Japan Births Plunge To Lowest Level Ever Recorded As "Celibacy Syndrome" Takes Its Toll

Back in 2013 we asked "Why Have Young People In Japan Stopped Having Sex?" And while that might sound like nothing more than a clever headline intended for The Onion, it was prompted by a very serious survey conducted by the Japan Family Planning Association which found that 45% of Japanese women aged 16-24 and 25% of men were "not interested in or despise sexual contact"...a growing trend that has revealed itself via the nation"s persistently declining birth rates.  In fact, "celibacy syndrome" has become of such great concern for the Japanese government that it is considered a bit of a looming national catastrophe....a catastrophe that seems to be getting worse at an accelerating rate.

According to data released today by Japan"s Ministry of Health, Labor and Welfare, child births in Japan will drop to just 941,000 in 2017, the lowest since data first started being recorded in 1899, and nearly 65% below the peak birth rate from the late 1940"s.

As the Financial Times notes today, the persistent declines in Japanese birth rates come despite the best efforts of central planners to encourage population growth via a litany of government entitlement programs aimed at helping young families cover the cost of childrearing...

The government of Shinzo Abe, prime minister, has made raising Japan’s birth rate a priority. On Friday it approved a budget that takes the first steps towards providing free pre-school, private high school and university education in an effort to reverse the trend.

 

Unless the low birth rate is reversed, the only option to increase Japan’s population would be for it to take in more immigrants. Yet despite high inflows of guest workers drawn by the strong economy, Japanese politicians have been reluctant to debate the subject.

 

Mr Abe’s government has instead set a target to raise the total fertility rate to 1.8. Officials hope the strong economy, combined with measures making it easier for women to combine work and childcare, will encourage families to have more children.

 

“We’d like to halt the decline by advancing our strategy to support children and make an easier environment for giving birth,” the ministry said.

...they"ve basically thrown in everything except a pony.

Meanwhile, Japan"s aging population means that the number of deaths will likely rise by 3% YoY in 2017 to 1.34 million, a post-World War Two high, resulting in the largest ever natural population decline of just over 400,000.   

Unfortunately, the crisis is only expected to get worse over time as projections from the National Institute of Population and Social Security Research suggest the pace of population declines will accelerate and that by 2045 Japan will be losing about 900,000 residents a year.  On current trends, the population is set to fall from 126.5m to 88m by 2065 and to just 51m by 2115.

All of which means there is really only one thing left to do...instruct the BOJ to print even more money and start passing it out to expecting parents...which we"re pretty sure will solidify Haruhiko Kuroda"s official title of "biggest pimp in the world".

Exit Polls Project Sweeping Victory, Supermajority For Japan"s Abe

As widely expected, Japan Prime Minister Abe"s ruling coalition is set for a sweeping victory in Sunday"s general election, and may retain the two-thirds parliamentary majority needed to revise Japan"s constitution, according to an NHK exit poll.

Shinzo Abe during an election campaign rally in Tokyo, on Oct. 21

Shortly after polls closed at 8pm, an NHK exit poll showed that Abe’s Liberal Democratic Party and coalition partner Komeito are set to win between 281 and 336 seats of the 465 total, boosting Abe"s chances of becoming Japan"s longest serving political leader: the Prime Minister needs 233 for a simple majority and 310 for a supermajority. Opposition parties are set to split the rest, with the left-leaning Constitutional Democratic Party projected to come in second. Actual results are now being counted.

NHK also projected the leftwing Constitutional Democratic party winning 44 to 67 seats, with upstart Tokyo governor Yuriko Koike’s Party of Hope taking 38 to 59 seats.

The exit polls are in line with the most recent media seat projections, shown below:

Source: Nikkei, Mainichi, Asahi, Kyodo, Goldman Sachs

The vote took place as a typhoon lashed Japan on Sunday, threatening to damp voter turnout for the election that was widely forecast to give Abe a fresh mandate to pursue economic revival and bolster the nation"s military.  Super Typhoon Lan is one of the strongest to hit Japan in years with heavy rain expected across much of the country. The Japan Meteorological Agency issued severe weather warnings for floods, wind damage and landslides. The typhoon is projected to make landfall near Tokyo on Sunday night.

A substantial win for Abe’s coalition would pave the way for more ultra-easy monetary policy and flexible fiscal stimulus that has allowed Japan - Asia’s second-biggest economy - to grow for 6 straight quarters, if only on paper. It would also give President Trump a stable partner in pushing a hardline stance against Kim Jong Un’s regime in North Korea. The LDP is due to hold a leadership election next September. If Abe runs and wins again, he could stay on as prime minister until 2021, according to Bloomberg.

Ever the opportunist, Abe called today"s election last month more than a year before parliament’s term expired, saying he wanted to test public opinion on a proposal to divert some revenue from a planned sales-tax hike to fund education and delay moves to rein in Japan’s swollen public debt. But the timing was really mostly influenced by a recent North-Korea driven uptick in his approval rating after a series of cronyism and corruption scandals hurt his popularity earlier in the year, sending his approval rating to a record low as recently as the summer.

As the FT notes, Japan’s election has been dominated by chaos among the opposition, which also helped Abe: the Constitutional Democratic Party was set up only about two weeks ago by former Chief Cabinet Secretary Yukio Edano after its predecessor split up. Other opposition lawmakers defected to populist Tokyo Governor Yuriko Koike’s upstart Party of Hope, which briefly jumped in opinion polls before fading. In his final election appearance on Saturday, Abe attacked the opposition for its time in government from 2009-12. “Just because they’ve changed their name, they can’t change that three years and three months. You can’t fool the public,” he said.

“It’s a very tough result,” Koike was quoted by Bloomberg immediately after the exit poll was released in a televised interview from Paris, where she is attending a conference on climate change. “We have to analyze the reasons properly, but I am sorry that I caused unpleasant feelings through my words and actions.”

UPDATE: Yuriko Koike, leader of Japan"s upstart Party of Hope, responds to "tough" poll projections https://t.co/DMlsMccrg0 pic.twitter.com/BHHiHqStLV

— Bloomberg (@business) October 22, 2017

In a sign of how little hope opposition parties had of defeating Abe, Koike left the country on Saturday night to attend a mayoral meeting in Paris on climate change. Even after the Democratic party had disbanded to support her, Ms Koike declined to run, leaving the opposition without a credible candidate for prime minister.

Meanwhile, almost five years into the job, Abe touted his economic record, with unemployment at less than 3 percent and the stock market at its highest level in more than two decades, both of which are largely and exclusively a function of the BOJ monetizing every piece of debt, not to mention ETF, if can find. The massive monetary easing has weakened the yen and bolstered exports while having less success at defeating deflation and boosting pay.

Abe also portrayed his party as best placed to defend Japan against the growing threat from North Korea’s missiles and nuclear bombs. His party is considering a proposal to allow Japan to have an offensive capability for the first time since World War II.

Set to become the latest Asian nation to turn to militarism, a two-thirds majority would make it easier for him to revise Japan’s pacifist constitution, a move he sees as necessary to strengthen the military. Any change would also need to pass a public referendum, and recent polls show the public divided over the issue. The ruling coalition currently controls 68% of seats in the lower house, including 288 for the LDP and 35 for its coalition partner Komeito, according to the parliamentary website.

What happens next?

According to Goldman analyst Naohiko Baba, "a big single-party majority for the LDP would afford the Abe administration stability, leaving the economic policy framework almost intact"

Baba adds that his biggest focus is whether the LDP can secure a majority on its own. If the ruling parties attain a majority but the LDP is unable to secure a single-party majority, Prime Minister Abe could come under pressure from within his party to step down in order to take responsibility, even if the LDP/Komeito coalition continued. How the election battle will unfold is anybody’s guess. However, based on exit polls, it appears the LDP is highly likely to secure far more than a majority of votes on its own.

Such a result would enhance Prime Minister Abe’s status within the LDP, highly likely enabling him to be reelected for a third term in the LDP presidential election in September 2018 and to maintain the reins of government for longer. It would also sharply reduce uncertainty surrounding economic policy as a whole since Prime Minister Abe is able to appoint the next BOJ Governor by himself when current Governor Kuroda"s term ends in April 2018.

With the election now concluded, the calendar below lists all the main political and economic events in Japan over the next four years.

Finally, here is a breakdown of the key party manifestos of Japan"s three main political parties: the LDP, the Party of Hope and the CDP:

Japan Prepares For Mass Evacuation Of 60,000 Citizens From South Korea

It won"t be the first time that a near-panicked Japan has came close to the edge when it comes to North Korea, and in preparation for an "emergency" was planning to evacuate its citizens located in South Korea. The last such notable spike in escalations took place in April, when as the Yomiuri Shimbun reported at the time, the Japanese government had asked the U.S. to provide advance consultation if it is about to launch military action against North Korea, and "ramped up preparations for emergency situations", including the potential evacuation of some 57,000 Japanese citizens currently in South Korea.

Fast forward to today, when moments ago Japan"s Nikkei reported that as tensions on the Korean Peninsula reach new heights following Pyongyang"s first (allegedly) hydrogen bomb test, Japan is planning a possible mass evacuation of the nearly 60,000 Japanese citizens currently living in or visiting South Korea.

"There is a possibility of further provocations," Japanese Prime Minister Shinzo Abe said at a Monday meeting with ruling coalition lawmakers. "We need to remain extremely vigilant and do everything we can to ensure the safety of our people."

In response to North Korea"s sixth nuclear test, Japan and the U.S. are seeking a peaceful resolution by ratcheting up economic pressure on the rogue state through an oil embargo and other measures, while South Korea"s president has also called for a currency/FX blockade of the Kim regime. And yet, what has spooked Tokyo is that on Sunday, Defense Secretary James Mattis also said any threat to the U.S. or its allies "will be met with a massive military response - a response both effective and overwhelming." Which means thousands of Japanese may soon be in harm"s way.

According to Nikkei, there are currently about 38,000 long-term Japanese residents in South Korea, as well as another 19,000 or so tourists and other short-term travelers. "If the U.S. decided on a military strike against the North, the Japanese government would start moving toward an evacuation on its own accord regardless of whether the American plans are public," a Japanese government source said.

Tokyo is working on a four-tier emergency plan based on the severity of the situation: discouraging unessential travel to South Korea, discouraging all travel to South Korea, urging Japanese citizens there to evacuate, and finally, urging them to shelter in place.

Should skirmishes erupt between the two Koreas, for example, the Japanese government would discourage all new travel to South Korea. At the same time, it would urge citizens already there to evacuate using commercial flights. Although the Japanese Embassy would help secure airline reservations, the government"s role under this scenario would mainly be to provide information.

But Japan would need to coordinate with South Korean authorities under a shelter-in-place scenario. If Pyongyang launched a major military attack that leads to the closure of South Korean airports, the Japanese embassy would urge citizens still in the country to stay at home, or move to a safer area within the South.

Also in case of a worst case scenario, Seoul has agreed to give Japanese citizens access to safe zones, such as designated subway stations, churches and shopping malls, according to a Japanese source. The Japanese government has already provided its citizens in South Korea with information on over 900 such facilities.

Furthermore, in the event of airport closures, the best option for Japanese citizens to return home would be by sea from the southeastern port city of Busan. The Japanese government is working to obtain cooperation from U.S. forces stationed in South Korea to transport evacuees across the country from Seoul to Busan.

Additionally, the Japanese Self-Defense Forces would need permission from South Korea"s government to operate inside the country. Approval has not been forthcoming, Yonhap reports, and could provoke a backlash from a South Korean public harboring historical grievances at the former colonial power. But SDF vessels could help in ferrying Japanese citizens home from Busan.

Such a crises could make it easier for terrorists and other dangerous individuals to enter Japan disguised as returning citizens. The Japanese government aims to work with the U.S. to prevent such unlawful entry. One proposal would create a temporary holding area for returnees in Busan or Japan.

"We are looking at a range of responses" to a crisis on the Korean Peninsula, from securing evacuees and processing their entry to creating and operating holding facilities, as well as determining whether Japan is responsible for their protection, Abe had said at a parliamentary session in April.

As we reported in April, and as the infographic below showed, the Japanese government has been contemplating five potential emergency responses should a military clash break out between the US and North Korea. They include the following:

• Logistical support by Japan"s Self-Defense Forces (SDF) in the event of a local conflict


• Use of force by the SDF in the event of a full scale war


• Protection of Japanese citizens in South Korea


• Preparation for armed attacks against Japan


• Civil protection and response to evacuees 

North Korea Fires ICBM Missile; Flies 45 Minutes, Lands In Japan Waters

Perhaps sensing that Trump is rather vulnerable right now, and confirming reports from two days ago that an ICBM launch is imminent, moments ago Japan"s NHK reported that North Korea has fired "what appears to be a missile", which Kyodo has since classified as an ICBM, which landed in Japan"s exclusive economic zone. The Pentagon, as reported by Fox news, confirms that Japan has indeed launched a ballistic missile, and is assessing the results.

Japan Prime Minister Shinzo Abe says on comments carried on TV that North Korea has again launched a missile, which may have landed in the waters of Japan’s exclusive economic zone, confirming an earlier report by NHK which said the missile may have landed in the waters near Japan, citing Japan Coast Guard. NHK adds that Japan Chief Cabinet Secretary Yoshihide Suga to give briefly shortly.

Japan Chief Cabinet Secretary Yoshihide Suga says that the missile flew for about 45 minutes before landing in Japan’s exclusive economic zone.

According to VoA, atatement from the Dept of Defense is expected soon on the latest DPRK missile launch.

As Citi writes, the current confused US and China policy on North Korea is doing little to stem these tests. On Wednesday we reported that NKorea was preparing for another launch. Meanwhile the Washington Post reported earlier this week that NK will likely be able to produce a nuclear-capable warhead by 2018 – a full two years ahead of schedule.

USDKRW has moved by 25bps so far on this news.

Abe's Days Numbered? DB Warns Japan PM "May Be Forced Out" Leading To Spike In Yields

Almost exactly ten years ago, on September 12, 2007 Japan"s current prime minister Shinzo Abe resigned less than a year into a tenure dogged by scandals, the suicide of a minister, a raft of resignations and corruption allegations, and a humiliating election drubbing for his Liberal Democratic Party. Never one to shrink away from resposibility, Abe blamed it on crippling diarrhea:

Shinzo Abe resigned as Prime Minister, claiming that diarrhea was preventing him from carrying out his duties. The diarrhea was due to ulcerative colitis, a bowel illness caused by ulcers. Abe had suffered from this illness for decades, but after becoming Prime Minister, the stress of his job apparently made the symptoms worse.

Apparently it did not prevent him from taking on the job again some five years later, when he was reinserted in the prime ministerial position again, largely as a smokescreen meant to keep the government together as BOJ"s then-new governor Haruhiko Kuroda unleashed the greatest "wealth creation" and bond monetization experiment in the history of Japan, which has culminated with the Japanese central bank owning nearly 100% of Japan"s GDP in Japanese Government Bonds.

Unfortunately for Abe, it may be time to buy Imodium again.

As Deutsche Bank reports, following a fresh series of political scandals, the Abe cabinet"s approval ratings have kept falling and are now in the sub-40% "danger zone" and as DB"s Makoto Yamashita writes, it is now starting to look as though Prime Minister Shinzo Abe might be forced out of office until the Liberal  Democratic Party leadership race scheduled for September 2018, "in which case JGB yields might be at risk of climbing quite significantly."

Ironically, in many ways this mirrors Abe"s first fall from grace. This is what the Economist wrote some ten years ago:

"Mr Abe"s government was initially very popular. Yet the tide in Mr Abe"s affairs only ebbed. True, early on he made a notable opening towards China, with whom relations had been strained under Mr Koizumi. Other than that, Mr Abe proved unable to impose discipline upon a cabinet of the corrupt and incompetent. Worse, he had a tin ear for the political mood. Voters, it had turned out, had been beguiled more by Mr Koizumi the messenger than by his message of structural reform, which entailed pain and uncertainty, notably in Japan"s rural regions and among the old. Mr Abe failed to address these concerns."

This time around, the reason for the German bank"s dour outlook is because sub-40% approval ratings have almost invariably triggered changes of leadership around one year later over the past two decades and have always resulted in significant national election defeats.

"We will thus be watching quite closely to see whether Abe"s upcoming cabinet reshuffle proves successful in regaining the 40% level. Given that this political risk is a yen-specific factor, it should be sufficient to buy foreign bonds as a hedge against the possibility of a "risk off" decline in interest rates."

And since the financial world is far more interested in the implications of Abe"s departure on JGBs than his actual political fate, here is the background: while the BOJ has once again proved successful in curbing upward pressure on the 10y JGB yield by conducting a fixed-rate operation, it continues to buy more 5y–10y JGBs than are being issued each month and is thus likely to reduce its purchases when yields are declining. Moreover, the BOJ has this month left its offer amounts in the super-long sector unchanged (at least to this point) despite yields having climbed quite considerably. The central bank thus appears willing to tolerate steepening of the >10y curve, which may suggest that a "shock" political event like an Abe resignation may lead to an accelerated selloff off the longest-dated Japanese bonds.

As for Abe"s fate, here are the details:

Abe cabinet"s approval ratings already in dangerous territory:  the Yomiuri Shimbun reported on July 10 that the Abe cabinet"s approval rating had fallen 13%pt from its previous survey to 36%, while other polls have shown a 5%pt decline to 33% (Asahi) and a 13%pt decline to 35% (NHK). An approval rating of 40% or higher is generally considered necessary for a prime minister to remain in office. The Yomiuri Shimbun also reported a 10% decline in the Liberal Democratic Party"s approval rating to 31%, a 1%pt decline for the Democratic Party to just 6%, and a 7%pt increase for independents to 47%. Some have suggested that  Prime Minister Shinzo Abe might still be "safe" for want of opposition, but past experience indicates that might not necessarily be the case.

And, as Deutsche Bank warns, it is now beginning to look as though Abe might be forced out of office prior to the LDP leadership race scheduled for September 2018. Here"s why:

For starters, no administration since 1997 has survived for more than a year after recording sub-40% cabinet approval ratings in consecutive months, although Keizo Obuchi should probably be considered an exception given that his cabinet"s approval rating had improved from 25% initially to 40% by the time he was forced to stand down due to the abovementioned diarrhea. Only Junichiro Koizumi served out his full term, having consistently maintained approval ratings above 40%. It is possible that Abe will redeem himself with his upcoming cabinet reshuffle, but failure to regain the 40% level would almost certainly point to a change of prime minister before the end of 2018 if past experience is any guide.

Second, the next lower house election needs to be called by December 2018, and it is important to note that each upper or lower house election since 2003 contested with a sub-40% cabinet approval rating has resulted in defeat for the incumbent party (chart below), with changes of government occurring after Abe"s July 2007 upper house election defeat, Taro Aso"s August 2009 lower house defeat, and Yoshihiko Noda"s December 2012 lower house defeat. The next LDP leadership race is scheduled for September 2018, and it seems highly unlikely that party members would throw their support behind someone with a sub-40% cabinet approval ratings. The lack of unified opposition is indeed a significant difference from the past, but it is quite conceivable that independents will have combined forces to establish a new party by the end of this year or soon thereafter.

Third, Abe will struggle to proceed with his attempt to revise the Constitution if his approval rating remains so low. Even if the necessary two-thirds majority can be secured in the Diet, it is difficult to envisage 50% support in a national referendum. There does not currently appear to be any headroom to use fiscal or monetary policy to boost the government"s popularity, with the Abe administration having already compiled a roughly JPY28.1 trillion "Economic Stimulus Package for Realizing Investment for the Future" under the second FY2016 supplementary budget. Some market participants appear to believe that further pump-priming could be on the cards, but recent experience has in any case demonstrated that even that might not be enough to win back the support of voters.

Fourth, while markets may be finding it difficult to envisage a post-Abe government, Kyodo recently claimed that Foreign Minister Fumio Kishida intends to stand down around the time of the cabinet reshuffle (although we are as yet unsure as to the accuracy or veracity of this report). Kishida heads a faction thought to consist of around 46 LDP lawmakers (chart below)). This faction has its origins in the Kochi Kai launched by then Prime Minister Hayato Ikeda back in 1957, and is thought to be more dovish than Abe with regard to matters of diplomacy or the possibility of constitutional reform. Kishida is believed to have reiterated on June 28 that he remains reluctant to revise war-renouncing Article 9 of the Constitution, and Finance Minister Taro Aso might also emerge as a contender now that he is effectively heading the LDP"s  second largest faction. As a result, expect talk of a successor to Abe to heat up unless the upcoming cabinet reshuffle does prove successful in reversing recent declines in popularity.

Finally, here"s why the above matters for Japanese risk assets, from Deutsche Bank:

We have been stressing the potential for political risk to drive JPY rates higher for several weeks now, but have yet to see this possibility priced into the market. This is somewhat puzzling given that the demise of Abe would almost certain have ramifications for the BOJ (with Abe having been such a strong support of Governor Haruhiko Kuroda). The current climate of low bond market volatility thus looks likely to come to an end sooner rather than later. Weak inflation has of course helped to keep JPY rates anchored, but that might not be enough if political instability does develop into a major market theme. We will therefore be  keeping a close eye on poll results following Abe"s upcoming cabinet reshuffle. 

And for those who are seeking a pair-trade variant to a long position in govvies elsewhere, DB recommends shorting Japan dur to said rising Abe risk:

Given that this political risk is a yen-specific factor, it should be sufficient to buy foreign bonds as a hedge against the possibility of a (global) "risk off" decline in interest rates (including super-long JGB yields).

As for Abe"s life after resigning - for the second time, - we are confident he will be fine following a few unpleasant run-ins, pardon the pun, with the bathroom which will once again be scapegoated for his failures, and several Imodium prescriptions. Who knows, after Japan"s economy crashes for a few more years, we may just see the third coming of prime minister Abe to serve as the smokescreen to the BOJ one last time, which at that point will be forced to buy, well, everything to keep the market from imploding.

Abe "Plunges Into Crisis" After LDP Suffers "Historic Defeat" In Tokyo Elections, USDJPY Slides

On Sunday Japanese PM Shinzo Abe’s Liberal Democratic Party suffered what Reuters called a "historic defeat" in the Tokyo assembly election, and "plunged into a crisis" after losing to an upstart outfit in an vote that is seen as a harbinger for Japan"s national elections, and signaling trouble ahead for the premier who has suffered from slumping support after a series of political scandals.

"We must recognize this as an historic defeat," former defense minister Shigeru Ishiba was quoted by NHK as saying. "Rather than a victory for Tokyo Citizens First, this is a defeat for the LDP," said Ishiba, who is widely seen as an Abe rival within the ruling party.

"We must accept the results humbly," said Hakubun Shimomura, a close Abe ally and head of the LDP"s Tokyo chapter. "The voters have handed down an extremely severe verdict."

According to Bloomberg, the ruling LDP party was projected to win its lowest number of seats ever in the capital, a crushing blow for Abe, which sent the USDJPY sliding after suddenly the very fate of Abenomics is in question, as past Tokyo elections have been bellwethers for national trends. A 2009 Tokyo poll in which the LDP won just 38 seats was followed by its defeat in a general election that year, although this time no lower house poll need be held until late 2018.

Tokyo Governor and head of Tokyo Citizens First party Yuriko Koike

As Reuters adds, the Tokyo Metropolitan assembly election was a referendum on Governor Yuriko Koike"s year in office, but the dismal showing for Abe"s party is also a stinging rebuke of his 4-1/2-year-old administration. Koike"s Tokyo Citizens First party and its allies were on track for between 73 to 85 seats in the 127-seat assembly, according to NHK TV exit polls. Later vote counts showed the LDP was certain to post its worst-ever result, winning at most 37 seats compared with 57 before the election, NHK said, while Koike"s party and allies were assured a majority.

Koike, a media-savvy ex-defense minister and former LDP member, took office a year ago as the first female governor in the capital, defying the local LDP chapter to run and promising to reform governance of a megacity with a population of 13.7 million and an economy bigger than Holland"s.

Among her allies is the Komeito party, the LDP"s national coalition partner.

"I am excited but at the same time, I am also keenly aware of the weight of my responsibility," Koike told NHK, adding the results had exceeded her expectations.

It was not immediately clear how the LDP"s loss would alter Japan"s political landscape: according to Japanese press, the strong showing by Koike"s party will fuel speculation that she will make a bid for the nation"s top job, though that may not be until after the 2020 Tokyo Olympics. It could also widen cracks between the LDP and the Komeito while damaging prospects for the opposition Democratic Party.

What is more troubling for the Yen and global capital markets, is that Abe"s rivals in his party could be encouraged by the LDP"s dismal performance to challenge him in a leadership race in September 2018, victory in which would set Abe on course to become Japan"s longest-serving leader and bolster his hopes of revising the post-war, pacifist constitution.

Meanwhile, according to Gerry Curtis, professor emeritus at Columbia University, Japan’s political landscape could be set for a shake-up.

"We may discover that Japan is not all that different from Britain, France, and the U.S. in its ability to produce a big political surprise," he said, referring to recent elections in those countries.

The LDP"s thrashing could also make it harder for Abe to pursue his cherished goal of revising the U.S.-drafted constitution"s pacifist Article 9 by 2020, a politically divisive agenda, said Sophia University professor Koichi Nakano.

"His prime motive to stay in power is his desire to revise the constitution, but once his popularity really starts to fall, that becomes very difficult to do," Nakano said.

Having been hit by a wave of favoritism scandals in recent months, Abe"s the most recent troubles center on concern he may have intervened to help Kake Gakuen (Kake Educational Institution), whose director, Kotaro Kake, is a friend, win approval for a veterinary school in a special economic zone. As noted here previously, Abe got in trouble because the government has not granted such an approval in decades due to a perceived glut of veterinarians. Abe and his aides have denied doing Kake any favors.

But potentially more devastating - according to Reuters  - is "the impression among many voters that Abe and his inner circle have grown arrogant." Perhaps it is because instructing your central banker to monetize all your GDP in debt, and boost the stock market takes some serious skills?

Meanwhile, the scapegoating process is being prepared: Abe is expected to reshuffle his cabinet in coming months in an effort to repair his damaged ratings, a step often taken by beleaguered leaders but one that can backfired if novice ministers become embroiled in scandals or commit gaffes. Among those many political insiders expect to be replaced is Defense Minister Tomomi Inada. Inada"s remark during the Tokyo campaign seeking voter support in the name of the Self-Defense Forces, as the military is known, came under heavy fire. By law, the military is required to be politically neutral.

In a kneejerk response, the USD/JPY fell as much as 0.4% to 111.90 in early Asia trading Monday in the wake of the shock loss.

The reason why suddenly Japan"s political process may go under the microscope, is that if indeed the LDP and Abe are in trouble, then the future of the BOJ"s QQE (with Yield Control) are in question. This is a problem because as Deutsche Bank reported late on Friday, "[our model] highlights the relative importance of BoJ purchases to Fed and ECB. For a 100 bn in annualized purchases of each, the BoJ has been associated with a 15 bps decline in term premium, almost twice the impact of either the Fed or the ECB. While the market is rightly concerned about the extent and timing of ECB taper, the BoJ is potentially much more important to the rate outlook as it was in the middle of last year."

But maybe Abe doesn"t even need to be ousted: according to Nobuyuki Nakahara, a former BOJ board member and Abe advisor, Kuroda shouldn’t serve another term as governor of the BOJ "because the central bank will need fresh ideas as it moves toward exiting years of unprecedented monetary easing."

"An exit will surely come up within the next five years and we need someone who can prepare for it," said Nobuyuki Nakahara, a former BOJ board member.

“He will fall into inertia and struggle to come up with bold new ideas. It’s the same in the private sector when a corporate president stays too long," he said.

With everyone expecting a political black swan to emerge out of Europe at the start of the year - only for all concerns to be laid to rest by the summer - could the source of 2017"s true political shock end up being Japan?

Shinzo Abe shouts "Banzai!" with members of the ruling Liberal Democratic Party
during the annual party convention in Tokyo

Japan's "Womenomics" Is Working Just As Well As Abenomics... Terribly

Via Japan Subculture Research Center,

Japan is getting serious about gender equality - and there were absolutely no bribes paid by Japan to win the right to host the 2020 Olympics - and the nuclear disaster at Fukushima is under control. Decide for yourself which of these three statements is the most untrue.

Womenomics was touted by Japan’s Prime Minister Shinzo Abe as his progressive policy to elevate the status of women in what is still a very sexist and unequal society, where women are far from being empowered. The Global Gender Gap report published last year noted that Mr. Abe and the LDP’s pledge to bridge the gender divide resulted in actually widening the gulf, with Nippon sliding down a few notches to 111th in terms of world gender equality. 

It’s hard to see women in Japan being “empowered” when they can be sexually assaulted with near impunity. The odds that their assailant will be arrested, or prosecuted are low–less than a coin toss. And if he is actually prosecuted–he can sometimes walk free, with no jail time and no criminal record,  by paying damages and saying, “I’m sorry.” It’s a situation that the Abe administration could have changed but neglected to do so, tabling newly revised criminal codes to instead focus on passing a conspiracy bill that the United Nations warns could erode civil liberties.

Of course, some would argue that “womenomics” have never been about elevating the status of women in Japan - it’s always been about keeping Japanese business thriving and hopefully encouraging woman to work - and breed. Of course, pregnancy in the workplace often is greeted with bullying from all sides. Abe’s vision of Womenomics has certainly never been about improving the lives of Japan’s single mothers, 50% of whom live in poverty. In fact, other than talking about “shining women–it’s not clear exactly what he wants for Japan’s future potential birthing machines.*

The current Minister of Gender Equality and Women’s Empowerment, is of course, also a man, and also in charge of improving Japan’s birthrate. Do we need to say more?

Yes, Japan’s Prime Minister Abe and the LDP are gungho about Gender Equality. Meet Katsunobu Kato, his home page will convince you.

Recently, Bloomberg published an interview with Democratic Party leader Renho, in which she pointed out the obvious, Womenomics is all talk and no walk.

“They should be ashamed to use the word ‘Womenomics’,” Democratic Party leader Renho, the 49-year-old mother of twins, said in an interview in Tokyo late Thursday when asked about the term Abe often uses to describe his efforts. “It’s an embarrassment.”

Abe had vowed to eliminate waiting lists for childcare in a bid to draw more women into the workforce to make up for Japan’s shrinking population. He also sought to have women take 30 percent of management positions in all fields by 2020.

On both goals he’s falling well short: Japan was 111th in the World Economic Forum’s Gender Gap ranking for 2016, down 10 places on the previous year.

“About 80 percent of those who take childcare leave are women, and if they’re forced to wait for daycare, that means unemployment,” Renho said.

“You either get demoted or you give up on work. What’s womenomics about if women are being forced to make such sad choices?”

For the rest of the article, go to

Abe’s Policies Failing Women, Japan Opposition Chief Says

*Reference to women as “birthing machines” is sarcasm. We know that the LDP also thinks of women as much more than that–as potential nurses for the elderly, expert green tea brewers for the office, and caretakers of the children that they should be giving birth to right now for the greater prosperity of Japan."

Japan Prepares For North Korea "Emergency"

Judging by the precautionary actions of North Korea"s neighbors, the next 48 hours on the Korean peninsula could see substantial volatility, because at the same time as China"s largest carrier was said to suspend flights to Pyongyang, the Japanese government has asked the U.S. to provide advance consultation if it is about to launch military action against North Korea, and "has ramped up preparations for emergency situations" according to Japan"s Yomiuri Shimbun, including the potential evacuation of some 57,000 Japanese citizens currently in South Korea.

According to the Japanese publication, PM Shinzo Abe stressed that the region is becoming increasingly tense. “[U.S. President Donald Trump] has stated that all options are on the table. It’s a fact tensions are rising,” he said at the Prime Minister’s Office after receiving a written proposal calling for tougher sanctions on North Korea from the Liberal Democratic Party’s Eriko Yamatani, chief of the headquarters for the abduction issue. 

He added that "if an unexpected situation occurs, we’ll ask the United States to cooperate in rescuing the abduction victims."

The Japanese government, like its South Korean peer, has asked for advance consultation regarding any U.S. military action against North Korea during a series of meetings between Japanese and U.S. officials. The U.S. side is said to have responded positively to the request. This is because Japan would need to take appropriate precautions given that, as an ally of Washington, it could be a target for retaliation should the U.S. military attack North Korea, although in order to preserve the "element of surprise" it would not be at all
surprising if Trump proceeded to launching a strike unannounced.

As the infographic below shows, the Japanese government is contemplating five potential emergency responses should a military clash break out between the US and North Korea:

• Logistical support by Japan"s Self-Defense Forces (SDF) in the event of a local conflict


• Use of force by the SDF in the event of a full scale war


• Protection of Japanese citizens in South Korea


• Preparation for armed attacks against Japan


• Civil protection and response to evacuees

There are three main threats Japan would face if Trump launches an attack: in addition to a potential ballistic missile retaliation; the mass evacuation of thousands of Japanese citizens, and what would likely be a massive refugee onslaught by North Koreans.

Furthermore, recall that under its post-war constitution, Japan is not allowed to have offensive military forces. Its Article 9 declares "the Japanese people forever renounce war as a sovereign right of the nation and the threat or use of force as means of settling international disputes." That may copmlicate logistics should war indeed break out in North Korea.

As the Japan Times notes, a North Korean attack on Japan would involve ballistic missiles. The Japanese government has been bolstering defensive measures against ballistic missiles, including making permanent in August 2016 an order to the Self-Defense Forces to intercept and destroy incoming missiles.

There is also the concern of an imminent evacuation:

A difficult issue that would emerge in a contingency on the Korean Peninsula is the rescue and protection of an estimated 57,000 Japanese, including tourists, in South Korea. The government started compiling an evacuation plan in the 1990s and has updated and changed it several times. The government plans to convene a meeting of the four ministers who form the National Security Council to review the strategy for dealing with this issue at an early date.

Security legislation that came into force in March 2016 newly allows the Japanese Self-Defense Forces (SDF) to take steps to protect, rescue and transport Japanese overseas. The Japanese government plans to use government-chartered aircraft and SDF transport vessels for such evacuations, which would be conducted in cooperation with the U.S. military.

A potential complication here is that the governments of Japan and South Korea don"t really have the best diplomatic relations, a tension that goes as far back as treatment of Koreans by the Japanese during World War II.  “South Korea’s allergy toward the SDF is still strong, so there has not been much progress regarding concrete talks between the Japanese and South Korean governments,” a senior Defense Ministry official told The Yomiuri Shimbun.

The Japanese government must also figure out how to cope with the huge number of refugees expected to descend on Japan from the Korean Peninsula. They would need to be temporarily accommodated, but it also is possible that North Korean agents would slip into Japan with the intention of striking nuclear power plants, heavily populated areas and other targets. As the Shimbun adds, implementing immigration control procedures for those refugees would not be easy.

* * *

So in case airstrikes do begin, will Japan get involved on the offensive, in breach of its constitution, and a development that would in turn put both China and Russia on edge? 

While in theory, the SDF is supposed to jointly respond with U.S. forces according to how a contingency on the Korean Peninsula would develop, however in practice a Japanese response would likely be limited: senior Defense Ministry official emphasized the difference made by the security legislation, which permit the limited exercise of the right of collective self-defense: “There has been progress regarding Japan-U.S. coordination for role sharing.”

The most realistic SDF activity would be logistics support for the U.S. military. The SDF is permitted to supply ammunition to U.S. forces and refuel ready-to-fly fighter jets, among other measures, in situations that do not constitute an armed attack but are recognized as having an important influence on Japan’s security and safety.

Still, as Shimbun notes, "in a situation that could result in Japan sustaining damage equal in seriousness to a direct attack, the government would recognize that the nation’s survival is under threat and permit the use of force by the SDF. Using the right of collective self-defense, it would become possible for the SDF to defend U.S. ships by counterattacking enemies that attacked them, based on the SDF mobilization order. The SDF could also conduct other operations, including minesweeping in the open sea to remove mines laid by North Korea.

Under such a situation, the government would simultaneously recognize that Japan is at imminent risk of coming under attack while likely starting preparations based on the Civil Protection Law, such as evacuating residents.

Ideally all of the above contingency scenarios never have to be implemented, and the threat of a US attack on North Korea remains just that, eventaully resulting in de-escalation instead of potentially unleashing another regional conflict and what some would saw "world war" in addition to the similar development in the middle-east. Unfortunately, considering how long the neo-con warhawks had been "caged" and prevented from profiting from an all out war, we doubt this optimistic scenario deserves much merit.