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Showing posts with label Tokyo. Show all posts
Showing posts with label Tokyo. Show all posts

Wednesday 18 July 2012

Japan-China Territorial Dispute is Serious, and Escalating!



The Prime Minister’s residence in Tokyo has a “war room.”  During the a.m. hours of July 11 the room was bustling as government and Japanese

English: Aerial Photo of Taisyoujima of Senkak...
Self Defense Force officials studied intelligence and heard briefings on intrusions of three Chinese navy ships into waters around the Senkaku Islands (Diaoyutai Islands) claimed by Japan as its “exclusive economic zone”  (EEZ).

The three Chinese ships had entered Japan’s EEZ waters after 4 a.m. on the 11th.  They were met, followed, and ordered out of the EEZ by Japanese Self Defense Force ships.  They finally departed just after 8 a.m.

Later in the day, Japan’s deputy foreign minister summoned the Chinese ambassador to the Ministry of Foreign Affairs and delivered a formal protest over the Chinese “intrusion.”

At the time, Japan’s foreign minister, Gemba Koichiro, was in Phnom Penh attending the ASEAN foreign ministers’ summit.  That day, the 11th, Gemba met in a hotel with Chinese foreign minister Yang Jiechi.  The meeting was scheduled to take 30 minutes.  It continued for 50 minutes.

This could not have been a pleasant meeting.   Very likely, it was lacking in the normal diplomatic decorum.  Seemingly overnight, Japan-China relations have turned icy, bitter, and emotionally charged.

The Gemba-Yang meeting was the first since Prime Minister Noda announced on July 7 that it had become Japanese policy for the central government to purchase the uninhabited Senkaku islands–now privately owned by Japanese interests and administered by Okinawa prefecture–that are also claimed by China, which calls the chain “Diaoyutai.”

Gemba’s talking points with Yang were scripted by Noda who had told reporters on July 7:  “There can be no doubt that the Senkaku Islands are part of Japanese territory, both under international law and from a historical point of view.  The Senkakus are under the effective control of our nation, and there is no territorial issue with any country over the islands.”  (The Yomiuri Shimbun, July 8.)

How Yang responded we can only guess.  We can imagine that the two men talked—or shouted—past each other, uttering almost identical, conflicting positions.

The incursion of the three Chinese vessels was plainly a response to Noda’s announcement, and a signal from China that “nationalization” of the islands by Japan would be met by further escalation.

Tokyo mayor Ishihara Shintaro first touted in April the idea of purchasing the islands, now owned by a man from Saitama prefecture, by Tokyo municipality.  Since then he has continued to advance this idea, setting up a special team in the Tokyo government under his direct control, and raising donations from around the country that reportedly now total more than JPY 1.3 billion (USD 165 million)

Ishihara’s announcement drew a furious response from Beijing.  Also, a public comment from Japan’s ambassador to China, Niwa Uichiro, a former president of one of Japan’s largest general trading companies (sogoshosha), C. Itoh & Co.

“If Ishihara’s plan is implemented, it will produce a crisis in Sino-Japan relations. We cannot let it ruin everything we’ve done in past decades,” Niwa was quoted as saying by the Financial Times on June 7.

This statement raised hackles in nationalist circles and in both major Japanese political parties.  To hard-liners, such a statement displayed weakness and lack of resolve, and sent the wrong message to China.

PM Noda seems to have hoped to quell some of the controversy and unify Japan’s response by “centralizing” Ishihara’s initiative and making it a national government initiative.

The confrontation between Japan and China on the Senkaku/Diaoyutai issue has escalated to a truly dangerous level.  Objectively it must be stated that it has been Japan that has done the most to raise tensions.  Further escalation cannot be in the interests of either side.  While his leadership in domestic policy matters has generally been laudable, even brilliant, in relations with China on this issue he seems captive to interests that would lead Japan into a trap.

When Japan and China established diplomatic relations in 1972, Premier Zhou Enlai agreed that the issue of Daiyutai (Senkaku) could be put to one side until the time for resolution “was ripe.”  In 1978, when the two countries concluded an historic peace treaty, Deng Xiaoping said of the issue that it could be settled by “our children and grandchildren.”

Japan seems compelled to force the issue with China, while China would very likely be satisfied to live with the status quo, as long as Japan would acknowledge that it too has a claim on the islands and surrounding area.   Diplomatic negotiation of some kind of modus vivendi and mutual efforts at resource development and safe-guarding navigation would be possible on this basis.

Stephen HarnerNothing so positive seems likely under current trends.  Quite the opposite.  Increasing, and increasingly dangerous, confrontation seems to lie ahead.

By Stephen Harner, Forbes Contributor

Thursday 31 May 2012

China, Japan to launch yuan-yen direct trading

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Trade between Asia's two largest economies is about to get a whole lot easier. China's central bank confirmed Tuesday that the country will allow the direct trading of its currency against the Japanese yen starting Friday.



This makes the yen the first major currency besides the US dollar that can be directly traded with the RMB. The move is part of efforts made by China and Japan to strengthen cooperation in trade and financial markets. And it’s a huge step forward for the internationalization of the yuan.

After some excitement in the Asian markets yesterday. The People’s Bank of China confirmed on Tuesday that China and Japan will start to directly trade their currencies in Shanghai and Tokyo from June 1. The move will shore up trade and financial ties between Asia’s two biggest economies, and also marks another step to raise the yuan’s international role.

Japanese Finance Minister Jun Azumi, who announced the decision in Tokyo, stressed the cost benefits behind the move.

Azumi said, "By conducting transactions without using a third country’s currency, it will bring merits of reducing transaction costs and lowering risks involved in settlements at financial institutions. It will also contribute to improving convenience of both countries’ currencies and reinvigorate the Tokyo market."

The step eliminates the US dollar’s monopoly position to set the exchange rate between the two currencies, and follows a deal struck by the leaders of the two countries in December.

Experts say it’s an important move towards the internationalization of China’s yuan currency.

Professor Ding Zhijie, dean of School of Banking & Finance, UIBE, said, "It raises the convertibility of the yuan. And I believe the yuan trading will be accepted by more Asian economies as well as the international markets. It will also push forward the internationalization of the yuan."

Several banks in the two countries, including Bank of Tokyo-Mitsubishi UFJ and Bank of China, will start the direct trading.

Huang Jiaying, trade with Bank of China said, "The move will likely make the yuan accepted by more Japanese investors as well. It will also help boost the possibility of the yuan becoming an internationally-settled currency, which is an important move of propelling the yuan to become an international reserve currency."

And Japan, which in March pledged to buy about 10 billion US dollars of Chinese government debt, is the first economy to connect with China’s yuan. The move is likely to strengthen ties with its biggest
trading partner.

Japan, China to shore up yen/yuan trade
Japan, China to shore up yen/yuan trade

Japan and China will start trading their currencies directly in Tokyo and Shanghai from June 1 in a move that shores up trade and financial ties between Asia's two biggest economies and also marks another baby step to raise the yuan's international role.

The step eliminates the use of the dollar to set the exchange rate and follows an agreement struck by the leaders of the two countries in December, which also involves Japan buying Chinese government debt and efforts to forge a free trade pact between China, Japan and South Korea.

"This is part of China's broader strategy to reduce dependence on the dollar. The yen has been chosen because of large trade flows between the two countries," said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong.

"Volumes of currency trading on shore are small, but this could lead to an expansion of trading with other currencies. It would be easier for China to expand into other Asian currencies."

Japanese Finance Minister Jun Azumi, who announced the decision in Tokyo, stressed the cost benefits of the move.

"By conducting transactions without using the third country's currency, it will bring merits of reducing transaction costs and lowering risks involved in settlements at financial institutions," Azumi told reporters after a cabinet meeting.

The People's Bank of China noted benefits for mutual trade, but also tied the decision to China's drive to boost the use of the yuan as a settlement currency for trade and financial transactions.

"Developing the direct yuan/yen trading will help form the direct yuan/yen exchange rate and reduce the trading cost for entities and promote the use of the yuan and yen in bilateral trade and investment as well as help strengthen financial cooperation between the two countries," it said in a statement.

A separate statement issued by the China Foreign Exchange Trade System said it will provide a market-making system for direct yuan/yen trading.

Until now yen-yuan rates were calculated on the basis of their respective rates against the dollar, so the move is expected to narrow trading spreads, lower transaction costs and allow more trade deals to be settled directly.

For Japan, which in March pledged to buy about $10 billion of Chinese government debt, becoming the first major economy to do so, the move could strengthen ties with its biggest trading partner.

Despite sometimes rancorous political ties between the two neighbours, Japan's economic fortunes are increasingly tied to China's economic growth and consumer demand.

Dealers in Shanghai said the near-term effect would be probably higher trading volumes and lower costs.

"Direct yuan-yen trading is likely to cut trading costs, boosting yuan-yen trading liquidity," said a dealer at a foreign bank. "Most yuan trading against the yen now goes through the dollar, because traders refer to dollar-yuan value to price yen-yuan."

But some played down the broader impact.

"From what I can see, it doesn't actually include any opening up of the capital account at all. It just allows a direct cross to be traded rather than actually increasing the amount of flow that can happen onshore to offshore," Dominic Bunning, currency strategist at HSCB in Hong Kong, said.

"It seems to be more of a technical issue rather than a major development."

The move to facilitate yen-yuan trading and the debt deal are part of Beijing's long-term efforts to elevate the yuan's status as an international currency, which so far have mainly centred on China's promotion of the yuan to settle trade.

Beijing has struck agreements with several nations from Malaysia to Belarus and Argentina on the use of the yuan in trade and other transactions. It has expanded a pilot programme started in 2009 into a nationwide one allowing firms to settle their trade in yuan.

The result has been a relative surge in the use of the currency. More than 9%of China's total trade was settled in yuan in 2011, up from just 0.7% in 2010.

Few argue against the idea that the yuan will one day become a reserve currency, given World Bank predictions that China will overtake the United States as the world's top economy before 2030. But to achieve that the yuan would need to become fully convertible and Beijing has yet to indicate any timetable for reaching that stage.- Reuters