1 00:00:04,160 --> 00:00:07,520 Speaker 1: Hello, Stephanomics, here the podcast that brings you the global economy. 2 00:00:07,800 --> 00:00:10,840 Speaker 1: This week, I'm in Japan, which seems for once to 3 00:00:10,920 --> 00:00:13,960 Speaker 1: be right in the thicker things. For years, this country 4 00:00:14,000 --> 00:00:18,880 Speaker 1: has been the odd one out in the global economy. Inflation, politics, policy, 5 00:00:19,400 --> 00:00:22,640 Speaker 1: they all seem to work differently here, even though those 6 00:00:22,720 --> 00:00:26,200 Speaker 1: differences have sometimes given us a sneak preview of economic 7 00:00:26,239 --> 00:00:30,280 Speaker 1: troubles to come. A big financial crisis followed by years 8 00:00:30,280 --> 00:00:34,000 Speaker 1: of slow growth, central bank pumping hundreds of billions into 9 00:00:34,040 --> 00:00:37,600 Speaker 1: the economy, cropping up asset markets, all in an effort 10 00:00:37,640 --> 00:00:41,320 Speaker 1: to stop low inflation. All of that happened in Japan. 11 00:00:41,960 --> 00:00:44,920 Speaker 1: Years before it happened in the US and Europe. People 12 00:00:45,000 --> 00:00:49,280 Speaker 1: talked about the Japanification of the world economy, the idea 13 00:00:49,360 --> 00:00:53,000 Speaker 1: that every aging industrial society was going to end up 14 00:00:53,040 --> 00:00:57,920 Speaker 1: looking like Japan. They're not saying that anymore now. Inflation 15 00:00:57,960 --> 00:01:00,040 Speaker 1: has taken off in the rest of the world, and 16 00:01:00,160 --> 00:01:03,680 Speaker 1: Japan might just might be starting to be more like 17 00:01:03,840 --> 00:01:06,959 Speaker 1: other places. And not just in the sense that it 18 00:01:07,040 --> 00:01:10,360 Speaker 1: might be finally able to change its monetary policy from 19 00:01:10,400 --> 00:01:14,039 Speaker 1: the maximum loose setting it's been at for nearly a decade. 20 00:01:15,040 --> 00:01:18,320 Speaker 1: Japan's also stuck in the middle of the Biden administration's 21 00:01:18,400 --> 00:01:22,560 Speaker 1: hardened approach to China and spook by the invasion of Ukraine, 22 00:01:22,959 --> 00:01:26,520 Speaker 1: the Japanese Prime Minister Kishida is planning to ramp up 23 00:01:26,560 --> 00:01:30,959 Speaker 1: defense spending, testing the limits of the pacifist constitution that 24 00:01:31,040 --> 00:01:34,399 Speaker 1: the US imposed on Japan after World War Two. I'm 25 00:01:34,400 --> 00:01:38,560 Speaker 1: going to talk to Bloomberg's longtime government reporter here, Isabel Reynolds, 26 00:01:38,600 --> 00:01:42,400 Speaker 1: about that a little later. I'll also talk through the 27 00:01:42,480 --> 00:01:46,200 Speaker 1: challenges facing the Central Bank and all of Japan with 28 00:01:46,240 --> 00:01:49,200 Speaker 1: a former senior official at the Ministry of Finance who 29 00:01:49,200 --> 00:01:51,600 Speaker 1: has also been the chair of the Asia Development Bank. 30 00:01:52,320 --> 00:01:57,560 Speaker 1: But first, Bloomberg's Japan economy reporter, Yoshiaki Nohara, has a 31 00:01:57,560 --> 00:02:00,800 Speaker 1: story to tell you about fish. Wage is on the 32 00:02:00,840 --> 00:02:13,959 Speaker 1: price of a plate of sushi. That is the sound 33 00:02:14,040 --> 00:02:18,200 Speaker 1: of a tuna auction at the wall's biggest fish market 34 00:02:18,639 --> 00:02:25,679 Speaker 1: to your soul market in the Bay of Tokyo, bells ring. 35 00:02:26,360 --> 00:02:35,079 Speaker 1: The men haddle up with a shouting bidding gold. Looking down, 36 00:02:35,440 --> 00:02:40,040 Speaker 1: I see hundreds of giant tuna all over the trading floor, 37 00:02:40,880 --> 00:02:46,160 Speaker 1: some roll, some frozen, some from Japanese waters, some from abroad. 38 00:02:47,440 --> 00:02:51,560 Speaker 1: Most are destined to be in mouth watering, sashiming or 39 00:02:51,800 --> 00:03:02,079 Speaker 1: sushi dishes at the ground. The market seems just as 40 00:03:02,160 --> 00:03:08,120 Speaker 1: big as ever, but something has changed and almost everyone 41 00:03:08,639 --> 00:03:16,679 Speaker 1: is feeding the pain. Whatever. You know, My guy that 42 00:03:16,800 --> 00:03:22,280 Speaker 1: this morning is a scan director of Tokyo Marine Products 43 00:03:22,560 --> 00:03:29,079 Speaker 1: Whole Serah's Association. Unique prices have shot up by more 44 00:03:29,120 --> 00:03:33,880 Speaker 1: than that's absolutely a matter of fact. I'm just talking 45 00:03:33,880 --> 00:03:37,880 Speaker 1: about the overall prices. Of course, some items are rising 46 00:03:37,920 --> 00:03:48,040 Speaker 1: by a whole lot more. Inflation has been dormant in 47 00:03:48,120 --> 00:03:54,160 Speaker 1: Japan since the mid n despite policy makers taking extraordinary 48 00:03:54,240 --> 00:03:59,120 Speaker 1: steps to get prices rising again. But with global inflation 49 00:03:59,200 --> 00:04:03,440 Speaker 1: catching fire in the recovery after the pandemic, the heat 50 00:04:04,000 --> 00:04:12,040 Speaker 1: has finally spread here too. They will, like the movie, 51 00:04:12,080 --> 00:04:14,960 Speaker 1: continue to go. The auction prices will keep going up 52 00:04:14,960 --> 00:04:18,240 Speaker 1: and up. They're set by these negotiations with bias, not 53 00:04:18,360 --> 00:04:22,279 Speaker 1: by contracts. So for fresh fish like tuna, the market 54 00:04:22,320 --> 00:04:28,520 Speaker 1: prices changing every day. You know how it works. Higher 55 00:04:28,560 --> 00:04:33,000 Speaker 1: fewer prices mean extra costs or fishing boats to catch 56 00:04:33,040 --> 00:04:36,599 Speaker 1: fish and transport them. On top of that, you have 57 00:04:36,720 --> 00:04:42,200 Speaker 1: the impact of lingering global supply change disruptions, and now 58 00:04:42,279 --> 00:04:46,000 Speaker 1: the historic collapse of the end that makes imported fish 59 00:04:46,320 --> 00:04:54,200 Speaker 1: way more expensive, and forty percent of japan seafood actually 60 00:04:54,240 --> 00:04:59,160 Speaker 1: comes from abroad. All of this has prices rising as 61 00:04:59,200 --> 00:05:02,719 Speaker 1: the fastest rate in forty years, and the government is 62 00:05:02,720 --> 00:05:07,760 Speaker 1: stepping in to help squeeze the consumers. If that sounds 63 00:05:07,839 --> 00:05:13,599 Speaker 1: familiar where you are, well the similarities and there. Because 64 00:05:13,640 --> 00:05:18,320 Speaker 1: the inflation rate here is still only three point six percent, 65 00:05:20,600 --> 00:05:24,599 Speaker 1: you might ask, how can inflation still be so low 66 00:05:25,240 --> 00:05:30,159 Speaker 1: when Japan is an island country heavily dependent on important 67 00:05:30,160 --> 00:05:35,760 Speaker 1: food and energy. To understand that, I need to take 68 00:05:35,839 --> 00:05:46,000 Speaker 1: you to another floor of the fish market, yosh Noble. 69 00:05:46,080 --> 00:05:51,040 Speaker 1: Yoshashi is one of several hundreds of small wholesalers who 70 00:05:51,080 --> 00:05:55,440 Speaker 1: buy seafood from the larger wholesalers and process it to 71 00:05:55,600 --> 00:06:01,159 Speaker 1: sell to retailers. It's not just fish, it's getting price here. 72 00:06:01,880 --> 00:06:05,680 Speaker 1: Sarching oil prices mean the cost of the plastic rock 73 00:06:05,800 --> 00:06:09,680 Speaker 1: to stop fish going dry and to form ice boxes 74 00:06:09,960 --> 00:06:13,960 Speaker 1: to keep fish cold are all going up too, But 75 00:06:14,200 --> 00:06:18,400 Speaker 1: these costs are not being passed on to customers, or 76 00:06:18,480 --> 00:06:26,200 Speaker 1: not yet anyway, Well, we can't. As you know, prices 77 00:06:26,200 --> 00:06:30,440 Speaker 1: on restaurant manames are pretty much fixed everywhere. You can't 78 00:06:30,480 --> 00:06:32,760 Speaker 1: just dump call our extra costs on our own customers. 79 00:06:33,680 --> 00:06:36,919 Speaker 1: We have to swallow the pain to a certain degree. 80 00:06:37,520 --> 00:06:42,440 Speaker 1: More obviously, that Yang is making things even more complicated 81 00:06:42,560 --> 00:06:47,200 Speaker 1: for your Shashi. By October this year, Japan's currency had 82 00:06:47,279 --> 00:06:51,440 Speaker 1: shared more than twenty against adalla at. Japan's stacked with 83 00:06:51,800 --> 00:06:55,839 Speaker 1: ultra low interest rates while the US hike rates to 84 00:06:56,000 --> 00:07:01,120 Speaker 1: tackle inflation. That's raised the price of your Hash's imports 85 00:07:01,560 --> 00:07:05,240 Speaker 1: the sea adgents from the US and Mexico, for example, 86 00:07:05,920 --> 00:07:09,479 Speaker 1: But it also means he makes a higher profit on 87 00:07:09,560 --> 00:07:15,120 Speaker 1: the sushi ingredients he exports to other markets in Asia. Overall, 88 00:07:15,760 --> 00:07:20,680 Speaker 1: his business managed to just stay above water, but his 89 00:07:20,840 --> 00:07:24,320 Speaker 1: restaurants in Japan are losing money and he had to 90 00:07:24,360 --> 00:07:29,320 Speaker 1: tap into company savings to keep paying his employees. So 91 00:07:29,440 --> 00:07:34,040 Speaker 1: why doesn't he just keep raising prices for his customers? 92 00:07:35,320 --> 00:07:42,400 Speaker 1: How does everyone is scared doing that in the US. 93 00:07:42,520 --> 00:07:45,280 Speaker 1: It's like people think crist sykes are inevitable because costs 94 00:07:45,280 --> 00:07:48,000 Speaker 1: are going up. But in our case here, we really 95 00:07:48,040 --> 00:07:50,200 Speaker 1: wonder what the customers will keep coming back if we 96 00:07:50,360 --> 00:08:00,960 Speaker 1: raise prices. Yoshi has she isn't alone many happenings. Companies 97 00:08:01,000 --> 00:08:04,880 Speaker 1: are very reluctant to pass on costs because of this 98 00:08:05,080 --> 00:08:11,160 Speaker 1: fear of losing customers not used to inflation. Two numbers 99 00:08:11,360 --> 00:08:16,760 Speaker 1: demonstrate how much they absolve. Nine point one percent is 100 00:08:16,800 --> 00:08:21,440 Speaker 1: a pace of rising material costs for companies, three point 101 00:08:21,560 --> 00:08:26,640 Speaker 1: six percent is a pace of inflation. Consumers see that 102 00:08:26,760 --> 00:08:32,160 Speaker 1: gap means squeeze the profit, and with less profit, companies 103 00:08:32,280 --> 00:08:36,160 Speaker 1: keep wayses front and if they're wases aren't going up, 104 00:08:36,760 --> 00:08:42,360 Speaker 1: people are less willing to accept higher prices. Japan has 105 00:08:42,360 --> 00:08:46,360 Speaker 1: been stuck in this vicious cycle for more than two decades. 106 00:08:47,040 --> 00:08:51,800 Speaker 1: As Bank of Japan Governor Harrohiko Crowder reminded us after 107 00:08:51,880 --> 00:08:57,160 Speaker 1: a recent media now which is effectively rising by around 108 00:08:57,160 --> 00:09:00,160 Speaker 1: three percent, we can't achieve our two percent inflation go 109 00:09:00,440 --> 00:09:06,400 Speaker 1: stably and sustainably. What you need, isn't it by sticking 110 00:09:06,400 --> 00:09:10,120 Speaker 1: with rock bottom interest rates while most of the world 111 00:09:10,320 --> 00:09:14,800 Speaker 1: is tightening. The Bank of Japan hopes finally to break 112 00:09:14,880 --> 00:09:18,720 Speaker 1: the cycle and the false wages up, even if it 113 00:09:18,960 --> 00:09:24,079 Speaker 1: means the yng falling and the Finance Ministry spending billions 114 00:09:24,080 --> 00:09:27,839 Speaker 1: of dallas propping it up, as they did this fall 115 00:09:28,320 --> 00:09:32,040 Speaker 1: fourth of first time in twenty four years. It's an 116 00:09:32,040 --> 00:09:36,280 Speaker 1: awkward combination, but the government and the central bank are 117 00:09:36,400 --> 00:09:39,800 Speaker 1: both hoping this can be the final chapter of the 118 00:09:39,920 --> 00:09:46,760 Speaker 1: country's decades long battle to raise inflation, but Japanese consumers 119 00:09:46,840 --> 00:09:50,560 Speaker 1: ready for a world where prices go up year after year. 120 00:09:51,640 --> 00:09:55,120 Speaker 1: I went to your Hashi Sushi restaurant in Chiba, seast 121 00:09:55,120 --> 00:10:06,480 Speaker 1: of Tokyo to test the move. Steph at the sushi 122 00:10:06,559 --> 00:10:13,080 Speaker 1: restaurant are getting ready for lunchtime. Restaurant manager recycle Inshida 123 00:10:13,480 --> 00:10:17,400 Speaker 1: comes back from the Toyosa market with boxes packed with 124 00:10:17,520 --> 00:10:21,680 Speaker 1: the fish gone for now. At the days of buying 125 00:10:21,800 --> 00:10:26,400 Speaker 1: road tuna to keep on budget, she buys it frozen. Now. 126 00:10:28,280 --> 00:10:30,800 Speaker 1: I really wonder how much longer we can go on 127 00:10:31,000 --> 00:10:33,520 Speaker 1: like this. I just don't see an end to how 128 00:10:33,640 --> 00:10:36,760 Speaker 1: your prices. We pushed up some prices on our menu 129 00:10:36,840 --> 00:10:40,480 Speaker 1: a bit, but we've already been hit by another rising coast. 130 00:10:41,200 --> 00:10:44,760 Speaker 1: That was the first price hike at the restaurant in 131 00:10:44,880 --> 00:10:50,040 Speaker 1: nearly six years. Nishida kept many of the items unchanged 132 00:10:50,160 --> 00:10:59,840 Speaker 1: out of fear of losing customers. It's lunch time now. 133 00:11:00,440 --> 00:11:03,960 Speaker 1: I meet no zoie Imori, a thirty eight year old 134 00:11:04,080 --> 00:11:07,200 Speaker 1: nurse who is sitting at the table with her parents. 135 00:11:07,880 --> 00:11:13,000 Speaker 1: You know they've just given up on the trip to Hawaii. 136 00:11:13,360 --> 00:11:17,480 Speaker 1: After calculating how much you would cost more because of 137 00:11:17,520 --> 00:11:22,800 Speaker 1: a cheapm they tell me they shop for household essentials 138 00:11:22,840 --> 00:11:26,679 Speaker 1: at the lowest prices, and they're only buy clothes when 139 00:11:26,720 --> 00:11:31,559 Speaker 1: it's on sale. Right. I think price hikes are inevitable, 140 00:11:31,960 --> 00:11:37,160 Speaker 1: but the problem is wages they aren't rising. As they 141 00:11:37,280 --> 00:11:40,680 Speaker 1: finished their meal, I asked them about the lunch price. 142 00:11:41,559 --> 00:11:46,200 Speaker 1: The price of the lunch special has been unchanged for years. 143 00:11:47,200 --> 00:11:52,480 Speaker 1: Eight pieces of sushi, including fresh tuner and the steamed egg. 144 00:11:53,360 --> 00:11:57,640 Speaker 1: It costs nine yen or six point five U S dollars. 145 00:11:58,360 --> 00:12:02,920 Speaker 1: I know, I know it's a still for average tourists 146 00:12:03,080 --> 00:12:08,319 Speaker 1: from overseas, and they agree this is very cheap. Yes, 147 00:12:08,720 --> 00:12:13,240 Speaker 1: this is cheap. I asked them if they think the 148 00:12:13,280 --> 00:12:17,640 Speaker 1: price should be hired. That discount for customers means less 149 00:12:17,679 --> 00:12:22,600 Speaker 1: profit for the restaurant. Less profit means workers are not 150 00:12:22,679 --> 00:12:27,520 Speaker 1: getting away. I don't think it's too cheap. The cheaper 151 00:12:27,600 --> 00:12:33,880 Speaker 1: the price, the happier we are. Kroda will stepped down 152 00:12:34,000 --> 00:12:38,240 Speaker 1: from the central bank soon after ten years trying to 153 00:12:38,280 --> 00:12:43,000 Speaker 1: make inflation normal gain in Japan. If this restaurant is 154 00:12:43,120 --> 00:12:47,679 Speaker 1: anything to go by, his job is not quite downe 155 00:12:52,400 --> 00:13:10,200 Speaker 1: in Tokyo for Umberg News. I'm Yosha Ki. Yeah, m so, 156 00:13:10,440 --> 00:13:13,320 Speaker 1: Isabel Reynolds has been here in Tokyo covering the government 157 00:13:13,360 --> 00:13:16,280 Speaker 1: in the country for many, many years. About twenty you 158 00:13:16,320 --> 00:13:20,679 Speaker 1: were saying, and I wanted to briefly dig into how 159 00:13:20,840 --> 00:13:24,160 Speaker 1: all of this is feeding into Japanese politics and how 160 00:13:24,200 --> 00:13:28,200 Speaker 1: the hardening lines between the US and China are also 161 00:13:28,320 --> 00:13:32,560 Speaker 1: affecting Japan's strategic outlook and it's where it sees itself 162 00:13:32,600 --> 00:13:36,040 Speaker 1: in the region. Is abelt Assuming that quite a lot 163 00:13:36,080 --> 00:13:39,120 Speaker 1: of people listening to this podcast are not closely following 164 00:13:39,200 --> 00:13:43,760 Speaker 1: Japanese politics, just give us a quick introduction to Prime 165 00:13:43,760 --> 00:13:46,880 Speaker 1: Minister from your Kashida, who came into office just over 166 00:13:46,920 --> 00:13:50,559 Speaker 1: a year ago. Yes, well for me, for Kia came 167 00:13:50,600 --> 00:13:54,360 Speaker 1: into office as a bit of a perhaps a person 168 00:13:54,480 --> 00:13:57,640 Speaker 1: lacking in personality, I would saying he managed to win 169 00:13:57,840 --> 00:14:00,360 Speaker 1: the job as leader of the party despite being the 170 00:14:00,400 --> 00:14:03,080 Speaker 1: most popular option with the public. So he came in 171 00:14:03,160 --> 00:14:07,479 Speaker 1: with this kind of slightly devish image in terms of 172 00:14:07,480 --> 00:14:11,960 Speaker 1: of security policy um and on the economy. On the 173 00:14:11,960 --> 00:14:14,920 Speaker 1: other hand, his policies on COVID were very popular. He 174 00:14:15,000 --> 00:14:19,000 Speaker 1: was quite conservative on that and Japan's elderly population tended 175 00:14:19,040 --> 00:14:22,080 Speaker 1: to like that UM, But then all of a sudden, 176 00:14:22,560 --> 00:14:25,880 Speaker 1: his predecessor and former boss Prime ministerians Or Abbe was 177 00:14:25,960 --> 00:14:30,400 Speaker 1: shot dead. That unveiled a huge scandal about links between 178 00:14:30,840 --> 00:14:35,280 Speaker 1: a controversial church known as the Moonies and the LDPUM 179 00:14:35,280 --> 00:14:38,520 Speaker 1: and that totally underlined his support UM. So it's been 180 00:14:38,560 --> 00:14:42,720 Speaker 1: falling ever since, and and issues over inflation and rises 181 00:14:42,760 --> 00:14:45,240 Speaker 1: in the cost of living have certainly not helped well. 182 00:14:45,240 --> 00:14:46,880 Speaker 1: I was going to ask you about that looking at 183 00:14:46,960 --> 00:14:49,280 Speaker 1: his approval rating, which I think is what you'll tell 184 00:14:49,360 --> 00:14:51,080 Speaker 1: me is but it's pretty it's pretty low at the moment. 185 00:14:51,080 --> 00:14:55,240 Speaker 1: How is inflation affecting that, Yes, it's it's certainly among 186 00:14:55,560 --> 00:15:00,560 Speaker 1: the issues that are weighing on on his support it UM. 187 00:15:01,480 --> 00:15:04,080 Speaker 1: I think we can say that he's seen as someone 188 00:15:04,120 --> 00:15:07,040 Speaker 1: who's perhaps not very proactive in a lot of ways. 189 00:15:07,160 --> 00:15:10,080 Speaker 1: So that played into his advantage when it came to COVID. 190 00:15:10,160 --> 00:15:12,320 Speaker 1: He didn't rush to open up the borders and left 191 00:15:12,320 --> 00:15:14,840 Speaker 1: everyone in when people were still worried about the virus. 192 00:15:15,960 --> 00:15:19,320 Speaker 1: But when it comes to inflation, is he changing things enough? 193 00:15:19,440 --> 00:15:21,600 Speaker 1: Is he doing enough to help people? If you look 194 00:15:21,600 --> 00:15:23,640 Speaker 1: at the polls, I think a majority would say no, 195 00:15:24,160 --> 00:15:27,280 Speaker 1: and that's definitely one of the factors that's that's hurting him. 196 00:15:27,320 --> 00:15:28,760 Speaker 1: And one of the things that sort of happened while 197 00:15:28,800 --> 00:15:31,800 Speaker 1: I've been here in Tokyo is a is a confirmation 198 00:15:31,800 --> 00:15:36,440 Speaker 1: of a big increase in defense spending. What's the significance 199 00:15:36,480 --> 00:15:38,520 Speaker 1: of that, I mean obvious, Traditionally we do think of 200 00:15:38,640 --> 00:15:44,400 Speaker 1: Japan as being constitutionally limited in what kind of defense 201 00:15:44,440 --> 00:15:46,920 Speaker 1: build up it can do. But I see it's on 202 00:15:47,040 --> 00:15:49,000 Speaker 1: course to the story you've written, and on course to 203 00:15:49,040 --> 00:15:52,360 Speaker 1: spend more than Russia on defense, right, Yes, yes, I 204 00:15:52,360 --> 00:15:55,480 Speaker 1: mean this is in fact a huge turning point for 205 00:15:55,480 --> 00:15:59,240 Speaker 1: for Japan, and I think it's mainly inspired by Ukraine. 206 00:16:00,040 --> 00:16:03,400 Speaker 1: People in Japan looked at Ukraine and realized that they 207 00:16:03,440 --> 00:16:06,080 Speaker 1: could be sitting there perfectly quietly and someone else might 208 00:16:06,080 --> 00:16:08,800 Speaker 1: come and attack them. Until now, I think it had 209 00:16:08,840 --> 00:16:12,200 Speaker 1: been sort of assumed that if you didn't attack anyone else, 210 00:16:12,240 --> 00:16:15,520 Speaker 1: well they wouldn't probably wouldn't attack you either, um, but 211 00:16:15,600 --> 00:16:18,280 Speaker 1: that that mindset has definitely changed a lot. If you 212 00:16:18,280 --> 00:16:20,360 Speaker 1: look at the polls, people are in favor of more 213 00:16:20,400 --> 00:16:22,800 Speaker 1: defense spending, and obviously there are issues about how much 214 00:16:22,840 --> 00:16:24,720 Speaker 1: more you should spend, way you should get the money 215 00:16:24,720 --> 00:16:27,720 Speaker 1: for that. I mean, will Japan cut its huge pension 216 00:16:27,760 --> 00:16:30,240 Speaker 1: budget to put money into defense. That would not be 217 00:16:30,240 --> 00:16:33,600 Speaker 1: a very popular option, or raising in a country full 218 00:16:33,640 --> 00:16:38,360 Speaker 1: of many many pensioners exactly exactly, and raising taxes is 219 00:16:38,440 --> 00:16:41,760 Speaker 1: very unpopular as well. So there's still many questions over 220 00:16:41,760 --> 00:16:44,080 Speaker 1: whether that where the money comes from. But I think 221 00:16:44,160 --> 00:16:48,040 Speaker 1: Japan is actually reaching a historic turning point over defense, 222 00:16:48,160 --> 00:16:53,200 Speaker 1: and it's happening amazingly quietly. During the Prime Minister Abbey's administration, 223 00:16:53,600 --> 00:16:57,520 Speaker 1: we often saw huge demonstrations outside the Prime Minister's residents 224 00:16:57,520 --> 00:16:59,800 Speaker 1: over what he was doing in defense, which was which 225 00:16:59,800 --> 00:17:03,640 Speaker 1: pay else in comparison really in terms of size with 226 00:17:03,760 --> 00:17:07,320 Speaker 1: what Prime Minister Kishido is doing despite his soft image. 227 00:17:07,680 --> 00:17:11,199 Speaker 1: Of course, it was Prime Minister Abbe who had was 228 00:17:11,240 --> 00:17:15,240 Speaker 1: the part of a shift in Japan's approach and a 229 00:17:15,280 --> 00:17:17,920 Speaker 1: sort of a tougher stance of these of each China, 230 00:17:18,000 --> 00:17:20,840 Speaker 1: at least on the sort of strategic front. I mean, 231 00:17:20,880 --> 00:17:22,200 Speaker 1: I guess we have to. It's not they're not worried 232 00:17:22,200 --> 00:17:25,159 Speaker 1: about being invaded by Russia when they spend this money. 233 00:17:25,359 --> 00:17:29,000 Speaker 1: It's very much with with China and defense against China. 234 00:17:29,040 --> 00:17:32,400 Speaker 1: In mind, I saw that he did meet with President 235 00:17:32,760 --> 00:17:37,800 Speaker 1: Sieging being last month in Thailand. You know, how did 236 00:17:37,800 --> 00:17:40,119 Speaker 1: the summit go and how has all this fed into 237 00:17:40,480 --> 00:17:43,920 Speaker 1: its relations with China? Because China is still Japan's biggest 238 00:17:43,920 --> 00:17:47,640 Speaker 1: trading partner, even as we're talking about these massive increases 239 00:17:47,640 --> 00:17:50,640 Speaker 1: in defense spending, right, I mean, the relationship was still 240 00:17:50,640 --> 00:17:53,840 Speaker 1: phenomenally important in terms of the economy for both sides. 241 00:17:54,440 --> 00:17:58,439 Speaker 1: Um So that was was the first big meeting on 242 00:17:58,480 --> 00:18:01,280 Speaker 1: that scale for Japan and China now for three years, 243 00:18:01,640 --> 00:18:05,159 Speaker 1: um um we I think we see a very different 244 00:18:05,160 --> 00:18:09,879 Speaker 1: relationship between Japan and China now, um largely because of 245 00:18:10,160 --> 00:18:12,359 Speaker 1: Beijing's clampdown on Hong Kong. I think that was a 246 00:18:12,400 --> 00:18:16,959 Speaker 1: turning point for Japan where they started to realize that 247 00:18:16,960 --> 00:18:19,120 Speaker 1: that China was going to be more difficult to deal 248 00:18:19,160 --> 00:18:22,560 Speaker 1: with them they realized. Um So, we've seen a more 249 00:18:22,880 --> 00:18:26,480 Speaker 1: robust attitude from Japan towards China on many fronts since then. 250 00:18:27,280 --> 00:18:30,320 Speaker 1: On the other hand, I think they do not, certainly 251 00:18:30,320 --> 00:18:33,760 Speaker 1: not everybody. And then the administration kind of appreciates what 252 00:18:33,920 --> 00:18:37,720 Speaker 1: America is doing on Taiwan. Um. For example, the visit 253 00:18:37,760 --> 00:18:40,000 Speaker 1: by Nancy Pelosi EA to Taiwan did not go down 254 00:18:40,080 --> 00:18:43,400 Speaker 1: very well with everybody in Japan. UM. They don't like 255 00:18:43,680 --> 00:18:47,720 Speaker 1: UM what they might see as unnecessary provocations. So where 256 00:18:47,760 --> 00:18:50,080 Speaker 1: they can cooperate, they say they do want to and 257 00:18:50,119 --> 00:18:52,880 Speaker 1: they want to continue their economic ties as as much 258 00:18:52,920 --> 00:18:55,840 Speaker 1: as they can. UM. At the same time, we're saying 259 00:18:55,880 --> 00:18:59,120 Speaker 1: reports that this huge increase in defense spending, a lot 260 00:18:59,119 --> 00:19:01,480 Speaker 1: of it's going to be intercepting missiles down on the 261 00:19:01,520 --> 00:19:04,840 Speaker 1: Southwestern Islands, which are close to Taiwan UM, so they're 262 00:19:04,840 --> 00:19:06,720 Speaker 1: going to be trying to be ready for whatever might 263 00:19:06,800 --> 00:19:09,639 Speaker 1: be coming down the pike. The way you describe that, 264 00:19:10,440 --> 00:19:14,000 Speaker 1: there was a world in which sort of economics and 265 00:19:14,119 --> 00:19:17,120 Speaker 1: geopolitics could go on different tracks, and that was very 266 00:19:17,200 --> 00:19:22,160 Speaker 1: much a world that Japan lived in the last few decades, 267 00:19:22,520 --> 00:19:26,240 Speaker 1: China becoming a much more important economic partner, even as 268 00:19:26,400 --> 00:19:28,639 Speaker 1: the political stance was very much, you know, as an 269 00:19:28,640 --> 00:19:34,280 Speaker 1: ally of the US and in a defensive stance visa v. China. 270 00:19:34,680 --> 00:19:38,240 Speaker 1: I think President Biden would say, you can't have those 271 00:19:38,280 --> 00:19:42,359 Speaker 1: things running on separate tracks anymore. And we've seen policies 272 00:19:42,400 --> 00:19:45,679 Speaker 1: from the US, like the attempts to limit access to 273 00:19:45,720 --> 00:19:48,480 Speaker 1: the sort of cutting edge semiconductor technology which Japan is 274 00:19:48,560 --> 00:19:51,080 Speaker 1: kind of in the cross airs, and we talked about 275 00:19:51,160 --> 00:19:56,480 Speaker 1: that on a previous program with the Japanese Trade minister. 276 00:19:57,520 --> 00:20:01,560 Speaker 1: Do you think do you think that Japanese politicians to 277 00:20:01,720 --> 00:20:06,040 Speaker 1: Japanese people are ready for a world in which you 278 00:20:06,160 --> 00:20:11,720 Speaker 1: actually have to start picking sides, not just politically but 279 00:20:11,840 --> 00:20:14,960 Speaker 1: also economically. Or do they think you can somehow have 280 00:20:15,080 --> 00:20:17,600 Speaker 1: kind of parallel supply chains, you know that sort of 281 00:20:17,680 --> 00:20:20,679 Speaker 1: keep the US happy but also continue training with China. 282 00:20:20,720 --> 00:20:23,760 Speaker 1: How are people grappling with that? Um? Yeah, and I 283 00:20:23,760 --> 00:20:25,879 Speaker 1: think they will put it out at the last possible minute. 284 00:20:25,880 --> 00:20:27,480 Speaker 1: I mean, there may be ways that the US can 285 00:20:27,480 --> 00:20:29,760 Speaker 1: force them to do things that they don't really want 286 00:20:29,800 --> 00:20:32,720 Speaker 1: to do in terms of the economy. Um. But as 287 00:20:32,720 --> 00:20:34,560 Speaker 1: far as they possibly can, I think they are going 288 00:20:34,600 --> 00:20:38,240 Speaker 1: to continue with those things because as everyone knows there's 289 00:20:38,240 --> 00:20:41,359 Speaker 1: a risk of a recession next year, Brimnisua is not 290 00:20:41,400 --> 00:20:43,919 Speaker 1: going to want to do anything that will damage the 291 00:20:43,960 --> 00:20:48,800 Speaker 1: economy in any way. So I think, yeah, they will. 292 00:20:48,920 --> 00:20:50,800 Speaker 1: They will push as hard as they can to to 293 00:20:50,880 --> 00:20:53,200 Speaker 1: stay where they are. It's interesting that it's been so 294 00:20:53,320 --> 00:20:56,240 Speaker 1: quiet that he's managed to do this big thing on defense, 295 00:20:56,640 --> 00:20:58,840 Speaker 1: and it hasn't been as contentious as these rather more 296 00:20:58,880 --> 00:21:02,840 Speaker 1: modest steps at Prime Minister Abbert it Took. I just 297 00:21:02,880 --> 00:21:06,720 Speaker 1: wondered whether would it start being contentious if it seemed 298 00:21:06,760 --> 00:21:11,760 Speaker 1: if he if the Prime Minister was more explicitly saying, 299 00:21:11,960 --> 00:21:15,400 Speaker 1: you know, our relations with China have to change going forward. 300 00:21:16,880 --> 00:21:19,679 Speaker 1: My sense is that even though the public in Japan 301 00:21:19,760 --> 00:21:23,359 Speaker 1: and China both still feel I think, quite hostile toward 302 00:21:23,440 --> 00:21:27,520 Speaker 1: one another, um, I think the strength of the business 303 00:21:27,560 --> 00:21:30,760 Speaker 1: lobby in Japan is such that it's going to be 304 00:21:30,840 --> 00:21:33,800 Speaker 1: quite hard for for Kia to do that kind of thing. 305 00:21:33,800 --> 00:21:36,000 Speaker 1: And to be honest, it's not really his style to 306 00:21:36,080 --> 00:21:39,320 Speaker 1: go out and say something very aggressive, you know, if 307 00:21:39,320 --> 00:21:42,639 Speaker 1: he doesn't really have to. So I think if Japan 308 00:21:42,760 --> 00:21:44,800 Speaker 1: is pushed into a corner by the US, of course 309 00:21:44,840 --> 00:21:46,679 Speaker 1: it will go along because the US is always going 310 00:21:46,720 --> 00:21:50,200 Speaker 1: to be its most important partner. But as far as 311 00:21:50,240 --> 00:21:52,720 Speaker 1: it can, it wants to cling onto that strong relationship 312 00:21:52,880 --> 00:21:56,080 Speaker 1: in the economy with China. It's fascinating because exactly the 313 00:21:56,080 --> 00:21:59,720 Speaker 1: same conversation is happening in the US, where businesses are 314 00:21:59,720 --> 00:22:05,000 Speaker 1: all hoping and pushing and saying, we do what it's 315 00:22:05,040 --> 00:22:09,120 Speaker 1: not practical to decouple this global economy, and we don't 316 00:22:09,160 --> 00:22:18,000 Speaker 1: know what's going to happen, Isabel Reynolds, thank you so much. So. 317 00:22:19,080 --> 00:22:22,520 Speaker 1: Ko and Nakao was Japan's top currency official at the 318 00:22:22,520 --> 00:22:25,760 Speaker 1: Finance Ministry. Then he ran the Asian Development Bank until 319 00:22:27,119 --> 00:22:30,919 Speaker 1: he's now chair of the Mitsuho Research and Technologies Institute 320 00:22:31,400 --> 00:22:33,959 Speaker 1: and as one of the names floated to replace Governor 321 00:22:34,000 --> 00:22:39,520 Speaker 1: Coroda at the Bank of Japan. Nakasan we heard in 322 00:22:39,640 --> 00:22:44,119 Speaker 1: the piece that my colleague Yoshi did for the podcast. 323 00:22:44,560 --> 00:22:46,919 Speaker 1: You know, families are not enjoying a rise in the 324 00:22:47,000 --> 00:22:50,840 Speaker 1: cost of the things that they buy, but those rising 325 00:22:50,880 --> 00:22:53,560 Speaker 1: prices they do hold out the possibility that we might 326 00:22:53,600 --> 00:22:57,520 Speaker 1: be at the end of these years of battling deflation 327 00:22:57,880 --> 00:23:02,640 Speaker 1: in Japan and policy can possibly start to be more normal. 328 00:23:03,119 --> 00:23:04,840 Speaker 1: So I just wonder whether what do you think. Do 329 00:23:04,880 --> 00:23:06,800 Speaker 1: you think it's different this time? Do you think there 330 00:23:06,880 --> 00:23:09,880 Speaker 1: is an opportunity for Japan to break out of that cycle. 331 00:23:10,720 --> 00:23:14,920 Speaker 1: I'm not sure yet, but many people, including the b O, 332 00:23:15,040 --> 00:23:18,520 Speaker 1: j and politions and also scholars, have been saying that 333 00:23:18,640 --> 00:23:22,480 Speaker 1: we need some moderate inflation and to get out of 334 00:23:22,520 --> 00:23:27,560 Speaker 1: the deferition definition is really bad. So I understand the logic, 335 00:23:27,640 --> 00:23:31,720 Speaker 1: but this time this inflation is more by the important 336 00:23:33,080 --> 00:23:37,400 Speaker 1: inflation because of community prices and because of the depreciation. 337 00:23:38,040 --> 00:23:41,720 Speaker 1: So if infreation is based on the wage increase and 338 00:23:41,760 --> 00:23:46,119 Speaker 1: the more permanent move over prices, which are healthy, it's okay. 339 00:23:46,160 --> 00:23:50,600 Speaker 1: But this is a little bit more abrupt. And we've 340 00:23:50,640 --> 00:23:54,640 Speaker 1: seen the yen has obviously fallen very dramatically this year. 341 00:23:55,359 --> 00:23:57,320 Speaker 1: The UK we've had to fall in the power as well. 342 00:23:57,359 --> 00:24:01,119 Speaker 1: But I've seen some people say that fall in the 343 00:24:01,320 --> 00:24:05,600 Speaker 1: end will be fantastic for Japanese industry. That you could be, 344 00:24:06,400 --> 00:24:09,200 Speaker 1: it will be part of the rebirth of Japan as 345 00:24:09,200 --> 00:24:12,800 Speaker 1: an exporting nation. But I know others think it's deeply damaging. 346 00:24:12,840 --> 00:24:15,040 Speaker 1: So with which side were you on? I don't like 347 00:24:15,200 --> 00:24:17,879 Speaker 1: cheap n I don't like cheapen. The good everything is 348 00:24:17,960 --> 00:24:20,840 Speaker 1: cheap in Japan, which is making the income I said, 349 00:24:20,880 --> 00:24:24,720 Speaker 1: personally everything low. And these are the japan going back 350 00:24:24,720 --> 00:24:27,480 Speaker 1: to the developing countries. And it's not that it's not 351 00:24:27,560 --> 00:24:30,959 Speaker 1: a good thing for the Japanese life or Japanese presence, 352 00:24:31,080 --> 00:24:38,000 Speaker 1: Japanese life, Japanese life, Japanese presents and whatever. I don't 353 00:24:38,000 --> 00:24:41,600 Speaker 1: like the cheap cheap in Japan. It's not good for 354 00:24:41,640 --> 00:24:45,560 Speaker 1: the Japanese economy. For several reasons. Once again, the imported 355 00:24:45,680 --> 00:24:51,520 Speaker 1: prices will or up and uh, the competitiveness gained by 356 00:24:51,640 --> 00:24:55,159 Speaker 1: the cheap being is not necessarily healthy and good for 357 00:24:55,240 --> 00:24:58,679 Speaker 1: the economy. And in addition, as the secrator rule being 358 00:24:58,800 --> 00:25:05,720 Speaker 1: you worked for him yea being mentioned through curlerency, it's 359 00:25:05,760 --> 00:25:09,560 Speaker 1: good before the economy because of the effort to gain 360 00:25:09,600 --> 00:25:14,520 Speaker 1: compete compete giveness through the more real things, and also 361 00:25:14,840 --> 00:25:18,000 Speaker 1: for financial industry to have a stable and a kind 362 00:25:18,000 --> 00:25:22,320 Speaker 1: of stronger courlerency is much better than the weakening. That 363 00:25:22,400 --> 00:25:24,199 Speaker 1: was the view of the Germans for many years, that 364 00:25:24,240 --> 00:25:27,760 Speaker 1: it's a constraint that makes you efficient because you can't 365 00:25:27,800 --> 00:25:30,080 Speaker 1: just rely on being cheaper. I'm afraid the UK is 366 00:25:30,119 --> 00:25:32,720 Speaker 1: not set on that part, but we will see. And 367 00:25:33,440 --> 00:25:36,760 Speaker 1: the Bank of Japan faced very early in trying to 368 00:25:36,800 --> 00:25:40,800 Speaker 1: deal with the problem of the risk of deflation, the 369 00:25:40,800 --> 00:25:44,320 Speaker 1: problem that interest rates could not fall below the zero 370 00:25:44,680 --> 00:25:46,960 Speaker 1: and obviously lots of other central banks have had to 371 00:25:46,960 --> 00:25:49,920 Speaker 1: deal with that in the global financial crisis, but now 372 00:25:50,240 --> 00:25:53,160 Speaker 1: Japan is the last one standing. Everybody else has been 373 00:25:53,240 --> 00:25:56,040 Speaker 1: raising interest rates. That the Bank of Japan still has 374 00:25:56,080 --> 00:26:00,760 Speaker 1: this quite extreme version of um not just stative easy 375 00:26:00,880 --> 00:26:06,800 Speaker 1: buying bonds, but also buying other assets, but also promising 376 00:26:06,840 --> 00:26:10,119 Speaker 1: to control long term interest rates, the so called yield 377 00:26:10,119 --> 00:26:12,600 Speaker 1: curve control. How on earth are you going to get 378 00:26:12,600 --> 00:26:14,280 Speaker 1: out of it? Do you think? Yeah, I think it's 379 00:26:14,400 --> 00:26:17,760 Speaker 1: very difficult to tell them. The build that can change 380 00:26:17,800 --> 00:26:22,000 Speaker 1: the policy in thestitution in Japanese are different from other countries. 381 00:26:22,119 --> 00:26:26,360 Speaker 1: And in addition, even in these conditions because of imported 382 00:26:26,480 --> 00:26:32,560 Speaker 1: the prices and also the commodity prices high, Japan's price 383 00:26:33,200 --> 00:26:37,560 Speaker 1: CPI right is still more moderate than others. It is 384 00:26:37,640 --> 00:26:41,400 Speaker 1: very clear that the wages are not that so much 385 00:26:41,720 --> 00:26:45,879 Speaker 1: increasing at this moment. The America has faced with the 386 00:26:46,160 --> 00:26:51,400 Speaker 1: very high increasing ages but because of the exit from 387 00:26:51,760 --> 00:26:57,000 Speaker 1: a pandemic and also because of a great resignation kind 388 00:26:57,000 --> 00:26:59,600 Speaker 1: of phenomena. But the in Japan is not the happening. 389 00:26:59,680 --> 00:27:04,280 Speaker 1: So lestitution is different. But uh, it is becoming more 390 00:27:04,320 --> 00:27:09,640 Speaker 1: clear clearer that the bog policies of irritical control. As 391 00:27:09,640 --> 00:27:13,600 Speaker 1: you mentioned, the quotitative is massive one including some risk 392 00:27:13,640 --> 00:27:18,400 Speaker 1: as set like a reed or real estate. These combinations 393 00:27:19,480 --> 00:27:24,639 Speaker 1: have more career clearly have a more side effect which 394 00:27:24,680 --> 00:27:29,400 Speaker 1: is bad, including as if the government can issue government 395 00:27:29,440 --> 00:27:35,159 Speaker 1: bond that very low cost to almost their cost, so 396 00:27:35,280 --> 00:27:40,080 Speaker 1: it's uh damaging that the discipline of our piscal policies 397 00:27:40,160 --> 00:27:45,880 Speaker 1: and also the spread for the intermediately banks is very small, 398 00:27:46,359 --> 00:27:50,840 Speaker 1: which makes the bank activity more conservative or less active. 399 00:27:51,160 --> 00:27:57,639 Speaker 1: And also in addition, Exchenerate is often influenced by the 400 00:27:58,200 --> 00:28:02,400 Speaker 1: easy matter policy. So it is becoming clear that the 401 00:28:02,440 --> 00:28:05,399 Speaker 1: applies have some side effects. As I said. One of 402 00:28:05,400 --> 00:28:07,680 Speaker 1: the side effects, as you said, is that the Bank 403 00:28:07,720 --> 00:28:10,439 Speaker 1: of Japan is very involved in the government bond market 404 00:28:10,840 --> 00:28:12,919 Speaker 1: in a way, in a way there is no government 405 00:28:12,920 --> 00:28:16,040 Speaker 1: bondmarket because it's bought all of the government. But also 406 00:28:16,200 --> 00:28:18,840 Speaker 1: in buying the government bonds, you're making it very cheap 407 00:28:18,880 --> 00:28:23,560 Speaker 1: all the time for the government to spend. What are 408 00:28:23,560 --> 00:28:25,480 Speaker 1: the what are the risks of that? As you say 409 00:28:25,520 --> 00:28:28,439 Speaker 1: that you've you've allowed the government to get used to 410 00:28:28,480 --> 00:28:31,080 Speaker 1: spending and spending and spending. That's right. So yeah, I 411 00:28:31,960 --> 00:28:34,919 Speaker 1: already mentioned that discipline is lost by this policy, and 412 00:28:35,800 --> 00:28:39,000 Speaker 1: some people might say that the government that can't spend 413 00:28:39,000 --> 00:28:43,080 Speaker 1: more because interst rates is law and the efficial radios law, 414 00:28:43,720 --> 00:28:48,400 Speaker 1: but we still need some disciplines or government spending because 415 00:28:48,640 --> 00:28:52,080 Speaker 1: the Japan's debt to GDP ration is already two hundred 416 00:28:52,120 --> 00:28:56,440 Speaker 1: sixty per cent or GDP much higher, maybe double UH 417 00:28:57,640 --> 00:29:02,200 Speaker 1: of the United States. So in the end, the if 418 00:29:02,720 --> 00:29:06,959 Speaker 1: we continued to have a high increasing debt to debratial, 419 00:29:07,120 --> 00:29:11,680 Speaker 1: people start worrying about the incredibility or the repairment or 420 00:29:11,840 --> 00:29:15,520 Speaker 1: government bond. If they can be fined refinanced all the time, 421 00:29:15,640 --> 00:29:18,600 Speaker 1: it's okay. But if we continue to have these ex 422 00:29:19,040 --> 00:29:22,840 Speaker 1: explosions of our debt depracial maybe it is not a 423 00:29:23,280 --> 00:29:27,520 Speaker 1: recent British case. I was going to ask you about that. 424 00:29:27,600 --> 00:29:30,640 Speaker 1: So when you see Britain getting into a mess with 425 00:29:30,760 --> 00:29:37,040 Speaker 1: the basically with the market's reassessing the riskiness of government 426 00:29:37,080 --> 00:29:43,480 Speaker 1: debt in the UK and real problems in the long 427 00:29:43,640 --> 00:29:47,320 Speaker 1: term in the market for long term government debt government 428 00:29:47,400 --> 00:29:50,760 Speaker 1: I have used is that? Does that give you pause? 429 00:29:50,840 --> 00:29:53,640 Speaker 1: Are you worried about something similar happening in Japan? I 430 00:29:53,640 --> 00:29:57,680 Speaker 1: think it happen in the future because of our home 431 00:29:58,080 --> 00:30:02,160 Speaker 1: very strong home country by US over Japanese investors. They 432 00:30:02,440 --> 00:30:06,200 Speaker 1: still continute to investing in the Japanese government bond. But 433 00:30:06,480 --> 00:30:11,720 Speaker 1: also because bulj is always UH buying the thing as 434 00:30:11,800 --> 00:30:16,800 Speaker 1: a bond of Japan. So in a sense, price kind 435 00:30:16,840 --> 00:30:20,720 Speaker 1: of signal is not really working in Japan, and it's 436 00:30:20,760 --> 00:30:24,480 Speaker 1: a really bad forul characteristic country or develop a common 437 00:30:24,520 --> 00:30:29,280 Speaker 1: country like Japan to lose the market functions of market 438 00:30:29,360 --> 00:30:32,840 Speaker 1: signal thing. So in the regard again there are so 439 00:30:32,880 --> 00:30:36,520 Speaker 1: many side effects. So but if the build changes it 440 00:30:36,800 --> 00:30:40,560 Speaker 1: there can be abrupt increasing or interest rate and it 441 00:30:40,760 --> 00:30:45,760 Speaker 1: can be uh, it can be uh transmitted to the 442 00:30:46,400 --> 00:30:51,440 Speaker 1: long interest rate of the housing. And also government financing 443 00:30:51,520 --> 00:30:56,120 Speaker 1: becomes more difficult because the refinancing go to go up, 444 00:30:56,400 --> 00:31:00,560 Speaker 1: so it can invite it really invite the shock to 445 00:31:00,720 --> 00:31:05,080 Speaker 1: the market the many ways. If the y cc IS 446 00:31:05,840 --> 00:31:10,840 Speaker 1: is abolished, but we need some adjustment even gradually in 447 00:31:10,920 --> 00:31:15,080 Speaker 1: coming years, otherwise there will be even bigger shock, a blunder. 448 00:31:15,680 --> 00:31:19,160 Speaker 1: H A lot of people in the markets act as 449 00:31:19,160 --> 00:31:22,480 Speaker 1: if it's very urgent, but it sounds like and certainly 450 00:31:22,520 --> 00:31:24,760 Speaker 1: we were talking to people at the bg A yesterday, 451 00:31:24,840 --> 00:31:27,480 Speaker 1: there's a feeling that it's not urgent. Yeah, because the 452 00:31:27,640 --> 00:31:32,320 Speaker 1: once again c p A is a still infition, is 453 00:31:32,480 --> 00:31:35,960 Speaker 1: still low, and also it is not really induced and 454 00:31:36,160 --> 00:31:41,600 Speaker 1: so at least from the perspective of video people, there 455 00:31:41,680 --> 00:31:45,360 Speaker 1: is a japanistiation is still different. So that's why the 456 00:31:45,520 --> 00:31:48,720 Speaker 1: policy mix can be different. As your final question, which 457 00:31:48,760 --> 00:31:51,960 Speaker 1: was thinking back, actually to that very memorable meeting. We 458 00:31:51,960 --> 00:31:56,160 Speaker 1: were asked a well bank in the autumn of in 459 00:31:56,200 --> 00:31:58,880 Speaker 1: Hong Kong, just as the age of financial crisis was 460 00:31:58,920 --> 00:32:02,440 Speaker 1: about to kick off. You know, that was the beginning 461 00:32:02,440 --> 00:32:06,240 Speaker 1: of an era where we saw much closer economic integration 462 00:32:06,320 --> 00:32:11,560 Speaker 1: with China and across the region, and a sort of 463 00:32:11,600 --> 00:32:14,760 Speaker 1: strengthening of the belief that you could have economics and 464 00:32:14,840 --> 00:32:19,080 Speaker 1: politics run on different tracks. You could have big political differences, 465 00:32:19,080 --> 00:32:22,880 Speaker 1: but you could still continue to integrate. The world looks 466 00:32:22,880 --> 00:32:27,360 Speaker 1: pretty different today. China also looks much stronger relative to 467 00:32:27,480 --> 00:32:31,840 Speaker 1: Japan as a regional power, and we see the Japanese 468 00:32:31,920 --> 00:32:37,080 Speaker 1: government increasing defense spending. I just wondered how you see 469 00:32:38,320 --> 00:32:43,160 Speaker 1: Japan's economy and its future in a world where the 470 00:32:43,280 --> 00:32:47,440 Speaker 1: US is forcing you to drive harder lines with between 471 00:32:48,120 --> 00:32:52,080 Speaker 1: the US and China and almost have a sort of 472 00:32:52,160 --> 00:32:56,040 Speaker 1: decoupling of the global economy. It's so one of the 473 00:32:56,080 --> 00:33:01,480 Speaker 1: most important issue of geopolitics, and also do economy or 474 00:33:01,520 --> 00:33:06,600 Speaker 1: economic discussions. Of course, the delusion vgent tre cran is 475 00:33:06,600 --> 00:33:10,400 Speaker 1: a very big phenomenon, but more a kind of the 476 00:33:11,280 --> 00:33:14,480 Speaker 1: historical trend is that the China has become a very 477 00:33:14,520 --> 00:33:19,560 Speaker 1: big economy and a very big technology center with the world. 478 00:33:19,800 --> 00:33:24,160 Speaker 1: It's not anymore based in the lower wages, and it 479 00:33:24,280 --> 00:33:28,880 Speaker 1: is become more assertive. So as you mentioned, when there 480 00:33:28,880 --> 00:33:32,800 Speaker 1: were Asian financial crissis and other issues in ninety nineties, 481 00:33:33,040 --> 00:33:39,040 Speaker 1: China's presence was much smaller. In ninety ninety. For instance, UH, 482 00:33:39,400 --> 00:33:43,600 Speaker 1: China's GDP in Dalla Touns was the one if about 483 00:33:43,960 --> 00:33:47,360 Speaker 1: in nineteen ninety, but today it is three times as 484 00:33:47,440 --> 00:33:54,560 Speaker 1: much or even bigger. Very I wouldn't say negligible, but 485 00:33:54,720 --> 00:33:58,000 Speaker 1: it was not a big player. But after as you said, 486 00:33:58,040 --> 00:34:02,640 Speaker 1: the Asian financial crissis the world, I realized that many 487 00:34:02,680 --> 00:34:06,720 Speaker 1: imagine e commies are not necessarily China alone, but the Indonesia, Thailand, 488 00:34:07,040 --> 00:34:11,120 Speaker 1: this country, Latin America, those are becoming important to players 489 00:34:11,160 --> 00:34:16,600 Speaker 1: in the world. So G twenty was established a finance 490 00:34:16,640 --> 00:34:20,000 Speaker 1: mistrel meetings of Central and governors meetings, and then it 491 00:34:20,000 --> 00:34:25,400 Speaker 1: became a submitting after the Demo crisis, and China became 492 00:34:25,480 --> 00:34:33,120 Speaker 1: a huge, huge economy, industrial and technological, financial in many 493 00:34:33,200 --> 00:34:36,040 Speaker 1: respect to China is a very big economies. So I 494 00:34:36,160 --> 00:34:41,440 Speaker 1: hope that the China will also become more moderate about 495 00:34:41,480 --> 00:34:47,680 Speaker 1: their assertations about territorial issues, domestic issues. UH they can 496 00:34:47,719 --> 00:34:51,200 Speaker 1: continue to be very big economy and big presence in 497 00:34:51,239 --> 00:34:56,560 Speaker 1: the world without assertation, without saying that the China is great. 498 00:34:56,920 --> 00:35:00,480 Speaker 1: China is already great economy. Chinese people still about kind 499 00:35:00,480 --> 00:35:04,120 Speaker 1: of resentment from the period of from the experiences of 500 00:35:05,040 --> 00:35:13,359 Speaker 1: the developed countries uh aggression to China, including open moll 501 00:35:13,760 --> 00:35:19,719 Speaker 1: and Japanese agression to China. But China is already respected 502 00:35:20,000 --> 00:35:23,719 Speaker 1: and the great economy. And even if they continue to 503 00:35:23,760 --> 00:35:27,240 Speaker 1: pass the moderate pass, even for the political system is different. 504 00:35:27,680 --> 00:35:32,600 Speaker 1: If they continue to pass moderate stands in many ways 505 00:35:32,640 --> 00:35:37,760 Speaker 1: about the diplomacy and about the domestical affairs. I don't 506 00:35:37,760 --> 00:35:42,360 Speaker 1: think other countries tried to repress China, but because of 507 00:35:42,800 --> 00:35:45,680 Speaker 1: that kind of I would say provocation. They used to 508 00:35:45,840 --> 00:35:48,960 Speaker 1: already regards the China as a great computer, great kind 509 00:35:49,040 --> 00:35:55,520 Speaker 1: of the country which can be which should be checked. 510 00:35:56,080 --> 00:35:59,759 Speaker 1: So it has already started. But I hope that we 511 00:36:00,040 --> 00:36:06,080 Speaker 1: have a more moderate stable I mean becoming after the 512 00:36:06,080 --> 00:36:09,480 Speaker 1: corpse of the Soviet system, we have had a kind 513 00:36:09,520 --> 00:36:15,000 Speaker 1: of a reasonable favorable international condition which made a huge 514 00:36:15,040 --> 00:36:19,319 Speaker 1: contribution to the welfare of the people. Although we now 515 00:36:19,400 --> 00:36:24,440 Speaker 1: face a difficulty climate change, also social divide or income divide. 516 00:36:24,520 --> 00:36:30,239 Speaker 1: We should tackle those issues. But overall, the favorable, more 517 00:36:30,280 --> 00:36:36,200 Speaker 1: peaceful liberal international system has made a huge contributions and 518 00:36:36,239 --> 00:36:38,880 Speaker 1: we should make every effort to keep it. And some 519 00:36:39,000 --> 00:36:40,680 Speaker 1: of the people who have been forced to change their 520 00:36:40,680 --> 00:36:43,480 Speaker 1: mind about China in the US would say that we 521 00:36:43,560 --> 00:36:46,799 Speaker 1: have failed many years hope that China would behave in 522 00:36:46,800 --> 00:36:49,920 Speaker 1: a certain way, but that can't be your policies to hope. 523 00:36:50,400 --> 00:36:53,319 Speaker 1: So I just wanted do you think it's risky for 524 00:36:53,320 --> 00:36:59,000 Speaker 1: for Japan economically to continue to believe in this new 525 00:36:59,040 --> 00:37:02,680 Speaker 1: world that you can be best friends with the US 526 00:37:02,760 --> 00:37:07,319 Speaker 1: politically but very closely related to China economically. But there 527 00:37:07,400 --> 00:37:11,760 Speaker 1: is no other choice, and I Japanese people should continue 528 00:37:11,800 --> 00:37:15,240 Speaker 1: to or there is no other choice but to believe, 529 00:37:15,320 --> 00:37:19,160 Speaker 1: but continue to believe that the China will be important 530 00:37:19,400 --> 00:37:25,200 Speaker 1: commun partners. And also the religion with the United States, 531 00:37:25,200 --> 00:37:30,200 Speaker 1: say in the security affairs is a crucial and alliance 532 00:37:30,280 --> 00:37:33,480 Speaker 1: with the United States in the Italy and the alliance 533 00:37:33,800 --> 00:37:36,799 Speaker 1: is a key to the Japanese stability and also it 534 00:37:36,920 --> 00:37:41,279 Speaker 1: is important element of a stability in Asia. If a 535 00:37:41,360 --> 00:37:46,520 Speaker 1: Japan starts that we amming Japan falsly, I think it 536 00:37:46,600 --> 00:37:50,680 Speaker 1: would be it would distablished the situation in Asia, so 537 00:37:51,200 --> 00:37:53,040 Speaker 1: there is no other choice. But at the same time, 538 00:37:54,480 --> 00:37:56,799 Speaker 1: we cannot have a very continue to have a big 539 00:37:57,040 --> 00:38:01,520 Speaker 1: optimistic view about China, as you said, so certain deterrence 540 00:38:02,080 --> 00:38:06,239 Speaker 1: in the security issues is important and sound adjustment to 541 00:38:06,440 --> 00:38:12,160 Speaker 1: the kind of hyper gloverization where people don't think about 542 00:38:12,239 --> 00:38:16,680 Speaker 1: the co execurities or interior heirs. And so we cannot 543 00:38:16,719 --> 00:38:20,520 Speaker 1: continue to have a hyper gloverization without any thinking about 544 00:38:20,560 --> 00:38:25,920 Speaker 1: this issue. We should adjust glorganization, but we cannot totally 545 00:38:27,000 --> 00:38:30,839 Speaker 1: abandoned that the kind of exchange it would with them, 546 00:38:30,960 --> 00:38:33,759 Speaker 1: the services within countries. I don't think that the US 547 00:38:34,360 --> 00:38:39,839 Speaker 1: totally be disengaged from the Chinese. Well, American business would 548 00:38:39,880 --> 00:38:42,799 Speaker 1: say that they can't. They gone too far already. But 549 00:38:43,719 --> 00:38:45,680 Speaker 1: just if you were pushed on it by the US, 550 00:38:45,800 --> 00:38:49,320 Speaker 1: do you think Japan would agree to limit, for example, 551 00:38:49,520 --> 00:38:54,360 Speaker 1: the semi conductor I think at this moment it is 552 00:38:54,800 --> 00:38:59,880 Speaker 1: good that way, so flable agree with the President Biden's 553 00:39:00,000 --> 00:39:06,120 Speaker 1: restrictions on semi conductor technology. It's a very difficult issue, 554 00:39:06,400 --> 00:39:09,839 Speaker 1: but you don't have to make the decisions. But I 555 00:39:09,880 --> 00:39:14,880 Speaker 1: think there can be some nuance of Japanese government which 556 00:39:14,920 --> 00:39:16,799 Speaker 1: can be a little bit different from that of the 557 00:39:16,880 --> 00:39:20,440 Speaker 1: United States. It's very difficult to explain, but the Japanese 558 00:39:21,120 --> 00:39:24,360 Speaker 1: history with the China is very long. To the students, 559 00:39:24,360 --> 00:39:29,120 Speaker 1: the Japanese students, we have to learn everything of Chinese dynasties, 560 00:39:29,200 --> 00:39:33,560 Speaker 1: are poem, poets, and history and the philosophers. We know 561 00:39:33,880 --> 00:39:36,680 Speaker 1: so many things. And Japan was so influenced by the 562 00:39:36,760 --> 00:39:41,279 Speaker 1: Chinese civilization. But after major restrictions, Chinese also learned a 563 00:39:41,320 --> 00:39:46,920 Speaker 1: lot from Japan. The Chinese word of communist, for instance, 564 00:39:47,080 --> 00:39:51,279 Speaker 1: is the Japanese translations of communists. So we we we 565 00:39:51,360 --> 00:39:55,759 Speaker 1: know each other much more than between China and the 566 00:39:55,800 --> 00:39:59,959 Speaker 1: United States. So I hope that the new US all 567 00:40:00,000 --> 00:40:05,040 Speaker 1: but difference the new US UH compared tones to reach 568 00:40:05,680 --> 00:40:12,880 Speaker 1: the difficult. It sounds like the British expression of you 569 00:40:12,960 --> 00:40:15,280 Speaker 1: want to have your cake and eat it, but maybe 570 00:40:15,280 --> 00:40:19,799 Speaker 1: you maybe you will achieve that. Thank you very much. 571 00:40:27,880 --> 00:40:30,960 Speaker 1: That's it for the Japanification of Stephanomics. Will be back 572 00:40:31,000 --> 00:40:33,520 Speaker 1: with something else next week. In the meantime, do rate 573 00:40:33,560 --> 00:40:35,640 Speaker 1: the show if you like it, and find more news 574 00:40:35,680 --> 00:40:38,960 Speaker 1: and analysis of Japan and the world on the Bloomberg 575 00:40:39,040 --> 00:40:43,800 Speaker 1: Terminal app and website. Also look at at economics on Twitter. 576 00:40:44,520 --> 00:40:47,120 Speaker 1: I should also say there was a grave injustice in 577 00:40:47,200 --> 00:40:50,200 Speaker 1: last week's credit Some very important people got left out 578 00:40:50,600 --> 00:40:53,680 Speaker 1: and that piece about the secondhand clothing that was co 579 00:40:53,920 --> 00:40:59,880 Speaker 1: reported by Ecodonto and Jani Pandia. Sorry. This episode was 580 00:41:00,000 --> 00:41:03,640 Speaker 1: produced by Yang Yang with help from Paul Jackson. Special 581 00:41:03,680 --> 00:41:08,319 Speaker 1: thanks to Yoshia Kahara, Takehito Nakao go on A, Mitso, 582 00:41:08,560 --> 00:41:14,759 Speaker 1: Ryotaro Nakamaru, Erika Yoka, Yama, Keiko Wiki, and Isabel Reynolds. 583 00:41:15,280 --> 00:41:18,279 Speaker 1: Mike Sasso is the executive producer of Stephanomics.