AOYAMA VIEW 16.03.2020
16.03.2020
HEALTH, ECONOMICS, POLITICS: PANIC, GLOOM AND POSTURING ALL OVER
Another virus week, another Prime Minister speech: he‘s becoming our new Saturday Night Live show!
Nothing much new again. Just “it must be tough for all citizens, but please put up with this for awhile more and all will be OK.” And, as expected: “Infection figures are still low in Japan compared to many other countries” and “Olympics will be held as scheduled.” We‘ve all heard this now umpteen times and trust on government assurances even less. Everybody is doing best to stay safe even without instructions from above.
Abe-san did not declare national emergengy as expected despite new law to make it possible passed Diet last Friday. Maybe he learned from what happened elsewhere after such move: USA stands as prime example. People are now hoarding food in “The Land of Plenty” and US Fed slashed interest rate at one giant leap overnight to zero, bottom level that was supposed to be reached only sometime in summer.
Virus keeps spreading around the world unhinged. Europe is now declared the new global center and countries there are closing borders from each other while US closed gates from whole Europe. How ironic that just weeks ago it was Europe worrying about Asia!
Here in Japan worries could change from whether we are accepted into Europe and USA to whether we are accepted to get back from there. Not that there are many travellers: outbound planes are as empty as pubs and restaurants in Tokyo downtown – Japanese people take virus seriously even without rules from higher up. Domestic travel, too, is grinding down: JR Tokai reported 50% decline in customers over the past weeks.
CHINA STORY: IT‘S POLITICS, NOT JUST HEALTH
The official story from China is that battle against virus has been already won “by heroic efforts of the Chinese people” and “thanks to glorious leadership from The Great Leader”. In fact, “other countries should be thankful to China” – it‘s an insult to accuse China for starting it all and spreading it out. Of course, that‘s exactly what US president has started saying. Expect more bashing other countries for crashing in to spoil his campaign party. Maybe time to launch that 25% tariff on cars from Europe and Japan? How about starting to demand new concessions from “my friend” in China?
There‘s some truth in what China says: over past weeks Europe and USA have focused on criticizing – or envying – what China was doing to contain the virus instead of preparing how to fight itself if/when it lands in. When it did arrive, most countries were caught badly prepared, just like WHO warned everybody already last year. Now they scramble as best they can and their political leaders look desperate to show “strong leadership” like China president, making speeches and taking dramatic new steps.
US president and Japan prime minister are prime examples of this political catch-up game. Both have issued new orders – or “requests” in Japan – that have baffled people and caused more confusion. Trump‘s flight ban from Europe was an unbelievable shot in own foot as the US stock market, his main claim to fame, just pumped back up by big central bank move, crashed down again. Of course, it went grandiously up again after President promised billions of new money to the markets. Judging by another big Fed cut and promise of USD 700 billion more, it was considered this was needed to keep the Dow index up when the trading starts again today.
In Japan, government decision to ban arrivals from China was an equally unnecessary, belated political show and shot in own foot: it cancels out what ever was left of the Chinese tourist wave that was considered so important for economy it could not be stopped earlier this year – so why now? An early move could have saved us from many infections, yet was not possible until president Xi state visit had been cancelled by mutual agreement. Banning Koreans, too, is just for show: they stopped coming here already last year by their own decision.
WHY JAPAN FIGURES REMAIN LOW?
That Japan infection figures increase only slowly, while others‘ keep climbing fast, is baffling. With official count at just over 700 today – excluding the US cruise ship – it‘s less per capita than Finland by now! In fact, it’s less than half of the death count in Italy (31 in Japan today).
We know the number of positive findings depend on how many tests you make and Aoyama question last week was whether Japan‘s low testing rate is because of bureaucratic incompetence or deliberate move to keep it low? Health officials claim they have now capacity to make 6000 tests per day – soon even 10,000 – yet the average rate of daily tests have remained in only few hundreds.
Now we know the answer is the latter: health officials have admitted they limit access to testing because they see there‘s anyway not enough hospital beds nor any effective medicine yet to treat the patients. If you feel sick, you are supposed to stay home at least 4 days whereafter you may (!) contact your community health office – not any doctor or clinic – who will then decide if your case needs testing. Instead, officials focus on epidemiology: finding where did you get the virus and how many other people you might have infected. Isolating all potentials is the key to preventing the virus from spreading, according their thinking.
You might think it‘s against basic rights of citizens to receive public health care – and I would agree on that – but to my surprise reading today that Finnish health officials, too, say “it is not necessary to test all who feel sick”. Of course, there are also countries where, even if tested, citizens do not have any public health care and citizens who cannot afford expensive private care.
ECONOMIC IMPACT
Global aspect: expect wave of new estimates of further damage around the world following US action which evidently admits the situation over there is worse than earlier given. It seems the whole world is grinding to halt now: it‘s not just how quickly China can get its industries back to work and consumers out spending again, it‘s about consumers all over the world.
A week ago economists were still talking about 2-3% GDP decline in China and 1-2% decline globally. For those with only 1-2% growth today, that would mean going negative. For Japan GDP that declined 7% speed in Oct-Dec – not just 6% as initially estimated – it means going below others. Estimates that Jan-March GDP would decline further 1-2% from Oct-Dec might not be enough. Consumer spending declined 4% in January following 5% decline in December and October and 2% in November and the decline must have become steeper in February-March.
Government announced details of its USD 5 billion financial help for struggling SME companies from restaurants, ryokans and bus operators to small machinery makers: you can get a bridge loan to carry your business on from two public institutions at just 1% interest or even with no interest if your turnover is more than 10% down. The next day the institutions were swamped with over 30,000 applications: it might take weeks or months before all application are processed – probably too late for many. Bureaucrats can always spoil whatever good politicians plan.
As it is much too early to predict when the virus stops here or anywhere else, think it is too early to predict how economy here or elsewhere will turn out for the full year. But things certainly do not look good.
OLYMPICS: WILL THEY BE HELD?
Finally, the question that everybody keeps asking and guessing. Last week still thought there was possibility that the virus scare would clear by summer and the games could be held, but in light of recent week‘s news we must give up any hope for that. In fact, the sooner the cancellation is confirmed, the better for all, including Japanese arrangers and public.
While local arrangers and Abe government have stuck to the official line that there is no change in the plans – the Olympic fire is already on its way from Greece for 3 months long nationwide tour starting March 26! – the fact is that decision whether to hold games or not is 100% up to IOC. Japan has no power to say yes or no, just stick to arranging and paying all the costs.
Now IOC has announced it will hold a video conference with all national Olympic committees on Tuesday this week. I‘m pretty sure we can expect to have some kind of consensus on how to proceed from that.
From Tokyo view, with all places ready and paid for, it would be best if the games would be just transferred to next year same time. That‘s up to IOC being able to renegotiate the TV-rights with international broadcasters, especially US ones who pay the biggest money. USD 5 billions is a lot, so IOC is unlikely to let is pass until 2024, but wants to have at least part of it earlier. Delaying the games to later this year is not acceptable for US broadcasters as other US sports are scheduled to start then. It could also be that we won‘t see virus gone by then.
Let‘s see what Olympic barons will decide. It‘s a bitter emotional issue for the Japanese public whose tax money has been used for this project in billions of dollars. No wonder, some people already say: let‘s send the bill to China!
Now that would be the last thing that Abe-san would ever do.
Timo Varhama
Tokyo, March 16, 2020