Re: Miscellaneous thoughts in the New Year (74) January 6, 2023

I wish you a Happy New Year. I kindly ask for your continued cooperation. It seems to me that this year’s New Year has been blessed with good weather and it has been relatively gentle three days. And due to relaxation of various regulations going with coronavirus spread, the movement of people at home and between Japan and abroad increased and I also heard of congestion in transportation and highway traffic jams. However, as we enter the fourth year, infected persons were over 200,000 all over Japan yesterday and there are still no signs of returning to normal. For the time being, “With corona” and the days of caution for influenza will continue.

■■ I would like to write what I was interested in lately.
■This year’s 10 major risks:
Eurasia Group known as political risk specialized consulting company publishes 10 major risks of the year at the beginning of every year. According to this, No.1 this year is “rogue country Russia”, and No.2 is “absolute power Xi Jinping”. Both are absolutism and totalitarianism countries, and persons reigning at the top are dangerous figures with a strong sense of imperialism and expansionism.
At present, interest in defending our own country has increased even in Japan, because geopolitical risks are emerging everywhere in the world. What is essential to defend its own country is resolution of “protecting our country by ourselves”. Ukraine which is in the middle of the war now will reach a year next month since Russian invasion. Power facilities were destroyed by missile attack, and citizens can’t use heating and are enduring the extreme cold below zero. Nevertheless, according to public opinion polls in Ukraine, over 80 % are trying to “fight for victory anyway”. Ukraine has a cause to defend its country from the invader. On the other hand, Russia has no cause and there is only Putin’s ambition. For that reason, soldiers fighting on the front line don’t raise their morale. Therefore, the outcome of this battle is clear and Russia’s victory will be tough.
Incidentally, the head of 10 major risks in 2022 mentioned by Eurasia Group at the beginning of last year was “the failure of zero-Covid policy in China, and world economy and political situations of various countries are getting unstable”, and the second was “influence of big IT companies is getting stronger worldwide”.
Contrasting this prediction with reality, the biggest topic last year was Russian military invasion to Ukraine occurred on February 24. This is an incident which we did not expect at all.
“The failure of zero-Covid policy in China”, which was the top of prediction last year, came true. A recession in China is a big burden for the global economy this year.
Next, No.2 “influence of big IT companies is getting stronger” was contrary to expectations. The percentage of big IT companies referred to as GAFA (Google, Apple, Facebook and Amazon) in total market capitalization of 500 major listed companies in the United States peaked at 18% in 2021 from 7% at the end of 2013. However, it dropped to 13% at the end of last year, and due to its impact, NY Nasdaq Stock Price Index to which many U.S. IT companies belong was down 30% in a year last year. At present, GAFA is forcing a review of growth strategies because of excessive investment, influence of recession, and increased government regulation, and undergoing a major restructuring. The prediction was a big mistake including this point.
Like this, no matter how much we use the most advanced technology and IT, we can’t read into the mind of Putin and Xi Jinping for instance. In other words, “nobody knows the future”.
Predictions are hard to come true. Reading “yosou which means prediction in English” backwards is “usoyo which means lie”. Incidentally, reading kusuri which means medicine backwards is “risuku which means risk”. When we read the word backwards, it can represent the meaning behind the scenes interestingly and accidentally.
■Global economic outlook for the year:
Managing director of IMF says that one third of the global economy will fall into a recession this year. Europe has already been in a recession. In the United States, interest rate on three-month treasury prices, short-term interest rate, is higher than 10-year treasury interest rate, long-term interest rate. Long-term interest rate is usually higher than short-term interest rate.
This long and short reversal phenomenon is said to predict the arrival of a recession with extremely high probability. Incidentally, total market capitalization of world stock prices peaked at 120.5 trillion dollars in November 2021 and turned down and was 86.9 trillion dollars in October 2022 and about one quarter of total market capitalization was lost.
On the other hand, the Nikkei lists four key points for the global economy of the year. ①a fight against high price pressures ②side effects of monetary tightening ③a slowdown in Chinese economy ④decoupling hitting the global economy. We need to be vigilant about the global economy trend of the year, and there are concerns about tangible and intangible effect on Japanese economy.
■The decline of the rate of unionization and a wage increase:
According to the recent announcement, the number of union members last year was 9.992 million decreased by 0.8% compared to the previous year, and the rate of unionization was record-low 16.5%. The record-high number of union members was 12.7 million in 1994, and the rate of unionization was over 20%. The decline in union presence can’t stop.
Kishida administration says that the key of Japanese economy in the future is “a wage increase”. Large companies which are benefiting from a weaker yen and doing well are showing cooperative attitudes. But it is not easy for small and medium-sized enterprises, which account for 99 % of all domestic enterprises and about 70% of total number of employees. Of course, they fully understand the necessity of a wage increase from the viewpoint of labor shortage countermeasures. But they can’t foresee the future due to a long-standing deflationary economy, and then can’t have bright visions for the future. The same is true for individuals, and this is a big reason why consumption is not getting pumped. In addition to that, a yellow union may be background to the sluggish wage increase.

≪P.S.≫ One and a half years have passed since I started Tsuji Business Support Office on July 1, 2021. I am taking on outside director and giving a lecture and contributing my essay now. In addition to such business, I think that I will move to the second stage of activities and restart overseas business trip which has been stuck in due to coronavirus spread for the past three years. I look forward to your continued guidance and encouragement this year.

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