Friday, February 01, 2013

From My Notes: Who Are the Wizards behind the Abenomics Curtain?

Edits in parentheses, otherwise, served as-is. And yes, in case you wondered, there is a real “we”.

“[W]ho do you feel has made the biggest impression on Abe?”

[*Beats me, but is that going to keep me from talking?*]

The third arrow first, which is actually micro, since it’s industrial policy broadly defined. (Monetary and fiscal are the macros.) It’s METI. Akira Amari, who is the minister in charge, was METI minister for two years (2006-2008) in the first Abe administration and the subsequent Fukuda administration and has staffed half his new 50-member or so policy team with METI secondments (please check numbers). Now the interesting angle here is, some METI officials were or became neoliberals in the reform processes under the Hashimoto and Koizumi cabinet, left public service, and have recently been prominently observed outside the tent pissing in on behalf of the likes of the Minna no Tou (Your party) and Ishin no Kai (Japan Restoration Party), often at the same time. MOF’s Yoichi Takahashi is also in the same boat. They may be taking a show-me stance for now since their grandmaster Heizo Takenaka has joined the Abe/Amari team but expect them to attack viciously if the Abe administration tacks toward picking winners and throwing money at them while pushing off difficult structural reforms.

Working backwards, for fiscal policy, [Finance Minister Taro] Aso really likes spending money, although Most LDP members worth their salt generally don’t need prompting to go ahead and spend our money—it’s part of their proverbial DNA—so Abe shouldn’t need much prodding from anyone. But Aso really seems to like spreading the muck around. (Cucek-san has some of the most pungent things to be said on this subject without using four-letter words.)

Finally, on monetary policy, I have no idea beyond Hamada’s obvious, overt influence. But Abe is no economist, professional or amateur, and he and Hamada go back some ways. So you need not look further than Hamada for reinforcement to Abe’s intellectual backbone on this. I’m sure that Robert has suggested Tag Murphy and John Campbell on this and the other macro question. But remember, Hamada’s influence is limited to taming the BOJ and its tightwad monetary policy; Hamada is critical of Abe’s fiscal policy, though he appears reluctant to call him out too strongly on it.

“We are also trying to determine when he first started hammering away at the BOJ, we feel it may have been after the quake around October 2011.”

You’ll have to check the records for that, although Abe reportedly thinks that Fukui’s 2006 abandonment of the zero-interest policy doomed the economic recovery and hurt his incoming (and short-lived) administration.

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