URSABLOG: Changing Seasons In Tokyo

I hadn’t been to Japan since before the pandemic, so I was really looking forward to getting back, seeing how things had changed, tasting the wonderful food (it’s not just sushi) and renewing contact with the many friends and contacts I have there, as well as making a few new friends too. An added bonus was that I would be there during the sakura – cherry blossom – season where for a few brief days the cherry trees are in full bloom and the petals then float in the wind like floral, white-tinged-with-pink snow.

On the surface not much had changed: the clean streets, the efficient metro system, the small shops and restaurants of local areas contrasting with the blasting lights of Shibuya and Ginza. But almost on arrival I noticed that it seemed to be a younger place, with fewer senior citizens around, and a younger more relaxed vibe on the streets. It was also – somehow – more colourful even though the clouds were grey (it rained on and off for most of the time I was there), with the younger people wearing louder colours. There were also many more tourists and non-Japanese people around than I remembered.

Many of my friends bemoaned the lack of taxis, which is something I didn’t notice to be honest. Whenever I travel abroad now, whether for business or pleasure, I try and walk or take public transport. I think it’s important that if you want to do business with people in different places you should at least try and experience how local, normal people live. It helps to get a sense of place too, and is healthier than being shunted from one meeting to another in the back of a cab.

I remember however many comedy moments in the past when handing a print-off of a map to a white-haired taxi driver (after remembering to let them open the passenger door automatically) and their puzzlement (after changing their glasses so they could read better) as they tried to read and orient themselves, and then – after a joyful cry of recognition – they proceeded to drive you, rather erratically – to your destination. The taxis themselves had changed I noticed, no longer the ancient – but immaculately kept – multi-coloured Toyota sedans, but London-style (but not quite) black cabs also made by Toyota.

My friends told me that the pandemic had changed many things, and one of them was that aged taxi drivers, having experienced an enforced stay at home had decided not to go back to work when the lockdown ended, although there was also an increasing awareness by the licensing authorities that octogenarian taxi drivers carried certain safety risks. My friends told me that there many other things changing, a shifting away from older ways of doing things – already changing before the pandemic – that was accelerated by Covid.

I remember my own bemusement during my first (and subsequent) visits almost 25 years ago of working practices. The employees of the bigger companies would finish work at six o’clock and go for dinner with clients, or if not, with each other, and then carry on drinking until around midnight when they would either go on, or go back to the office for a meeting to write a memo of what they had discussed during their dinner and drinks. There was a whole food, drink and entertainment economy built around these practices, which seemed to me unsustainable, even though I was a London based broker at the time. There is even a Japanese word – karoshi – that means dying at your desk.

This has all changed. I was still entertained at dinner – with excellent food – by my friends, but everyone had a home to go to. No stumbling out of Roppongi bars in the early hours of the morning anymore. No being waved off by adoring kimono attired hostesses. I am sure it still happens for those that want it (or need it) but it does not seem to be the norm, and for me at least, so much the better.

There are other things going on, outside Tokyo as well as in it. Shipbuilding capacity in Japan is being reduced as the yards struggle to attract and retain suitable workers, as the older ones retire, and the younger generation does want to work outside in the alternate steaming heat and biting cold of Japanese seasons. A restrictive immigration policy does not help either. So shipyards are closing, productivity is decreasing, and the future is uncertain.

This has subsequent ripple effects for the rest of the industry. What berths are now available for new orders are from 2028 onwards, so Japanese owners, especially the small to medium size ones, either have to wait, or order outside Japan (there are not many earlier berths in China or South Korea either), or look for some other area of investment. This means that they are holding on to their ships for longer, and consequently having to rethink their period charter policy that they have long held, as many of the charterers they are used to dealing with will not consider older vessels, especially as many of these ships do not meet their increasingly stringent emission requirements.

Japanese owners are therefore having to charter their ships out to counterparties that they have never done business with before, for shorter periods and in some cases without the comfort of fixed rates. Shipbroking practices in Japan are changing too, with older shipbrokers retiring, and more non-Japanese companies setting up branches in Tokyo. Younger, more cosmopolitan descendants of traditional shipowning families are increasingly willing to do business directly with brokers and charterers outside Japan.

The supply of ships into the secondhand market, long a staple diet for foreign shipowners, especially Greek owners who favour Japanese built ships, is drying up as Japanese owners are reluctant to sell because they cannot get their hands on any replacements anytime soon. The price of newbuildings, rising in the face of increasing costs – not to mention scarce labour – does not help their calculations either. The arrival of inflation – after many years simply non-existent – and increasing interest rates (no longer negative at least) offers no relief to shipowners, even whilst being broadly welcomed by policy makers. There are other structural inefficiencies in the Japanese economy, and tax system, that exacerbate these problems further, but there is little sign of reform there coming any time soon. It makes for a troubling, and depressing, picture. The Japanese shipping industry is facing many of the challenges that other large economies have faced as they moved into a post-industrial era.

Between 1852 and 1855, Commander Perry of the United States Navy undertook two expeditions to Asia, with a top priority being the opening up of trade and diplomatic relations with Japan, after two hundred and twenty years of self-imposed isolation. President Fillmore, who ordered the expeditions, sanctioned the use of ‘gunboat diplomacy’ if necessary. The implications for Japan were profound, from the abolition of the shogunate to the restoration of the Imperial family moving to Edo (now Tokyo) from Kyoto. There is a direct line that can be drawn from this to an increasingly confident and belligerent Japan attacking Pearl Harbor leading America to enter the Second World War and use atomic weapons to annihilate Hiroshima and Nagasaki. These cities, rebuilt and repopulated, are now important centres of the Japanese shipowning community whose way of doing business is now threatened by a decline in shipbuilding and the demographic and sociological changes within Japan.

I came away from Tokyo feeling that the shipping industry there is about to undergo some major changes, and the rather closed, cosy and predictable environment of the last forty years or so is about to be transformed into something very consequential for us all, especially when you throw in the expected challenges of a net zero carbon future.

Japan has always been an important centre for shipping. I cannot foresee or even guess the implications of the changes happening there, but I sense that Japanese shipping will be changing more in the coming years than it has done during the whole of my career as a shipbroker. I may be wrong, but the momentum for change, and the factors pushing that change, are not anything that individual owners can do much about and are unavoidable. Change is coming, and coming fast. Whilst thankfully this means I will probably be an even more frequent visitor to Japan, the nature of the country, and of the shipping industry, in the coming years will surprise us. I am glad I went.

Simon Ward