Trade Dispute Avoided, Innovation Accelerated

(Resource Investing – Michael Montgomery)

Tensions over rare earth policy came to a head last week in the showdown over a fishing boat captain detained by Japanese authorities. The Chinese fisherman had collided with two Japanese coast guard boats in “disputed” waters between the two nations. The Japanese arrested the boat captain and he had been awaiting trial until Chinese port authorities halted shipments of rare earth elements to Japan. Chinese officials have disputed the non-official trade restriction as simply an administrative matter carried out by customs officials. Beijing had requested the release of the boat captain, and many suspect the halting of rare earth shipments is a direct response to the diplomatic situation. Japan released the boat captain without trial, and shipments of rare earths began almost immediately thereafter.

The situation illustrates the immense power that these elements have over the world economy. While the market is small in relation to other minerals, such as iron and copper, the monopolistic power of China over this market leaves little option for countries and companies alike to give in to the whims of China. Read more here.

China’s Rare Earth Exports Back on Track

(Japan Times)

China has resumed procedures to export rare earth metals to Japan after the bilateral dispute over the Senkaku Islands reportedly halted shipments of the critical materials, trading house sources said Wednesday. A Chinese mining company has restarted applications for exports and Chinese customs authorities have confirmed that cargo will be shipped once the procedures are completed, the sources said.

Separately, Chief Cabinet Secretary Yoshito Sengoku said that China may have started trying to repair ties with Japan, but more must be done to reduce the bilateral tension. “Currently, we are not in a win-win relationship. It is probably obvious to everyone,” the government’s top spokesman said at a news conference. “However, I presume that (China) has started making efforts to bring the situation back to zero (from negative).” Read more here.

When Everybody Exports, Nobody Wins

(Bloomberg BusinessWeek – Simon Kennedy)

Japan’s yen intervention may be a bad omen for global trade

On Sept. 15, Japan sold yen for dollars to slow the yen’s climb to a 15-year high against the dollar. Japan decided to take on the market to protect its exporters from the devastating impact of the super-yen. It’s a logical move, from Japan’s point of view. Yet it exposes a flaw at the heart of the current global recovery effort: The world’s major industrial economies can’t all export their way to prosperity.

Governments from Tokyo to Washington are counting on exports to keep their economies growing at a time of painfully high jobless rates and record budget deficits. The danger is that the race to hand companies such as Hitachi and Boeing an edge in the international marketplace will lead to a series of currency devaluations and protectionist measures that threaten global growth – a reprise of the 1930s-era beggar-thy-neighbor trade policies that worsened a global depression. Read more here.

Japan Challenges Canadian Renewable Energy Incentives at WTO

(Bridges Weekly)

Japan launched dispute settlement proceedings against Canada at the World Trade Organization on September 13 by saying that the province of Ontario’s green energy plan unfairly pressures its producers of clean power to buy hardware from local manufacturers.

Specifically, Japan is challenging Ontario’s Feed-in Tariff Program (FIT), which enables the province to subsidise electricity operators that use renewable energy produced using stringent local content requirements. The “made-in-Ontario” requirement demands that up to 60% of all green energy project inputs be manufactured in the province as it strives to create local jobs. [...]

But Japan says the local-content provisions breach portions of the General Agreement on Tariffs and Trade (GATT), and fall under the definition of a “prohibited subsidy.” It has asked for “consultations” with Canada under the WTO process, the first stage of a formal trade dispute. Read more here.

Japan: Dark Clouds Obscure the Sunrise

(Export Development Canada – Peter G. Hall)

Last week began with double-barreled news from Japan that grabbed the airwaves. The industrial giant was bumped out of second place among world economies by China. This occurred as growth in Japanese GDP slowed to a crawl in the second quarter. The world seemed shocked, but it shouldn’t have been. China’s ascendancy was as imminent and predictable as Japan’s nascent slowing.

Progress in the post-recession months seemed to fuel hopes that at long last, the Japanese economy was turning the corner. For a six-month span starting last October, GDP growth averaged 4.2% at annual rates, quite a feat for Japan. But the optimists seemed to forget that even this growth still left the country’s GDP a hefty 4.6% below peak, thanks to the pounding that production endured in the recession. They were reminded when the economy eked out just 0.4% growth in the second quarter.

Read more and/or watch the video here.

WTO Says No to Hi-tech Duties in EU

(Industry Week – Agence France-Presse)

The World Trade Organization has backed the United States, Japan and Taiwan in their complaint against EU duties on high-technology products, according to a ruling published on August 16.

"Having found that the European Communities has acted inconsistently ... we recommend that the Dispute Settlement Body request the European Communities to bring the relevant measures into conformity with its obligations," the WTO panel of arbitrators said.

The plaintiffs had accused the EU of violating the WTO's Information Technology Agreement by imposing duties on imports of products including television set-top boxes, flat-screen panels and printers with multiple functions. Read more here.

China Overtakes Japan in 2Q as World’s No. 2 Economy Amid Slowdown in Recovery

(Tomoko A. Hosaka — The Associated Press)

Japan lost its place as the world’s No. 2 economy to China in the second quarter as receding global growth sapped momentum and stunted a shaky recovery. Gross domestic product grew at an annualized rate of just 0.4%, the government said Monday, far below the annualized 4.4% expansion in the first quarter and adding to evidence the global recovery is facing strong headwinds.

The figures underscore China’s emergence as an economic power that is changing everything from the global balance of military and financial power to how cars are designed. It is already the biggest exporter, auto buyer and steel producer, and its global influence is expanding. [...]

China has been a major force behind the world’s emergence from deep recession, delivering much-needed juice to the U.S., Japan and Europe. Tokyo’s latest numbers, however, suggest that Chinese demand alone may not be enough for Japan or other economic giants. Read more here.

Japan Questions Local-Content Requirements in [Ontario’s] Energy Programme

(WTO News)

Japan, at the meeting of the Council for Trade in Goods on 21 May 2010, expressed concern over what it said were local-content requirements in a renewable-energy programme in Canada’s province of Ontario. It asked Canada to explain the consistency of the requirements with various WTO agreements, including the GATT 1994 provision on equal treatment for imports, and the Agreement on Trade-Related Investment Measures. The European Union and the United States expressed interest on this matter.

Canada said that its trade officials are reviewing the programme, and that Japan's questions had been forwarded to Ontario.

On another matter, Chinese Taipei expressed concern that Canada imposes higher tariffs on products from Chinese Taipei as compared to products from developing economies with higher levels of per capita GDP. It urged Canada to provide non-discriminatory tariff treatment to products from Chinese Taipei as Canada had done with other members that are at comparable levels of development.

Canada said that it already maintains very low tariffs, and that recently, it had eliminated tariffs on manufacturing inputs and machinery. It added that these measures have benefited its trading partners, including Chinese Taipei.

The Goods Council approved requests by the European Union to extend deadlines on its tariff negotiations with other members on its enlargements in 2004 and in 2007 respectively. It also approved a request by Argentina to extend its waiver related to the introduction of the Harmonized System 1996 changes, and forwarded the decision to the General Council for adoption.

Western Premiers on Asian Trade Quest

(CBC News)

Three western premiers are leaving for Asia on Thursday, with an eye to promoting investment in their provinces from China and Japan and touting the region as Canada’s “economic powerhouse.”

Saskatchewan Premier Brad Wall, Alberta’s Ed Stelmach and British Columbia’s Gordon Campbell are making the trek as part of their recently signed New West Partnership agreement, which commits them to work together promoting trade and reducing trade barriers.

Wall said the three provinces may establish a trade office in China.

“There’s a cost issue, to be sure, if we were to do this,” said Wall. “There’s also a branding issue.

“Because it’s one thing for the Saskatchewan brand to be known in a market that big and that far away. It’s a little bit better to leverage the western Canadian brand or the Canadian brand, and so if we were to do something like that – that would be the rationale – yes, cost and also the branding issue of the ‘Canadian brand.’”

“The recent economic downturn has proven that we are stronger if we work together,” said Campbell. Read more here.

Japanese Fret Over Quality of Manufacturing

(Financial Times)

Toyota’s recall of 8.5m cars , trucks and sports utility vehicles in recent months has shocked Japan, home of manufacturing innovations such as the kaizen philosophy of continuous improvement and “total quality management”. But while there is little evidence that Japan has got worse at making things - in spite of fretting triggered by Toyota’s recalls - quality has become a big problem for Japanese companies. Japan’s challenge is that, while its factories still work well, the nature of products, the scale on which they are sold and where they are made have all changed.

Cars and gadgets have become more complicated, with engineers forced to specialise. “There are fewer and fewer people who understand how all the parts work together,” said Yoshinori Iizuka, a professor at Tokyo University. Cars now use more electronics and digital electronics use more software. “For electronics, quality is largely determined at the design stage. If there’s a flaw, it doesn’t matter how good quality control is at the assembly plant,” said Yoshiki Matsui, a professor at Yokohama National University.

On Monday, Sony told millions of PlayStation 3 users not to use their games consoles as it rushed to fix a bug. The warning appeared to be another blow to one of the biggest names in the electronics industry. Sony, which yesterday said it had resolved the glitch, believes its PS3 problem was due to a bug in the clock system that led consoles to act as if 2010 was a leap year. Toyota answered complaints about the brakes in its Prius hybrid with a patch to the software that controls them.

The problems highlight how Japanese companies have had to accept imperfections as products become more complex and their lifespan shorter, and mass-market consumers have demanded lower prices. “It’s extremely costly to make products 100 per cent defect-free,” said Mr Matsui. Read more here.

Related: Senator Suggests Banning Japanese-made Cars (USA Today)

Japan Calls for Tougher WTO Rules on Anti-Dumping

(Forbes – Jonathan Lynn, Reuters)

Japan called on World Trade Organisation members on Wednesday to agree tougher rules on how far states can go to defend themselves against unfairly priced imports, warning excessive retaliation could disrupt commerce.

WTO rules allow members to impose duties on imports that are “dumped” – or sold for less than they cost at home – if they damage businesses in the importing country.

But such anti-dumping investigations and duties are often themselves criticised for being unfair and motivated by protectioniosm, and are the major cause of trade disputes.

Reform of anti-dumping rules was one of Japan's top priorities in the WTO's long-running Doha round, said Hiroyuki Ishige, vice-minister in Japan's Ministry of Economy, Trade and Industry (METI). Japan feared that the gains to the world economy from cutting tariffs to open markets in a Doha deal could be undermined by unwarranted use of anti-dumping measures, he told a meeting of senior WTO negotiators.

“It is not a theoretical concern. It is a real concern. Dumping is sometimes found to exist when there is none,” he said according to a text of his remarks made available to Reuters. Read more here.

Japanese Economy Breaks Free of Recession

(CTV News)

Japan has joined the short but growing list of developed countries to emerge from recession, its government said Monday, by posting 0.9% economic growth in the second quarter of 2009.

After the global financial crisis struck last year, the world’s second-largest economy shrank for four consecutive quarters, its largest decline since Second World War. But according to new data released Monday, recovering exports and a sweeping stimulus program helped it grow by an annualized growth rate of 3.7% during the three months ending June 30.

Cutting taxes and creating incentives to buy energy-efficient cars and household appliances helped encourage consumer spending. The Japanese government has also promised to spend roughly US$263 billion to stimulate the economy. That includes cash handouts and public spending on infrastructure projects such as reinforcing the country’s public schools against earthquakes.

Still, Japan’s unemployment rate was 5.4% in June, the highest in six years. And wages fell between April and June. Read more here.

Japan Warns Against Buy American Provisions

(Journal of Commerce Online – Alan M. Field)

Letter to U.S. Trade Representative asks for change in appropriations bill

The government of Japan sent a letter of concern to the United States concerning the Buy American provision included in an appropriations bill recently passed in the U.S. House of Representatives, an anonymous official in the Japanese Foreign Ministry told Reuters.

In the letter to U.S. Trade Representative Ron Kirk, Japan's Ambassador to the United States, Ichiro Fujisaki, expressed concern about a provision in the House appropriations bill for energy and water development that said funds should not be used to buy cars other than those manufactured by Ford, GM or Chrysler, the so-called 'Big Three' U.S. manufacturers. The U.S. Senate will soon vote on the bill.

In the letter, Ambassador Fujisaki asked USTR Kirk to urge the Senate to exclude that provision from the appropriations bill, the official said. Read more here.

Canada and Japan Expand Bilateral Air Transport Agreement

(Canada-Asia News Service – Transport Canada)

The Government of Canada has reached an agreement with Japan to expand the existing bilateral air transport agreement between the two countries. The expanded agreement allows airlines to offer unlimited services between Canada and any city in Japan outside of the Tokyo area. It also allows, for the first time, under certain conditions, access to Haneda Airport,

Tokyo’s metropolitan airport. The agreement further includes modernized aviation safety and security provisions and provides mechanisms for airline prices to adapt faster to market fluctuations.

Japan Stations Food Safety Officials in Canada, Other Countries

(Canada-Asia News – Mainichi Shimbun)

The Japanese government has stationed 26 food safety officials at nine of its foreign diplomatic missions. The officials, mostly employees of the agriculture and health ministries, will consult with governments and relevant agencies, gather information, and inform local Japanese communities about food safety problems. In addition to the Japanese Embassy in Ottawa, officials have been stationed in the US, China, Australia, Thailand, France and Italy as well as at EU headquarters. Canada is one of Japan’s top five sources of imported food.

Japan’s Gloom Deepens as Exports Suffer Record Drop

(Miwa Suzuki — AFP)

Japan’s economic woes deepened Monday as data showed it suffered a record drop in exports amid a global crisis while sentiment drastically weakened even among heads of major companies. Japan reported a trade deficit of 223.4 billion yen (2.5 billion dollars) in November as exports fell at their fastest-ever rate, according to official figures released from the finance ministry.

The Japanese economy “stepped up the pace of its decline last month but is falling head over heels this month,” said Hiroshi Watanabe, economist at Daiwa Institute of Research. “Japan has been hit by an unprecedented, sudden change in climate,” he said.

A survey published in the Nikkei economic daily Monday showed a rapid worsening in sentiment even among large companies. The mid-December survey found 99.3% of chiefs at Japan’s 137 major corporations believe the domestic economy is deteriorating. Among them, those who said the economy is worsening “rapidly” rose to 86.8% from just 10.8% in the previous survey conducted in early October, the daily said.

The trade deficit, which was much larger than the October deficit of 67.7 billion yen, reversed a surplus of 784.4 billion yen a year earlier, even though imports fell for the first time in 14 months. Japan’s imports in November shrank 14.4% from a year earlier to 5.55 trillion yen on lower oil prices, while overall exports tumbled 26.7% to 5.33 trillion yen.

The fall in exports was the steepest decline in comparable data dating back to 1980, the ministry said. It was also the first time Japan has incurred a trade deficit for two straight months since October-November 1980, when the nation was reeling from a second oil crisis.

Japan has enjoyed a large trade surplus since the 1980s thanks to brisk demand for its cars and other goods but the recent financial turmoil and a strong yen have hit exports hard. November shipments of automobiles plunged 31.9% with microchips and other electronics components falling 29.0%. Read more here.

Japan’s Exports Fell the Most in Almost Seven Years

(Video: Associated Press • Story: Bloomberg)

Japan’s exports declined at the fastest pace in almost seven years in October as the intensifying global financial crisis stifled sales of cars and electronics.

Exports, the main engine of Japan’s economic growth in the past six years, fell 7.7% from a year earlier, the biggest drop since December 2001, the Finance Ministry said today in Tokyo. Economists surveyed by Bloomberg News predicted an 8% drop.

The Nikkei 225 Stock Average dropped 4.1% on concern exporters’ profits will deteriorate as the global slowdown spreads to Asia, where Japan’s shipments dropped last month for the first time in six years. Automakers Isuzu Motors Ltd. and Hino Motors Ltd. said today they plan to cut output in response to weaker overseas sales.

“We’re in store for even more depressing export news,” said Kyohei Morita, chief Japan economist at Barclays Capital in Tokyo. “Exports will heavily weigh on Japan’s economy as the impact of the global financial crisis deepens.”

The yen traded at 95.72 per dollar at 12:16 p.m. in Tokyo from 95.88 before the report was published. Japan’s currency has advanced 9.2% since September, eroding exporters’ earnings. Read the rest here.

Japanese Business Sentiment Turns Negative for First Time in 5 Years

(Video: CNBC • Story: International Herald Tribune)

Large Japanese manufacturers turned pessimistic in September for the first time in five years and prepared to tighten their budgets for capital spending as the financial crisis cut into their export markets, a survey from the Bank of Japan showed Wednesday.

The Tankan, an index that tracks sentiment among big manufacturers, slipped to -3 in September from 5 in June, compared with economists’ expectations for a fall to -2.

The survey turned negative shortly before the Japanese economy entered its previous two recessions, and the September reading suggested that Japan was again on track for a recession.
The survey also indicated that the upheaval on Wall Street was stifling global economic growth, although analysts said many companies might have responded to the survey before Lehman Brothers, the U.S. investment bank, collapsed on Sept. 15, shattering confidence in the world’s financial system. Click here for the complete article.

Japan to Mandate Carbon Labelling

(The Age, Melbourne)

Japan is to enforce carbon footprint labelling on food packaging and other products in an ambitious scheme to persuade companies and consumers to do more to reduce their greenhouse gas emissions.

The labels will appear on food, drink, detergents and electrical appliances from next year, providing detailed breakdowns of each product’s carbon footprint under a calculation and labelling system being formulated by the Trade Ministry.The ministry said the labels would show emissions produced by the manufacture, distribution and disposal of each product.

To promote the scheme, the ministry released details of the carbon footprint of a packet of chips. One bag produces 75 grams of carbon dioxide: 44% from growing potatoes, 30% in production, 15% from the packaging, 9% during delivery and 2% from disposal.

Last month, the Government vowed to reduce total carbon emissions by up to 80% by 2050.

Customs Clearance to be Simplified in Japan

(CIFFA eBulletin – ITJ)

The Japanese ministry of Finance is currently holding discussions with the USA and the European Union. The talks aim to simplify customs clearance procedures for all participants that have been granted the internationally valid status of authorized economic operator (AEO).

Japan hopes to come to an agreement with the USA and EU by March next year. Such a pact could accelerate European exporters’ traffic with Japan by a day.