TT-453 -- Cheaper gas, ebiz news from Japan

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, January 20, 2008 Issue No. 453


- What's new
- News
- Candidate roundup/Vacancies
- Upcoming events
- Corrections/Feedback
- News credits

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2008 will go down as a memorable year in politics. Of
course we have the US presidential election coming up in
November, but closer to home there will be plenty of
fireworks in Tokyo, and possibly a local general election
as well. The reason why things are heating up here lies
with an ongoing power struggle inside the ruling LDP
between reformers and the old guard, which the old guard
are winning, and which is disgusting the Japanese voting
public. Then at the same time, the opposition DPJ party
is starting to get a feel for how much power it can wield
now that it controls the Upper House of the Diet

This is a historic period for Japanese politics, and we get
the feeling that a cornered LDP will be calling on all its
various vested interests to come out swinging for the
party. This includes the news media. For example, the
Yomiuri has started running heavily biased editorials about
how irresponsible the DPJ is for attempting to spoil the
US-Japan ship refueling legislation which the LDP finally
had to ram through in a second reading of the bill, using
their 2/3 super-majority in the Lower House. We can only
assume that the Yomiuri, representing the right wing views
of the country, must be getting concerned that the DPJ
threat is for real.

Ozawa, the leader of the DPJ, is not a popular person among
Japanese voters, who feel he is arrogant and lacks
commonsense. But with former PM Junichiro Koizumi gone, it
now falls to the DPJ to perform the role of being a force
for change (well, a change of power anyway) and the party
appears to be tapping in to the same fount of consciousness
that Koizumi did when he won a landslide election victory
in 2005. You'll recall that prior to the election he
expelled those opposing his efforts to privatize the
Japanese Post Office, the world's largest financial
institution, and with the subsequent resounding public
endorsement, he was able to move quickly and forcefully in
2006 to push through the privatization legislation.

Koizumi's victory should have taught the LDP Old Guard that
the public has had enough of construction-based pork barrel
politics, at its worst during the public works pump priming
of the 1990's, and that they do in fact understand that
more of the same will bankrupt the country. But for some
reason, with Koizumi then Abe both gone, under PM Fukuda
it's been a race for the feeding troughs.

Well, at least until late last year when the DPJ had a
brainwave and a golden opportunity handed to them...

[Continued below...]

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[...Article continues]

The golden opportunity is petrol taxes. At the end of the
fight over the refueling law, many wondered why Ozawa
walked away from the second vote, in order to stump for a
DPJ candidate in Osaka. The reason was that he realized
that the public don't really care about overseas support
of the US effort in Iraq. They're more concerned with
falling living standards here and the threat to their
futures (i.e., the pensions). Thus, Ozawa decided to make
his stand on something more symbolic and more relevant.
This has turned out to be the removal of a special
supplementary tax on gasoline, which is a cash spigot
for the Old Guard in government. This issue is perhaps
the DPJ's one real chance to cast themselves as the good
guys, and portray the LDP as having sold out to vested

The story behind the gasoline taxes, as you will have no
doubt read in the media, goes back to the early 1960's.
It was then that the initial tax (along with some others)
was set at JPY24.3 per liter of gas. However, back in 1974
the scandal-ridden Tanaka Kakuei government put in place a
special provisional (5-year renewing) surcharge of another
JPY24.3 to fund an acceleration of roading projects. It is
this provisional second tax increase that is the focus of

It appears that Tanaka's team deliberately designed the tax
in such a way that it has remained non-transparent to the
public, and is highly controllable. Nowadays, gasoline
taxes account for 60% of all roading taxes and represent a
huge flow of off-budget cash. Tanaka's government and those
ever since have all used the massive flow of funds to
allocate construction projects to "deserving" rural areas
and thus lock in the support of those local governments and
the companies which feed from those projects. The
politicians behind this funding are extremely powerful,
persistent, and are nick-named the "Doro Zoku", or the Road

Tanaka's efforts weren't all negative, and indeed, he
managed to open up swathes of Northern Honshu which might
otherwise still be locked in a post-war time warp. But the
need for such a system expired several decades ago and the
projects promulgated in the 1990's and ever since have
mostly been unnecessary or an overkill of the problems at
hand. As a result, in 2002 Koizumi mandated a massive
10.7% reduction of public works projects, and he and the
Ministry of Finance planned to use any surplus to pay
down national debts, improve the pension funding, and
cope with the aging of the population. Since that date,
until this year, the government has indeed managed to cut
public works by 4% a year -- bringing the total
expenditure down from a bloated JPY9.4trn (US$85bn) to
JPY6.9trn (US$62bn), a surprising 25% reduction.

Well done Koizumi...

The road tax numbers are truly mind boggling. The
government raises about JPY3.4trn from them, equivalent to
about 2% of the current consumption tax income. The money
is split between central and local governments and by law,
JPY2.8trn is committed to roading. The remaining JPY600bn
comprises surplus funds, and is the object of the political
tussle at present. Previously, Koizumi had the money
allocated to servicing the debts of the four roading
corporations formed after he forced their privatization in
2005. The public was staggered to learn that, mostly during
the 1990's, these entities had managed to incur debts of
JPY40trn (US$363bn)!

The thing that most of the Japanese public understand is
that the use of private automobiles is dropping, there is
a clear mis-allocation (or worse) of funds, and there are
many other government obligations (pensions, consumption
tax, etc.) which have higher priority. Their sense of
fairness and the obviousness of the problems are helping to
elevate the gas tax issue above the manipulations of the
conservative media, and it is this fact that the DPJ is
trying to take advantage of.

But the DPJ has to be careful. They quickly need to gather
facts and figures prove the gasoline taxes are
misallocated, and to show how its elimination won't
endanger the country's transport infrastructure. If they
choose the intellectually cheaper avenue of bluster and
confrontation, they will be painted by the LDP and the
press as ineffective blow-hards unhappy with the fact that
they can't force Fukuda into an election. Under such
conditions, they would be likely to lose an election.

As one example of how poorly thought out the use of funds
has been, the Ministry of Land, Infrastructure, and
Transport back in 1995 OK'd the start of the 320km Dai-ni
(No. 2) Tomei expressway between Nagoya and Tokyo, as well
as the 170km Meishin expressway between Nagoya and Kobe --
even though they knew at the time that road usage by trucks
was dropping.

Conceived as a backup transportation link in case the
existing Tomei was closed or clogged with holiday and
end-of-month traffic jams, in 2005 construction costs for
the Dai-ni Tomei had ballooned to around JPY23.6bn
(US$214m) per kilometer to build! That's a lot of money to
relieve a few days per year of inconvenience.

Indeed, it is about 5 times more than other expressways, due
to the fact that around 60% of the links are above ground
in the form of bridges, or underground as tunnels. The
overall budget was planned to be around JPY10trn - JPY20trn
(US$90bn-US$120bn), but of course that was in 1995 yen,
before China started swallowing global resources, and we
imagine that the final real cost could be as much as double
this amount. Put in proper perspective, this one project
will swallow up between one third and one half of the
nation's entire tax take for this year. Segments of it have
been completed, but no one really seems to know when the
project will finish, and thus, what it will finally cost.

Some suggest that there are indirect economic benefits,
such as savings in traveling times and gasoline
consumption, and that these justify the investments.
However, it isn't hard to see that road usage is going to
continue dropping by wide margins. For example, by at least
the same rate as the population decrease (i.e., decreases
in people available to drive trucks and to consume goods).
Simple extrapolation of a 20% decrease in population by
2050 also helps us see that Japan doesn't need a
second Tomei -- some intelligent discounting of tolls and
letting JR East go ahead with its mag-lev plans (which
would be privately funded) would easily distribute the peak
traffic loads.

In the meantime, if the DPJ is successful in stalling a
renewal of the provisional gasoline tax by the end of
March, motorists can expect gas prices to fall about 20-30
days later when the newly de-taxed supplies reach the pumps.
Interestingly, the oil companies are reported to be
thinking about holding tankers off-shore during March, in
the expectation that there will be a temporary slump in
gasoline demand over that month, and dock them in time
for an anticipated April surge once the prices drop.

Consumers will certainly be happy with the cheaper prices,
and the DPJ will see a resurgence in its popularity. But
will it last until Fukuda is finally forced to call an


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+++ NEWS

- Herbal producers tracking suppliers
- Goodwill temps in trouble
- Diet stand-off endangers BoJ appointment
- Blu-Ray killing HD-DVD
- Mr Yen says JPY100 to the dollar

-> Herbal producers tracking suppliers

Two herbal medicine companies distributing in Japan but
sourcing ancient remedies from China have decided to start
tracking their sources of supply, so as to increase food
safety, quality, and accountability. The two are Tsumura
and Kracie Pharma, who between them have more than 20,000
suppliers in China and who control about 70% of the
Chinese herbal remedy market in Japan. ***Ed: We've seen
this trend already in the organic produce field, where
photos and even short resumes of the producers can be
called up from 2D barcodes. Next up, western herbal
medicines?** (Source: TT commentary from,
Jan 19, 2008)

-> Goodwill temps in trouble

Well, if you're a government regulator about to suspend the
biggest temping agency in Japan, one would hope that you've
planned for the resulting fall-out. But it doesn't seem
that this is the case with Goodwill-registered temporary
staffers. Apparently, the business suspension of the
company has caused 2.9m (yes, that's a lot of people)
staffers to suddenly be out of work -- and for between 2
and 4 months. Although the Tokyo Labor Bureau is fielding
inquiries, because most of the the temp staffers don't have
unemployment insurance, they're not getting financial help.
***Ed: For some strange reason, probably just an oversight,
the Ministry of Health, Labor, and Welfare neglected to
require Goodwill to register its staffers under a "day
worker" insurance program set up specially for temporary
workers.** (Source: TT commentary from,
Jan 18, 2008)

-> Diet stand-off endangers BoJ appointment

The Times newspaper reports that the ongoing stand-off
between the LDP and DPJ parties threatens to derail the
appointment of the new governor of the Bank of Japan
(BoJ). Although the position is not expected to be left in
limbo for long, it is both embarrassing and a poor start
for Toshihiko Fukui's successor. Observers are saying that
the new man will probably be even more invisible than
Fukui has been of late (at least since his shares scandal),
and will toe the LDP line rather than run the BoJ
independently as it is supposed to be. (Source: TT
commentary from, Jan 18, 2008)

-> Blu-Ray killing HD-DVD

A BCN store sales report has stated that Sony's Blu-Ray
format high-density DVDs are killing competing Toshiba's
HD-DVD format in the stores. Apparently about 90% of
next-gen DVDs are the Blu-Ray format. Sony has a 60%
market share, followed by Panasonic with a bit less than
27% and Sharp with just under 10%. Toshiba came in at 4%
of overall sales. About 35% of all DVD players are now
next-gen models. (Source: TT commentary from, Jan 19, 2008)

-> Mr Yen says JPY100 to the dollar

Former vice Finance Minister, Eisuke Sakakibara, has
commented that he thinks that the US Fed lowering interest
rates again will significantly increase the demand for yen,
and the currency is possibly in for a major increase vs.
the US dollar. He says that unlike past years, the
Japanese government is unlikely to intervene if the yen
strengthens past 105, and as this fact is absorbed by
currency traders, they will be likely to push the yen up.
Sakakibara speculates that the yen will hit 100 to the
dollar by summer and could possibly move higher later in
the year. (Source: TT commentary from, Jan 19,

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.


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In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to

-> In TT444, Baby Machines, we speculated as to the reasons
for the falling birth rate in Japan.

*** Reader's Response:
I have been curious/interested in this issue as well, and
have a couple more items to add to the low birthrate cause

1. Unsuitable diet
In addition to the additives in processed foods, one can
also mention the heavy emphasis on simple carbs (sugar,
white rice, white flour) in the modern Japanese diet, a
type of diet which has been shown to negatively affect
fertility (there was a major article on this topic in the
US edition of Newsweek in December, 2007. Also mentioned
in this article is the negative effect of transfats on
fertility. It amazes me the lack of awareness in Japan of
the dangers of transfats and their widespread use – even
many ostensibly "health" foods boast of margarine
and/or shortening in their ingredients.

2. High levels of mercury
This has been been shown to lead to infertility.
The heavy consumption of tuna and other seafood in Japan
means that there is likely a lot of elevated mercury levels
among the Japanese. A recent study in NY city, where
people also eat a lot of sushi, showed high levels of
mercury among many people, so it's safe to assume that the
situation in Japan is same or worse.

3. No opportunities to date
But more importantly, a couple of steps earlier in the
process From my observation of my single 30-something
Japanese girlfriends, one of the biggest issues is the
difficulty finding a mate. I know quite a few Japanese gals
who would love to marry and have children, if only they
could find a guy! These are attractive, intelligent women
with good personalities. But there is no way in their daily
lives (commute, work, hang out with other single
girlfriends) for them to have a chance to meet eligible
men. And even if they "get out there" to activities, there
are no men attending because they are all working. None of
them would ever do something like online dating
(considered dangerous and unsavory, not something a
respectable girl would do). The old ways that Japanese used
to meet their spouses have largely gone away, but no new
ways have come into being to take their place.

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