A Kohno/Murayama-Abe-Hashimoto Dialogue

The following exchange took place between me and a Chinese analyst over the working week, edited for typos and augmented for clarity. I (think I) have his consent in reproducing his end.

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1. “Just wondering what's your comment on Hashimoto, the Osaka Mayor's remakrs regarding the issue of ‘comfort women.’ I have a particular question on the possible consequences of politicians who delivers reckless remarks. If Mr. Hashimoto was a German politician, I assumed he'd already resigned from his post. 

“But obviously he's blaming people for their lack of understanding or ability to understand what he meant.  In this sense, are Japanese public more tolerant than in other countries to their public figures?”

If he were a cabinet minister, yes, I'm sure that he would have been forced to resign. But he's a mayor, and I'm sure local elected officials have said/done worse things unrelated to their job description and stayed on. The political damage has been done, though, and the Your Party has decided to break off cooperation with the Japan Restoration Party in the July upper house election, much to the delight of the DPJ

There a genuine need for an open debate on the where and what regarding the role of the Japanese government/military regarding the sexual demands of male soldiers and how all that compared to the other governments/military forces. But Hashimoto chose the wrong place and wrong interlocutors for his message--Hashimoto himself was also the wrong person to raise the issue.

A public figure must expect to have his words framed in a context not of his choosing.

Does that help?

2. “For an outsider like me, I'd assume that with the 1995 Prime Minister Tomiichi Murayama remarks on the comfort women issue, we turned a page of history. Why is [it necessary] to revisit that part of history, bearing in mind that it's a sensitive issue to Korea and China?”

Let me give you the short version of my answer to an ever so slightly different question, namely: Why do Japanese politicians keep revisiting that part of history, bearing in mind that it's a sensitive issue to Korea and China? 

First of all, there are two statements: the Kohno statement, which addressed the comfort women issue, and the Murayama statement, which addressed the Japanese war of aggression. Most Japanese politicians who have looked into the first issue as well as much of the Japanese mainstream media believe that the Kohno statement is not based on good evidence and is at best highly misleading. (I happen to agree with them regard to the women from the Japanese archipelago, the Korean Peninsula and Taiwan (who were all at the time Japanese citizens) but disagree with some of them with regard to the women in the areas of China and Southeast Asia that were occupied by the Japanese military. I’ll leave it at that for now.) They believe that South Koreans and the Korean-Americans have, with the complicity of the leftwing media in Japan, managed to whitewash the true history of the Korean comfort women as part of its national myth at the expense of Japan. They hold plenty of frustration inside, which sometimes boils over when they are prodded by reporters and Diet members. The outcome is always disappointing for them, which generates more frustration in a vicious cycle.

The Murayama statement is a different animal. Only people on the rightwing fringe (I hope) fail to see the post-1937 war in China terms of aggression. A slightly larger (but still small) number probably fail to see the post-1931 establishment of Manchuria as aggression. However, the 1894-95 Sino-Japanese War and the 1904-05 Russo-Japanese War are seen in a very different light by most Japanese. Specifically, they were wars fought between regional powers in a Hobbsian era of global imperialism, regional powers who were widely assumed to have militaries superior to that of contemporary Japan. The Chinese, no doubt, would frame it against the backdrop of the Opium War and other erosion of Chinese sovereignty by the Western powers, whose worldview the Japanese leadership seemingly adopted wholesale. As for Korea, the Koreans tell a story of a proud, independent nation subjugated by its longtime cultural (if not political) subordinate. The Japanese view is less clear, but there’s probably a large segment of the Japanese body politic that sees it this way: There was a dynasty ruling over a largely illiterate caste-ridden society complete with hereditary slaves and it was either us or the Russians. Yes, this sounds like the unedifying “everybody was doing it” defense. But have the Dutch apologized to the Indonesians? The British to the Burmese? The Americans to the Filipinos? The list goes on. So the story looks very different in the rest of Asia, explaining, perhaps, why they like us so much there. Does all this mean that the Murayama statement is wrong? No, but the commentary looks very different from the Chinese and Korean perspectives—as well as the American’s, which basically looks at its war in the Pacific through the Pearl Harbor perspective.

My take is that every nation will have its own national myth, not to the likings of others, perhaps, but not to be bent to their will either. If my advice had any currency, it would be: Never mind what they say; keep an eye on what they do.

“Polls show a majority of people are against Hashimoto's remarks. But he said there' s a problem with the polling method. If we take a look at the political elite group in Japan, how much support can Hashimoto count on? He's once considered a candidate for future PM, does the comfort women issue damage his chances?”

The other conservative parties (as well as some prospective JRP candidates) are avoiding him like the plague. I don’t think that he can fully recover from this reverse in his political fortunes in the foreseeable future. But then, the future is notoriously hard to foresee.

“People in Korea and China will naturally respond with concern over remarks like this in the sense that history will repeat itself in which Japan will impose its will on neighboring countries. I know it's an overestimated feeling toward the conservatives (so-called) in Japan. But people do have a concern there. Besides the comfort women issue, you have Prime Minister Abe's talk of "aggression" not being defined and his wearing a military uniform at an electoral event last month, among other controversial choices.”

Abe was wrong in one sense about the lack of consensus on the meaning of “aggression.” There’s a unanimous 1974 UN resolution on the definition of the term. The problem, of course, is in its application, and when did the opposing parties in any conflict ever end up in agreement? Ask the Turks and Armenians. The Israelis and Palestinians. The Mexicans and Americans. The Spaniards and Americans. The Filipinos and Americans. The Hawaiians and Americans. The Native Americans and Americans… The list goes on. Then ask, how do these differences in understanding affect the here-and-now, and the future? Do the Chinese and Koreans believe that the Japanese are willing and able to change the status quo by force? If so, that says more about them than it says about the Japanese in my view. Otherwise, be happy that Abe has reconfirmed the Japanese government’s commitment to those two statements. Did he want to? Probably not. But that’s the point. Isn’t confirmation by an unwilling prime minister worth far more than one from a willing one?

“How do people view that kind of gestures?”

Depends on the individual. “Comfort women” comments have far more negative domestic currency than those parsing “aggression.” BTW I was surprised that “aggression”=侵略. I had always assumed that it was “invasion”=侵略.

Why Did Abe Dispatch a Senior Advisor to North Korea?

I have no way of knowing, which is probably a good thing, since I wouldn’t be able to talk about it if I did, would I? But I do have some thoughts around it, helped by a few healthy servings of generic whiskey, in case you’re interested.

1)    Park Geun-hye is not the first South Korean head of state to address a joint Congressional session. And we get it: South Korea has shed a lot of blood for the United States in Vietnam, Afghanistan and where else, whereas we haven’t even made up our minds to come to the protection of US warships patrolling nearby waters. Still, it must have been galling for Abe, who served Prime Minister Koizumi, famously denied by Congress for daring to go to Yasukuni during his tenure, and is in his second round as prime minister himself, to see Congress give her an opportunity to give an oblique kick to Japanese dignity. BTW what do Karzai and al-Maliki have that Koizumi and Abe don’t? Okay, wrong question.

2)    South Korea has vastly more at risk with regard to North Korea than Japan. We worry about rogue missiles, which may or may not carry a nuclear warhead in the possibly not-too-distant future. South Korea must worry about an all-out land war and a massive influx of refugees and a multitrillion-dollar reconstruction undertaking or, worse, North Korea’s absorption into China for all practical purposes, if not legal.

3)    Making nice with North comes with little if any economic costs to Japan. Abe has already managed to put Japan into play with regard to the TPP negotiations and now the Obama administration did not put a hold on LNG exports to Japan because of Iijima’s North Korean sojourn.

4)    And hey, Abe proved, as has been done time and time again, that the North Koreans are rational. And that should count for something.

5)    South Koreans are not going to settle for anything less than total acceptance of their national myths. Abe cannot afford that, even if he were inclined to do so, which he is not. And without that, at least one distinguished delegate from New Jersey is going to put a hold on a Japanese prime minister from addressing a joint congressional session. So, so much for that.

Has the Japanese Economy Really Sucked as Much as I’ve Been Led to Believe?

As doomsayers have changed their sell on Abenomics from it’s not going to work to it’s not really working to it’s not working that much all thing considered, I began to wonder, how much have we sucked, all things considered, anyway? The very first numbers that I looked at surprised me. I’m not an economist, so I’m putting them out there, just in case anyone is interested.

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How poorly has the Japanese economy doing this century, say, relative to the rest of the G7? (Remember those countries?) Depends. The following chart shows the quotient of GDP in national currencies at constant prices, with 2013 and 2000 figures as dividend and divisor. It puts Canada ahead of the pack and the United States second, with Japan a disappointing sixth.

Canada	1.277962
United States	1.234331
United Kingdom	1.212253
Germany	1.15034
France	1.135103
Japan	1.111628
Italy	1.001247
International Monetary Fund, World Economic Outlook  Database, April 2013

Does this mean that we suck, if not nearly as much as Italy? Not necessarily. The following chart using the same database shows the quotient of per capita GDP in national currencies at constant prices, with 2013 and 2000 figures as dividend and divisor. Italy still sucks, but the rest of them are bunched more closely together. And Japan has jumped to fourth place, leapfrogging France and the United States, just behind now third-place Canada.

Germany	1.156469
United Kingdom	1.119617
Canada	1.11236
Japan	1.107157
United States	1.099738
France	1.048757
Italy	0.934377

Many things could be happening between 2012, when the GDP estimates were put together, and the end of the year, and middle-of-the-pack, 0.8% per capita growth per year isn’t anything to crow about. And the unconventional fossil fuel revolution will give the US economy a leg up on the rest of the G7 (while putting the eight and last-wheel Russia in a conundrum). Still, for now, I can say, “It could have been worse, I could have been in America all this time,” if barely? Or am I missing something so very, very obvious?

Did Something Funny Happen to Me on China Radio International? I’m Staying Tuned

20130510Did Something Funny Happen to Me on China Radio International? I’m Staying Tuned

It’s a Friday night and I’m having a few beers with friends, when talk turns to my media appearances (or lack thereof recently). I mention my Monday turn on a China Radio International (CRI) panel discussion around the 61^st anniversary* of the restoration of Japanese independence and the first thing that one of my friends says is that CRI appeared to have banned him, since it had asked him for comments regularly but hadn’t called on him for half a year now. So I told them my story and we wondered if I’d get the boot too.

* You may be wondering, why 61^st? Obviously, surely because Abe wanted to commemorate the event as soon as he had the chance. But, then, why didn’t he do it in 2007, when he first had the chance? It actually makes sense when you remember that it is the 61^st year that marks the beginning of a new sexagesimal cycle. You celebrate your birthday on the 366^th, not 365^th, day, don’t you? It’s the same thing.

  

CRI, like all audiovisual news outlets that I’m aware of, provides a list of questions beforehand so that the panelists/interviewees can prepare for the event, and the session usually runs more or less according to script. But this time, a funny thing happened. As one of the panelists was responding to the third question, my line went dead. When it returned, the exchange on Q6 was coming to an end and the session subsequently began to go off-script. I’m reproducing below the Qs and my As as they looked just before the session. If you have the time to listen to a one-hour podcast, click here. Incidentally, Professor Lawson was pretty awesome. Criticized Abe’s words, criticized China’s actions. I wonder if she’ll be contacted again, too.

Talking points:

1 How do you evaluate Abe's foreign affairs policy after he won the election this time?

I give him an A-minus. His economic diplomacy has been near-flawless. He engineered Japan’s entry into Trans-Pacific Partnership negotiations in time for meaningful negotiations against considerable domestic opposition. TPP in turn has spurred the Japan-China-South Korea FTA and the Regional Comprehensive Economic Partnership processes, while serving as a cornerstone of the third pillar of Abenomics. He is presiding over an auspicious start to his energy policy agenda—nuclear power, natural gas—with Vietnam, Turkey and elsewhere in the Middle East, and of course Russia. His political diplomacy is where I give him a minus, since he has helped annoy two important neighbors partly unnecessarily. Note that he has a chance of killing two birds with one stone vis-à-vis Russia as talks move forward on the Northern Territories.

2 Why could he lead the country to turn more conservative?

Fundamentally, because everybody else in the immediate neighborhood—China, South Korea, North Korea—is pushing the envelope on nationalism, becoming more aggressive. Prime Minister Abe’s political agenda is probably to the right of the Japanese public’s ideological gravity center, but anxieties around regional developments are further marginalizing pacifists.

3 Did Shinzo Abe want to reinterpret Japan’s war history? Abe commented on Japanese aggressions against China and Korea, saying there’s no clear definition of “aggression” either in academia or international communities. Different countries may have different understanding of the term depending on their own situation. Why did he do so? How dangerous is it for the region?

Actually, Mr. Abe is wrong about the definition of “aggression.” A UN resolution adopted unanimously in 1974 defines “aggression.” That said, there is an important question here. Specifically, does that definition apply retroactively? After all, Europe and the United States had been engaging in all sorts of aggressive behavior in Asia and worldwide for many years. Which leads us to my next point, which is: It’s obvious that, as Mr. Abe said, “It differs from which side you look.” If you don’t believe me, just ask the Israelis on one hand and Palestinians on the other, the Indonesians on one hand and the Dutch on the other, Anglo-Saxons on one hand and Native Americans ion the other, the Han people and the Tibetans and Uighurs… but you get the idea. As for why he said what he said, he was asked. In the upper house Budget Committee, where, by custom, the prime minister can be summoned to be subjected to questioning. But he also reiterated his intent to leave the matter to experts to hash it out; the overseas media tend to leave that part out of their reports, but Mr. Abe also should have left it at that.

4 But still Abe got over 70% for supporting rate, why is it? Does it mean domestically people support nationalism? Or is it more for his economic policy?

It’s Abenomics, Abenomics, Abenomics. His political agenda is of minor importance when it comes to opinion polls.

5 Will this support rate push him further on the road of nationalism and right-wing orientation?

Support for his administration is key to achieving his political agenda, which is already fairly clear. It does not change his orientation, but it certainly makes it more potent.

6 Japan is trying to escape the post-war regime. What steps/measures have been taken by Abe on this road?

I don’t know what you mean by “escape the post-war regime,” but if you mean develop ballistic missiles, nuclear weapons, and aircraft carriers, no, Japan is not, give us credit for not being that stupid. But if you mean, coming to the defense of allied military vessels under attack, coming to the defense of UN PKO forces under attack, yes, I think that Mr. Abe wants that, and a majority of the Japanese public will support him on this.

7 In 2007, when Abe served as Prime Minister for the first time, the national referendum law was enacted. The law established the procedures for amending the Constitution. Is this just the first step for Abe’s goal of revising Japan’s pacifist Constitution?

Yes. Without the law, the process could not go forward. But remember, not only the LDP but the DPJ also wanted to amend the constitution in principle, so it also supported the law. Most Japanese political parties of significance and a healthy majority of the Japanese public want to amend the constitution. However, they are very much divided on what they actually want in an amendment. So how China deals with this desire will play a meaningful role in how the eventual consensus evolves.

8 In Japan, fresh calls for constitutional amendment from various political parties have got louder. Why is it? How likely is it for Japan to amend the Article 9 of its Pacifist Constitution?

A determined and powerful prime minister is surely needed for and probably capable of putting such a momentous initiative of little immediate consequence for the Japanese public at the front and center of the national debate. Mr. Abe is the first prime minister to make progress in this respect a centerpiece of his eventual legacy, while the early success of Abenomics has prolonged the proverbial post-election honeymoon. So he’s serious, which means that all the other parties have to speak up as well. I expect that the Self-Defense Force will be recognized as an army and that the role of that military in international peacekeeping operations will be sanctioned. An affirmation of the right to collective self-defense is also to be in order. Otherwise, the pacifist elements of Article 9 will remain in place and may even be augmented, depending on how far the LDP can go without forcing the Komeito to bolt the coalition.

9 Will the US allow Japan to revise its pacifist Constitution? What role will US play in this issue?

Japan is a sovereign state. And has the United States ever intervened in the constitutional amendment process of a democracy? Case closed. Besides, any assertive commentary from the United States, or China for that matter, is likely to have the opposite effective in the national debate over the constitution.

10 How dangerous is it for the region if they finally get Pacifist Constitution Article 9 revised?

No more than, say, the extent to which the region is threatened by South Korea’s constitution, whatever it says about its military. Did you know that South Korea has compulsory military service? Look, Japan is not going to retake the Northern Territories or Takeshima by force just because it has a new Article 9. And it already has administrative control over the Senkaku Islands. And if an amendment enables the Japanese Self-Defense Force to play a more effective role in UN peacekeeping operations, I hope that our neighbors, who are already very active in this respect, should support it wholeheartedly.

11 Another event is that for the first time, Japan officially celebrated the day of restoration of Japanese sovereignty on April 28, when the San Francisco Peace Treaty was signed 61 years ago to end the occupation by allied forces. The event was marked with the presence of both the Prime Minister and emperors and empress. How meaningful is this event? Is this another signal that Japan is on its way to more right wing?

The event does not change the facts on the ground: the Japanese government is not going to increase its defense spending by 10% or even 5% per year. The Japanese Self-Defense Force is not going to take the Northern Territories or Takeshima by force. The Maritime Self-Defense Force is not going to lock fire-control radars on PLA vessels on the high seas. The event does not change the national narrative that molds Japanese behavior. The left wanted Japan to repudiate the past; the right wanted to celebrate it. The Prime Minister did neither, and chose to focus on the post-war recovery, both the economic and the political. And I suspect that the Japanese public was more focused on enjoying the long Golden Week holidays.

12 When defending the controversial visit to Yasukuni Shrine by ministers and parliament members, Abe dismissed the concern by neighboring countries, arguing that it’s natural for people to pay respect to soldiers who died for their national interests. He also mentioned of using “force” to expel potential Chinese landing on Diaoyu Islands. What message do these send?

What else could he say when reporters or Diet committee members ask these questions? After all, Diet members and cabinet ministers have long visited Yasukuni—notable Yasukuni supporters include universally-recognized pro-China doves, such as former Foreign Minister Masahiko Komura and former Prime Minister Yasuo Fukuda—and the Abe administration has adhered to the deal that the Prime Minister, the Chief Cabinet Secretary, the Foreign Minister, and the Defense Minister stay away. And the Japanese government, exercising administrative control, has always used force to expel anyone who has landed on the islands, including Japanese nationalists. In fact, it was precisely to keep Japanese nationals away from those islands that the Noda administration tried to buy the remaining three in a bidding war with Governor Ishihara.

13 Japan has strengthened its relationship with the US and will continue to seek support from the US to gain an advantageous position in related territorial disputes. Japan is aware that the US refuses to take sides in the Diaoyu Islands issue. The US has claimed that it will support neither Japan nor China in the territorial disputes. However, Japan has managed to make the US confirm that the Diaoyu Islands fall within the scope of the US-Japan Treaty of Mutual Cooperation and Security. Why did US take such positions? Does it mean the US also need/rely on Japan to fulfill its “pivot to Asia” strategy?

States, as a rule, do not take sides on territorial disputes, which should be settled by negotiation, arbitration, and, that failing, at the International Court of Justice. But states do take sides when use of force comes into play. Specifically, Japan exercises administrative control over the Senkaku Islands, control that the United States ceded when it returned Okinawa to Japan. There is a mutual security treaty between Japan and the United States. Ergo, the United States is obligated to come to Japan’s defense on the Senkaku Islands. So it’s just a reiteration of the legal implications of the status quo.

14 At the same time, Japan will further its military buildup and will probably go beyond the exclusively defense-oriented strategy. Due to the restriction by the pacifist Constitution, the Self-Defense Forces are not allowed to possess intercontinental ballistic missiles, strategic bombers, or attack aircraft carriers. However, Japan has been trying to bypass the Constitution to upgrade its military capability. For instance, Japan has invested a lot in the Maritime Self-Defense Force. How dangerous is it to the neighboring countries like China and South Korea? And the Northeast Asia region?

Like you, I do not worry about Japan developing intercontinental ballistic missiles, strategic bombers, or attack aircraft carriers. They are very expensive, and any efforts directed towards the development of such indigenous capacities will be strongly discouraged by the United States. Besides, any increase in the overall defense budget will be very incremental. Do not expect anything like 10% or even 5% per year. I can see factions in the PLA and their political, industrial and academic supporters making those arguments, though; the military—to be fair, all militaries, not just China’s—is always looking for potential enemies.

15 What’s the prospects of Japan’s relation with China? South Korea? Will the regional countries accept Japan’s growing right-wing trend?

The question you really should be asking is: Will China persist in its efforts to change the status quo vis-à-vis Japan, Vietnam, the Philippines, and India? On a related, if geopolitically less important matter, will China continue to allow North Korea to develop nuclear weapons? The Japanese public will support Mr. Abe as long as China’s answer to these two questions is “yes.”

16 What should Japan do to restore its relation with regional countries?

Stand up for its rights, fulfill its obligations, and respect the rule of law. And be as consistent as circumstances allow in its actions and words.

Is Mrs. Watanabe Already Gearing Up to Play the Role of the Greater Fool?

Analysts agree that individual investors largely sat out the pre-lower house-election, post-summer, stock-market recovery. Most also believe that they have been instrumental in the post-election bull market along with overseas investors. However, there’s dissenting opinion that claims otherwise, telling us that they have been for the most part been net sellers. So who’s right?

My money is on conventional wisdom. Individual investors had been buying and selling equities in the neighborhood of 3 trillion yen per month most of 2012. In December, the month of the lower house election, the figures jumped to 5.5 (buy) and 6.0 (sell) trillion. In January, the monthly numbers crossed the 10 trillion threshold, where they have stayed ever since. What has happened is obvious: Mrs. Watanabe is selling stock, taking out some cash, then plowing most of the money back and/or churning her equity holdings—most likely both. (There’s data to make a more educated guess if you’re interested.) Either way, the individual investor is obviously helping to drive up the stock market. The real question is: If Mrs. Watanabe is finally here, can a bubble be far behind?

From Prime Minister Abe’s Take on “Aggression,” to Reading Entrails

Prime Minister Abe said the wrong thing, but was what he said wrong? But first, let’s clear up one thing; the Japanese media did not “refrain” from covering Prime Minister Abe’s comments around his intention to revisit the Murayama Statement and more specifically his views on Japanese “aggression.” Here are online samples dated April 23 from three major dailies (translation mine):

Asahi: On April 23 at the House of Councilors Budget Committee, Prime Minister Shinzo Abe stated with regard to the Murayama Statement, which expressed remorse and apologized for colonial rule by Japan that “the definition of ‘aggression’ has not been determined, academically or internationally. It differs from which side you look in the relationship between one country and another.”

…

Prime Minister Abe agreed that “it can be said [about the phrases in the Murayama Statement ‘not too distant past’, ‘following a mistaken national policy’, and ‘colonial rule and aggression’ that they] are vague points.”

安倍晋三首相は２３日の参院予算委員会で、日本の植民地支配への反省とおわびを表明した「村山談話」に関連し、「侵略という定義は学界的にも国際的にも定まっていない。国と国の関係でどちらから見るかで違う」と述べた。

　自民党の丸山和也氏が「村山談話」の文言について、「遠くない過去の一時期」「国策を誤り」「植民地支配と侵略によって」の３点をとりあげ、「あいまいなまま『すみません』という事なかれ主義。歴史的価値はない」と指摘した。

　これに対して、安倍首相は「丸山委員が質問された点は、あいまいな点と言って良い。この談話で、そういう問題が指摘されているのは事実ではないか」と同調した。

Mainichi: On April 23 morning at the House of Councilors Budget Committee, Prime Minister Shinzo Abe expressed the understanding with regard to the Murayama Statement, in which then Prime Minister Murayama apologized for past colonial rule aggression by Japan, that “the definition of aggression has not been determined, academically or internationally. It differs from which side you look in the relationship between one country and another.”

(安倍晋三首相は２３日午前の参院予算委員会で、１９９５年に当時の村山富市首相が日本による過去の植民地支配や侵略を謝罪した「村山談話」について「侵略という定義は学界的にも国際的にも定まっていない。国と国の関係でどちらから見るかにおいて違う」との認識を示した。)

Yomiuri: Regarding the 1995 Statement by Prime Minister Murayama, which apologized for the past colonial rule and aggression, [Prime Minister Abe pointed out that “it can be said that the definition of “aggression” has not been determined, academically or internationally. Regarding the passages where the statement says among other things, “During a certain period in the not too distant past, Japan, following a mistaken national policy…”, he stated that “it can be said that they are vague. These issues have been pointed out in the statement.”

(過去の植民地支配と侵略について謝罪した１９９５年の村山首相談話について、「『侵略』という定義は、学界的にも国際的にも定まっていないと言ってもいい」と指摘。「わが国は、遠くない過去の一時期、国策を誤り」などとした談話の記述に関しても、「あいまいな点と言ってもいい。この談話はそういう問題が指摘されている」と述べた。)

Sankei is the only one of the four major dailies that failed to report Abe’s April 23 comments. At first glance, this is odd. After all, the Murayama Statement is a pet peeve of the staunchly nationalist daily. However, it did cover an earlier Abe statement at the same Budget Committee the previous day that reiterated his commitment to issue a new statement in 2015, the 70^th anniversary of the end of WW II (which the other dailies apparently did not deem sufficiently newsworthy) and, like the other dailies, has been providing significant coverage of the subsequent overseas fallout. Most likely, the reporter or his/her editor considered the April 23 comments merely incidental to the reiteration of Abe’s determination and consequently insufficiently newsworthy, at least for that particular day.

Whence the misunderstanding? First of all, you have a problem if you have to rely on The Japan Times and the English language versions of the Japanese dailies for news on Japan, Second, what you see online may not be what you get on hardcopy, and the dailies have different internet strategies. A cursory online search may be insufficient to tease out editorial intent (and its potential impact) as evidenced in the coverage.

In this case, an online search was sufficient to dispel any notion of a media conspiracy, implicit or explicit. But note that the difficulties for political analysts do not end there. Economists have at their fingertips (nowadays quite literally) numerous quantitative data sets collected and arranged for a wide variety of temporal and spatial densities, which they can mine for correlations on which to superimpose their favored causal relationships. Pity the poor political analysts, though, who for the most part only have monthly (at best) public opinion polls with their limited number of often changing questions and election results to work with. Beyond that, they have to make do with descriptive information and told-to stories: the former limited by inherent medium bias, the latter by the fact that even highly placed sources, once beyond matters of their immediate ken, must rely on the same recursive information cloud generated by the media and rumormongers that the analysts can tap in on their own.

If the economic analyst is a practitioner of numeromancy, then the political analyst is condemned to read entrails.

I’ll take a shot at answering my initial question later, and I think I already have the gist of it in my head. But this is it for now. Life beckons.

On “Abenomics” Step One, on China Radio International

This Monday, I took part in a one-hour panel discussion on China Radio International entitled “Japan’s Central Bank Reviving the Economy.” Some people have questioned the wisdom of appearing on a Chinese state radio, but I've never been censored or told what to say. (I've managed to say “Senkaku Islands” twice in a 5-minute interview.) Until something like that happens, I'll keep obliging them. The following is my crib sheet, whose answers I'd whacked out the day before with a little help from Jim Beams, then slightly revised the next morning. I changed my mind on at least one point after a comment from Professor Robert Dekle—it may be noticeable in the podcast—but I've left the memo as it was.

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2013.04.08- Japan’s Central Bank Reviving the Economy- DRAFT QUESTIONS

PART 1 (10:05-10:20)- Understanding Japan’s Economy

OVERVIEW (Brief Opening Positions)

1 Do you generally support Japan’s hyper easing policy or are you against it?

I support it. The Japanese economy has been underperforming over most of the last couple of decades, the chronic deflationary environment is a major reason why, and there are enough experts convinced that hyper-easing is at least a good place to start.

JAPAN’S ECONOMY

2 How would you describe Japan’s economy today?

Chronic underachievement. World class workforce, world class infrastructure, and world class manufacturers somehow add up to economic disappointment.

JAPAN’S SLOWDOWN

3 What are main factors that have hurt Japan's economy for years?

The failure to:

1) 1990s failure to deal with the consequences of the collapse of the bubble economy.

2） face down vested interests in the policy-making process

3) synchronize labor law and the social safety net

4) optimize the utilization of women in the workforce. (This appears to be an East Asian, not Japanese, failure.)

4 What is behind decades of deflation?

First, interest rates have fallen globally since the 1990s. When is that last time any state other than a few failed states had to worry about hyperinflation? And it's been only a little over a dozen years since a deflationary environment became the norm, not an exception. Beyond that, though, Japan does suffers from a chronic consumption and investment deficit, which appears to have created a self-perpetuating deflationary environment. Abe, in his own way, is aware of that, and is pushing an economic program to reverse this.

5 The classic description of Japan’s economy has been the aging population slowing growth, is this really that hurtful? At the same time as the population aged Japan also seemed to top out of infrastructure projects and faced substantial competition from regional powers South Korea and then eventually China, is Japan really a victim to domestic aging or regional competition?

The problem is the combination of a declining working-age population and a rising elderly, non-working population. The Japanese economy has a harder time raising productivity even as social expenditures grow.

Chinese and South Korean competition has been painful for Japanese construction firms, but Japanese engineering firms, for one, have more than held their own against global competition, while the manufacturing sectors are to a great extent mutually compatible and reinforcing. Besides, the reliance of the Japanese economy on exports has always been surprisingly low.

CAPITAL INVESTMENT

6 Japan’s domestic investment has slowed substantially. Some say this is because private companies have moved manufacturing and capital intensive investment to other countries because of strict environmental rules. How much has regulation pushed this investment out of Japan?

I believe that offshoring is mainly driven by cost considerations and the need for presence in growing markets. Sometimes, local content rules give manufacturers no choice. Regulatory costs certainly enter into the equation, but they are not as big a factor as you might imagine. Developing countries and emerging economies have quite stringent environmental rules and regulations, and Japanese firms established there follow them religiously, if only because they have too much reputation at risk and too little political leverage to avoid the consequences of violations.

7 The Japanese government has engaged in various capital intensive infrastructure projects. Why have they failed to stimulate the economy long term?

There is reason to believe that a good portion of those infrastructure projects turned out to be poor investments in terms of raising productivity. To give an example: Work on Narita International Airport languished for decades while the more convenient Haneda Airport was kept out of the regular international flights market. The result: Japan slips behind in the battle of the Asian hubs while it is left with small, money-losing airports scattered all over Japan. 　

CURRENT MONETARY POLICY

8 Japan's modern economy is built on incredibly low interest rates, aggressive asset purchases by the central bank and the world's 2nd largest national debt, how successful has this monetary policy been?

Interest rates look much higher if you factor in deflation, and a negative nominal interest rate is difficult to engineer. By comparison, Chinese state enterprises and national flagship companies can borrow under negative real interest rates. That's why Prime Minister Abe and Governor Haruhiko Kuroda are taking aim at a 2% inflation target, and replacing interest rates with the monetary base as the focus of monetary policy. That means buying loads of Japanese Government Bonds (JGBs).

9 Japan has been the classic example of a “liquidity trap” for years, is the answer to that problem even more liquidity?

Kuroda calls it quantitative and qualitative easing. The Bank of Japan is attempting to generate inflationary expectations while keeping long-term interest rates low by going long on maturity in its JGB purchases. It's also increasing its exchange-traded fund and real estate fund purchases. The hope, expectation, is that this generates a virtuous cycle out of the liquidity trap.

PART 2 (10:20-10:32)- BOJ Plan

INDEPENDENCE

10 The new BOJ plan fits exactly with Shinzo Abe’s hyper easing campaign promises. He also forced his way into choosing a new BOJ governor. Is the BOJ losing its independence? Is that going to undermine its impact on the economy?

Remember that most governments have the right to choose their central bank governors contingent on legislative consent. Once in place, those governors enjoy great independence throughout their terms. Japan is no different. And in terms of policy coherence at least, it is a good thing to have the administration and the central bank sin broad agreement on policy goals and the means to achieve them.

GOALS OVERVIEW

11 Japanese central bank governor Haruhiko Kuroda is planning to inject 1.4 trillion US Dollars into the economy to spur inflation and revive growth. What is he trying to achieve with this?

You are referring to the doubling of the monetary monetary base, which is part of the policy package designed to achieve a 2% inflation target in two years' time while keeping interest rates low. The idea is that low nominal long-term borrowing costs under inflationary expectations will provide a pro-investment environment for businesses and households.

12 What are risks involved in such kind of massive bond sales on the government's debt?

The perception that the BOJ is financing an ever-growing public debt could touch off a massive JGB sell-off, the bond market collapses, interest rates go through the roof, and hyperinflation ensues. This is a low-probability scenario, but the Japanese government does have to restore credibility in the long-term sustainability of the public debt, or that scenario will gain more credibility, with serious consequences all around. That's why the fiscal part of the Abenomics package cannot begin and end with spend-spend-spend and the long-term growth strategy must have real teeth.

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SHOCK AND AWE

13 This is twice the size of the US quantitative easing. Why is the stimulus so radical this time? Did Japan need to shock the markets to continue to push its currency down? Did the long build up to this announcement require the BOJ to go bigger than it wanted to?

With expectations already baked into the equity and currency markets, Kuroda needed to do something dramatic and unexpected, at least at this juncture so early into his regime. “Doubling down” seems to be a good way to send a clear, if not quantitatively explainable message. I also think that Kuroda wanted to signal a clear break with the past with a Big Bang approach. Who knows what would have happened if the BOJ had taken a more measured approach? I suspect that it would have eventually wound up doing more cumulative easing to less effect.

MONETARY BASE

14 The governor of the BOJ says the plan will double the nation’s monetary base to 3 trillion US Dollars by 2014, what does this mean?

Most of the increase will come in the form of current deposits held by banks in BOJ accounts. The expectation is that this, coupled with the purchase of JGBs with longer maturities and other elements of the policy package, will help boost investment.

15 The BOJ will be the only major central bank to target Monetary base, how different is this type of target? Should banks be focusing their goals on monetary base?

The Japanese economy is unique in that it is in a chronic deflationary environment. With interest rates effectively bottomed out at zero, the BOJ appears to have no choice but to look to the monetary base for policy guidance. At least that's how I see it.

INFLATION TARGETS

16 Is setting a target to increase inflation healthy for a central bank? Growth numbers driven by inflation can be misleading, is Japan trying to pump up its numerical growth rather than real growth?

It is healthy when you have chronic deflation, and inflation in the vicinity of 2% looks like a reasonable premise for a functional monetary policy. Real growth, of course, is the ultimate objective, but the Japanese economy is underachieving, and chronic deflationary expectations appear to be a significant cause of this.

17 Some analysts say Japan already has inflation. They say that looking only at CPI is misleading, but if you look at credit on the market there is already an overabundance of credit. Are these inflation targets looking at credit or simply at CPI? With so much credit inflation on the market already is there any guarantee that even more would finally hit CPI?

There is no “credit inflation” unless the price of goods and services goes up, no? And that is exactly what the inflation target and the policy package are intended to achieve. Yes, there is plenty of money out there; it simply hasn't translated into rising prices. Let's hope that Governor Kuroda's clear-cut, Big Bang approach works.

18 Some analysts say an aggressive inflation target like this only works if you can convince people to buy ahead of prices rising, is that really true? Is the potential inflation going to spur near term buying?

The idea is that inflationary expectations will spur buying, in terms of investment and consumption. I am aware that the 2001-2006 quantitative easing did not achieve that kind of result. So there is a risk that the issue will remain unresolved over the course of Governor Kuroda's term, which would be a major problem for monetary policy precisely because he has taken a Big Bang approach and has no additional tools to call on.

19 If you don’t get this psychological/economic response are inflation targets going to backfire on Japan?

Yes. Everything goes back to square one, except the BOJ will have a lot of JGBs on its hands. Worst case scenario (see 12) becomes more plausible.

PART 3 (10:32-10:47)- Impacts

CURRENCY IMPACTS

20 Is the new BOJ policy currency manipulation?

A floating currency rates means that anything significant that happens in the domestic economy directly affects the exchange rate. In that sense, all governments are currency manipulators. If it were my choice to make, I would have governments talk to each other about the negative effects, real and potential, of exchange rate controls and currency market interventions without using what is actually a US legislative concept.

21 Tokyo is already under fire in the US, accused by some of currency manipulation. Is Japan going to set off a currency war with this new plan?

No. As long as the Japanese government or the BOJ does not start buying up foreign currency-denominated financial instruments, this will not become a significant political problem.

22 Will other countries follow Japan by engaging in quantitative easing? Or will the ones who can control their currencies more directly artificially weaken their currencies?

The US and Europe are already doing it, no? Countries like China exercise more direct control on exchange rates, which has its own merits. But exchange rate controls are a more brittle regime; the harder they come, the harder they fall.

BANKS

23 Some are of the opinion that this will achieve its aims, helping to boost consumer prices, drive up domestic demand and help spur growth. But others say given the sluggish state of the Japanese economy, as well as problems in Japan's key export markets, business and consumers are not too keen to borrow money at this stage. In this case, all this extra cash is likely to sit with the banks and not flow to the real economy. So is there a risk that benefits will not flow into the real economy?

If the real economy fails to pick up, then yes, there is a risk. But the global environment appears to be picking, if modestly. And the Japanese economy is far less reliant, always has been, on exports than, say, China and South Korea. Public sentiment has taken a turn for the better, and the employment picture for new graduates has been improving for the last two fiscal years.

24 Will banks begin to engage in “Currency Carry Trade” rather than truly invest in the economy?

The yen has already fallen significantly. I don't think that Japanese banks are ready to go back to the zaitech of the nineties any time too soon.

STOCK MARKETS

25 It's not just the volume of new money that is significant; it is where the new money will go. Kuroda is targeting long-term government bonds and non-government assets such as ETFs - Exchange Traded Funds. Buying ETFs is a way for the central bank to push money directly into the stock market, supporting and increasing the value of assets. Will the inclusion of ETFs simply push money into the stock market? The US stock market has been booming yet the impact on jobs is significantly less. Is Japan getting caught in the same trap of focusing on the stock market rather than the real economy?

Not very much. The amount of ETF purchases is relatively modest—the ETF market is relatively small—and there are signs that rising stock prices are already boosting luxury goods purchases. Anything that raises consumption is useful in the current economic environment. Rising stock prices also helps financial institutions and encourages businesses to raise funds through the equity market.

NATIONAL DEBT

26 At 230% of the GDP, Japan's public debt is already the highest among industrialized nations. How will such stimulus move impact Japan's national debt?

Keeping interest rates down helps keep debt service down while rising GDP and inflation increase tax revenue, don't they? This in turn diminishes the need for deficit bond issues, or at least that's how the logic goes.

27 Is japan actively trying to monetize its debt? Considering the large amount of Japanese bond holders are Japanese, is this that concerning?

No, as long as the BOJ is conducting monetary policy of its own volition and is not being forced by the government to buy those JGBs.

28 Some say in a worst case scenario, the government may not have enough cash to make those payments and will be forced to sell additional bonds to raise money. How bad would that be?

The Japanese government already issues deficit bonds, which is essentially “not having enough cash to make those payments and will be forced to sell additional bonds to raise money.”

29 If the BOJ will be buying 70 percent of the bonds available monthly with this program, wouldn’t that mean market appetite for bonds would still remain? Wouldn’t that mean even if the government has to issue extra bonds to roll over debt, they would have willing customers?

Yes. As long as financial institutions and institutional investors think believe that the bond market will not collapse.

PART 4 (10:48-10:58)- Next Steps

FISCAL POLICY

30 The Abe government has already announced aggressive fiscal spending. How will this monetary easing policy interact with this new spending? Is all of this too much stimulus?

The LDP touted a 10 year, 200 trillion yen public investment program coming in. I suspect that this is more bark than bite and will be quietly scaled back as the overall Abenomics fiscal strategy comes under closer scrutiny.

NEXT STEPS

31 What should the BOJ do next?

Nothing, except stay the course. Unless there is a significant change in the economic circumstances. In poker terms, the BOJ went all-in. It's the Big Bang approach. To change course now, even in a benign direction, would seriously undermine credibility in the Kuroda regime.

32 What should the Abe Government do next to help the economy?

Two things: a credible long-term plan to sustain fiscal credibility, and a credible long-term growth strategy that overrides entrenched vested interests. Prime Minister has three months to convince the Japanese public, before the July upper house election.

33 If you were a business person in japan, how would you be reacting to these actions?

I'm not a businessman, never have been. But I can tell you that business response has been generally favorable. That said, businesses reliant on the domestic market and imported inputs are rightfully worried about rising costs while they wait for the consumption tax hike to kick in less than a year from now.

34 What should regional national competitors do in response to these policies?

Maintain a sense of proportion. Japan is an important part of the regional economic environment, and the falling yen has a negative effect on the Japanese import environment. But there's more to their export environment than Japan, the yen will rise again if Abenomics works, while inflation will eventually work against the competitivity of Japanese products, and Japanese achievement of its full growth potential surely benefits all regional economies.

OUTLOOK

35 Will Abenomics, a combination of big government spending as well as an aggressive central bank asset buying program, work to push Japan out of deflation and stimulate its growth?

My answer to this kind of question is always the same: I'm an optimist; I have to be, I live here. And then there's the third arrow in his quiver: the long-term growth strategy.

36 Will Abenomics be harmful to regional economic cohesion?

A strong Japanese economy is good for the regional economy. Remember, Japan is a major customer of Chinese and South Korean goods and services. 

Kuroda Swings, Clears the Bases

BOJ Governor Haruhiko Kuroda got essentially what he (the market too) was asking for, by way of mostly unanimous decisions to boot (the announcement in English, here). Am I surprised? Yes. The two dissents, both by one board member, were a little too arcane for me; in any case, they appear to have little practical consequence. Now, Kuroda owns it. And many, perhaps most, experts believe that the 2% target will be hard to achieve, especially within the informal two-year window that the Kuroda team has situated for itself.

One government observer said to me that it won’t be such a big deal two years from now one way or the other. True—if the other economic indices, real GDP, jobs, etc., are in good shape and public sentiment is robust. But if the broader economic outcome is ambiguous, Deputy Governor Kikuo Iwata will have provided critics a big stick to beat the Kuroda team with by putting his job on the line with regard to that two-year timeline at the confirmation hearings. I think that Iwata went out of bounds by drawing his own red line, when Kuroda had not committed himself nearly that firmly.

My Expectations for the Day at the Bank of Japan

Later in the day, the BOJ Policy Board will wind up two days of deliberations by announcing changes in monetary policy aimed at achieving the 2% inflation target in two years. Consolidating BOJ’s asset purchase program with its regular, so-called Rinban, operations seems like one of the easier things on which to achieve a nine-member consensus, though the technical details may take a little longer to work out. Governor Haruhiko Kuroda would no doubt like to secure majority support for all the other four items that have been aired in public, and he could all but erase market uncertainty by bringing all of them to a vote today. However, my guess is that he will only have the board vote on the items for which he has secured a majority and present them outcome as the first stage in a measured rollout process. He cannot afford to have anything voted down so early in his regime, can he?