$80 Billion Bullet Train Scandal in Japan

A scandal threatens to put the brakes on Japan’s plan to build the world’s fastest train. To surpass the nation’s famous bullet train, the project incorporates magnetic-levitation technology that promises to cut journey times from Tokyo to Osaka by more than half, to just over an hour. The $80 billion project carries the government’s added hopes of exporting the maglev technology.

1. What is the scandal?

It centers on possible collusion on contracts for the project by four of the giants of Japan’s construction industry — Kajima Corp., Shimizu Corp., Obayashi Corp. and Taisei Corp. The Tokyo District Public Prosecutors Office and the Japan Fair Trade Commission raided their headquarters earlier this month following reports that the four companies were under investigation for possible antitrust violations related to maglev contracts. All four firms acknowledged the raids and said they’re cooperating with authorities. On Dec. 19, the Yomiuri newspaper reported that Obayashi had admitted to the FTC that it colluded with the three others. An Obayashi spokesman declined to comment.

bullet train

2. How did the collusion allegedly play out?

The contractors are suspected of having conspired to decide in advance which of them would win orders and at what prices, meeting regularly to discuss bids, Japanese media including Sankei newspaper have reported. The companies prompted suspicions by each winning about the same number of orders, according to reports. A former Taisei executive is suspected of being the mediator in the collusion, passing on details of the project obtained from an acquaintance at Central Japan Railway Co., which is running the project, Asahi reported on Dec. 26. A Taisei spokesman declined to comment on the report.

3. What is magnetic levitation exactly?

Maglev trains use magnetic power to float carriages, eliminating the friction of tracks. The trains set off on wheels (the kind used on F-15 fighter jets) until there’s enough speed for the magnets to kick in and create lift. China already operates a maglev over a short route in Shanghai, but the Japanese work-in-progress is on a much larger scale. During a trial in 2015, Japan’s project set a world speed record for a train — 603 kilometers an hour (375 miles an hour).

4. When can I ride it?

Don’t line up for tickets just yet. Central Japan Railway, known as JR Central, is running the project and began construction in 2015, but the first leg — from Tokyo to Nagoya — isn’t scheduled to open until 2027. The second stage, to Osaka, is planned for 2045, though the government is providing a loan to try to bring that forward by eight years.

5. Why is the project so important for Japan?

The government has hailed the project as “Japanese technology that will revolutionize intercity transport.” It sees maglev as a highly exportable revenue generator, with foreign dignitaries frequently taken on rides at a test line near Mount Fuji. Prime Minister Shinzo Abe has said his government may provide financing to JR Central’s bid to provide trains for a proposed Washington-Baltimore line. Japan’s interest in maglev technology dates back to the 1960s, about the time when bullet trains first appeared.

6. Why has it taken so long to develop?

As well as the cost, there are technical challenges. Such as tunneling through the Japanese Alps. Or making the train line straight enough to accommodate maglev’s speed. To achieve that goal, JR Central has to dig some 246 kilometers of tunnels for the first leg — almost five times the length of the Channel Tunnel linking Britain and France.

7. What’s at stake in the collusion allegations?

Other than another black mark for Japan Inc. in a year when manufacturers admitted faking data, there’s a risk that the project will face delays. The contractors under suspicion constitute all but one of the so-called super zenecon, or super general contractors, that dominate Japan’s construction market. The super zenecon are said to be the only companies with the capacity to handle large-scale projects with the technical precision required. Tunnel-building would face a serious obstacle if the investigation were to jeopardize their involvement, industry experts say. Many see such far-reaching consequences as unlikely, however. Transport Minister Keiichi Ishii has declined to comment on the possibility of delays.

8. What’s at risk for the companies?

The worst-case scenario is a criminal conviction against the companies and their executives, according to Daiske Yoshida, a Tokyo-based partner at Latham & Watkins LLP. While Japanese authorities rarely prosecute cartels, criminal charges were filed against three of the nation’s ball-bearing makers in a price-fixing case earlier this decade. Shares in the four construction firms fell as much as 10 percent in the days following the first reports, but investors don’t seem overly concerned. “The market isn’t having a big reaction,” said Minoru Matsuno, president of Tokyo-based investment adviser Value Search Asset Management Co. “There is a feeling that the market accepts that for this type of large-scale project, bid-rigging is a necessary evil.”

– Bloomberg



India, Japan Draw Closer on China Unease

A meeting between the leaders of Japan and India in mid-November is set to build on security and economic cooperation to help counter China’s increasing sway in the Asian region. Indian Prime Minister Manmohan Singh will meet his Japanese counterpart, Yoshihiko Noda, in Tokyo in the middle of the month (UpdateIndian Prime Minister, Manmohan Singh’s trip to Tokyo has been cancelled as of now as the Japanese Prime Minister Yoshihiko Noda has dissolved the government and called for elections). The two leaders will discuss strengthening security cooperation after a flurry of meetings this year between the countries’ top defense and foreign affairs officials and the first India-Japan joint naval operations in June, according to a Japanese foreign ministry official.

Both countries have committed to start regular meetings on maritime security in the region’s waters and hope to begin such discussions as soon as possible, the official said. A spokesman for Mr. Singh’s office declined to comment. The heightened spotlight on defense, especially maritime security, is a product of unease in Tokyo and New Delhi over Beijing’s territorial claims in the seas around China and its development of  ports in the Indian Ocean. In September, angry crowds across China attacked Japanese businesses in protest of Japan’s claims to a chain of disputed islands in the East China Sea. The islands – claimed by both countries – are known as Senkaku in Japan and Diaoyu in China.

Pic source: http://india.blogs.nytimes.com

Tensions also have risen in the South China Sea between China and a number of countries, including India, which is prospecting for gas in the area. New Delhi says it’s also concerned about China’s funding of ports in the Indian Ocean – India’s sphere of influence – including in Pakistan and  Sri Lanka. Expanding trading ties between Japan and India are also likely to feature in the upcoming talks. Japan’s difficult relationship with China, a major trading partner, has pushed its companies to look elsewhere to expand business. India, with a young population and growing economy, has been a major beneficiary.

So far this year, Japan is the largest foreign direct investor in India, with investments of $1.5 billion in 34 deals through Oct. 11, according to Dealogic. Two-way trade between the two nations, who signed a free-trade deal in 2011, is expected to touch $25 billion by 2014, up from $18 billion in 2011. Companies like Toyota Motor Corp and Suzuki Motor Corp have invested in India for decades. More recently, Japanese firms have begun to buy stakes in India’s insurance and information technology sectors.

There have also been hiccups in the commercial relationship. Suzuki’s local production joint venture had to suspend operations at a plant this summer after workers rioted over  a dispute between a worker and a supervisor. Japan has pledged $4. 5 billion in financial guarantees for an Indian project to build an industrial corridor between New Delhi, the capital, and Mumbai, the country’s financial center. But the project has been beset by delays, many of the relating to the difficulties of acquiring land.

News source: WSJ


Of War Games & Defence Diplomacy

Indian armed forces have chalked out a stunning round of combat exercises with foreign forces over the coming several months to use “defence diplomacy” as a tool to bolster national security as well as promote strategic cooperation.

Defence ministry officials say the 1.13-million Army alone has planned 14 to 18 exercises with countries ranging from the US, UK and Russia to Bangladesh, Mongolia, Thailand and Tajiskistan, both at home and abroad.

For instance, the armies of Seychelles and Singapore will be in Belgaum and Deolali in January for joint combat exercises . Similar is the case with Navy and IAF. Indian warships will hold combat manoeuvres with French warships, including nuclear-powered aircraft carrier Charles de Gaulle, during the “Varuna” wargames on the high seas in January . “Indian and French navies and air forces have build a high-level of interoperability through such exercises… We have a strategic partnership ,” said visiting French chief of defence staff Admiral Edouard Guillaud.

The US, of course, is leading the charge in this “interoperability” game, with Indian and American armed forces holding a staggering 60 or so wargames over the last decade.

Many more are in the offing. After the ‘Malabar’ naval wargames on the western coast, the “Habu Nag” amphibious exercise at Okinawa (Japan) and the “Vajra Prahar” counterterrorism drills at Belgaum earlier in the year, around 200 Indian soldiers are now leaving for Alaska to take part in the “Balance Iroquois” exercise with American special forces.

Despite defence minister A K Antony always being eager to downplay the expansive Indo-US defence relationship, the armed forces of the two nations have set a scorching pace in their bilateral engagement . Of the 64 exercises conducted by the Army between 2001 and 2009, well over one-third were with the US.

“The US is the only superpower around… We learn a lot from exercising with them. With the vast counter-insurgency experience of our professional forces, we also teach them a lot,” said a senior officer.

Above news source: TimesofIndia

Pictures courtesy: Military photos, Getty