Case against Coast Guard Officer Not Air-Tight

More bad news for the Kan administration, according to the evening edition of the hardcopy Yomiuri. My translation, plus comments.

Katsuyuki Nishikawa, the Director-General of the Criminal Bureau of the Ministry of Justice testified in the Judiciary Committee of the House of Councilors regarding the leak of the video of the Chinese fishing boat collision*, “We are not treating [the leaked video] as documents or articles of evidence, but since we received it as material for investigation, it will obviously a document related to a trial as prescribed in (the Code of Criminal Procedure,) Article 47.”

The Code of Criminal Procedure, Article 47 stipulates, “No document relating to the trial shall be made public prior to the commencement of the trial” unless “it is necessary for the public interest or other reasons” [and this testimony] expresses the view that it is strongly suspected that the leak is a violation of the National Public Service Act (obligation to preserve secrecy).

This testimony exposes two problems. First, it could be argued that it is no longer a document related to a trial. The Chinese captain was released under reservation of disposition, which means that as a matter of pure logic, he could still be charged and brought to trial. However, because of the political considerations explicitly stated by the public prosecutors in Okinawa on his release to the Chinese authorities with the obvious understanding that he would be returned to China, where he would be placed beyond the long arm of Japanese law, there is good reason to believe that the Public Prosecutors Office has given up any possibility of prosecuting him at any point in the future. Hence, no trial for the document to be “relating to” pending “commencement of the trial.”

Second, the document can be made public without violating Article 47 “if it is necessary for the public interest or other reasons.” Now I’ve used the quasi-official translation here, but “necessary” does not extend to “other reasons” in the Japanese text. In other words, if there is a valid reason for the disclosure, or rather, a valid reason not to apply the Article 47 restriction to a case of disclosure, then it could be a “document relating to [a] trial” and still not be prosecutable. And what better “other reasons” could there be than the fact that there is no longer a real possibility of a trial?

Note also that a criminal prosecution is a serious encroachment by the state on the individual. There is also the public’s right to know. These are good reasons for the Public Prosecutors Office to exercise restraint in actually proceeding with the case, and the courts are likely to take them into consideration in taking up my two preceding points.

I don’t know if the courts will accept all of these arguments, but don’t you think they’re pretty sound? At a minimum, unless the Coast Guard officer is willing to do the Japanese version of nolo contendere, his lawyers will surely raise them, and his Coast Guard colleagues and retired officers as well as volunteer groups politically motivated or otherwise are sure to pitch in financially for the legal ordeal.

My point is that the Kan administration is looking at a prolonged legal battle that it has little control over but will become intimately tied to in part because of Chief Cabinet Secretary Yoshito Sengoku’s intemperate and misguided statement equating it with the monstrosity of evidence tampering by a public prosecutor to buttress a weak case and subsequent alleged cover-up by his superiors. And that is bad. Ex-Prime Minister Hatoyama’s similarly bombastic and erroneous description of an administrative coup d’état hasn’t helped either.

To Conspiracy Theorists: Need a House?

I’ve consistently maintained that there was no conspiracy and that it was a rogue Coast Guard officer, not anyone from the Public Prosecutors Office, and it looks increasingly like it. In fact, I'll bet the house that it’s not an institutional operation. At most, one accomplice, who slipped him the video. Of course the DPJ is trying to dump it all on the Coast Guard, and as an administrative issue, it's right, there's absolutely no way new MLIT Minister Mabuchi can be held responsible for it—or for that matter his predecessor and now Foreign Affairs Minister Seiji Maehara—unless his predecessors are willing to share the blame for decades of neglect that allowed the Coast Guard to operate with such carelessness that an officer in Kobe could get hold of an unauthorized copy.

You know, there’s something to be said for the complaint that I often hear from John Campbell, Professor Emeritus at the University of Michigan, who now resides in Tokyo, that the LDP continues to spit at the heavens (my words, not his) and the media is giving it a free ride. But is there an anti-DPJ bias? Stephen Reid at Chuo University also has something to say about that. I’m not so sure about that though. I’m inclined to look at all the other factors that go into the bad press for the incumbents and the neglect towards the opposition, though it’s certainly something that should be explored systematically—if someone isn’t already doing it.

Why the DPJ Claims about the Leak Are So Wrong and My Fears over a Weakened Kan Administration

Far less coherent than I’d thought when I wrote it as an email, so I’ve edited it extensively. Still not completely sound, but life is short, so here it is.

The video leak is a serious problem for the Kan administration, but there’s more than this and they are accumulating on Chief Cabinet Secretary (CCS) Yoshito Sengoku’s doorsteps. In this particular instant, making the legally unsound statement that equated it with a group of public prosecutors allegedly involved in the fabrication of evidence to buttress a weak criminal charge and the subsequent cover-up when the fabrication came to light in an attempt to put all the blame on the bureaucracy—which, ironically, it mostly should properly be placed—is going to backfire on him. He has a tendency to wing it in the spotlight—which is really not what the CCS should be doing, though I can't blame him much, given that Kan has turned out not to be a good communicator as prime minister, which fact has been a surprise to me—and have to walk it back, apologize, bluff his way though, whatever. That’s not good. Now let’s look at how his statement is ill-considered.

A) One is a criminal offense by an agent of the state against an individual, while the other is a piece of administrative malfeasance and only possibly a criminal offense by an agent of the state against the state. The latter can, yes, go all the way up to insurrection, but I'm sure that a leak that has little practical effect than to confirm the allegations of the Japanese government pales in comparison to an attempt to sustain an unsound indictment by tampering with the evidence (and entrap the defendant), casting a heavy pall on the entire prosecution process.

B) The evident contrast between the politically motivated release of the Chinese fisherman and the harsh treatment of the Japanese Coast Guard officer, assuming that the officer is indicted, will be all too painful, while the Kan administration will look utterly foolish if the official is not.

C) My guess is that the video was passed around among the officers like a Paris Hilton home movie, and the guy in Kobe got so mad that he went and posted his copy on YouTube. That, Mr. Hatoyama, is administrative failure, not a coup. (Yes, ex-Prime Minister called it a “coup d’état by members of the government.” And ex-MIAC Minister Kazuhiro Haraguchi used the word “insurrection against the state.”

Okay, C) is more of an aside, but my point is that bombastic misstatements from Hatoyama, Sengoku and the like indicate how seriously the DPJ is taking this as a threat to the long-term survival of the DPJ regime. This and Ozawa's lie-in—refusal to testify in the Diet—are playing havoc with the legislative schedule in this extraordinary session as well as with public opinion*, and jeopardizing prospects of expanding alliances, most plausibly with Komeito. Meanwhile, Kamei is yapping about the Japan Post and worker dispatching agency bills. Ozawa is likely to continue to dig in, so that issue will linger well into the regular Diet session, which overlaps with the consolidated local elections in April. As a Japanese voter, I'm beginning to worry that Kan will be too weakened to push the debates on consumption taxation and Trans-Pacific Partnership negotiations, facing down opponents with the threat of a snap election if necessary.

* The near-universal public outcry in Japan reminds me albeit in very low-key form of the way Kim Jong Il’s revelations over the abductees blew up in Prime Minister Junichiro Koizumi’s face (though to be fair, he showed a remarkable stick-to-it-iveness through his second trip to North Korea and beyond).

Impressed by William D. O’Neill’s Commentary on Senkaku Collision

There must be more than enough opinions from the informed, less informed, uninformed, and of course the ill-informed to last a lifetime of reading. There’s one that’s really impressed me, though, and it’s this one from William D. O’Neill explaining that the Chinese fishing boat initiated the collisions. Now I have no way of verifying (or refuting for that matter) his claims except to turn to another nautical expert (and the claim-counterclaim may not be of that much importance to people who think that the islands belong to China and that’s all there is to it), but a forensic, if cursory, examination from someone who’s been there, done that, is a welcome addition to a debate that has been overwhelmingly dominated by social science and lawyer types—like me. It’s a breath of fresh air, really.

That said, I will soon inflict on you some of my ruminations on the subject that I don’t see reflected out there, at least as far as I’m aware. They are my comments in discussions with my friends at Eurasia Group—social science types, most of them—lightly edited for public consumption.

Just for Fun, Trivia of Sorts around the Senkaku Incident

The search for The Source begins. In the meantime, an edited version of a memo that I sent out in response to suspicions of a high-level, politically motivated leak to my Asia practice friends at Eurasia Group that will never find its way to its clients:

This Jiji Tsushin wire, which identifies the video as a version edited by the Japan Coast Guard station in Ishigaki and this Sankei report, conjointly support my conjecture that a relatively junior JCG official engineered the leak. FYI, I happened to receive a secondhand report on the JCG dismay just after the Chinese boat captain's release by the public prosecutors. The prosecutors have always been at odds with the regular police. Now, they and the Kan administration have managed to piss off the Coast Guard.

There’s an important lesson here for the Chinese authorities.

Hu’s Coming to Dinner?

Yes, he will. At least that’s what I think. There’s been much speculation in Japan whether Hu Jintao, the Chinese President, will actually show up to sup with his fellow heads of state and government at the upcoming APEC summit in Yokohama. The last-minute unilateral cancellation of a meeting on the sidelines of the ASEAN summit between Prime Ministers Naoto Kan and Wen Jiabao by the Chinese side—accompanied by a tirade from the Chinese Foreign Deputy Minister—had put the matter in further doubt. The Japanese authorities pointed out that a key part of the denunciation—the last straw if you will—was the result of an erroneous AFP report*. On the heels of this dust-up, though, Foreign Minister Seiji Maehara, for whom the Chinese netizens appear to harbor particular enmity, announced that the two prime ministers had indeed subsequently held a ten minute chat, where Wen reportedly expressed his regret that their meeting had to be canceled. I wondered how that story would be carried in the Chinese media. Now, I know. Yesterday (Sunday, Oct. 31), the answer came in 法制晩報 (Evening Legal Report: my translation), one of many semi-official publications operating out of Beijing, according to Damien Ma** at Eurasia Group. The Evening Legal Report, according to a Kyodo Tsushin wire by way of among others the Sankei, gave a matter-of-fact report of a ten-minute meeting and characterized it as a “coincidental” “reenactment of corridor diplomacy.” It does not appear to have referred to the Japanese claim about Wen’s regrets. In the meantime, the Chinese side appears to be putting the blame on attempts by national security conservative Foreign Minister Maehara and other hawkish elements in the Kan administration to repair the damage under the Hatoyama administration to the Japan-US bilateral relationship, according to the somewhat more authoritative—am I right, Damien?—環球時報 (Global Times) indicated today (Nov.1) in a bylined report.

Leaving aside guesswork on Chinese motives, I think that the first report is a sign that the Chinese authorities want to limit their reputation risk abroad while containing discontent at home—the demonstrations have all occurred in the less prosperous interior provinces (and Chongqing, a special city in the interior), the most recent ones spilling over into domestic complaints—which means that Hu will show, the only suspense surrounding the status of a bilateral that should take place on the sidelines. The second report? A reminder that the US is the other big dog in the neighborhood, as well as possibly a manifestation of the Chinese authorities’ desire to localize if not completely isolate in the minds of the Chinese public the undesired elements of the Japanese political establishment. There is no mention of the near-universal if low-key Japanese aversion to Chinese actions around the latest Senkaku incdident***.

(Addendum) More to the point, this Global Times editorial puts the blame squarely on Maehara’s shoulders. Note also that Maehara has risen to the top of the preferred politicians in Japan according to the latest Nikkei-TV Tokyo public opinion poll. I don’t think that this is a delayed recognition for his JAL bankruptcy workout efforts, or his less commendable work on the Yamba Dam project.

* Is it just me, or is AFP generally less reliable than, say, Reuters?

** Damien, you will remember, blogs at the Atlantic website, a considerably more prestigious piece of virtual real estate than my more modest efforts. Little known fact: Damien played lead guitar for Johnny Cash’s studio recordings in the country legend’s last years. He is also quickly becoming an authority on rare earth elements. True story.

*** The Chinese belligerence took the Japanese public by surprise and captured its attention in a way that reminded me of the national response to the revelations of the North Korean abduction of Japanese citizen albeit in a much more low-key way. So many people in Japan, including those who had shown little to no interest in Japan’s international relations, or politics for that matter, woke up and took note.

Let’s Hope Mr. Fukuyama Has Worked Out His Announcement with His Chinese Counterpart

According to this Sankei report, Prime Ministers Kan and Wen did have a chat around the ASEAN summitries in Hanoi after all. Tetsuro Fukuyama, the Japanese Deputy Chief Cabinet Secretary, the two prime ministers held a ten minute chat in the waiting room for heads of state/government this morning (October 30), less than 24 hours after the Chinese Deputy Foreign Minister Hu Zhengyue unilaterally announced that China was cancelling the eagerly awaited post-Senkaku bilateral meeting between the two and delivered a blistering tirade against the most recent Japanese actions surrounding the Senkaku Islands and the South China Sea gas fields. Fukuyama reportedly told the media that the two heads of government shared a common understanding that they:

a) regret that the summit meeting did not occur this time;
b) appreciate the resumption of the private sector exchange between Japan and China;
c) will strive to promote the strategic mutually beneficial relationship; and
d) will create an opportunity in the future to talk at their leisure.

I hope that Fukuyama has worked out his latest statement with his Chinese counterpart—the Japanese announcement of the bilateral meeting reportedly was marred by conflicting reports by government officials about a Chinese cancellation, which turned out to be true—so that it will not be followed yet another dressing-down by the Chinese deputy foreign minister or worse. After all, Wen (if, yet again, reports are to be believed) is under some pressure from hardliners for his more conciliatory policy regarding China’s relations with Japan. To look at this from a different angle, if Fukuyama is not directly contradicted by the Chinese authorities, that would be strong indication that the fix is in, and that the Chinese authorities are really serious about rapprochement.

Note that the Chinese gripe about the gas field announcement appears to have been the result of an erroneous AFP wire that was subsequently corrected after a Japanese MOFA protest. Does this give enough wiggle room to Wen? Hard to believe; it sounds too trivial. But you never know. It’s certainly not encouraging to know that the Chinese side didn’t bother to confirm the wire service report before acting.

Is the Happiness Realization Party Newsworthy If It Manages to Mobilize 2,600 Happy Science Followers in Tokyo to Protest Chinese Action around the...

There’s some commotion out there on a discussion forum about the Japanese media’s treatment, or lack thereof, of a October 3 event in Shibuya featuring “about 2,600, which apparently included ordinary people, not just right-wing thugs” raging against a Chinese incursion into the territorial waters of the Senkaku Islands. But if this claim by the Happiness Realization Party, the political arm of the Happy Science—does it have a special Hell for economists?—cultreligious movement, is true, it was an event staged by the HRP itself, a party that won 0.39% of the proportional representation vote, 0.50% of the prefectural vote, and zero seats in the July 11 upper house election.

The HRP did somewhat better today (October 16) in its demonstration in front of the Chinese Embassy, as it attracted Toshio Tamogami, the former Chief of the Sir Defense General Staff who was prematurely retired during the Aso(!) administration for publicly challenging the government’s long-held and highly restrictive views on the constitutionality of collective defense (read:coming to the aid of the US military protecting Japan). In case you wondered, the HRP has been canoodling with Tamogami of late.

The Sankei group is the only MSM outlet that appears to be taking the event seriously.

So, are the MSM correct to make light of the two occasions? Yes and no. On one hand, they were not expressions of the genuine and general if low-key Japanese outrage but events manufactured by fringe movements that represent a tiny fraction of the Japanese public. On the other hand, they appear to have touched off a much larger and sporadically violent set of protests in China—okay, they do outnumber us 10 to 1—timed to coincide with the second event. The Japanese MSM probably should have used the Japanese events as lead-in to what would have been a useful meditation on the contrast between the two nations whenever one or other incident like this one pops up.

Why Is the DPJ Getting Such Bad Press? Why Is the LDP’s Policy Message—Such as It Is—Not Getting Across?

Questions, questions…

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I was with a group of mostly foreign academics engaged in Japan studies (and one fellow blogger), when one of the two elders stated that the media was holding the DPJ up to much higher standards than it did with the LDP when the latter was in power. I wasn’t aware of this, but all the others in the group who had opinions on this matter agreed, so I’m inclined to believe that they were on to something. The LDP would be happy to tell you that the DPJ is merely being hoisted on its own petards—though it’s hard to listen to LDP Diet members without laughing when they preface their questions for the DPJ ministers with qualifiers to the effect that “the LDP may have been guilty of these sins itself, but…”—but I think that there’s also a structural explanation to this, and I said as much at that session. The following is a substantially revised, expanded version of my off-the-cuff comments on this point.

MSM reporters have been covering the LDP at its headquarters—where they have a “reporters’ club*”—since 1955. They have doing likewise with the DPJ only since 1996 (or 1998 depending on your preferred year of DPJ birth). The daily interaction under the reporters’ club system—there was a time when ambitious LDP politicians literally fed and watered the reporters on their beat—inevitably creates a measure of rapport between the reporters and their subjects. Now, the reporters are rotated in and out from their assignments at fairly short intervals—two years on average would be a reasonable guess—so this should be less of a problem theoretically. However, those rotations are likely to include turns at any of a large number of reporters’ clubs at the Prime Minister’s Office and ministries and agencies, where until September 2009 the LDP had with only a brief interruption monopolized or dominated ministerial and subcabinet assignments. Thus, there would have been plenty of time to develop the kind of relationships that could have delivered more favorable press to the LDP administrations than otherwise would have been the case. By contrast, even a large opposition party would be covered by its own reporters’ club and little more**. The devil you know, perhaps?

This also likely provides a good answer to another complaint at the group session: the lack of coverage where LDP policy ideas, such as they are, are concerned. Now, the only reporters’ club covering the LDP regularly is the LDP reporters’ club—which has traditionally focused on the political, not the policy, side of the LDP., since the ministry/agency/BOJ reporters’ club took care of the policy side. I can’t see the LDP reporters’ club changing its coat any time soon. Thus, now with a vastly smaller number of reporters covering the LDP in exile and institutionally inclined to focus on the political game, it stands to reason that the LDP’s policy pronouncements will be shortchanged. This also explains the preponderance, also noted at the group session, of youthful, articulate, telegenic figures in the LDP’s new shadow cabinet. With low expectations for help from the reporters’ club, the LDP is obviously courting the broadcasting networks’ attention, which also provides newspaper fodder for the morning edition the next day.

* In case anyone is wondering, a reporters club is a self-governing organization of mainstream reporters covering an institution who receive office space and access to regular briefing in return for agreeing to respect embargoes and other rules imposed by the club itself. The effect is an information cartel, or trust with the institution at the core. The DPJ regime has gone a long way in eroding the collusive arrangement.

** In fact, any added attention would most likely be unwelcome, since it would near-certainly come from the national beat, which covers crime, scandals and human interest stories. Guess which ones it’ll be coming after when it converges on politicians.

So Much for the Fourth International…

The Japanese Communist Party has come out with its official response to the Senkaku Islands incident, and you only need to know the title of the document to understand where the JCP’s sentiments lie:

The Senkaku Islands Issue: Japan Territorial Possession Is Justified Both Historically and Under International Law[so there!]

So I guess my question is: Will Sapio print the document word for word?*

Oh well, so much for the Fourth International.

Yes, I’m aware that the fraternal animosity goes back some ways. That said, note also that the subtitle of the latest JCP outburst contains the word 大義, or “Noble Cause,” a word with historic resonance, a word that reminds me of the less democratic times of the period after the Meiji Restoration and the unconditional surrender in WW II. The appeal to nationalism draws an interesting parallel to China’s more elaborate and effective efforts.

* According to Sankei, in what must be a first for the conservative news group to approvingly reference the JCP, the JCP is going to translate its statement and pass out copies to the foreign embassies in Tokyo.

The Chinese and Japanese Authorities Want to Wind It Down, but Democracy Gets in the Way

In a clear sign that the Chinese leadership wants to move on from the Senkaku Islands incident, China’s Foreign Ministry spokeswoman has been toning down the rhetoric dramatically in recent days. It appears to be sending signals on the domestic front to cease and desist, too, as anecdotes surface of the Chinese bureaucracy resuming work on shipment papers for rare earth exports to Japan and dropping some of the administrative nuisance imposed on Japanese businesses in China exporting to Japan. In fact, the Japanese Coast Guard folks are the good guys, did you know, helping save sick Chinese sailors, according to this reportfrom Xinhua, China’s state wire service.

The feeling is mutual at the leadership level; the Kan administration also wants to get this issue out of the way before the fallout worsens. However, in Japan, public opinion in general, most of the mainstream media, much of the political opposition, and even some DPJ members are driving driving the domestic political cycle in the opposite direction. You have not, will not, see the kind of government action and very little of the private sector bandwagonning that was evident in China, but the issue will remain in the public domain for a while, not when, for instance, the latest Yomiuri opinion poll (October 1-3) is showing overwhelming negatives for China and the Kan administration around the issue and support for the Kan administration fell from the post-Ozawa euphoria of 66% (September 17-18) to a still above-the-waterline 53%. It’ll be a while before the two sides can kiss, discreetly at first, and make up, as they eventually will—until the next flare-up.

Coming Up for Air after My First PowerPoint Production

Not very fun weekend, as I have just finished (hopefully) my first PowerPoint for presentation, on Tuesday…on a webcast. It’s in ugly black-and-white—except the tables, which the software automatically colored my tables and I couldn’t figure out how to turn that function off. Two days, in fact, which brings the hourly rate for the speaking fee to… wait, I’m not going to let the thought spoil my after-work hours, when I’m getting my drink on and then breaking off to cook dinner. In fact, I’ll probably won’t even be going back to my most recent posts until after I’ve made the presentation; there’s other work when the weekday dawns too.

That said, I can’t help mentioning how godawful the Kan administration’s response to the Senkaku Islands crisis was. No, I couldn’t have done any better—I am the last person that you want to turn to for crisis management (just ask my old METI friends)—but would you believe me, I actually foresaw a similar issue there and featured it in a piece of work that I was doing some time back? And you’d think that the government would have had a crisis management plan in place for such contingencies, don’t you?

Never mind, let’s see if an emboldened Chinese government sees fit to actively challenge Japan’s effective control over the islands. I think that this has emerged as a real, if still small, possibility.

I’m signing off for the day. I generally check my email, even when I’m dead drunk, so that’s where to find me if you’re in a hurry, okay?

Is Anybody Watching Straight Talk Tomorrow?

On CNBC, at 7:30PM Tokyo Time? Just sayin’.

Okay, back to my deadline work, for multiple clients. And liquor. There’s always liquor.

Maeda, Meet Nifong; Nifong…

Sheesh. I can’t find a good word for it, since I don’t want to disrespect “shit,” a perfectly respectable word that is now having hard times the last few centuries. FYI Maeda’s arrest is the first arrest that the Supreme Prosecutors Office has ever made on its own, according to a media report.

Silver lining? Gives the lie to big bad conspiracy theories about the Japanese bureaucracy and the public prosecutors. Hey, you take what you can get.

Chinese Authorities Escalate and My Dialogue with Sun Bin Continues

The Chinese government made front-page headline news in Japan as it upped the ante on the Japanese government’s refusal to give up the fishing boat captain without a trial, announcing its unilateral suspension of ministerial-level exchanges, suspension of bilateral consultations on increasing airline routes between Japan and China, and postponement of the Japan-China Comprehensive Conference concerning Coal. It has already postponed scheduled high-level talks on the joint development of the East China gas fields and the dispatch of a National People’s Congress delegation.

By going public with these measures and accompanying them with belligerent language, the Chinese government is making it even more impractical politically for the Japanese government to coax the Public Prosecutors Office to give up the fishing boat captain without taking the criminal case to court, as it is in the PPO’s discretion to do (somewhat adulterated by a legal amendment that allows the Committee of Inquest for Prosecution the authority to force prosecution against the PPO’s will, but this is irrelevant for all practical purposes in this case).

The saving grace here is that the Chinese side is not taking any action to challenge the effective control itself of the territorial waters by the Japanese government. It actually appears to be keeping Chinese vessels from launching expeditions to the Senkakus. Also significantly, as Sun Bin notes in our ongoing dialogue, criminal prosecution sets precedence of a legal shading, an undesirable development from the Chinese perspective, at least in the court of public opinion.

Anybody Still Interested in the Chinese Fishing Boat?

If so, there is a dialogue between Sun Bin and me in the comments here that you might want to look into.

And Finally, One of the Most Beautiful C&W Songs Ever Written…

…and mostly forgotten. Reid Jamieson—no, he’s not George Clooney’s evil, underfed brother—presenting Is It So Strange as an Elvis Presley tribute.

May, Schmay, Might, Schmight… Could, Schmould? But You Get the Idea

I shouldn’t be saying bad things about the MSM; my livelihood depends in part on their interest in what I have to say. Still, this Newsweek headline:

Murkowski May Launch Write-In Bid, but It Might Not Change Election's Outcome

is pretty obscene. Yes, and:

“The Cow May Jump over the Moon, but the Fork Might Not Run Away with the Spoon…

A more honest headline would read:

I Don’t Know If Murkowsky Will Launch a Write-In Bid, and I Don’t Know If She’ll Win If She Does

One of my favorite putdowns is that “it’s not even wrong.” This one doubles down with a may-might compound hedge.

Kaieda Shows Roots in Pushing Zero-Interest Government Bonds

Banri Kaieda, the new State Minister for Fiscal and Economic Policy, is promoting zero-interest, estate tax-free government bonds as a cheap means to finance the public deficit. This is an idea that was already advocated by notable economic gurus Shizuka Kamei (most publicly when he held the Financial Services and Postal Reform cabinet portfolios) and Ichiro Ozawa (during the DPJ leadership campaign). This Yomiuri report states without further comment:

“The objective [of the zero-interest bonds] is to sop up tansu yokin (ed. ”Tansu yokin” is the Japanese equivalent of “mattress money”) and other assets that are lying about unused in households with government bonds and put the [funds] to good use.”

This is rubbish. Most people in Japan do not keep their savings in their bureaus (or their mattresses). Instead, they put the money into better use as financial assets, bank deposits, mutual funds, and the like. And guess what those banks (and Japan Post Office), fund managers, and the like purchase with the money…

So what’s the point of it all? Japanese inheritance tax law gives us the answer. The first 50 million yen of an estate is tax-free and there’s a 10 million deduction for each legal heir, so there’s a minimum 60 million tax-free to begin with. (There are other deductions that vastly complicate the picture, but let’s keep it simple. Besides, I’m not a tax attorney.) Beyond that, the marginal tax rate is highly progressive, beginning at 10% for the first 10 million but rising quickly to peak at 50% for anything over 300 million. At its simplest, the inheritance tax-free bond would result in massive windfalls for the heirs of the rich and elderly while the government avoids modest interest payments over the lifetime of the bonds. You don’t need to do the math to see that the government will be the big loser in terms of present value, while accepting more volatility in its long-term cash flow (interest payments being more predictable than mortality profiles of the eventual bond purchasers). It’s boondoggle, that’s what it is.

Then why are these politicians advocating the zero-interest, inheritance tax-free bonds? Well, Kamei and Ozawa are old men who have accumulated plenty of personal assets over their lifetimes. It is conceivable that they have a personal interest in pushing the measure. More likely, though, is the input that they get from the company they keep. As conservative political leaders with an ironclad grip on their Diet seats, their most important constituency consists of the rich, i.e. the members of the moneyed class who find vicarious pleasure in sponsoring their favorite politicians, much in the way that they might spend money on racehorses or professional sumo wrestlers.

I suspect that the reason for Kaieda’s support for the bonds is somewhat different, although it’s still represents doing favors for the rich. Before he became a politician, he had built up something of a reputation as an economic analyst. However, it appears that it was not as just any kind of analyst. A look through his bibliography shows that he was essentially a personal finance guru, more Suze Orman than Paul Krugman, Kazuyo Katsuma than Heizo Takenaka. And if an inheritance tax-free bond isn’t a personal finance advisor’s dream, I don’t know what is.

Case closed.

This does not, of course, bode well for economic policymaking under the Kan administration. It also does not speak kindly of the MSM in terms of economic literacy. On the other hand, this kind of nonsense gives me material for this blog, and in a very roundabout way helps put food on my table. So who’s complaining?

Ozawa as Warlord-Oracle

From a well-earned, long lunch-break spent on the Internet, where still I’m unable to drift too far off the reservation.

Sankei, if not always the firstest among the MSM outlets, for sure posts the mostest on its media website. And here it is, reporting on the blame-game among the Ozawa forces, where the fingers point to: The Four Heavenly Kings, the keepers of the world, keeping, according to the complaints in the report, the world from the Dharma. (Confession: To show you how little I actually know, I wasn’t even aware that Ozawa had “Four Heavenly Kings” surrounding him.)Then there is, of course, majordomo Kenji Yamaoka, who led the election campaign for Ozawa and kept issuing cheerful “Imperial General Headquarters announcements” till the bitter end that only served to aggravate the anguish of defeat.

It’s the identities of the Four Kings that intrigued me though. Two of them, Koji Sato and Kazumasa Okajima are second-generation Diet members, sons of Ozawa allies who now dwell in that Great Big Diet Building in the Sky. If you’re dead, then there’s no danger of the falling out that plagues ever other associate sooner or later, is there*? Another King, Takeshi Hidaka, left his day job early in his professional career and joined the horde of Ozawa aides**. A few years later, he married one of the daughters of a Diet member and—you guessed it—Ozawa ally, and a very trusted one too, before he retired. There is something visceral and atavistic about these relationships, casting on Ozawa an aura of a feudal warlord. The fourth King, Kenko Matsuki, the only one without such clear ties, started out with the LDP, where his father was the head of a small local chapter, but his career only took off after he joined the Ozawa camp.

All this is in sharp contrast to the popular image of men and women accomplished in their respective professions making a mid-career shift in response to DPJ solicitations, and comes across as more the product of old-school conservative politics typical of the LDP, now making a painful shift to the public solicitation process and limitations on heirloom candidates***. You wonder how many of the new breed will be inclined to follow the 68 year old Ozawa into the wilderness if he decides to pull up stakes and leave.

* Actually, Okajima’s father did leave Ozawa’s party, but later lost his Diet seat and died while plotting a comeback, having returned to Ozawa’s wing, after the appropriate apologies.

** You may remember his name from the recent Ozawa financial scandals, where Tomohiro Ishikawa, the main defendant, implicated him in the cover-up.

*** Yamaoka is, unlike the other four, Ozawa’s generational cohort who left the LDP with him to form the Japan Renewal Party.

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While I’m on Ozawa’s throwback tendencies, let me mention that I wasn’t the only one who was surprised to see the New Ozawa, the one full of smiles and handshakes and emotional speeches, and opening himself up to the press, any press, when the campaign started. That Ozawa may have been one of those Terminator robots from the future (or is it the other way around?), though, because the smiles and open access vanished in a political instant when the September 14 election ceremonies ended. Leaving the conference room, Ozawa stared down the throng of journalists waiting for his comments and left without a word for public consumption. Words leaked out from that night’s gathering, including his vow to return to “one common foot-soldier to work for the party” (according to media report a phrase known to be use by Ozawa to express the equivalent of “you’ll have to pull all my teeth with a pair of pliers to see if I cooperate with the bastard”). This has been Ozawa’s usual Oracular mode of communication; he seems to have reverted immediately to type.

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Sorry if I’m boring you with Ozawa trivia, but for me, it’s a welcome diversion from an assortment of Kan admin stuff that I’m working on. And Ozawa is a fascinating diversion.