I boast two qualifications for writing about Nikkei‘s takeover of the Financial Times. First I am a former editor at the paper. Secondly, I lived 27 years in Japan and in the late 1980s was virtually alone in predicting the Tokyo crash. I believe that in acquiescing in the deal, the FT’s current editor-in-chief Lionel Barber has little inkling what is ahead. I am hereby, therefore, extending an invitation to him to discuss the issues publicly. As an inducement for him to come forward I pledge to pay $10,000 to his favorite good cause. In the open letter below, I lay out some of the issues.
I refer to your public assurances that the Financial Timesâs independence will not be compromised by the Nikkei takeover. You are misinformed. Frankly, I concur with the BBCâs economics editor Robert Peston who has tweeted that this is a âdesperately sadâ moment.
As you know, I have spent 27 years covering finance and economics from a base in Tokyo. It took a few years to get my bearings but eventually I began to piece together the real story. The truth has turned out in many crucial respects to be the opposite of what my previous reading of the Anglophone press had led me to expect.
For a start, Japan is not a pro-Western democracy. On the contrary it remains a bizarrely authoritarian society that in many respects is tacitly anti-Western. Much of what is presented in the West as democratic activity is merely Gilbertian theatrics. Indeed for an introductory guide to latter-day Japanâs age-old tradition of cast-of-thousands make-believe, you might usefully consult the libretto of W.S. Gilbertâs Mikado.
Critically for the future of the FT, in few areas of life is Japanâs otherness so pronounced as in the media. As the prominent British commentator Alex Brummer has pointedly asked, âdo we really think that the editors and managers of Nikkei understand the values of independence of thought that distinguish British financial journalism?â
Not only is the Japanese press not free, but Japanese editors quietly rejoice in a role as principal apologists for the Japanese establishment, and in particular for an all-powerful, if virtually invisible, higher bureaucracy. When such editors attack Japanese companies, they are typically not acting autonomously but are merely performing their appointed role as pit bulls settling scores for the bureaucracy.
The âspecialâ nature of Japanese journalistic ethics is readily appreciated if you ask yourself a few questions. When, for instance, did Nikkei last publish a serious account of Japanâs mercantilist trade policies? I am not aware that it has ever done so.
And where was Nikkei on the â comfort womenâ sex slavery issue? Nowhere, of course. The issue was first raised in the Dutch press, which focused on the brutalization of brave Dutch women captured in the early 1940s in the then Dutch East Indies. The Dutch women were the tip of an iceberg but their allegations inspired East Asian victims (principally Koreans) finally to find their voice in pressing for an apology and compensation. The Japanese press was eventually embarrassed into breaking its silence but only after the story had become a cause cĂ©lĂšbre in the West.
All this is the more piquant for the fact that the FTâs coverage of Japanese economics in recent decades has been remarkably naive. The FT has led the global press in presenting Japan as a basket case. In reality given its demographics, Japan has done remarkably well (more on the counterintuitive truth of Japanâs demographics in a moment).
In publicizing the basket-case story the FT has fallen for a characteristically brilliant Japanese propaganda initiative. Japanese officials see major advantages in pretending their nation is weak and dysfunctional. Certainly in the 1980s they learned the hard way that clear evidence of Japanâs success created a hornetâs nest of diplomatic problems. Most notably trade tensions with the United States became so explosive that a trade war seemed imminent. Meanwhile victims of imperial Japanâs World War II atrocities â and their families â began pushing in earnest for compensation (they had previously been fobbed off by claims that Japan was too poor to make amends). Then there were countless Third World nations begging for a share of Japanâs foreign aid budget. Finally there was the matter of the rising Japanese yen. As an exporting nation, Japan â like Germany â has consistently sought to keep its currency as undervalued as possible.
All these problems were quickly neutralized when, with the stock and real-estate crashes of the early 1990s, the basket case story took hold. For a nation noted for its capacity for make-believe, the message was clear: act out various routines that emphasized Japanâs weaknesses, real or imagined, and hid its strengths.
The strategy has proved spectacularly successful, not least in reining in American pressure for market opening. A chivalrous United States, faithful to the principle that you should not kick a man when heâs down, has not pressed Japan on trade in more than two decades. Yet the Japanese market remains as closed as ever. In the car industry, for instance, even Volkswagen, which is a match for Toyota in any other market, has yet to achieve more than a token presence. (No wonder therefore that with the benefit of big profits in a large sheltered home market, Japanese carmakers have out-invested most foreign competitors during the lost decades â so much so that the Japanese industry has almost doubled its unit output since 1989.)
All the doom notwithstanding, Japan is not only one of the worldâs most prosperous nations but has made remarkable strides in recent decades. The point is obvious to foreign visitors the moment they arrive. For a start Japanese airports are state-of-the-art and invariably these days enjoy fast public transport links to downtown areas. Meanwhile the Japanese people are among the worldâs best dressed and they drive some of the worldâs best cars â in particular Lexuses and Infinitis that are a world away from the tinny little three-wheelers of the 1980s.
Then there are Japanâs urban skylines. These have been transformed by a huge building boom during the âlost decadesâ that has greatly alleviated Japanâs previous shortage of housing space. According to figures compiled by skyscraperpage.com, already as of 2012, 81 high-rise buildings taller than 152 meters (500 feet) had been constructed in Tokyo since 1989. That compares with 64 in New York, 48 in Chicago and seven in Los Angeles.
The construction boom has produced many superlatives. The AkashiKaikyoBridge, linking two of Japanâs main islands, boasts the longest main span of any bridge in the world â no mean feat given that the engineering challenge in bridge-building increases with the cube of the span. Then there is the worldâs first long-distance maglev line. Construction is well advanced, and trains will eventually run at world-record speeds of up to 350 miles an hour. Meanwhile the Tokyo Skytree skyscraper-cum-communications-tower, which was completed in 2012, boasts a height of 634 meters. This makes it the second tallest free-standing structure in the world after Dubaiâs Burj Khalifa.
Now for Japanâs problems, alleged and real. The biggest is often assumed to be its aging population. Actually this is a solution, not a problem. Far from reflecting some terrible post-crash national death wish, it was set in stone by the so-called Eugenic Protection Acts of the late 1940s. The objective was, by various means, to induce a dramatic reduction in a previously super-high birth rate. In the 1930s Japanese women had, in obedience to military diktats, procreated profusely to populate an expanding empire. In the late 1940s, however, top officials decreed a reverse course as they recognized that, shorn of empire, Japan faced an alarming food security problem â far worse even than the problem that later prompted China to adopt a one-child policy. (On a per-capita basis, Japan boasts little more than one-third of Chinaâs arable land.)
Japanâs demographic profile is a triumph in another way in that it stems from remarkable progress in healthcare. Average life expectancy has increased more than 20 years since the late 1940s â and given that the Japanese have been eating more McDonaldâs hamburgers lately, diet is not the explanation. Rather the Japanese healthcare system, one of the worldâs most efficient, excels particularly in early diagnosis of diseases that if not caught in time claim lives.
Perhaps the most compelling single statistic is that just since 1989 alone, average life expectancy at birth has increased by 5.9 years â to 84.7 years from 78.8 years. This means the Japanese now typically live 4.3 years longer than Britons and 5.0 years longer than Americans.
Of course, all this has a cost in that Japan is in the middle of an acute, if ultimately probably temporary, demographic imbalance. Whereas in the 1960s and 1970s, Japan boasted a high ratio of working-age people to dependents, the ratio now is one of the worldâs lowest. Yet such are the inherent strengths of the Japanese economy (particularly in advanced producersâ goods â a crucial sector formerly dominated by the United States) that Japan has continued to earn healthy current account surpluses. This is all the more remarkable for the fact that the United Kingdom and the United States, both of which have far more favorable demographics, persistently incur huge and ultimately catastrophically unsustainable deficits.
Japanâs continuing success in exporting is rarely alluded to in the Anglophone press. For details of how the Japanese have highly effectively targeted a host of âchokeholdâ industries (in advanced materials, key components, leading-edge production machinery), I commend you to my books, particularly Blindside and In Praise of Hard Industries.
What is not in doubt is that all through the lost decades Japanâs trade success â and consequent preeminence as a capital exporter â has financed an impressive array of foreign acquisitions. In the United Kingdom alone in the last few years we have seen such mega-deals as Hitachiâs $1.2 billion purchase of Horizon Nuclear Power and Olympusâs $2.2 billion purchase of Gyrus. Then there has been Sompoâs takeover of Canopius, Toshibaâs of NuGeneration, Dentsuâs of Aegis, and Brotherâs of Domino. For a fuller list click here.
In many ways Nikkeiâs $1.3 billion purchase of the FT is likely to be remembered as the most consequential of them all. The deal values the FT at a remarkable premium to earnings even by the highly inflated standards that have become common in recent years on the London stock market (particularly given that the FTâs headquarters building in central London is not included). Commentators have suggested that Nikkei is paying far too much. Actually from a Tokyo point of view, the deal is a steal. What the commentators fail to understand is that for Nikkei this is not about profits. Rather it is about power. Nikkei is fronting for the entire Japanese economic system in seeking to control one of the worldâs most influential Anglophone news organizations.
There is much, much more that could be said. I hope at least I have convinced you that you need to take a closer a look at what a critical geopolitical development you are leading the United Kingdom into.
If on reflection you still feel confident you are doing the right thing, I would be happy to invite you to a public discussion in a prominent forum. The Royal Institute of International Affairs in London might be appropriate or perhaps the Council on Foreign Relations in Washington. As an inducement for you to come forward (and as an earnest of my confidence in my analysis), I will be happy to make a donation of $10,000 to your favorite good cause.
All the best,