 Yeah, I'm Jay Fidel. This is Think Tech and more specifically, this is looking to the east with Steve Zercher in Kansai Gaida University in Kobe, Japan, telling us about things in Japan. This is an update on coronavirus in Japan. Hi Steve, thank you for joining us this morning. Good morning. Nice to join you again, Jay. So what's the situation? The paper suggests that Japan is having a bad time of it now. Yeah, for the last few months, Japan was listed as an exception to the rapid infection rates that most of the rest of the world has gone through, dramatically in the United States and Italy and so forth. Relatively speaking, the number of infections in Japan is still low. It's in the 4,000 range, but the number of cases are increasing on a daily basis. So it used to be 30 or 40 cases a day. This was a few weeks ago. Now we're into the hundreds. Actually, yesterday it was 500. It was reported in Japan. So it looks like unfortunately, even though we're at a very low base level now, Japan is beginning to climb up that steep right hand curve, the hockey stick curve that so many countries like the United States has gone through. So it's not absolutely determined that we're actually going to go on that route, but we're certainly getting very close to it and we're showing signs that the country could be, like so many other countries, an experience, an overwhelming number of infections over the next couple of months. And of course the medical resources here are going to be strained to the max. So Japan may be facing some hard times over the next couple of months. I wish more than what we had expected was going to be the case as early as just a week or so ago. What's the government doing about it? Well, they are, to their credit, reacting finally. You know, it's been three months plus now going into the fourth month that we all knew about this. Japan government was very slow in initially responding. There was nothing done until early March when there were some school closures that began. But up until that point, there was no activity and the government was issuing mixed messages. Then about the middle of March, the diet, the Congress in Japan passed a resolution allowing the Prime Minister to declare a state of emergency, which would give the government more power in terms of issuing decrees. For example, closing schools 100% or closing down any activity where there's more than 100 people or 250 people. But Abe kind of sat on that. This is a Prime Minister. It wasn't until last night that he made the announcement that based on the increase of infections that we just talked about, Japan is now in a national state of emergency and the government will be mobilizing in six key regions in Japan where the infection rates are the highest. The worst case is Tokyo. Tokyo, the increase there is the highest of any region. So there'll be new activities, more encouragement of people to stay at home. Not mandated, like in some states in the United States or in some countries. But there'll be more messaging from the government saying do not go out unless it's absolutely necessary. Schools will be closed in those regions for an additional period of time and so forth. And then on the economic side, as you know, Japan technically is in a recession, I would imagine. We don't have the Q1 numbers yet, but I'm sure they're going to be negative. Q4 numbers were minus 7%. Q1 numbers are easily going to be in that range if not higher. So Abe, just like Trump and many other national governments, is now passing a resolution to help fund businesses and consumers, people living at home with funds. So as in America, consumers are going to receive money and Japan also, somewhere between $2,000 and $3,000 as a subsidy will be distributed to people to help them overcome the economic downturn that we'll be facing over the next six months or so. The total amount, it's quite dramatic, it's a trillion dollars. So Japan's GDP is five trillion, so the subsidy that Abe is wanting to pass and surely it will pass, because all parties will be supportive of this, is 20% of the GDP in terms of funding for businesses, for consumers and so forth. Well, what are the similarities and contrasts between the Japan plan and the US plan? I mean, just to mention that the US plan has issues about oversight. It has issues, I mean, raised yesterday by Mnuchin. He wants stock of the airlines in return for making the loans or grants to the airlines, which the airlines really don't like at all. And of course in the US, we have projected delays of months and months before certain sectors receive a dime. And furthermore, there are delays at the state level, which blocked the receipt of the money by the people it was intended for. And then they say it's not enough money. On top, very interesting, compared to the US, Europe has what many people consider a better idea. Their money is going to preserve jobs, not to pay people who have been fired, but to preserve the jobs so that when it's all ready to come back again, the jobs will still be there, people will still be in the jobs. So how does it work in Japan? So a couple of things there, Jay. One cultural factor which is in play in Japan that isn't in play in the United States is the fact that when you're hired by a major company in Japan, they're very reluctant to lay you off. So that's kind of a cultural aspect of working in Japan. A company asks for 100% commitment from you, but then in return, they're less likely to let you go as compared to the United States or Singapore or Hong Kong or other parts of the world, where if the economic conditions change, you lose your job immediately. So that's a little bit of a buffer. So companies are taking the long-term view of this. And frankly, if they started firing people, those individuals could go to the various agencies, the employment agencies, and probably get the company to pay their salary anyway. So Japanese rules and regulations are very supportive of the employee. So there's this tradition of long-term employment, which is not as strong as it was certainly 20 years ago, but it is still a factor for many companies. And then there's also regulations in Japan that make it very difficult for any company to let anybody go. And in these circumstances, because of the illness, it'd be very, very difficult for people to be let go by any companies. And then to your other point about the efficiency of the Japanese government, just one anecdotal piece of information. I have a small investment. It's a Japanese, it's a brewery, a Japanese craft brewery that I've invested money in. I'll probably never get that money back, Jay, between you and me. But anyway, it's a fun investment. And sometimes I get the founders to come to my class and talk about what they're going through. But I had a chat with the founder-president just a couple of days ago. He is already lining up loans. The banks are actually knocking on his door saying, how can we support you? So the government is somehow incenting banks to make loans to small businesses to save them. So it's a very different circumstances from what you're describing, which is going on in the United States, in that the small businesses can't get the money. In this case, even though this is a very small business, it's barely profitable, he has multiple banks calling him saying, what can we do to help you? So there must be a tremendously strong incentive from the government to get banks to loan to small businesses. And the interest rates are zero. That's another aspect. Yeah, zero. Well, that's a cultural point, isn't it? In Japan, you have this kind of feeling of community. We're all in this together as something that exists already in the Japan culture. And I wanted to ask you about volunteers. Now, one thing that came out in the news here in Hawaii is that a lot of state employees, and there are 70,000 state employees here, 70,000. That's really enormous, right? A lot of them are not working. They're merely at home collecting their regular salaries. Nobody knows the number, and I don't think they're going to find out the number, but there are a lot of them at home just collecting salary. And so there was a governmental initiative to try to get them to volunteer where needed since they were being paid anyway. And the union, HGEA, the government employees union said, no, no, no. If you want them to volunteer and come and help in other aspects of the crisis, you're going to have to pay them 25% more than their ordinary salary. And I don't know if it's the union that calls for this or the members of the union, but that would undermine any notion you might have for altruistic volunteering in Hawaii. What about in Japan? Is there altruistic volunteering? Oh, well, on a general level, certainly that's true. I think in the case of the Olympics and now canceled or the delayed Olympics, they had 30,000, 40,000 people apply as volunteers. There's a strong national pride, especially when it comes to a marquee event like the Olympics. Last year, in the fall, we had the World Cup rugby competition. The numbers there, actually I knew the person who was responsible for the volunteers. It was 10,000 to 12,000 people volunteered. So there is a sense of giving back to society in Japan, at least for those types of events. And this event itself, other than the fact that you wouldn't want people to put their health at risk, I think that Japanese people would be inclined to help if they could. If, for example, they were sent home and they couldn't actually do their normal job. Or students, for example, schools closed right now for many of them and they really don't have anything to do. Abe could probably call on those people and say, look, we want you to help with preparing food packages or something that's non-threatening to their health. And probably the response in Japan based on my years of living here and watching Japanese people respond to these types of things would be very, very positive. And there wouldn't be any interference from unions or any kind of agencies. It would just be a sense that this is for the greater good. And this needs to be done as people aren't busy right now. So, yes, let them go ahead and volunteer and help. So if it comes to that, I think the response will be very different from what you're describing in Hawaii. Yeah. One other thing I wanted to ask you on a cultural level. So you have an expansion in the number of cases. And I assume that's a number of deaths as well. Yes, that's increasing too. So what is making this happen? Now, we know we have found out, although I don't think everybody understands it yet, that this virus is airborne. In other words, somebody can be in a room, breathe in the room, leave the room, you come into the room, you breathe it in, now you have the virus. You don't even know somebody was there before. And the other thing is that it comes from asymptomatic people, people who have a very mild case, they don't even know it. They know symptoms. And those people are carriers. And so you might have some kind of contact with them and presto. You've got it in a lethal dose. It only takes one viral particle to infect somebody. And so all of that considered. I wonder if you have any thoughts about certain strains of gathering, of being together of the Japanese culture that is enhancing the contagion. Yeah, it's the infection right now in Japan is at the point where it's not traceable. So people are getting sick and they have no idea why. In the early days, there were clusters, they could trace exactly, oh, this person is sick because he went to this place at this time where there wasn't infected. Now, people are just randomly getting ill. So we're beyond the point where we can actually trace the illness. I think there's been some moderate success in terms of discouraging people from gathering at large, like stadiums and so forth, baseball. All major sports are now canceled or delayed. So there's no gathering of thousands of people, which would be a normal part of the spring routine, whether it be football or baseball and so forth. And that's up somewhat, I think, to mitigate the number of infections. But the biggest challenge is at work. So the Japanese work tradition is that you're really not counted as working unless you're physically at your desk, and you're at your desk for a long time. And the people who spend more time at their desks eventually are the ones who get promoted. This is one of my frustrations as a businessman in Japan, that people are promoted based on time served, not necessarily on their ability. Now, that's changing around the margins, but still, that's how things are done. So for example, at my school, I have a meeting which is now going strictly remote. But last week we actually got together, about half of us. So there were six of us in a room, and we were spaced out and we all had masks on. And we completed our meeting, and then as we exited, 35 people in this office crammed into the same room. So they all are aware of the risks. They all know that it's not a good thing to do. But the fact that that's how work is done, that those meetings are mandatory, those meetings are totally 100% necessary, they're actually not necessary at all. Most meetings in Japan, like in the United States, are kind of a waste of time. But anyway, they all crammed in there. So that kind of behavior continues despite the warnings, despite the knowledge, despite the risk that everyone is aware of. So that's the biggest, I think, potential risk for Japan over time. Abe should say, look, everyone stay at home. Use the internet to do your work. Don't gather in large groups, in meetings. But I don't think that he would have the ability or would have the courage to actually make that announcement. That's the challenge. You know, I remember the public transportation in Japan. Although everybody's very respectful, they jam in like sardines. And you are inches away, if not less, than the person next to you. I don't think masks are very helpful, even if they're wearing masks in that circumstance. Yeah, that's still happening. So last week, when I was returning home, unfortunately, the train was late. So it was 40 minute delay. So even though the ridership is down, probably 50 or 60%, that meant that those people were piling up, waiting 40 minutes for a train that arrives every 15. And yeah, it was bad. Now, one thing about Japanese culture on trains is that people do not talk. It's very, very quiet. And almost 100% of the people have masks, including me, I had a mask on as well. So at least they're not speaking and spreading the virus out. But still, that's a high risk area. And someone could spread it in some other way within a very small space where there's a lot of people. So I stopped going on the trains, Jay. So I hate driving in Japan. And my school is a long way away from where I live. But I've decided that no more trains for the duration. So when I do go to school, I drive. You talked about Abe's power and all that. And in the US, we have a very strange, reverse federalism going on. For the longest time, power was centralized in the federal government. I guess it still is. Certainly Trump is taking more power than any president has. And misusing it, that's my opinion. But then you have this phenomenon where he's telling the states, no, they have to handle issues about shortfalls in equipment. They have to do this, that and the other thing. It's not, you know, what did he say? Who are we a stock clerk? You know, that sort of attitude about this is a reverse federalism. The states have to handle it. From your description though, Steve, it sounds to me like in Japan, you don't have that. There's nobody, you know, competing for the power on this. Abe is the prime minister. If anybody's running this operation with the diet, he's the one. He's not relegating or delegating to individual prefectures. No. The way the Japanese system works, there is a balance. So it took Abe to announce that there's a national emergency to allow the prefectural leaders to take more strict actions. So they couldn't do that without the national government making it okay for them to do it. So he does have that overarching power in terms of allowing new activities, like for example, a forced closure of businesses or demanding that a company produce masks, or change their production to produce things that are needed in order to fight the coronavirus. But he can't mandate that, but now he has given permission or he has allowed the prefectural level or the state level leaders to be able to carry that out. Now one thing that they're doing too, we talked about before the call started, at a national level as a part of this economic stimulus package that Abe has proposed and certainly will pass very soon, they're funding $2 million to get Fujifilm holdings, which is the producer of a anti-flu drug which may be effective against the coronavirus. It's called Avagon, A-V-I-G-A-N. So he has the power, the ability through the control of the federal budget to be able to allocate funds on a national level to support the production of a drug which may help to fight the coronavirus. So he has power certainly in that regard. Well, and the fact that the government put that much money into it shows that they really care about developing a pharmacology that will help. And I hope, how many doses did you say, 2 million doses? That doesn't cover all of Japan, but it might cover a lot of the cases in Japan. And the question is, let's assume for a minute that the Japanese researchers are smart enough to really hit on something here, query what happens to other places in the world. I would like to see them come up with something. I would like to see anybody come up with something, but how do we get it to go worldwide? This is really important because this is a pandemic. He's already obviously indicated, the Japanese government has indicated that if this is successful, it's something that they'll share on a worldwide basis. I don't know how they would do that if they would still with the profit motive would be the overarching consideration that Fujifilm would make money on this or the government just subsidizes the distribution of the drug, not just in Japan, but maybe on a worldwide basis. Japan is certainly rich enough to do that, but I don't know what strategy they're going to take, if indeed this drug does have a beneficial effect. And one other thing too, Jay, I wanted to let you guys know is that the U.S. Embassy also has been very quiet other than issuing kind of general warnings. A couple of days ago through the consulate, I received a video from the U.S. Embassy and it actually was quite strong, surprisingly so. So basically it was recommending that all Americans leave Japan, that the infection rate is increasing and there's no telling how high it will get, that for the safety of American citizens, the embassy is now strongly recommending that everyone return home. They think that if you don't go home in the near term, you could be stuck in Japan for what they call an indefinite period of time. They also faulted Japan for not really knowing how many people are infected in this country because they have not carried out a very rigorous testing regime. So the testing that they've done basically in Japan has only been people who they already know are sick. That's the strategy that they've used from the beginning when the coronavirus began to grow in this country. So the embassy is saying indirectly that these numbers that are reported, the 4,000 cases, could be totally underplaying the actual number of people in Japan that are infected and that for that reason they're highly recommending that Americans return home. They also said a risk factor is that it may be that there is no way for you physically to leave Japan. So they quoted in the announcement that the post-pandemic flights from Japan to the United States are now at 11%. So 89% of all flights between the two countries are now canceled. So it may be at some point it will be 100% of all flights between the two countries are canceled and there wouldn't be a way physically for you to leave Japan to get back to the United States. So that I thought was interesting that for a long time again they didn't really say anything, they were neutral about it precautionary and wash your hands and no large groups that kind of information which everybody knows anyway. But a couple days ago they decided to have a much sharper pointed message and actually placed some blame on the Japanese government for not testing rigorously from the beginning to try and mitigate the number of infections in this country, which is true. That is true. Because we have had terrible testing in this country, we still do. We don't have it and we don't have a test to find out. So I find that remarkable. I find that highly ironic. It's a pot calling the kettle black. I don't understand why the United States will say that. Certainly. Certainly yet there were responses from the FCC. Yeah. You're criticizing Japan for not testing. Who's number one in terms of infections? What's the epicenter right now? But anyway, usually they're very neutral. They're all diplomats, right? And they generally don't criticize the government in that way. But I guess they were moved to do that maybe for the other concern for the safety of Americans that are here in Japan and trying to emphasize, hey, look, the infection rate may be way higher than what the Japanese government is reporting, which is probably the case, Jay. It's probably the case in the U.S. Also. Yes. Probably the case in the U.S. Yes, I agree. I want to ask you one last question. How are things doing at Kansai Gada University? You were going to send students home, which meant in some cases back to the U.S., and you were going to continue the classes in the spring by remote using Zoom. How has that worked out? Yeah, about 60% of our students have returned. So about 40% are still in Japan. Some schools in the United States are now mandating that their students have to return because how bad the situation has gotten in the United States. I'd say this grand experiment with what we now call Zoom University. Everybody's in Kansai Gada or University of South Florida. We're all in Zoom University now. For the most part, it seems to be working. We did this because we wanted to preserve the credits for the students so they didn't lose a semester. But we do have some students that have disappeared. I don't know what the number is, but off the top of my head I'd say probably 20% are not responding. Either they're back home and their situation is so bad there that they're not keeping up with their classes. We actually have some students that are still in Japan that are not checking in with the professors that are not responding to email and so forth. So there is some loss around the edges in terms of engagement with the students. So I don't have the hard numbers on this, but for the most part it seems to be working and the students seem to be happy that we're offering them this way to gain credit. But we are losing a certain percentage of students that are just withdrawing because they're overwhelmed by this or maybe they discovered something else more interesting to do while they're still here in Japan and carry out in the classes. That's a possibility. Very important that we catch up with you. Very good to talk to you, Steve. I certainly want to follow what happens in Japan going forward and I look forward to talking with you a couple of weeks hence and see how all of these threads are coming out and I know there'll be surprises one way or the other. So all I can say to you is stay well and to the extent you can. Stay home and off the trains, okay? Yes. Yes, thank you, Jay. Good to see you. You take care as well. You look very healthy. You look like you're doing fine. I'm glad to see that. So do you, Steve. Stay that way. Thank you. Okay.