Emperor Hirohito of Japan joins President Ronald Reagan, both dressed in tuxedos, in a toast during ... More a formal state dinner in Tokyo. Bettmann Archive One of the favourite books I have received as a gift is ‘Bushido’, the framework of the Japanese code of chivalry. I was given the book in the very early 2000’s, when it was not yet obvious that Japan would stagnate for quite so long and, the talk was still of the collapse in Japanese golf club membership prices Indeed, one of the remarkable socio-economic trends in Japan up to the mid-1990’s was the startling rise in Japanese gold club membership fees, which in the heady 1980’s Japan, had become a tradeable asset, so much so that an index was created (always a warning sign). During the period 1982-1989 the average golf club membership fee rose by 400%, with a final 190% spurt from 1989 to 1990. Companies such as Ginza Golf Services initially made a lot of money trading golf club memberships and at the peak of the market some were changing hands for close to USD 3mn. Naturally, this bubble collapsed, and as a nod to the future I flag a blogpost from ‘GolfProp’ magazine that shows that on average entry fees for American gold club memberships have been increasing at a rate of 23% per annum since 2019. Indeed, within the past year the membership fee at Mar-a-Lago has gone up by 43% Back to Bushido, which as a noble, chivalric code developed in the 16th century, is unlike European ‘Chivalry’ (see Maurice Keen’s book of this title is a must read) in that the idea of ‘Chivalry’ came about much earlier, and largely because of an effort to stop the knights of Europe killing each other in jousts and disputes. Bushido is still part of the mindset of many Japanese, and Japan is increasingly unique as a country where very strong social codes frame behaviour. To that end, the sense of bushido and Japanese diplomacy will have been taken aback by the unexpected decision by President Trump’s to slap a 25% tariff on America’s main allies in Asia, Japan and South Korea. Japan has always enjoyed close ties to the US (Al Alletzhauser’s 1990 book ‘House of Nomura’ is a very good account of how America helped build the modern Japanese financial and corporate system). I have a sense that another book of that era, Ezra Vogel’s ‘Japan as Number One’, seems to have stuck in Trump’s mind (in the 1990’s he went on CNN to castigate Japan American foreign and trade policy on Japan). MORE FOR YOU Trump and ‘bushido’ are anathema to each other, and the Japanese will be disappointed by his behaviour, given that Tokyo has always had close relationships with American presidents – though never as close as that with Jacques Chirac who visited Japan over 40 times (for various reasons which I shall not disclose). The potential rupture in relations between Tokyo and Washington introduces a strategic dilemma for Japan, at a time when its economy is awakening from decades of slumber. Like the UK, Japan’s geopolitical moorings are coming unstuck. President Macron’s state visit to London shows the direction of travel for the UK on security and defence, and whilst it is accelerating defence spending, Japan may end up considering more radical solutions for its defence in the context of Chinese belligerence (in 2024 Japan’s air force scrambled jets 704 times against incursions by Chinese and Russian jets). For instance, Japan is the one country that could quickly build a nuclear weapons programme, if it needed to. What is interesting in the Japanese case is that as geopolitical uncertainty rises, its economy and financial markets are thawing. The property sector is just reaching levels last seen in the early 1990’s (while Tokyo prices have recovered beyond 1991 levels, the rest of the Japan’s residential market is still below the price point reached then). Having suppressed bonds yields for a long time, the Bank of Japan is now raising rates, and Japanese bond yields have been pushing higher, and given the size of the Japanese bond market (and the balance sheet of the Bank of Japan), it is driving yields higher internationally, and deserves watching as a medium-term risk to markets. However, while bond yields are rising in the absence of yield curve control by the central bank, factors that are regarded as engines of the economy – earnings, consumer behaviour and employment are more muted, and give rise to the sense that Japan is either in the ante chamber of a full recovery, or on the precipice of something nastier. Tariffs, and a confusing break with the US, could upset the Shigeru Ishiba’s unpopular government (Upper House elections are soon), which is struggling in the context of a very ‘un-bushido’ world. Editorial StandardsReprints & Permissions