Tuesday, April 17, 2007

There and Back Again

Thank you for your patience.

A personal tragedy has kept me from writing.

I am afraid I shall not be very funny for a long while (Oh, you were not that funny to begin with - Editor) but I will try to think out loud more often.

Here is a first thought.

Of late, the great minds congregating at NPR's Japan Forum have been debating, to a greater or lesser degree, the stupidity/immaturity/naivety of the Koizumi economic team in the first years of the Koizumi Era--and consequently what are the limits on economic reform and policy making in the present time.

It is a long-running debate, having taken place under a variety of thread names in the past. The cast of characters, however, remains largely the same.

The general consensus between the various warring factions is a condemnation of the policies of the Koizumi-Takenaka axis in the years 2001-2--when the constriction of public works spending and the focus on strict regulation of financial instutions had a deleterious effect upon stock markets and the economy, one that only the once-in-a-lifetime burst of capital goods demand from China and a massive flood of liquidity from the Bank of Japan could bring to a halt.

Or something like that...the details of what happened next fascinate any and all those who really, really, really want to make mountains of money out of differential molehills.

The problem with the argument--and I am not referring to the inherent bias problem when you have stockbrokers and investment bankers offering up their views about what the government is doing about the stockmarkets and financial regulation--is that the Koizumi Cabinet may not have had an economic policy in its first years. What Koizumi & Ko. more likely had was a political policy with economic consequences.

Koizumi and his advisors saw the Lost Decade as the proof that nothing but nothing would ever pull Japan out of its slump except a cauterization of wounds inflicted by the LDP. Koizumi came into office intent on reviving Japan by breaking the majority party.

In imposing constricting and thus deflationary measures, the Koizumi-Takenaka team was not intent on purifying business, as the hapless GOJ Governor Hayami Masaru had tried to do (winning him the coveted "Worst Central Banker in the World" accolade). The goal of the Koizumi shock was the halting of the redistribution of Japan's surpluses to economic losers--not the weak, as the mincing statists wail, but the parasites--that had been allowed to survive and cover the landscape because of their political utility (and we can all list up, without much effort, the various LDP money pumps that were sucking the country dry).

So to debate about the "economic mistakes" of the Koizumi team in its first years in office strikes me as engaging in argument arising from improper premises. The Koizumi team was not trying to revive an economy; it was trying to kill a political system.

1 comment:

Japan Observer said...

Brilliant post.

I give Koizumi a great deal of credit for recognizing that the problem with Japan was and is a political problem.

But if he couldn't destroy the LDP -- and the Japanese political system -- then I strongly doubt that anyone can.