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Japan’s Stimulus Package: Abe’s Last Gamble

 4 min read / 

Abe Shinzo won his premiership in 2012 with a promise to finally get Japan’s economy moving again. The latest fiscal stimulus package is yet another sign that Abe has failed and that the world’s third largest economy refuses to learn from its mistakes. There have been numerous stimulus packages over the past 20 years and all of them have failed to have the desired effect. It is clear that throwing money at the problem is not the answer and the markets’ negative response to the announcement suggests that they feel the same way.

Government Debt

One of the main challenges Japan faces is its huge government debt with its debt/GDP ratio standing at 229%. Greece’s public debt stands at 176.9 %. This comparison highlights the scale of Japan’s problem. Yet, Abe has chosen fiscal activism over austerity, and the debt is likely to go even higher following the implementation of the stimulus package. Government debt at such a high level that it affects an economy is a huge cause for debate. George Osborne clearly thought that it could seriously affect the economy, and the UK’s debt/GDP ratio was only at 78.4% in 2010 when he announced plans for austerity and referenced the debt/GDP ratio in his main policy goals. Perhaps a period of fiscal frugality, offset by a loosening of monetary policy, could be an option for Japan, yet they have done the opposite. Whether one thinks this is the right decision comes down purely to whether one thinks that having a large government debt hampers economic growth. Japan’s recent economic performance would suggest it does.

Structural Reform

Perhaps Abe should be implementing the structural reforms that the Japanese economy so desperately needs. Japan has an ageing population coupled with an extremely low birth rate meaning there are not enough young tax-paying people entering the labour market. The country must overcome its reluctance to accept foreigners if it is to find a new and young labour force stream. A mixture of public opinion and political sensitivity points to the fact that a sudden influx of migrant workers would not be welcomed by Japan.

229% is Japan’s debt/GDP ratio

Yet, as the population gets older and the government debt gets higher, it is possible that Japan will have to open its doors and come to terms with its status as a country in need of immigrants.

There are other crucial structural reforms such as the deregulation of the services sector as well as opening up the services to competition and foreign direct investment. Citigroup Chief Economist, Willem Buiter, argues that these structural reforms over time could boost GDP by up to 40%.

Isolationism

Another possible solution for Japan’s economic problems is to mend the strained relations it currently has with China and South Korea. Japan has been unable to overcome the historic problems and a bitter rivalry between China and Japan has been particularly damaging. At the moment these relationships are too deep-rooted and complex to understand fully or to find a practical solution to. Perhaps China’s economy continuing to slow down and Japan’s stagnating will force an economic union between the two countries. The three Asian powerhouses will eventually need each other to expand their productive capacity and a trade agreement similar to the EU could have significant economic advantages.

Domestic Market

Perhaps the target for Abe’s new stimulus package is jumpstarting Japan’s weak domestic market which has hindered economic growth. Slow wage growth has scampered efforts to encourage domestic consumption. Interest rates are at -0.1 % and yet inflation remains at around 0% which is way off the 2% target. Additionally, uncertainty regarding the world economy and the impact of Brexit has meant the yen remains extremely strong. This makes it harder for Japan to rely on its strong exports as the main catalyst for economic growth. In this sense, the stimulus package is welcomed as it should boost domestic demand and increase prices. However, history would show that these packages have been unsuccessful in the past.

Doom And Gloom For Japan

Clearly, there are various problems that the Japanese must tackle before they can finally get their economy moving again. Political and structural reform is absolutely vital to getting out of this mess. Until these reforms are implemented, one can expect more stimulus packages, more debt and more stagnation in the near future.

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Asia

Google to Open Artificial Intelligence Centre in China

 2 min read / 

Google AI China

Google will be opening its first artificial intelligence (AI) research centre in China, despite many of its services being blocked there.

Fei-Fei Li, Chief Scientist of Google Cloud, said:

“I believe AI and its benefits have no borders. Whether a breakthrough occurs in Silicon Valley, Beijing or anywhere else, it has the potential to make everyone’s life better for the entire world. As an AI first company, this is an important part of our collective mission. And we want to work with the best AI talent, wherever that talent is, to achieve it.”

The research centre will focus on basic AI research, and will consist of a team in Beijing, who will be supported by Google China’s engineering teams.

Google’s search engine and its Gmail are banned in China. However, the country has 730 million internet users, making the market too large to ignore.

Google is not the only tech giant facing restrictions in China. Facebook is also banned, while Apple’ App Store has been subject to censorship. In order to comply with government requests, Apple removed many popular messaging and virtual private network (VPN) apps from its App Store in China earlier on this year.

China has recently announced plans to develop artificial intelligence, and wants to catch up with the US. However, human rights groups are concerned by China’s use of artificial intelligence to monitor its own citizens.

Keep reading |  2 min read

Asia

Trump’s Jerusalem Declaration: What Are Its Impacts?

 8 min read / 

Trump Jerusalem

‘Therefore, I have determined that it is time to officially recognize Jerusalem as the capital of Israel.’

President Donald Trump has further instructed the State Department to begin the process of moving its embassy to Jerusalem from Tel Aviv, with Rex Tillerson also engaging other countries to join in relocating.

In yet another bombshell, the President of the United States unleashed a wave of condemnation across the world. With the obvious exception of Israel, leaders left and right have rushed in to accuse Mr Trump of exacerbating existing tensions within the region; British Prime Minister Theresa May called it ‘unhelpful in terms of prospects for peace in the region,’ and UN Secretary-General Antonio Guterres deemed it as, ‘a moment of great anxiety.’

Palestinian authorities were outraged, with calls for another intifada to take place. The response by their Arab neighbours has seemingly been in similar vein. At the time of writing, protests have already broken out, with scores of Palestinians injured in clashes with Israeli troops across the West Bank and the Gaza Strip, and one fatally shot dead as of Friday.

The Multifaceted Aspects of Trump’s Move

There are a number of dimensions to consider when examining the implications of Trump’s latest move, and to simply label it as populist policymaking would not do it justice.

In that same speech, he talked about how he was a President that was finally ‘delivering’ in the elusive search for lasting Israeli-Palestinian peace where his predecessors had seemingly failed to do so for two decades. This self-aggrandizing is not new and has been characteristic of his presidency.

Yet, it must be noted that Trump is delivering – not peace and reconciliation, but on a campaign promise he had made. Trump is a charismatic showman, but even more so a stubborn politician. This move was made against th counsel of both Rex Tillerson, his foreign secretary, and defence secretary James Mattis, in favour of keeping a promise he had made to the American Israel Public Affairs Committee back in March of 2016.

As highlighted in the New York Times, Sheldon Adelson, a pro-Israel casino billionaire, is close to Trump and donated an estimated $25m to his campaign.

In fact, Mr Adelson serves as the single largest political donor not only to the Republican Party, but between both major parties, forking out millions in both 2012 and 2016. In addition to Mr Adelson and Jewish lobbying arms are the evangelical Christian groups that made switching to Jerusalem a top priority among their influential ranks. The numbers speak: in a 2014 Pew Survey, a staggering 82% of evangelicals were of the opinion that Israel was the land given by God to the Jews, with less than half of American Jews sharing the same sentiment.

John Hagee, leader of the Christians United for Israel, spoke of how, in each meeting with Trump and his Vice President Mike Pence, the embassy’s relocation to Jerusalem was brought up. Earlier this year, Pence, speaking at the Hagee’s group’s annual summit, described how the issue of moving the embassy was not an issue of how, but of when.

Trump’s move is aided further by the aforementioned Arab neighbours. To assume that the relocation would harm relations between the US and its Arab allies would be superficial, to say the least. It should be noted that the most important group of allies – Egypt, Saudi Arabia and the United Arab Emirates – are united with Israel, and by extension the US, on a number of key issues. These include the mutual belief of Iran being the region’s most dangerous destabilizing force, along with the acknowledgement of the Muslim Brotherhood as a terrorist group.

Saudi Arabia stands as the most peculiar case. As the birthplace of Islam and the location of the two of the three holiest Islamic shrines (in Mecca and Medina), Saudi Arabia sees itself as the custodian of the religion; the de facto guardian of Muslims across the globe. However, symbolism gives way to a ruthless pragmatism, spearheaded by the ambitious Crown Prince Mohammed Bin Salman.

Bin Salman, whose recent top-down anti-corruption measures have swayed public opinion in his favour, is close to Jared Kushner, Trump’s son-in-law. Adding to that is the alleged Saudi proposal, which, as reported by the Times, would lead to Palestine accepting limited sovereignty and a total forfeiture of Jerusalem. This, in effect, draws the Saudi regime close to Israel and the most anti-Islam administration in US history.

Are Arab Countries Indifferent?

Yet the current situation serves as a further reminder that the majority of leadership in the Arab world are, admittedly, indifferent to the Palestinian grievances. It is not aided by the status of these regimes – they are mostly unelected autocratic monarchies and thus do not reflect the will of the people. Further adding to that is how the Saudis’ onslaught on Yemen has further made a farce of any genuine Arab unity. A humanitarian crisis affecting millions of (mostly Muslims) is being instigated by the self-professed protector of all Muslims.

It would be naïve to neglect the Arab populaces in this discussion. Unlike their leaders who limit Israel-Palestine to rhetoric, the common Arab continues to see Palestine as an important symbol – representing decades of oppression, betrayal, and disunity. These same feelings form the foundations for extremism to be nurtured. Trump’s move reignites Palestine as a rallying cry for Muslims, who perceive his administration as being openly at war with Muslims.

Provocative populist nationalism serves its purpose in the short run, yet in the long run, especially in a region as volatile as the Middle East, it harbours even more anti-American resentment. Couple this latest move with Trump’s proposed travel ban, and the sentiment among Muslims is justified.

Terror groups, aided by social media’s ever-increasing role, prey exactly on people who are disillusioned and disheartened. The Islamic State, it must be noted, is far from being defeated, and this latest measure acts as a gift for recruiters with which to radicalise unsuspecting young men and women.

Extremist Islamic parties will also be in ‘celebratory’ mood, with those in US ally Pakistan being of particular importance. Designated terror group Laskar-e-Taiba’s (LET) founder Hafiz Muhammad Saeed (accused of terrorist attacks in India) was recently released, and has set his eye on national elections.

Terrorist groups based in Kashmir have called upon lone wolves to attack American and Israeli embassies around the world as a result of this, with the Gaza-based Al Tawheed Brigades firing rockets at Israel. Pro-IS media group Tarjuman al-Asawirti described how the US understood only the language of bullets, car bombs, IEDs and the slitting of throats.’

Exacerbating this situation is the lack of diplomats on hand skilled enough to mitigate the fallout from this, though it must be considered that a long-term strategy hasn’t exactly been characteristic of the Trump administration, at least not in foreign policy. Fadah Pandith, former special representative to Muslim Communities at the State Department, questioned the timing of Trump’s latest move-right before Christmas-and describes how it exposed Americans to greater dangers.

The Implications of the Decision

What does this pronouncement? Just another macho publicity stunt? Detractions aside, there is a positive element in Trump’s latest decision. Formal recognition of Jerusalem as Israel’s capital by the US to Israel will put the former in a position of greater bargaining. This bargaining can include asking considerable concessions on part of the Israelis.

As for the Palestinians, this latest development, according to Emile Nakhleh, former CIA Senior Intelligence Service member, can hopefully act as a jolt for the Palestinian leadership. Hamas has proven to be an ineffective governing body, whilst the Palestinian Authority (PA) has long been mired in rampant corruption.

Their legitimacies are now being threatened and, in the face of rapid erosion, this latest move by the US can help galvanize the need to speed up peace talks, contrary to assumptions that it was the final nail in the coffin. This is the scenario desired by Trump, but it is only wishful thinking.

In the long run, however, it must be noted that nuance and compromise are central towards preventing tensions from escalating. Trump’s announcement has opened the floodgates to a number of speculations on whether there will be another intifada and, more importantly, on whether the two-state solution is still viable. The latter notion has gained traction recently, with Palestinian politicians now expressing interest in a one-state solution instead.

Conclusion

Yet this may be, again, unrealistic. Gaith al-Omari, a former adviser to the PA, states how these are empty threats, and that a two-state solution must persevere, and will continue to do so. The bottom line is that the US will still have a significant role to play in Israel-Palestine-the lingering question is how significant it will be.

Most importantly, the solution drawn must ensure that it does not leave one side gloating, and the other humiliated and disgruntled, which this latest move has clearly been unable to prevent. The Israel-Palestine conflict will continue to fester and ruin the lives of millions in the absence of compromise and understanding.

Keep reading |  8 min read

Asia

Gandhi Wins Congress Leadership

Gandhi Congress

Rahul Gandhi faced no challengers in the race to succeed his mother, Sonia, as leader of India’s Congress Party.

Gandhi is the fourth generation of India’s Nehru-Gandhi dynasty and has been destined from birth to one day head India’s Congress party. However, the 47-year-old has an uphill battle if he is ever to follow in his predecessors’ footsteps and win the Indian premiership. India’s prime minister, Narendra Modi, is the country’s most internationally visible prime minister for a generation and cemented his position earlier this year by winning various state elections. Accordingly, the relatively inexperienced Gandhi will need more than his good name to unseat Modi and his BJP.

Keep reading |  1 min read

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