“Revenge Battle” was the word used by Japan’s well-known weekly magazine, “Toyo Keizai”, on December 19 to comment on the Japan-India high-speed rail project agreement. For a while, Japan seems to have been in competition with China’s high-speed rail and other infrastructure projects in Asia. Hizumi Katsuo a Japanese economy commentator considers the dictum in competition in Asian countries; infrastructure to be “humility is not the supreme virtue”. Japan’s “Shinkansen” and China’s high-speed both have their own national equipment manufacturing industry and both countries promote their industry in foreign countries —especially in Asia, which is the largest and most promising market with infrastructure the main driving force of the economy. A survey in Japan shows that Japan is competing for Asian infrastructure markets but ignores its cooperation with China.
Anxiety comes from Japan’s export strategy adjustment
After Japan and India reached an agreement on using Japan’s Shinkansen technology in India’s first high-speed railway construction project, Japan Business News J-CAST president, who has also worked for three years in India as Special Commissioner, told this reporter that it it very common for Indian people not to be punctual but with Japan’s high speed rail, Indians might also be on time.
On December 12, Japan, Asahi Shimbun reported that the “Ministry of Economy is ready to develop 6000 local talents for 5 years in order to obtain railways, power plants and other infrastructure projects in India and other emerging countries, Japan’s bidding in the future is to let them understand Japanese railway and power plants technology.” According to Japan’s Daily News report, Japanese are also ready to participate in the main high-speed rail projects in United States, Thailand, Malaysia and Singapore. Previously, the defeat in Indonesia’s high-speed rail project competition at the hands of Chinese enterprises shocked the Japanese people, who thought that the “cooked ducks” would fly into their enterprise’s plate.
Japanese media use the word “revenge” to comment on the Japanese winning the Indian Railways project, leading some people feel a sense of victory, but this is also a reflection of Japanese anxiety. In Tokyo, Japanese counterparts working on infrastructure for years told this reporter, “I never expected that China would rival Japan in these three expansion projects, referring to Japan’s foreign exports which have changed significantly over the years. Japan focuses on exports of household electric appliances, automobiles, power plants (energy), railway (traffic) and healthcare industry. Japan’s industrial future lies in these areas. At present, the Japanese railway construction industry has suffered at the hands of its Chinese rival.
For Japan, the lost opportunity in October of building the high-speed rail in Indonesia was an”insult” of their national export. Japan’s Yomiuri Shimbun editorial on October 7 said that railways are one of the most promising industries in the world. There are projects to be bagged in Malaysia and the United States in the future. This defeat led to a re-evaluation of their export strategy.
“Japanese Economic News” outlook 2020
Japan’s three major export sectors are energy, transportation and medical care. In 2020 a specific estimate of Japan’s exports of power plants, energy equipment etc was 9 trillion yen, while the 2010 annual statistic was less than 4 trillion yen. in 2010, Japan exported about 0.2 trillion yen in the transport sector (including the rail and port construction). By 2020, it is expected to achieve 6 trillion yen. Medical and agricultural exports in 2020 are expected to reach the target of nearly 5 trillion yen.
Compared with their traditional export advantage, they are able to put the issue more clearly. Japan’s exports to major economies includes electronic and mechanical products and home appliances. In 2006, Japan’s exports of electronic machinery products were 11 trillion yen but in 2014 they fell to less than 7 trillion yen. In 2015, it was estimated that it would reduce further. In 2006, auto exports were about 16.6 trillion yen, but the last two years witnessed a continuous decline of exports, and although depreciation of the yen resulted in an increase in the value of automobile exports, the increase was not large.
Inadequate reflection on “lesson from Indonesia”
As far as we know Japanese high-speed rail technology is very advanced and safe. Japanese blindly believed in their advanced technology but the loss of the high-speed rail project in Indonesia has made them cautious. As a result they are carefully pondering over the question: Why did Japan lose the high-speed rail project to China? The vast majority of Japanese media stresses that Japanese technology is of high quality, but if it comes to a price war, Japan is nowhere near China.
In Japan, this reporter came into contact with many high speed rail operators and equipment manufacturing enterprises. Earlier, in discussions on high-speed rail project in Indonesia, most felt that Japanese high-speed rail will win in Indonesia. There was a production of high-speed rail vehicle equipment manufacturers; their technical staff in Europe, Asia did a lot of investigation of the vehicles.When it comes to the notorious Indonesia project, locals were very confident, whether it was Japan’s manufacturing technology or the relationship between Japan and Indonesia. Japan was the first to propose the construction of high-speed rail. In 2008, China’s high-speed railway construction was on the right track, Japan tried hard to enter the Chinese market, but it was hopeless. Then they moved to Indonesia and put forward a proposal to build a high-speed rail in Indonesia. Fukushima University Asian Economy professor Sano told the reporter that “Indonesia is in very close relationship with Japan; at least in bilateral relations, Indonesia and Japan are very close.”
According to media coverage, the Japanese initially offered a very low price, hoping that they will get the bid. Until September 3 this year, when the Indonesian government announced re-evaluation of quotations submitted by China and Japan and the project content, Japan did not seem to have a sense of crisis. Then Japan almost automatically abandoned the re-bid for Indonesia’s high speed rail project. According to the Japanese economic news analysis, Japan proposed to let the government ensure the low interest loan debt to Indonesia, while Indonesia hoped that the project would be completed within the current Presidential term. Japan International Cooperation Bank Managing Director Mr Maeda said that it is very difficult to solve the contradiction bnetween two sides. He further said: “Japan cannot agree with all conditions in Indonesia.”
A Japanese reporter familiar with Indonesia secretly mentioned that “the reason behind China’s successful bid of the high-speed rail project is that China had established a joint venture with new local enterprises and those companies are directly responsible for high-speed rail construction in Indonesia. Secondly, China is not only constructing high-speed rail, but also will fulfil the needs of Indonesia. A senior member of Japan External Trade Organization (JETRO) also revealed to this reporter “No matter what the government’s attitude, a lot of Japanese companies in China’s Indonesia project are going to profit, and also transfer technology to China and finally export it to Indonesia.” But similar to the objective analyses of Chinese high-speed rail in Indonesia the Japanese media can hardly find anything wrong. While most of Japanese media assesses the high-speed rail project in Indonesia is to be a defeat, some now also believe that Japan has not wasted “a lot a lot of money.” And also consider that Japan will lose lots of money.Some also said that loss of the high-speed rail project in Indonesia to China is because the Chinese government’s approach to implementation of high-speed railway but Japan was taking the business route of self-reliance.
Japan should not go it alone in Asian Infrastructure
“Compared to the cost, India pays more attention to safety and punctuality aspects. Japan obtained a proper evaluation”, Japan’s Ministry of land and transportation officials commented on Shinkansen agreement between Japan and India. In fact, what is most significant about India using Japanese high-speed rail technology, is that Shinkansen technology was not exported to other countries for the past 50 years, except for China and Taiwan. It has now been introduced in India formally and comprehensively. This is a big “breakthrough”. With India formally deciding to introduce Shinkansen technology, Japan’s East Japan Railway (JR East Japan), Kawasaki Heavy Industries and Hitachi Japan will set up an industrial complex for bidding jointly. In Japan, the Prime Minister, public opinion and other senior government officials are promoting and giving financial support to the national authorities and the private sector to jointly promote Japanese companies in India and help them win a “truly cooked duck.”
Abe’s government emphasizes the high quality of Japanese products and implies that “China has only a low price.” In fact, while promoting the Japanese Shinkansen and power plants technology to other countries, Japan is not stingy. In 2015 there is additional budget of hundreds millions of Japanese yen to invite foreign experts and high-speed thermal power station technologies, and entrepreneurs to examine Japanese companies and increase goodwill and trust in Japan. Not only “inviting”, the Ministry also choose to “go out” and send technical experts to developing countries to promote Japanese technology. Japan’s Ministry of Economy officials told “Asahi Shimbun” reporters that from 2015 Japan, will train about 4,000 people. “The Japanese will not only make a great improvement in terms of money and speed, but also play a strong role in training of personnel”. After training a large number of pro-Japanese technical experts and entrepreneurs, Japan will promote construction of railways and other infrastructure in Asian countries. That will be more than an important supporting force in the future.
In fact, there is a large demand for sociall infrastructure in Asian countries. Japan led the Asian Development Bank in the scale of construction in 2010 to 2020. The social infrastructure demand in Asian countries is estimated to be more than 8 trillion dollars.This is not a monopoly of any one country. If Japan place too much emphasis on competition with China in Asian infrastructure construction, then it not have any practical significance.
Abe’s launch of comprehensive competition with China in Asia resulted in the weakening of the Japan’s yen (compared to China). Just look at the size of the Asian infrastructure construction: e.g. high-speed rail cooperation between Japan and India alone costs $ 15 billion over just eight years. Asia Development Bank said that in Asia, it estimates average business of more than $ 800 billion p.a. A Japanese government official who is to go to work in Indonesia discussed high speed rail project of India and Indonesia with this reporter. He came out with the opinion of Japanese PM Abe’s cabinet in somewhat different words, “Japan and China should cooperate in Asia.”
Vice president of a Japanese trading company also told this reporter, ”Our industrial park in Burma is only two square kilometres; if we cooperate with China, we can make it 10 square kilometres”. This suggests that some Japanese government and business people view the scale of Asian infrastructure development to be limited if dependent on the speed the strength of Japan alone, but one that can be made larger through Sino-Japanese cooperation.