese companies facing higher costs but could also be a boon for others banking on rising incomes to spur demand for high-quality goods.
Japan's number two carmaker on Wednesday restarted operations at its auto parts factory after offering a 24 percent pay rise to placate staff who had walked out on May 27.
Honda's Chinese assembly joint ventures, Guangqi Honda Automobile and Dongfeng Honda Automobile, will resume operations on Friday and Saturday, a spokesman said, but did not give a timetable for returning to full output.
Honda produces 650,000 vehicles per year in China but it has lost thousands of units because of the shutdown.
"We never expected something like this would happen," said Tokai Tokyo Research Centre auto analyst Mamoru Kato.
After the Honda strike "Chinese workers will likely be encouraged to start making more demands and such situations will inevitably increase production costs there," he added.
According to the All-China Federation of Trade Unions, nearly a quarter of Chinese employees have not had a raise in five years.
Labour issues in China have come to the forefront in recent weeks after suicides at Taiwanese high tech maker Foxconn, which counts Dell, Sony and Panasonic among its clients, forced it to give staff a 30 percent rise.
The unrest has raised questions about working conditions for the millions of employees in China's factories, sparking calls for better oversight from those who benefit from Chinese labour and a ban on unions.
"As the Chinese economy grows and people's income rises, companies are now facing the need to review their strategies," said Mizuno Credit Advisory auto analyst Tatsuya Mizuno.
Yang Lixiong, professor at School of Labor and Human Resources of Renmin university in Beijing said opportunities at foreign companies are limited for Chinese staff.
"In the case of Honda, the management is mostly Japanese. It's very hard for local staff to work their way up. In addition to that, salaries are very low and working conditions are not good," he added.
To curb the effects of rising wages Japanese businesses are harnessing economies of scale that would effectively bring down unit costs.
Nissan chief executive Carlos Ghosn recently announced plans to ramp up production to more than one million cars a year in China by 2012.
Honda sold 576,223 vehicles in China last year, up 23 percent year-on-year and Toyota saw sales rise 21 percent.
Fashion retailer Uniqlo aims to open 1,000 stores in China by 2020 and achieve more than 10 billion dollars in sales.
And Sharp said it will double the number of outlets in China for its popular Aquos televisions to 10,000 this year and boost its lineup to more than 30 models from the current 24.
But rising wages are not necessarily bad as richer consumers have more purchasing power, analysts said.
Japan, with its reputation for craftsmanship, "can only compete in the high-end market as it has already lost out to local rivals in terms of affordability," Okasan Securities strategist Hirokazu Fujiki recently said.
"Japanese companies need to win out by targeting the mid-to-high level consumers. They can stay ahead of the competition by rolling out new and advanced technologies."
They must also address Chinese resentment against Japanese workers due to their long and tense history. Honda's Chinese staff complain Japanese workers in the same factory earn 50 times more than them.
"Chinese workers seem to have a strong sentiment of being discriminated by Japanese employees," said Mizuno.
"This may become a more emotional, fundamental issue, which could potentially develop into a political problem," he warned.
RUSSIA: Terrorists will attempt to foil Sochi Olympics – FSB
Published 03 June, 2010, 12:55
Terrorists are planning to foil the 2014 Sochi Winter Olympics, the Federal Security Service (FSB) head, Aleksandr Bortnikov has said.
A real threat coming from Al-Qaeda, Bortnikov said, resulted in the cancellation of the rally “Dakar-2008” for the first time in the history of this prestigious auto race.
"In this respect, the intentions of several warlords are looming to put into practice a similar scenario ahead of the Winter Olympics in 2014," the FSB director said, as quoted by Itar-Tass.
"The threat of terrorist acts is turning into a factor which exerts substantial influence on political decision-making,” he stated in the opening speech at the 9th meeting of the Council of Chiefs of Security Services and Law Enforcement Agencies of FSB foreign partner-countries here on Thursday.
The FSB forecasts that the threat of terrorism will grow further throughout the world and “no country is immune to terror attacks,” Bortnikov warned.
“Following on from the analysis of today’s terrorism, the terror threats will increase, becoming a serious menace for the majority of countries, irrespective of the level of their economic development, military potential and government system,” the Russian security chief warned.
This follows, he said, from the fact that the geography of the biggest terrorist attacks covers the US, Spain, Britain, Israel, Russia, Saudi Arabia, the Philippines, Indonesia, Egypt, Iraq, Afghanistan, Pakistan and other countries. "Entire regions fall under the terrorists' influence," Bortnikov stressed.
Seeking to spread fear among society and destabilize the situation, Bortnikov said, “international terrorist groups unite and change their strategies and tactics”.
"Terrorists are actively using radicalism and extremism in their interests, trying to get hold of the state of the art technologies, and gain access to weapons of mass destruction,” he added.
According to the FSB chief, this is the result of “negligence, and sometimes even direct support to terrorists, by some political forces, which are attempting to use them for their own purposes”.
Fighting terrorism today requires “consolidation of efforts of the entire world community, imposing timely sanctions and a joint approach to certain persons and structures connected with terrorism and extremist activities.”
Bortnikov expressed hope that the conference – which will take place on June 3-5 – will contribute to both national and international security.
The meeting of special services chiefs in Yekaterinburg in central Russia has brought together 86 delegations from 63 countries. The participants will focus on discussing counter-terrorism measures and look for new ways of co-operation on the issue.
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