The Bad News

Satyajit Das paints an "abandon all hope all ye who enter here" portrait of the Japanese economic and budget situation, long term (Link). The upshot: getting all hotted up about Abenomics, whether for it or against it, is probably a waste of energy.

All that Das writes is true. I nevertheless take heart in this dismal passage:

Japan's current account surplus has also allowed the government to run large budget deficits which can be funded domestically. Since 2007, the Japanese trade account surplus has fallen sharply, turning into a deficit in 2012.

The factors driving the fall include an appreciating Yen and slower global growth, which has reduced demand for Japanese products, such as cars and consumer electronics. In late 2012, territorial disputes with China exacerbated the decline in exports. It also reflects the impact of the Tohoku earthquake and tsunami as well as the subsequent decision to shut down Japanese nuclear power generators, which increased energy imports, especially Liquid Natural Gas.

Unlike the demographic and incomes problems the country faces, items in the above passage are fixable -- or at least lend themselves to amelioration with government help and guidance.

Work on energy supply -- which Abe Shinzo, in his recent policy address to the Diet, managed to ignore -- and you are attacking the trade deficit and economic restructuring at one swoop. Make gestures toward a cooling down of the acrimony in the Japan-China relationship -- which Abe is doing (Link) -- and one buys Japanese companies some breathing room to realign themselves to political changes in China. Damage the yen's status as a safe reserve currency -- and shutting up about doing so (in Diet questioning yesterday Abe again went into the red zone, promising to help those hurt by endaka) -- and one can help the profitability of Japanese companies (though just why Japan's exporters cannot handle currency strength and/or volatility escapes me).

It is not as though nothing can be done.

A Maritime Balkans

Former Prime Minister of Australia Kevin Rudd either writes astonishingly well or has astonishingly capable writers working for him. (Link)

A good read, once one get past the unfortunate "tinderbox on water" metaphor ("A tinderbox? On water? What's the problem then?").

A Public Appearance

I will be delivering a speech on the outlook for the Abe Administration in 2013 -- or fizzle out trying to -- at Temple University Japan's Azabu Hall on 28 February 2013.

Please R.S.V.P. if you should like to attend.

RSVP: icas@tuj.temple.edu

Image: Japanese Macaque (Nihonzaru - Macaca fuscata) foraging on Nokogiriyama
Kyonan Township, Chiba Prefecture on January 27, 2013
Image credit: MTC

How And If Debt Will Change Anything

The Economist's Free Exchange blog has been looking at attempts to inject the behavior of financial intermediaries into macroeconomic modeling. A recent post introduces a paper by Markus K. Brunnermeier and Yuliy Sannikov (Link) which takes a hard look at the tale the post-Bubble Japanese economy has to tell about treating the financial sector as a afterthought or as a fundamental element.

I am trying to wrap my head around two items in the paper.

The first is the statement "Of course, aggregate total debt in a closed economy is zero." This is both obvious and salient for an economy such as Japan's where so much of all forms of debt are held domestically.

The second is this pair of graphs of the aggregate debt levels in the economies of the United States (left) and Japan (right).

What the right hand graph shows is that total debt in Japan is over 600% of GDP whereas in the United States the figure is less than 300%. The right hand graph also shows a massive shift in the creation of debt from the non-financial corporate sector (deepest blue) to the government (lightest blue) after 1991.

No surprises here either.

What I am trying to understand is where is the ceiling -- the point where the various actors inside a largely closed economy say to each other, "We cannot go on borrowing like this from each other anymore"?

Put another way, with Japan having zero incentive to foreclose upon itself, is there a percentage of GDP where the total aggregate liability becomes significant, save as a psychologically depressing factor?

Later - Reader MK points me to the long, graph-rich look at Japan's economy published by John Makin of the American Enterprise Institute (Link). While Makin tries, as most Americans writing on Japan's economy do, to influence ongoing fiscal and monetary policy battles in Washington, the paper gives a comprehensive, if pessimistic view of the likelihood of Abenomics changing Japan's overall economic situation.

One question: how is it that an economist who argues so strongly for the importance of large-scale, inevitably deficit-enlarging government spending, holds a chair at the American Enterprise Institute?


Image courtesy: Brunnermeier and Sannikov (2012)

What Does Abe Know That We Do Not Know?

The most peculiar moment in the prime minister's policy speech yesterday?

The one that starts at the 16:22 mark of the exceedingly brief (18:55 - with applause) address, the text of which I repost and translate below. When watching the video (Link) pay close attention to what happens after Abe finishes his last sentence.

そして何よりも、拉致問題の解決です。全ての拉致被害者の御家族が御自身の手で肉親を抱きしめる日が訪れるまで、私の使命は終わりません。北朝鮮に「対話と圧力」の方針を貫き、全ての拉致被害者の安全確保及び即時帰国、拉致に関する真相究明、拉致実行犯の引渡しの三点に向けて、全力を尽くします。

And then, more than anything, a resolution of the abductees problem. Until the day is upon us when all of the families of the abducted can hold their relations in their arms, my mission will not have ended. I will not swerve from the plan of employing "dialogue and pressure" upon the DPRK. I will exert every effort to meet the three goals of confirming the safety of and securing the immediate return of all of the abducted, clearing up the mystery surrounding the abductions and having those responsible for the abductions handed over to our custody.

Notice the oddity? After Abe thunders out his determination, he is not greeted with a chorus of hooting or sustained applause. Just embarrassed-sounding shouts from a few members, quickly abandoned.

The abductees issue is Abe's signature issue -- the pole he has used to vault over his more experienced and politically savvy rivals in the party. The stick, if you will, that props him up.

One would have thought that the reactionary Friends of Shinzo, many of whom owe their seats and prominence to incessant thumping of rostrums about the abductees, would have prepared a coordinated explosion of applause and shouting at Abe's declaration of unwielding will.

One would have thought that...and been wrong.

I am not sure I understand the politics of including this paragraph in the speech, without support. The promises made are impossible to realize -- unless Abe knows something nobody else knows. Neither those in the chamber nor the public needed a reminder that Abe is Abductee Man.

So what was the point of making outlandish promises? To highlight the differences between his approach and the approaches of the last three Democratic Party of Japan prime ministers? When there cannot be any differences, either in approach or in outcomes?

What's Up With That?

Am I missing something?

Wizards managing the Prime Minister's Residence's (Kantei) website had the text of the prime minister's policy speech (and now the video too) up immediately following the prime minister's address to the House of Representatives.

The English-language Kantei page, however, has nothing.

Is it not standard operating procedure to provide the English translation along with the original text?

Shinzo Does The Minimalist Thing

For a guy whose Cabinet and party are riding high in the polls (Link - J and Link - J) Prime Minister Abe Shinzo delivered a subdued and limited policy speech. (Link - J)

Unsurprisingly, he opened with an executive summary of the Algerian gas plant incident and his government's response to the crisis. Surprisingly, he did not connect the events of the last two weeks with a call for an expansion of the capacity of the Self Defense Forces to carry out evacuations of Japanese nationals.

Also surprising was how much of the the body of the exceedingly brief speech consisted of the pattings of the heads of the pet issues of a tiny minority, ignoring big policy issues of interest to the majority of the electorate. How else to explain the call to build a "respectable and proper society" (matto na shakai) -- the answer, it seems, to everything -- or the call for Japan to aim to be #1 -- a reference not, as some commentators are going to say, to Ezra Vogel, but to a question posed by Democratic Party of Japan legislator Ren Ho to bureaucrats defending Japan's next generation supercomputer program?

It was also striking how much of the speech was delivered in an intellectual crouch. Was it really necessary to kick up the hysteria quotient, declaring the economy, reconstruction of the Tohoku, foreign affairs and education in crisis? Yes, if you are trying to seize power in an election. Yes, if you are trying to foist unpopular programs on a doubting electorate. But when you are front-loading the budgetary and monetary goodies and enjoying 65% Cabinet approval ratings -- do you need to do it then too?

Sometimes one had to wonder whether the various parts in Abe's government are speaking to each other. Who is going to listen to Finance Minister Aso Taro's scoffing at the concept of the Japanese government having a beggar-thy-neighbor weak yen policy (Link) when the prime minister says in his Diet policy speech that unless Japanese policy changes, there will be no way to pull out of deflation and a high yen?

As to foreign policy, who made the calls? Mentioned were:

1) the deepening the Japan-U.S. security relationship, including the third rail of the relationship, the move of Marine Corps Air Station Futenma to a replacement facility

2) Japan-ASEAN relations

3) trendy threats: terrorism, cyberwarfare and natural disasters

What of China-Japan relations, other than a pledge to increase the national capacity to police Japan's territorial waters and airspace? What of Russo-Japanese relations? What of Japan-South Korea relations?

What of energy policy? Or energy, period? (Just one mention, PLEASE!) What of pensions, eldercare, youth underemployment?

And what are we supposed to make of a promise to return to primary budget balance in the medium term? Those who are interested in the issue know the promise to be a lie, while those are not interested in the issue cannot understand why the promise is being made.

And why as a conclusion, after making all sorts of promises to better Japan and make the lives of its citizens easier (including an eyebrow-raising pledge to make it easier for domestic companies and organizations to recruit non-Japanese employees) wind up the speech with an "Do not ask others what will be done -- the only way to improve your own lives is by your own hands?"

All in all, a surprisingly surprising little speech.


Later, much later - Here is a translated Yomiuri Shimbun article (Link) providing the background to Abe's rhetorical question, "Everyone, shall we not go forward from this day with a goal of being the best in the world?"

On The Algerian Gas Plant Incident

Most of my posts are about idiocy and venal failure. However, sometimes it is worthwhile to close the jaundiced eye and offer praise where it is deserved.

The deaths of so many hostages in the firefight between Algerian military forces and insurgents in the third week of this month was a debacle of the first order. The Algerian government carried out a rescue operation on its own terms, with tragic consequences.

Despite having almost no solid information, no guidance from the Japanese government and the likelihood of a catastrophe on their hards, the executives of JGC Corporation comported themselves with dignity and strength. The performance of investor relations head Endo Takeshi, the company's face and voice during the early days of the crisis, was simply masterful. Watching his press availabilities and the later appearances in public by JGC president Kawana Ko'ichi -- and realizing that no one in Japanese corporate life has had to handle the loss of 16 of workers, 10 of whom were Japanese nationals, in a terrorist incident or military confrontation -- one could only wonder, "Where did they get these guys and can we get more of them? (Link)

No crying jags, no whining about how little the government could tell them about the situation in Algeria, no checking into the hospital for stress, no idiotic standing up and bowing to take responsibility for things they had no control over...

The stoic yet caring conduct of JGC Corp.'s executives almost makes me forget Prime Minister Abe Shinzo's ludicrous reference to the dead workers as "corporate war dead" (kigyo senshi - Link - J)　and the news media's attempts to make an issue out of one of those killed's having been a dispatched worker from a personnel firm -- as if we all bought in to the concept that the killing of a full-time employee was somehow less sad.

Why Abe Shinzo Might Succeed

I have a sense that if a Democratic Party of Japan-led government had proposed debasing the currency, fiscal irresponsibility and standing up to China over the Senkaku Islands, the Hallelujah Chorus would have undermined the international image of Japan, calling the government "clumsy" and "amateurish" and its actions "politically motivated."

So perhaps there is a silver lining in having Abe & Company in power after all.

Japan Policy Jobs In My Mailbox

A trio of interesting opportunities:

East-West Center Asia Studies Fellowship 2013

The East-West Center is now accepting applications from scholars and analysts who wish to undertake policy-relevant research and writing on issues of key relevance to the US-Japan partnership, including diplomatic, politico-security, economic, social and international fields. We especially welcome applicants specializing on Japan’s economy or US-Japan collaborative economic ties.

Funded by the Center for Global Partnership (CGP) at the Japan Foundation, the fellowship finances a three-month OR six-month residence at the East-West Center in Washington, D.C. While in residence, the fellows will complete articles or a monograph to be considered for publication, such as the East-West Center’s Asia Pacific Bulletin series, Asia Pacific Issues series, or the Policy Studies series. The first full draft of longer publications should be completed before the end of the residency period. Fellows must also give a seminar on their topic.

The fellowship includes a monthly stipend of US$2,500 to $4,500 (dependent upon experience) while in residence at EWC in Washington, round trip economy airfare to Washington, D.C., and a one-week research trip to Japan. Residency at the Center's Washington, D.C., office may begin as early as May 2013 and extend until January 2014.

To apply: http://www.eastwestcenter.org/ewc-in-washington/visiting-fellows/japan-studies-fellowship

Deadline to submit materials is February 1.

Country/Banking Analyst for the Country Analysis Unit (CAU)
Federal Reserva Bank of San Francisco

SUMMARY OF THE JOB:

The Federal Reserve Bank of San Francisco's Regional and Foreign Institutions Group is seeking a team-oriented individual to serve as a country/banking analyst for the Country Analysis Unit (CAU). CAU is primarily dedicated to advancing the effective supervision of Asian Foreign Banking Organizations (FBOs) by: (1) evaluating the financial capacity of FBOs to support their U.S. operations; (2) identifying country risks and focusing supervisory resources to mitigate the impact of such risks; (3) strengthening relationships with Asian supervisory authorities and regional organizations; (4) enhancing our understanding of how Asian economic, financial sector and regulatory issues affect financial institutions; and (5) assisting the Federal Reserve System in developing and implementing effective supervisory strategies and policies.

POSITION REQUIREMENTS:

* An applicant for employment must be a U.S. Citizen, U.S. National, or hold a permanent resident/green card with intent to become a U.S. Citizen.
• Familiarity with banking sector issues in Asia, in particular, Japan. The successful candidate will likely be responsible for covering Japan.

DESIRED QUALIFICATIONS:

• Financial sector experience in Asia or experience covering this region.
• Proficiency in Japanese or another Asian language.

To apply: http://www.frbsf.org/careers/

Head Of Policy Japan
Facebook - Tokyo (Tokyo, Japan)

The Head of Public Policy, Japan will be the primary contact with the Japanese government and policymakers and will work closely with the Privacy and Public Policy global team. This position is based in Tokyo.

Responsibilities

- Monitor the Japanese political environment for policy issues that interest the company
- Work with the Government of Japan and non-governmental organizations on issues of data protection, safety and security, intellectual property, e-governance, free expression, and other technology-relevant public policy concerns
- Actively promote the uses of Facebook with policymakers and influencers in both electoral and governing bodies
- Represent Facebook in meetings with politicians and policymakers
- Build coalitions to help advance and support Facebook’s policy agenda
- Communicate Facebook’s positions in public presentations and with media
- Advise Facebook teams on public policy matters emerging in Japan

To apply: http://www.facebook.com/careers/department?dept=communications&req=a2KA0000000DhrHMAS&ref=a2aA0000000Q9cd

I suppose "Advise Prime Minister Abe Shinzo on how to optimize his 'Like' button" should also be on the responsibilities list of this last position.