The House of Councilors voted to promote newly-appointed BOJ Deputy Governor and Acting Governor Masaaki Shirakawa to full-time Governor. However, it vetoed 121 to 115 the appointment of ex-MOF Vice Minister for International Affairs Hiroshi Watanabe, the Fukuda administration’s choice to replace him as Deputy Governor. From the DPJ, Hideo Watanabe*, Yasuhiro Ōe* and Masashi Fujiwara voted in favor of the latter appointment, while Tadashi Inuzuka**, Naoki Kazama, Yoshitake Kimata, Mitsuru Sakurai and Takashi Morita abstained. The Councilors who voted in favor will be duly punished. The abstainers will be excused, says Yukio Hatoyama, since “given the circumstances, it was inevitable.” Mr. Kimata, you may remember***, was already under a one-month suspension for voting in favor of promoting the ill-fated Toshirō Mutō. Although the Japanese Criminal Code does not have a three-strikes clause, two-time offenders can receive heavier sentences.
The DPJ showed remarkable discipline, “given the circumstances”****. All credible news reports contend that majorities of both the party leadership and the rank-and-file in the DPJ supported Mr. Watanabe’s candidacy, but Ichirō Ozawa shot it down. The irony is that it’s evidently payback for opposing Mr. Mutō’s original candidacy, which Mr. Ozawa had been inclined to support. I know that he’s cutting off the nose to spite the face － editorial writers and talking heads are going to have a minor field day over this － but it is vintage Ozawa. Sure, it’s a public relations setback, but he could have split the party over this, do the kind of nasty he has not hesitated to do from his LDP days. His colleagues knew this, so they had no choice but to go along. Besides, they have plenty of battle-scars from the BOJ appointment votes, so one more wouldn’t put them over the PR pain threshold.
There appears to be a fairly common perception, particularly among Mr. Fukuda’s LDP enemies, that the Prime Minister has botched the entire BPJ appointment process. I don’t know about that; the DPJ is worse off than the Fukuda administration, and that would not have happened if Mr. Fukuda had tapped Mr. Shirakawa (or Mr. Watanabe for that matter) in the first place. Remember, you only have to make sure that you run faster than the other guy to escape from the marauding bear. Still, it makes good copy for the media (snap election, please) and trope for pretenders (can’t fight election under that wuss), so expect to keep hearing it.
And with that, attention turns back to the gasoline tax surcharge. That’s Mr. Fukuda’s real touchstone. Is he as half as crazy as Mr. Ozawa － willing and able to wield his own nuclear weapon? That Prime Minister’s prerogative, together with normal party discipline, should see him through. Which, when you think about it, is a better-case long-term scenario for the DPJ, if not for someone who shares the very mortal Mr. Ozawa’s sense of urgency.
BTW, I’m beginning to feel a little sorry for Mr. Hatoyama, who has to keep going out there as Mr. Ozawa’s Deputy and explain things to the media. (At least one mainstream news report puts Mr. Watanabe’s name on a list of five acceptable candidates that Mr. Hatoyama gave to the LDP). How many more times does he have to first talk out of one side of his mouth, then another, before he yells, I’m mad as hell and I’m not going to take this any more?
* Mssrs. Watanabe and Ōe first came to the blog’s notice in January, when they joined mostly roadies and fellow travelers from the LDP at that road money retention meet-and-greet for prefectural assemblymen.
** Mr. Inuzuka claims that the voting machine must have malfunctioned, since he voted against both appointments.
ADD April 10: Today’s hardcopy Yomiuri has kindly provided a more complete list of the justifications/excuses, which I record here for future reference:
Voting in favor:
Hideo Watanabe: Making the decision with a view to the political game in disregard of the opinions in the organization will not earn the trust of the public.
Yasuhiro Ōe: The party was leaning towards agreeing [to the appointments]. We should act in a way befitting the largest party in the House of Councilors.
Masashi Fujiwara: The button I pushed says it all.
Abstaining:
Tadashi Inuzuka: (His office stated that he said he pushed the “no” button.)
Naoki Kazama: I mistakenly pushed the wrong button.
Absent:
Mitsuru Sakurai: It’s not right that we decided to oppose the appointment when more than 70% of the members of the [DPJ Public Finance and Financial Sector] Departmental Committee supported it. If people think that we’ll oppose everything, it will become difficult to seize power.
Yoshitake Kimata: (His office stated that he had returned to his home district and could not arrive in time for the vote.
Four DPJ members skipped the House of Representatives vote:
Masayo Tanabe: (Her office stated that she had to campaign for the DPJ candidate in the HR Yamaguchi 2nd District by-election.)
Hiroko Nakano: (Her office gave an injury as the reason for her absence.)
Hideo Hiraoka: (His office stated that he had to prepare to stand as the DPJ candidate in the HR Yamaguchi 2nd District by-election.)
Motohisa Furukawa: At one point, we had indicated to the government that Mr. Watanabe would be acceptable as Governor.
*** Posted, very briefly, here.
**** Showing less discipline but a rather keen sense of gallows humor, Kenji Yamaoka, the DPJ Diet Affairs Chairman left a message on Mr. Watanabe’s phone telling him that he wouldn’t have the votes to be affirmed. He claims that he called to soften the blow.
Showing posts with label BOJ. Show all posts
Showing posts with label BOJ. Show all posts
Wednesday, April 09, 2008
Saturday, April 05, 2008
Masaaki Shirakawa Receiving BOJ Promotion
It’s in the media, the DPJ has agreed to the Fukuda administration’s proposal to promote recently appointed Deputy Governor Masaaki Shirakawa to Governor and appoint Hiroshi Watanabe, the recently retired MOF Vice-Minister for International Affairs. The battlefield promotion for Mr. Shirakawa came after the DPJ decided to oppose two former MOF administrative Vice-Ministers and, most recently, any MOF official for the job and the Fukuda administration couldn’t come up with anyone suitable from the private sector to take the job. In fact appears impossible to find anyone outside the bureaucracy － the BOJ is also a bureaucracy for most legal and practical purposes － who:
1) has the requisite experience, expertise, and English and (far more importantly) Japanese communication skills;
2) can withstand bear the slings and arrows from the tabloid sheets as well as more respectable quarters of the media; and
3) work full time for an annual salary (including bonuses) of roughly US $350,000 at current exchange rates.
Actually, I fulfill two of these three requirements － you guess which ones; I’m not going to make it easy for you － and would have been willing to work on the other. Too bad they forgot to contact me; they would have had their man much more quickly, and Kōji Tanami would have been spared the embarrassment. Oh well, I still have my privacy, so their loss is actually my gain. And I’m not saying that because THIS BLOG GOT IT SPECTACULARLY WRONG. To be fair to the blog, though, the DPJ was an even bigger loser, since it came out looking even worse than the ruling coalition in the political game, which had been the focus of its actions in the first place.
1) has the requisite experience, expertise, and English and (far more importantly) Japanese communication skills;
2) can withstand bear the slings and arrows from the tabloid sheets as well as more respectable quarters of the media; and
3) work full time for an annual salary (including bonuses) of roughly US $350,000 at current exchange rates.
Actually, I fulfill two of these three requirements － you guess which ones; I’m not going to make it easy for you － and would have been willing to work on the other. Too bad they forgot to contact me; they would have had their man much more quickly, and Kōji Tanami would have been spared the embarrassment. Oh well, I still have my privacy, so their loss is actually my gain. And I’m not saying that because THIS BLOG GOT IT SPECTACULARLY WRONG. To be fair to the blog, though, the DPJ was an even bigger loser, since it came out looking even worse than the ruling coalition in the political game, which had been the focus of its actions in the first place.
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.
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.
Saturday, March 22, 2008
Update on Gasoline Tax/Road Construction Proposal
Yesterday, a Friday, Sadakazu Tanigaki and Tetsuo Saitō, the Policy Research Council Chairmen of the LDP and New Kōmeitō respectively, dutifully consulted their peers and presented the results to the opposition parties as a six-item proposal. There are three major changes, which I show in the following translations, from Prime Minister Fukuda's original instructions. The emphasis and italics are mine, to highlight the differences:
3) The road provisioning mid-term plan shall be reviewed, including the period of the plan, on the basis of new data on demand, etc. In the event, necessary provisioning of roads shall be steadily implemented.
5) With regard to items 2 through 4, an organization for consultation between the government parties and opposition parties shall be established expediently and consultations shall be started.
6) With regard to matters on which agreement is achieved under such consultations, they shall be implemented in the budgets for fiscal year 2009 and beyond.
Item 5 merely changes the procedural point as Mr. Fukuda’s instructions to the two party chairmen are transcribed as a proposal to the opposition parties. Item 6 merely confirms my observation that any amendments will come at least a couple of years into the future. It does spell out explicitly the practical implications of item 2, which still reads, “The road-specific fiscal funds shall be reviewed with a view to its inclusion in the general-purpose fiscal funds on the occasion of the fundamental reform of the tax system.” This is, I repeat, a killer for the DPJ.
The most significant change by far is the addition in item 3. The words do not on their own have any operative meaning, but were added, according to a Yomiuri report, to alleviate the New Kōmeitō’s worries. If true, the New Kōmeitō is out-LDPing the LDP on this one. The opposition will surely highlight it as the expression of a business-as-usual mentality.
The DPJ continues to say that it won’t agree to talk unless the LDP and New Kōmeitō in effect accept its proposal in its entirety, which is a kind of procedural oxymoron. To avoid the confusion over retail pricing and purchases around the expiration of the gasoline tax surcharge, it has introduced legislation in the Upper House (echoing the two-month extension that the coalition gave up under the Chairmen’s consent decree) to refund to wholesalers the surcharges for March*.
Everything indicates that the DPJ will stand pat come 31 March, and nothing the media says is going to change this situation. I am convinced that the coalition, including the Prime Minister, knows that as well. Also, note that the coalition itself cannot alter the tax bills during this Diet session without the DPJ’s consent**. Thus, the coalition is going to be stuck with the taxes and the road construction budget as-is until the next Diet session at the earliest, and most likely until the 2009 ordinary session, which traditionally convenes in January***.
One of the consequences of this outcome of this Diet session as I foresee it is that the coalition will have to come up with a credible program on the gasoline taxes and their disposal in its entirety in place, including some down payments, before it can go to the electorate. This means that the Lower House general election will come later rather than sooner. In fact, the current Lower House members now have a good chance of serving out their full four-year terms, until 2009 September.
That, of course, does not mean that Prime Minister Fukuda necessarily will be able to do so as well.
* This could create some accounting problems on its own where the gasoline has already been sold to the retailer. I’d have to read the actual bill to be sure, but I’d really have to be at a loss of things to do for that, since the coalition will surely not let the bill pass when it comes to the Lower House.
** The coalition can, of course, alter the bill in the Upper House and send it back for a simple majority revote in the Lower House if it can get the Communists and Socialists on board. But it's easier to, say, make Australians stop killing kangaroos.
*** As a matter of pure speculation, the Prime Minister can summon a long and early ordinary session that covers the usual “extraordinary” session that is now commonly summoned in the autumn. If that happens, it will surely go down in history as the Long Diet.
3) The road provisioning mid-term plan shall be reviewed, including the period of the plan, on the basis of new data on demand, etc. In the event, necessary provisioning of roads shall be steadily implemented.
5) With regard to items 2 through 4, an organization for consultation between the government parties and opposition parties shall be established expediently and consultations shall be started.
6) With regard to matters on which agreement is achieved under such consultations, they shall be implemented in the budgets for fiscal year 2009 and beyond.
Item 5 merely changes the procedural point as Mr. Fukuda’s instructions to the two party chairmen are transcribed as a proposal to the opposition parties. Item 6 merely confirms my observation that any amendments will come at least a couple of years into the future. It does spell out explicitly the practical implications of item 2, which still reads, “The road-specific fiscal funds shall be reviewed with a view to its inclusion in the general-purpose fiscal funds on the occasion of the fundamental reform of the tax system.” This is, I repeat, a killer for the DPJ.
The most significant change by far is the addition in item 3. The words do not on their own have any operative meaning, but were added, according to a Yomiuri report, to alleviate the New Kōmeitō’s worries. If true, the New Kōmeitō is out-LDPing the LDP on this one. The opposition will surely highlight it as the expression of a business-as-usual mentality.
The DPJ continues to say that it won’t agree to talk unless the LDP and New Kōmeitō in effect accept its proposal in its entirety, which is a kind of procedural oxymoron. To avoid the confusion over retail pricing and purchases around the expiration of the gasoline tax surcharge, it has introduced legislation in the Upper House (echoing the two-month extension that the coalition gave up under the Chairmen’s consent decree) to refund to wholesalers the surcharges for March*.
Everything indicates that the DPJ will stand pat come 31 March, and nothing the media says is going to change this situation. I am convinced that the coalition, including the Prime Minister, knows that as well. Also, note that the coalition itself cannot alter the tax bills during this Diet session without the DPJ’s consent**. Thus, the coalition is going to be stuck with the taxes and the road construction budget as-is until the next Diet session at the earliest, and most likely until the 2009 ordinary session, which traditionally convenes in January***.
One of the consequences of this outcome of this Diet session as I foresee it is that the coalition will have to come up with a credible program on the gasoline taxes and their disposal in its entirety in place, including some down payments, before it can go to the electorate. This means that the Lower House general election will come later rather than sooner. In fact, the current Lower House members now have a good chance of serving out their full four-year terms, until 2009 September.
That, of course, does not mean that Prime Minister Fukuda necessarily will be able to do so as well.
* This could create some accounting problems on its own where the gasoline has already been sold to the retailer. I’d have to read the actual bill to be sure, but I’d really have to be at a loss of things to do for that, since the coalition will surely not let the bill pass when it comes to the Lower House.
** The coalition can, of course, alter the bill in the Upper House and send it back for a simple majority revote in the Lower House if it can get the Communists and Socialists on board. But it's easier to, say, make Australians stop killing kangaroos.
*** As a matter of pure speculation, the Prime Minister can summon a long and early ordinary session that covers the usual “extraordinary” session that is now commonly summoned in the autumn. If that happens, it will surely go down in history as the Long Diet.
Thursday, March 20, 2008
A Few More Words on the Fukuda Gasoline Tax/Road Construction Proposal
Note that in item 2 of his proposal that I wrote about here, Prime Minister Fukuda proposes to convert the gasoline tax into general-purpose revenue as part of “the fundamental reform of the tax system”. This is a killer for the DPJ. It’s bad enough for them that it puts the matter a couple of fiscal years into the future at the very earliest; it will also expose the weakness of its position on funding for the public pension system without a tax hike. Its current piecemeal approach makes it easier for it to avoid facing the cumulative revenue effects of its “out-promise the LDP and deal with the consequences when we win” strategy that they’ve adopted under Ichirō Ozawa. An overall review will make it difficult for the media not to notice.
In the meantime, Sankei continued pushing its interpretation － the DPJ has the ruling coalition and the Fukuda administration in particular in a panic － with this story. They run under different bylines, and I don’t see any of the other major dailies going nearly this far, so this must be a uniquely Sankei narrative. I see the immediate political situation quite differently, which has been the point of my earlier posts, here and here. Sankei, of course, is highly critical of any deviations from the dynamics that the Koizumi reform had put into place (and also supportive of Prime Minister Koizumi’s romps on the hallowed grounds of the Yasukuni Shrine), so it’s actually more aligned with the opposition on this. I think that its apprehensions － well-founded, by the way － are clouding its judgment of the overall situation.
For the record, here’s a translation of a more complete version of Mr. Fukuda’s proposal:
1) Enactment of the fiscal year 2008 revenue bills within this [2007] fiscal year.
2) The road-specific fiscal funds shall be reviewed with a view to its inclusion in the general-purpose fiscal funds on the occasion of the fundamental reform of the tax system. The fiscal funds of the local governments shall be protected on that occasion.
3) The road provisioning mid-term plan shall be reviewed, including the period of the plan, on the basis of new data on demand, etc.
4) Transparency and discipline with regard to the road budget shall be [promoted], including expenditures to public interest legal entities.
5) I request that [you] consult with the opposition parties after coordinating within the government parties on the basis of the above points.
The hardcopy Yomiuri article also carries the following estimate, surely courtesy of the Fukuda administration, in 100 million yen units, of the road-specific fiscal funds for FY 2008:
State: Volatile oil tax 27685 ( of which 13843 temporary); petroleum and [natural] gas tax 140 (0); automobile weight tax 5541 (3097); total 33366 (16940)
Local: Local road transfer tax 2998 (461); petroleum and gas transfer tax 140 (0); automobile weight transfer tax 3601 (2013); automobile acquisition tax 4024 (1309); light oil transaction tax 9914 (5281); total 20677 (9064)*.
Total: 54043 (26004)
So that’s the breakdown of the 2.6 trillion yen overall loss in revenue and the 0.9 trillion yen loss to the local governments that the ruling coalition is always talking about.
*Transfer taxes are collected as national taxes and automatically transferred to local governments.
In the meantime, Sankei continued pushing its interpretation － the DPJ has the ruling coalition and the Fukuda administration in particular in a panic － with this story. They run under different bylines, and I don’t see any of the other major dailies going nearly this far, so this must be a uniquely Sankei narrative. I see the immediate political situation quite differently, which has been the point of my earlier posts, here and here. Sankei, of course, is highly critical of any deviations from the dynamics that the Koizumi reform had put into place (and also supportive of Prime Minister Koizumi’s romps on the hallowed grounds of the Yasukuni Shrine), so it’s actually more aligned with the opposition on this. I think that its apprehensions － well-founded, by the way － are clouding its judgment of the overall situation.
For the record, here’s a translation of a more complete version of Mr. Fukuda’s proposal:
1) Enactment of the fiscal year 2008 revenue bills within this [2007] fiscal year.
2) The road-specific fiscal funds shall be reviewed with a view to its inclusion in the general-purpose fiscal funds on the occasion of the fundamental reform of the tax system. The fiscal funds of the local governments shall be protected on that occasion.
3) The road provisioning mid-term plan shall be reviewed, including the period of the plan, on the basis of new data on demand, etc.
4) Transparency and discipline with regard to the road budget shall be [promoted], including expenditures to public interest legal entities.
5) I request that [you] consult with the opposition parties after coordinating within the government parties on the basis of the above points.
The hardcopy Yomiuri article also carries the following estimate, surely courtesy of the Fukuda administration, in 100 million yen units, of the road-specific fiscal funds for FY 2008:
State: Volatile oil tax 27685 ( of which 13843 temporary); petroleum and [natural] gas tax 140 (0); automobile weight tax 5541 (3097); total 33366 (16940)
Local: Local road transfer tax 2998 (461); petroleum and gas transfer tax 140 (0); automobile weight transfer tax 3601 (2013); automobile acquisition tax 4024 (1309); light oil transaction tax 9914 (5281); total 20677 (9064)*.
Total: 54043 (26004)
So that’s the breakdown of the 2.6 trillion yen overall loss in revenue and the 0.9 trillion yen loss to the local governments that the ruling coalition is always talking about.
*Transfer taxes are collected as national taxes and automatically transferred to local governments.
Wednesday, March 19, 2008
Is the LDP-New Kōmeitō Coalition Following My Game Plan?
As expected, the DPJ said no to Kōji Tanami, the latest sacrificial lamb on the BOJ Governorship altar. There are two ways to interpret this: Prime Minister Fukuda is nuts; or, there’s a game plan. Since the first one leads nowhere unless you’re a diehard DPJ fan or an LDP member seeking to depose Mr. Fukuda, I, as an Independent, have no option but to hypothesize that there is a game plan. And if there is one, then this looks as good as any, no*?
Well, today, even while the LDP-New Kōmeitō were pushing Mr. Tanami’s doomed candidacy, the coalition got together and worked all day to hammer out a gasoline tax/road construction budget game plan. It culminated in Prime Minister Fukuda’s five-point plan “Our Thinking on the Road-Specific Fiscal Revenues:**
1) Pass tax bills during this fiscal year [before 1 April];
2) reexamine the road-specific revenue with a view to turning it into general-purpose revenue as part of the fundamental reform of the tax system;
3) Re-examine the mid-term road provisioning plan for including its [ten-year] term;
4) [Promote] transparency and discipline with regard to the road budget, including expenditures to public interest legal entities; and
5) Consult with the opposition parties after coordinating within the ruling [coalition].
If anything, they went beyond my “message”. But then, you can’t win ‘em all. Besides, something may have been lost in translation. But I digress. Luckily for the coalition, Naoto Kan, one of Ichirō Ozawa’s two deputies and once and (hoping to be) future king, rejected it even before it had been announced*.
As for Mr. Tanami, you need not shed a tear for him. He remains ensconced as the head of the Bank of International Cooperation (for which I have a special place in my heart, having come up with its English name when OECF and the Ex-Im Bank merged to form JBIC), after gaining some political brownie points for his momentary humiliation.
Speaking of “advice”, I have been reminded that “the [Japanese government] has followed [DMr. Dujarric’s] advice and recognized Kosovo.***” Well, is it my fault the LDP prefers to listen to American Japan handlers and ignore the concerns of Japanese voters like me?
FYI, Serbia recalled its ambassador to Japan in protest.
* Mr. Kan also said, “We were 99% willing to accept just about anybody.” That’s one of the faults of the DPJ leadership. They’re too honest to be really effective politicians.
** Is he finally getting the hang of it?
ADD. *** Actually, it was Robert himself that reminded me.
Well, today, even while the LDP-New Kōmeitō were pushing Mr. Tanami’s doomed candidacy, the coalition got together and worked all day to hammer out a gasoline tax/road construction budget game plan. It culminated in Prime Minister Fukuda’s five-point plan “Our Thinking on the Road-Specific Fiscal Revenues:**
1) Pass tax bills during this fiscal year [before 1 April];
2) reexamine the road-specific revenue with a view to turning it into general-purpose revenue as part of the fundamental reform of the tax system;
3) Re-examine the mid-term road provisioning plan for including its [ten-year] term;
4) [Promote] transparency and discipline with regard to the road budget, including expenditures to public interest legal entities; and
5) Consult with the opposition parties after coordinating within the ruling [coalition].
If anything, they went beyond my “message”. But then, you can’t win ‘em all. Besides, something may have been lost in translation. But I digress. Luckily for the coalition, Naoto Kan, one of Ichirō Ozawa’s two deputies and once and (hoping to be) future king, rejected it even before it had been announced*.
As for Mr. Tanami, you need not shed a tear for him. He remains ensconced as the head of the Bank of International Cooperation (for which I have a special place in my heart, having come up with its English name when OECF and the Ex-Im Bank merged to form JBIC), after gaining some political brownie points for his momentary humiliation.
Speaking of “advice”, I have been reminded that “the [Japanese government] has followed [
FYI, Serbia recalled its ambassador to Japan in protest.
* Mr. Kan also said, “We were 99% willing to accept just about anybody.” That’s one of the faults of the DPJ leadership. They’re too honest to be really effective politicians.
** Is he finally getting the hang of it?
ADD. *** Actually, it was Robert himself that reminded me.
Tuesday, March 18, 2008
The Winner? Mr. None of the Above
This morning, the LDP tossed two names in the ring, one of them being Kōji Tanami, head of JBIC and the Fukuda administration’s latest candidate for BOJ Governor. Problem? Mr. Tanami, like the unfortunate Mr. Mutō, is also a former MOF Administrative Vice Minister. The DPJ leadership is understandably throwing a collective fit. I, too, for a moment wonder, Is Mr. Fukuda nuts? Then I remember that everything exists for a reason, and go back to my default mode: It is part of the setup. They are tossing up one unacceptable candidate after another because they know that it makes the other side look bad…
The problem for the LDP is that it also makes Prime Minister Fukuda look helple…
Aha!
… but who then look crappy themselves…
Do you know who I think is behind it all? Mr. None of the Above, that’s who.
The problem for the LDP is that it also makes Prime Minister Fukuda look helple…
Aha!
… but who then look crappy themselves…
Do you know who I think is behind it all? Mr. None of the Above, that’s who.
Guessing Game: Why Fukui Rerun, for God’s Sake?
follow up to this post…
When all the main Japanese dailies reported that the LDP had proposed that Toshihiko Fukui, the current BOJ Governor, and Mutō Toshirō, one of the two Deputy Governors and favorite candidate of the coalition, business and mainstream media, stay on for another term, I’m sure that everyone had the same thought, namely, WTFBBQ? Of course the DPJ said no way, leading to near identical headlines on all the reports.
This particular turn of events (if true － Chief Cabinet Secretary Nobutaka Machimura denied that such a proposal had been made) reflected badly on Prime Minister Fukuda, and rightly so. Now all things unconsidered, that would be a great choice during these troubled times. (You also wish that there had been provisions in the BOJ Act in the first place for a Governor or Deputies continuing to perform their duties during a (now near-inevitable) interregnum, like most institutional by-laws.) But Mr. Fukuda would have been nuts to have expected that the DPJ would say yes. He’s looking wussy lately, but a moron he is not. So what’s going on?
My guess is, the Fukuda administration is stalling while MOF and its internationalist allies lobby other major ADB shareholders (US and who else?) to make sure that Japan can continue to impose a Japanese President on the ADB if Haruhiko Kuroda vacates the post to be appointed BOJ Governor. I think that, in that case, they want to replace Haruhiko Kuroda with the recently retired (from MOF) Hiroshi Watanabe.
When all the main Japanese dailies reported that the LDP had proposed that Toshihiko Fukui, the current BOJ Governor, and Mutō Toshirō, one of the two Deputy Governors and favorite candidate of the coalition, business and mainstream media, stay on for another term, I’m sure that everyone had the same thought, namely, WTFBBQ? Of course the DPJ said no way, leading to near identical headlines on all the reports.
This particular turn of events (if true － Chief Cabinet Secretary Nobutaka Machimura denied that such a proposal had been made) reflected badly on Prime Minister Fukuda, and rightly so. Now all things unconsidered, that would be a great choice during these troubled times. (You also wish that there had been provisions in the BOJ Act in the first place for a Governor or Deputies continuing to perform their duties during a (now near-inevitable) interregnum, like most institutional by-laws.) But Mr. Fukuda would have been nuts to have expected that the DPJ would say yes. He’s looking wussy lately, but a moron he is not. So what’s going on?
My guess is, the Fukuda administration is stalling while MOF and its internationalist allies lobby other major ADB shareholders (US and who else?) to make sure that Japan can continue to impose a Japanese President on the ADB if Haruhiko Kuroda vacates the post to be appointed BOJ Governor. I think that, in that case, they want to replace Haruhiko Kuroda with the recently retired (from MOF) Hiroshi Watanabe.
Sunday, March 16, 2008
Yukio Hatoyama Gives Okay to Haruhiko Kuroda and Hiroshi Watanabe
Yukio Hatoyama appeared on Sōichirō Tawara’s Sunday Project and defended the DPJ against the accusation that it was playing politics with the replacement for the current BOJ Governor, Toshirō Mutō, whose term expires on 19 March. Never mind, though; he endorsed Haruhiko Kuroda and Hiroshi Watanabe, two former MOF Vice Ministers for International Affairs, as the next BOJ Governor. He did not come out and say it outright － it’s not his decision to make － but he responded to Mr. Tawara’s questioning and stated that it was his understanding that the two men were highly regarded, superior to Mr. Mutō in their international backgrounds, and did not come with the kind of MOF baggage that comes with a former Administrative Vice Minister like Mr. Mutō. In fact, the two men were so carried away by the prospects for a compromise that they forgot about Yutaka Yamaguchi, a third possible candidate whose image was prominently displayed in the background together with Mr. Kuroda and Mr. Watanabe’s. One of the regular panelists, an Asahi editorial writer*, pointed that out, but Mr. Hatoyama didn’t bother responding. Go figure.
I still think that it’s going to be Mr. Kuroda. Mr. Watanabe is easier to move, but he lacks seniority. I believe that the foreign press will give either one (or Mr. Yamaguchi, for that matter) a warm welcome, and the domestic press will also show their immediate relief over the resolution of the impasse. The problem with these men, though, is that they lack experience in fiscal policy and more broadly in economic management. Also, their domestic networks are bound to be very different from people from the MOF mainstream. So Mr. Kuroda (or Mr. Watanabe) must give the media a good honeymoon, or they will quickly show their disrespect.
The gasoline taxes took up a lot of Sunday Project time too, but I didn’t hear anything new from Mr. Hatoyama.
Former Mie Governor Masayasu Kitagawa and Kanagawa Governor Shigefumi Matsuzawa, founding figures of Sentaku as well as the Yamazaki faction transplant Nobuteru Ishihara and DPJ Ozawa-hater Yukio Edano, two key members from its political win, appeared on the show to discuss their objectives. They denied that the Sentaku was aimed at seikai saihen, or reorganization of the political parties, but it was clear that Governor Matsuzawa, for one, would love to see that happen. I’ve been working on an argument that something different is likely to happen and the reasons for that (I briefly touched on the subject here, at the end, and in the first footnote here), but I think that it’s going to be too long for a post. If you can help me get it into print, you will receive my undying gratitude.
* Incidentally, it’s my impression that Asahi editorial writers usually come across individually as more moderate than the editorials that they actually write. I assume that it’s the same thing with Yomiuri editorial writers, only in the opposite direction ideology-wise. What do you think?
I still think that it’s going to be Mr. Kuroda. Mr. Watanabe is easier to move, but he lacks seniority. I believe that the foreign press will give either one (or Mr. Yamaguchi, for that matter) a warm welcome, and the domestic press will also show their immediate relief over the resolution of the impasse. The problem with these men, though, is that they lack experience in fiscal policy and more broadly in economic management. Also, their domestic networks are bound to be very different from people from the MOF mainstream. So Mr. Kuroda (or Mr. Watanabe) must give the media a good honeymoon, or they will quickly show their disrespect.
The gasoline taxes took up a lot of Sunday Project time too, but I didn’t hear anything new from Mr. Hatoyama.
Former Mie Governor Masayasu Kitagawa and Kanagawa Governor Shigefumi Matsuzawa, founding figures of Sentaku as well as the Yamazaki faction transplant Nobuteru Ishihara and DPJ Ozawa-hater Yukio Edano, two key members from its political win, appeared on the show to discuss their objectives. They denied that the Sentaku was aimed at seikai saihen, or reorganization of the political parties, but it was clear that Governor Matsuzawa, for one, would love to see that happen. I’ve been working on an argument that something different is likely to happen and the reasons for that (I briefly touched on the subject here, at the end, and in the first footnote here), but I think that it’s going to be too long for a post. If you can help me get it into print, you will receive my undying gratitude.
* Incidentally, it’s my impression that Asahi editorial writers usually come across individually as more moderate than the editorials that they actually write. I assume that it’s the same thing with Yomiuri editorial writers, only in the opposite direction ideology-wise. What do you think?
Friday, March 14, 2008
The Next BOJ Leadership? You Tell Me.
The DPJ is not going to back down from its opposition to Toshirō Mutō as BOJ Governor. It knew what the media and big business had wanted, and went and vetoed him anyway (as well as Takatoshi Itō, who lost his only chance for the job of his dreams － the DPJ Upper House majority is likely to last at least until the 2013 election). The LDP may appear to make some attempt at reconciliation after the Lower House vote, but that would be just for show. The search for a replacement will begin, unless there’s been someone else lined up all the while. With that, attention should turn to the gasoline tax revenue/road construction expenditures.
Speaking of which, one name that keeps coming up is Haruhiko Kuroda, President of the Asia Development Bank. Mr. Kuroda, like Mr. Mutō, is also a MOF lifer, but that association could be explained away if the DPJ so desires. He hails from the former financial and international side of MOF, so he cannot be directly identified with the mainstream, public revenues and expenditures side, whose dominance over BOJ was at the heart of the post-bubble BOJ reform in 1997 that, among other things, gave an equal voice to the Lower House on the Governor and Deputy Governor appointments.
Mr. Kuroda also has more than enough international experience to engage in verbal combat with US and European bankers and finance ministers in the G-8. More specifically, as a top internationalist bureaucrat, he can and will recite by heart in both languages every line in the playbook. That is a skill that also makes him one of the most predictable and boring public speakers on the planet, a definite plus for a head of a central bank.
Of course the DPJ could just as easily claim that an administrative background in banking and finance is just as bad, since it came with jurisdiction over the BOJ. But who else is there?
It’s too bad that Toshihiko Fukui, the incumbent, is a non-starter. He is a career BOJ official and once worked the media perfectly, two qualities that Mr. Kuroda could never hope to match. He is also articulate in the two most important languages. Thus, he should have been acceptable to the DPJ. Unfortunately, his is far more complicit than Mr. Mutō to DPJ eyes (or so the DPJ must claim) for the hyper-low-interest policy that robbed deserving widows and retirees of the modest fruits of their hard-earned savings. Add that investment scandal that once threatened to cut his tenure short, and you can see why the DPJ will reject him even as a stopgap measure while the LDP looks for a suitable replacement.
As for Masaaki Shirakawa, the one Deputy Governor who was acceptable to the DPJ, he simply does not look Gubernatorial.
Sorry. It’s difficult to imagine anyone of Mr. Mutō’s stature, network and experience stepping in at the last minute and announcing himself as the second choice candidate, when he doesn’t even know if the DPJ will accept him or not. Unless there’s someone else that we haven’t heard of at all, I think that it’s Mr. Kuroda’s job by default.
Have fun. Ladbrokes must love this one.
Speaking of which, one name that keeps coming up is Haruhiko Kuroda, President of the Asia Development Bank. Mr. Kuroda, like Mr. Mutō, is also a MOF lifer, but that association could be explained away if the DPJ so desires. He hails from the former financial and international side of MOF, so he cannot be directly identified with the mainstream, public revenues and expenditures side, whose dominance over BOJ was at the heart of the post-bubble BOJ reform in 1997 that, among other things, gave an equal voice to the Lower House on the Governor and Deputy Governor appointments.
Mr. Kuroda also has more than enough international experience to engage in verbal combat with US and European bankers and finance ministers in the G-8. More specifically, as a top internationalist bureaucrat, he can and will recite by heart in both languages every line in the playbook. That is a skill that also makes him one of the most predictable and boring public speakers on the planet, a definite plus for a head of a central bank.
Of course the DPJ could just as easily claim that an administrative background in banking and finance is just as bad, since it came with jurisdiction over the BOJ. But who else is there?
It’s too bad that Toshihiko Fukui, the incumbent, is a non-starter. He is a career BOJ official and once worked the media perfectly, two qualities that Mr. Kuroda could never hope to match. He is also articulate in the two most important languages. Thus, he should have been acceptable to the DPJ. Unfortunately, his is far more complicit than Mr. Mutō to DPJ eyes (or so the DPJ must claim) for the hyper-low-interest policy that robbed deserving widows and retirees of the modest fruits of their hard-earned savings. Add that investment scandal that once threatened to cut his tenure short, and you can see why the DPJ will reject him even as a stopgap measure while the LDP looks for a suitable replacement.
As for Masaaki Shirakawa, the one Deputy Governor who was acceptable to the DPJ, he simply does not look Gubernatorial.
Sorry. It’s difficult to imagine anyone of Mr. Mutō’s stature, network and experience stepping in at the last minute and announcing himself as the second choice candidate, when he doesn’t even know if the DPJ will accept him or not. Unless there’s someone else that we haven’t heard of at all, I think that it’s Mr. Kuroda’s job by default.
Have fun. Ladbrokes must love this one.
Tuesday, March 11, 2008
“No Budget Talk, We Are Offended,” Says DPJ
This is in the Asahi, so nobody can be accused of setting up the DPJ. Let me translate for you:
The informal meeting of the directors of the Upper House Budget Committee was held on the 10th, where the ruling parties sought to hold hearings on the FY 2008 budget bill. However, the DPJ was angered because the government with regard to the BOJ appointments introduced its plan to promote Deputy Governor Toshirō Mutō, so it was determined that they would confer further.
The top DPJ director Mitsuru Sakurai explained that it did not consent to hearing under orders from the party leadership. He told the reporters, “Someone that we could not accept was nominated, and was nominated with little time left. (The Diet) is abnormal as a whole and we interpreted our orders to mean that we should not even agree to holding hearings on the budget.” Budget Committee Chairman Yoshitada Kōnoike criticized the DPJ, saying, “It is inexcusable to put the BOJ appointments and hearings on the budget bill on the same level and use them as tools for the political game.”
But, the DPJ is willing to hold hearings on the BOJ appointments, it seems.
I am not sure that Mr. Sakurai realizes how irresponsible this exchange must be making the DPJ look in the eyes of independent voters (while undermining his own personal authority), but I am pretty sure that the “leadership” is a leadership of one, the enigmatic, volatile Ichirō Ozawa. You remember how his long-suffering deputy Yukio Hatoyama has had to harden his position on Mr. Mutō and kept embroidering his reasons for rejecting him as Mr. Ozawa indulges his hopeless obsession for an early snap election.
Even if the increasing DPJ intransigence turns out to be entirely the product of the usual escalation and hardening of positions as a negotiating deadline approaches, I no longer see much room for a DPJ climb-down, and the LDP isn’t helping. The LDP game plan seem to be: be as conciliatory as possible on the gasoline taxes and road construction expenditures, and hold fast on the BOJ appointments. It looks like it’s working so far.
The informal meeting of the directors of the Upper House Budget Committee was held on the 10th, where the ruling parties sought to hold hearings on the FY 2008 budget bill. However, the DPJ was angered because the government with regard to the BOJ appointments introduced its plan to promote Deputy Governor Toshirō Mutō, so it was determined that they would confer further.
The top DPJ director Mitsuru Sakurai explained that it did not consent to hearing under orders from the party leadership. He told the reporters, “Someone that we could not accept was nominated, and was nominated with little time left. (The Diet) is abnormal as a whole and we interpreted our orders to mean that we should not even agree to holding hearings on the budget.” Budget Committee Chairman Yoshitada Kōnoike criticized the DPJ, saying, “It is inexcusable to put the BOJ appointments and hearings on the budget bill on the same level and use them as tools for the political game.”
But, the DPJ is willing to hold hearings on the BOJ appointments, it seems.
I am not sure that Mr. Sakurai realizes how irresponsible this exchange must be making the DPJ look in the eyes of independent voters (while undermining his own personal authority), but I am pretty sure that the “leadership” is a leadership of one, the enigmatic, volatile Ichirō Ozawa. You remember how his long-suffering deputy Yukio Hatoyama has had to harden his position on Mr. Mutō and kept embroidering his reasons for rejecting him as Mr. Ozawa indulges his hopeless obsession for an early snap election.
Even if the increasing DPJ intransigence turns out to be entirely the product of the usual escalation and hardening of positions as a negotiating deadline approaches, I no longer see much room for a DPJ climb-down, and the LDP isn’t helping. The LDP game plan seem to be: be as conciliatory as possible on the gasoline taxes and road construction expenditures, and hold fast on the BOJ appointments. It looks like it’s working so far.
Saturday, March 08, 2008
Asahi Gives Passing Grades to Toshirō Mutō
The March 8 Asahi editorial says:
Mr. Mutō worked as Finance Vice-Minister for two and a half years, the longest tenure in the post-War era. He has administrative experience in the financial sector, and has a reputation for his sense of balance and his personal network among politicians. As for his weaknesses, perhaps it could be his relative lack of experience in international finance.
It has been five years since he became Deputy Governor. There is a clear impression that he has faithfully assisted Governor Toshihiko Fukui, and has not acted in ways that makes one sense the “intentions” of his old place of work the Finance Ministry or those of politicians. Within the Bank of Japan and the financial market, he has been considered the next Governor from early on. The government presumably thinks that this is “a highly appropriate appointment”.*
Coming from Asahi, that’s an A-minus, or a B-plus at worst. Note that the head of the editorial board, together with his mainstream media counterparts, should have been meeting regularly with Mr. Mutō during their respective tenures and likely has a personal relationship that goes back much longer. So it is clear that that Mr. Mutō has a way with the press as well, a crucial consideration in picking a central bank governor.
True, Asahi, being Asahi, scolds the LDP for provoking the DPJ in the first place by forcing the budget and budget-related bills through the Lower House (which I argue was a calculated decision on the part of the LDP*). But it is clear what it means when it calls on both sides to “reach a conclusion with the big picture in mind”. So there is no need to even wonder what Sankei,Yomiuri and Mainichi are saying.
The writing is on the paper screen; let’s see if the DPJ will read it.
* The LDP reverted to its good cop routine on Thursday and canceled the Upper House and Land, Infrastructure and Transport Committee sessions.
Mr. Mutō worked as Finance Vice-Minister for two and a half years, the longest tenure in the post-War era. He has administrative experience in the financial sector, and has a reputation for his sense of balance and his personal network among politicians. As for his weaknesses, perhaps it could be his relative lack of experience in international finance.
It has been five years since he became Deputy Governor. There is a clear impression that he has faithfully assisted Governor Toshihiko Fukui, and has not acted in ways that makes one sense the “intentions” of his old place of work the Finance Ministry or those of politicians. Within the Bank of Japan and the financial market, he has been considered the next Governor from early on. The government presumably thinks that this is “a highly appropriate appointment”.*
Coming from Asahi, that’s an A-minus, or a B-plus at worst. Note that the head of the editorial board, together with his mainstream media counterparts, should have been meeting regularly with Mr. Mutō during their respective tenures and likely has a personal relationship that goes back much longer. So it is clear that that Mr. Mutō has a way with the press as well, a crucial consideration in picking a central bank governor.
True, Asahi, being Asahi, scolds the LDP for provoking the DPJ in the first place by forcing the budget and budget-related bills through the Lower House (which I argue was a calculated decision on the part of the LDP*). But it is clear what it means when it calls on both sides to “reach a conclusion with the big picture in mind”. So there is no need to even wonder what Sankei,Yomiuri and Mainichi are saying.
The writing is on the paper screen; let’s see if the DPJ will read it.
* The LDP reverted to its good cop routine on Thursday and canceled the Upper House and Land, Infrastructure and Transport Committee sessions.
Saturday, March 01, 2008
Mainstream Dailies Line Up behind Gasoline Tax-Road Construction Compromise
Yesterday, on the very last day of February, the LDP-New Kōmeitō coalition pushed the budget and budget-related bills through the Lower House. This ensures that the budget at least will be enacted by default before the beginning of the next fiscal year on April 1 (see Article 60, paragraph 2, Japanese Constitution). All the opposition parties (even the People’s New Party) except the Communist Party absented themselves from the plenary vote in protest. Meanwhile, in the Upper House the same day, the DPJ submitted its own tax and road bills that essentially affirmed its post-manifest three-point position: 1) abolish the gasoline tax surcharge; 2) turn the remaining gasoline tax revenue over to the genera budget; and 3) eliminate local government co-payments from public works projects under the direct control of the central government. The coalition had in recent weeks been increasingly telegraphing its willingness to compromise, but the DPJ, likely emboldened by a weakened Fukuda administration, appears to have quieted internal dissent for the time being against its our-way-or-no-highway approach.
This sets up a showdown there on the gasoline taxes as the April 1 deadline approaches. The Lower House will not be completely in the background, though, as DPJ leaders are indicating that it may use the bicameral consent required to appoint the BOJ Governor － current Governor Toshihiko Fukui’s term expires on March 20 － as a counter in the high-stakes political game.
The outcome? Compromise is all but certain, though the outline is yet to emerge, given the DPJ’s hardball tactics, as well as the fact that the length of the extension (10 years in the government bill), the surcharge rate and the turnover to the general budget are all in play. The two sides must also figure out what to do with the 10-year, 59 trillion yen road construction plan. Still, a look at the media’s response leaves no room to doubt that a compromise will be reached.
In the blame game, the media are following their political instincts with more than the usual faithfulness. Asahi on the left puts the entire blame on the coalition, somewhat implausibly claiming that there should have been a way towards a compromise in the Lower House and even sympathizing with the opposition tactics on the BOJ appointment. The right-center Yomiuri comes down harder on the opposition over its stonewalling tactics in the Lower House. The left-center Mainichi calls down a cow pox on both parties and seeks the turnover of the gasoline tax revenues to the general budget while maintaining the surcharge.* However, all three are united in urging compromise.
Now every move under the DPJ’s tactics, as distinct from the substance of its proposal, has been focused on weakening the coalition government and forcing a snap election. To this end, they will feel the need for the support of significant portions of the mainstream media. So the consent decree set down by the two Presidents of the Upper and Lower House will stand; a compromise there will be, in time for the new fiscal year.
This will actually be a good thing politically for the DPJ. It has ceased to highlight lowering gasoline prices as the selling point for its position and is now hammering the coalition on the bloated road construction plan. This resonates with a public that has consistently agreed (a two-thirds majority in the opinion polls) with the DPJ that the road construction plans are highly wasteful. However, even if it manages to maintain its stonewalling tactics to the bitter end (doable; but no sure thing, given the internal dissent that will resurface as the deadline approaches), it will still be faced with the need to pick up the pieces after April 1. The DPJ package is not achievable in its entirety, if only for its revenue implications on the government finances as a whole. The DPJ would wind up with more or less what it would have achieved in the first place, but will be blamed for the momentary chaos that will have transpired in the meantime.
* Sankei on the right has not come out with an editorial on this issue today, preferring to go with the Chinese poisoned dumplings and the Social Insurance Agency. China and the bureaucracy: two Sankei favorites. As editorial fodder of course.
One possible casualty of a compromise is Toshirō Mutō, whose appointment as BOJ Governor appeared all but certain (at least to me) until the political fallout from the JMSDF collision further emboldened the opposition. The name of Yasushi Yamaguchi is being floated in the media today as a compromise figure acceptable to the DPJ. Mr. Yamaguchi is a former Deputy Governor, thus all but eliminating the need for a lengthy vetting process. More important, he is a BOJ lifer (in contrast to Mr. Mutō, a Finance Ministry graduate) and thus passes the partlcular separation-of-powers criterion that the DPJ wishes to impose.
Having said that, a one-day rumor will not a BOJ Governor make. I still think that Mr. Mutō is the overwhelming favorite, but stay tuned.
This sets up a showdown there on the gasoline taxes as the April 1 deadline approaches. The Lower House will not be completely in the background, though, as DPJ leaders are indicating that it may use the bicameral consent required to appoint the BOJ Governor － current Governor Toshihiko Fukui’s term expires on March 20 － as a counter in the high-stakes political game.
The outcome? Compromise is all but certain, though the outline is yet to emerge, given the DPJ’s hardball tactics, as well as the fact that the length of the extension (10 years in the government bill), the surcharge rate and the turnover to the general budget are all in play. The two sides must also figure out what to do with the 10-year, 59 trillion yen road construction plan. Still, a look at the media’s response leaves no room to doubt that a compromise will be reached.
In the blame game, the media are following their political instincts with more than the usual faithfulness. Asahi on the left puts the entire blame on the coalition, somewhat implausibly claiming that there should have been a way towards a compromise in the Lower House and even sympathizing with the opposition tactics on the BOJ appointment. The right-center Yomiuri comes down harder on the opposition over its stonewalling tactics in the Lower House. The left-center Mainichi calls down a cow pox on both parties and seeks the turnover of the gasoline tax revenues to the general budget while maintaining the surcharge.* However, all three are united in urging compromise.
Now every move under the DPJ’s tactics, as distinct from the substance of its proposal, has been focused on weakening the coalition government and forcing a snap election. To this end, they will feel the need for the support of significant portions of the mainstream media. So the consent decree set down by the two Presidents of the Upper and Lower House will stand; a compromise there will be, in time for the new fiscal year.
This will actually be a good thing politically for the DPJ. It has ceased to highlight lowering gasoline prices as the selling point for its position and is now hammering the coalition on the bloated road construction plan. This resonates with a public that has consistently agreed (a two-thirds majority in the opinion polls) with the DPJ that the road construction plans are highly wasteful. However, even if it manages to maintain its stonewalling tactics to the bitter end (doable; but no sure thing, given the internal dissent that will resurface as the deadline approaches), it will still be faced with the need to pick up the pieces after April 1. The DPJ package is not achievable in its entirety, if only for its revenue implications on the government finances as a whole. The DPJ would wind up with more or less what it would have achieved in the first place, but will be blamed for the momentary chaos that will have transpired in the meantime.
* Sankei on the right has not come out with an editorial on this issue today, preferring to go with the Chinese poisoned dumplings and the Social Insurance Agency. China and the bureaucracy: two Sankei favorites. As editorial fodder of course.
One possible casualty of a compromise is Toshirō Mutō, whose appointment as BOJ Governor appeared all but certain (at least to me) until the political fallout from the JMSDF collision further emboldened the opposition. The name of Yasushi Yamaguchi is being floated in the media today as a compromise figure acceptable to the DPJ. Mr. Yamaguchi is a former Deputy Governor, thus all but eliminating the need for a lengthy vetting process. More important, he is a BOJ lifer (in contrast to Mr. Mutō, a Finance Ministry graduate) and thus passes the partlcular separation-of-powers criterion that the DPJ wishes to impose.
Having said that, a one-day rumor will not a BOJ Governor make. I still think that Mr. Mutō is the overwhelming favorite, but stay tuned.
Tuesday, February 19, 2008
What the Procedural Agreement on Consent for Appointments Means
As a procedural agreement*, it is quite modest in scope. For one thing, the agreement only covers a total of eight positions in four institutions, including the Bank of Japan. This leaves a total of approximately 200 positions in 31 other institutions that require the consent of each of the two Houses outside the purview of this agreement**.
I assume that the two sides consider the nominations for the other 31 institutions to be uneventful. And that should usually be the case, as long as the administration stays away from bureaucrats without specific technical expertise or possible appearance of conflicts of interest. But appointments to, say, NHK, the state-owned broadcasting corporation, will usually be fraught with more controversy than to the Board of Audit, one of the four institutions that fall under the procedural agreement.
Needless to say, the agreement covers only the nomination procedures, and does not change in any way how the two full Houses will treat the nominations if and when they come to the floor. It will be highly damaging to the administration to nominate someone, only to face rejection for understandable cause － say, a non-criminal but still embarrassing personal scandal. Thus, all candidates for the four institutions, will be weighed and vetted with care, and feelers sent out to the opposition before the process officially unfolds, just like those for the other 31 institutions.
But such worries are reserved for the future. As far as the hypothetical nomination of Toshirō Mutō as BOJ Governor is concerned, it’s in the bag. In fact, the entire process appears to have unfolded with the unstated purpose of engineering the nomination without causing serious harm to any of the parties concerned.
Official discount rates and money supply, in the current instance at least, have little, if any, of the kind of public resonance that gasoline taxes/road expenditures (waste! corruption!) or JSDF soldiers in Iraq (our boys in danger! Article 9!). All the while, economic actors had clamored for certainty, increasingly with Mr. Mutō in mind. It became increasingly clear that there was no political upside to an outright rejection reminiscent of the “eternal opposition” of the LDP v. Socialist years.
Not that the DPJ was alone in looking for a graceful climb-down. The ruling coalition could not hope to stare the DPJ down and hope that public opinion would force it to cave. So once the issue came down to procedures, it had to give in to every reasonable opposition demand, lest the coalition itself come to be perceived as the cause of undue delay.
If this affair, in retrospect, has the look of a pre-season match, the two sides play for keeps when the gasoline taxes and the rest of the revenue package reach the Upper House. Here, the Fukuda administration is losing traction with the public. If this continues － and there seems to be little of substance waiting in relief over the coming weeks*** － it will only help the opposition make, and achieve, bolder demands before it allows the fiscal package to pass/be voted on in the Upper House.
* Mainichi as of this writing, had almost as much information as Yomiuri. The Mainichi archives also appear to have the longest shelf life of the Big Four. I’m beginning to feel more left-centrist now.
** The Japanese Wikipedia has the full list of the 35 institutions.
*** Hu Jintao’s visit has been in the sights ever since Shinzō Abe went to Beijing. Thus it should provide a momentary bump at most.
I assume that the two sides consider the nominations for the other 31 institutions to be uneventful. And that should usually be the case, as long as the administration stays away from bureaucrats without specific technical expertise or possible appearance of conflicts of interest. But appointments to, say, NHK, the state-owned broadcasting corporation, will usually be fraught with more controversy than to the Board of Audit, one of the four institutions that fall under the procedural agreement.
Needless to say, the agreement covers only the nomination procedures, and does not change in any way how the two full Houses will treat the nominations if and when they come to the floor. It will be highly damaging to the administration to nominate someone, only to face rejection for understandable cause － say, a non-criminal but still embarrassing personal scandal. Thus, all candidates for the four institutions, will be weighed and vetted with care, and feelers sent out to the opposition before the process officially unfolds, just like those for the other 31 institutions.
But such worries are reserved for the future. As far as the hypothetical nomination of Toshirō Mutō as BOJ Governor is concerned, it’s in the bag. In fact, the entire process appears to have unfolded with the unstated purpose of engineering the nomination without causing serious harm to any of the parties concerned.
Official discount rates and money supply, in the current instance at least, have little, if any, of the kind of public resonance that gasoline taxes/road expenditures (waste! corruption!) or JSDF soldiers in Iraq (our boys in danger! Article 9!). All the while, economic actors had clamored for certainty, increasingly with Mr. Mutō in mind. It became increasingly clear that there was no political upside to an outright rejection reminiscent of the “eternal opposition” of the LDP v. Socialist years.
Not that the DPJ was alone in looking for a graceful climb-down. The ruling coalition could not hope to stare the DPJ down and hope that public opinion would force it to cave. So once the issue came down to procedures, it had to give in to every reasonable opposition demand, lest the coalition itself come to be perceived as the cause of undue delay.
If this affair, in retrospect, has the look of a pre-season match, the two sides play for keeps when the gasoline taxes and the rest of the revenue package reach the Upper House. Here, the Fukuda administration is losing traction with the public. If this continues － and there seems to be little of substance waiting in relief over the coming weeks*** － it will only help the opposition make, and achieve, bolder demands before it allows the fiscal package to pass/be voted on in the Upper House.
* Mainichi as of this writing, had almost as much information as Yomiuri. The Mainichi archives also appear to have the longest shelf life of the Big Four. I’m beginning to feel more left-centrist now.
** The Japanese Wikipedia has the full list of the 35 institutions.
*** Hu Jintao’s visit has been in the sights ever since Shinzō Abe went to Beijing. Thus it should provide a momentary bump at most.
Wednesday, February 13, 2008
In Case Anybody’s Still Worried about the BOJ Succession…
Sankei has the best online reproduction of its hard copy version, and it’s doing this as part of its partnership deal with MSN. I can’t help loving Sankei. I can’t help loving Microsoft. So sue me.
Seriously, one of the good things that Sankei does is to reproduce the Chief Cabinet Secretary’s press briefings in full. Here’s my translation of an excerpt from the February 8 briefing:
Q: In a speech Mr. Tanigaki, [LDP] Policy Research Council Chairman, gave today in Tokyo, he said with regard to the candidacy for BOJ Governor that the ability to communicate to the market was important and that Deputy Governor Mutō had the requisite qualifications. Deputy Governor Mutō, his name has been coming up before; do you think that he is sufficiently qualified?
A. I will not talk about individual names.
Q. How about the BOJ’s personnel decision process next week and beyond (ed. The briefing took place on Friday)?
A. I’m not saying anything.
And that was the end of it. Smart move**; the leaks coming out of the LDP side must have been at the roots of all the commotion in the first place. Expect the LDP to keep a lid on it until the Diet vetting process goes forward. In the meantime, the DPJ seems to be holding up their end of the implicit bargain and eager to calm the waters. Today’s hardcopy Yomiuri has a page four report of a couple of press briefings by DPJ Leaders with a headline (Mr. Ozawa Leaves Door Open to Accepting Mr. Mutō (subtitle Ruling Parties Give Full Negotiating Mandate to Diet Affairs Committee Chairman) almost identical to that of the February 9 article. Here are the translations of the quotes*:
Mr. Ozawa: With regard to the consent for the appointment, it is to be decided yes or no in a meeting of the (party) leaders in Diet matters. (The report interprets this as the intent to make the final determination in the DPJ meeting of Diet member leaders, including Mr. Ozawa, the Secretary-General (Yukio Hatoyama) and the Diet Affairs Committee Chairman (Kenji Yamaoka))
Separation of fiscal and financial [policies] is one line of thought. On the other hand, [the government] has bonds worth 1000 trillion yen outstanding, so (fiscal policy) has a very close relationship with financial policy. There are opinions to the effect that [the issue] should not be determined solely by the logic of separation of fiscal and financial [policies].” (The report interprets this as opening the door to the acceptance of Mr. Mutō’s promotion.)
Kenji Hirata; LDP Upper House Secretary-General: It is arrogant to say that this person won’t do before the government has said, “Please accept this person.” (The report interprets this as a criticism of Mr. Sengoku’s negative comment in Seoul with regard to Mr. Mutō.)
The article goes on to say that Kazumori Ōshima and Mr. Yamaoka, the Diet Affairs Committee Chairmen of the LDP and DPJ respectively, will hammer out the procedures for the Diet process.
So both sides are playing it cool. Expect little of note in the media, until the Diet hearings and the subsequent consent. Nobody has lost, except perhaps the Ozawa-unfriendly Mr. Sentani. All in all, a good deal for the markets.
* Keep in mind that newspaper quotes are not always verbatim renditions. In this case, however, I don’t think that there is any undue paraphrasing.
** Mr. Machimura has other reasons to mind his words. He has a surprisingly sharp tongue, and it has been getting him into trouble from time to time. Yesterday, he had to apologize in the Diet for insinuating in the Lower House Budget Committee that Mr. Ozawa had acted improperly with regard to party funds when he merged his Liberal Party into the old DPJ in 2003. He also asked that the offending comments be deleted. Permission granted. The controversy itself is discussed in this previous post.
Completely off-topic: Speaking of a quiet media, there’s been a deafening silence around the Defense Ministry scandals during this Diet session. Perhaps I was right and the LDP did luck out when it blew open during the previous extraordinary session. Let’s see if the DPJ decides to revive it (or, more significantly, something happens that compels it to do so) as April 1 approaches and it’s crunch time for the budget and the budget-related legislation. I removed this paragraph inadvertently when I was correcting some typos after I had posted it. I noticed it when I added the subsequent paragraph, so I am restoring it now.
ADD: Taking the matter up at the party leadership as a matter of logic takes the decision away from Mr. Sengoku, contrary to what Mr. Ozawa had stated initially.
ADD 2: Here’s my translation of an excerpt from the February 12 Chief Cabinet Secretary briefing:
Q. Will the BOJ appointments be submitted to the Diet this week? Also, there are news reports that a proposal to appoint (Toshirō) Muto as Governor and former BOJ board member Masaaki Shirakawa as Deputy Governor, so what are the facts?
A. That news report has no foundation in facts. In any case, the honorable Takeo Nishioka, Chairman of the Upper House Rules and Administration Committee, has said that if BOJ appointments are reported, that will be considered prior leaking by the government and [the appointments] shall not be given confirmation. Since these conditions or rules, shall we say, exist, I am sorry, but with regard to the issue of the BOJ Governor, regardless of what kind of question you may put forth, I definitely will not answer them.
Seriously, one of the good things that Sankei does is to reproduce the Chief Cabinet Secretary’s press briefings in full. Here’s my translation of an excerpt from the February 8 briefing:
Q: In a speech Mr. Tanigaki, [LDP] Policy Research Council Chairman, gave today in Tokyo, he said with regard to the candidacy for BOJ Governor that the ability to communicate to the market was important and that Deputy Governor Mutō had the requisite qualifications. Deputy Governor Mutō, his name has been coming up before; do you think that he is sufficiently qualified?
A. I will not talk about individual names.
Q. How about the BOJ’s personnel decision process next week and beyond (ed. The briefing took place on Friday)?
A. I’m not saying anything.
And that was the end of it. Smart move**; the leaks coming out of the LDP side must have been at the roots of all the commotion in the first place. Expect the LDP to keep a lid on it until the Diet vetting process goes forward. In the meantime, the DPJ seems to be holding up their end of the implicit bargain and eager to calm the waters. Today’s hardcopy Yomiuri has a page four report of a couple of press briefings by DPJ Leaders with a headline (Mr. Ozawa Leaves Door Open to Accepting Mr. Mutō (subtitle Ruling Parties Give Full Negotiating Mandate to Diet Affairs Committee Chairman) almost identical to that of the February 9 article. Here are the translations of the quotes*:
Mr. Ozawa: With regard to the consent for the appointment, it is to be decided yes or no in a meeting of the (party) leaders in Diet matters. (The report interprets this as the intent to make the final determination in the DPJ meeting of Diet member leaders, including Mr. Ozawa, the Secretary-General (Yukio Hatoyama) and the Diet Affairs Committee Chairman (Kenji Yamaoka))
Separation of fiscal and financial [policies] is one line of thought. On the other hand, [the government] has bonds worth 1000 trillion yen outstanding, so (fiscal policy) has a very close relationship with financial policy. There are opinions to the effect that [the issue] should not be determined solely by the logic of separation of fiscal and financial [policies].” (The report interprets this as opening the door to the acceptance of Mr. Mutō’s promotion.)
Kenji Hirata; LDP Upper House Secretary-General: It is arrogant to say that this person won’t do before the government has said, “Please accept this person.” (The report interprets this as a criticism of Mr. Sengoku’s negative comment in Seoul with regard to Mr. Mutō.)
The article goes on to say that Kazumori Ōshima and Mr. Yamaoka, the Diet Affairs Committee Chairmen of the LDP and DPJ respectively, will hammer out the procedures for the Diet process.
So both sides are playing it cool. Expect little of note in the media, until the Diet hearings and the subsequent consent. Nobody has lost, except perhaps the Ozawa-unfriendly Mr. Sentani. All in all, a good deal for the markets.
* Keep in mind that newspaper quotes are not always verbatim renditions. In this case, however, I don’t think that there is any undue paraphrasing.
** Mr. Machimura has other reasons to mind his words. He has a surprisingly sharp tongue, and it has been getting him into trouble from time to time. Yesterday, he had to apologize in the Diet for insinuating in the Lower House Budget Committee that Mr. Ozawa had acted improperly with regard to party funds when he merged his Liberal Party into the old DPJ in 2003. He also asked that the offending comments be deleted. Permission granted. The controversy itself is discussed in this previous post.
Completely off-topic: Speaking of a quiet media, there’s been a deafening silence around the Defense Ministry scandals during this Diet session. Perhaps I was right and the LDP did luck out when it blew open during the previous extraordinary session. Let’s see if the DPJ decides to revive it (or, more significantly, something happens that compels it to do so) as April 1 approaches and it’s crunch time for the budget and the budget-related legislation. I removed this paragraph inadvertently when I was correcting some typos after I had posted it. I noticed it when I added the subsequent paragraph, so I am restoring it now.
ADD: Taking the matter up at the party leadership as a matter of logic takes the decision away from Mr. Sengoku, contrary to what Mr. Ozawa had stated initially.
ADD 2: Here’s my translation of an excerpt from the February 12 Chief Cabinet Secretary briefing:
Q. Will the BOJ appointments be submitted to the Diet this week? Also, there are news reports that a proposal to appoint (Toshirō) Muto as Governor and former BOJ board member Masaaki Shirakawa as Deputy Governor, so what are the facts?
A. That news report has no foundation in facts. In any case, the honorable Takeo Nishioka, Chairman of the Upper House Rules and Administration Committee, has said that if BOJ appointments are reported, that will be considered prior leaking by the government and [the appointments] shall not be given confirmation. Since these conditions or rules, shall we say, exist, I am sorry, but with regard to the issue of the BOJ Governor, regardless of what kind of question you may put forth, I definitely will not answer them.
Sunday, February 10, 2008
Bank of Japan Governor Succession as Good as Done
Ichirō Ozawa was in Chiba City, where some comments he made during a press briefing had the media playing a guessing game. Namely, did Mr. Ozawa give the nod, however tentative, to Toshirō Mutō, the Fukuda administration’s choice as the successor to Toshihiko Fukui, the next Governor of the Bank of Japan? The Governor must receive the approval of both House of the Diet, but the ruling coalition does not command a majority in the Upper House. Since the Communists and Social Democrats will never vote in favor of the government’s candidate and there is no supermajority override available, the Fukuda administration needs the DPJ’s consent in order to make the appointment.
Mr. Fukui’s term ends on March 19, but a reappointment was never in the cards after he nearly lost his job in 2006 due to his investment in the Murakami Fund. The dip in the global stock market and the concomitant economic uncertainties triggered by the subprime loans crisis has lent an added urgency to the swift resolution of the succession.
By all accounts, Mr. Mutō is a fine candidate for the assignment. He has kept his nose clean as Deputy Governor since his appointment in 2003, and is generally well-regarded in most quarters. In fact, the only serious DPJ objection against Mr. Mutō is that he is a former Administrative Vice-Minister of Finance. For the DPJ regards his promotion as a violation of “”zaisei-kinyū bunri no gensoku (the principle of separation of fiscal and financial [policies])”.
This was the situation under which the press popped the question to Mr. Ozawa, and the media recorded more or less the same words. However, they chose to spin it in different directions. And for once, they do not arrange themselves along ideological lines, or according to their proximity to the administration. Look at the headlines:
Asahi: BOJ Governor Appointment Decision “Blank Sheet”, Will Respect Decision of Party Subcommittee(日銀総裁人事「白紙」、党小委の判断尊重 民主・小沢氏)
Mainichi: BPJ Governor: Does Not Disavow Mr. Mutō (日銀総裁：武藤氏の昇格否定せず…民主党・小沢代表)
Yomiuri: DPJ Chief Ozawa Leaves Door Open to Mr. Mutō’s Promotion to BOJ Governor (民主党の小沢代表、武藤氏の日銀総裁昇格に含み)
Sankei: “Completely a Blank Sheet” Mr. Ozawa on BOJ Governor Appointment (「まったくの白紙」 日銀総裁人事で小沢氏)
Actually, it’s a done deal, even if they don’t realize it yet. There’s little more than a month to go, so it’s too late to come up with an alternative. No serious bank is going to cough up its successful president at short notice to assume the top spot at BOJ. The best it could do would be to offer its chairman － largely a ceremonial post － or a vice-president who is slated to be on the way out anyway. That is not a good message to be sent to the market. And that’s assuming that he passes the rigorous vetting process. That leaves Kazumasa Iwata, the other deputy governor. Now Dr. Iwata is a fine economist and appears to favor an expansionary monetary policy, so it’s plausible. But he’s a lifelong academic, though he did spend his first 14 years after university as a government economist**. Mr. Mutō is the guy that the establishment wants, and the DPJ has little to gain and much to lose in terms of political credibility by pressing this case without a publicly compelling reason; a surprise nomination at this point is a highly remote possibility at most.
* The former Economic Planning Agency. The best and brightest at the EPA tended to leave as soon as they could land a tenured (associate) professorship at a prestigious university. Dr. Iwata landed in Tokyo University. He did return to his old haunts (now merged into the Cabinet Office) in 2001 to take charge of state-of-the-economy and economic-policy analyses until he was appointed to his current job in 2003.
(Pre-post ADD) I often let something that I’ve written lie until the next day. Some of them never get posted, saving me a lot of embarrassment. This was another one that I put away as a draft yesterday, and what do you know, the media reports from Seoul tell me that Yoshihito Sengoku, former DPJ Policy Research Council Chairman, pushed back on Mr. Mutō’s putative appointment, crfiticizing the BOJ, saying, “Are there (other) central banks buying 1.2 trillion yen worth of state bonds every month?”* With regard to Mr. Mutō, he said that “if you evaluate (the financial policy taken in the five-years under Governor Fukui), logic does not lead to elevating [Mr. Mutō] to Governor.”* By this logic, Dr. Iwata, or any other of the current board members for that matter, would be inappropriate.
Mr. Sengoku is not just any other DPJ Diet member. He is the head of the DPJ subcommittee that vets candidates for appointments subject to Diet approval, and Mr. Ozawa was clearly referring to that subcommittee when he stated that the decision would be made in the appropriate department. Moreover, Mr. Sengoku hails from the old Socialist Party, and does not see eye to eye with Mr. Ozawa. Could he use the vetting process to force Mr. Ozawa away from any thoughts of collaborating with the Fukuda administration?
But does this change the overall trajectory? Should I rewrite my narrative above the line? Not at all. There have been a string of news reports over the past week suggesting that the LDP was in the process of putting the final touches on Mr. Mutō’s candidacy and that Mr. Ozawa was opening the door to Mr. Mutō’s acceptance. The media had no choice but to pop the question; and Mr. Sengoku had no choice but to answer negatively, if only to preserve his prerogative. Mr. Sengoku may or may not be ill-disposed to Mr. Mutō, and he may or may not wish to undermine Mr. Ozawa**. His critique of Mr. Fukui’s steerage is a common, if not accepted uncritically, one. However, a wholesale disqualification of banking officials associated with Mr. Fukui’s steerage would paralyze the BOJ. I do not believe that Mr. Sengoku can take his statement to its ultimate conclusion. He will extract his pound of flesh when he cross-examines Mr. Mutō. But the potential reception of the financial market and the resultant damage to the DPJ’s reputation will be such that the usually reasonable Mr. Sengoku will acquiesce with time to spare before the March 19 deadline.
* The quotes have been reconstructed from Asahi , Yomiuri (hard copy only), and Sankei articles.
** In fact, he was in Seoul as part of a multiparty delegation to South Korea led by two left-center LDP leaders, Taku Yamazaki and Kōichi Katō. According to the Yomiuri, some people in the DPJ take the trip as a sign that Mr. Sengoku may be plotting against Mr. Ozawa. Whatever the truth of the matter may be, you don’t go on a bipartisan junket and use the occasion to undermine the LDP on the BOJ appointment.
Mr. Fukui’s term ends on March 19, but a reappointment was never in the cards after he nearly lost his job in 2006 due to his investment in the Murakami Fund. The dip in the global stock market and the concomitant economic uncertainties triggered by the subprime loans crisis has lent an added urgency to the swift resolution of the succession.
By all accounts, Mr. Mutō is a fine candidate for the assignment. He has kept his nose clean as Deputy Governor since his appointment in 2003, and is generally well-regarded in most quarters. In fact, the only serious DPJ objection against Mr. Mutō is that he is a former Administrative Vice-Minister of Finance. For the DPJ regards his promotion as a violation of “”zaisei-kinyū bunri no gensoku (the principle of separation of fiscal and financial [policies])”.
This was the situation under which the press popped the question to Mr. Ozawa, and the media recorded more or less the same words. However, they chose to spin it in different directions. And for once, they do not arrange themselves along ideological lines, or according to their proximity to the administration. Look at the headlines:
Asahi: BOJ Governor Appointment Decision “Blank Sheet”, Will Respect Decision of Party Subcommittee(日銀総裁人事「白紙」、党小委の判断尊重 民主・小沢氏)
Mainichi: BPJ Governor: Does Not Disavow Mr. Mutō (日銀総裁：武藤氏の昇格否定せず…民主党・小沢代表)
Yomiuri: DPJ Chief Ozawa Leaves Door Open to Mr. Mutō’s Promotion to BOJ Governor (民主党の小沢代表、武藤氏の日銀総裁昇格に含み)
Sankei: “Completely a Blank Sheet” Mr. Ozawa on BOJ Governor Appointment (「まったくの白紙」 日銀総裁人事で小沢氏)
Actually, it’s a done deal, even if they don’t realize it yet. There’s little more than a month to go, so it’s too late to come up with an alternative. No serious bank is going to cough up its successful president at short notice to assume the top spot at BOJ. The best it could do would be to offer its chairman － largely a ceremonial post － or a vice-president who is slated to be on the way out anyway. That is not a good message to be sent to the market. And that’s assuming that he passes the rigorous vetting process. That leaves Kazumasa Iwata, the other deputy governor. Now Dr. Iwata is a fine economist and appears to favor an expansionary monetary policy, so it’s plausible. But he’s a lifelong academic, though he did spend his first 14 years after university as a government economist**. Mr. Mutō is the guy that the establishment wants, and the DPJ has little to gain and much to lose in terms of political credibility by pressing this case without a publicly compelling reason; a surprise nomination at this point is a highly remote possibility at most.
* The former Economic Planning Agency. The best and brightest at the EPA tended to leave as soon as they could land a tenured (associate) professorship at a prestigious university. Dr. Iwata landed in Tokyo University. He did return to his old haunts (now merged into the Cabinet Office) in 2001 to take charge of state-of-the-economy and economic-policy analyses until he was appointed to his current job in 2003.
(Pre-post ADD) I often let something that I’ve written lie until the next day. Some of them never get posted, saving me a lot of embarrassment. This was another one that I put away as a draft yesterday, and what do you know, the media reports from Seoul tell me that Yoshihito Sengoku, former DPJ Policy Research Council Chairman, pushed back on Mr. Mutō’s putative appointment, crfiticizing the BOJ, saying, “Are there (other) central banks buying 1.2 trillion yen worth of state bonds every month?”* With regard to Mr. Mutō, he said that “if you evaluate (the financial policy taken in the five-years under Governor Fukui), logic does not lead to elevating [Mr. Mutō] to Governor.”* By this logic, Dr. Iwata, or any other of the current board members for that matter, would be inappropriate.
Mr. Sengoku is not just any other DPJ Diet member. He is the head of the DPJ subcommittee that vets candidates for appointments subject to Diet approval, and Mr. Ozawa was clearly referring to that subcommittee when he stated that the decision would be made in the appropriate department. Moreover, Mr. Sengoku hails from the old Socialist Party, and does not see eye to eye with Mr. Ozawa. Could he use the vetting process to force Mr. Ozawa away from any thoughts of collaborating with the Fukuda administration?
But does this change the overall trajectory? Should I rewrite my narrative above the line? Not at all. There have been a string of news reports over the past week suggesting that the LDP was in the process of putting the final touches on Mr. Mutō’s candidacy and that Mr. Ozawa was opening the door to Mr. Mutō’s acceptance. The media had no choice but to pop the question; and Mr. Sengoku had no choice but to answer negatively, if only to preserve his prerogative. Mr. Sengoku may or may not be ill-disposed to Mr. Mutō, and he may or may not wish to undermine Mr. Ozawa**. His critique of Mr. Fukui’s steerage is a common, if not accepted uncritically, one. However, a wholesale disqualification of banking officials associated with Mr. Fukui’s steerage would paralyze the BOJ. I do not believe that Mr. Sengoku can take his statement to its ultimate conclusion. He will extract his pound of flesh when he cross-examines Mr. Mutō. But the potential reception of the financial market and the resultant damage to the DPJ’s reputation will be such that the usually reasonable Mr. Sengoku will acquiesce with time to spare before the March 19 deadline.
* The quotes have been reconstructed from Asahi , Yomiuri (hard copy only), and Sankei articles.
** In fact, he was in Seoul as part of a multiparty delegation to South Korea led by two left-center LDP leaders, Taku Yamazaki and Kōichi Katō. According to the Yomiuri, some people in the DPJ take the trip as a sign that Mr. Sengoku may be plotting against Mr. Ozawa. Whatever the truth of the matter may be, you don’t go on a bipartisan junket and use the occasion to undermine the LDP on the BOJ appointment.
Friday, January 18, 2008
Five Bills Face March 31 Deadline in Twisted Diet; BOJ Governorship Also on the Line
I looked into this to satisfy my own curiosity, but I thought that people who cannot read Japanese but are into the facts might be interested. I’d be happy to do a more detailed analysis, but hey, there’s only so much I can do without getting paid.
There will be five bills on the table that face deadlines. By the end of March, the main battlefront will be the gasoline taxes. The fight over the replacement for BOJ Governor should also be over by then. Let’s look at them one-by-one. Bill to:
1. Amend Income Tax Act and Others: The extension of national special tax measures is the main purpose of this amendment. The “temporary” supercharge on the volatile oil tax, set to expire at the end (March 31) of the fiscal year is the main event in this Diet session. The local road tax, collected as a national tax and distributed to local governments, also expires as of March 31. These two taxes, collected at the point of purchase on gasoline sales, comprise what I have been calling the gasoline tax. In the future, I will refer to them in the plural, as “gasoline taxes”, so as not to confuse them with the singular volatile oil tax.
2. Amend Local Tax Act and Others: Similar to 1, for prefectural and municipal taxes. The “temporary” surcharge on the automobile acquisition tax, collected and used by prefectural governments and also distributed to municipalities, expires as of March 31. The “temporary” surcharge on the automobile weight tax, collected as a national tax and also distributed to municipalities, expires as of April 30.
3. Amend Customs Tariff Act and others: Here, the key is the Temporary Customs Tariff Measures Act, under which the government reduces rates on much of its imports. The temporary reduction on beef expires as of March 31.
4. Adopt Special Measures Act on the Issuance of Public Bonds: Each year, the Diet passes a law to authorize the government to issue a set amount of so-called akaji kokusai, or national bonds to cover the national budget deficit*.
5. Extend Extraordinary Measures Act on Financing Funds for the Improvement of Fisheries Processing Industry Facilities: It authorizes government-backed, long-term, low-interest financing for… the improvement of fisheries processing industry facilities, what else. It expires as of March 31.
Let’s deal with the easy ones first. No.5 looks like a gimmie. Nobody wants to annoy the fishing lobby, though they could wait a few weeks for a Lower House override if it comes to that. No. 3 is an even easier call, since nobody wants to piss off, in no particular order: all consumers, all developing countries, the United States, and Australia, the world’s largest kangaroo meat exporter, to name just a few.
No.4 will pass eventually; the opposition cannot deny the short-term reality that without the authorization, the government will grind to a stop at some point during the fiscal year. The opposition will look highly irresponsible if it lets the bill linger in the Upper House into the new fiscal year before the Lower House passes it with the override, likely at some point in April. The DPJ is apparently willing to give a pass to a bill that will be submitted as part of the FY2007 supplementary budget package** to authorize local governments to issue deficit bonds to cover FY 2008 revenue shortfalls, and I see the same thing happening with regard to the FY 2008 national deficit bonds. Along the way, the opposition will surely criticize the ruling coalition for, say, “the long years of fiscal mismanagement that created this mess”. I think that this particular debate will be more like a wash, since the ruling coalition can also score some points by demanding that the DPJ account for the multitrillion coverage for its public pension funding, subsidize-the-microfarmers and childcare subsidies and other proposals.
So it boils down to Nos. 1 and 2. They are a package, but it is the gasoline taxes that really matter. I expect the Fukuda Cabinet to submit a bill that is allows for a possible hiatus between April 1 and the eventual enactment of the bill in the case of the gasoline taxes, since, unlike tax benefits, they cannot be made retroactive***. If they don’t, it probably means that they are daring the DPJ to play a game of Chicken. A relatively short delay in the tax benefits will not have a serious effect on the macro-economy, since the tax benefits mostly cover capital expenditures that can be delayed. A promise at some point from the ruling coalition that it would exercise the override (and thus make the measures retroactive) should erase any concerns in the market. But the gasoline taxes revenue during the gap will be lost forever. Somewhat less important, the two technical adjustments as the tax rates go down and back up again will cause confusing at the points of sale. All this assumes that the ruling coalition will exercise the override. That, I think, is the most likely outcome, given the balance of interests that both sides must consider. However, both sides will also be driven by public opinion and media coverage, so a compromise is possible. What I don’t think is possible: a snap election before the session is up; or total ruling coalition/opposition capitulation on the gasoline taxes.
Addition: The gasoline taxes in No.1 are taxed to the producer/wholesaler at the point of sale to the retailer, not at the pump as I had erroneously assumed. Thus, the “technical” adjustments will be far smaller than I had anticipated. However, difficult pricing decisions remain at the retail level and should cause confusion at the pump, where drivers will expect instant gratification while the lower tax rates must work (or not) their way into the retail price over several weeks. The light oil transaction tax, the local (prefectural) tax that is the diesel engine equivalent of the volatile oil tax (this is an important item that I'd originally missed; I have to see the eventual bill to produce definitive lists of the included items), is taxed to the retailer (non-gasoline, non-light oil hydrocarbon fuel used in internal combustion engines is taxed to the producer/wholesaler; kerosene is specifically mentioned, but alcohol fuel should be covered here), so the time lag between tax incidence and the final sale will be much shorter. This means that a temporary adjustment is much easier for trucks and buses than for passenger automobiles. Also, expect a drop in auto sales in the coming months in anticipation of a tax reduction after March 31 and a corresponding jump after that as auto buyers rush to take advantage of what I believe will be a temporary situation. (December 19)
Something else is set to expire as of March 19. Toshihiko Fukui’s term as the Governor of the Bank of Japan is coming to an end, and he has only a marginally better chance to be reappointed than President Bush has to be elected to a third term. In the past, Toshirō Mutō, currently Deputy Governor and former MOF Vice-Minister, would be a shoo-in, but the DPJ is strongly opposed to his appointment. It requires the consent of both Houses, and there are no provisions for an override. The Cabinet could reappoint him to the BOJ Board of Directors any way － his term is up as well, but it can do that without the Diet’s consent － and name him acting Governor, but it probably wouldn’t be the same. At a minimum, it will send a negative signal about Japanese governance when the global financial market may still be in the throes of the subprime-driven crisis. With the uncertainties in the Middle East, the inhospitable climate between the US and Russia, the US Presidential election, and the potential for acts of global terrorism, a BOJ leadership that lacks firm political backing is an unpleasant plan B. Both sides will be looking at public opinion polls and media coverage for guidance here as well, as they grope towards a compromise whose outlines nobody can ascertain as of now.
* Funding for roads, dams, development loans, etc. are covered by “national construction bonds”. These expenditures do not go into the budget deficit in the first instant because they create assets. I assume that depreciating assets must be amortized, but I have to check it.
** Every fiscal year, the Cabinet submits one supplementary budget (sometimes two) budgets to take care of unforeseen matters such as additional expenditures to cover earthquake damages and additional deficit bonds to cover increased tax revenue shortfalls, as well as additional expenditures and tax relief to goose the economy.
*** Actually, I think it would be unconstitutional.
Off topic: The media says that Masataka Kitagawa, the highly-influential former Governor of Mie Prefecture and reportedly first choice of the DPJ to challenge Shintarō Ishihara in the 2007 Tokyo gubernatorial, is getting together with businessmen, academics and other local political leaders to start a new policy study group. Could this movement be the catalyst for a true makeover of Japanese politics? If so, then it’s something that many people including me have been hoping for since the 90s, when many of the best and brightest of the establishment elite with political ambitions began to put national politics on hold and go into local politics. I’ll see if there’s more to post after they make the official announcement tomorrow, on Saturday.
There will be five bills on the table that face deadlines. By the end of March, the main battlefront will be the gasoline taxes. The fight over the replacement for BOJ Governor should also be over by then. Let’s look at them one-by-one. Bill to:
1. Amend Income Tax Act and Others: The extension of national special tax measures is the main purpose of this amendment. The “temporary” supercharge on the volatile oil tax, set to expire at the end (March 31) of the fiscal year is the main event in this Diet session. The local road tax, collected as a national tax and distributed to local governments, also expires as of March 31. These two taxes, collected at the point of purchase on gasoline sales, comprise what I have been calling the gasoline tax. In the future, I will refer to them in the plural, as “gasoline taxes”, so as not to confuse them with the singular volatile oil tax.
2. Amend Local Tax Act and Others: Similar to 1, for prefectural and municipal taxes. The “temporary” surcharge on the automobile acquisition tax, collected and used by prefectural governments and also distributed to municipalities, expires as of March 31. The “temporary” surcharge on the automobile weight tax, collected as a national tax and also distributed to municipalities, expires as of April 30.
3. Amend Customs Tariff Act and others: Here, the key is the Temporary Customs Tariff Measures Act, under which the government reduces rates on much of its imports. The temporary reduction on beef expires as of March 31.
4. Adopt Special Measures Act on the Issuance of Public Bonds: Each year, the Diet passes a law to authorize the government to issue a set amount of so-called akaji kokusai, or national bonds to cover the national budget deficit*.
5. Extend Extraordinary Measures Act on Financing Funds for the Improvement of Fisheries Processing Industry Facilities: It authorizes government-backed, long-term, low-interest financing for… the improvement of fisheries processing industry facilities, what else. It expires as of March 31.
Let’s deal with the easy ones first. No.5 looks like a gimmie. Nobody wants to annoy the fishing lobby, though they could wait a few weeks for a Lower House override if it comes to that. No. 3 is an even easier call, since nobody wants to piss off, in no particular order: all consumers, all developing countries, the United States, and Australia, the world’s largest kangaroo meat exporter, to name just a few.
No.4 will pass eventually; the opposition cannot deny the short-term reality that without the authorization, the government will grind to a stop at some point during the fiscal year. The opposition will look highly irresponsible if it lets the bill linger in the Upper House into the new fiscal year before the Lower House passes it with the override, likely at some point in April. The DPJ is apparently willing to give a pass to a bill that will be submitted as part of the FY2007 supplementary budget package** to authorize local governments to issue deficit bonds to cover FY 2008 revenue shortfalls, and I see the same thing happening with regard to the FY 2008 national deficit bonds. Along the way, the opposition will surely criticize the ruling coalition for, say, “the long years of fiscal mismanagement that created this mess”. I think that this particular debate will be more like a wash, since the ruling coalition can also score some points by demanding that the DPJ account for the multitrillion coverage for its public pension funding, subsidize-the-microfarmers and childcare subsidies and other proposals.
So it boils down to Nos. 1 and 2. They are a package, but it is the gasoline taxes that really matter. I expect the Fukuda Cabinet to submit a bill that is allows for a possible hiatus between April 1 and the eventual enactment of the bill in the case of the gasoline taxes, since, unlike tax benefits, they cannot be made retroactive***. If they don’t, it probably means that they are daring the DPJ to play a game of Chicken. A relatively short delay in the tax benefits will not have a serious effect on the macro-economy, since the tax benefits mostly cover capital expenditures that can be delayed. A promise at some point from the ruling coalition that it would exercise the override (and thus make the measures retroactive) should erase any concerns in the market. But the gasoline taxes revenue during the gap will be lost forever. Somewhat less important, the two technical adjustments as the tax rates go down and back up again will cause confusing at the points of sale. All this assumes that the ruling coalition will exercise the override. That, I think, is the most likely outcome, given the balance of interests that both sides must consider. However, both sides will also be driven by public opinion and media coverage, so a compromise is possible. What I don’t think is possible: a snap election before the session is up; or total ruling coalition/opposition capitulation on the gasoline taxes.
Addition: The gasoline taxes in No.1 are taxed to the producer/wholesaler at the point of sale to the retailer, not at the pump as I had erroneously assumed. Thus, the “technical” adjustments will be far smaller than I had anticipated. However, difficult pricing decisions remain at the retail level and should cause confusion at the pump, where drivers will expect instant gratification while the lower tax rates must work (or not) their way into the retail price over several weeks. The light oil transaction tax, the local (prefectural) tax that is the diesel engine equivalent of the volatile oil tax (this is an important item that I'd originally missed; I have to see the eventual bill to produce definitive lists of the included items), is taxed to the retailer (non-gasoline, non-light oil hydrocarbon fuel used in internal combustion engines is taxed to the producer/wholesaler; kerosene is specifically mentioned, but alcohol fuel should be covered here), so the time lag between tax incidence and the final sale will be much shorter. This means that a temporary adjustment is much easier for trucks and buses than for passenger automobiles. Also, expect a drop in auto sales in the coming months in anticipation of a tax reduction after March 31 and a corresponding jump after that as auto buyers rush to take advantage of what I believe will be a temporary situation. (December 19)
Something else is set to expire as of March 19. Toshihiko Fukui’s term as the Governor of the Bank of Japan is coming to an end, and he has only a marginally better chance to be reappointed than President Bush has to be elected to a third term. In the past, Toshirō Mutō, currently Deputy Governor and former MOF Vice-Minister, would be a shoo-in, but the DPJ is strongly opposed to his appointment. It requires the consent of both Houses, and there are no provisions for an override. The Cabinet could reappoint him to the BOJ Board of Directors any way － his term is up as well, but it can do that without the Diet’s consent － and name him acting Governor, but it probably wouldn’t be the same. At a minimum, it will send a negative signal about Japanese governance when the global financial market may still be in the throes of the subprime-driven crisis. With the uncertainties in the Middle East, the inhospitable climate between the US and Russia, the US Presidential election, and the potential for acts of global terrorism, a BOJ leadership that lacks firm political backing is an unpleasant plan B. Both sides will be looking at public opinion polls and media coverage for guidance here as well, as they grope towards a compromise whose outlines nobody can ascertain as of now.
* Funding for roads, dams, development loans, etc. are covered by “national construction bonds”. These expenditures do not go into the budget deficit in the first instant because they create assets. I assume that depreciating assets must be amortized, but I have to check it.
** Every fiscal year, the Cabinet submits one supplementary budget (sometimes two) budgets to take care of unforeseen matters such as additional expenditures to cover earthquake damages and additional deficit bonds to cover increased tax revenue shortfalls, as well as additional expenditures and tax relief to goose the economy.
*** Actually, I think it would be unconstitutional.
Off topic: The media says that Masataka Kitagawa, the highly-influential former Governor of Mie Prefecture and reportedly first choice of the DPJ to challenge Shintarō Ishihara in the 2007 Tokyo gubernatorial, is getting together with businessmen, academics and other local political leaders to start a new policy study group. Could this movement be the catalyst for a true makeover of Japanese politics? If so, then it’s something that many people including me have been hoping for since the 90s, when many of the best and brightest of the establishment elite with political ambitions began to put national politics on hold and go into local politics. I’ll see if there’s more to post after they make the official announcement tomorrow, on Saturday.
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