TIME China

China May Be Heading for a Japanese-Style Economic Crisis

CHINA-ECONOMY-PROPERTY
A man walks past a construction site in Beijing on May 30, 2014. After years of boom that have seen prices rocket, the prospect of a bust is looming over China's vast property sector. WANG ZHAO—AFP/Getty Images

Beijing is pursuing policies similar to those Tokyo did before Japan tumbled into financial meltdown

The economic system East Asian policymakers have put in place over the past 60 years has had both spectacular successes and equally spectacular failures. On the positive side, the “Asian development model,” as it is often called, generated what is probably the greatest surge of wealth in human history, wiped out poverty on an unprecedented scale and built industries at a spellbinding pace. On the downside, however, the model — by effectively subsidizing investment — also produces dizzying levels of debt, burdensome excess capacity and enfeebled financial sectors. That has resulted in severe financial crises, like the one suffered by 1990s Japan (the inventor of the Asian development model), from which it has still not fully recovered.

China, too, has followed this same model. In fact, Beijing has put it on steroids, by adding in a degree of state control that the Japanese would never have dreamed up. So that begs the obvious question: Will China face the same fate as Japan?

Strategists Naoki Kamiyama and David Cui at Bank of America-Merrill Lynch say the answer could be yes. “China’s development unfortunately has largely followed the script written by Japan some 30 years ago,” they wrote in a new report. As a result, “China today is facing many similar problems Japan did in the late 1980s and early 1990s — imbalanced growth, government stimulus, overcapacity, an overwrought housing market, and a severely under-capitalized financial system.”

Beijing today, the report contends, is creating these similar conditions by making similar policy mistakes Tokyo did more than 20 years ago. The Asian development model made both economies highly dependent on investment and exports for growth. In the 1980s, when Japanese exports struggled due to a stronger yen and slower global growth, Tokyo tried to keep the system going by flooding the economy with cheap credit. That led, ultimately, to an asset-price bubble.

Beijing has walked the same path. In response to the downturn following the 2008 financial crisis, China pumped up credit at home to offset the collapse of external demand. That held up growth rates, but also led to a scary spike in debt levels, excess capacity, and a surge in the property market. Kamiyama and Cui also contend that Chinese policymakers are repeating the errors their Japanese counterparts made to solve these problems. In Japan, the central bank hiked interest rates to control asset prices, producing a bust in the property market and blowing a hole in the balance sheets of Japanese banks. Then the government was too slow in acknowledging the extent of the problem. China is doing the same. The central bank has been tightening monetary policy to rein in property prices. The Merrill strategists fear that that decision is bursting China’s property bubble. “It appears that the property market seems to be tipping over,” they wrote.

Going further, Kamiyama and Cui make the case that the situation in China is more dangerous than it had been in Japan. “It appears to us that the problem facing China today may be more serious than Japan’s in the late 1980s and early 1990s,” they write. “China’s growth was more imbalanced, its reliance on external demand was heavier, the government’s monetary policy in response to the external demand shock was looser, debt growth was faster, over-capacity was worse, and asset price appreciation had been just as rapid.”

That means, they believe, that the consequences for the financial system in China could be more severe as well. “We suspect that China’s (nonperforming loan) ratio could be higher than Japan’s,” they forecast. “Japan’s reached over 8% some 10 years after the property bubble burst. In fact, judging from past experience in China, we could argue that the ultimate NPL ratio could be significantly into double-digit.”

The Merrill strategists also worry that China’s leaders aren’t taking the action to necessary to confront these problems. They believe the banks need to be given a boost of fresh capital to strengthen and prepare them for an onrush of bad loans, but they aren’t optimistic that Beijing will take such a step anytime soon.

On that point, they appear spot on. China’s leaders seem to be quite content with the current pace of reform in the country. Chinese Premier Li Keqiang told business leaders at the World Economic Forum in Tianjin on Wednesday that “the reform measures we have taken are good for now and make a hard landing less possible.” But there is a growing chorus of voices that argue the pace of reform in China is simply too slow. Jörg Wuttke, president of the European Union Chamber of Commerce in China, complained on Tuesday that even though China’s new leaders “have recaptured some of the necessary reform zeal … it’s now time that China’s leadership walks the talk.”

The fact is that China’s new leaders, for all of their bold statements, have done little to change the basic nature of the Chinese economy. It has been nearly two years since President Xi Jinping and his team began to take the country’s helm, and almost a year since an important party plenum unveiled a much-heralded policy document that promised sweeping change. But beyond some intriguing experiments — a few new private banks have got the greenlight, and there have been some preliminary steps to reform state-owned enterprises—there has been almost no progress towards making the Chinese economy more market-driven and more capable of fairly allocating resources and financing.

A much-touted free-trade zone in Shanghai, launched a year ago as an experiment in freer capital flows, has barely gotten off the ground. In some areas, policymakers seem to have moved backwards—most notably in market opening. The business environment appears to have become more nationalistic. Government agencies, for example, are widely perceived as wielding an anti-monopoly law against foreign companies to an unfair degree. The U.S. Chamber of Commerce recently complained that China’s anti-monopoly actions “often appear designed to advance industrial policy and boost national champions.”

There should be, at this stage, real concern about the ability or will of President Xi, Premier Li and their policymakers to undertake the fundamental reconstruction of the Chinese growth model necessary to avoid a Japan-style economic crisis. The Merrill study just provides more evidence that China is repeating the same mistakes and suffers from the same flaws of other economies that experienced financial crises. There will always be businessmen and economists who dismiss or downplay such concerns. These “panda huggers” argue that China is “different” and isn’t vulnerable to the same problems as other economies — that somehow the laws of economics don’t apply. But remember, that’s what experts used to say about Japan too.

TIME China

Majority of Chinese Expect War With Japan by 2020, Poll Finds

Anti-Japan Protests Erupt In China
Anti-Japan protesters are confronted by police as they demonstrate over the disputed Diaoyu/Senkaku Islands on Sept. 16, 2012, in Shenzhen Lam Yik Fei—Getty Images

About 53% of Chinese respondents expect war to break out between the two countries before the end of the decade, a new survey found

More than half of China’s citizens expect their country to be at war with Japan in as little as six years, according to a new public opinion poll that finds a widening sense of mistrust and hostility between the two countries.

About 53% of Chinese respondents and 29% of Japanese respondents expected a war to break out by the year 2020, according to a joint survey conducted by newspaper China Daily and Genron, a Japanese NGO.

Each country’s favorability rating of the other remained at historic lows: 93% of Japanese respondents reported having a negative impression of China, the worst rating in the survey’s decadelong history, while 87% of Chinese responded negatively to Japan, a slight decrease from last year’s record high.

Tensions between Japan and China flared in 2013 over disputed islands in the East China Sea, and diplomats from both countries accused one another of behaving like “Voldemort,” the evil wizard from the Harry Potter fame. The rhetoric has cooled slightly since then, but public resentment evidently is still running deep.

TIME Video Games

Some Pretty Tough News About the Xbox One’s Japan Launch Sales

No one's surprised that Microsoft's latest game console isn't doing so hot in the Land of the Rising Sun.

Tell me you weren’t expecting something like this: Xbox One sales in Japan, where the console just launched on September 4, are bad. Make that really bad.

According to Japanese game mag Famitsu, Microsoft’s games console sold just 23,562 units during its first four days on the market, September 4-7. Contrast with the Japanese Xbox 360 launch back in December 2005, which sold 62,135 units in half as many days, or the original Xbox in February 2002, selling 123,929 during its launch weekend.

Sony and Nintendo game systems have historically sold better in Japan, so it’s no surprise that figures for their respective launch windows are much higher: Sony’s PlayStation 4 sold 322,083 units during its first two days on the market (in November 2013) and the Wii U moved 308,570 units during its initial two days of availability (in November 2012). In Japan, that makes the Xbox One one of the most poorly launched mainstream game consoles on the books (the best remains the PlayStation 2, which hit 630,552 units sold during its preliminary weekend).

Microsoft’s original Xbox sold fewer than half a million units in Japan over the course of its life, and the Xbox 360’s only fared slightly better: presently somewhere north of 1.6 million units sold in the country. Nintendo’s Wii U–no trailblazer itself sales-wise–just crept past Microsoft’s nine-year-old system in units-sold last February.

Titanfall topped the charts with 22,416 units (nearly as many sold as systems moved, in other words), followed by Kinect Sports Rivals (14,191 units) and Dead Rising 3 (7,330 units).

By contrast, the Xbox One, while presumably behind Sony’s PlayStation 4 in worldwide sales given Microsoft’s reluctance to publicly lock horns with Sony sales-figure-wise, has sold in record numbers (relative to prior Xbox systems) in the U.S. At last check, back in April, the Xbox One had sold 5 million units across the globe, and it’s launching in 29 new markets this month. None of them immediate game changers, but it’s a significant shoring up of the availability gap between the Xbox One and the more broadly available PlayStation 4.

On September 4, Microsoft’s Aaron Greenberg weighed in on the company’s reluctance to publish worldwide sales figures:

He’s talking in part about Halo: The Master Chief Collection (strictly rehash, but all four Halo core games fully remastered and immaculately packaged) and racer Forza Horizon 2. Microsoft’s been hyping Sunset Overdrive, an irreverent third-person shooter by former Sony-exclusive studio Insomniac Games (the Ratchet & Clank and Resistance games), so there’s that, and maybe Ori and the Blind Forest, a platformer that’s arguably the most interesting of the bunch, but it’s not yet a lock for 2014.

TIME tennis

Cilic Tops Nishikori at U.S. Open for 1st Slam Title

Marin Cilic
Marin Cilic of Croatia holds up the championship trophy after defeating Kei Nishikori of Japan in the final match of the 2014 U.S. Open tennis tournament in New York City on Sept. 8, 2014 Mike Groll—AP

Croatia's Cilic won his first Grand Slam title by beating Japan's Kei Nishikori 6-3, 6-3, 6-3

(NEW YORK) — Unable to play in the U.S. Open a year ago because of a doping suspension, Marin Cilic is now the tournament’s champion.

Croatia’s Cilic won his first Grand Slam title by beating Japan’s Kei Nishikori 6-3, 6-3, 6-3 on Monday at Flushing Meadows, using 17 aces — including four in one game — and the same powerful groundstrokes that helped him eliminate Roger Federer in the semifinals.

“This is (from) all the hard work in these last several years — and especially this last year,” Cilic said during the on-court ceremony, when he kissed his silver trophy and collected a check for $3 million.

The 14th-seeded Cilic prevented the 10th-seeded Nishikori from becoming the first man from Asia to win a major singles championship.

“Tennis has not been our biggest sport in Japan,” Nishikori said. “Hopefully I can win next time.”

There hadn’t been a matchup between players making their Grand Slam final debuts at the U.S. Opensince 1997. Lopsided and lasting less than two hours, this hardly qualified as a classic.

“Both of us were pretty nervous in the first set, especially,” Cilic acknowledged. “When we got ourselves going, it was a bit better.”

Nishikori stunned No. 1 Novak Djokovic in the semifinals, and this was the first Grand Slam final since the 2005 Australian Open without Djokovic, Federer or Rafael Nadal, who won the U.S. Open in 2013 but is sidelined now by a wrist injury. That trio had won 34 of the past 38 major titles, but this was the second of this season that eluded them.

Some, including Cilic, had seen Stan Wawrinka’s victory at the Australian Open in January as an indication that the next tier was about to get a crack at the hardware.

Twelve months ago, Cilic missed the U.S. Open while serving a four-month ban after testing positive for a stimulant at a tournament in Germany in May 2013. The International Tennis Federation initially sought a two-year punishment, but Cilic wound up with a shortened suspension on appeal. He said he ingested the substance unintentionally via a glucose tablet bought at a pharmacy and calls the process that led to his penalty unfair.

Cilic, whose only previous trip as far as the semifinals at a major came at the 2010 Australian Open, used the forced break from competition to improve his game. And that work was on full display the past two weeks — particularly Monday, under thick gray clouds and in a strong breeze.

The 6-foot-6 (1.98-meter) Cilic, who is 25, and the 5-10 (1.78-meter) Nishikori, 24, each is coached by a guy with a Grand Slam title: 2001 Wimbledon champion Goran Ivanisevic, the last Croatian man to win a major, works with Cilic; 1989 French Open champion Michael Chang is one of Nishikori’s two coaches.

“My team has brought something special to me, especially Goran,” Cilic said. “The most important thing that he brought to me was joy in tennis, and always having fun. And I think I enjoyed my best tennis ever here and played the best ever in my life.”

The Arthur Ashe Stadium artificial lights were on and the stands were mostly empty when the players walked out to the court at 5 p.m. — which was 6 a.m. in Japan, but did not prevent folks there from gathering to watch the popular Nishikori on TV.

One indication of how far these two men have come: Their two previous U.S. Open meetings were in the second round in 2010, won by Nishikori, and the third round in 2012, won by Cilic.

This time, there was never really any intrigue.

Cilic won 19 of the last 20 points he served in the opening set, helped by three aces at up to 134 mph (216 kph). The biggest problem for Nishikori, really, was there were not many extended groundstroke exchanges — and even when there were, he tended to lose them.

He was off, whether because of the wind, the accumulated fatigue from a pair of four-hour-plus victories over No. 3 Wawrinka and No. 5 Milos Raonic, or perhaps knowing what was at stake for him, his country and his continent. Cilic wound up with twice as many winners, 38-19.

“I guess Kei didn’t feel it today,” said Dante Bottini, who helps Chang coach Nishikori.

Nishikori only broke once, in the second set, and Cilic broke right back. In the third set, trailing 4-2,Nishikori had three other break points. But one was erased by an ace and on the others, Nishikori slapped second-serve returns into the net — an escape Cilic would later call “lucky.”

But good fortune is not all Cilic credited for his career-defining triumph.

“For all the other players working hard, this is a big sign, a big hope,” Cilic said, “that if you’re working hard, things are going to pay off.”

TIME Innovation

Five Best Ideas of the Day: September 3

1. Russia’s power play could be the best way to reinvigorate NATO.

By John Cassidy in the New Yorker

2. Why India and Japan need each other – badly.

By Michael Schuman in Time

3. One way Congress can speed things up for the Foreign Service – appoint career ambassadors en masse.

By David Ignatius in Washington Post

4. Labor unions in decline are no longer assimilating immigrants, counteracting racial inequality or equalizing incomes.

By Justin Fox in the Harvard Business Review

5. Congress must debate and vote on our growing military involvement in Iraq.

By Mickey Edwards and David Skaggs in the Los Angeles Times

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

TIME Japan

Japanese Prime Minister Selects 5 Women in New Cabinet

Japan's Prime Minister Abe walks into the Prime Minister's official residence in Tokyo
Japan's Prime Minister Shinzo Abe walks into his official residence in Tokyo on Sept. 3, 2014 Yuya Shino—Reuters

PM Shinzo Abe has set a goal of having women in 30% of leadership positions by 2020

(TOKYO) — Japan’s prime minister picked a record-matching five women for his Cabinet Wednesday, sending the strongest message yet about his determination to revive the economy by getting women on board as workers and leaders.

Prime Minister Shinzo Abe has set a goal of having women in 30 percent of leadership positions by 2020, and proved he is out to practice what he preaches in his selection for the 18-member Cabinet, which includes Yuko Obuchi, daughter of a former prime minister, as the trade and economy minister.

Having five women in the Cabinet is extremely rare for Japan, and is the record number set in 2001. The previous Cabinet, dissolved earlier in the day, had two women ministers.

Abe has stressed that his policies of economic growth, dubbed “Abenomics,” center around utilizing the talent of women and empowering them, or so-called “womenomics.”

Since he took office in late 2012, the world’s third-biggest economy after the U.S. and China has been on a recovery track, with stock prices rising and major companies’ earnings improving.

Several top ministers were retained, such as Fumio Kishida as foreign minister and Taro Aso as finance minister, both men.

Although holding ministerial positions are in some ways ceremonial in Japan — where government affairs are largely run by professional bureaucrats, who stay on regardless of new ministers — expanding the presence of women in a place as high-profile as the Cabinet is a victory for sexual equality in Japan.

The Geneva-based World Economic Forum ranked Japan 105th in last year’s Global Gender Gap Report, which measures economic equality and political participation. Iceland was No. 1, followed by the Scandinavian nations. Germany was 14th and the U.S. 23rd.

In the U.S., President Barack Obama has three women in Cabinet positions. Women make up about half the ministers in France.

Women make up 3.9 percent of board members of listed Japanese companies, versus 12 percent in the U.S. and 18 percent in France, according to the Organization for Economic Cooperation and Development.

Abe risked offending the long line of powerful men in his ruling party, who had been waiting to get their promotions. Some experts say provoking such anger can weaken Abe’s grip on power and can even endanger his own position.

Among the women appointed were Midori Matsushima, a former trade and economy minister, as justice minister; Sanae Takaichi, another former trade and economy minister, as minister of internal affairs and communications; and Eriko Yamatani as minister in charge of Japanese abducted by North Korea, an area she has been active in the past.

A woman was also tapped to be minister in charge of promoting women, Haruko Arimura. All five are legislators.

TIME Thailand

Surrogate Offers Clues Into Man With 16 Babies

Thailand Baby Mystery
Thai police display pictures of surrogate babies born to a Japanese man who is at the center of a surrogacy scandal during a press conference at the police headquarters in Chonburi, Thailand, on Aug. 12, 2014 Sakchai Lalit—AP

"The agent told me it was for a foreign couple"

(BANGKOK) — When the young Thai woman saw an online ad seeking surrogate mothers, it seemed like a life-altering deal: $10,000 to help a foreign couple that wanted a child but couldn’t conceive.

Wassana, a lifetime resident of the slums, viewed it as a nine-month solution to her family’s debt. She didn’t ask many questions.

In reality, there was no couple. There was instead a young man from Japan named Mitsutoki Shigeta, whom she met twice but who never spoke a word to her. This same man — reportedly the son of a Japanese billionaire — would go on to make surrogate babies with 10 other women in Thailand, police say, spending more than half a million dollars to father at least 16 children for reasons still unclear.

The mystery surrounding Shigeta has riveted Thailand and become the focal point of a growing scandal over commercial surrogacy. The industry that catered to foreigners has thrived on semi-secrecy, deception and legal loopholes, and Thailand’s military government is vowing to shut it down.

Wassana’s story, which she shared with The Associated Press on condition that her last name not be used to protect her family and 8-year-old son from embarrassment, offers clues into an extraordinarily complex puzzle that boils down to two questions: Who is Shigeta and why did he want so many babies?

Shigeta is being investigated for human trafficking and child exploitation, but Thai police say they haven’t found evidence of either. The 24-year-old, now the focus of an Asia-wide investigation, has said through a lawyer that he simply wanted a big family.

He has not been charged with any crime and is trying to get his children back — 12 are currently in Thailand being cared for by social services. His whereabouts are unknown; he left Bangkok after police raided his condominium Aug. 5 and discovered nine babies living with nine nannies. Police say he sent DNA samples from Japan that prove he is the babies’ father.

Key to unraveling all of this are the women Shigeta paid to bear his children. And Wassana, whose account has been corroborated by police, was his first.

___

AN ANSWER TO EVICTION

Wassana’s Bangkok is not the city of skyscrapers and spas that most visitors see. The petite, soft-spoken 32-year-old with a ninth grade education has spent her life in a trash-strewn slum, scraping by selling traditional Thai sweets from a food cart and sharing a mildew-stained tenement with seven relatives. At $6 a day, it was affordable until her late father’s medical bills drained the family’s savings. They couldn’t pay rent for a year and faced eviction.

So when her sister stumbled upon an ad seeking surrogates in 2012, Wassana didn’t hesitate.

“I thought that any parents who would spend so much money to get a baby must want him desperately,” she says. “The agent told me it was for a foreign couple.”

She assumed it was customary to keep the biological parents’ identities confidential. In a country where deference to authority is expected — especially for poor, uneducated women — she didn’t probe.

She wondered, though, who the baby’s mother was.

“I don’t know if the doctor used my eggs or another woman’s,” she says. “Nobody told me.”

During the pregnancy, she developed pre-eclampsia, a condition that causes dangerously high blood pressure. She was rushed into the delivery room two months early and on June 20, 2013, she underwent a cesarean section, giving birth to a boy. Wassana’s family came to visit, but, she says, Shigeta did not.

The infant was placed in an incubator and after six days, Wassana returned home. She’s not sure when the baby was released from the hospital to Shigeta’s custody.

Two months later, she finally met Shigeta for the first time at the New Life fertility clinic, which had posted the Internet ad.

He was tall, with shaggy, shoulder-length hair, and was dressed casually in jeans and a wrinkled, button-down shirt he left untucked. His lawyer had accompanied him to the meeting, where he and Wassana signed a document granting him sole custody.

He wasn’t personable. There was no “thank you” for carrying his child, she says. There was, in fact, no communication at all.

“He didn’t say anything to me,” she says. “He never introduced himself. He only smiled and nodded. His lawyer did the talking.”

___

PERJURY ALLEGATIONS

A month later, the same lawyer, Ratpratan Tulatorn, called and told her to go to the Juvenile and Family Court to finalize the custody transfer. Under Thai law, a woman who gives birth is the legal mother, and, if she is married, her husband is the legal father. A court approval is required to transfer custody, which experts say often involves perjury.

Police Col. Decha Promsuwan, who has questioned five of Shigeta’s surrogates, said several of the women told police Ratpratan had instructed them to tell the court they’d had an affair with Shigeta, resulting in a child their husbands did not want.

Ratpratan said he is no longer Shigeta’s attorney and declined to comment on the women’s statements, saying, “I don’t want to touch that point because it’s a legal matter.”

During the hearing, Shigeta told the judge he owned a finance company in Japan.

His story is being intensely followed in Japan despite legal threats against the press. After his case made headlines, a group of prominent lawyers sent letters warning Japan’s mainstream media not to report Shigeta’s name or the names of his family members, according to news organizations that received the letter.

However, several Japanese magazines and online publications have identified him as a son of Japanese tycoon Yasumitsu Shigeta, founder of mobile phone distributor Hikari Tsushin.

Yet even his heritage is shrouded in mystery. The company says it can neither confirm nor deny the father-son relationship, calling it “a personal matter,” and Thai police and Interpol say they are investigating his family ties. Multiple stock filings, meanwhile, show the elder Shigeta has a son named Mitsutoki and his company has a shareholder with the same name. The stock papers show that Yasumitsu’s child was born Feb 9, 1990, the same birthdate as the Mitsutoki Shigeta at the center of the surrogacy scandal, according to Thai media that published his passport page.

Yasumitsu Shigeta did not respond to a request for an interview and Mitsutoki Shigeta’s current lawyer did not respond to requests for interviews with his client, who has multiple addresses throughout Asia. Phone calls to a Hong Kong mobile number listed for the younger Shigeta went straight to voicemail, and he did not answer text messages. No one answered the bell at his Hong Kong condo, and the doorman said he could not recall ever seeing him there.

___

’10 TO 15 BABIES A YEAR’

In early August, barely a year after Wassana’s court date with Shigeta, she saw his face again — this time, on television. She almost didn’t recognize him; his hair was now neatly trimmed.

The Thai media was calling it the “serial surrogacy” case. It had broken just after another scandal involving an Australian couple who paid a Thai surrogate to carry twins, then left behind the one with Down syndrome.

Wassana was floored. What was happening?

Police wondered the same thing. So intricate was Shigeta’s quest for children that they crafted a flowchart to keep track of how he did it.

The 9-step diagram starts with Shigeta’s picture and traces the steps he took to get his babies, from hiring surrogacy clinics and nannies, to registering apartments in the infants’ names and completing legal paperwork required for birth certificates and passports. The deliveries were spread out at nine Bangkok hospitals.

Shigeta’s acquaintances offer varying accounts of his motives.

The New Life clinic, which is currently closed pending investigation, stopped working with Shigeta after two surrogates got pregnant and he requested more, said founder Mariam Kukunashvili.

Shigeta told New Life “he wanted to win elections and could use his big family for voting,” Kukunashvili said. “He said he wanted 10 to 15 babies a year, and that he wanted to continue the baby-making process until he’s dead.”

Kukunashvili said she reported his requests to Interpol in an April 8, 2013 fax to its French headquarters, but never heard back. Thailand’s Interpol office said it never saw the warning.

She rejected Wassana’s account that the New Life agent had portrayed the parents as a couple and withheld Shigeta’s identity.

“At New Life, surrogates are always informed fully and never treated this way,” she said.

The Medical Council of Thailand, meanwhile, spoke with Wassana’s doctor, Pisit Tantiwattanakul, before he closed his All IVF fertility clinic and emptied it of all patient files after the scandal broke. His whereabouts are unknown, but he has vowed to present himself for a police interview in early September.

Pisit told the council Shigeta said he had businesses overseas and wanted a large family because he only trusted his own children to take care of them.

Interpol has asked its regional offices in Japan, Thailand, Cambodia, Hong Kong and India to probe Shigeta’s background. Police say he appears to have businesses or apartments in those countries.

Japan has no law banning surrogacy, but the medical industry has issued orders against it that are strictly followed, which could explain why Shigeta flew to one of the few places in Asia where it is openly practiced. Since 2010, he has made 41 trips to Thailand and police say he traveled regularly to Cambodia, where he holds a passport and brought four of the babies. Cambodian police have refused to comment on the case.

One of the babies in Cambodia might be Wassana’s — a prospect that leaves her riddled with guilt.

“What if they’ve done something bad to the baby?” she says. “Did I deliver him to some terrible fate?”

Today, her own fate is uncertain. The money she received for bearing Shigeta’s child cleared the family debt but was not enough to drag them out of the slums. She still lives in the same derelict tenement.

She has held the boy just once, when Shigeta handed him to her briefly in court. But she told police that she would be willing to raise him if he is being mistreated.

“I thought he would be with a good family that would love him,” she says. “That’s what I thought.”

TIME India

Why India’s Modi and Japan’s Abe Need Each Other — Badly

India's PM Modi shakes hands with Japan's PM Abe during a signing ceremony at the state guest house in Tokyo
India's Prime Minister Narendra Modi, left, shakes hands with Japan's Prime Minister Shinzo Abe during a signing ceremony in Tokyo on Sept. 1, 2014 Shizuo Kambayashi—Reuters

The two Asian leaders are looking to strengthen ties during their meetings in Japan to counter a rising China

Cuddly is not an adjective that comes to mind when describing the Prime Ministers of either Japan or India. Shinzo Abe, like most Japanese politicians, often appears overly formal, while Narendra Modi has a reputation for being demanding and stern. But apparently the two feel warm and fuzzy about each other. Abe made the unusual gesture of welcoming Modi on his five-day official visit to Japan with an uncharacteristic hug. After that, the duo chatted over an informal dinner and strolled through a temple in the historic cultural center of Kyoto.

The leaders of Asia’s two most prominent democracies have good reasons to cozy up. Greater cooperation between India and Japan could prove critical in helping Abe and Modi achieve their economic goals at home and their strategic aims in the region — which means countering an aggressive China. That’s why the two have gushed about the importance of the India-Japan relationship. Modi said in a statement that his visit would “write a new chapter” in relations, while Abe in a Monday press conference said that their bilateral ties have the “most potential in the world.”

They have a lot of catching up to do. For economies of such size — Japan and India are the second and third largest in Asia, respectively — their exchange is still relatively small. Trade between the two reached only $15.8 billion in 2013 — a mere quarter of India’s trade with China. Japanese direct investment into India totaled $21 billion between 2007 and 2013, making Japan an extremely important investor for the country. But recently, the inflows have tapered off amid India’s economic slowdown. Over the past three years, Japanese firms have invested more in Vietnam and Indonesia than India.

That may be about to change. The fact is that the economic interests of the two nations dovetail nicely. Modi is looking to restart India’s slumbering economic growth by upgrading its woeful infrastructure, strengthening its manufacturing base and constructing a network of new “smart” cities across the nation — all of which Japanese money, technology and investment can help make a reality. Abe on Monday pledged $33 billion of financing and investment for India from public and private sources over the next five years. “Japanese trade and investment ties with India are set to strengthen significantly over the next decade and beyond,” Rajiv Biswas, Asia-Pacific chief economist for consulting firm IHS, predicted in a recent report.

Meanwhile, Abe is trying to jump-start a Japanese economy that has been stalled for two decades, and badly needs new sources of exports and revenue for ailing Japan Inc. India, with its 1.2 billion increasingly wealthy consumers and bottomless investment opportunities, can provide just what Japan requires. That is especially the case due to Tokyo’s souring relations with that other Asian giant, China. As tensions have risen over disputed islands in the East China Sea, investment and trade between China and Japan has deteriorated.

China is pressing Tokyo and New Delhi closer together for other reasons as well. Abe is trying to forge ties with countries across the region to contain a rising and increasingly assertive China. Meanwhile, Modi, who has his own territorial disputes with Beijing on India’s borders in the far east and north, is aiming to enhance the country’s military capabilities. Much of a joint declaration signed by the Prime Ministers dealt with strategic cooperation. The two pledged to “upgrade and strengthen” their partnership in defense by regularizing joint maritime exercises and collaborating on military technology.

China wasn’t specifically mentioned in the declaration, but which country Abe and Modi have in mind is no secret. Modi, in fact, took a clear swipe at Beijing in a speech to businessmen on Monday. “Everywhere around us, we see an 18th century expansionist mind-set: encroaching on another country, intruding in others’ waters, invading other countries and capturing territory,” Modi said.

None of this has gone unnoticed in the Middle Kingdom. An editorial in the state-run Global Times written in response to Modi’s comments attempted to downplay the friendly Abe-Modi summit. “The increasing intimacy between Tokyo and New Delhi will bring at most psychological comfort to the two countries,” the newspaper contended. “If Japan attempts to form a united front centered on India, it will be a crazy fantasy generated by Tokyo’s anxiety of facing a rising Beijing.”

Whether closer India-Japan ties are a fantasy will become apparent quickly. China’s President Xi Jinping is due to visit Modi in India later in September. Let’s see if he gets a hug.

TIME Japan

The Most Dangerous Room in the World

Dominic Nahr for TIME

Three-and-a-half years after a catastrophic meltdown, Fukushima is far from fixed

Our gas masks are on, as are three pairs of gloves secured with tape, two pairs of socks, rubber boots, a hard hat and a hazmat suit that encases our bodies in polyethylene. Ice packs cool our torsos, but photographer Dominic Nahr, reporter Chie Kobayashi and I start sweating. Maybe it’s nerves, or maybe it’s just the sticky humidity of summertime Japan.

Soon we approach the Fukushima Daiichi nuclear power plant—ground zero of the worst atomic meltdown since Chernobyl. Dosimeters around our necks record the rising levels of radiation. After the 9.0 earthquake and subsequent tsunami on March 11, 2011, the aging plant on Japan’s northeastern coast suffered a total power failure, causing the cooling system to shut down…

Read the full story here.

TIME Japan

Hiroshima Landslide Kills at Least 36

At least 36 people were killed in Japan on Wednesday when landslides triggered by heavy rain hit the outskirts of Hiroshima. Several people were missing after a month's worth of rain fell overnight, loosening slopes saturated by previous heavy rain that fell over the past few weeks

Your browser, Internet Explorer 8 or below, is out of date. It has known security flaws and may not display all features of this and other websites.

Learn how to update your browser