Policy Radar August 2019

Langley Esquire’s initiative to deliver up-to-date information on political developments in the Japanese Diet. While the parliament remains closed, the Japanese Government has been active in the international scene with PM Abe’s visit to the G7 in France and the diplomatic feud with South Korea. This month’s edition focuses on Japan’s participation in the G7 and trade relations with key partners, as well as policy developments in the Integrated Resorts, Technology and Labor industries.

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G7 and Trade:

G7 Summit Summary

Prime Minister Abe finished the three-day G7 Summit in France, where leaders have expressed their concerns in global governance, calling for international cooperation in numerous policy-areas. However, the conference lacked any profound discussion of sensitive or salient issues (for example, the ongoing tensions between the U.S. and China and global warming) with no pressure on any particular country participating as a full member in the G7. The heads of state and government agreed to intensify cooperation to contain the nuclear threat posed by North Korea, as well as the need to accede to the Japanese proposal of reforming the World Trade Organisation. Leaders also expressed their concern at the rapid expansion of fire in the Amazon forest, deciding to donate $20 Million to help extinguish the fire. The conference, as a Japanese government official claimed, lacked any substantial discussion of any specific policy. On the sidelines of the Summit, the Japanese PM was able to secure the broad outline of a future trade deal with the U.S., as seen above.  

China and Japan prepare President Xi’s Visit to Japan

Relations between the People’s Republic of China and Japan have entered a blooming phase as both countries prepare President Xi’s first visit to Japan since he came into power in 2013. Both Foreign Ministers Kono and Wang, on the sidelines of a trilateral meeting between China, South Korea and Japan, have agreed to accelerate efforts to materialise the visit of the Chinese leader as soon as next spring. This effort was also ‘ratified’ in principle by PM Abe and President Xi during the G20 which took place in Osaka. Seoul, Beijing and Tokyo are also vying to hold a trilateral summit in December in Beijing, as this year it is China’s turn to be the rotating chair. It remains to be seen whether Beijing can have any influence in the easing of tensions between Japan and Korea, however Japanese bureaucrats have insisted on keeping bilateral issues out of the trilateral framework. Beijing is also arranging for Vice President Wang Qishan to attend the Sokurei Seiden no Gi ceremony on the 22nd of October, the accession of the Emperor to the Chrysanthemum throne, showing “great significance” that the Chinese government places on the ritual (in the words of Chinese bureaucrats).    

Japan and the U.S. Trade Deal ‘Ready’

On the sidelines of the G7 Summit in Biarritz (France), both the U.S. and Japan have agreed on a trade deal in principle and to continue working on the specifics next month, September. The Japanese PM promised his American counterpart that the private sector will be allowed to buy excess U.S. corn stocks, while further opening the market to $7 billion worth American products. The negotiations were delegated to Motegi Toshimitsu, Minister of Economy, Trade and Industry, and Robert Lightizer, U.S. Trade Representative. Minister Motegi defends that Japan was able to protect its interests and agriculture. Both sides acquiesced to farm products’ tariffs not be brought further down from those existing in other multilateral frameworks such as TPP or EPA. For example, tariffs on American beef will be slowly decreased in stages from 38.5% to 9%. The Japanese government has supported the idea of an expedited trade deal, restricting the number of policy areas to be affected by it (namely, agriculture, industrial goods and the digital economy). Japanese policymakers are also vying for the U.S. administration to restrict the number of tariffs— or to scrap them altogether— on Japanese cars, specially the 2.5% tariff on passenger cars. It is reported that this task will be sought by the PM in his next visit to Washington, just before the eventual signing of the treaty on the sidelines of the UN General Assembly meeting next month.  

Japanese lawmakers want to renegotiate TPP clauses in the surge of beef imports

Japanese lawmakers are scared that low tariffs from countries in the TPP and the United States may place Japanese farmers at a competitive disadvantage, hinting at TPP clause renegotiations. A Japanese lawmaker from the LDP commented on the need to subtract U.S. imports from the TPP safeguard import quota, a safeguard quota designed to protect Japanese producers limiting imports, should quotas be surpassed. The Australian Agriculture Minister, Bridget McKenzie, has reaffirmed his country’s veto to renegotiate any mechanism within the Trans-Pacific Partnership (TPP). While Australia’s stance is clear, Japan has yet to finalise the specifics of the free trade agreement with the U.S. administration next month, however it is unlikely that it will retract from its pledge to reduce beef tariffs to levels of the TPP.  

Japan and South Korea to continue efforts towards pacification of the bilateral relationship:

The Japanese government has hinted towards a deescalation of the diplomatic feud with South Korea which started last month after Tokyo announced export curbs on numerous materials. In  retaliation for Japan taking out South Korea from its export whitelist, Seoul responded by putting an end to the General Security of Military Information Agreement (GSOMIA)— a key intelligence-sharing pact. Japan’s Ministry of Economy, Trade and Industry has insisted that its decision to bar Korea from its export whitelist remains solely on national security concerns. Additionally, the Foreign Ministry has expressed to his South Korean counterpart the need for South Korea to abide by international law over the wartime labor disputes as well as concerns for the safety of Japanese residents in the peninsula in light of the surging “Anti-japan sentiment”. The LDP insisted that the Government keep pressing their neighbour to “normalise” the diplomatic relationship between both countries. With little progress being made in terms of deliverables, both foreign ministries have agreed to continue dialogue.  

Integrated Resorts:

Yokohama Mayor announces candidacy to host a casino resort

Mayor Hayashi Fumiko has announced that the city of Yokohama will launch a bid to host an Integrated Resort (IR), hoping that more visitors will visit the harbour city while stimulating the regional economy. So far, only Osaka, Nagasaki and Wakayama have officially announced their bids to host newly legalised casino resorts. The legislation initially allows for three IR locations, with 3% maximum of casino floor within the total resort floor space. The candidate site for Yokohama is set to be Yamashita Pier. While around 90% of the pier is directly owned by the city government, the rest in mainly owned by Yokohama Harbor Transport Association Chairman, Yukio Fujiki, who has signalled his strong resistance to the idea of bringing casinos to the area. The city mayor has insisted that casinos are needed for the area to provide profitable returns for such a big investment. In the meantime, top casino providers have already started to turn their eyes towards the Kanto region, and even in some cases, already announcing the opening of an office in the city. 

Basic Policy on Integrated Resorts to be released in November

The Integrated Resort Basic Plan, which will contain specific requirements and the details of the bidding process (criteria used to choose where to locate IRs) from the central government, is expected to be released in November. Although the release of the Basic Plan was initially moved from July 1st to the beginning of 2020, it will be revealed earlier than expected. Now that the Upper-House elections are behind, the government is set to focus on the IR industry from now on. Although the delay has seriously affected city governments’ timetables and the coming of IRs to Japan, effective preparations regarding the bidding process and more credible timelines will begin once the Basic Plan is passed. However, the creation of the Casino Management Committee (カジノ管理委員会) will not be affected by the government’s early release of legislation specifics, as it is still planned to be established in January. The establishment of the casino committee would require its five board members to be confirmed by the Diet first. After the Basic Plan is approved, a public comment process will be held, giving a chance to outsiders to give their assessment. 

Technology:

Government invites research proposals from technological firms for major investments

The Japanese government is readying to invite research proposals from technological firms in over 25 areas, which include cyborg technology, industrial waste reduction, A.I. and artificial hibernation, among others. Upon selection, the Japanese government will invest and support the firms for a period of 5 to 10 years, with a total budget of ¥100 billion for the first five years. The programs seek multiple goals in technological advancement, but mainly aims to attract foreign researchers in major scientific projects to tackle major issues. The government will accept proposal submissions from the end of this year and will subsequently rank the 25 project areas in order of priority, linking the projects to individual deadlines ranging from 2035 to 2060 to see their goals achieved. In the area of cyborg technology, for example, the government has set a deadline to produce robotics that can replace human body parts by 2050. 

Japan to tighten foreign investment in high-tech industries

The Japanese Government will be tightening the control over foreign involvement in Japanese high-tech companies. The new regulations will be introduced in a few months, but details have already been revealed. The government aims to be able to place greater scrutiny on foreign acquisitions of domestic companies as well as major purchases of shares. If a foreign company acquires over 10% of voting rights in a listed technological company, a mandatory government review will ensue. Investments in companies that have a direct impact on national security will also be controlled more closely by the government. Recently, Tokyo also expanded the number of sectors up for review within the Foreign Exchange Law, by adding various sectors such as semiconductors, software, phones etc. to the already heavily protected nuclear power sector. Introduction of new legislation and regulations parallel the growing concern within the ministries of protecting key industries from foreign encroachment with more oversight and control. This concern is followed by the United State’s Administration move to ban the purchase of materials from certain foreign companies.

Online registration system to facilitate commercial use of drones

The Government is ready to relax the current restrictions in place for the commercial use of drones (i.e. product delivery). Currently, it is banned to fly unmanned aerial vehicles without a permit and the permit itself is hard to acquire. To this effect, the government is planning to create an online registry to allow using self-driven vehicles in residential areas, notably speeding up the process for the acquiral of a permit. The company/individual will have to register online with his name, the user and the drone ID given upon purchase to recieve flying permission. The new online system will not only facilitate the process, but allow for permits that last a certain period of time, instead of a single-time use permit. With this, Tokyo intends to have  closer scrutiny in case of accidents safeguarding residential areas while at the same time enhancing technological advancement. It also intends to add no-fly-zone-like blocks (with skyscrapers) to the already prohibited Imperial Palace, military bases and sport venues. Additionally, legislation is being prepared for the safety standards of drones. The online drone registration system as well as drone-related legislation is aimed to be passed in the Diet by 2021. 

Labor: 

Government advisory panel recommends raising minimum wage to ¥901 in 2019

An advisory panel within the Ministry of Labor has suggested that the minimum hourly wage should be increased to ¥901 in fiscal 2019. It is the biggest increment (¥27) since 2002, and the first time the recommendation of the minimum hourly wage hits ¥900. This was proposed by the Central Minimum Wages Council to the Labor Minister, Nemoto Takumi, in late July. It also proposed wage rise targets in four different wage classifications, depending on the state of the local economy (ranked from A to D). This raise is in line with the Government’s will to increase the minimum wage by 3%, so that a national (average) minimum hourly wage of ¥1000 is reached. The recommendation comes due to the predicted effects of the consumption tax rise in October. However, minimum wages are decided by each of the Ministry of Labour’s regional bureaus, depending on the state of the regional economy. Now, throughout the month of August regional panels will submit their minimum wage recommendations and adopted in October. 

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