Japan scraps pacifist postwar defence strategy to counter China threat
Tokyo to acquire counter-strike capabilities under national security strategy that seeks assertive regional role
Japan will overturn six decades of postwar security policy and arm itself with one of the world’s largest defence budgets to counter “an unprecedented and the greatest strategic challenge” posed by China’s rising military aggression.
In a new national security strategy released on Friday, its first in almost a decade, Tokyo laid out its ambitions to play a more active role in regional security, saying it would “achieve a new balance in international relations” by working more closely with the US and its allies to achieve “a free and open Indo-Pacific”.
“Japan’s security environment is as severe and complex as it has ever been since the end of [the second world war],” the strategy, which will be executed over the coming decade, said. “We will fundamentally reinforce defence capabilities as the last guarantee of national security.”
Under Prime Minister Fumio Kishida, Japan has adopted a more aggressive stance in forging deeper security ties with allies beyond the US, particularly after Russia’s invasion of Ukraine highlighted the risk of a similar conflict in Taiwan.
But its decision to acquire counter-strike capabilities, outlined in three critical security-related documents presented on Friday, marks Japan’s most significant departure from the pacifist stance grounded in its war-renouncing constitution and is likely to draw a strong response from China.
“One year ago, it would have been unthinkable for Japan to possess the capability to directly attack another country’s territory or to secure a budget to acquire such capability,” said Tetsuo Kotani, senior fellow at the Japan Institute of International Affairs. “By witnessing the invasion of Ukraine, the general public began to have a more realistic view of our security issue and it made it easier for the government to take action.”
Over the next five years, Tokyo plans to spend ¥43tn ($313bn) to strengthen its defence capabilities, bringing military expenditure to roughly 2 per cent of its current gross domestic product, matching Nato’s target for member states. Since the 1960s, Japan has maintained a self-imposed cap on military spending of about 1 per cent of GDP.
The budget includes ¥5tn to buy Tomahawk cruise missiles from the US, expand the range of its domestic surface-to-ship cruise missiles and develop hypersonic weapons, according to the medium-term defence programme. Another ¥3tn will be spent on enhancing integrated air and missile defence capabilities, including a radar upgrade for the Patriot missile system to counter hypersonic weapons.
Roughly ¥2tn will be allocated to strengthening Japan’s space and cyber defence capabilities, an area of weakness that US officials have repeatedly pressed Tokyo to address. It will create a 20,000-strong cyber team within the Self-Defense Force, as the country’s military is known, and the defence ministry to prevent cyber attacks before they occur.
The largest portion of the military spending, ¥15tn, will be designated to strengthening the SDF’s basic needs including ammunition stockpiles and fuel tanks, reflecting concerns that Japan’s armed forces will not have the capability to persevere in a prolonged conflict such as one over Taiwan.
In addition to expanding defence capabilities, Japan will also create a framework outside its official development assistance programme that will allow it to provide funding to strengthen maritime capabilities and military-related infrastructure in south-east Asian countries.
Noting rising concerns about stability in the Taiwan Strait, the strategy said: “China’s current external stance and military activities . . . present an unprecedented and greatest strategic challenge in ensuring peace and security of Japan and the peace and stability of the international community”.
It also said North Korea’s repeated missile launches and progress in its weapons capabilities posed “an even more grave and imminent threat to Japan’s national security than ever before”.
Even with an expanded budget, which is expected to be financed via tax increases, a large gap will remain between Japan and China in terms of military capability.
But Ken Jimbo, an international security expert at Keio University, said Tokyo’s counter-strike ability would complicate calculations for Chinese policymakers and Beijing’s operational capability if it were to invade Taiwan.
“The counter-strike capability is of course important for Japan’s own defence, but it will also significantly raise the costs for China if it were to attempt a change in status quo,” Jimbo said, adding that tensions with China, North Korea and Russia were likely to increase.
Herbert Diess to make comeback to corporate Germany as Infineon chair
Chipmaker picks former VW boss as chair of supervisory board
Chipmaker Infineon has picked Herbert Diess to chair its supervisory board, marking a swift return to a big German corporate role for the former head of Volkswagen.
Infineon said on Friday that two board members, including current chair Wolfgang Eder, would not seek re-election when shareholders next vote on February 16. That would make room for Diess and former Siemens executive Klaus Helmrich.
“Now is the right time for changes,” said Eder.
Infineon, whose largest customers are carmakers, has been one of the winners of the global shortage of semiconductors. Diess was ousted from VW in July after pressure from a labour union and shareholders over company strategy.
He became known for skirmishes with VW’s powerful works council and a strong enthusiasm for rival Tesla, which became a driver for his ambition to transform the world’s largest carmaker into an electric pioneer. The announcement of his new job comes as his successor, Oliver Blume, hosts his first annual meeting with VW investors in Berlin.
“[Infineon] increasingly plays a role as facilitator of the solutions for major, global tasks,” said Diess. “Accompanying Infineon on this journey is a tremendous motivation for me.” Diess previously served as a member of Infineon’s supervisory board between 2015 and 2020.
The German chipmaker last month raised its target for “long-term” average revenue growth from 9 per cent to 10 per cent, and announced that it was building a new plant in the eastern German town of Dresden to expand its 300-millimetre production capacities.
Chief executive Jochen Hanebeck is also new at the reins, having taken over from predecessor Reinhard Ploss earlier this year. He said Diess and Helmrich were “proven experts on the major topics that will determine the future of our business”.
Infineon’s share price, which has slumped 23 per cent in the past year, barely moved on the news on Friday.
Hedge funds raise bets against bitcoin miners
Sharp falls in the token’s price and the rising cost of energy prompt managers to short several key players
Hedge funds have been upping their short positions against shares of cryptocurrency miners, betting that more will go to the financial brink after the collapse of the FTX exchange.
With the bitcoin price down by nearly two-thirds this year and the cost of the power that miners require to fuel their energy-intensive computers having risen sharply, hedge funds are wagering that some companies’ business models are still far from viable.
Bearish investors have been betting that the implosion of Sam Bankman-Fried’s FTX will further deepen the malaise for a corner of the crypto market that expanded rapidly last year, often with borrowed money, in the hope of cashing in on high prices of tokens like bitcoin.
Miners, which use a network of powerful computers to solve cryptographic calculations in return for new tokens, face the constant need to upgrade their technology and are also highly dependent on the price of the cryptocurrencies they sell.
“Because crypto is trading vastly below where it was before, and they [miners] have a lot of expenses, it’s not clear they will ever be able to turn a consistent margin,” said Chris Crawford, chief investment officer at Crawford Fund Management in Boston, which runs a hedge fund for Eric Sturdza Investments and has been shorting some crypto miners. Shorting means betting that prices in the future will be lower.
Short interest in US group Marathon Digital, one of the largest US listed miners, rose sharply again last month to more than 36 per cent of the outstanding shares in the weeks after FTX collapsed, according to data from Nasdaq.
Last year Marathon paid its former chief executive Merrick Okamoto just under $220mn in stock. This was driven by awarding him shares based on the company’s market capitalisation, which is heavily influenced by the bitcoin price. And in October this year it paid him $24mn to settle a dispute over previous stock awards.
The company has repeatedly been lossmaking. This year it has fallen well short of its own production targets set last year of mining 55 to 60 bitcoin a day and predictions of generating mining profits of between $86.5mn and $103.6mn a month.
Investors had already swelled their bets on Marathon in the past year and have been rewarded as the company’s shares have plummeted 86 per cent.
Funds have also more than doubled their bets against Stronghold Digital Mining — whose shares are already down 96 per cent this year — to nearly 10 per cent of the shares since the start of the year.
Short interest in Greenidge Generation has risen from less than 1 per cent to 4.7 per cent, while Hut 8 Mining and Riot Blockchain, the largest US listed operator, have also attracted more attention from short sellers this year.
Already hard hit by the bear market in risky assets this year, crypto prices fell further last month following the dramatic failure of FTX, which was once valued at $32bn, and whose former chief executive Sam Bankman-Fried was arrested in the Bahamas this week after US government prosecutors filed criminal charges.
“The profitability of miners is a discussion that comes up every time bitcoin is down — and then perceived as a problem for all crypto,” said Anders Kvamme Jensen, co-fund manager of the AKJ Digital Assets fund.
“Bitcoin mining misses the whole point behind digital assets: the goal, after all, is to decouple from the traditional world and all its players, and not go in reverse by camping out on the power grid,” he added.
>>> Up
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Exclusive Look Inside the World’s Skinniest Skyscraper
On the famed Billionaire’s Row, SHoP Architects and Studio Sofield have delivered on a long-awaited promise
Despite being the world’s skinniest skyscraper, New York’s newest tower is still shaking up Midtown Manhattan in a big way. Located at 111 West 57th Street, the residential skyscraper cuts straight through the sky with an astounding height-to-width ratio of 24:1. Though some residents moved in last April, the full suite of amenities and additional units were still under construction until now, when JDS Development Group and Property Markets Group announced that the monumental building was finally completed.
The tall, slender tower is surely the first thing passersby will see, but 111 West 57th Street is actually a two-part building: the original landmarked Steinway Hall—a Warren & Wetmore–designed home to Steinway & Sons piano company—and the new high-rise by SHoP Architects, which some also call Steinway Tower. Both house sprawling residences: There are 14 in the landmarked 1925 building and 46 full-floor and duplex residences within the tower.
With the collaborative effort of developers JDS Development Group and Property Markets Group; SHoP Architects designing the exterior; and AD100 architects Studio Sofield taking on the interior architecture, 111 West 57th Street is like a monument for impressive design. In addition to holding the record for skinniest skyscraper, the building is also the second tallest residential building in the Western Hemisphere, reaching a whopping 1,428 feet high, including a 300-foot decorative steel crown.
“The completion of 111 West 57th Street is a testament to the design and ingenuity that can only be achieved by collaborating with today’s most extraordinary designers, artisans, construction, and sales teams,” Michael Stern, founder and CEO of JDS Development Group, said in a statement. “Every aspect of this development has been meticulously conceived to achieve a delicate balance that pays homage to the classic skyscrapers of Manhattan’s past while also setting a new standard for the future.”
An appetite for boldness is obvious in New York City—it’s part of what makes the energy and ambition unparalleled in the US metropolis—and it’s a sentiment that is clearly displayed in the city’s architecture. Steinway Tower is no exception in this. From afar, the new building looks almost futuristic, but the architects—both SHoP and Studio Sofield—wanted to reference Manhattan’s prewar Golden Age wherever they could. “I have my romantic memory of old New York,” Sofield tells AD.
On the exterior, each section of the building is paired with a layer of terracotta pilasters that don both the east and west facades of the tower, giving it that glamorous late-19th-century feel without overdoing it. Further, JDS Development Group restored much of the Steinway Hall building originally designed in the 1920s. The facade and instantly recognizable rotunda were restored in collaboration with the Landmarks Preservation Commission of New York, and it will be connected to the new tower by way of a sweeping central lobby.
On the inside, Studio Sofield took inspiration from the original Steinway Hall. For the block-long entry, William Sofield enlisted New York artisans such as John Opella and Nancy Lorenz to create what he describes as “a series of emotional experiences” that are informed by the New York skyscrapers of the past.
“Reuse gives new life to historical fragments,” Sofield adds, explaining that, when possible, he would find ways to reimagine parts of Steinway Hall into the development. For example, the building’s lobby makes use of end-grain wood flooring that was “rescued from the original piano loading docks.” Other old-world details include an ornamental chandelier in the amenity space reproduced from an original design that once hung in Steinway Hall. The residences also take a cue from classic home layouts and feature elements such as formal dining rooms with coved-wall sitting areas, solid oak floors, spacious galleries, and stepped panel doors.
Additionally, the AD100 designer found moments to infuse little easter eggs into the history-making property, should you know where to look. “There are the lilies of the valley, my mom’s favorite flower, with rock crystal bells that sway like my favorite curtains at the Seagram Building,” he says. All of the New York landmark buildings—like The Whitney or Saint Patrick’s—can be seen in bas-relief throughout the property.
While the design may be a tribune to old New York, the amenities are all about modern living. They feature an 82-foot-long two-lane swimming pool surrounded by private cabanas, sauna, steam room, double-height fitness center with its own mezzanine terrace, private dining room, and a chef’s catering kitchen, residents’ lounge boasting an expansive terrace, and a dedicated concierge service. “My world is equal parts legacy and imagination, a place where architecture and opera collide,” Sofield says. “Yes, there are bits of the past, but they are always used in modern ways.”
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Sam Bankman-Fried’s Dirty Political Donations
FTX’s chief spent big on contributions. The recipients have some explaining to do.
Celebrity crypto savant Sam Bankman-Fried is in a heap of trouble. The FTX founder was arrested this week on federal fraud charges. But he can’t be the only one sweating. Washington has its own giant FTX problem, in what now appears to be millions of dollars in dirty donations. It’s a donor scandal for the ages, and yet politicians are mum on what they intend to do about it.
The country is learning more about FTX’s spectacular collapse, including the allegation that SBF stole billions from customers to prop up a side venture, Alameda Research. But the Beltway zinger can be found in a civil complaint from the Securities and Exchange Commission. The SEC explains that FTX customer funds were diverted to Alameda to the extent that there was “no meaningful distinction,” and that SBF then used these “commingled FTX customers’ funds” to make “large political donations.” Put simply, SBF stands accused of using stolen money to fuel politics.
And not little donations. According to OpenSecrets, SBF came in as the sixth-largest donor overall in this midterm cycle, and the second-largest donor to Democrats. Only George Soros gave more. SBF dumped close to $40 million into political-action committees, outside groups and individuals.
That’s not all. Individuals associated with FTX and its affiliates contributed some $70 million this cycle. They include executives Ryan Salame (at $20 million, the 14th-largest donor this cycle) and Nishad Singh ($8 million, 31st-largest). Given that both received sizable loans from Alameda, it’s possible all the FTX political donations are criminally tainted.
The complaint suggests those donations were made at the expense of thousands of FTX customers—including smaller investors—who are now at risk of not getting their money back. The SEC says that among other things it wants a “disgorgement” of SBF’s “ill-gotten gains.” The natural follow-on question: When will political outfits return their ill-gotten donations to aid in compensation?
Some of the money is gone forever. A sizable portion of SBF’s political spending (some $28 million) went into his own hybrid committee, the Protect Our Future PAC, which played in Democratic primaries. Who knows how different the political landscape might look now if these funds hadn’t been tipping the scales in races. Good thing Washington remains obsessed with Russian meddling in elections.
SBF gave money to 50 Democratic House and Senate candidates and eight Republicans, and several have already announced they’ll direct their donations to charity. But dumping cash into a lefty charity hardly helps to make FTX customers whole.
As for the recipients of large donations, don’t expect a rush to write checks given the sheer numbers involved. SBF donated $6 million to the House Majority PAC, an outside group affiliated with Speaker Nancy Pelosi. That was one of the largest donations this cycle to that entity—which, according its most recent federal disclosure report, has $490,000 in cash on hand.
FTX execs gave an additional $3 million to the Senate Majority PAC, $2.25 million to Women Vote! and more than $1 million to the LGBTQ Victory Fund. There were also donations to the Democratic National Committee, the Democratic House and Senate campaign funds, and state Democratic parties. And that’s only this cycle. SBF in 2020 gave more than $5 million to the elect-Biden effort.
Not that Republicans aren’t also in the hot seat. While SBF’s declared donations are primarily to Democrats, Mr. Salame turned up this cycle as a GOP megadonor. Much of his money (at least $13 million) also went into his own vehicle—American Dream Federal Action—which engaged in GOP primaries. Again, that’s gone. There’s also $2 million to the GOP’s Congressional Leadership Fund, $2.5 million to its Senate Leadership Fund, and additional money to GOP candidates, state parties and outside groups. SBF recently suggested he made his own sizable, undeclared donations to Republican-affiliated groups.
The media has reported some details, and a few are now starting to ask recipients what they intend to do about the political liability. Remarkably, top political outfits are stonewalling. While the court case will lay out more of the technicalities of commingling, that’s now almost beside the point—FTX is already toxic. And Washington already has egg on its face, given revelations about FTX lobbying on potential crypto regulation.
Political outfits can fairly claim they didn’t know about FTX indiscretions when they accepted the donations (even if there may be a lesson here in the wisdom of banking sums from overnight billionaires). Still, they know now. Time to explain how they plan to make it right