According to BCS, near-realtime provider of ITC and digital home appliances sales data, the Walkman—yes, the brand lives—beat the ubiquitous iPod in retail sales last month for the first time since BCS began keeping score almost nine months ago, in 2001 November. Bad news? The real winner was the iPhone, which appears to have cannibalized iPod sales. Plus, iPod is about to launch new models.
Never mind the new iPod models, how’s the Xperia doing?
Showing posts with label Japanese economy. Show all posts
Showing posts with label Japanese economy. Show all posts
Wednesday, September 01, 2010
Sunday, May 02, 2010
Alert: Central Bank Becoming Development Bank?
Tuesday, September 01, 2009
Recomendations for a DPJ Administration: The Sequel
I met Tobias Harris last night, when he reminded me that he had responded on his blog to this post on my blog. It did point to a serious technical error in my original comments at the very beginning, so perhaps an acknowledgement of my mistake is overdue...
1. Oops, I forgot about the FY2009 budget. Remind me not to contest the numbers from a Japan strategist. Of course, you are right, Ms. Fink, that was not the core of my argument, which is that, basically, much of the “large pool of capital, much of which has yet to be dispensed, ripe for spending to boost the economy,” may in fact be gone or will be hard to revisit, as the DPJ says that it intends to do. To put it another way, “Mr. Hatoyama and other party leaders’ chances of boosting “their credibility by offering a more realistic stimulus plan, which will establish more concrete funding,” appears to be low and very risky as far as FY2009 is concerned simply because half the fiscal year will be gone before the DPJ can put a hold on things and another month, minimum, before it can put its own plan into action. Much of the money will be gone, or as good as gone well before the next FY.
2. I’ve always had grave personal reserves about dipping into the FX Special Account profits. The Account looks very much like thebiggest second biggest carry-trade operation on the planet. Unless you ignore currency risk, I don’t understand how it can be considered less costly than borrowing from the market. Between tax revenues and government bonds, it is much closer in nature to the latter than the former. I don’t see that as “buried treasure” at all. But maybe that’s just me. (Note also that not all of the 4 trillion—in a good year!—will be available for stimulus, since a large chunk of those profits has more or less become incorporated into the annual revenue for the General Budget.) The budgetary effect of lending the money to JBIC depends on the spread between JBIC borrowing from the market and the interest rate on the loans to JBIC (LIBOR+0.3%, for 5 years, apparently). My guess is that it’s a drop in the bucket compared to the 88 trillion yen General Budget.
3. I have no quarrels about the long-term desirability of balancing the budget. I had grave doubts about the desirability, policy- and politics-wise, of your suggestion that “the DPJ should offer measurable annual targets for deficit reduction” ahead of the polling. Making up numbers out of thin air in the last ten days of the political campaign appeared not only to be a act of technocratic folly but would also put a big fat “kick me” on the DPJ butt for the LDP aim at for the next 4 years. I think I made my case sufficiently clear in the original post, but there you are.
4. Going forward, I have no objection to the points that you make here to the extent that arguments regarding FY2009, 2010 and beyond are properly distinguished.
5. A “promise to postpone indefinitely any increase in the consumption tax” is a political, not economic statement. As such, it will be judged politically. Now the DPJ has pretty much said soin exactly if not in exactly those terms (as properly translated into Japanese). I think we should agree to disagree now about the political implications of explicitly putting “indefinitely” into play while at the same time setting primary balance targets.
6. As for widening the tax base, eliminating/cutting back on special tax measures, even under revenue-neutral constraints, is technically not that difficult to do, though it will encounter political resistance from vested interests. I will not offer any substantive comments on your suggestion stricter enforcement of existing guidelines, since I know next to nothing about the laws and regulations—how strictly they are enforced, in whose favor ambiguities are resolved, and whether the tax authorities have enough underutilized human resources to make the extra effort—to guess what kind of impact such action will have on government finances, and how soon.
7. Regarding your final counterpoint, my answer: Yes, but. All op-eds, at least in media outlets for general consumption, occur within a commonly shared context (or a commonly shared set of conflicting contexts). I see your op-ed as basically a call for the continuation of the wholesale reform that Koizumi politically and Takenaka technocratically set in motion yet left woefully uncompleted—or its logical extension. But, with ten days to go between your op-ed and the election, the K-T reform had been rejected in rhetoric and manifesto by the leaderships of all the parties except perhaps the Your Party (whose tentative feelers for a post-election coalition were summarily rejected by the DPJ Secretary-General). Now, Ms. Fink, you are an economist. You have the right to say, “Well, this is the best course of action for the DPJ and possibly Japan. You comments occur within the political realm, which is not where my opinions in this instance are unfolding.” But Tobias, you are a political scientist. Do you really think that an op-ed that does not give any recognition to the basic political context into which your recommendations are being injected is appropriate? In fact, you do acknowledge the political context of your technical opinions when you write of the DPJ/Hatoyama’s “credibility.” I do not believe that you can reject the consideration of the political and likely technical difficulties and impossibilities of your recommendations and argue for their political efficacy at the same time.
That’s about it.
1. Oops, I forgot about the FY2009 budget. Remind me not to contest the numbers from a Japan strategist. Of course, you are right, Ms. Fink, that was not the core of my argument, which is that, basically, much of the “large pool of capital, much of which has yet to be dispensed, ripe for spending to boost the economy,” may in fact be gone or will be hard to revisit, as the DPJ says that it intends to do. To put it another way, “Mr. Hatoyama and other party leaders’ chances of boosting “their credibility by offering a more realistic stimulus plan, which will establish more concrete funding,” appears to be low and very risky as far as FY2009 is concerned simply because half the fiscal year will be gone before the DPJ can put a hold on things and another month, minimum, before it can put its own plan into action. Much of the money will be gone, or as good as gone well before the next FY.
2. I’ve always had grave personal reserves about dipping into the FX Special Account profits. The Account looks very much like the
3. I have no quarrels about the long-term desirability of balancing the budget. I had grave doubts about the desirability, policy- and politics-wise, of your suggestion that “the DPJ should offer measurable annual targets for deficit reduction” ahead of the polling. Making up numbers out of thin air in the last ten days of the political campaign appeared not only to be a act of technocratic folly but would also put a big fat “kick me” on the DPJ butt for the LDP aim at for the next 4 years. I think I made my case sufficiently clear in the original post, but there you are.
4. Going forward, I have no objection to the points that you make here to the extent that arguments regarding FY2009, 2010 and beyond are properly distinguished.
5. A “promise to postpone indefinitely any increase in the consumption tax” is a political, not economic statement. As such, it will be judged politically. Now the DPJ has pretty much said so
6. As for widening the tax base, eliminating/cutting back on special tax measures, even under revenue-neutral constraints, is technically not that difficult to do, though it will encounter political resistance from vested interests. I will not offer any substantive comments on your suggestion stricter enforcement of existing guidelines, since I know next to nothing about the laws and regulations—how strictly they are enforced, in whose favor ambiguities are resolved, and whether the tax authorities have enough underutilized human resources to make the extra effort—to guess what kind of impact such action will have on government finances, and how soon.
7. Regarding your final counterpoint, my answer: Yes, but. All op-eds, at least in media outlets for general consumption, occur within a commonly shared context (or a commonly shared set of conflicting contexts). I see your op-ed as basically a call for the continuation of the wholesale reform that Koizumi politically and Takenaka technocratically set in motion yet left woefully uncompleted—or its logical extension. But, with ten days to go between your op-ed and the election, the K-T reform had been rejected in rhetoric and manifesto by the leaderships of all the parties except perhaps the Your Party (whose tentative feelers for a post-election coalition were summarily rejected by the DPJ Secretary-General). Now, Ms. Fink, you are an economist. You have the right to say, “Well, this is the best course of action for the DPJ and possibly Japan. You comments occur within the political realm, which is not where my opinions in this instance are unfolding.” But Tobias, you are a political scientist. Do you really think that an op-ed that does not give any recognition to the basic political context into which your recommendations are being injected is appropriate? In fact, you do acknowledge the political context of your technical opinions when you write of the DPJ/Hatoyama’s “credibility.” I do not believe that you can reject the consideration of the political and likely technical difficulties and impossibilities of your recommendations and argue for their political efficacy at the same time.
That’s about it.
Friday, August 21, 2009
Let’s Get Real When Making Recommendations for a DPJ Administration
The Wall Street Journal certainly qualifies as mainstream media…
While looking for something else, I bumped into this op-ed co-written by fellow blogger Tobias Harris. It is, as usual for Harris, intelligent and well written. (Disclosure: we are friends.) But it also displays a fundamental disregard for the realities. Let’s look at them one by one.
Of 19.7755 trillion yen (roughly 4% of GDP), 1.0641 trillion yen FY2008 I+4.7858 trillion yen FY2008 II=5.8499 trillion yen FY 2008 (and out of reach?), leaving 13.9256 trillion yen (a little less than 3% of GDP). Now, let’s take a closer look at the 13.9 trillion yen.
3.1066 trillion yen are money drawn from the Fiscal Investment and Lending Special Account—that is, part of the “buried treasures” that the DPJ is hoping to tap for the initial installments of their 3-year plan. If the DPJ spends it in FY2009, there’ll be that much less for its multi-year agenda. Almost all of the rest of the money, i.e. 10.8190 trillion, consists of borrowed money. Now a substantial amount of money has been dumped, as it were, in local governments and public institutions to be used as paid-in capital or to cover expenditures in worthy programs beyond the current fiscal year. I believe that this is the money that the DPJ likes to talk about. Now an administration that wishes to claw back some of this “stashed treasure” will have to force these governments and public institutions to stop these programs in mid-progress, adopt new FY2009 budgets—in the case of local governments with the consent of conservative local legislatures—and return the unused money. This is not going to be easy.
As for the rest of the 13.9 trillion yen, it is true that much of the money for the itemized subsidies has not been spent. But that does not mean that the recipients of the subsidies have not incurred expenses. In principle, expenses incurred according to a valid project approval must be made good, with contingent payments on expenses incurred typically coming from the government each quarter. The earliest that the DPJ can put a stop to such expenditures by recipients will be the middle of September, when Hatoyama takes over as Prime Minister. Something tells me that the recipients will be doing their damndest to make sure that they incur expenses as soon as possible, before the DPJ takes over. And the DPJ will have to do this about-turn while working out a new politics-bureaucracy relationship and preparing the FY2010 budget.
At a minimum, “a large pool of capital, much of which has yet to be dispensed, ripe for spending to boost the economy” is a chancy proposition. One way to minimize the difficulties of a turnabout is to warn the recipients of stimulus largesse to stop spending the money because the DPJ is going to suspend additional disbursements when it takes over. But this will send a chill through the entities involved in the implementation of the LDP stimulus packages and toss immediate ownership of the short-term fortunes of the Japanese economy onto DPJ shoulders, a burden that a new administration should be highly cautious of taking on.
The sequel, here.
While looking for something else, I bumped into this op-ed co-written by fellow blogger Tobias Harris. It is, as usual for Harris, intelligent and well written. (Disclosure: we are friends.) But it also displays a fundamental disregard for the realities. Let’s look at them one by one.
“If the DPJ wins on August 30, it will find itself heir to a fortunate legacy: Fiscal stimulus enacted by the current government, totaling roughly 5% of GDP, represents a large pool of capital, much of which has yet to be dispensed, ripe for spending to boost the economy.”Actually, it’s roughly 4% of the GDP (see below). Is a 1 percentage-point difference trivial? Well, it is a 5 trillion-yen difference, and, as I like to say, a trillion here, a trillion here, and soon... but joking aside:
Of 19.7755 trillion yen (roughly 4% of GDP), 1.0641 trillion yen FY2008 I+4.7858 trillion yen FY2008 II=5.8499 trillion yen FY 2008 (and out of reach?), leaving 13.9256 trillion yen (a little less than 3% of GDP). Now, let’s take a closer look at the 13.9 trillion yen.
3.1066 trillion yen are money drawn from the Fiscal Investment and Lending Special Account—that is, part of the “buried treasures” that the DPJ is hoping to tap for the initial installments of their 3-year plan. If the DPJ spends it in FY2009, there’ll be that much less for its multi-year agenda. Almost all of the rest of the money, i.e. 10.8190 trillion, consists of borrowed money. Now a substantial amount of money has been dumped, as it were, in local governments and public institutions to be used as paid-in capital or to cover expenditures in worthy programs beyond the current fiscal year. I believe that this is the money that the DPJ likes to talk about. Now an administration that wishes to claw back some of this “stashed treasure” will have to force these governments and public institutions to stop these programs in mid-progress, adopt new FY2009 budgets—in the case of local governments with the consent of conservative local legislatures—and return the unused money. This is not going to be easy.
As for the rest of the 13.9 trillion yen, it is true that much of the money for the itemized subsidies has not been spent. But that does not mean that the recipients of the subsidies have not incurred expenses. In principle, expenses incurred according to a valid project approval must be made good, with contingent payments on expenses incurred typically coming from the government each quarter. The earliest that the DPJ can put a stop to such expenditures by recipients will be the middle of September, when Hatoyama takes over as Prime Minister. Something tells me that the recipients will be doing their damndest to make sure that they incur expenses as soon as possible, before the DPJ takes over. And the DPJ will have to do this about-turn while working out a new politics-bureaucracy relationship and preparing the FY2010 budget.
At a minimum, “a large pool of capital, much of which has yet to be dispensed, ripe for spending to boost the economy” is a chancy proposition. One way to minimize the difficulties of a turnabout is to warn the recipients of stimulus largesse to stop spending the money because the DPJ is going to suspend additional disbursements when it takes over. But this will send a chill through the entities involved in the implementation of the LDP stimulus packages and toss immediate ownership of the short-term fortunes of the Japanese economy onto DPJ shoulders, a burden that a new administration should be highly cautious of taking on.
“The DPJ could also build credibility by articulating some basic fiscal-policy principles that would distinguish it from the LDP. The ingredients are there already—party leaders have demonstrated some solid principles in this area. They just need to spell them out again ahead of the polling.But this would tie the DPJ to measurable goals against highly provisional revenue and expenditure projections. This is likely to seriously damage their future credibility when they are likely to easily win this election anyway. So why bother to waste valuable intellectual and political resources to come up with iffy fiscal projections in the last ten days of an extremely busy political campaign?
First among these would be aiming for a balanced budget…As an alternative to this history, the DPJ should offer measurable annual targets for deficit reduction. This will assure voters that the party sees a path back to balance.”
“On a related note, the DPJ also should promise to postpone indefinitely any increase in the consumption tax.”Why do this when the majority of the public acknowledges that a consumption tax hike is inevitable anyway? The current position of the DPJ, i.e. we’re not going talk about it until we’ve wrung the bureaucracy dry of unnecessary expenditures, is more than good enough.
“Instead of a consumption tax, the DPJ could offer a plan to broaden the corporate tax base.”The DPJ is already committed to lowering the corporate tax rate for corporations with less than 100 million yen in paid-in capital to 11% (which in my view is an added incentive to undercapitalize your business or segment it into a gajillion separate corporations interlocked by mutual financial guarantees—the other incentive being the restrictive labor laws). In fact, the DPJ is committed to broadening the corporate tax base. It promises to put its foot down on the enormous web of tax incentives that has grown up over the years. Curiously, the op-ed does not acknowledge this. Beyond this, while a “[w]idening [of] the tax base while at the same time lowering the tax rate [may] leave the government less exposed to the business cycles of large companies,” it may also leave all businesses in the position of paying even more corporate taxes than they do now in the form of local taxes during times of economic duress.
“Perhaps most importantly, the DPJ should continue with broader-based reforms. One specific way would be to reverse plans to delay the privatization of Japan Post, currently set for an initial public offering in 2010.”I agree. But this highlights the fundamental flaw of this op-ed. None of its recommendations will be adopted by the DPJ. Thus, it is as relevant to the political debate as a SPD election manifesto demanding that U.S. troops pull out of Okinawa altogether.
The sequel, here.
Saturday, May 02, 2009
Japan’s Surprise Economy Boost?
Well, that’s what the TIME article’s headline, copied almost verbatim from a BBC report—not most reliable of news outlets, as everyone who has been kind enough to follow my blog knows—that it links to. All that the TIME report itself says is:
Actually, if the BBC reporter had talked to real human beings (or read Japanese newspapers), they would have known that Japanese manufacturers would be coming out of the precipitous inventory adjustment downswing sometime during the spring anyway. So the issue is not the March uptick, much less its size, but whether an upward trajectory can be sustained.
Industrial output in Japan rose in March for the first time in six months, according to government figures.Now industrial production for March registered a 1.6% rise. So I guess my question is, if industrial production ended up in a 0.9% rise—the average of private sector forecasts—would that have meant that Japan’s “plunge in production and exports” would have no chance of “nearing an end”? Or would the same sentence have read:
The larger-than-expected increase is seen as a sign the country's plunge in production and exports may be nearing an end.
The expected increase is seen as a sign the country's plunge in production and exports may be nearing an end.I would not be carping if the reports had not used the words “surprise” and “may”.
Actually, if the BBC reporter had talked to real human beings (or read Japanese newspapers), they would have known that Japanese manufacturers would be coming out of the precipitous inventory adjustment downswing sometime during the spring anyway. So the issue is not the March uptick, much less its size, but whether an upward trajectory can be sustained.
Thursday, April 16, 2009
Ozawa and the DPJ Stimulus Package
Ichiro Ozawa makes what would be a good debating point with regard to the DPJ emergency package in his latest press conference here and here. He is essentially claiming that the DPJ’s package is for the ages while the coalition is merely touting one-off expenditures that the bureaucracy has slapped together. He’s mostly sound bites, but then, Koizumi was even more so. One problem is, the media don’t seem ready to match the DPJ proposal up against the coalition package.
One reason for the media neglect is that—I know I’m repeating myself here—the DPJ package is basically a 21-trillion retread of the primary phase of its 2007 Manifesto plus—most of it is not really news. The proposal does suspend for the first year the cost-cutting measures that are supposed to accompany additional expenditures, so there would be genuine “freshwater”, or net fiscal outlay, at least for FY2009. Unfortunately, the media are simply consumed by the Ozawa/Nishimatsu Construction affair—it’s apparently hard to pay attention to two things at the same time. The media also do not think that the DPJ can win under Ozawa. So, for the economic and financial reporters who would normally be expected to report on the issue, the ruling coalition’s package is the only real game in town and the heavy lifting necessary to analyze the DPJ proposal and match them up isn’t worth the trouble.
As if that weren’t enough, the head of the Policy Research Council that put the package together is Yoshihito Sengoku, the eminence grise of Yukio Edano and other next-generation figures who can barely contain their contempt for the old-school ways of Ozawa and his people. So policy wonks who could serve as Ozawa’s surrogates on the substance—and help with the media—are not being lined up to do service. (I think I’ve touched on this before too—you don’t want to grow old.) Add to this Ozawa’s admission that the DPJ is unlikely to submit its own alternative bills to the Diet, and it’s hard to see the media finding reason to get worked up about the DPJ proposal.
All this is a shame, because—to repeat (again!)—the DPJ could say, We’ll stick with the program; the short-term fix will come from a one-year cost-cutting suspension; what have you guys got to say for yourself? That’s a debate that deserves to be heard.
On security issues, I find Ozawa’s press conference a little alarming with regard to U.S. troops in Japan, frivolous with regard to Somali pirates, and resigned with regard to Taepodong 2.
One reason for the media neglect is that—I know I’m repeating myself here—the DPJ package is basically a 21-trillion retread of the primary phase of its 2007 Manifesto plus—most of it is not really news. The proposal does suspend for the first year the cost-cutting measures that are supposed to accompany additional expenditures, so there would be genuine “freshwater”, or net fiscal outlay, at least for FY2009. Unfortunately, the media are simply consumed by the Ozawa/Nishimatsu Construction affair—it’s apparently hard to pay attention to two things at the same time. The media also do not think that the DPJ can win under Ozawa. So, for the economic and financial reporters who would normally be expected to report on the issue, the ruling coalition’s package is the only real game in town and the heavy lifting necessary to analyze the DPJ proposal and match them up isn’t worth the trouble.
As if that weren’t enough, the head of the Policy Research Council that put the package together is Yoshihito Sengoku, the eminence grise of Yukio Edano and other next-generation figures who can barely contain their contempt for the old-school ways of Ozawa and his people. So policy wonks who could serve as Ozawa’s surrogates on the substance—and help with the media—are not being lined up to do service. (I think I’ve touched on this before too—you don’t want to grow old.) Add to this Ozawa’s admission that the DPJ is unlikely to submit its own alternative bills to the Diet, and it’s hard to see the media finding reason to get worked up about the DPJ proposal.
All this is a shame, because—to repeat (again!)—the DPJ could say, We’ll stick with the program; the short-term fix will come from a one-year cost-cutting suspension; what have you guys got to say for yourself? That’s a debate that deserves to be heard.
On security issues, I find Ozawa’s press conference a little alarming with regard to U.S. troops in Japan, frivolous with regard to Somali pirates, and resigned with regard to Taepodong 2.
Sunday, April 12, 2009
Newspaper Editorials Lining Up on the Biggest, Baddest Economic Package Ever
Saturday, April 11, 2009
Gaijin Media Reaction to the Economic Package
Out of curiosity, I looked around to see what some of the main actors were saying; here’s my report. I should look at FT, The Economist, and the magazines, but not tonght.
WaPo does by far the best job—there’s some real depth here—though it suffers from what I think is an overreliance on pro-government sources. I trust the headline comes from the copy desk, and not the writer(s).
NYT provides some color on the details of the latest package.
No obvious mistakes by BBC, and the headline is matter-of-fact. It’s not print journalism, so I’m not going to complain.
CNN shows what happens when you look at the box-and-arrow diagrams on the government pdf document, then go out and interview a few analysts from securities firms to put together a report.
WaPo does by far the best job—there’s some real depth here—though it suffers from what I think is an overreliance on pro-government sources. I trust the headline comes from the copy desk, and not the writer(s).
NYT provides some color on the details of the latest package.
No obvious mistakes by BBC, and the headline is matter-of-fact. It’s not print journalism, so I’m not going to complain.
CNN shows what happens when you look at the box-and-arrow diagrams on the government pdf document, then go out and interview a few analysts from securities firms to put together a report.
A Couple of Political Points, Plus One Digression, on the Latest Economic Package
The latest economic package announced by the LDP-New Komeito coalition on Friday identifies two crises precipitated by the global financial and economic crises—the short-term risk that the Japanese economy will collapse and the structural weakness of an export-reliant economy—and proposes a three-step recovery process aimed at avoiding economic collapse (~FY2009 Q3-4), securing an economic recovery (FY2009 Q3-4~FY2010 Q3-4), and putting Japan on a new growth trajectory (FY2010Q3-4~). To that end, the coalition proposes to inject 56.8 trillion yen into the Japanese including yet another supplementary budget with 15.4 trillion yen in “freshwater”, or new money. I have little to say about the economics; the economic analysts themselves are all over the place on that and I’ve seen at least one that appears to be what we in Japan call “cherry blossom”—more on cherry blossoms on a later blog—so why bother adding more noise? Instead, I’ll raise a couple of points on the political side that are sure to be passed over by the media.
Before I do that though, I fail to resist this one digression, a repetition, actually. There is little attention being paid to the 56.8 trillion yen for the overall package of which \41.8 trillion yen belongs to the financial sector, mainly financing for working capital. The authorities themselves have for some time stopped touting the total figures for stimulus packages because the media have tended to criticize them—sometimes rightfully—for inflating the true value of the package and focus on the “freshwater” instead. However, in the current situation, there is a real danger of the business sector being hit by a giant credit crunch as the result of a shrinking cash flow caused by plummeting production and a lending squeeze by skittish banks anxious to avoid the kind of financial crisis that the rest of the “West” is going through. As a measure of how potentially serious the situation is, the authorities have already opened access to “small and medium” enterprise lending facilities to 100% subsidiaries of big businesses—the banks are not, to the best of my knowledge, complaining about the competition. So this time around, the 56.8 trillion yen, or 41.8 trillion yen if you prefer, does means something.
Now, to the politics. The package itself has been put forth as a joint ruling-party/government decision, with the full document available here on the LDP websiteand here on the Prime Minister’s Office website. One point in the full document that is unlikely to be picked up in the media is that the PKO (price-keeping operations for the Japanese stock market) provisions* leave the necessary legislation for consideration by the ruling parties. Now, few legislative bills of substance—that is, bills that have immediate budgetary consequences—that pass into law are submitted by Diet members; instead, most come from the sitting Cabinet, drafted by the ministerial bureaucracy and vetted by the Cabinet Legislation Bureau. Rarely if ever has a bill that is part of a government policy package been left in the hands of Diet members. The ruling coalition may indeed submit the requisite bills on its own; more likely, it is may only be a political trophy being claimed by the group of stock market-friendly LDP politicians—it is to be noted that the historical relationship between the market and LDP politicians has not always been a wholesome one—pushing this idea, who will toss back a prearranged outline back to the bureaucracy to fill out the details for Cabinet approval and submission. Either way, it surely reflects a genuine reluctance on the part of the ministerial authorities—the Financial Services Agency (FSA) and possibly MOF—who fear contaminating the stock market through politically motivated interventions, and likely signals a subtle shift in power between the political and the bureaucratic. The overall change has been going on for some time now, so the significance of this particular incident should not be exaggerated. Still, (what I believe to be) its formal recognition is notable, and should be recorded as such.
Another point of note and of more political consequence is the fact that it is indeed an economic package of historical proportions, particularly as it comes on the heels of two other stimulus packages and the new regular budget that came into effect a little more than a week ago. Discussion of its appropriateness and adequacy I leave to more learned if divided sources, but I cannot deny the sense of a genuine effort in size and scope to rise to an historical occasion, while the DPJ response is visibly lacking in this sense of political drama. I am, to repeat, incapable of passing economic judgment on its choice; I am quite sure, though, that this will hurt it come the Lower House election.
Incidentally, I’ve asserted that the DPJ’s relative lack of response to the economic crisis can be traced to Ichiro Ozawa’s indifference to policy issues. The latest initiative from the LDP-New Komeito coalition also highlights the enormous gap in policymaking expertise. If DPJ leaders think that a DPJ-led administration can better push its agenda by placing one hundred Diet members into the ministries—effectively doubling the number of political appointees—they are in for an unpleasant surprise.
* ○Utilizing the Bank Shareholdings Purchase Corporation
Preferred shares (preferred capital investment securities), ETF and J-REIT owned by financial institutions and preferred shares (preferred capital investment securities) of financial institutions held by business-operating juridical persons [think non-financial corporation] shall be added to the shares eligible for purchase by the BSPC (necessary legislation to be considered by the ruling parties).
○Responding to the Stock Market
A mechanism for government-related institutions to purchase shares, etc. from the market as extraordinary and exceptional measure shall be established in order to prepare for an exceptional case such as one where a situation continues of a serious obstruction of the price-discovery function of the market (necessary legislation to be considered by the ruling parties). Necessary budgetary measures, such as a \50 trillion yen government guarantee tranche for purchases—shall be taken.
○ 銀行等保有株式取得機構の活用
・金融機関が保有する優先株（優先出資証券）、ETF及びJ-REIT、並びに事業法人が保有する金融機関の優先株（優先出資証券）を買取対象に加える（そのための法律改正を与党において検討）
○ 株式市場への対応
・市場の価格発見機能に重大な支障が生じる状況が継続するような例外的な場合に備えて、臨時・異例の措置として、政府の関係機関が市場から株式等を買い取る仕組みを整備する（そのための法律改正を与党において検討）。借入に係る政府保証枠を50兆円とするなど、所要の予算措置を講じる
My snarking on the Newsweek article to be continued.
Before I do that though, I fail to resist this one digression, a repetition, actually. There is little attention being paid to the 56.8 trillion yen for the overall package of which \41.8 trillion yen belongs to the financial sector, mainly financing for working capital. The authorities themselves have for some time stopped touting the total figures for stimulus packages because the media have tended to criticize them—sometimes rightfully—for inflating the true value of the package and focus on the “freshwater” instead. However, in the current situation, there is a real danger of the business sector being hit by a giant credit crunch as the result of a shrinking cash flow caused by plummeting production and a lending squeeze by skittish banks anxious to avoid the kind of financial crisis that the rest of the “West” is going through. As a measure of how potentially serious the situation is, the authorities have already opened access to “small and medium” enterprise lending facilities to 100% subsidiaries of big businesses—the banks are not, to the best of my knowledge, complaining about the competition. So this time around, the 56.8 trillion yen, or 41.8 trillion yen if you prefer, does means something.
Now, to the politics. The package itself has been put forth as a joint ruling-party/government decision, with the full document available here on the LDP websiteand here on the Prime Minister’s Office website. One point in the full document that is unlikely to be picked up in the media is that the PKO (price-keeping operations for the Japanese stock market) provisions* leave the necessary legislation for consideration by the ruling parties. Now, few legislative bills of substance—that is, bills that have immediate budgetary consequences—that pass into law are submitted by Diet members; instead, most come from the sitting Cabinet, drafted by the ministerial bureaucracy and vetted by the Cabinet Legislation Bureau. Rarely if ever has a bill that is part of a government policy package been left in the hands of Diet members. The ruling coalition may indeed submit the requisite bills on its own; more likely, it is may only be a political trophy being claimed by the group of stock market-friendly LDP politicians—it is to be noted that the historical relationship between the market and LDP politicians has not always been a wholesome one—pushing this idea, who will toss back a prearranged outline back to the bureaucracy to fill out the details for Cabinet approval and submission. Either way, it surely reflects a genuine reluctance on the part of the ministerial authorities—the Financial Services Agency (FSA) and possibly MOF—who fear contaminating the stock market through politically motivated interventions, and likely signals a subtle shift in power between the political and the bureaucratic. The overall change has been going on for some time now, so the significance of this particular incident should not be exaggerated. Still, (what I believe to be) its formal recognition is notable, and should be recorded as such.
Another point of note and of more political consequence is the fact that it is indeed an economic package of historical proportions, particularly as it comes on the heels of two other stimulus packages and the new regular budget that came into effect a little more than a week ago. Discussion of its appropriateness and adequacy I leave to more learned if divided sources, but I cannot deny the sense of a genuine effort in size and scope to rise to an historical occasion, while the DPJ response is visibly lacking in this sense of political drama. I am, to repeat, incapable of passing economic judgment on its choice; I am quite sure, though, that this will hurt it come the Lower House election.
Incidentally, I’ve asserted that the DPJ’s relative lack of response to the economic crisis can be traced to Ichiro Ozawa’s indifference to policy issues. The latest initiative from the LDP-New Komeito coalition also highlights the enormous gap in policymaking expertise. If DPJ leaders think that a DPJ-led administration can better push its agenda by placing one hundred Diet members into the ministries—effectively doubling the number of political appointees—they are in for an unpleasant surprise.
* ○Utilizing the Bank Shareholdings Purchase Corporation
Preferred shares (preferred capital investment securities), ETF and J-REIT owned by financial institutions and preferred shares (preferred capital investment securities) of financial institutions held by business-operating juridical persons [think non-financial corporation] shall be added to the shares eligible for purchase by the BSPC (necessary legislation to be considered by the ruling parties).
○Responding to the Stock Market
A mechanism for government-related institutions to purchase shares, etc. from the market as extraordinary and exceptional measure shall be established in order to prepare for an exceptional case such as one where a situation continues of a serious obstruction of the price-discovery function of the market (necessary legislation to be considered by the ruling parties). Necessary budgetary measures, such as a \50 trillion yen government guarantee tranche for purchases—shall be taken.
○ 銀行等保有株式取得機構の活用
・金融機関が保有する優先株（優先出資証券）、ETF及びJ-REIT、並びに事業法人が保有する金融機関の優先株（優先出資証券）を買取対象に加える（そのための法律改正を与党において検討）
○ 株式市場への対応
・市場の価格発見機能に重大な支障が生じる状況が継続するような例外的な場合に備えて、臨時・異例の措置として、政府の関係機関が市場から株式等を買い取る仕組みを整備する（そのための法律改正を与党において検討）。借入に係る政府保証枠を50兆円とするなど、所要の予算措置を講じる
My snarking on the Newsweek article to be continued.
Thursday, April 09, 2009
DOJ Has “New” Economic Package—Does the DPJ Read My Blog or What?
I complained before that the DPJ was essentially ceding the ground to the LDP on the economy. Maybe they’re reading my blog because, yesterday, the DPJ came up with a two-year plan with 21 trillion yen in freshwater—that is, additional fiscal expenditures.
Okay, it’s still mostly taken from the DPJ manifesto 2.0, but I do like the idea that 14.1 trillion goes to households as cash. I’ve become increasingly convinced that constructing stuff that has no assurance of raising productivity while waiting for global consumption patterns to recoalesce and reach a new equilibrium is a huge risk. Never give people gifts that they can’t eat or give away—unless you really, really love them. It’s the same thing.
I don’t think the media is going to really pick up on it though. And I’ll be pleasantly surprised to see the DPJ really get behind it, though I would bet against it. I’m half convinced that Ozawa is totally indifferent to it all. That’s another reason that the DPJ won’t look good going into the Lower House election with Ozawa.
Incidentally, by that same definition, little if any of the new money that IMF has available for lending to illiquid emerging market economy governments is freshwater. Which reminds me that the Japanese media overemphasize the value of freshwater and seriously misunderestimate the value (and forgets the cost) of the official lending facilities. Frankly, I think that they are stupid.
Okay, it’s still mostly taken from the DPJ manifesto 2.0, but I do like the idea that 14.1 trillion goes to households as cash. I’ve become increasingly convinced that constructing stuff that has no assurance of raising productivity while waiting for global consumption patterns to recoalesce and reach a new equilibrium is a huge risk. Never give people gifts that they can’t eat or give away—unless you really, really love them. It’s the same thing.
I don’t think the media is going to really pick up on it though. And I’ll be pleasantly surprised to see the DPJ really get behind it, though I would bet against it. I’m half convinced that Ozawa is totally indifferent to it all. That’s another reason that the DPJ won’t look good going into the Lower House election with Ozawa.
Incidentally, by that same definition, little if any of the new money that IMF has available for lending to illiquid emerging market economy governments is freshwater. Which reminds me that the Japanese media overemphasize the value of freshwater and seriously misunderestimate the value (and forgets the cost) of the official lending facilities. Frankly, I think that they are stupid.
Wednesday, April 01, 2009
DPJ—DNP-CD on the Economic Crisis?
I am not competent to pass judgment on the Aso administration and the LDP-New Komeito coalition’s initiative to put forth another stimulus package most likely before the Golden Week holidays. Having said that, I do prefer maintaining consumption by putting cash directly into the pockets of people who are affected by the downturn and otherwise reinforcing the safety net while giving as much leeway as possible for the national economy to adapt to what is likely to be a significant adjustment to global consumption patterns. Thus, it is not reassuring to see reports of an LDP wish list filled with roads and high-speed railways whose prospects for raising long-term productivity are in doubt in the first place.
Contrast that, though, with the DPJ, which has been mostly missing in action as the economic crisis deepens. They seem to be stuck with its 2007 Election Manifesto upgrade. There’s a case to be made that that is all we need and that we should just wait out the storm, but it’s not really doing that either. This is odd for a party full of policy wonks, as well as economists more than willing to lend them a hand to help give Prime Minister Aso the send-off that they feel he deserves. (I suspect, though I have no personal knowledge, that some members of the bureaucracy—no monolith—would be willing to work on the side with the opposition in this respect.) However, many of the policy-oriented crowd are the very people that Ozawa has sidelined from the party leadership.
The Nishimatsu scandal has further pushed it in that direction, but it’s not as if this began yesterday. Ichiro Ozawa’s supporters hold him up as a man of ideas, or, more appropriately, ideals, but even they do not accuse him of being overly interested in the actual policies nor of having a grasp of economics and finance beyond what he needs to maintain his political machine. The distraction has merely added to his disinterest, and this all shows. This is a game in which this coach is not ready to play his players.
Industrial production, and with it the economy as a whole, is likely to stabilize in April, and possibly even show a modest rebound, all of which the administration/coalition will claim as an “announcement effect”. Of course that still means that we will be looking at a 5-6% fall in this year’s GDP. But without a meaningful response of its own, the DPJ will be tagged as mere naysayers—if not part of the problem, then certainly not part of theproblemsolution. And as of now, it is not equipped to engage in the policy debate.
Contrast that, though, with the DPJ, which has been mostly missing in action as the economic crisis deepens. They seem to be stuck with its 2007 Election Manifesto upgrade. There’s a case to be made that that is all we need and that we should just wait out the storm, but it’s not really doing that either. This is odd for a party full of policy wonks, as well as economists more than willing to lend them a hand to help give Prime Minister Aso the send-off that they feel he deserves. (I suspect, though I have no personal knowledge, that some members of the bureaucracy—no monolith—would be willing to work on the side with the opposition in this respect.) However, many of the policy-oriented crowd are the very people that Ozawa has sidelined from the party leadership.
The Nishimatsu scandal has further pushed it in that direction, but it’s not as if this began yesterday. Ichiro Ozawa’s supporters hold him up as a man of ideas, or, more appropriately, ideals, but even they do not accuse him of being overly interested in the actual policies nor of having a grasp of economics and finance beyond what he needs to maintain his political machine. The distraction has merely added to his disinterest, and this all shows. This is a game in which this coach is not ready to play his players.
Industrial production, and with it the economy as a whole, is likely to stabilize in April, and possibly even show a modest rebound, all of which the administration/coalition will claim as an “announcement effect”. Of course that still means that we will be looking at a 5-6% fall in this year’s GDP. But without a meaningful response of its own, the DPJ will be tagged as mere naysayers—if not part of the problem, then certainly not part of the
Sunday, March 22, 2009
Conventional Wisdom Watch: The Failure of Japan’s Export-Oriented Economic Strategy
The latest piece of conventional wisdom that has been coming down the pike is that Japan must drop her export-oriented economic ways and increase domestic consumption in order to have any hopes of avoiding a national catastrophe in the face of the global financial/economic crisis. Now there’s a certain arithmetical truth to this line of thinking and I have a lot of respect for the people who had been warning us all the while of the risks inherent in what turned out to be a five-year export-reliant recovery. But I want some value-added from the Johnny-Come-Latelies, the people who are discovering post facto the follies of Japan’s export-dependent economic strategy (assuming there is someone/are people who answers/answer to the name of Japan to whom a “strategy” can be ascribed), a plausible proposal to raise Japan’s marginal collective propensity to consume. And if their answer is “a better safety net”, they have to explain why the United States, with arguably the worst social safety net in the OECD, had managed to live beyond its means for decades before the house of cards came crashing down. They also have to explain why a high external savings rate is wrong for country that is likely to go into a long period of structural external deficits in the not-too-distant historical future. There’s immigration, but do they think we haven’t heard about that already? My aunt is not going to grow wheels any time soon.
No, I didn’t see this coming either, though I had wondered out loud seven years ago how long the U.S. economy could hold itself up by building yet more homes. (Ask the people who were there at JETRO NY if you don’t believe me.) But, like Greenspan, I’d lost my sense of unease over the “irrational exuberance” when everything kept going up—that is, until the current crisis gave me a painful reminder. Incidentally, two other countries have had just as rough a fourth quarter in 2008 as Japan—Brazil and South Korea. The latter is even emulating Japan’s high suicide rates. Go figure.
Next up on Conventional Wisdom Watch: Japan’s Two-Tier Economy, tomorrow, hopefully, after I get over a hangover.
No, I didn’t see this coming either, though I had wondered out loud seven years ago how long the U.S. economy could hold itself up by building yet more homes. (Ask the people who were there at JETRO NY if you don’t believe me.) But, like Greenspan, I’d lost my sense of unease over the “irrational exuberance” when everything kept going up—that is, until the current crisis gave me a painful reminder. Incidentally, two other countries have had just as rough a fourth quarter in 2008 as Japan—Brazil and South Korea. The latter is even emulating Japan’s high suicide rates. Go figure.
Next up on Conventional Wisdom Watch: Japan’s Two-Tier Economy, tomorrow, hopefully, after I get over a hangover.
Monday, March 16, 2009
Third Time’s the Charm? Yet Another Stimulus Package.
I’ve just been surprised to hear from RS that the English-language media has been talking down chances of a big fiscal push from Japan in the wake of the ongoing G20 process. The Aso administration has been touting a third stimulus package for some time now. There’s been some rumbling about filling the demand gap, which could put the amount as high as 20 trillion yen. On Sunday, two LDP figures, Suga Yoshihide, Deputy Chairman of the Election Strategy Council, and an unnamed member of the Policy Council, put a floor of 10 trillion yen under “freshwater (真水)”, or actual fiscal outlays, as opposed to lending facilities, loan guarantees and other financial facilities that often require little or no additional budgetary allocations*.
Given the ruling coalition’s need to raise public confidence ahead of the Lower House general election and Prime Minister Aso’s desire to remain relevant, it is now inevitable that they will mount a spring offensive for “the largest supplementary budget in history”**. The size of the package means that government scrip—really an imputed tax on financial assets including cash—is no longer out of the question.
* People often discount the monetary value of these official lending facilities that usually comprise the bulk of the announcements. I note that they haven’t done so as Congress, Bernanke and the Obama administration have come forward with TARP and subsequent installments of the U.S. efforts. Moreover, in Japan, where direct and indirect public facilities comprise a significant if small portion of borrowing by small businesses in the best of times, these facilities play a major stabilizing role—many people will argue that this has serious long-term side effects—during economic downturns.
** In the words of Hiroyuki Sonoda, Acting Chairman of the Policy Research Council, addressing the LDP prefectural chapter in Kumamoto on Sunday.
Given the ruling coalition’s need to raise public confidence ahead of the Lower House general election and Prime Minister Aso’s desire to remain relevant, it is now inevitable that they will mount a spring offensive for “the largest supplementary budget in history”**. The size of the package means that government scrip—really an imputed tax on financial assets including cash—is no longer out of the question.
* People often discount the monetary value of these official lending facilities that usually comprise the bulk of the announcements. I note that they haven’t done so as Congress, Bernanke and the Obama administration have come forward with TARP and subsequent installments of the U.S. efforts. Moreover, in Japan, where direct and indirect public facilities comprise a significant if small portion of borrowing by small businesses in the best of times, these facilities play a major stabilizing role—many people will argue that this has serious long-term side effects—during economic downturns.
** In the words of Hiroyuki Sonoda, Acting Chairman of the Policy Research Council, addressing the LDP prefectural chapter in Kumamoto on Sunday.
Wednesday, March 11, 2009
Diet Members’ League to Examine the Issuance of Government Paper Money and Inheritance Tax-Free, Zero-Interest National Bonds Toils on…
Today, the Diet Members’ League to Examine the Issuance of Government Paper Money and Inheritance Tax-Free, Zero-Interest National Bonds presenting its recommendations to the Ministry of Finance and the LDP Policy Research Council. If you can’t guess what they are recommending, this highly negative take on the two ideas should shed a little light on the issue. I’m posting on this issue again because a media report says that the inheritance tax reduction (apparently, the DMLEIGPMITFZINB has backed away from the “tax-free” idea) is “intended to increase the liquidity of personal assets”.
Now I don’t know exactly what the DMLEIGPMITFZINB means by “personal assets”, but we won’t be losing much by way of logic if we limit consideration to financial assets and real estate. It’s probably safe to assume that people do not have hundreds of millions of yen in paper money lying around the house unless it’s the kind of money that, to put it gently, they don’t want people to know that they have. Bank accounts are another matter, but I don’t see how using that money to buy government bonds “enhances” the liquidity of personal assets. They could sell government bonds already in their possession, but I again fail to see any changes in “liquidity”, the only effect being a trade-off between lower inheritance tax revenues for smaller interest payments whose consequences for the national treasury is dubious at best. If they sell corporate shares to purchase the government bonds, then you could argue that “liquidity” has been enhanced. However, in these times, you want to encourage people to buy shares, not sell them. Same thing goes for real estate, whose prices have resumed their downturn in metropolitan areas as well. (It has never bottomed out in the provinces.)
So far, I have implicitly assumed that the assets in question are domestic ones. But they need not be. In fact, if people sold off foreign assets to finance the purchase of the government bonds, the immediate effect would be that that government can finance its deficit spending without crowding out domestic borrowers. Although there is a whiff of that beggar-thy-neighbor stench, it might be a nice way for all those people who have been losing money in the forex market to recoup some of those losses through the tax break. But I detect no movement to limit the measure to overseas assets.
This idea is as bogus as it gets. So, if you see Kaoru Yosano, please tell him to read my blog so he won’t have a change of heart. Thanks.
As for government scrip, I still believe that it’s a dangerous idea. But at least it makes as much sense as helicopter money.
Now I don’t know exactly what the DMLEIGPMITFZINB means by “personal assets”, but we won’t be losing much by way of logic if we limit consideration to financial assets and real estate. It’s probably safe to assume that people do not have hundreds of millions of yen in paper money lying around the house unless it’s the kind of money that, to put it gently, they don’t want people to know that they have. Bank accounts are another matter, but I don’t see how using that money to buy government bonds “enhances” the liquidity of personal assets. They could sell government bonds already in their possession, but I again fail to see any changes in “liquidity”, the only effect being a trade-off between lower inheritance tax revenues for smaller interest payments whose consequences for the national treasury is dubious at best. If they sell corporate shares to purchase the government bonds, then you could argue that “liquidity” has been enhanced. However, in these times, you want to encourage people to buy shares, not sell them. Same thing goes for real estate, whose prices have resumed their downturn in metropolitan areas as well. (It has never bottomed out in the provinces.)
So far, I have implicitly assumed that the assets in question are domestic ones. But they need not be. In fact, if people sold off foreign assets to finance the purchase of the government bonds, the immediate effect would be that that government can finance its deficit spending without crowding out domestic borrowers. Although there is a whiff of that beggar-thy-neighbor stench, it might be a nice way for all those people who have been losing money in the forex market to recoup some of those losses through the tax break. But I detect no movement to limit the measure to overseas assets.
This idea is as bogus as it gets. So, if you see Kaoru Yosano, please tell him to read my blog so he won’t have a change of heart. Thanks.
As for government scrip, I still believe that it’s a dangerous idea. But at least it makes as much sense as helicopter money.
Friday, February 27, 2009
War of Words within the Opposition a Harbinger of Things to Come?
Today, a reliable source told me that I would soon be proven wrong on the DPJ response (or lack thereof) to the economic crisis. Let’s hope he’s right, and I’m wrong.On Thursday, the People’s New Party threatened to boycott opposition consultations over a DPJ slight. According to media reports, Masaaki Itokawa, the PNP Upper House whip, sought to introduce an Upper House censure motion against the Prime Minister. The DPJ is understandably reluctant to do that since it doesn’t want to push Aso so hard that he resigns, opening the way for an electorally more attractive face (Kaoru Yosano?) to lead the LDP-New Komeito coalition into the Lower House election that must be called no later than September. Jun Azumi, the DPJ deputy whip, could have tried to mollify his PNP colleague, but instead went on the attack, pointing to the PNP’s reluctance—more specifically Shizuka Kamei’s—to go along with an earlier, DPJ push for a censure motion against the troubled then-Finance Minister Shoichi Nakagawa. Azumi further insulted Itokawa by telling him:
“go tell that to your party.”He did, and Kamei talked to the press, saying:
“Even if the DPJ wins the next Lower House election, it won’t be able to maintain power if the PNP and the Social Democratic Party say no because it won’t have a majority in the Upper House). They’re being full of themselves, not understanding how scary that is.”The DPJ-PNP-Shin-Ryokufūkai-New Party Nippon bloc holds 118 seats. Add to that the four seats that the SDP holds, and the DPJ and its allies have 122, or a razor-thin majority, of the 242-seat Upper House.
The rhetoric notwithstanding, this is a minor dustup. The DPJ needs the PNP’s votes in the Upper House, but the PNP needs the DPJ’s electoral help if it intends to keep its place in the Diet. (Three-way battles with both the LDP and the DPJ could spell disaster for all but the strongest PNP candidates.) So the two sides will kiss and make up. But it gives you a preview of how the two small tails, one of them old-school conservative, the other pro-labor paleo-pacifist, will wag the new dog on the block if it manages to catch the meat truck. We’ve seen the wagging happen in more important matters, as in the DPJ’s acceptance of PNP desires to turn back the clock on Post Office privatization. And there may be something personal about Ichiro Ozawa’s newly-evident stance against the U.S. military presence in Japan, but it certainly helps to keep the SDP satisfied.
The problem, as we’ve seen before, is not limited to the DPJ’s relations with its prospective coalition partners. To reprise the point, the DPJ itself is just as motley a crew of everyone from SDP defectors to fiscal and national security hawks, who are united only in the desire to finally topple the LDP-centric 1955 regime for good. The divisions, many latent, have led most conspicuously to the DPJ’s inability to address the growing financial/economic crisis head on despite its formidable cadre of in-party policy wonks and academic suporters.
In the here and now, the DPJ is being gifted by a Prime Minister that the mass media and the Japanese public have almost completely tuned out, as well as an LDP that has come up with duds three in a row with little relief in sight. (Which must be why new Finance Minister and septuagenarian Kaoru Yosano is gaining credibility just for being coherent, affable, and at peace with himself.) But in the long-run, the fault lines are likely to become evident under a DPJ-led regime, as the consequences of its policies become manifest in the face of the realities and the coalition members and the DPJ’s own factions begin making new demands. That has also been true, of course, with the LDP-New Komeito axis and the LDP itself, which have most recently suffered from their own dissonances, most recently under the wobbling, lurching Aso administration. They have set the bar pretty low, so to speak. Still, the media and the public will expect more than just more of the same. A DPJ honeymoon, particularly under an Ozawa administration, in an economically challenging climate is likely to be short, and filled with unpleasant surprises.
Monday, February 23, 2009
Death Brings Relief in the Worst of Economic Downturns (and Other Ramblings)
It is only in the last week that the enormity of the fourth quarter decimation of the Japanese economy became clear and sent economic prognosticators running to their computer terminals to revise their 2009 forecasts downward; the Japanese economy is now going to fall three percent instead of two—if the average crystal ball is any indication. Of course most households, companies, governments can individually absorb a three-percent hit on their incomes with ease; the catch is that the blows will fall unevenly, with some folks going into negative-income territory, especially in the case of businesses. Thus, the stimulus bill/bills and the FY2009 budget will be at best a most clumsy means of easing the collective pain. And I don’t think we’re getting out of this until global consumption patterns re-coalesce.
Beyond that, I have little or nothing to say about the big picture; I’m not even an economist. However…
A look at the details will show us that some are less worse off than others, in fact, may be doing just fine. Take death. We all know that death can bring relief to the most miserable of lives, but did you know that it is uplifting an entire industry? In fact, the funeral industry was one of the few bright spots on Japan’s 2008 economic scene.
More broadly, during downturns, services as a whole tend to hold up better in Japan and it’s no different this time around according to METI statistics . Of the six business services for which 2008 data is available on a year-on-year basis, four actually increased sales in 2008. (Up: rentals; information services; credit card services; engineering. Down: leasing; advertising.) Of the thirteen personal services with year-on-year data, seven increased sales (Up: theaters, performances and theatrical companies; golf driving ranges; amusement and theme parks; funeral services; wedding ceremony halls; fitness clubs; supplementary tutorial schools. Down: movie theaters; golf courses; bowling alleys; pachinko parlors; foreign language schools; culture centers.), with funeral services among the winners. After all, if there’s one purchase that’s hard to put off until better times…. And more people are dying anyway, as Japanese society ages and the baby boomers begin taking leave. In fact, this is one industry where they can predict the size of your long-term, year-to-year market within a fairly narrow margin of error.
Looking beyond the funerals industry, there are several interesting inverse symmetries. One is between the decline in golf club revenue and the rise in driving range revenues. Japanese golfers are plaything less, but practicing more. It’s not hard to connect the dots here; I don’t think that Ryo Ishikawa has touched off a desire among golf dads to raise their own versions of the next Tiger Woods (or the less fortunate next Michelle Wie).
Another requires a look into the fine print. The METI table shows that the “credit card industry” as whole increased year-on-year business volume in 2008. However, most of this came in the dominant “sales credit” sector, while the “consumer credit” business (read: reformed loan sharks) continued a year-on-year decline. Cash-strapped consumers in Japan must be stretching out payments, instead of paying cash on the barrel as is the Japanese custom. Meanwhile, the shakeout appears to be continuing in the consumer credit business in the wake of the long-running judicial and legislative crackdown on usury.
Finally, rentals increased, but that did little to offset the much larger drop in leasing. It’s no surprise that businesses are more reluctant to take on long-term financial obligations.
On a different note, movies, bowling alleys and pachinko parlors continued their downward trend. I wonder if this noticeable drop in the cheaper amusement categories is an indication of the hit that the lower-income brackets are taking, or merely a point in the long-term timelines of entertainment industries whose best days are behind them.
Beyond that, I have little or nothing to say about the big picture; I’m not even an economist. However…
A look at the details will show us that some are less worse off than others, in fact, may be doing just fine. Take death. We all know that death can bring relief to the most miserable of lives, but did you know that it is uplifting an entire industry? In fact, the funeral industry was one of the few bright spots on Japan’s 2008 economic scene.
More broadly, during downturns, services as a whole tend to hold up better in Japan and it’s no different this time around according to METI statistics . Of the six business services for which 2008 data is available on a year-on-year basis, four actually increased sales in 2008. (Up: rentals; information services; credit card services; engineering. Down: leasing; advertising.) Of the thirteen personal services with year-on-year data, seven increased sales (Up: theaters, performances and theatrical companies; golf driving ranges; amusement and theme parks; funeral services; wedding ceremony halls; fitness clubs; supplementary tutorial schools. Down: movie theaters; golf courses; bowling alleys; pachinko parlors; foreign language schools; culture centers.), with funeral services among the winners. After all, if there’s one purchase that’s hard to put off until better times…. And more people are dying anyway, as Japanese society ages and the baby boomers begin taking leave. In fact, this is one industry where they can predict the size of your long-term, year-to-year market within a fairly narrow margin of error.
Looking beyond the funerals industry, there are several interesting inverse symmetries. One is between the decline in golf club revenue and the rise in driving range revenues. Japanese golfers are plaything less, but practicing more. It’s not hard to connect the dots here; I don’t think that Ryo Ishikawa has touched off a desire among golf dads to raise their own versions of the next Tiger Woods (or the less fortunate next Michelle Wie).
Another requires a look into the fine print. The METI table shows that the “credit card industry” as whole increased year-on-year business volume in 2008. However, most of this came in the dominant “sales credit” sector, while the “consumer credit” business (read: reformed loan sharks) continued a year-on-year decline. Cash-strapped consumers in Japan must be stretching out payments, instead of paying cash on the barrel as is the Japanese custom. Meanwhile, the shakeout appears to be continuing in the consumer credit business in the wake of the long-running judicial and legislative crackdown on usury.
Finally, rentals increased, but that did little to offset the much larger drop in leasing. It’s no surprise that businesses are more reluctant to take on long-term financial obligations.
On a different note, movies, bowling alleys and pachinko parlors continued their downward trend. I wonder if this noticeable drop in the cheaper amusement categories is an indication of the hit that the lower-income brackets are taking, or merely a point in the long-term timelines of entertainment industries whose best days are behind them.
Monday, February 16, 2009
The DPJ Response to the Economic Crisis or Lack Thereof
Briefly:
The DPJ is taking the Aso administration to task for talking about yet another multi-trillion-yen budget well before the second stimulus package and the FY2009 budget have been enacted by the Diet. This lack of foresight on the part of the Aso administration may not be unique from a global perspective and given the rarity of the economic situation, but it’s still fair game politics-wise.
What makes me uneasy, given the increasing likelihood that the DPJ will take over in the next Lower House election, is the fact that the DPJ is even less reluctant to address the current, escalating economic problems. It came out last year with a plausible plan to deal with the financial crisis, but it never went on to push it with the Japanese public. More significantly, it is sticking to its four-year rollout plan for the 2007 DPJ manifesto plus a few big-ticket items that it subsequently promised, such as the discontinuation of the “temporary” gasoline surtax.
If the Aso administration suffers from a case of making-it-up-as-you-go-along frivolity, the DPJ is welded to a partly-sound, part political-expediency set of measures that may have been superseded by the dramatically altered economic landscape, in Japan and globally.
The DPJ is taking the Aso administration to task for talking about yet another multi-trillion-yen budget well before the second stimulus package and the FY2009 budget have been enacted by the Diet. This lack of foresight on the part of the Aso administration may not be unique from a global perspective and given the rarity of the economic situation, but it’s still fair game politics-wise.
What makes me uneasy, given the increasing likelihood that the DPJ will take over in the next Lower House election, is the fact that the DPJ is even less reluctant to address the current, escalating economic problems. It came out last year with a plausible plan to deal with the financial crisis, but it never went on to push it with the Japanese public. More significantly, it is sticking to its four-year rollout plan for the 2007 DPJ manifesto plus a few big-ticket items that it subsequently promised, such as the discontinuation of the “temporary” gasoline surtax.
If the Aso administration suffers from a case of making-it-up-as-you-go-along frivolity, the DPJ is welded to a partly-sound, part political-expediency set of measures that may have been superseded by the dramatically altered economic landscape, in Japan and globally.
Wednesday, February 11, 2009
Desperate Times Call for Desperate Means: Government Scrip and Inheritance-Tax-Exempt, Zero-Interest National Bonds
One of the less-noticed features of Yoshimi Watanabe’s Dear John letter to the LDP was his proposal to issue government paper money (in addition to the BOJ paper money and the government-issue coins) and use the funds to prop up the stock market. More recently, an old LDP chestnut, the inheritance-tax-free zero-interest national bond, has been revived by Yoshihide Suga and other prominent LDP MPs. Last Friday, the forces came together in the preparatory meeting for the establishment of the Diet Members’ League to Examine the Issuance of Government Paper Money and Inheritance Tax-Free, Zero-Interest National Bonds. (政府紙幣・無利子国債（相続税減免措置付き）発行を検討する議員連盟; it’s easier on the eye when you have space- and breath-saving kanji, sure, but eschewing katakana altogether?…Wait, is there a political agenda here?) Yoichi “Buried Treasure” Takahashi, the MOF bureaucrat-turned-academic and economic guru to LDP reformists, is the intellectual force behind this, if this report is to be believed. According to the media, the first idea was knocked down by old-school, older, fiscal conservatives such as faction leader and ex-Finance Minister Bunmei Ibuki and current Economic and Financial Regulation Minister Kaoru Yosano and the more expansion-minded Prime Minister Aso and Finance Minister Nakagawa, while the second received a somewhat warmer hearing. Now I have some respect for Professor Takahashi and I’m not an economist, but I have to say no to both. Let me explain:
Both measures are essentially interest-free loans; in fact, with paper money, the government doesn’t even have to repay the principle. That’s why most countries try to take segniorage out of the hands of politicians and leave it to an independent central bank. Otherwise, what you have is “scrip”—more appropriate for provisional governments, rebel regimes, Argentine provinces and mine site canteens.
Now government scrip stays in the monetary base forever unless it is redeemed with BOJ notes or other fungible assets. In fact, if I understand correctly, that is exactly the point—to increase the monetary base to raise prices and push consumption without swelling future debt repayments. But experience during the post-bubble years has shown that increasing the monetary base is like pushing on a string when nobody wants the money. I’m not an economist, but it looks like the measure runs a serious risk of runaway inflation if it is anywhere near effective in goosing demand. I’m siding with the people doing the worrying.
The inheritance-tax-free, zero-interest national bond by contrast has received a respectful nod from the LDP mainstream. Let’s take look at what this means.
The top inheritance tax rate—applicable above a net tax base of 300 million yen (after a maximum 47 million yen deduction)—is 50%, while the going annual interest rate for a maximum-maturity 30-year national bond is a shade under 2%. If we round up the interest rate to 2% and use it as the discount rate, the present value of the principal for a 100 million yen bond comes to 55.2 million yen. So it appears that someone on his deathbed who has a net tax base of more than 400 million can lock in a 5.2 million yen after-inhertance-tax profit on a 100-million yen, inheritance-tax-free, zero-interest bond—the difference between the bond’s 55.2 million present value and the 50 million-yen after-tax cash—for his heirs or other more worthy causes. (It is named inheritance tax but is in effect an estate tax.) Of course it doesn’t quite work that way, since the discount rate, which is equal to the corresponding interest rate, should be progressively higher for each later interest payment—which should be considered as independent cash flows for valuation purposes. Since the face value of a 100-million bond at a 2% interest rate is the sum of the present value of the principal and all the present values of the interest payments, all but the last of which are subject to lower discount rates than the principal, the present value of the principal and hence the present value of the zero-interest bond is lower than 55.2 million yen and likely lower than the 50 million threshold that would begin making the deal attractive at the margins, i.e., to wealthy people on their deathbeds. The terms under progressively shorter maturities improve rapidly for the 300-million-and-over tax base, though, with the effect of the shorter maturities being compounded by the lower discount rates. Note that a ten-year government bond currently carries an interest rate around 1.2-1.4%, a five-year bond 0.7-0.8%.
Now, it will not be difficult to calculate the break-even point for any given life expectancy under any given set of yield curves. Since the government cannot match the maturity of the bonds to the individual purchaser’s life expectancies but must set a single maturity for each issue, it will in principle have to give up more in terms of present value that it loses in inheritance taxes than it gains in interest that goes unpaid. And if the government is to have any hopes of taking in substantial revenue, that giveaway shall have to substantial as well.
And all that for what? Let’s say that the government manages to save a couple of hundred million yen in interest payments per year over ten years on a trillion-yen bond issue. That’s the kind of money that would help my cash flow, but would be lost in a 80-something trillion yen budget. Moreover, these “gains” will be more than cancelled out in the initial years by huge shortfalls in inheritance tax revenue, since purchasers of these bonds will be concentrated on the short end of the life expectancy range. In fact, I foresee a massive concentration of the shortfall coming in the first year of implementation. (Buy, then die quickly, would be the best strategy for people who buy the bond.) And that’s over and above the government giveaway that I referred to in the previous paragraph.
All this begs the question: Why bother? Unless of course, you want to turn it into a no-questions-asked money-laundering scheme—something not totally out of the question.
It is possible that the intent is to placate complaints from the wealthier LDP supporters that the inheritance tax is too high, and that the generally well-off LDP Diet members (if you are taking those annual disclosures of personal assets at face value, I have a bridge to sell you) are inclined to be more than sympathetic to their views. To be fair, I think that the top rate (or the threshold tax base thereof) is excessive, and I swear I have no personal financial interest in this issue either way. But that’s a different agenda that should be met head on, instead of sneaking in a one-off favor to the well-to-do before the DPJ and its allies with their more egalitarian background comes into power.
Both measures are essentially interest-free loans; in fact, with paper money, the government doesn’t even have to repay the principle. That’s why most countries try to take segniorage out of the hands of politicians and leave it to an independent central bank. Otherwise, what you have is “scrip”—more appropriate for provisional governments, rebel regimes, Argentine provinces and mine site canteens.
Now government scrip stays in the monetary base forever unless it is redeemed with BOJ notes or other fungible assets. In fact, if I understand correctly, that is exactly the point—to increase the monetary base to raise prices and push consumption without swelling future debt repayments. But experience during the post-bubble years has shown that increasing the monetary base is like pushing on a string when nobody wants the money. I’m not an economist, but it looks like the measure runs a serious risk of runaway inflation if it is anywhere near effective in goosing demand. I’m siding with the people doing the worrying.
The inheritance-tax-free, zero-interest national bond by contrast has received a respectful nod from the LDP mainstream. Let’s take look at what this means.
The top inheritance tax rate—applicable above a net tax base of 300 million yen (after a maximum 47 million yen deduction)—is 50%, while the going annual interest rate for a maximum-maturity 30-year national bond is a shade under 2%. If we round up the interest rate to 2% and use it as the discount rate, the present value of the principal for a 100 million yen bond comes to 55.2 million yen. So it appears that someone on his deathbed who has a net tax base of more than 400 million can lock in a 5.2 million yen after-inhertance-tax profit on a 100-million yen, inheritance-tax-free, zero-interest bond—the difference between the bond’s 55.2 million present value and the 50 million-yen after-tax cash—for his heirs or other more worthy causes. (It is named inheritance tax but is in effect an estate tax.) Of course it doesn’t quite work that way, since the discount rate, which is equal to the corresponding interest rate, should be progressively higher for each later interest payment—which should be considered as independent cash flows for valuation purposes. Since the face value of a 100-million bond at a 2% interest rate is the sum of the present value of the principal and all the present values of the interest payments, all but the last of which are subject to lower discount rates than the principal, the present value of the principal and hence the present value of the zero-interest bond is lower than 55.2 million yen and likely lower than the 50 million threshold that would begin making the deal attractive at the margins, i.e., to wealthy people on their deathbeds. The terms under progressively shorter maturities improve rapidly for the 300-million-and-over tax base, though, with the effect of the shorter maturities being compounded by the lower discount rates. Note that a ten-year government bond currently carries an interest rate around 1.2-1.4%, a five-year bond 0.7-0.8%.
Now, it will not be difficult to calculate the break-even point for any given life expectancy under any given set of yield curves. Since the government cannot match the maturity of the bonds to the individual purchaser’s life expectancies but must set a single maturity for each issue, it will in principle have to give up more in terms of present value that it loses in inheritance taxes than it gains in interest that goes unpaid. And if the government is to have any hopes of taking in substantial revenue, that giveaway shall have to substantial as well.
And all that for what? Let’s say that the government manages to save a couple of hundred million yen in interest payments per year over ten years on a trillion-yen bond issue. That’s the kind of money that would help my cash flow, but would be lost in a 80-something trillion yen budget. Moreover, these “gains” will be more than cancelled out in the initial years by huge shortfalls in inheritance tax revenue, since purchasers of these bonds will be concentrated on the short end of the life expectancy range. In fact, I foresee a massive concentration of the shortfall coming in the first year of implementation. (Buy, then die quickly, would be the best strategy for people who buy the bond.) And that’s over and above the government giveaway that I referred to in the previous paragraph.
All this begs the question: Why bother? Unless of course, you want to turn it into a no-questions-asked money-laundering scheme—something not totally out of the question.
It is possible that the intent is to placate complaints from the wealthier LDP supporters that the inheritance tax is too high, and that the generally well-off LDP Diet members (if you are taking those annual disclosures of personal assets at face value, I have a bridge to sell you) are inclined to be more than sympathetic to their views. To be fair, I think that the top rate (or the threshold tax base thereof) is excessive, and I swear I have no personal financial interest in this issue either way. But that’s a different agenda that should be met head on, instead of sneaking in a one-off favor to the well-to-do before the DPJ and its allies with their more egalitarian background comes into power.
Sunday, January 25, 2009
LDP Appears to Have Contained Dissent until After the Lower House Election
The New Komeito income tax rebate proposal that wound up turning into a 12 thousand yen per head, 2 trillion yen handout will surely go down in LDP history as one of its all-time public relations fiascos. The botched rollout of the Late-Term Elderly Medical Care Insurance system probably did more than any other single event to damage the Fukuda administration, but much of the blame for that in my view should go to the bureaucracy, but the handout was almost purely a political hack job. Sankei has a nice on-line post mortem in Japanese.
Given the lukewarm to frigid response from the experts, the handout may not have been a political panacea under the best of circumstances. But it’s not as if the Japanese public sat down, looked at the proposal and ran it through an economic model and 70% of them decided that it was an unsound idea either. It was the miasma generated by a waffling Prime Minister amidst all the political posturing and leaks that encouraged the negativity and made the public so receptive to it, while putting a decisive stamp of incompetence on the Aso administration.
So where do things go from here? The supplementary budget authorizing the handout and other expenditures passed the Lower House on 13 January and went to the Upper House. The Japanese Constitution all but guarantees that the budget will become effective within 30 days, so that part is a done deal. But budgets typically need legislation to secure the funds required to meet the expenditures; this supplementary budget is no exception*. On 19 January, the Aso Cabinet submitted a legislative bill that would authorize the government to a) issue long-term bonds and b) dig up buried treasures—transfer reserves from the Fiscal Investment and Loan Program Special Account to the General Account—in order to finance the handout and other expenditures. This bill requires a Lower House supermajority revote, after the Upper House opposition votes it down or refuses to vote for 60 days after receiving the bill from the Lower House. But dissatisfaction and fear is so strong among the LDP rank-and-file that there is talk of enough members—16 or more— breaking ranks to vote against the legislative bill to deny the Aso administration a supermajority.
Several scenarios are possible if such a thing comes to pass, but I do not see any plausible sequence that would not lead to an early snap election. In every case, the Aso administration would come to an end with the legislative failure. However, it is still highly unlikely that such a thing will come to pass. I noted before that the LDP had closed ranks after it resumed in the new year, and gave my take on the reasons why. In any case, the moment for a Lower House rebellion over the handout passed with the 19 January vote. Even Yoshimi Watanabe, who subsequently left the LDP of his own accord, merely abstained from the budget bill vote. He was joined by Kenta Matsunami, who got off with a mild scolding, a fact which may encourage a few other Lower House members to follow suit in the revote, but it is unlikely that they will breech the 50-abstention threshold required to deny a supermajority**.
Another potential tipping point arrived in the form of the internecine battle over Prime Minister Aso’s insistence on putting FY2011 as the target year for raising the consumption tax rate in drafting the FY 2009 tax bill, which, like any other legislative bill, would almost certainly require a Lower House supermajority. There was a dancing-on-the-head-of-a-pin quality to the argument, since no one in the LDP is willing to do so until the Japanese economy is out of the woods as far as the current recession is concerned. In the event, they came up with compromise language that tied a consumption tax hike to economic recovery as well as radical administrative and fiscal reform, a piece of rhetorical artistry that even the DPJ would find hard to reject on principle. In any case, the wording doesn’t matter; the important thing is that potential dissenters are on board, including, apparently, Hidenao Nakagawa. I now believe that this takes the issue out of play as far as splitting the LDP before the Lower House election is concerned, although, as in the case of the handout, I would not rule out a smattering of abstentions.
Since we’re talking about fiscal matters…
…Someone at a seminar asked why the Japanese government couldn’t its foreign currency reserves to prop up the Japanese economy. The speaker didn’t address the point directly, and I know that some of you reading this were there. Here’s my answer:
Japan finances its foreign currency reserves with short-term (1year and under) yen bonds. Think of our foreign currency reserves as a huge carry-trade operation. Using the short-term money to finance infrastructure investments would be risky; spending it on handouts for instance would be disastrous. In contrast, the reserves in petro-states can be used as political slush funds because they consist mainly of excess oil revenue.
Given the lukewarm to frigid response from the experts, the handout may not have been a political panacea under the best of circumstances. But it’s not as if the Japanese public sat down, looked at the proposal and ran it through an economic model and 70% of them decided that it was an unsound idea either. It was the miasma generated by a waffling Prime Minister amidst all the political posturing and leaks that encouraged the negativity and made the public so receptive to it, while putting a decisive stamp of incompetence on the Aso administration.
So where do things go from here? The supplementary budget authorizing the handout and other expenditures passed the Lower House on 13 January and went to the Upper House. The Japanese Constitution all but guarantees that the budget will become effective within 30 days, so that part is a done deal. But budgets typically need legislation to secure the funds required to meet the expenditures; this supplementary budget is no exception*. On 19 January, the Aso Cabinet submitted a legislative bill that would authorize the government to a) issue long-term bonds and b) dig up buried treasures—transfer reserves from the Fiscal Investment and Loan Program Special Account to the General Account—in order to finance the handout and other expenditures. This bill requires a Lower House supermajority revote, after the Upper House opposition votes it down or refuses to vote for 60 days after receiving the bill from the Lower House. But dissatisfaction and fear is so strong among the LDP rank-and-file that there is talk of enough members—16 or more— breaking ranks to vote against the legislative bill to deny the Aso administration a supermajority.
Several scenarios are possible if such a thing comes to pass, but I do not see any plausible sequence that would not lead to an early snap election. In every case, the Aso administration would come to an end with the legislative failure. However, it is still highly unlikely that such a thing will come to pass. I noted before that the LDP had closed ranks after it resumed in the new year, and gave my take on the reasons why. In any case, the moment for a Lower House rebellion over the handout passed with the 19 January vote. Even Yoshimi Watanabe, who subsequently left the LDP of his own accord, merely abstained from the budget bill vote. He was joined by Kenta Matsunami, who got off with a mild scolding, a fact which may encourage a few other Lower House members to follow suit in the revote, but it is unlikely that they will breech the 50-abstention threshold required to deny a supermajority**.
Another potential tipping point arrived in the form of the internecine battle over Prime Minister Aso’s insistence on putting FY2011 as the target year for raising the consumption tax rate in drafting the FY 2009 tax bill, which, like any other legislative bill, would almost certainly require a Lower House supermajority. There was a dancing-on-the-head-of-a-pin quality to the argument, since no one in the LDP is willing to do so until the Japanese economy is out of the woods as far as the current recession is concerned. In the event, they came up with compromise language that tied a consumption tax hike to economic recovery as well as radical administrative and fiscal reform, a piece of rhetorical artistry that even the DPJ would find hard to reject on principle. In any case, the wording doesn’t matter; the important thing is that potential dissenters are on board, including, apparently, Hidenao Nakagawa. I now believe that this takes the issue out of play as far as splitting the LDP before the Lower House election is concerned, although, as in the case of the handout, I would not rule out a smattering of abstentions.
* Supplementary budget bills are more often than not accompanied by taxation bills. This second supplementary budget bill is not, because the original tax rebate proposal was altered to a cash handout independent of the tax system.
** 1 nay=3 abstentions—if my arithmetic is any better than Fareed Zakaria’s.
Since we’re talking about fiscal matters…
…Someone at a seminar asked why the Japanese government couldn’t its foreign currency reserves to prop up the Japanese economy. The speaker didn’t address the point directly, and I know that some of you reading this were there. Here’s my answer:
Japan finances its foreign currency reserves with short-term (1year and under) yen bonds. Think of our foreign currency reserves as a huge carry-trade operation. Using the short-term money to finance infrastructure investments would be risky; spending it on handouts for instance would be disastrous. In contrast, the reserves in petro-states can be used as political slush funds because they consist mainly of excess oil revenue.
Friday, January 16, 2009
If I Didn’t Know Better, I’d Think the Aso Administration Was Preparing to Step Away from the 2-Trillion Yen Giveaway
The Fiscal System Council gives advice to the Finance Minister on the fiscal system and related matters. The Council consists of thirty full members as well as the hundreds of lesser worthies who populate its five sub-councils. Once a year, usually in January, the thirty wise men and women usually get together in a plenary session with the Finance Minister and his senior subordinates, take care of housekeeping matters, and let loose with whatever they have on their minds. Since there are no specific items on the agenda, no issues put forth by the MOF Minister for advice—what really counts are the twice-s-year (what else?) proposals the Fiscal System Sub-council issues—the plenary session usually passes with scant notice. Not so this year…
On 15 January, the Fiscal System Council met for their annual plenary session, where, as all the dailies reported (surely on page one) that the council members mostly agreed that the 2-trillion yen giveaway that the New Komeito forced on the Aso administration would be ineffective and that other more useful ways should be found to spend the money. We know this from the press conference by Taizo Nishimuro, the Council Chairman and former head of Toshiba, after the meeting. His statement (including who said what at the plenary session) as well as a summary of the proceedings should be available on the MOF website as soon as they’re ready.
MOF Minister Shoichi Nakagawa did his best to brush it off, claiming that nothing had been decided (true), that he hadn’t received any orders (true again). The Chief Cabinet Secretary stated that it was only the doing of three, four of the Council members. We’ll know if that’s true after MOF updates its website. In the meantime, I have to wonder, is this really happening without the blessing of the MOF bureaucracy and Keidanren?
On 15 January, the Fiscal System Council met for their annual plenary session, where, as all the dailies reported (surely on page one) that the council members mostly agreed that the 2-trillion yen giveaway that the New Komeito forced on the Aso administration would be ineffective and that other more useful ways should be found to spend the money. We know this from the press conference by Taizo Nishimuro, the Council Chairman and former head of Toshiba, after the meeting. His statement (including who said what at the plenary session) as well as a summary of the proceedings should be available on the MOF website as soon as they’re ready.
MOF Minister Shoichi Nakagawa did his best to brush it off, claiming that nothing had been decided (true), that he hadn’t received any orders (true again). The Chief Cabinet Secretary stated that it was only the doing of three, four of the Council members. We’ll know if that’s true after MOF updates its website. In the meantime, I have to wonder, is this really happening without the blessing of the MOF bureaucracy and Keidanren?
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