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Facebook needs a dislike button for Shinzo Abe's ideas
By William Pesek |
November 28, 2012, Wednesday
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Print Edition
Print Edition
FOR Shinzo Abe, it isn't enough to see Sony Corp and Panasonic Corp, two icons of industrial Japan, reduced to junk-debt status. The man who probably will become prime minister next month might do the same for the yen.
That is the upshot of his desire to browbeat the Bank of Japan into unlimited easing. Abe's designs on the BOJ smack of a monetary jihad that would do more harm than good.
Polls suggest Abe will get a second crack at running Japan after a Deccember 16 election. His first one, from 2006 to 2007, was an exercise in mediocrity and focused on education and military matters. Round two will home in on ending deflation. To Abe, that means opening the monetary spigot indefinitely.
Abe may well revolutionize the central bank, though in unhelpful ways. He would get to pick the BOJ's top three jobs, including replacing Masaaki Shirakawa with a more compliant governor. Yet Abe, in a series of comments, stepped way over the line of ignorance and veered into financial irresponsibility.
Maybe the BOJ could do more. It might, for instance, pay greater attention to how the strong yen is gutting Japanese companies such as Sony and Panasonic, which Fitch Ratings Ltd lowered to speculative grade on November 22.
Hovering dilemma
Abe's interest in creating inflation ignores the dilemma hovering over Japan: the largest public debt in the industrialized world. Let's say Abe gets his wish and the BOJ achieves 3 percent inflation in short order. That would drive up the ultra-low borrowing costs on which Japan depends. A chaotic plunge in the yen is also in no one's interest, least of all a government that needs to import more oil to offset the nuclear reactors that were taken offline after last year's enormous earthquake.
The BOJ's global clout is already in doubt. When it intervenes in currency markets or adds new stimulus, traders yawn.
Abe is backpedaling a bit. His call for the BOJ to buy construction bonds to support government spending ran afoul of many Japan watchers. Abe took to Facebook to clarify, a rare step for a Japanese politician and one that has many economists clicking the "like" button to follow his monetary musings.
Not that they necessarily actually agree with what he is proposing. One of the more pointed rebuttals came from former Finance Minister Hirohisa Fujii. At 80, Fujii is one the few policy makers who recalls growing up amid the insanity and devastation of World War II.
Has it not occurred to Abe and the LDP that monetary stimulus alone won't revitalize Japan? There seems to be little recognition that deflation is a symptom of Japan's two-decade- long economic drought, not its cause. Far more good would come from taking a fresh look at fiscal and tax policies. Ending Japan's balance-sheet recession requires new strategies to increase demand from all directions.
The year ahead promises to be another rough one for the world economy. As 2013 unfolds, economists will wonder what Prime Minister Yoshihiko Noda was thinking when he raised consumption taxes in such a shaky environment.
Why not put Japan's next finance minister and BOJ chief in a room together and demand a new course? Japan's debt already equals more than twice the size of the economy, and the days of trying to generate growth with huge public-works projects are over.
The financial levers must be re-assessed. The same goes for deregulating the economy with more-flexible labor markets and fewer barriers to trade.
Perhaps it's all talk. At the very least, Abe's monetary fixation portends something troubling about his second turn as prime minister: He is coming to the job with some bad ideas. If only his Facebook page had a dislike button.
That is the upshot of his desire to browbeat the Bank of Japan into unlimited easing. Abe's designs on the BOJ smack of a monetary jihad that would do more harm than good.
Polls suggest Abe will get a second crack at running Japan after a Deccember 16 election. His first one, from 2006 to 2007, was an exercise in mediocrity and focused on education and military matters. Round two will home in on ending deflation. To Abe, that means opening the monetary spigot indefinitely.
Abe may well revolutionize the central bank, though in unhelpful ways. He would get to pick the BOJ's top three jobs, including replacing Masaaki Shirakawa with a more compliant governor. Yet Abe, in a series of comments, stepped way over the line of ignorance and veered into financial irresponsibility.
Maybe the BOJ could do more. It might, for instance, pay greater attention to how the strong yen is gutting Japanese companies such as Sony and Panasonic, which Fitch Ratings Ltd lowered to speculative grade on November 22.
Hovering dilemma
Abe's interest in creating inflation ignores the dilemma hovering over Japan: the largest public debt in the industrialized world. Let's say Abe gets his wish and the BOJ achieves 3 percent inflation in short order. That would drive up the ultra-low borrowing costs on which Japan depends. A chaotic plunge in the yen is also in no one's interest, least of all a government that needs to import more oil to offset the nuclear reactors that were taken offline after last year's enormous earthquake.
The BOJ's global clout is already in doubt. When it intervenes in currency markets or adds new stimulus, traders yawn.
Abe is backpedaling a bit. His call for the BOJ to buy construction bonds to support government spending ran afoul of many Japan watchers. Abe took to Facebook to clarify, a rare step for a Japanese politician and one that has many economists clicking the "like" button to follow his monetary musings.
Not that they necessarily actually agree with what he is proposing. One of the more pointed rebuttals came from former Finance Minister Hirohisa Fujii. At 80, Fujii is one the few policy makers who recalls growing up amid the insanity and devastation of World War II.
Has it not occurred to Abe and the LDP that monetary stimulus alone won't revitalize Japan? There seems to be little recognition that deflation is a symptom of Japan's two-decade- long economic drought, not its cause. Far more good would come from taking a fresh look at fiscal and tax policies. Ending Japan's balance-sheet recession requires new strategies to increase demand from all directions.
The year ahead promises to be another rough one for the world economy. As 2013 unfolds, economists will wonder what Prime Minister Yoshihiko Noda was thinking when he raised consumption taxes in such a shaky environment.
Why not put Japan's next finance minister and BOJ chief in a room together and demand a new course? Japan's debt already equals more than twice the size of the economy, and the days of trying to generate growth with huge public-works projects are over.
The financial levers must be re-assessed. The same goes for deregulating the economy with more-flexible labor markets and fewer barriers to trade.
Perhaps it's all talk. At the very least, Abe's monetary fixation portends something troubling about his second turn as prime minister: He is coming to the job with some bad ideas. If only his Facebook page had a dislike button.
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