Sergiy Korsunsky speaking to the media at the Ukrainian Embassy in Ankara, Turkey on April 22, 2014.
Anadolu Agency | Anadolu Agency | Getty Images
SINGAPORE — Japanese Prime Minister Fumio Kishida will likely visit Ukraine’s capital before the G-7 Hiroshima Summit, Ukraine’s ambassador to Japan Sergiy Korsunsky told CNBC.
The envoy’s comments come after Ukrainian President Volodymyr Zelenskyy attended a virtual G-7 leaders’ meeting Friday on Kishida’s invitation as the world marked one year of the war in Ukraine.
When CNBC asked if the ambassador sees Kishida visiting before Japan hosts the summit in May, Korsunsky answered, “for sure,” without elaborating further on the timeline of the potential trip.
“He understands fully that G-7 chair[‘s] responsibility is to go to visit Ukraine before [the] summit in Hiroshima,” Korsunsky said, adding that it is a matter of “when and how.”
Kishida’s office did not immediately respond to CNBC’s request for comment.
“From my discussions with the political leaders around Kishida[‘s trip], in the parliament and the government, he is very much willing to go,” he said. “They will result, I’m sure in the best possible manner as soon as possible,” he said.
Following U.S. President Joe Biden’s surprise visit, Kishida is the only leader left among the Group of Seven who has not visited Ukraine since Russia invaded last year.
Canadian Prime Minister Justin Trudeau, French President Emmanuel Macron, German Chancellor Olaf Scholz, Italian Prime Minister Giorgia Meloni and U.K. Prime Minister Rishi Sunak have all visited.
“We want this to happen as soon as possible,” said Korsunsky, adding he cannot make details surrounding the discussions of the trip public.
European Commission President Ursula Von der Leyen, Ukraine president Volodymyr Zelensky and European Council President Charles Michel pictured at a Special European council summit, in Brussels, Thursday 09 February 2023.
Nicolas Maeterlinck | AFP | Getty Images
He emphasized logistical issues remain one of the top concerns of a potential trip by Kishida to Ukraine.
The ambassador said security concerns are also a priority in disucssions about Zelenskyy’s potential visit to the Japanese city of Hiroshima, home to the site of the world’s first atomic bombing.
If extended an invite from G-7 nations, the ambassador said Zelenskyy would “carefully consider this opportunity, taking into account … issues of logistics and security.”
He added Zelenskyy would have to consider “possible provocations” before making the trip.
“To fly to Japan is different than to fly to the United States. When you fly in the west direction, you fly over friendly territory,” he said. “If you fly into the East, you have to carefully consider every possible provocations,” he said.
Korsunsky noted a potential trip by Zelenskyy to Hiroshima would carry symbolic significance given that Ukraine faces “credible threats” similar to that of the atomic bombings on Japan during World War II.
“Japan experienced as well nuclear weapons in Hiroshima and Nagasaki, and that’s a threat which now exists, with a credible threat against Ukraine,” he said.
“If President Zelenskyy personally will attend summit in Hiroshima, that will be an extremely powerful message to the world, about the intentions of the G-7 to fight against nuclear terrorists in any form,” he said.
When asked about U.S. fears that China could provide lethal weapons to Russia, Korsunsky said, “China must understand this is a red line which cannot be crossed.”
“You shouldn’t open Pandora’s box with nuclear friends,” he said. “I want to hope that China will change its attitude once the clear picture of atrocities committed by Russia becomes more clear,” he said.
The ambassador however remained skeptical of such plans leading to tangible actions.
“Even if such discussions are happening somewhere in Beijing’s political circles, I believe they will go nowhere,” he said.
TOKYO (AP) — A Japanese startup announced plans Tuesday to launch commercial space viewing balloon flights that it hopes will bring an otherwise astronomically expensive experience down to Earth.
Company CEO Keisuke Iwaya said passengers do not need to be billionaires, go through intense training or have the language skills needed to fly in a rocket.
“It’s safe, economical and gentle for people,” Iwaya told reporters. “The idea is to make space tourism for everyone.” He said he wants to “democratize space.”
The company, Iwaya Giken, based in Sapporo in northern Japan, has been working on the project since 2012 and says it has developed an airtight two-seat cabin and a balloon capable of rising up to an altitude of 25 kilometers (15 miles), where the curve of the Earth can be clearly viewed. While passengers won’t be in outer space — the balloon only goes up to roughly the middle of the stratosphere — they’ll be higher than a jet plane flies and have an unobstructed view of outer space.
The company teamed up with major Japanese travel agency JTB Corp., which announced plans to collaborate on the project when the company is ready for a commercial trip. Initially, a flight would cost about 24 million yen ($180,000), but Iwaya said he aims to eventually bring it down to several million yen (tens of thousands of dollars).
While Japanese space ventures have fallen behind U.S. companies like SpaceX, Iwaya said his aim is to make space more reachable.
SpaceX launched three rich businessmen and their astronaut escort to the International Space Station in April for $55 million each — the company’s first private charter flight to the orbiting lab after two years of carrying astronauts there for NASA.
But unlike a rocket or a hot air balloon, the Iwaya Giken vessel will be lifted by helium that can be largely reused, company officials said, and flights will safely stay above Japanese territory or airspace. The first trip is planned as early as later this year.
The balloon, which can carry a pilot and a passenger, would take off from a balloon port in Hokkaido, rise for two hours to as high as 25 kilometers (15 miles) and stay there for one hour before a one-hour descent. The drum-shaped plastic cabin is 1.5 meters (4.9 feet) in diameter and has several large windows to allow a view of space above or the Earth below, the company said.
Applications for a space viewing ride opened Tuesday and will continue through the end of August. The first five passengers selected will be announced in October, company officials said, and flights will be approximately a week apart, depending on the weather.
___
This story corrects Iwaya’s title to CEO instead of president.
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Stocks snapped their losing streak. Analysts are divided on whether it’s a false rally.
U.S. stocks rebounded Thursday as all major indexes closed in the green. Asia-Pacific markets traded mixed on Friday. Japan’s Nikkei 225 rose 1.09% as Bank of Japan governor nominee Kazuo Ueda said the country’s ultra-loose monetary policy is “appropriate” despite inflation reaching a 41-year high of 4.2%.
PRO Analysts cannot agree if we are still in a bear market, or if a new bull market underway — and there are reliable indicators backing each case. In this confusing market, it’s best to stay open-minded, writes CNBC’s Michael Santoli.
Markets snapped their losing streak. The Dow Jones Industrial Average gained 0.33%. The Nasdaq Composite, boosted by a huge 14.02% spike in Nvidia, rose 0.72%. The S&P 500 added 0.53%, ending the trading session at 4,012.32 points — dispelling fears, if only for now, that the index could remain below 4,000 points this year.
Even though stocks have staged a rebound, analysts warn that markets are not out of the woods yet. “The market has not priced in the risk of recession,” said BankRate’s Chief Financial Analyst Greg McBride. A note from Societe Generale was harsher, saying markets have entered a “Death Zone” — where there is little valuation support for the levels stocks are at now.
Not everyone is pessimistic about the state of the markets, however. Brendan Murphy, head of core fixed income, North America at Insight Investment, thinks the U.S. economy can avoid a recession while bringing inflation down to 2%. “We are now in a period of low growth and moderating inflation,” said Murphy.
Newly released data seems to back him. On Thursday, fourth-quarter gross domestic product in the U.S. was revised down from 2.9% to 2.7% on an annualized basis — consumer spending wasn’t as strong as initially estimated. While that means it’s possible for markets to advance further this year, two pieces of data coming out Friday — January’s personal consumption expenditures price index and personal income report — will test that idea.
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Toyota Motor, the world’s biggest automaker, said on Wednesday it would accept a union demand for the biggest base salary increase in 20 years and a rise in bonus payments, as Japan steps up calls for businesses to hike pay.
As one of Japan’s biggest employers, Toyota
(TM) has long served as a bellwether of the spring labor talks, which are in full swing at major companies. Many are expected to conclude swiftly as the government seeks inflation-beating wage hikes to ease burdens on consumers.
The automaker’s incoming president Koji Sato said the decision to accept the union’s demands in full at the first round of talks was meant not just for Toyota but “also for the industry as a whole, and in the hope that it will lead to frank discussions between labor and management at each company.”
Within hours of Toyota’s announcement, rival Honda
(HMC) Motor said it had agreed to union demands for a 5% pay increase. The average monthly base salary rise of 12,500 yen ($92.70) at Honda
(HMC) is the biggest jump since at least 1990.
Toyota and the union federation representing 357,000 Toyota group workers said the base pay rise was the biggest in two decades, though they both declined to provide the percentage increase.
With inflation running at around 4%, the highest level in 40 years following decades of deflation, Japan is under more pressure than ever before to raise wages to revive consumption.
But with the economy struggling, it averted recession in the fourth quarter but grew much less than expected, analysts say pay increases will remain limited to big firms, such as Toyota.
Small and medium-sized companies, which employ most Japanese workers, will struggle to afford pay rises, they say.
Toyota said its wage increase would also apply to part-time workers and senior contract workers. It had agreed to union’s request for one-off bonus payments worth 6.7 months of wages.
Takaaki Sakagami, deputy secretary-general of the Federation of All Toyota Workers’ Union, said the union was pleased it had been able to reach a deal with the company quickly.
The pay agreement comes as Prime Minister Fumio Kishida has stepped up calls on business leaders to accelerate wage increases, warning of a return to stagflation if pay rises fall short of the rapid increase in prices.
“We will boost consumption and expand domestic demand by promoting efforts toward structural wage increases,” Kishida said at a lower house budget committee session on Wednesday.
Fast Retailing
(FRCOF), which owns clothing giant Uniqlo, last month said it would boost pay by up to 40%, fueling expectations big manufacturers would offer more at annual wage talks with unions this spring.
Video game maker Nintendo
(NTDOF) said earlier this month that it planned to lift workers’ base pay by 10%, despite trimming its full-year profit forecast.
LONDON — Joe Biden’s “protectionist” Inflation Reduction Act won’t help the U.S. counter the rise of China and could create a “single point of failure” in key supply chains, Britain’s trade chief Kemi Badenoch warned.
Speaking at a POLITICO event Tuesday night, Badenoch — recently promoted to head up the U.K.’s new Department for Business and Trade — predicted the flagship law would not achieve its key aims, and insisted the U.K. is not sitting on the sidelines in the transatlantic tussle over the plan.
The comments came just minutes after the U.S. ambassador to the U.K. mounted a spirited defense of the IRA at the same event.
The Inflation Reduction Act offers billions in subsidies and tax credits to try and incentivize take-up of electric vehicles and build up green infrastructure. But European and British carmakers are particularly concerned about the impact on their own industries of massive help for U.S. firms.
Speaking on Tuesday night, Badenoch said Britain — which has been lobbying against the plan but is not prepping its own subsidies — is “working very well with a group of like-minded countries who are worried about the Inflation Reduction Act.”
“The EU is very worried and we’re working jointly with them on it,” she said. “It’s not just the EU doing stuff and we’re not in the room. Japan is worried. South Korea is worried. Switzerland is worried.”
Many countries, Badenoch contended, are now “looking at what the U.S. is doing” with concern.
“It is onshoring in a way that could actually create problems with the supply chain for everybody else,” she said.
“And that will not have the impact that it wants to have when it’s looking at the economic challenge that China presents. So no, I don’t think it’s a good idea, not just because it’s protectionist. But it also creates a single point of failure in a different place, when actually what we want is diversification and strengthening of supply chains across the board.”
Speaking earlier Tuesday night, U.S. Ambassador to the U.K. Jane Hartley argued that the plan could have major positive implications for countries beyond the U.S.
“One of the things I would say is there’s going to be a huge amount of money, R&D — the technology is going to improve, the technology is going to be cheaper,” she said. “The technology is going to be used by everyone in the world — not just the U.S.”
Hartley stressed that U.S. Treasury Secretary Janet Yellen is “looking pretty hard” at the act during its so-called comment period, when U.S. agencies take feedback on a plan. Both President Biden and U.S. Trade Secretary Katherine Tai had, she said, stressed that their country “didn’t do this to hurt our allies — we want to protect our allies.”
CORRECTION: A previous version of this article misstated Janet Yellen’s job title. She is the treasury secretary.
United States Federal Reserve building, Washington D.C.
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The Fed wants to bring inflation down to 2%. But the economy may be fine with higher inflation.
HSBC, Europe’s largest bank by assets, reported a fourth-quarter profit of $5.2 billion before tax. That’s a 108% jump year over year, beating analysts’ estimates of an 87% increase. More good news: The bank is one of the few companies optimistic about its performance this year.
Markets in the U.S. were closed on Monday for Presidents Day, but stock futures dropped overnight. In Asia-Pacific, markets traded mixed Tuesday. Japan’s Nikkei 225 dipped 0.23% as the country’s flash purchasing managers’ index fell to 47.4 in February, indicating a contraction.
The U.S. Federal Reserve — and many other central banks in the world — have been proclaiming their determination to bring inflation down to 2%. But it’s an arbitrary target criticized by some economists.
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The 2% inflation target has been repeated so often by Fed officials and central bankers worldwide that it seems absolutely crucial to a healthy economy. But “the 2% inflation target, it’s relatively arbitrary,” said Josh Bivens, director of research at the Economic Policy Institute.
In fact, it was invented in New Zealand in the 1980s. Arthur Grimes, professor of wellbeing and public policy at Victoria University, said that New Zealand was experiencing skyrocketing inflation then, and the central bank picked an inflation target — seemingly out of nowhere — so that it could work toward a goal.
Other central banks followed suit. In 1991, Canada announced its inflation target; the United Kingdom followed a year later. It was not until 2012 that the U.S. declared its 2% inflation target, but that number has remained stubbornly alive in the minds of the Fed ever since.
But if the 2% target is arbitrary, it implies that the economy could function normally at a higher level of inflation. Indeed, in 2007, some economists wrote a letter to the Fed arguing for a higher ceiling. “There’s no evidence that 3% or 4% inflation does substantial damage relative to 2% inflation,” said Laurence Ball, professor of economics at Johns Hopkins University, who was among those who signed that letter.
The Fed, however, is unlikely to change its target amid the current hiking cycle — it might look like it’s caving to investor demands for lower rates. Reconsidering what healthy inflation means will be a task left to another generation of central bankers.
—CNBC’sAndrea Miller contributed to this report.
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Tokyo CNN
—
A surprisingly large number of Japanese say that travel is no longer a priority for them.
A survey done last year by global intelligence company Morning Consult showed that 35% of Japanese respondents said they were unwilling to travel again, the highest number of any country.
Tetsu Nakamura, a professor at Tamagawa University and a tourism behavior and psychology specialist, says the results are not at all surprising.
“In 2019, even before the pandemic, (Japanese) people who traveled abroad at least once a year made up about 10% of the population,” says Nakamura.
According a study Nakamura did back in 2016, there are what he calls “passivists,” those who say they want to travel abroad but won’t, and “denialists” – people who show no interest in traveling abroad and won’t.
Together, these two groups comprise around 70% of respondents in his pre-pandemic study, with “denialists” comprising roughly 30% of them.
For some of these “never travelers,” domestic trips within Japan are enough.
“Many Japanese feel like overseas travel is time-consuming even before they step foot on foreign land, that it takes a lot of time, skill and planning,” says Nakamura.
Hiroo Ishida, 25, a caregiver from Chiba Prefecture and motorcycle enthusiast with a love for Harley Davidson bikes, says this resonates with him.
“I have some desire to go to the US, mostly because in Western media shown in Japan, that’s the place to go to for motorcyclists, but I most likely won’t go because just planning it is an inconvenience. Japan is abundant with destinations that motorcyclists find attractive,” says Ishida.
His last trip abroad was a field trip to Guam in high school; he’s never felt the urge to go overseas since, he adds.
Kotaro Toriumi, a Japanese aviation and travel analyst, says the thought of complicated travel procedures abroad due to the pandemic and the risk of infection hinders people from seeking overseas travel.
Further, he claims that the pandemic has altered the “Japanese mindset.”
“People who used to travel … are now afraid to go abroad because of the risk of infection, but are fine traveling domestically. I think they are realizing more and more that there are many attractive tourist spots within Japan and people can have fun without going abroad,” says Toriumi.
The analyst notes that people who say they “never want to travel again” may simply be reluctant to travel soon until the pandemic is fully over.
Less disposable income means young people may be more inclined to stay at home or explore nearby locations.
“Compared to the older generations, they are less likely to go abroad since they don’t have much money. Besides, many young people find online entertainment or smartphone games more enjoyable than traveling abroad,” explained Toriumi. “Many elderly people would like to travel abroad again after Covid settles down.”
Aki Fukuyama, 87, is a “half-retired” financial executive of a hospitality conglomerate. He has had many golf trips overseas and wishes to go again but cites his health and age as the main reasons why he isn’t likely to make another international trip.
“I frequently went (abroad) until about 15 or 20 years ago,” he said. “It doesn’t help that most of my friends have passed away. I plan on traveling domestically, maybe somewhere close by, if someone invites me.”
Nakamura’s studies show that positive attitudes win over external pressure to refrain from heading abroad, so people that have always liked to travel wouldn’t let social conformity get in the way.
“People who have always had positive views regarding overseas travel try to do so as soon as they get the chance,” says Nakamura. “This is true for both before and after the pandemic. Those we see going abroad now are those people…they can’t wait to go back (abroad).”
Yuma Kase, 25, is a Tokyo-based finance worker who says she loves visiting new countries and interacting with people from different backgrounds.
“Preparing to go to a foreign country is part of the journey and excitement, I feel. Knowing that I have to practice what to say when I get there or do some research about cultural differences is something that I look forward to,” Kase says.
But her love of exploring isn’t genetic. Her mother hates to travel and likes to stick to a fixed daily routine. “The farthest my mother has been to in 2022 was an outlet mall,” laughs Kase.
According to the latest data from the Japan National Tourism Organization, the number of Japanese overseas travelers was down 86.2% in 2022, with around 2.7 million people compared to the 20 million figure in 2019.
“Those who only used to go because it was cheap or don’t particularly like to travel…they are not traveling now,” says Toriumi.
Top: The Shinjuku district of Tokyo at night. Photo via Adobe Stock.
North Korea launched a presumed long-range ballistic missile Saturday afternoon, South Korea’s Joint Chiefs of Staff said, a day after Pyongyang warned of “unprecedented strong responses” if the US and South Korea go ahead with planned military exercises.
Japanese Prime Minister Fumio Kishida said the missile landed inside Japan’s exclusive economic zone west of the northern main island of Hokkaido, sparking condemnation from the United States.
Japan’s Defense Ministry said the missile reached an altitude of 5,700 kilometers (3,541 miles) and flew a distance of about 900 kilometers (559 miles). It was launched from Pyongyang’s Sunan area around 5:22 p.m. local time Saturday, the South Korean JCS said.
Japanese officials said the missile flew for more than 60 minutes.
North Korea launched a missile last March with a slightly longer flight distance and time. That projectile was believed to be an intercontinental ballistic missile (ICBM), its first test of such a missile since 2017.
Japanese Defense Minister Yasukazu Hamada said at the time it had the potential to reach the US mainland. “The ICBM-class ballistic missile launched this time could have a range of over 15,000 km when calculated based on the flight distance of this ICBM,” Hamada said in a statement. “It depends on the weight of the warhead, but in that case, the US mainland would be included in the range.”
North Korea tests its missiles at a highly lofted trajectory. If they were fired at a flatter trajectory, they would in theory have the ability to reach the US mainland.
The US government described Saturday’s missile launch as “a flagrant violation of multiple UN Security Council resolutions,” according to a statement from White House National Security Council spokesperson Adrienne Watson.
“While [the US Indo-Pacific Command] has assessed it did not pose an immediate threat to U.S. personnel, or territory, or to our allies, this launch needlessly raises tensions and risks destabilizing the security situation in the region,” Watson said. “It only demonstrates that the DPRK continues to prioritize its unlawful weapons of mass destruction and ballistic missile programs over the well-being of its people.”
Watson said the US is urging other countries “to condemn these violations and call on the DPRK to cease its destabilizing actions and engage in serious dialogue.”
Earlier this month, the Kim Jong Un regime showcased almost at least 11 advanced ICBMs at a nighttime military parade in Pyongyang in the biggest display yet of what its state-run media described as North Korea’s “nuclear attack capability.”
Analysts said those missiles appeared to be Hwasong-17s.
Ankit Panda, a nuclear policy expert at the Carnegie Endowment for International Peace, said on social media that if each missile in the parade were equipped with multiple nuclear warheads, they could represent enough volume to overwhelm US ballistic missile defenses.
Saturday’s test came after the North Korean Foreign Ministry lashed out at the United States and South Korea on Friday over their plans for upcoming military exercises.
Washington and Seoul are expected to hold nuclear tabletop drills next week at the Pentagon, the South Korean Defense Ministry said Friday. The allies are also expected to hold military drills next month in the Korean Peninsula.
North Korea, in the same statement, also said it would consider additional military action if the UN Security Council continues to pressure Pyongyang “as the United States wants.”
Kim had called for the development of a new “Intercontinental Ballistic Missile system,” capable of a rapid nuclear counterstrike, according to the KCNA report.
The Japanese government has nominated Kazuo Ueda to lead its central bank, in a surprise move that could pave the way for the country to wind down its ultra-loose monetary policy.
If appointed, Ueda — a 71-year-old university professor and a former Bank of Japan (BOJ) board member — would succeed Haruhiko Kuroda, the country’s longest serving central bank chief and the architect of its current yield curve control policy (YCC).His term ends on April 8.
Ueda’s nomination must be approved by both houses of parliament, each is currently controlled by the ruling coalition, before the government of Prime Minister Fumio Kishida can formally appoint him for a five-year term.
Analysts believe Ueda’s appointment could increase the odds that the BOJ will exit its prolonged ultra-easy monetary policy, which is increasingly difficult to maintain at a time when inflationary pressure is rising and other central banks are hiking rates aggressively.
“Investors reckoned that the pick of Ueda-san is a signal to pave the way [for BOJ] to exit the ultra-loose policy,” said Ken Cheung, chief Asian foreign exchange strategist at Mizuho Bank.
“[The] chance for ending the yield curve control policy and negative interest rate[s] has been increasing,” he said, but adding that the BOJ’s monetary policy will likely stay “accommodative.”
The yield curve control policy is a pillar of the central bank’s effort to keep interest rates low and stimulate the economy.
Accommodative is a term used to describe monetary policy that adjusts to adverse market conditions and usually involves keeping interest rates low to spur growth and employment.
The BOJ has implemented an ultra-easy policy since Kuroda took the reins in 2013. In 2016, after years of aggressive bond buying failed to push up prices, it introduced the yield curve control program, where it bought targeted amounts of bonds to push down yields, in order to stoke inflation and stimulate growth.
As part of that program, the central bank targeted some short-term interest rates at an ultra-dovish minus 0.1% and aimed for 10-year government bond yields around 0%.
But as pricesrose and interest rates elsewhere went up, pressure has grown on the BOJ to wind down YCC.
In December, the BOJ shocked global markets by allowing the 10-year government bond yield to move 50 basis points on either side of its 0% target, in a move that stoked speculation the central bank may follow the same direction as other major economies by allowing rates to rise further.
The unexpectedly hawkish decision caused stocks to tumble, while sending the yen and bond yields soaring.
But Kuroda later dismissed a near-term exit from his ultra-loose monetary policy.
When local media first reported Friday that Ueda would be nominated as the next BOJ governor, the yen jumped against both the US dollar and the euro.
“Investors interpreted the news as signaling a hawkish turn,” said Stefan Angrick, senior economist at Moody’s Analytics.
“But it will take time for the implications to become clear,” he said. “With demand-driven price pressure still preciously scarce and stronger wage gains yet to materialize, it’s hard to see the BOJ rush towards tightening under a new governor.”
On Friday, Ueda told reporters that he thinks “the current BOJ policy is appropriate” and “monetary easing must carry on given the current state.”
In an opinion piece published last July in the Nikkei, Ueda warned against prematurely raising rates.
However, in the same piece, he also noted the BOJ should prepare an exit strategy, saying that a “serious” examination is needed at some point on the unprecedented monetary easing framework, which has continued far longer than most would expect.
“We don’t think he is expected to immediately change the BOJ’s policy stance based on his previous remarks,” said Min Joo Kang, senior economist at ING Group, in a recent research report.
“He [Ueda] is likely to shift monetary policy only gradually and the BOJ’s data dependency – inflation and wage growth – will become more important.”
Japan’s economy remains weak, highlighting the tough task ahead for Ueda.
According to the latest data from Tuesday, Japan’s economy grew by an annualized 0.6% in the fourth quarter of 2022, reversing a 0.8% contraction in the third quarter. But it was much weaker than the consensus forecast of 2% expansion.
“We believe that the modest recovery will continue this year, but today’s data support[s] the Bank of Japan’s argument that the recovery is still fragile and that easy monetary policy is needed,” said ING analysts. “The incoming new governor will find it difficult to start any normalization.”
Asia’s second-largest economy grows 0.2 percent during the October-December period, falling short of expectations.
Japan’s economy rebounded at a slower pace than expected in the final quarter of 2022, even as the reopening of the country’s borders gave a boost to growth.
Asia’s second-largest economy grew just 0.2 percent during the October-December period, government figures showed on Tuesday, indicating that the slowdown in the global economy may be dragging on the country’s recovery.
Analysts surveyed by Bloomberg had forecast 0.5 percent growth for the last quarter of the year. Japan’s economy unexpectedly shrank in the third quarter as a weak yen and higher import costs cut into household consumption and businesses.
The latest figures mean that the world’s third-largest economy grew 1.1 percent overall in 2022.
“Japan saw moderate growth in Q4 2022,” Hiroyuki Ueno, senior economist at SuMi TRUST, said in a note before the data was released.
“Consumer services benefitted from an increase in domestic travel and a rise in inbound tourists,” he wrote.
“Exports were resilient, reflecting the easing of supply constraints on automotive-related goods and moves to restore inventories overseas.”
Japan in October welcomed the return of mass tourism after two-and-a-half years of some of the world’s toughest pandemic travel restrictions.
A record 31.9 million foreign visitors visited Japan in 2019 before the country shut its borders in response to the arrival of COVID-19.
Policymakers are hoping that an uptick in domestic consumption will drive up wages to help households weather rising food and fuel costs.
Despite rising inflation, the Bank of Japan (BOJ) has bucked the international trend of hiking interest rates, sticking to an ultra-easy monetary policy aimed at boosting growth.
Outgoing BOJ Governor Haruhiko Kuroda, who is set to retire in April, has expressed a preference for an ultra-loose monetary policy until wages rise significantly.
Kuroda’s successor is expected to be nominated by Prime Minister Fumio Kishida later on Tuesday. Kazuo Ueda, an economics professor at Kyoritsu Women’s University and a former BOJ policy board member, is tipped to take over the role.
Brent Delta Topside oil platform at Seaton Port in the United Kingdom on May 5, 2017.
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It feels like 2022 again for markets. But investors want a fresh start this year.
Adidas shares tanked 11.64% after the company warned it could lose around 1.2 billion euros ($1.3 billion) in revenue if it can’t clear its Yeezy stock. The German sportswear company ended a partnership with Ye (formerly known as Kanye West), the face of Yeezy, after he made antisemitic comments.
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A selloff in the U.S. markets, rising oil prices and escalating U.S.-China tensions — it feels like we’re back in the worst part of 2022.
U.S. stocks had a terrible week. The Nasdaq dropped 0.61% on Friday, giving it a 2.41% loss for the week. The Dow gained 0.5% and the S&P rose 0.2%, but they still ended the week lower, with the S&P turning in its worst weekly performance in nearly two months.
Higher energy prices are back, too. The Brent contract for April, which covers oil from Europe’s North Sea, hit $86.39 a barrel, having risen more than 8% for the week. U.S. West Texas Intermediate crude futures rose to $79.72 a barrel, an 8.63% increase for the week — its best since October. Those prices spiked about 2% each on Friday after Russia said it would cut oil production next month to retaliate against Western sanctions.
Relations between the United States and China are fraying. After the U.S. shot down a suspected spy balloon last week, the Commerce Department imposed sanctions on six Chinese aerospace companies that it said support China’s espionage program. On Sunday, the U.S. military shot down a fourth unidentified object — following a second object downed on Friday and a third over the Yukon on Saturday. Though the objects’ origins are still unclear, it’s increasingly likely more sanctions will come.
Amid all that, investors are focusing on the upcoming U.S. consumer price index reading for January with renewed intensity. The numbers will indicate whether we’ll be forced to relive the dark days of 2022, or if there’s hope in at least one part of the economy — America’s consumers.
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North Korea put on a show of force this week with a military parade featuring more intercontinental ballistic missiles than ever before. Many of the missiles are believed to have the capability of reaching the U.S. Elizabeth Palmer has the details.
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Japanese zookeepers believe they have solved the mystery of how a gibbon became pregnant despite living alone in her cage.
Momo, a 12-year-old white-handed gibbon, shocked her keepers at the Kujukushima Zoo and Botanical Garden in Nagasaki in February 2021 when she gave birth despite having no known male companionship.
Now two years later, following a DNA test on her baby, the zoo has worked out who the father is – and even has a theory about how the gibbons mated.
The test showed the father to be Itō, a 34-year-old agile gibbon, who was in an adjacent enclosure to Momo around the time she became pregnant.
The zoo told CNN on Friday it believed that Momo and Itō had managed to mate through a small hole in a steel plate between their enclosures. The hole measured about 9 millimeters (0.3 inch) in diameter.
The baby ape – who is yet to be named – now weighs around 2 kilograms (4.4 pounds) and is “growing healthily” under Momo’s loving attention, the zoo said.
“It is a precious life born into the world, we will continue to take good care of him and hope that he will live a healthy long life,” said Hideki Hisano, deputy director of the zoo.
There are dozens of gibbon species that are native to parts of Asia, ranging from northeastern India to China and all the way to the Borneo archipelago.
The population of agile gibbons in the wild has been decreasing and they have been listed as an endangered species in the International Union for Conservation of Nature, because their habitat is threatened by human activities such as deforestation, mining and road construction.
Speciality eel restaurant of long-established ryotei, Kikusuiro, opens for the first time in Tokyo on March 15, 2023.
Press Release –
Feb 7, 2023 22:45 JST
TOKYO, February 7, 2023 (Newswire.com)
– Eel Restaurant Unakiku, a well-established restaurant in Nara Prefecture, will open its second location at Hotel Chinzanso Tokyo on March 15, 2023. Just in time for cherry blossom season, the hotel will begin accepting reservations from March 6.
The restaurant’s original location is in Kikusuiro, a revered ryotei (traditional Japanese restaurant), in Nara Prefecture. Opened in 1891, the venue has long been a favorite for many notable guests from Japan and abroad. In 2016, Kikusuiro opened Eel Restaurant Unakiku to bring exceptional, seasonal eel to more people.
Now, the renowned menu is coming to central Tokyo, providing guests the opportunity to taste the same recipes handed down for more than 130 years without having to travel to Nara. Guests can also dine while appreciating Hotel Chinzanso Tokyo’s iconic Japanese garden, abundant with nature.
Diners can enjoy kabayaki, a dish where the eel is grilled slowly over charcoal and dipped in marinade. Shirayaki is another beloved grilled eel dish, using kombu sake and served with wasabi soy sauce or salt. One of the most popular menu items is ‘Ainoseju,’ which offers diners the opportunity to try both kabayaki and shirayaki eel.
The restaurant will also offer a menu item only available at its Tokyo location. Served in an iron pot, the Unagi Tetsunabe Mabushi can be enjoyed three ways and is designed to be shared in a group. The Tokyo location will also feature an exclusive, newly arranged eel course.
The restaurant will be open every day from 11:00-15:00 (last order) and 17:00- 21:00 (last order). More information can be found on their website: https://www.kikusuiro.com/unakiku-tokyo
About Hotel Chinzanso Tokyo
Hotel Chinzanso Tokyo is one of the city’s most iconic luxury hotels with 70 years of history. The property includes 267 guest rooms/suites, nine restaurants, 38 meeting/banquet rooms, and a full-service spa with a Japanese onsen. Its award-winning garden has a wide variety of botanicals, including more than 100 cherry trees and 1,000 camellia trees. The standout feature of the garden is the ‘Tokyo sea of clouds,’ a re-creation of the natural phenomenon that can usually only be found in the mountainous regions of Japan. The hotel is owned and managed by Fujita Kanko Inc., a publicly-traded tourism industry corporation headquartered in Tokyo.
TOKYO (AP) — Japanese video game maker Nintendo recorded a slight drop in in profit in April to December as it maintained strong sales of its Switch console games.
Nintendo Co.’s net profit in the first nine months of the fiscal year through March was 346 billion yen ($2.6 billion), down 5.8% from 367 billion yen in the same period of the previous year.
Nintendo, the Kyoto-based maker of Pokemon and Super Mario video games, did not provide a breakdown of quarterly numbers.
Among the games selling well were “Splatoon 3,” a paint-shooting game, “Pokemon Scarlet and Violet” and “Nintendo Switch Sports.”
Nintendo sold fewer machines compared to a year earlier, partly because a shortage in computer chips, a critical part for the console, due to disruptions from the pandemic crimped production, the company said.
Nintendo lowered its full fiscal year profit forecast to 370 billion yen ($2.8 billion), from the 400 billion yen ($3 billion) it had projected in November. Previous fiscal year profit was 477.7 billion yen.
This fiscal year’s nine-month sales totaled nearly 1.3 trillion yen ($10 billion), down 1.9% from a year earlier.
Nintendo earlier was more bullish about its performance because an increase in people staying home during the pandemic boosted its sales.
That advantage is likely wearing off now that pandemic restrictions have eased and people increasingly are traveling and working outside their homes both in Japan and the rest of the world.
Nintendo expects to sell 18 million Switch consoles in the current fiscal year, down from an earlier forecast of 21 million Switch machines that was cut to 19 million machines late last year.
Cumulative Switch sales around the world have topped 122 million machines.
Japanese exporters like Nintendo have gotten a boost in profits from the yen’s weakness against the U.S. dollar and other major currencies. That lifts the value of their overseas earnings when converted into yen.
The U.S. dollar is now trading at about 130 yen after rising to about 150 Japanese yen a few months ago.
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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama
TOKYO (AP) — Japanese investor SoftBank Group reported Tuesday that it sank into a deep loss for the October-December quarter, slammed by the global plunge in technology shares.
SoftBank Group Corp. racked up a 783 billion yen ($5.9 billion) loss for the fiscal third quarter, a reversal from the 29 billion yen profit recorded the same period a year ago.
SoftBank invests in hundreds of companies, including mobile carrier SoftBank, web services provider Yahoo, vehicle-for-hire company Didi and Chinese e-commerce giant Alibaba. It also runs the Vision Fund that includes other global investors.
SoftBank Group recorded nearly 512 billion yen ($3.9 billion) in losses on investments during the quarter, as prices of its shareholdings and funds nose-dived, it said.
Various uncertainties have slammed Japanese companies recently, such as soaring material costs and rising interest rates. Tensions such as the war in Ukraine have also added to what tends to work as negatives for SoftBank’s sprawling portfolio of investments.
Quarterly sales edged up 6% on year to 1.69 trillion yen ($12.8 billion).
Over the last year, Tokyo-based SoftBank Group raised money using Alibaba shares and selling shares in European telecommunications company T-Mobile, while exiting or partially exiting companies like Uber, according to the company.
Earlier this month, group company Z Holdings decided to merge the messaging app company Line and Yahoo Japan, a move aimed at boosting synergies and better focusing on products. Besides those two companies, Z Holdings also owns PayPay, a major Japanese mobile payment system.
SoftBank’s charismatic founder and chief executive Masayoshi Son has often managed to put a positive spin on his vision, even in the most challenging times.
He has said putting your money on artificial intelligence, massive data and robotics will pay off as paving the way for future innovation. He was one of the first believers in the internet business, long before the idea caught on in Japan.
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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama
Hideya Tokiyoshi started his career as an English teacher in Tokyo about 30 years ago.
Since then, his salary has stayed pretty much the same. That’s why, three years ago, after giving up hopes for higher pay, the schoolteacher decided to start writing books.
“I feel lucky, as writing and selling books gives me an additional income stream. If not for that, I would’ve stayed stuck in the same wage loop,” Tokiyoshi, now 54, told CNN. “That’s why I was able to survive.”
Tokiyoshi is part of a generation of workers in Japan who have barely gotten a raise throughout their working lives. Now, as prices rise after decades of deflation,the world’s third largest economy is being forced to reckon with the major problem of falling living standards, and companies are facing intense political pressure to pay more.
Japanese Prime Minister Fumio Kishida is urging businesses to help workers keep up with higher living costs. Last month, he called on companies to hike pay at a level above inflation, with some already heeding the call.
Like other parts of the world, inflation in Japan has become a major headache. In the year toDecember, core consumer prices rose 4%. That’s still low by comparison with America or Europe, but represents a 41-year high for Japan, where people are more used to prices going backwards.
“In a country where you haven’t had nominal wage growth over 30 years, real wages are declining quite rapidly as a result [of inflation],” Stefan Angrick, a Tokyo-based senior economist at Moody’s Analytics, told CNN.
Last month, Japan recorded its biggest drop in earnings, once inflation is taken into account, in nearly a decade.
In 2021, the average annual paycheck in Japan was $39,711, compared with $37,866 in 1991,according to data from the Organisation for Economic Co-operation and Development (OECD).
That means workers got a pay bump of less than 5%, compared to a rise of 34% in other Group of Seven economies, such as France and Germany, over the same period.
Experts have pointed to a series of reasons for the stagnant wages. For one, Japan has long grappled with the opposite of what it’s facing now: low prices. Deflationstarted in the mid-1990s,because of a strong yen — which pushed down the cost of imports — and the bursting of a domestic asset bubble.
“For the past 20 years, basically, there has been no change in consumer price inflation,” said Müge Adalet McGowan, senior economist for the Japan desk at the OECD.
Until now, consumers wouldn’t have taken a hit to their wallets or felt the need to demand better pay, she added.
But as inflation rises, people are likely to start making “strong” complaints about the lack of raises, predicted Shintaro Yamaguchi, an economics professor at the University of Tokyo.
Experts say Japan’s wages have also suffered because it lags in another metric: its productivity rate.
The country’s output, measured by how much workers add to a country’s GDP per hour, is lower than the OECD average, and “probably the biggest reason” for flat wages, according to Yamaguchi.
“Generally, wages and productivity growth go hand-in-hand together,” McGowan said. “When there’s productivity growth, firms perform better and [when] they do better, they can offer higher wages.”
She said Japan’s aging population was an additional issue because an older labor force tends to equate to lower productivity and wages. The way people are working is also changing.
In 2021, nearly 40% of Japan’s total workforce was employed part-time or worked irregular hours, up from roughly 20% in 1990, according to McGowan.
“As the share of these non-regular workers has gone up, of course the average wages also stay low, because they make less,” she said.
Japan’s unique work culture is contributing to wage stagnation, according to economists.
Many people work in the traditional “lifetime employment” system, where companies go to extraordinary lengths to keep workers on the payroll for life, Angrick said.
That means they’re often very cautious about raising wages in good times so that they have the means to protect their workers when times are tough.
“They don’t want to lay people off. So they need to have that buffer in order to be able to keep them on the payroll when a crisis hits,”he said.
Its seniority-based pay system, where workers are paid based on their rank andlength of service rather than performance, lowers incentives for people to change jobs, which in other countries generally helps push up wages, according to McGowan.
“The biggest issue in Japan’s labor market is the stubborn insistence on pay by seniority,” Jesper Koll, a prominent Japan strategist and investor, previously told CNN. “If genuine merit-based pay were introduced, there would be much more job switching and career climbing.”
Last month, Kishida warned the economy was at stake, saying Japan risked falling into stagflation if wage rises continued to fall behind price increases. The term refers to a period of high inflation and stagnant economic growth.
Raising wages by 3% or more a year was already a core goal of Kishida’s administration. Now, the prime minister wants to take another step further, with plans to create a more formalized system.
Asked for details, a government spokesperson told CNN that new “comprehensive economic measures will include expanded support for wage increases, integrated with an improvement in productivity.”
Authorities plan to roll out guidelines for companies by June, said a representative from the Ministry of Health, Labor and Welfare.
Meanwhile, the country’s largest labor group, the Japanese Trade Union Confederation or Rengo, is now demanding wage increases of 5% at this year’s talks with the management of various companies. The annual negotiations kick off this month.
In a statement, Rengo said it was making the push because workers were making “inferior wages on a global scale,” and needed help with rising prices.
Some companies have already acted. Fast Retailing
(FRCOF), the company behind Uniqlo and Theory, announced last month that it would boost salaries in Japan by up to 40%, acknowledging that compensation had “remained low” in the country in recent years.
While inflation was a factor, the company wanted to align “with global standards, to be able to increase our competitiveness,” a Fast Retailing spokesperson told CNN.
According to a Reuters poll released last month, more than half of the country’s big firms are planning to raise wages this year.
Suntory, one of Japan’s biggest beverage makers, may be one of them.
CEO Takeshi Niinami is weighing a 6% raise for its Japanese workforce of approximately 7,000 people, according to a spokesperson, adding that it was subject to negotiation with a union.
The news may prompt other businesses to follow suit.
“If some of the biggest companies in Japan raise wages, many other firms will follow,” if only to stay competitive, said Yamaguchi. “Many firms look at what other firms do.”
A version of this story appeared in CNN’s What Matters newsletter. To get it in your inbox, sign up for free here.
CNN
—
Multiple developments in recent weeks reinforce the US military’s new hyperfocus on China:
There is a new agreement between the US and Japan that will redesignate US Marines stationed on Japan, allowing them to fire anti-ship missiles.
These military moves give the impression of resolve and focus that the US will help protect the democratic, self-governing island of Taiwan in the event of direct Chinese aggression.
China’s ruling Communist Party views Taiwan as part of its territory, despite never having controlled it, and has refused to rule out the use of military force to bring about what it calls “reunification.” The US provides Taiwan with defensive weapons but has remained intentionally ambiguous on whether it would intervene militarily in the event of a Chinese attack.
Top US officials such as Chairman of the Joint Chiefs Gen. MarkMilley have said US intelligence suggests China’s goal is to be able to strengthen its military capabilities to levels required to potentially attack and seize Taiwan by 2027, something which analysts believe it does not possess at present.
If you look at a map, the Philippines, where the US has expanded its existing access to bases, is just south of Taiwan. The Japanese island of Okinawa, where Marines are stationed, is to the north.
Writing about the Marines on Okinawa, CNN’s team has reported thatthe Pentagon is certainly aiming to be ready for any conflict with China – noting “the Pentagon’s desire to shift from the wars of the past in the Middle East to the region of the future in the Indo-Pacific. The change comes as simulated war games from a prominent Washington think tank found that Japan, and Okinawa in particular, would play a critical role in a military conflict with China, providing the United States with forward deployment and basing options.”
The military labels China as a “pacing threat,” meaning its military is making strategic strides against the US. In fact, China’s navy has surpassedthe US Navy in fleet size, and some experts have warned that an American technological advantage may not be enough to maintain superiority, particularly when the US is committing many of its munitions to Ukraine.
When American politicians such as President JoeBiden talk about this current time period as an era in which democracies must stand up to autocracies, he’s largely talking about China and Russia.
Secretary of State Antony Blinken travels to China this weekend to discuss a range of issues with Chinese officials.
Biden has angered the Chinese government by repeatedly saying out loud what has been the assumed part of US foreign policy – that the US would respond if China was to move militarily against Taiwan.
Warnings about China wanting to supplant the US as the dominant world power are not new.
In March 2021, Navy Adm. Philip Davidson, who at the time was in charge of US Indo-Pacific Command, told lawmakers on Capitol Hill that China could be aiming to topple the “rules-based international order” by 2050 or soonerand could pose a direct threat to Taiwan even earlier,by 2027.
That’s all geopolitical background with which to a view a memo from a top commander in the US Air Force, Gen. Michael Minihan, that warns subordinates his “gut” tells him to be ready for war with China – and not just in theory, but in two years.
The memo is out of step with the rest of the US government, fueling Republican criticisms of Biden and giving China reason to claim the US is the aggressor in the region.
Is this general being serious?
The memo, first reported by NBC News, was shocking because its inappropriate language and hard deadline not only presupposes that a war between the US and China is inevitable – something both Washington and Beijing maintain is inaccurate – but is wholly out of step with the much more diplomatic, public-facing language coming out of the White House, the State Department and pretty much anywhere else of military or diplomatic authority.
“I hope I am wrong. My gut tells me we will fight in 2025,” writes Minihan, the four-star general who oversees the Air Mobility Command, which controls transport and refueling.
Officials from the Pentagon and White House have distanced themselves from the memo and made clear that war with China is not preordained or even likely.
“The president believes it shouldn’t evolve into conflict,” John Kirby, the coordinator for strategic communications at the National Security Council, told CNN’s Wolf Blitzer on Monday. “There’s no reason for the bilateral relationship – the most consequential bilateral relationship in the world – to erupt into some kind of conflict. We do believe, and the president has made clear, that we are in a competition with China, a competition that he believes the United States is well poised to win.”
Minihan asks his commanders to report on their plans for a war with China by the end of Februaryand encourages his personnel to use target practice to preparefor the challenge with “unrepentant lethality.” He says theupcoming 2024 presidentialelection in Taiwan could provoke China, and theupcoming presidentialelection in the US could distract Americans from the threat.
Minihan’s warning is getting a lot of attention in conservative media outlets, which are pushing for a major increase in defense spending, particularly to build up the US Navy to counter China.
The House Foreign Affairs Committee chairman, Texas Rep. Michael McCaul, said on “Fox News Sunday” that he hopes Minihan is wrong: “I think he’s right, though, unfortunately.”
McCaul also took a political shot at Biden over his decision to remove US troops from Afghanistan.
“We have to be prepared for this,” McCaul said. “It could happen, I think, as long as Biden is in office projecting weakness.”
Republicans are looking to make China a focus after taking control of the US House of Representatives and have created a new congressional committee to focus on threats posed to the US by China. After a report that House Speaker Kevin McCarthy was planning to follow in his predecessor Nancy Pelosi’s footsteps and visit Taiwan, a Chinese Foreign Ministry spokesperson urged against US officials interacting with Taiwan, according to The Hill.
Former Defense Secretary Mark Esper, who worked for former President Donald Trump, said there is an important line between being prepared for the possibility of war and predicting one will definitely occur.
“On one hand, I think it’s very important to drive a sense of urgency. I applaud him for that. He’s an aggressive commander,” Esper told CNN’s Kate Bolduan on Monday, referring to Minihan’s memo. “On the other hand, I would not paint it as inevitable that we will be in war, and I hope we will do everything we can to deter a conflict.”
LONDON — As nations around the world scramble to secure crucial semiconductor supply chains over fears about relations with China, the U.K. is falling behind.
The COVID-19 pandemic exposed the world’s heavy reliance on Taiwan and China for the most advanced chips, which power everything from iPhones to advanced weapons. For the past two years, and amid mounting fears China could kick off a new global security crisis by invading Taiwan, Britain’s government has been readying a plan to diversify supply chains for key components and boost domestic production.
Yet according to people close to the strategy, the U.K.’s still-unseen plan — which missed its publication deadline last fall — has suffered from internal disconnect and government disarray, setting the country behind its global allies in a crucial race to become more self-reliant.
A lack of experience and joined-up policy-making in Whitehall, a period of intense political upheaval in Downing Street, and new U.S. controls on the export of advanced chips to China, have collectively stymied the U.K.’s efforts to develop its own coherent plan.
The way the strategy has been developed so far “is a mistake,” said a former senior Downing Street official.
Falling behind
During the pandemic, demand for semiconductors outstripped supply as consumers flocked to sort their home working setups. That led to major chip shortages — soon compounded by China’s tough “zero-COVID” policy.
Since a semiconductor fabrication plant is so technologically complex — a single laser in a chip lithography system of German firm Trumpf has 457,000 component parts — concentrating manufacturing in a few companies helped the industry innovate in the past.
But everything changed when COVID-19 struck.
“Governments suddenly woke up to the fact that — ‘hang on a second, these semiconductor things are quite important, and they all seem to be concentrated in a small number of places,’” said a senior British semiconductor industry executive.
Beijing’s launch of a hypersonic missile in 2021 also sent shivers through the Pentagon over China’s increasing ability to develop advanced AI-powered weapons. And Russia’s invasion of Ukraine added to geopolitical uncertainty, upping the pressure on governments to onshore manufacturers and reduce reliance on potential conflict hotspots like Taiwan.
Against this backdrop, many of the U.K.’s allies are investing billions in domestic manufacturing.
The Biden administration’s CHIPS Act, passed last summer, offers $52 billion in subsidies for semiconductor manufacturing in the U.S. The EU has its own €43 billion plan to subsidize production — although its own stance is not without critics. Emerging producers like India, Vietnam, Singapore and Japan are also making headway in their own multi-billion-dollar efforts to foster domestic manufacturing.
US President Joe Biden | Samuel Corum/Getty Images
Now the U.K. government is under mounting pressure to show its own hand. In a letter to Prime Minister Rishi Sunak first reported by the Times and also obtained by POLITICO, Britain’s semiconductor sector said its “confidence in the government’s ability to address the vital importance of the industry is steadily declining with each month of inaction.”
That followed the leak of an early copy of the U.K.’s semiconductor strategy, reported on by Bloomberg, warning that Britain’s over-dependence on Taiwan for its semiconductor foundries makes it vulnerable to any invasion of the island nation by China.
Taiwan, which Beijing considers part of its territory, makes more than 90 percent of the world’s advanced chips, with its Taiwan Semiconductor Manufacturing Company (TSMC) vital to the manufacture of British-designed semiconductors.
U.S. and EU action has already tempted TSMC to begin building new plants and foundries in Arizona and Germany.
“We critically depend on companies like TSMC,” said the industry executive quoted above. “It would be catastrophic for Western economies if they couldn’t get access to the leading-edge semiconductors any more.”
Whitehall at war
Yet there are concerns both inside and outside the British government that key Whitehall departments whose input on the strategy could be crucial are being left out in the cold.
The Department for Digital, Culture, Media and Sport (DCMS) is preparing the U.K.’s plan and, according to observers, has fiercely maintained ownership of the project. DCMS is one of the smallest departments in Whitehall, and is nicknamed the ‘Ministry of Fun’ due to its oversight of sports and leisure, as well as issues related to tech.
“In other countries, semiconductor policies are the product of multiple players,” said Paul Triolo, a senior vice president at U.S.-based strategy firm ASG. This includes “legislative support for funding major subsidies packages, commercial and trade departments, R&D agencies, and high-level strategic policy bodies tasked with things like improving supply chain resilience,” he said.
“You need all elements of the U.K.’s capabilities. You need the diplomatic services, the security services. You need everyone working together on this,” said the former Downing Street official quoted above. “There are huge national security aspects to this.”
The same person said that relying on “a few [lower] grade officials in DCMS — officials that don’t see the wider picture, or who don’t have either capability or knowledge,” is a mistake.
For its part, DCMS rejected the suggestion it is too closely guarding the plan, with a spokesperson saying the ministry is “working closely with industry experts and other government departments … so we can protect and grow our domestic sector and ensure greater supply chain resilience.”
The spokesperson said the strategy “will be published as soon as possible.”
But businesses keen for sight of the plan remain unconvinced the U.K. has the right team in place for the job.
Key Whitehall personnel who had been involved in project have now changed, the executive cited earlier said, and few of those writing the strategy “have much of a background in the industry, or much first-hand experience.”
Progress was also sidetracked last year by lengthy deliberations over whether the U.K. should block the sale of Newport Wafer Fab, Britain’s biggest semiconductor plant, to Chinese-owned Nexperia on national security grounds, according to two people directly involved in the strategy. The government eventually announced it would block the sale in November.
And while a draft of the plan existed last year, it never progressed to the all-important ministerial “write-around” process — which gives departments across Whitehall the chance to scrutinize and comment upon proposals.
Waiting for budget day
Two people familiar with current discussions about the strategy said ministers are now aiming to make their plan public in the run-up to, or around, Chancellor Jeremy Hunt’s March 15 budget statement, although they stressed that timing could still change.
Leaked details of the strategy indicate the government will set aside £1 billion to support chip makers. Further leaks indicate this will be used as seed money for startups, and for boosting existing firms and delivering new incentives for investors.
U.K. Chancellor Jeremy Hunt | Leon Neal/Getty Images
There is wrangling with the Treasury and other departments over the size of these subsidies. Experts also say it is unlikely to be ‘new’ money but diverted from other departments’ budgets.
“We’ll just have to wait for something more substantial,” said a spokesperson from one semiconductor firm commenting on the pre-strategy leaks.
But as the U.K. procrastinates, key British-linked firms are already being hit by the United States’ own fast-evolving semiconductor strategy. U.S. rules brought in last October — and beefed up in recent days by an agreement with the Netherlands — are preventing some firms from selling the most advanced chip designs and manufacturing equipment to China.
British-headquartered, Japanese-owned firm ARM — the crown jewel of Britain’s semiconductor industry, which sells some designs to smartphone manufacturers in China — is already seeing limits on what it can export. Other British firms like Graphcore, which develops chips for AI and machine learning, are feeling the pinch too.
“The U.K. needs to — at pace — understand what it wants its role to be in the industries that will define the future economy,” said Andy Burwell, director for international trade at business lobbying group the CBI.
Where do we go from here?
There are serious doubts both inside and outside government about whether Britain’s long-awaited plan can really get to the heart of what is a complex global challenge — and opinion is divided on whether aping the U.S. and EU’s subsidy packages is either possible or even desirable for the U.K.
A former senior government figure who worked on semiconductor policy said that while the U.K. definitely needs a “more coherent worked-out plan,” publishing a formal strategy may actually just reveal how “complicated, messy and beyond our control” the issue really is.
“It’s not that it is problematic that we don’t have a strategy,” they said. “It’s problematic that whatever strategy we have is not going to be revolutionary.” They described the idea of a “boosterish” multi-billion-pound investment in Britain’s own fabricator industry as “pie in the sky.”
The former Downing Street official said Britain should instead be seeking to work “in collaboration” with EU and U.S. partners, and must be “careful to avoid” a subsidy war with allies.
The opposition Labour Party, hot favorites to form the next government after an expected 2024 election, takes a similar view. “It’s not the case that the U.K. can do this on its own,” Shadow Foreign Secretary David Lammy said recently, urging ministers to team up with the EU to secure its supply of semiconductors.
One area where some experts believe the U.K. may be able to carve out a competitive advantage, however, is in the design of advanced semiconductors.
“The U.K. would probably be best placed to pursue support for start-up semiconductor design firms such as Graphcore,” said ASG’s Triolo, “and provide support for expansion of capacity at the existing small number of companies manufacturing at more mature nodes” such as Nexperia’s Newport Wafer Fab.
Ministers launched a research project in December aimed at tapping into the U.K. semiconductor sector’s existing strength in design. The government has so far poured £800 million into compound semiconductor research through universities, according to a recent report by the House of Commons business committee.
But the same group of MPs wants more action to support advanced chip design. Burwell at the CBI business group said the U.K. government must start “working alongside industry, rather than the government basically developing a strategy and then coming to industry afterwards.”
Right now the government is “out there a bit struggling to see what levers they have to pull,” said the senior semiconductor executive quoted earlier.
Under World Trade Organization rules, governments are allowed to subsidize their semiconductor manufacturing capabilities, the executive pointed out. “The U.S. is doing it. Europe’s doing it. Taiwan does it. We should do it too.”
This story has been updated. Cristina Gallardo contributed reporting.
