Tuesday, March 25, 2008

Governor Fukui Leaves without Successor, Japan Does Not Fall Apart; Also Bank Ishihara

One of the more amusing headlines after the Upper House rejected Kōji Tanami, a former Administrative Vice Finance Minister and current head of the Japan Bank for International Cooperation (JBIC), as BOJ Governor Toshihiko Fukui’s successor came with this 20 March Sankei editorial:

Vacancy in BOJ Governor’s Seat…Japan Will Disintegrate…Stop the Spreading of Political Confusion

日銀総裁空席 日本がつぶれてしまう 政治混乱の拡大食い止めよ

Nearly a week has gone by, and “political confusion” is indeed “spreading”. But that has nothing to do with the BOJ and everything to do with the gasoline taxes, and Japan does not look like it’s sinking into the Pacific any time soon. The market took little, if any, notice of the event, and the media itself has moved on. As Ross has reminded me, the BOJ and its bureaucracy (you didn’t think that Mr. Fukui sat around closeted with a couple of central bankers and a bunch of non-specialists to hash out the next move on the official discount rate, did you?) are institutionally capable of weathering any number of mini-crises. In fact, if Masaaki Shirakawa, the Governor Pro Tem and a BOJ graduate himself, weathers a couple of such events - say, for one, just to give him a little practice, the Tokyo New Kōmeitō comes to its senses and vetoes the Shin-Ginkō Tokyo rescue and causes a bank run on it - and earns market confidence, it will become hard for MOF and its LDP sympathizers to deny him full title to the job.

That would be a salutary turn of events, something for which the DPJ should be able to take credit for. Unfortunately, because it played the issue for political effect only, it brought substantial negatives on itself public communications-wise.

Speaking of Shin-Ginkō Tokyo, or “Bank Ishihara”, as Governor Ishihara’s opponents love to call it, the 40 billion yen rescue package put forward by Governor Ishihara (it is widely assumed that it is likely to balloon to 100 billion before the year is out) and the pending vote on it in the Tokyo Prefectural Assembly are receiving little if any attention in the foreign media. In fact, the entire Bank Ishihara controversy is being ignored, while it’s front-page news every other day in Japan. That is strange, given their long-time fascination with the controversial but charismatic national - and nationalist - political figure, the possibility of a Japanese bank failure, however small, in the context of a global financial uncertainties triggered by the subprime crisis, and the opportunity to link the two. Perhaps, like me, they find the technicalities too daunting to write or talk it up on just hearsay and the work of their research staffs

In any case, the foreign media (and yours truly) are not the only ones avoiding the issue. Everyone who had a role in bringing the poorly timed and ill-conceived bank to the dinner table for small businesses in distress is ducking for cover, from Governor Ishihara to then-Kaidanren head Hiroshi Okuda.

Update (26 March): At least the loss is in yen, not dollars.


MTC said...

Okumura-san -

With the Bear Sterns collapse and the dangerous subprime/ARM disaster still looming, the usual suspects are too busy bailing themselves out to express their usual smug schadenfreude at the failures of Japanese financial surveillance.

Jun Okumura said...


Maybe Shin-Ginkō Tokyo is too small for the economy-savvy and too complicated for the weird-tales crowd. But they could have gotten together to write it up as nice tie-in to the global story and had some fun with it, like, at least the Tokyo authorities can take comfort in the fact that it’ll only cost 40 billion yen… or 100 billion… whatever….