Russell Clark: Japan, China, and USD reserve status — Manifold #56

 

Russell Clark is a hedge fund investor who has lived and worked in both Japan and China. He writes the widely followed Substack Capital Flows and Asset Markets: https://www.russell-clark.com/ 

Steve and Russell discuss: 

0:00 Introduction 

0:52 Russell's background and experiences in Japan 

13:25 Hong Kong and finance 

31:53 China property bubble 

48:54 Dollar status as global reserve currency 

56:09 Japan and China economies from a long run perspective 

1:05:07 Inflation, US economy, and macro observations 

Audio-only and Transcript

Strategic Calculus of a Taiwan Invasion

It seems implausible to me that PRC would risk an invasion of Taiwan in the near term, absent a very strong provocation such as an outright declaration of independence. Mastro's recent article in Foreign Affairs: China's Taiwan Temptation made the case for potential near term conflict, and caused quite a stir among analysts.

My guess is that PRC already has the capability to take Taiwan, but not without significant risk. However, as long as they continue to believe that time is on their side an invasion seems unlikely.

Some comments:

1. PRC would have local air and naval superiority at the beginning of the conflict.

2. I am uncertain as to the details of lift/amphibious assault -- discussed by Goldstein on the panel. This is the main failure mode for PLA.

3. I am uncertain as to Taiwan's will to fight. A quick surrender is not excluded, in my opinion. It seems that most US planners do not understand this.

4. Most westerners fail to understand that this is a frozen civil war, with very strong and emotional commitments from the PRC side. The involvement of Japan in this conflict, given their history of aggression in Asia and previous colonial occupation of Taiwan, could easily get them nuked again (this time with much greater megatonnage). It is unclear whether the present leadership of Japan appreciates this sufficiently.

5. The interests of the average person in the US or Japan (or any Asian country) are best served by working very hard to avoid this conflict.

What is happening across the Taiwan Strait? 

In March, Admiral Philip Davidson, then commander of U.S. forces in the Pacific (INDOPACOM), said in a hearing before Congress that a Chinese attack on Taiwan could take place within six years. His successor, Admiral John Aquilino, agreed that such an attack could occur sooner “than most think.” More recently, however, the chairman of the joint chiefs of staff, General Mark Milley, testified that he believes that China has little intention to take Taiwan by force, and that the capability to do so remains a goal rather than a reality. 

On the other hand, the Chinese military has increased pressure on Taiwan in the past year, flying into the island’s air defense identification zone on numerous occasions. During one day in June, China flew 28 military aircraft toward Taiwan, the largest number in a single day, perhaps in response to G7 and NATO statements on China and Taiwan. 

On July 19, 2021, the National Committee hosted a virtual program with Lyle Goldstein and Oriana Skylar Mastro to discuss China/Taiwan/U.S. military relations. NCUSCR President Stephen Orlins moderated and NCUSCR Director Admiral Dennis Blair offered commentary. 

Lyle J. Goldstein is a research professor in the China Maritime Studies Institute (CMSI) at the Naval War College (NWC) and an affiliate of its new Russia Maritime Studies Institute. Founding director of CMSI and author of dozens of articles on Chinese security policy, he focuses on Chinese undersea warfare. On the broader subject of U.S.-China relations, Dr. Goldstein published Meeting China Halfway in 2015. Over the last several years, he has focused on the North Korea crisis. 

Dr. Goldstein received his bachelor’s degree in government from Harvard, his master’s degree in strategic studies and international economics from the Johns Hopkins University School of Advanced International Studies, and his doctoral degree in politics from Princeton. He speaks Russian as well as Chinese. 

Oriana Skylar Mastro is a center fellow at the Freeman Spogli Institute for International Studies at Stanford University where her research focuses on Chinese military and security policy, Asia-Pacific security issues, war termination, and coercive diplomacy; a senior non-resident fellow at the American Enterprise Institute; an inaugural Wilson Center China fellow; and a fellow in the National Committee’s Public Intellectuals Program. She has published widely, including in Foreign Affairs, International Security, International Studies Review, Journal of Strategic Studies, The Washington Quarterly, The National Interest, Survival, and Asian Security. Her 2019 book, The Costs of Conversation: Obstacles to Peace Talks in Wartime, won the 2020 American Political Science Association International Security Section Best Book by an Untenured Faculty Member. 

Dr. Mastro holds a B.A. in East Asian studies from Stanford University and an M.A. and Ph.D. in politics from Princeton University.

Added from comments:

Russia is discussed by the panelists. My guess is that if PRC launched a surprise invasion of TW they would just sit it out. The panelists go so far as to speculate that Russia might collaborate with PRC in the planning of an invasion, and could even provide some geopolitical distraction in support of it. I'm not sure I believe that -- the risk of losing surprise due to information leakage from the Russian side would be a big negative against coordination. 

There would be huge repercussions from nuking Japan (PRC actually has a no first use policy), but the emotional effect of, e.g., seeing a large PLAN ship sunk by a Japanese missile would be very strong. Remember, to PRC it looks like a (very much still disliked) foreign power intervening in an internal Chinese dispute. Sort of like Britain helping the confederacy during our civil war, but much worse. At the beginning of a TW invasion PRC might issue some kind of very strong ultimatum of non-interference to all parties (US, Japan, etc.) and then feel justified if the ultimatum is not obeyed. 

Please don't confuse descriptive analysis with normative analysis. It's important to understand how this looks from the other side, in order to predict their behavior. 

PRC faced down the US on the Korean peninsula when they had NO nuclear deterrent. (The historical record is clear that the US seriously considered using nukes against PRC over Korea and over TW in the past.) This would be a fight over (in their minds) actual Chinese territory, not Korea, and today they have a very credible MAD deterrent.

Re: item #3 above, I would like to see a detailed analysis of Taiwan's senior military leadership and their political leanings. I suspect that among them are many descendants of KMT military officers (like my father and grandfather), who largely still support the KMT political party and not the pro-independence DPP. These officers might lead a military coup in the event of a PRC invasion -- especially if it is a reaction to a DPP proclamation of independence, or other US-backed provocation.

 

This interview with Professor Alexander Huang of Tamkang University (Taiwan) Graduate Institute of International Affairs and Strategic Studies addresses the possibility of direct participation by the US and Japan in defense of Taiwan. In my opinion, Huang is realistic and well-calibrated.  

This is a clear explanation of the status quo, with opinion poll results:

Japan and The Quad (Red Line geostrategy podcast)

 

I recommend this episode of The Red Line geostrategy podcast: Japan and The Quad. 

Serious analysts from the Asia-Pacific region (e.g., Australia, India, Japan, etc.) are often much better than their US counterparts. US analysts tend to misperceive local political and economic realities, and can be captives of Washington DC groupthink (e.g., about weapons systems like aircraft carriers or the F35 or missile defense). 

For example, Australian analysts acknowledged the vulnerability of US aircraft carriers to PRC ASBM and cruise missiles well before it became common for US analysts to openly admit the problem. The earliest technical analysis I could find of PRC satellite capability to track US surface ships in the Pacific came from an Indian military think tank (see maps below), at a time when many US "experts" denied that it was possible.

In this podcast Japan's reliance on sea lanes for energy, food, and raw materials is given proper emphasis. Japan imports ~60% of its food calories and essentially all of its oil. The stituation is similar for S. Korea and Taiwan. It is important to note that blocking sea transport to Taiwan and Japan does not require PLAN blue water dominance. ASBM and cruise missiles which threaten aircraft carriers can also hold oil tankers and global shipping at risk from launch sites which are on or near the Asian mainland. Missile + drone + AI/ML technology completely alters the nature of sea blockade, but most strategic planners do not yet realize this. Serious conflict in this region would likely wreak havoc on the economies of Taiwan, S. Korea, and Japan.

        

Red Line: ... In seeking to counter an ever-expanding China, Tokyo is turning abroad in search of allies. Key to this is the recent revival of "The Quad", a strategic dialogue between the US, Australia, Japan and India. Will it be enough to counter their rising neighbour across the East China Sea? Is this the first step to creating an "Asian NATO", and how will China respond? 

Guests: 

Owen Swift 

Geopolitics and defence analyst specialising in Australian & East Asian Defence Written with organisations including The Australian Strategic Policy Institute and Monash University. Senior Producer and resident Asia-Pacific expert at The Red Line 

John Nilsson-Wright 

Senior Lecturer on Japanese Geopolitics and International Relations for Cambridge University. Senior Research Fellow for Northeast Asia for Chatham House. Author of the book Unequal Allies about the post-war relationship between Japan and the United States. 

John Coyne 

Head of the Northern Australia Strategic Policy Centre at the Australian Strategic Policy Institute (ASPI). Head of Strategic Policing and Law Enforcement at ASPI. One of the most trusted experts when it comes to the dynamics of East Asia for Australia and the United States.

 

Part 1: The Return from Armageddon (02:52) Owen Swift overviews Japan's place in East Asia and the fundamental geographic challenges that inform its geopolitics. We tackle Japan's inability to domestically provide the resources and food that its population needs, and how it has historically dealt with this insecurity. The consequences of World War 2 wreaked havoc on Japan's economy, political system and territorial holdings. We analyse the short and long term consequences of this, and seek to understand why it was that Japan took a positive view of the US occupation, comparing it to the option of a possible partial USSR occupation. In the 1980s some thought Japan was on a path to overtake the US economically. While that hasn't come to pass, we look at what it was that made Japan's economic miracle, and the effect that US involvement has today. We look at domestic issues in Japan, including the drastic demographic decline, their ongoing 'defensive only' posture, and the policy options on the table for balancing against the rise of China. Finally we overview Japan's involvement in the Asia-Pacific region as a whole, analysing who it has the best relations with. We look at the extensive investments and infrastructure development Japan is undertaking in ASEAN states, and its cooperation with India and Australia in recent years. 

Part 2: The Grand Dilemma (17:56) John Nilsson-Wright helps us understand the fundamental shifts in Japanese politics and foreign policy, including Article 9, the tension between the Yoshida doctrine, public opinion and US pressure within Japan, and the country's re-entry into the sphere of great power competition. We examine the extent of Japan's military presence in the Indo-Pacific; looking at its exercises with other powers and the concerns its neighbours have, some of whom still bear significant scars from World War 2. South Korea's relationship with Japan is one that, on the surface, seems like it should be closer than it is. We analyse why it is that despite their mutual interest in countering North Korea and China, their close geography and both being under the US umbrella, the two states have been unable to overcome enormous domestic resentment and historic scars. Japan's constitution has very tight constraints on what it can do militarily. Nilsson-Wright helps us understand the details of these restrictions and their history over the past few decades. We look at how the legal interpretation of the article has changed as Japan's needs have changed. We also look at Japan's expanding concept of national interest, which began as a purely defensive, geographically limited concept, but that has continued to expand in recent years. We contrast that with the difficulty the government has had with domestic views of Japan's role on the global stage. We tackle territorial issues including the Kuril and Sakhalin Islands, and look at Japan's role in a potential Taiwanese conflict. 

Part 3: A United Front? (43:48) John Coyne a takes us through the details of the Quad, and the roles that its constituent members play. We look at Japan's re-examination of their supply chains, their development of strategic depth and the recent news that they are considering abolishing the 1% of GDP cap on military spending. Coyne helps us understand what the Quad actually is - It is not and does not seek to be an Asian NATO - just as ASEAN is not an Asian EU. We look at what the limitations are for each of the states involved, particularly India. We look at the actual relationships and cooperation that has been seen between Quad members. With Japan's newfound willingness to be involved in military operations, we examine how closely they will work with Australia, India and the United States, and the extent to which the Quad is more than just symbolic. We then turn to China's response. Is China likely to seek a grouping like the Quad in opposition to it? Can the Quad actually contain China or its navy in any practical sense? What will China do if cooperation tightens? We look at how China has already sought to hit back, targeting Australia in particular with the "14 Grievances", which were delivered as a consequence of the deterioration of their relationship. Australia's membership and participation in the Quad is a key part of this deterioration. Finally we look at how the Quad members have worked to strategically separate from China, such as Japan's work to defeat China's monopoly on the rare earths industry.

The map below appeared in the 2017 blog post On the military balance of power in the Western Pacific.

Here is another map:

Excerpt below from China’s Constellation of Yaogan Satellites and the Anti-Ship Ballistic Missile – An Update, International Strategic and Security Studies Programme (ISSSP), National Institute of Advanced Studies (NIAS -- India), December 2013. With present technology it is easy to launch LEO (Low Earth Orbit) micro-satellites on short notice to track ships, but PRC has had a much more sophisticated system in place for almost a decade.

Authors: Professor S. Chandrashekar and Professor Soma Perumal 

We can state with confidence that the Yaogan satellite constellation and its associated ASBM system provide visible proof of Chinese intentions and capabilities to keep ACG strike groups well away from the Chinese mainland. 

Though the immediate purpose of the system is to deter the entry of a hostile aircraft carrier fleet into waters that directly threatens its security interests especially during a possible conflict over Taiwan, the same approach can be adopted to deter entry into other areas of strategic interest. 

Viewed from this perspective the Chinese do seem to have in place an operational capability for denying or deterring access into areas which it sees as crucial for preserving its sovereignty and security.

Bonus: This political cartoon about the G7 meeting has been widely shared in the sinosphere. Some of the esoteric meaning may be lost on a US audience, but see here for an explanation. Note the device on the table which turns toilet paper into US dollars. The Japanese dog is serving radioactive water to the co-conspirators. Italy, the BRI participant, refuses the drink. France and Germany seem to be thinking about it carefully. Who is the little frog? (Hint: NTD)

Ronin

My first visit to Japan was in 1993. Ostensibly, I was there to attend a conference on High Energy Physics at the University of Tokyo, and to give a seminar at KEK, the largest particle accelerator laboratory in Japan.

I spent the first night at the Shinagawa Prince Hotel. I had carefully chosen this hotel -- it is a short walk from Sengakugi Temple, the resting place of the 47 Ronin (see photos above and history below).

It was already late at night when I checked in and deposited my luggage in the room. I was jet-lagged, but still energetic after the long trip. Outside, the neighborhood was deserted and dark except for the harsh glare of neon streetlights. It had rained and the streets were wet and shiny. As I approached the temple I could smell the burning incense that suffused the night air ...

47 Ronin (photo above from the 1941 movie directed by Kenji Mizoguchi)

... At the death of their lord, Asano’s samurai retainers become masterless, or rōnin, and under the planning of Ōishi Kuranosuke Yoshio, Asano’s counsellor, 47 of these rōnin plot to avenge their former master. Because Kira suspects this, and spies on Ōishi, revenge is delayed as the rōnin disperse and assume other occupations, while Ōishi performs the life of a drunkard, visiting taverns and geisha. After a year and a half the rōnin return to Edo to stake out Kira’s house, and two years following Asano’s death they attack. Kira is eventually killed and his head is taken as an offering to Asano’s grave. The rōnin then turn themselves in to the Shogunate authorities. Having defied a Shogunate edict prohibiting them to avenge their master, but having followed the requirements of bushido in doing so, the rōnin are sentenced to death but allowed to die honourably by committing seppuku.

I had all but forgotten about my strange visit to Sengakuji, so long ago. But memory returned when I came across the interview below, with former special forces soldier and tactical instructor Tu Lam.

Interview

When you started out in the world of Special Operations it was pre-9/11. What was that like compared to how it is now?

TL: My understanding from birth was one of war. I was born out of war. I was born in ’74 after the fall of Saigon. In ’76 they dragged us out into the streets of Vietnam because they were trying to impose the Communist ideologies of our government. My uncles were serving in the Navy and were dragged out into the streets like animals and shot. They separated our family and imprisoned my other uncles in what they called “re-education camps.” My grandfather took his life savings and smuggled us out of the country because my mom was like, “There’s no way my two sons will grow up under Communist rule.” We left on an overstuffed wooden boat with hundreds of other refugees. First we had to be navigated past the pirating that was going on. There were a lot of bandits, pirates and everyone who was leaving country had money. These pirates would intercept the refugees, rape the women, rob the boats and kill everyone on board.

We navigated past the pirates first then made it into Indonesia where the Coast Guard stopped us. They told us we couldn’t come into their country. They anchored us down and pulled us back into the ocean on lines, then shot our motor and cut the lines, leaving us out in the middle of the waters to die. Our boat drifted further and further into the ocean. My mother told me that people were stealing from each other, fighting, and eventually dying due to the terrible conditions. We were caught up in a storm and this storm took us out into the middle of Russian waters by the grace of God. A Russian supply boat picked us up as they were crossing the Pacific Ocean into Singapore. They dropped us off at a refugee camp in Indonesia. The irony of this story is the same ideology that took me out of my country (Communism) was the same ideology that brought me to safety.

My family was gunned down like animals by a Communist government and yet the Russians, another Communist government, saved us. That was my first lesson in humanity and that everyone is truly different. The Indonesian monks came and helped us while we were in the camp. My aunt had married a Special Forces Green Beret and he expedited the paperwork to get us out of Indonesia and to the United States. At the age of eight I found myself on Ft. Bragg and my mom re-married a Sergeant who was a Green Beret. At that early age, I was indoctrinated in the ways of a Special Forces soldier. I learned how to speak different languages, learned how to take apart many different types of weapons, and learned how to properly navigate the back woods of North Carolina.

I was taught how to navigate the stars and build my own compasses. The truth is, we were just spending father and son time but he was teaching me a trade craft. Throughout my life he’d leave, come back, leave, come back and I’d equate it with seeing something bad on the news. Panama happened and he immediately went over there. I felt from a very young age, being raised as a part of that warrior class, that I had a much higher purpose. I knew what a sheep, sheep dog, and a wolf were from a very young age. My dad taught me that very early on. I asked my father how I could help protect and my dad said I’d have to pass a test to become a part of the brotherhood. At ten years old I wanted to be a Green Beret.

Like a lot of Asians, I was academically gifted at a very young age. I had scholarships and I turned them down. I made better grades than my brother and he ended up being a doctor. When I got to age 18 I went to MEPS and applied for 11B (Infantry). There was no such thing as 18X or direct entry into Special Operations. You couldn’t just come off the streets and train for Special Operations. You had to become an E5 (Sergeant) first and then do a certain amount of years. Those years could be waived and so I made E5 after a year and a half. When I went in I went into long-range reconnaissance, which took me directly into the Marines’ Amphibious School, Ranger training, and a lot of other leadership courses as well as the Army Sniper School.

See also On Japan and Learning how to fight.

Weak Meat Strong Eat

弱肉強食

These characters mean "Weak Meat Strong Eat" -- the weak are meat for the strong. It's a Chinese (and Japanese) saying. Sometimes it is even translated as "Survival of the fittest"!

One of the repeated themes in Cloud Atlas is: The weak are meat the strong do eat.  David Mitchell, the author, lived in Japan for many years and has a Japanese wife. I suspect he learned this phrasing from the Japanese.

My favorite sub-plot in Cloud Atlas is the Orison of Sonmi 451. Hmm... what is psychogenomics? (See also Dune.)

Cloud Atlas: ... sourced his supply of psychogenomics theses from an obscure tech institute in Baikal. The original author of my x-postgrad’s work was a production zone immigrant named Yusouf Suleiman. Xtremists were killing genomicists in Siberia at that time, and Suleiman and three of his professors were blown up by a car bomb. Baikal being Baikal, Suleiman’s research languished in obscurity for ten years until it was sold on. The agent liaised with contacts at Papa Song Corp to instream Suleiman’s ascension neuro-formula to our Soap. Yoona939 was the prime specimen; I was a modified backup. If all that sounds unlikely, Hae-Joo added, I should remember that most of science’s holy grails are discovered by accident, in unxpected places.

Some video of Suleiman (identified by caption) appears in the movie in the scene in which Hae-Joo educates Sonmi about fabricants and genetic engineering. Suleiman is lecturing in front of a board covered with equations -- no snail shells in sight.

All that is left is the wind in the pines

The FT's Asia editor has lunch with Japan scholar Donald Keene (shown above with Yukio Mishima and Hiroshi Akutagawa). Keene has a keen intelligence and fine literary and historical sensibilities. He recently became a Japanese citizen at the age of 89. I highly recommend his memoir Chronicles of My Life: An American in the Heart of Japan. See also Japanese Diaries and Yukio Mishima. (Via Gwern.)

Financial Times: ... I steer Keene back more than 70 years to when, as an 18-year-old, he came across a translation of The Tale of Genji in the Astor Hotel in New York. At the time, Keene was studying French and Greek literature at Columbia University, having won a scholarship to study there at the age of 16. He bought the book because, at 59 cents, the epic story, written 1,100 years ago, contained more words per dollar than any book in the store. That was how the love affair began.

... “He was an extraordinary person,” says Keene, who knew Mishima well. They had met, symbolically enough, outside Tokyo’s Kabuki-za theatre in 1954, and had gone to see plays together. Keene had translated one of Mishima’s modern Noh plays.

“He died, as you know, at the age of 45, leaving at least 45 stacked volumes of novels, plays, criticism, poetry.” Mishima slit his belly after leading a failed, and farcical, coup to restore the emperor’s power but Keene thinks he committed suicide because he was passed over for the Nobel Prize. During the 1964 Tokyo Olympics, Mishima had written Keene a letter with the line, “I envy the athletes who know if they are first, second or third.” Keene says: “That was all he said but I knew exactly what he meant.” The irony was that Kawabata, who did win the Nobel Prize, also committed suicide because of the pressure of living up to his new reputation.

As our coffee arrives, I mention the writer Jun Takami (1907-1965), one of whose plays ends with the line, “All that is left is the wind in the pines.” Keene gives me an ecstatic look. “Yes, it’s the most marvellous end to any play. There’s nothing on the stage at all, nothing but the pine.” He shakes his head at the sadness and the beauty. “Oh, what a stroke of genius that was. I think of it now and I’ve got shivers going down my spine.”

One passage in Takami’s diaries was written in 1944 during the wartime bombing of Tokyo when he was trying to get his mother to safety in the countryside. At Ueno station “everybody is quiet, everybody’s just moving slowly and no one is trying to get ahead of anybody else,” says Keene. “And Takami thought, ‘I want to live with these people. I want to die with these people’. And that is what I [Keene] thought in January, when I was in hospital. ‘I want to live with these people. I want to die with these people.’”

Keene is in a kind of reverie by now, lost in the personal and literary wanderings of a lifetime. “I knew Takami Jun,” he says, using the Japanese name order. “He was a very elegant man. The last time I saw him, he was wearing a white suit and he was surrounded by about seven or eight young women. And he was smiling.” Keene’s eyes are moist. He is staring past me or through me. The restaurant is still quite empty but Keene has flooded it with the memories of people, mostly long dead. He stands to leave and is helped up the narrow stairs to the city above. Down in the basement, I am left at the empty table. There is nothing, not even the wind in the pines.

Sony is toast

See my post Sell Sony, buy Samsung from 2005 for comparison. Where is Ken Kutagari these days? Younger people today probably can't remember a time when Sony was a technology leader.

In 2005 it was clear to me that Sony was in trouble and Samsung on the rise. I also knew OS X and the iPod were going to be very successful, but I had been conditioned by MSFT's success to think that mediocrity would continue to rule in PCs and other computer products. So I certainly didn't think Apple's market cap would reach its current value.

NYTimes: Sony ... is now in the fight of its life.

In fact, it is in a fight for its life — a development that exemplifies the stunning decline of Japan’s industrialized economy. Once upon a time, Japan Inc., not to mention Sony itself, seemed invulnerable. Today, Sony and many other Japanese manufacturers are pressed on all sides: by rising Asian rivals, a punishingly strong Japanese yen and, in Sony’s case, an astonishing lack of ideas.

... Sony’s market value is now one-ninth that of Samsung Electronics, and just one-thirtieth of Apple’s.

Even in Japan, where many consumers remain loyal to the brand, some people seem to be giving up on the company.

“It’s almost game over at Sony,” said Yoshiaki Sakito, a former Sony executive who has worked for Walt Disney, Bain & Company, Apple and a start-up focused on innovation training. “I don’t see how Sony’s going to bounce back now.”

... Japanese consumer electronics manufacturers “have lost their technology leadership in many areas,” Steve Durose, head of Asia Pacific telecommunications, media and technology ratings at Fitch Ratings, said in a recent industry commentary.

“Ten years ago, these companies were major technology innovators, the creators or leading developers of many electronic products and trendsetting devices such as televisions, digital cameras, portable music players and games consoles,” Mr. Durose said. “Today, however, the number of products remaining where they can boast undisputed global leadership has narrowed significantly, having being usurped or equaled by the likes of Apple and Samsung Electronics.”

... Sony’s woes hurt not just Sony, but also Japan. In the United States, new technologies are often developed by young companies not held back by their past. These upstarts eventually replace slow-to-adapt giants. But in Japan, no major electronics manufacturer has joined the industry’s top ranks for over a half-century. [Unbelievable! But isn't this also true for other sectors in most European countries?] And, though struggling, companies like Sony continue to lure some of the country’s top talent.

... Some analysts wonder if Mr. Hirai — who previously ran the money-losing games and TV businesses — is the right man to lead Sony. A protégé of Mr. Stringer, he appears to have been appointed as much for his ease in English as his management skills, analysts say.

“The bottom line is: if you want to be perceived as a creator of cool tech, you have to create cool tech. The challenge for Sony is that those examples have not been there, and they haven’t been there now for a number of years,” said Steve Beck, founder and managing partner at cg42, a management consulting firm that focuses on brand vulnerabilities at top tech companies. “The tarnish on their brand has definitely begun.”

Yukio Mishima

I was never enamored of his fiction (I've read more biographies of Mishima than novels by him), but Yukio Mishima lived one of the most fascinating lives of the mid 20th century, culminating in his suicide:

With a prepared manifesto and banner listing their demands, Mishima stepped onto the balcony to address the soldiers gathered below. His speech was intended to inspire a coup d'état restoring the powers of the emperor. He succeeded only in irritating them, however, and was mocked and jeered. He finished his planned speech after a few minutes, returned to the commandant's office and committed seppuku.

I was surprised to find this video with Mishima speaking English. I had thought his English rudimentary, but it's actually quite good.




Some classic photos.

Duty, Honor, Country: Fukushima grunts

The grunts at Fukushima are not doing it for money. No "Yeah, I calculated the NPV, and, you know, it's just not worth it for me. I really believe in your project, though. And, I share your passion. Good luck."

WSJ: ... In normal times, thousands of workers perform routine tasks of reactor maintenance at the Fukushima Daiichi complex. Now, many of them are being called to volunteer to work, at standard pay, at the troubled plant.

"I'm scared," says Kenji Tada, 29 years old, a worker at protective-coating specialist Tokai Toso Co. "But someone has to go."

... "There isn't a single person who's been doing this because of money,'' says Tadashi Ikeda, senior managing director of Tokai Toso. Plenty of workers are locals who have been forced out of their homes by the radiation levels and are eager to help get things back to normal, he adds.

Mr. Tada says he typically earns about ¥200,000 ($2,470) a month, well below Japan's average monthly salary of ¥291,000. "It can't be helped," he says, adding his mother doesn't want him to go. "Someone has to do it."

... Radiation managers at Tepco take readings at the places where they want to send each day's workers. Shifting winds and leaks from unstable reactors have meant radiation levels in the complex have veered wildly in the space of hours, and hot spots move from one area to another.

Workers wear protective gear and a mask and must have had training in dealing with radioactive environments. Each person also wears two badges, in chest pockets under gear, to track radiation exposure on each visit. Each worker is limited to a total of 250,000 microsieverts for the duration of the crisis, a limit that was lifted last week from 100,000 microsieverts—the borderline for what is considered "low-dose" exposure.

Mr. Tada says colleagues already at the site have told him they were exposed to around 100 microsieverts of radiation after five hours of work, an amount equivalent to one chest X-ray. That is less than the 190 microsieverts Mr. Tada says he logged in four hours of work one recent day, before the crisis.

Not everyone is so sanguine. At the Saitama Super Arena, a stadium north of Tokyo that has been converted into a refugee shelter for people forced from towns near the Fukushima plant, Mitsuyoshi Oigawa says his son was among those asked to return.

Mr. Oigawa says the call came six days after the quake struck and that his son will likely work at the plant for two or three days. Mr. Oigawa says he has tried without success to call his son's cellphone since then. He worries that radiation exposure could sicken his son.

"There's no way to express what I'd do for him," says Mr. Oigawa, 70. "I'd go in his place if I could."

In an evacuee camp in the city of Tamura, about 20 miles west of the Fukushima Daiichi complex, another worker for a nuclear-equipment maker says he got his call to report for duty earlier this week. The man says he thinks he will be carrying and laying pipes that will bring water to reactor No. 3.

The high-school graduate, whose salary is similar to Mr. Tada's, says he was told he could refuse the call. But he says he felt duty-bound to accept, musing that he would be in the position of sacrificing himself for the good of others, as he says Japanese pilots did in World War II suicide missions. "If the call comes, there's only one thing I can say: 'Yes, I'll go.' I thought of the kamikaze—sacrificing yourself for someone else," he says. "My heart is calm."

Are these values unique to the Japanese? No, many Americans would do the same.

Douglas MacArthur (1962, West Point): ... Duty, Honor, Country: Those three hallowed words reverently dictate what you ought to be, what you can be, what you will be. They are your rallying points: to build courage when courage seems to fail; to regain faith when there seems to be little cause for faith; to create hope when hope becomes forlorn.

Unhappily, I possess neither that eloquence of diction, that poetry of imagination, nor that brilliance of metaphor to tell you all that they mean.

The unbelievers will say they are but words, but a slogan, but a flamboyant phrase. Every pedant, every demagogue, every cynic, every hypocrite, every troublemaker, and I am sorry to say, some others of an entirely different character, will try to downgrade them even to the extent of mockery and ridicule.

...

The soldier, above all other men, is required to practice the greatest act of religious training -- sacrifice.

In battle and in the face of danger and death, he discloses those divine attributes which his Maker gave when he created man in his own image. No physical courage and no brute instinct can take the place of the Divine help which alone can sustain him.

However horrible the incidents of war may be, the soldier who is called upon to offer and to give his life for his country is the noblest development of mankind.

...

The shadows are lengthening for me. The twilight is here. My days of old have vanished, tone and tint. They have gone glimmering through the dreams of things that were. Their memory is one of wondrous beauty, watered by tears, and coaxed and caressed by the smiles of yesterday. I listen vainly, but with thirsty ears, for the witching melody of faint bugles blowing reveille, of far drums beating the long roll. In my dreams I hear again the crash of guns, the rattle of musketry, the strange, mournful mutter of the battlefield.

But in the evening of my memory, always I come back to West Point.

Always there echoes and re-echoes: Duty, Honor, Country.

Today marks my final roll call with you, but I want you to know that when I cross the river my last conscious thoughts will be of The Corps, and The Corps, and The Corps.

Nuclear Boy is sick

Some videos to take us into the weekend here in Asia.

Nuclear Boy





And two more just for fun...


J.R. Oppenheimer




Mario Savio

Fukushima meltdown: worst case scenario?

UK government Chief Scientific Officer Professor John Beddington comments on the developments at Fukushima nuclear plant. I hope he is correct.

If the Japanese fail to keep the reactors cool and fail to keep the pressure in the containment vessels at an appropriate level, you can get this, you know, the dramatic word "meltdown." But what does that actually mean? What a meltdown involves is the basic reactor core melts, and as it melts, nuclear material will fall through to the floor of the container. There it will react with concrete and other materials that is likely.

Remember this is the reasonable worst case, we don't think anything worse is going to happen. In this reasonable worst case you get an explosion. You get some radioactive material going up to about 500 meters up into the air. Now, that's really serious, but it's serious again for the local area. It's not serious for elsewhere, even if you get a combination of that explosion it would only have nuclear material going in to the air up to about 500 meters.

If you then couple that with the worst possible weather situation, i.e. prevailing weather taking radioactive material in the direction of Greater Tokyo and you had maybe rainfall which would bring the radioactive material down, do we have a problem? The answer is unequivocally no. Absolutely no issue.

The problems are within 30 km of the reactor. And to give you a flavor for that, when Chernobyl had a massive fire at the graphite core, material was going up not just 500 meters but to 30,000 feet; it was lasting not for the odd hour or so but lasted months, and that was putting nuclear radioactive material up into the upper atmosphere for a very long period of time. But even in the case of Chernobyl, the exclusion zone that they had was about 30 kilometers. And in that exclusion zone, outside that, there is no evidence whatsoever to indicate people had problems from the radiation.

The problems with Chernobyl were people were continuing to drink the water, continuing to eat vegetables and so on and that was where the problems came from. That's not going to be the case here. So what I would really reemphasize is that this is very problematic for the area and the immediate vicinity and one has to have concerns for the people working there. Beyond that 20 or 30 kilometers, it's really not an issue for health.

Japanese diaries

So Lovely a Country Will Never Perish: Wartime Diaries of Japanese Writers



I had a look at this in the bookstore recently -- it is beautifully written and translated. Both Keene and the diarists he has translated have exceptional psychological insight into an interesting time in Japanese history. There are many striking anecdotes. For example, one diarist records the applause of cinema goers in occupied Japan during American newsreels showing kamikaze fighters striking US ships.

See also Modern Japanese diaries: the Japanese at home and abroad as revealed through their diaries, which chronicles the impressions of early Japanese travelers visiting America, Europe and other parts of the world.

On Japan

Readers of this blog have probably noticed that I regularly post about China and globalization. I've devoted much less space to Japan, even though I once lived in Tokyo as a JSPS (Japan Society for the Promotion of Science) Fellow. While in Tokyo I dated an All Nippon Airlines stewardess, trained in MMA with local fighters and spent too much time in Shibuya (pictures above and below). I scandalized my physicist hosts by (a) visiting Thailand on the way to Tokyo and (b) investigating all kinds of weird social phenomena in my spare time (see below).

Below are a few old pictures, the first four from Thailand (Ko Samui) and the rest from Kamakura, Japan.





While in Japan I wrote a travelogue which I posted on the internet. That may not sound very radical, but this was back in 1997, long before the appearance of blogs :-) The travelogue covers topics like girlie bars, muay thai and expats in Thailand, Judo vs BJJ in Tokyo, physics lectures in Kyoto and at KEK, Japanese youth culture, etc. Any Hollywood producers or directors interested in making this into a movie should contact me right away ;-)

For those who are interested in Japan but don't want to read my stuff, I recommend the following.

Lafcadio Hearn: the grandfather of foreigners writing in English about Japan. Hearn arrived in Japan in 1890 as a journalist, eventually becoming professor at Tokyo Imperial University. See here for a collection of his work.

The blog Neojaponisme, edited by Harvard grad W. David Marx (an expat writer and musician in Tokyo) offers excellent writing about Japan, often informed by the latest academic research. For example, The misanthropology of the late stage kogal is about the kogal (video) and enjo kosai phenomena, which very much puzzled me when I was in Tokyo. (Having access to this research at the time could have saved me a lot of field investigation ;-) Kyabaio Japan is about hostess clubs, a topic covered with much less insight recently in the Times.

China market cap now #2

Yesterday, China's stock market cap ($3.21 trillion) exceeded Japan's ($3.20 trillion) slightly to become the world's second-largest.

The last time this occurred was in January 2008. As recently as early 2006, Japan's market cap was 12x the size of China's.



See earlier posts Sustainability of China economic growth (top figure) and Back to the future (bottom two figures; note these are PPP adjusted).

Lessons from Japan

It took the Japanese two decades to recover from their 80's-90's bubble. This Times article discusses the similarities and differences between their crisis and ours. (Our current crisis is also affecting them -- the Nikkei is down 11 percent as I type this.)

I first posted the graph above in 2005.

NYTimes: ...The similarities with Japan are striking. Like the United States today, Japan in the early 1990s faced a banking and real estate crisis that undermined the entire economy and required large government intervention. Some of Japan’s most venerated financial institutions collapsed as snowballing losses from failed business and property loans plunged the nation’s financial system into paralysis.

But the differences are also pointed and revealing. The United States reacted far more quickly than Japan, committing taxpayer funds just over a year after the subprime mortgage problems surfaced in summer of 2007. Japan took nearly eight years to pass a sweeping bailout, a delay that contributed to a long economic slump that Japanese call their “lost decade.”

“Japanese government and financial institutions realized there was a problem, but they tried to cover it up,” said Junichi Ujiie, chairman of Nomura Holdings, Japan’s largest investment bank. “The United States has done in months what Japan took years to do.”

...Most of the government officials, business leaders and economists interviewed praised America’s plan to spend $700 billion buying troubled mortgage-related assets from banks. But they also said they expected that Washington would soon have to put together another huge bailout package, this time to recapitalize American banks, especially with the International Monetary Fund now estimating total bank losses from the subprime mortgage crisis to reach $1.4 trillion.

On the other hand, another lesson from Japan is that the American bailout may end up costing taxpayers far less than $700 billion or whatever the final figure may be. Japanese regulators were eventually able to recover all but $100 billion of the $450 billion spent by selling off the troubled loans and bank stocks later, after the economy had rebounded.

Notes of a Japanese soldier in the USSR

The drawings below are by Kiuchi Nobuo, a Japanese soldier captured in Manchuria, who survived capitivity in the USSR. He was transported all the way to a camp in Ukraine. His web site is fascinating -- the sketches depict beautiful Soviet women (officers and doctors), children, Mongols, and prisoners of all nationalities. The emotional tone of the pictures is remarkably cheerful, despite what must have been harsh conditions.

By the end of World War II about 600 thousand Japanese soldiers and officers have been held captive in thousands of prison camps on a territory, stretched from Kamchatka in the East, across Urals to European part of USSR in the West and Yenisei Basin in the North. The History Chapters not only hold Japanese Army sound victories but also atrocities of defeat that I intend to tell about to the new generation. I decided to draw these pictures in memory of those of my comrades-in-arms, who were not destined to return home..

Picture of Kiuchi:



Some sketches (English translations of captions to be found on the web site):

Japan's brain drain

This Times article describes the exodus of senior engineers from Japan to other Asian countries, in particular companies in Taiwan. Hsinchu is the silicon valley of Taiwan. Japan, unfortunatlely for them, has no silicon valley. The incentives must be particularly attractive for insular Japanese to consider joining a foreign company and living abroad, but there you go. These are exactly the talented risk takers that no nation can afford to lose.

See also here for more on the decline of the chip industry in Japan. Japanese LCD-makers have had to form alliances with Korean and Taiwanese competitors to stay in the display business, where fabs cost billions each.

A Japanese Export: Talent

By MARTIN FACKLER
HSINCHU, Taiwan — One of the hottest exports from Japan these days isn’t video games or eco-friendly cars.

It is engineers.

Japan’s once vaunted electronics industry has downsized to survive global competition, and is inadvertently setting off a brain drain. Thousands of Japanese engineers and other industry professionals have gone to Taiwan, South Korea and China to seek work at aggressive, fast-growing companies that want to use Japanese technological expertise.

One such explorer is Heiji Kobayashi, a 41-year-old semiconductor engineer, whose career hit a dead end when his employer, Mitsubishi Electric, spun off its memory-chip business a few years ago. With job prospects bleak in Japan, he turned to Taiwan’s booming chip industry, where he became a popular commodity.

Last month, he began a new job overseeing the design of factory production lines at Powerchip Semiconductor, a memory-chip maker in this suburban city just south of Taipei. As a deputy director, he gets stock options (rare in Japan) and a secretary, and he is climbing the top rungs of management at the company, which has 6,500 employees.

“My skills are in far higher demand here,” said Mr. Kobayashi, who once worked in Taiwan for Mitsubishi Electric. Such employment mobility was once unthinkable in highly insular Japan, where until recently, workers virtually married into their company and kept their jobs for life, and the strength of its electronics industry was a source of national pride.

However, the recent export of job seekers is a sign of just how much Japan has changed during a decade of increased competition, corporate belt-tightening and the end of lifetime job guarantees. This harsher new world has forced Japan’s famously conservative salarymen to become more aggressive in their job choices, and to view their careers as something for their own benefit and not simply their companies’, employment experts say.

This shift in mindset also underscores how Japan’s long-closed economy is finally integrating with that of its neighbors. China has already replaced the United States as Japan’s biggest trading partner, and many Japanese now see their nation’s and their own personal future as linked to Asia’s red-hot economies.

“Salarymen are taking bigger risks,” said Mitsuhide Shiraki, a professor of economics at Waseda University in Tokyo. “They’re making a logical decision to work in Asia, where they are being better rewarded than in Japan.” The trend has set off some hand-wringing in Japan, where the government fears the loss of technology to Asian rivals. Some Japanese companies are also complaining that they are having trouble finding enough talented engineers at home, especially as fewer young Japanese are now entering the field.

No one knows for sure how many Japanese have left, since the outflow began in earnest less than five years ago. However, employment agencies in Tokyo have reported a surge in inquiries by middle-age Japanese professionals seeking work abroad.

There has also been a growing number of retired engineers wanting to go to less-developed economies where their skills are still highly valued, allowing them to pursue second careers late in life.

“In Asia, we can keep contributing to society,” said Kazumitsu Nakamura, 64, a former engineer for Hitachi who quit to go to Taiwan, and was recently hired by a Hitachi subsidiary to train Taiwanese employees. “In Japan, we would just be collecting pensions.”

Taiwan was one of the first to start courting Japanese professionals, with at least 2,500 moving here in recent years, the Taiwanese government says.

Taiwanese companies have been keen to gain access to Japan’s leading technology in areas like electronics, both to catch up with Japanese front-runners like Sony and to stay ahead of fast-gaining Chinese competitors.

More recently, however, China and Southeast Asian countries like Singapore have also begun hiring Japanese en masse to acquire their know- how, recruiting agencies say.

“This is a new era,” said Tomoko Hata, managing director of Pasona Global, a Tokyo-based recruiting agency that specializes in finding jobs overseas for Japanese. “The number of Japanese working abroad is only going to keep growing.”

The Japanese migrants are finding themselves welcomed with open arms and generous pay packages. The Taiwan government says it has spent $20 million a year since 2003 to recruit foreign engineers, including Japanese, in key industries like semiconductors and flat-panel displays. It has held annual job fairs in Japanese cities like Tokyo and Osaka, and offers subsidies to Taiwan companies to help pay moving costs and the higher salaries that Japanese expect. To avoid angering Tokyo, Taiwan officials say that they direct their efforts at older Japanese engineers nearing retirement age.

“We need experienced engineers, and we need them quickly,” said Lin Ferng-ching, the cabinet minister in charge of technology policy in Taiwan. “Japanese engineers are very well trained, and have good attitudes toward their work.”

Larger Taiwanese companies have offered annual pay packages topping $1 million for candidates in prized technological fields, according to some Japanese engineers. Such a large number of Japanese has moved to Taiwan that some cities are building or planning Japanese-language schools for the engineers’ children.

In Hsinchu, a subeconomy has sprung up to serve the rising number of Japanese, including izakaya (pub-style restaurants), karaoke bars and dubious-looking massage parlors with names like Tokyo Town.

Japan’s trade ministry is trying to stem the outflow of engineers by persuading Japanese companies to offer better pay and more frequent promotions. It has also reminded companies of other alternatives, like laws that forbid former employees from leaking corporate secrets to competitors. Asian diplomats have also said that Japanese officials have complained to them about their efforts to lure Japanese engineers.

“The national government cannot stop these people from going overseas,” said Nobuhiro Komoto, an official in the Japanese trade ministry’s manufacturing policy section. “We’re helping companies think of their own ways to protect their technological know-how.”

While many Japanese engineers say that they have been offered potential jobs by Asian companies, others say that they have looked for work in Asia in hopes of finding something more promising or stimulating.

Pasona Global, the employment agency, said 4,930 Japanese registered last year for job searches in other Asian countries, twice the number five years ago.

Almost every Japanese with technology-related experience attracts job offers, Ms. Hata said. The largest number of offers are from companies in China, she said, but those with the most coveted skills tended to be hired by companies in Taiwan, which is rushing to close the technological gap with Japan.

Hiroshi Itabashi was an engineer with more than 20 years of experience at a midsize Japanese television maker when he got an unexpected phone call in 1999 from Delta Electronics, a fast-growing Taiwanese electronic components company. Delta wanted to start producing TV screens and asked Mr. Itabashi to help set up their operation.

Three interviews later, including one with a Delta executive who flew to Tokyo to have lunch with him on a Saturday, Mr. Itabashi decided to make the jump.

“They gave me this exciting opportunity to build a whole new business from scratch,” said Mr. Itabashi, 56, who asked that his former Japanese employer not be named. “This is something you can’t do in Japan. These days, Japanese companies always seem to be closing down operations, not starting new ones.”

Mr. Itabashi said that his friends were puzzled at first about his moving to a company they had never heard of. But now, they ask him for help finding jobs overseas for themselves. To lure Japanese engineers and their families to Taiwan, a government-run industrial park for technology companies in the southern city of Tainan is building a Japanese-language school. A similar technology park in Hsinchu plans to add a Japanese school and a Japanese restaurant.

“Companies in the park are asking us to do more for the Japanese,” said the director of the Hsinchu Science Park, Huang Der-ray. Though the benefits are great, Japanese going abroad say they sometimes struggle to adapt to vastly different corporate cultures. For Tatsuo Okamoto, a 51-year-old semiconductor engineer, the biggest change was the speed in decision-making at the Taiwanese company, Winbond Electronics, which hired him away from the Tokyo-based chip maker Renesas Technology two years ago.

Dr. Okamoto recalled one instance when a 15-minute chat in the hallway with Winbond’s president was enough to win immediate approval to purchase millions of dollars worth of factory equipment. The same decision in Japan would have taken days of committee meetings, he said.

Dr. Okamoto said the experience opened his eyes to the problems that were hobbling the competitiveness of Japan’s electronics industry.

“Joining a Taiwanese company was a high-risk, high-return decision,” Mr. Okamoto said. “But staying in Japan had become a high-risk, low-return proposition.”

Japan chipmakers: industrial policy gone bad

Proponents of industrial policy should have a careful look at the chip industry in Japan for an example of how badly wrong things can turn out. In the 80's the US formed an industry-government consortium called Sematech to combat what seemed to be an unstoppable Japanese juggernaut. The semiconductor industry was given as a prime example where the US had dropped the ball and where Japanese industrial policy, formulated by MITI, would lead to domination of yet another market. Now, Samsung alone spends more on chip R&D and infrastructure than all of Japan combined!

That the NEC President could say "It's a big risk to limit yourself to a small number of products. Those have to be very strong products," shows the enormous gulf between Japanese corporate thinking and the competitive and entrepreneurial spirit we have here. Innovative companies here are often one (or few) product companies. If your product isn't strong, why are you in that market in the first place?

Choosing technology winners and losers is probably not an area in which government will outperform the market. Is a bureaucrat going to do a better job than entrepreneurs, VCs and big company CEOs with skin in the game? We're better off putting our resources into basic science (the underlying infrastructure for technological advances) and science and engineering education.

NYTimes:
In the late 1980's, Japan dominated the global computer chip industry, overtaking the United States in what was seen as a symbol of American economic decline and Japanese ascendance.

Those roles have been reversed. Japan's global market share is now half of what it was then, while Intel of Santa Clara, Calif., has risen to become the world's largest and most profitable chip maker. Indeed, Intel and Samsung Electronics, a South Korean company that was not even in the picture in Japan's glory days, together have a market share as large as the combined shares of the 20 large Japanese chip makers tracked by the research firm iSuppli.

Japanese chip makers are trying to snap out of this decline by joining forces, either by sharing factory construction costs or through outright mergers. The latest move came Dec. 28, when the Japanese chip makers Hitachi, Toshiba and Renesas Technology announced they were in talks to jointly build a semiconductor factory, a project that would be backed by the government. The media has called the plant the Rising Sun chip factory, after Japan's flag.

Efforts to combine forces have failed in the past: a wave of mergers two years ago produced companies as unprofitable as their predecessors.

At their height in 1988, Japanese companies produced 51 percent of the world's semiconductors, and the top three chip makers by market share - NEC, Toshiba and Hitachi - were all Japanese. Now, Japanese companies have a combined share of 23.4 percent of the $237.3 billion global semiconductor market, according to iSuppli. Just three Japanese companies made the Top 10.

"This has been a lost decade and a half for Japanese semiconductor companies," said Yoshiharu Izumi, an analyst at J. P. Morgan Securities. "Japan has been caught between the United States and Asia, and this middle ground keeps shrinking."

The chip makers' woes have spurred much soul-searching in Japan, where the industry had been a source of national pride. But analysts say an intense sense of national mission in Japan's chip industry has been one cause of its undoing.

For years, chip makers helped the country's export machine by supplying consumer electronics companies with every type of semiconductor imaginable, often at little regard for profits. Much of this was done in-house, as many of today's chip companies started life as divisions of Japanese electronics giants.

Chip sales rose while Japan's consumer electronics were globally dominant, but plunged when the world started buying cheaper televisions, laptop computers and other products made elsewhere in Asia. As losses mounted, many Japanese electronics companies could no longer afford their chip operations and spun them off as separate companies. These new companies lacked the cash to keep pace with the billions of dollars that rivals like Intel and Samsung were spending on new factories and production lines.

Now, many analysts here say, the only way the industry can save itself is by learning from American chip makers like Intel and Texas Instruments, which reinvented themselves two decades ago in response to Japan's strength. These United States companies succeeded by building strong overseas sales networks and concentrating their resources on a small number of products that they made well. Intel focused on building microprocessors, the brains of personal computers, and now dominates the global market. Texas Instruments specialized in chips used in cellphones.

"In the 1980's, the United States figured out a new business strategy," said Toshio Nakajima, president of NEC Electronics, the chip subsidiary of the Japanese electronics giant NEC. NEC fell from being the world's largest chip maker in 1988 to the 10th-largest today. "It is remarkable how these American companies learned to compete."

Mr. Nakajima said his company might eventually focus production on just three types of chips, though it had not decided which three. "It's a big risk to limit yourself to a small number of products. Those have to be very strong products," he said.

Toshiba is doing well focusing production on a specialized product, advanced NAND flash memory chips that are used in digital cameras and music players like the Apple iPod. Toshiba's chip revenues are expected to have grown a healthy 7 percent in 2005, according to iSuppli. (Like most companies, Toshiba does not break out its chip sales figures.)

The picture is not so rosy for the rest of Japan's industry. Of the 20 Japanese chip makers tracked by iSuppli, 12 are expected to report reduced revenues in 2005, including NEC Electronics and Renesas, which was created by the 2003 merger of the chip operations of Hitachi and Mitsubishi Electric.

The Japanese chip makers' problems are not the result of a lack of technology but an overdependence on their home market. Even the three biggest chip makers - Toshiba, Renesas and NEC - still sell about 60 percent of their chips within Japan, according to the Ministry of Economy, Trade and Industry. By contrast, Intel, Samsung and Texas Instruments do about 80 percent of their business outside their home countries.

Another problem is high costs, partly because of outdated and inefficient factories. As sales fell, companies had to cut back on buying new facilities and equipment. In 2002, such spending by all Japanese chip makers totaled 266 billion yen (about $2.3 billion), a third of its level in 1989, according to J. P. Morgan. It is now back up to 741 billion yen ($6.3 billion), still barely enough to keep pace with the $33 billion that Samsung alone plans to spend over the next six years to build nine new semiconductor production lines.

Japan's powerful bureaucrats, who originally helped guide the industry to preeminence, have been urging companies to pool money and technology, with limited success. They originally pressed the largest half-dozen companies to cooperate in building the Rising Sun semiconductor factory, which could cost as much as $3 billion. But the effort was delayed for years as companies failed to agree on what kind of chips Japan should focus its resources on. In the end, just three companies announced that they would join the project.

"Japanese companies have been looking hard for a winning strategy," said Tatsuya Fujiwara, deputy director in charge of the semiconductor industry at the Ministry of Economy, Trade and Industry. "They still haven't found one yet."

Chalmers Johnson on US-China-Japan relations

No Longer the "Lone" Superpower: Coming to Terms with China

Johnson rightly focuses on the tensions building around the Taiwan strait, and notes that the US is pushing Japan into a dangerous military role in the region.

[ Let me make clear that in East Asia we are not talking about a little regime-change war of the sort that Bush and Cheney advocate. After all, the most salient characteristic of international relations during the last century was the inability of the rich, established powers -- Great Britain and the United States -- to adjust peacefully to the emergence of new centers of power in Germany, Japan, and Russia. The result was two exceedingly bloody world wars, a forty-five-year-long Cold War between Russia and the "West," and innumerable wars of national liberation (such as the quarter-century long one in Vietnam) against the arrogance and racism of European, American, and Japanese imperialism and colonialism.

...The Bush administration is unwisely threatening China by urging Japan to rearm and by promising Taiwan that, should China use force to prevent a Taiwanese declaration of independence, the U.S. will go to war on its behalf. It is hard to imagine more shortsighted, irresponsible policies, but in light of the Bush administration's Alice-in-Wonderland war in Iraq, the acute anti-Americanism it has generated globally, and the politicization of America's intelligence services, it seems possible that the U.S. and Japan might actually precipitate a war with China over Taiwan.

Japan Rearms

...Since the end of the Cold War in 1991, the United States has repeatedly pressured Japan to revise article nine of its Constitution (renouncing the use of force except as a matter of self-defense) and become what American officials call a "normal nation." For example, on August 13, 2004, Secretary of State Colin Powell stated baldly in Tokyo that if Japan ever hoped to become a permanent member of the U.N. Security Council it would first have to get rid of its pacifist Constitution...

America's intention is to turn Japan into what Washington neo-conservatives like to call the "Britain of the Far East" -- and then use it as a proxy in checkmating North Korea and balancing China... Japan has so far not resisted this American pressure since it complements a renewed nationalism among Japanese voters and a fear that a burgeoning capitalist China threatens Japan's established position as the leading economic power in East Asia...

    Japan's remilitarization worries a segment of the Japanese public and is opposed throughout East Asia by all the nations Japan victimized during World War II, including China, both Koreas, and even Australia. As a result, the Japanese government has launched a stealth program of incremental rearmament. Since 1992, it has enacted 21 major pieces of security-related legislation, 9 in 2004 alone.

    A New Nuclear Giant in the Making?

    Koizumi has appointed to his various cabinets hard-line anti-Chinese, pro-Taiwanese politicians. Phil Deans, director of the Contemporary China Institute in the School of Oriental and African Studies, University of London, observes, "There has been a remarkable growth of pro-Taiwan sentiment in Japan. There is not one pro-China figure in the Koizumi Cabinet."

...Bush and Koizumi have developed elaborate plans for military cooperation between their two countries. Crucial to such plans is the scrapping of the Japanese Constitution of 1947. If nothing gets in the way, Koizumi's ruling Liberal Democratic Party (LDP) intends to introduce a new constitution on the occasion of the party's fiftieth anniversary in November 2005. This has been deemed appropriate because the LDP's founding charter of 1955 set as a basic party goal the "establishment of Japan's own Constitution" -- a reference to the fact that General Douglas MacArthur's post-World War II occupation headquarters actually drafted the current Constitution. The original LDP policy statement also called for "the eventual removal of U.S. troops from Japanese territory," which may be one of the hidden purposes behind Japan's urge to rearm.

    A major goal of the Americans is to gain Japan's active participation in their massively expensive missile defense program. The Bush administration is seeking, among other things, an end to Japan's ban on the export of military technology, since it wants Japanese engineers to help solve some of the technical problems of its so far failing Star Wars system. The United States has also been actively negotiating with Japan to relocate the Army's 1st Corps from Fort Lewis, Washington, to Camp Zama, southwest of Tokyo in the densely populated prefecture of Kanagawa, whose capital is Yokohama. These U.S. forces in Japan would then be placed under the command of a four-star general, who would be on a par with regional commanders like Centcom commander John Abizaid, who lords it over Iraq and South Asia. The new command would be in charge of all Army "force projection" operations beyond East Asia and would inevitably implicate Japan in the daily military operations of the American empire. Garrisoning even a small headquarters, much less the whole 1st Corps made up of an estimated 40,000 soldiers, in a sophisticated and centrally located prefecture like Kanagawa is also guaranteed to generate intense public opposition as well as rapes, fights, car accidents and other incidents similar to the ones that occur daily in Okinawa.

    Meanwhile, Japan intends to upgrade its Defense Agency (Boeicho) into a ministry and possibly develop its own nuclear weapons capability. Goading the Japanese government to assert itself militarily may well cause the country to go nuclear in order to "deter" China and North Korea, while freeing Japan from its dependency on the American "nuclear umbrella." ]