PM Kishida goes to Washington

Insight: Japan’s Prime Minister Fumio Kishida began a seven-day visit to the United States on Monday. So far, he has held talks with President Joe Biden and will also address a joint session of Congress tonight. It will mark the first time a sitting Japanese prime minister has made such an address since 2015. Kishida is expected to outline his vision for a stronger U.S.-Japan bond, with defence in the Asia-Pacific region a key focus during the trip. Major shakeups to the Japan-U.S. defence alliance may be on the cards, which Biden and Kishida appear to have confirmed at a press conference yesterday. Biden stated the allies were taking ‘significant steps’ to ensure their militaries could work together ‘in a seamless and effective way’. Kishida’s visit is being hailed as 'historic’, with a senior U.S. official telling reporters the two will announce a whopping 70 agreements in total.

Impact: PM Kishida’s administration has pushed a hawkish stance on defence, famously making changes to Japan’s previously ironclad prohibition on exporting weapons. This allowed the country to furnish the U.S. with new Patriot missiles and sell a fighter jet model Japan is designing in cooperation with Italy and the U.K. Kishida and Biden are expected to agree to bolster the Japan and U.S. joint defence equipment production system, a probable boon for industrial contractors in both countries. Kishida’s visit is happening amid what the PM calls ‘the most severe security climate’ since WWII and, with talks focusing so heavily on defence, other military powers in the region will surely be watching closely. 

10

The number of hours it took for TSMC, Taiwan’s biggest chipmaker, to get 70% of its operations back online following the island’s worst earthquake in 25 years – a 7.2 magnitude quake on April 3 that killed 13 people. Semiconductor equipment is especially sensitive to disruption and damage and this rapid recovery shows how much Taiwan and its chipmakers have done to improve resilience, from installing early-warning sensors and shock absorbers to carrying out regular disaster drills.

Insight: Life expectancy is increasing while birth rates are declining around the globe, no more so than in Asia. In South Korea, which has the world’s lowest fertility rate, more prams were sold last year for pets than for babies. In response to this demographic timebomb, some Korean companies are offering workers USD 75,000 as an incentive to start a family. Japan’s working-age population has also been shrinking since 1994, while China’s is set to fall by 140 million people in the next 20 years (the populations of Germany and Italy combined). But why does this matter for investors and the wider corporate world?

Impact: For one thing, fewer workers can mean slower growth, unless offset by workforce and immigration reforms or tech advancements. Aging populations may also impact inflation, interest rates and government debt, in part due to increased pension and healthcare spending. According to a new BlackRock report, this trend – known as ‘demographic divergence’ – creates both opportunities and risks. Investors must therefore be selective, dynamic and stay connected to markets, like Indonesia, where a younger population may equal greater investment demand. For companies and brands too, the growth of the so-called ‘silver economy’ presents new product opportunities and audience challenges. Knowing when to pivot your business model will also be key, as the pram sellers of South Korea have learned.

Insight: Singapore had more high-growth companies than Seoul or Tokyo, according to a recent ranking compiled by the Financial Times, with 93 entries (out of a total of 500). And they were varied too, with start-ups and rapidly growing enterprises spanning manufacturing, healthcare, financial services, and software, including artificial intelligence.

Impact: Strong institutions and a highly educated workforce, plus a strategic geographical location and liberal government support, all help to explain Singapore’s allure for entrepreneurs. But the key to its appeal in recent years appears to be its neutrality, as it maintains a careful balance between the U.S. and China. This, unsurprisingly, is proving highly attractive to companies keen to protect themselves from supply chain disruptions, sanctions, and political pressure. Understanding the business environment in the Lion City is therefore a must for MNCs and investors with a regional interest.

Grace Shao, Director at FGS Global in Hong Kong, writes for The Diplomat on what China’s economic rough patch means for Japan’s revitalization.

Insight: As a result of President Joe Biden's restrictions on U.S. investments in China's advanced technology sectors, a steady shift of global capital from China to Japan is underway. China’s tech giants have been especially impacted by U.S. sanctions, as well as domestic Chinese regulations, leading to a loss of confidence among global investors and the closure of many China-focused hedge funds. By contrast, according to The Diplomat, Japan’s mature capital market has become increasingly attractive to foreign investors. We have seen a doubling of Japan-focused funds, with the Tokyo Stock Exchange implementing reforms to improve capital management. This has led to a robust projection for the Japanese equity market, with the Tokyo Price Index forecasts rising and a significant increase in M&A activity.

Impact: International media have framed Japan's economic revitalization in stark contrast to China's current economic downturn. This has been accompanied by a scramble among business-focused outlets and investors to better understand what is happening on the ground in Japan, with daily think pieces opining on the reasons behind the country’s Phoenix-like recovery. Communications experts must also quickly get up to speed on this unique market and its equally unique communications environment, to ensure they understand these corporate governance changes and convey the ‘Japan story’ to a global audience. FGS Global’s team in Tokyo stands ready to assist!

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