Wednesday, January 06, 2010

The Fujii Resignation

I agree with everything that Tobias Harris has written, including his dismissal of the Sankei Shimbun's theorizing that Finance Minister Fujii Hirohisa is resigning in order to avoid being questioned in the Diet about a possible fundraising scandal.

As all of the newspapers note, Fujii's departure knocks a big hole in the Cabinet -- in terms of its credibility with the financial markets, in terms of its policy independence from the DPJ party apparatus and its chief Ozawa Ichiro and in terms of its ability to work hand-in-glove with the Finance Ministry bureaucracy. As for who would be a proper replacement for Fujii, I have little clue. A search for continuity and stability would suggest that either of the two Senior Vice Ministers of Finance, either Noda Yoshihiko or Minezaki Naoki should move up to the top spot, despite lack of personal ties to senior members of the bureaucracy. Shifting anyone else around from another ministry or government post would be disruptive to the government and the DPJ's delicate internal machinery.

Once a replacement is named, will market players be restrained from acting out their desires to test the replacement's intestinal fortitude? Speculative attacks on the Ministry's and the Bank of Japan's self-imposed ban on currency intervention; shorting of the Nikkei index; sending Japan Govenment bond rates pogoing up and down or any of a number of other provocative, panic-inducing strategies -- would be bad for the country, but good for business, or at least some businesses.

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