Showing posts with label economic malaise. Show all posts
Showing posts with label economic malaise. Show all posts

Friday, August 05, 2016

The Grand Illusion

Dr. Noah Smith has been one of the great defenders of Abenomics, that amorphous mass of Keynesian stimulus, Friedmanesque monetary policy and Nice Words About Structural Reform, particularly changes in work-life balance allowing women greater access to executive and management positions.

Dr. Smith, however, seems to have undergone a change of heart about the economics of the prime minister. Either that or he has a particular onus against one particular recent seemingly huge announcement: a 28 trillion yen stimulus package, the details of which will be examined in the Diet this Fall (the overal plan received Cabinet approval this week).

Japan's New Stimulus Is Just the Same Old Thing
Bloomberg

Japanese growth is still sluggish. Consumers aren't consuming much, and businesses aren't investing. The government doesn't have many options to remedy this, and the Bank of Japan, which has sent both long-term and short-term interest rates into negative territory, has basically no more room to maneuver.

The dreaded Zero Lower Bound is starting to bite. The BOJ is buying more stocks, but this too has its limits -- eventually companies become de facto nationalized, as the government becomes the majority shareholder. That's scary both because it would affect corporate governance, and because it would be politically unpopular. It's also unclear how much of an economic boost the stock-purchasing program has given the country anyway. The BOJ could resort to policies like a higher inflation target or the much-discussed "helicopter money" approach, but so far it has been afraid to take these steps.

With the BOJ seemingly out of the game, demand-side macroeconomic policy is up to the parliament. So this week the government of Prime Minister Shinzo Abe proposed a new fiscal stimulus package. It is moderately sized: about $45 billion in U.S. dollars this year, and about $60 billion in low-interest loans, to be followed by slightly less next year.

That move might win a few halfhearted cheers from Japan's battered consumers, but it's unlikely to have much of an effect...

(Click here to read more)

Later today (inshallah) Langley Esquire will be posting to YouTube a conversation Timothy Langley and I had yesterday on exactly the same subject.

(For the Langley Esquire YouTube channel, click here)

What should be setting everyone's teeth on edge about both the stimulus package and Abe's recent Cabinet picks, aside from the knowledge that both are in-your-face I-got-mine-suckers giveaways to cronies, is that with majorities in both houses of the Diet, a prostrate opposition, an emasculated bureaucracy, a totally compromised bond market, increasingly compromised equities markets and no rival power centers within the ruling Liberal Democratic Party, the Abe government has failed to pass a single fundamental structural reform of consequence. No other G7 or OECD leader enjoys the freedom and dominance of Abe Shinzo and his LDP. Abe & Friends nevertheless remain timid and/or clueless.

Amaterasu Omikami, save this blessed land from these poseurs and legacy turkeys.



Monday, December 07, 2015

As Heresies Go, Mine's Not Going To Make Me Too Popular



Let me just toss this out, as it has been annoying me for a while.

"Womenomics" -- the precise term invented by Goldman Sachs analyst Kathy Matsui (Link) and the Abe Government's fluffier set of programs intent on improving the status and numbers of women in corporations and government -- promise(s) to increase the size of Japan's GDP per capita and in total. By injecting the talents of women into the established sectors of the economy, corporations will have greater sales and government will become more responsive, bettering people's lives.

Really?

When since the beginning of the Meiji Period has Japan's problem been a lack of talent? Put another way, when since those very few decades after the Restoration has there been a massive need to import skilled labor?

Has not the problem in Japan been, and acutely so since the collapse in the Bubble, corporations and government sitting on talent, misapplying it or allowing it to wither?

If so, how will luring more women into the corporate and career government paths improve the performance of these entities? Without a fundamental reform in the way labor is used -- with workers allowed to flow toward more profitable and efficient enterprise -- having more women in the corporate management and government might mean only women will be gaining an equal chance at having their talents go to waste.

As for society at large, the triumph of "Womenomics" could significantly decrease public welfare. A consequences of the poor uptake of women into career path Japanese corporate and government positions has been a surplus of talented women seeking to become professionals (doctors and lawyers), working for non-Japanese corporations and establishing their own businesses and NGOs. By increasing the percentage of the women gaining access to higher level positions in The Establishment one would be shrinking the pool of talent available for these often much more socially constructive courses.

Already improving opportunities for women in corporations and government could be one of the factors behind the trend identified in a hard-to-read but still fascinating recent graph from plotted//grundriss. Entrepreneurship, rather than equalizing in between the sexes, has become an increasingly male activity. (Link)

While other factors may be in play -- the large lump of mostly male Baby Boom retirees looking for something to do with the last two decades of their active lives, for example -- the decreasing percentage of women entrepreneurs corresponds with the expected outcome from greater opportunities opening up for women in government and established corporations.

In a broader and less fair sense, should we not be more skeptical about ideas hatched in the Goldman Sachs fun factory? Kathy Matsui may be a fine human being (I cannot say, having only chatted with her that one time at that bizarre conference) but any analysis finding "the world would be a better place if more persons were able to become like us" has to be seen as at least potentially unsound -- especially if the definition of "better" is "that which allows us to sell more of our precisely targeted investment instruments."

I get it that in the aggregate having more women working increases the number of wage earners and thus the size of the economy. However, that "Womenomics" has never been shy about being a nakedly regressive nationalist social policy, pushing Japanese women into the workforce to take up mostly the sorts of jobs other societies have immigrants do -- receiving thunderous applause from international circles in the process -- that I do not get.

Friday, February 20, 2015

Labor = Capital *

Looking at Japan's perennially and perniciously weak consumer spending, the marriage rates of those not in permanent employment versus those who are, the decades-long reign of "public servant" at the top of "What I want my child to be when he/she grows up" rankings (for example, Bandai - J or Kuraray - J) the speed at the checkout stands at Ozeki supermarkets (I was wrong, Ozeki does employ part-timers -- but only high school students it seems) I am beginning to think that the fundamental divisions of economic factors of production into Land + Labor + Capital are unhelpful and possibly harmful. Indeed, in light of the rise of the glaring social downsides of the increasing fraction of non-permanent workers in the workforce, it may not be hyperbolic to say that looking to the economists of Anglo-Saxon economies for advice on reforms of the Japanese labor market is much like asking anarchists for advice on reform of the banking system.

Yes, I will elaborate.


* Offer geographically restricted. Not available in some countries and territories.

Friday, December 05, 2014

Het Was Erg Aardig Van Hem Om Dit Te Doen #34

Daniel Leussink of Het Financieele Dagblad and I had a conversation recently. An excerpt of some of what I said, translated into the Dutch, can be found here:

http://fd.nl/economie-politiek/967371/abenomics-levert-japanse-winkeliers-wisselend-resultaat-op

I wish I could say that I am the original author of the metaphor that the first two arrows of the Three Arrows of Abenomics were anesthetic for the Japanese economy, administered in advance of the surgery of the third arrow, structural reform. I think the first person to suggest this metaphor was Richard Katz of The Oriental Economist.

Tuesday, December 02, 2014

Oh You Have Got To Be Kidding Me


Politics is such a glamorous profession...
Half the people are stoned
And the other half are waiting for the next election.
Half the people are drowned
And the other half are swimming in the wrong direction.

- Paul Simon, for Leonard Bernstein's MASS (1971)

Hey everybody!

Remember way, way back, you know, like a month ago, when folks used to think Prime Minister Abe Shinzo should wait until the December revision of the third quarter GDP figures came out before he made a final decision on whether or not to approve the second rise in the consumption tax? If you cannot remember, this was back before the November 3 Shukan Bunshun article revealed Abe's and Chief Cabinet Secretary Suga Yoshihide's tumescent desires for an election (that's with an "l") and the whole world's going nuts over the November 17 preliminary release showing a 1.3% decline over the previous quarter, making Prime Minister Abe's announcement of a Diet dissolution in the evening on November 18 almost an afterthought.

Well...
Japan's third-quarter recession seen milder than feared as capex grows
Reuters

TOKYO - Japan's fall into recession between July-September could turn out to be less severe than feared, with new capital expenditure figures out on Monday suggesting revisions will put the third quarter in a slightly more positive light.

The 5.5 percent year-on-year rise in capital expenditure over the third quarter reported on Monday followed a 3.0 percent annual increase in April-June, which could ease concerns about recovery from a sales tax increase earlier this year.

"The revised data will show a smaller contraction in GDP that could be close to zero," said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management Co...
If the revised GDP figure for the third quarter turns out to be close to zero, meaning that all this panicked action was for nothing, then there will be hell to pay. If anything is going to tick off Japanese voters it is a Diet dissolution and an election for absolutely no reason.

And for folks like the urbane, serious and admirable House of Representatives member Kono Taro (LDP, 6 elections to the Diet) who has been posting hilarious and sad photos of his bedraggled, lonely self campaigning in the cold late autumn rains (the above photo is from yesterday) learning that this was all for nothing will make future relations with Abe and his confidants a bit...testy, shall we say?

Photo image courtesy: Kono Taro's Twitter feed (https://twitter.com/konotarogomame)

Monday, November 17, 2014

Abe Shinzo's Life Out Of Balance

You may recall that a few months back the Prime Minister's Residence release a video of Abenomics set to an amazing soundtrack. (Link)

You may be wondering whether the Kantei is offering a follow-up video, offering the popular view of Abenomics in the aftermath of today’s stellar third quarter preliminary GDP figures. (Link)

As far as anyone can tell, the Kantei has not...but I believe I have discovered a working copy of the rushes of the video on You Tube.




https://www.youtube.com/watch?v=i1kOW-luAoI


Now that leaks from the Kantei regarding Abe's desires for dissolution (Link) have pushed everyone into deep campaign mode, freezing all activity in the Diet and sending the opposition scurrying for policy and institutional union (Link) even as the PM is plaintively warbling, "But I have never said that I am going to dissolve the Diet!" (Link - J)the question arises:

"With the economy in recession, a loss in Okinawa (Link), reactors restarting, the Special Secrets Act going into force on December 10, the public still ticked off at the dodgy constitutionality of the July 1 announcement on collective self defense and the loss of marquee reform legislation (empowerment of women and labor mobility, for example) to the dissolution, what does Abe and Company think it will be telling the voters is the reason they should vote for the Liberal Democratic Party?"

To be sure, the Second Coming of the Abe Administration has been exemplary in trying to stay ahead of the curve, cutting off straying actions at the quick, avoiding a loss of momentum. Now, on the eve of an election without great purpose (大義) or causes to fight for (争点) being ahead of the curve seems to have put Abe and his people on the edge of a cliff.

What I Am Clicking On - Re The Economy On Monday, November 17

- Paul Krugman on the apparent decision to delay the October 2015 imposition of a 10% consumption tax rate ((Link). He clarifies that in a deflationary world, an independent monetary authority can be a curse.

- The Diplomat 's interview with Dr. Martin Schulz -- because one should see what the other side is arguing. (Link)

Yes, I too find off-putting Dr. Schulz's characterizations of those who are not with the program as being narrow-minded, short-term fixated and demanding of a large-scale story the media can mediate.

- Tobias Harris on the reality Abe Shinzo does not want to face -- that the greatest menaces to the success of Abenomics are the executives of Japan's corporations (a.k.a. his New Best Friends Forever) and their deflation-honed parsimonious ways (Link). Key here is the understanding that these are not evil individuals (well, some of them are, but for reasons other than parsimony). It is just that their accumulated virtues of thrift become the black hole into which the nation's generate surplus disappears, never to be seen again. The government of Japan has an obligation to yank some of the 300 trillion yen in inert savings back into the economy in the same way the government has an obligation to step in with increased spending when private consumption falters.


The all-important-until-last-week-when-the-Diet-dissolution-story-stomped-over-everything-else preliminary third quarter GDP figures are today. Prime Minister Abe Shinzo is rushing back from the G20 in Brisbane, Australia to meet them.

Friday, October 10, 2014

Very Kind Of Them #26

En Français, on the crumbling public facade of Abenomics, courtesy Le Temps:

"'Abenomics', un programme qui rate ca cible"

What offends in the Abe Administration's approach to the Third Arrow is the absence of maths. In June, for example, we had 230+ ideas flung at us without the least estimate of the economic or budgetary consequences of the proposed actions. Unconscionable.

Monday, February 17, 2014

If I-Phones Are To Blame For Lousy GDP

The JapanRealTime blog has a post up arguing that a significant portion of bad news in the GDP net negative trade figures arises from durable goods retailers having imported in the expectation of a rush to buy before the rise in the consumption tax on April 1.(Link)

If so, then figures to look at to answer the question "Is Abenomics a bust?" will be the monthly retail sales figures. If they do show tradeable durable goods flying out of the nation's showrooms these next two months, great. If not, then look out below -- especially since the alternate explanation, that Japanese consumers after 20 years of deflation are shrugging their shoulders at a sudden 3% increase in prices, is simply ridiculous.

If the data fails to shows retailers moving mountains of inventory, then we will not need to wait for the next GDP release to hit the panic button.

Let us all, Abenomics believers and skeptics alike, pray the retail figures show folks on a spending spree.

Of course, the heavy importation figures in 2013 Q4 could also have been done in anticipation of the yen falling further against major currencies -- a reasonable supposition that has just not panned out.

Of course, there are those who see a silver lining in every cloud -- such as today's lousy GDP figures  pressuring the Bank of Japan to increase the pace of its radical easing measures, leaving cash lying around for the markets to sop up, making the Nikkei a buy. (Link)

Friday, February 14, 2014

Takahashi Kosuke On Abe Shinzo's Nationalist Plan

Rare it is that I find myself reading an essay where I am in total concord with the views expressed.

That is why I am a bit taken aback by Takahashi Kosuke's essay for The Diplomat entitled "Shinzo Abe’s Nationalist Strategy" (Link). The opening sentence is shaky but the rest of the piece is solid.

It is clear that what underlies Abe Shinzo's attempt to escape from the postwar regime is the faith that the United States will sign off on on pretty much any plan changing Japan's position in the world order as long as interoperability of Japanese Self Defense Forces and U.S. military arms is increased. What is unclear is whether the Abe team is aware that keeping the Pentagon happy is only one facet of a program of increased national resilience -- that the ideological self-indulgences of the escape from the postwar regime can interfere with the hard work of restructuring the economy for growth.

Tip of the hat for the link to Neojaponisme.

Tuesday, January 28, 2014

Estimated Are The Prophets And The Fruits Of Their Labors



Yesterday NHK reported the results of a pair of surveys it conducted mid-month asking public corporations about their business conditions and personnel plans for the year. The first was of leading corporations (shuyo kigyo -- with no definition as to what that means); the second was of small- and medium-sized enterprises (again no definition but the content of the survey would preclude the inclusion of no single employee proprietorships). The response rate for the leading corporation survey was fantastic: 100 companies of 100 surveyed reporting. The response rate for the SMEs survey mediocre: 201 out of 346 corporations, or 58%.

What made two surveys particularly interesting was the difference in between the content and NHK's framing of it. Last night's 19:00 News 7 (Nyusu seben) broadcast -- the nation’s most-watched news broadcast -- began with a smiling Takeda Shin'ichi assuring the viewers, "We have some very heartening news tonight..." -- which made it sound as though something truly wonderful was about to be unveiled.

What was revealed, however, seems rather less than "wonderful":

- Of the 100 leading corporations surveyed, 10 were confident enough to declare an economic recovery underway. 86 of the companies were less certain, judging that the best that could be said was that a moderate (yurayaka na) recovery was underway.

- Of the SMEs, less than 20% were declaring increased profits for the year. 46% will be reporting flat-lining results. 25% will be reporting decreases in profits and 8.5% will be declaring losses.

- The two surveys found nearly identical levels -- 71% of large corporations, 72% of responding SMEs -- studying ways to raise take home pay. Not intending to increase pay, mind you, studying (kento suru) whether to increase pay and how to do it. These potential pay raise figures would furthermore be limited to remuneration for full-time employees -- no word on the remuneration of the nation's legions of part-time workers.

- 32 of the leading corporations were considering raising pay using automatic wage hike mechanisms (teiki shokyu); 30 were considering raising bonuses and 11 were thinking of "increasing monthly compensation by some way or another." Only 9 of the 100 leading corporations were thinking of revising upward the numbers listed in the basic tables used to calculate remuneration (beesu appu).

Links:

- 100 leading corporations survey report (Link - J + video)

- SME survey report (Link - J + video)

[NB: hurry to copy down contents as link rot sets in soon -- MTC]

Given the lack of the measurement of definitive moves toward higher base pay, which would be indicative of the nation's corporate executives being willing to share an Abenomics-derived economic bounty, Takeda's bubbly intro seemed almost sarcastic -- and NHK generally does not have sarcasm in its tool kit.

What is furthermore interesting in the SME survey are the high levels of performance reported. Only 8.5% of the NHK respondents were preparing to report losses. This would seem to stand in direct contradiction to known percentages of corporations declaring losses on the financial year.

Below is a wonderful graph compiled by the folks at the Tokyo Shimbun of the historical trends of loss accounting as reflected in the percentage nation's corporations exposed to the corporate income tax. The red line is all corporations; the blue line, corporation with at least 100 million yen of base capital.



As the graph shows, since the bursting of the bubble a steadily increasing fraction of the nation's corporations are fiddling with accounts so as to declare themselves unprofitable in the current fiscal year. In Fiscal Year 2011-12, the most recent year available, only 28% of all Japanese companies paid corporate income tax, with only about half of larger capitalized firms (53%) paying the tax.

Self-selection of a particularly active kind is therefore taking place in the NHK survey. We can guess that a goodly number of the 42% of SMEs who failed to return the completed survey are companies with horrible books. We must also assume that the 46% of SMES reporting unchanged results have clever accountants who take potentially reportable profits and bury them in the bad ideas and dumb decisions of previous years.

On a somewhat ancillary note, the Tokyo Shimbun graph should drive a stake through the heart of a particularly egregious misperception of Japan: the purportedly minor size of Japanese non-profit sector. The clichéd complaint is that the lack of a large formal non-profits as they are known in the Anglo-American world -- the research centers, the foundations, the think tanks --represents a glaring weak point for Japanese society and Japanese capitalism.

As the above graph illustrates, Japan's non-profit sector is not small. It is in fact HUGE -- with the majority of the country's non-government workers employed in enterprises that should be classified as non- or even anti-profits.

Monday, December 23, 2013

Niseko Bound And Unbound

My New York style maven pseudo-cousin (I hail from Northern California, where family trees are...complicated) A.K. arrives in Tokyo today, years after she promised to drop by. As is the wont of one living on the bleeding edge of fashion and design, she will be trolling Tokyo for a couple of days, meeting with folks too far out even for Harajuku or Shibuya.

After only the briefest of stints in the capital, however, A.K. will be striking out for her real destination: Niseko. (Link)

That A.K., who goes everywhere in search of that which is most rarefied and daring, should leave New York to document the Christmas-into-New Years scene in Niseko means that the Hokkaido ski resort town has arrived. Not that this is any news to the ten thousands of Australians, Hong Kong residents and Singaporeans who have been traveling there each year to pound away at the mountain with their skis and snowboards -- and the tens of thousands of more folks from all over who visit the township in the summer. (Link - J)

The success of Niseko, and the way it has achieved its success through attracting not only foreign visitors but small-scale foreign investment (Link) should make the village the central focus of every national and local government effort to promote tourism and economic growth in rural communities.

However, nowhere will one find anyone in government flogging a "Learn From Niseko!" slogan. That national government bureaucrats would not want to do so is not surprising. But why not the politicians, when it is economic development of any kind that makes people's livelihoods better and Japan's government coffers fuller?

The Abe administration's glaring lack of interest in Niseko's market- and foreign-private-investor sector supported rise (I have never heard any of the economics-linked Cabinet members talk about the place) seems a strong indicator that the administration's free markets and private enterprise rhetoric is just that: rhetoric. Indeed from the way Abe and his folks maneuver, uncharitable eyes would see an administration interested only in economic transformation it can control. Whether it is rewarding multinationals with balance sheet inflating attacks on the value of the yen, coopting new industries though regulatory change and subsidies (the drafting Mikitani Hiroshi of Rakuten and the coddling of Nobel Prize winner Yamanaka Shinya and his pluripotent stem stells) or the promises of regulation-lite enclaves, all whilst dumping longtime partners on the down slope of economic history such as Japan Agriculture and the Post Office, the goal of Abe and the Liberal Democratic Party does not seem to be an internationally open economic environment -- despite the reality that this approach to economic transformation seems to work .Instead, the goal seems the formation of new, dependable and dependent voting blocs.

Which is just about the worst goal for an economics policy imaginable.

Monday, December 09, 2013

Eyes Not On Prize

The zing in this morning's cup of tea:
Japan third-quarter GDP revised down to +0.3 percent quarter/quarter
Reuters

Japan's economy expanded 0.3 percent in July-September from the previous quarter, government data showed on Monday, revised down from a preliminary 0.5 percent increase.

The downward revision underscores the fragile state of Japan's economic recovery, now enjoying a temporary boost from pent-up demand ahead of an increase in the sales tax next April...

(Link)
So dear Prime Minister Abe, it seems while you and your fellow legislators were expending all your energies promoting explosive growth in the number of the country's secrets and stiffening the penalties for revealing any of them, your signature economic program, the one with your name on it, has been underperforming. If after all that has been done to devalue the yen, buck up the construction sector and deliver better days for shareholders, larded atop a foundation of front-loaded consumer and corporate spending in advance of a looming consumption tax increase, the country ends up with 1.1% annualized growth in GDP, then you have a wee bit of a problem.

Unless, of course, you insist that the hiccup on the road to high growth not your fault...


Later - The New York Times is not thrilled at the quality of whatever growth is going on. (Link)

Later still - From Bloomberg, a way too hopeful headline on what are promises of progress on what has become the most important Abe so-far-undeliverable, bar none: a rise in median wages. (Link)

Thursday, December 05, 2013

A Brief Note On Japanese Political Vocabulary

I have completed a few more orbits of the Sun than I want to acknowledge. I have made a rather larger number of those orbits whilst standing upon Japanese soil.

It has not been until this autumn, however, that I have come to understand the functions of two nouns -- one a common noun and the other a proper noun -- in Japanese political discourse. The usage of these two nouns has always caused my ears to tingle and my breath to halt. However, until this fall's Potemkin debate on the raising of the consumption tax and the lurching, blood-spewing path the execrable* Official Secrets Bill (my latest read: the ruling coalition will pass the bill amid chaos on Friday, giving the public the reason it has been seeking to hate the Liberal Democratic Party all over again) has taken toward passage, I could not put my finger on why.

Now I can.

Here are the two nouns whose political meanings I have come to understand:

Taisaku- 対策

The dictionary defines taisaku as "countermeasures" - the changes you have to make to your operations in order to cope with a new situation. In Japanese political speech, however, taisaku has a more limited meaning. Rather than being "countermeasures" in a general sense, the taisaku drawn up by bureaucrats and politicians should be understood as "dubious government actions intended to countermand the entirely predictable deleterious side effects of earlier and equally dubious government actions, primarily in the sphere of economics."

The escalating rounds of countermeasures leading up to the decision to go forward with the rise in the consumption tax illustrates this special meaning of taisaku. First we had the bungled Bank of Japan response to the Plaza Accords, which led to asset price bubble. After the piercing of the bubble and the consequent collapse of economic activity, elected officials responded with fiscal stimulus package after fiscal stimulus package, each one too puny to halt economic contraction because of Finance Ministry fears of jacking up the national debt. The too puny fiscal stimulus packages and tentative monetary easings of the 1990s, coupled with Japa'’s long-recognized aging, created an unsustainable level of national debt via-a-vis the nation's pension/health care obligations. Meeting these obligations requires more revenues, which means higher taxes. Higher taxes, especially regressive taxes like the consumption tax, decreases economic activity. So the government has to cobble together a stimulus packages, either cutting back on tax receipts from other areas or borrowing money, which further increases the debt burden, which means the creation of expectations of further tax increases in the future, which diminishes the desire to spend, which...

The main reason why Japan's bureaucrats, politicians and even its big businessman have not ever thought of stepping off the ascending spiral staircase of taisaku is that halting the process would force members of the Establishment say, out loud:

"You know, we screwed up. We pretended to be omniscient, transcendent higher beings when what we were really was cowards and frauds. Sorry."

Which establishments never say. Ever.

Except, of course, when they say, "Taisaku."


Yokota Megumi - 横田めぐみ

Yokota Megumi was a 13 year-old girl, walking home from a badminton practice at her middle school in the heart of Niigata City, Niigata Prefecture on November 15, 1977. On the way, she seems to have crossed the path of North Korean agents. For reasons that will likely never be explained, the agents took her as a captive and spirited her away to North Korea, where she grew up a prisoner, employed as a trainer for North Korean spies hoping to pass as Japanese citizens. She purportedly committed suicide in 1994, and is survived by a former husband and a daughter, both of whom are prisoners of the DPRK regime.

While tragic, Ms. Yokota's story is not unique. A couple dozen other Japanese nationals, hundreds of South Korean nationals and a smattering of citizens of other nations have all been kidnapped and held captive by the irretrievably evil government of the DPRK. Ms. Yokota's story and that of Soga Hitomi, a young woman whose was kidnapped from Sado Island in 1978, indicate that her gender and youth were factors in her survival. They also indicate that the kidnapping of Japanese citizens to become teachers of Japanese mores and culture -- Megumi's eventual role in North Korean society -- was an ad hoc justification for what was a fairly pointless and marginal facet of North Korea's ever-evolving program of extortion through random acts of terror.

In Japanese political diction, however, mention of "Yokota Megumi" is the refuge of the intellectually unsound. Like references to Hitler in English-language discussions of politics, the brandishing of "Yokota Megumi" is supposed to stun the listener into silence. Why does Japan need a national security council? "Yokota Megumi." Why does Japan need such a draconian new official secrets law? "Yokota Megumi." Why does Japan have to revise Article 9 of the 1947 Constitution? "Yokota Megumi." Why does Japan have to …“SHUT UP! SHUT UP! I CAN’T HEAR YOU! YOU SEE MY FINGERS IN MY EARS, YOU CHINA-LOVING, DPRK-CODDLING DUPE? I HAVE NO RATIONAL REASON FOR CURTAILING CIVIL LIBERTIES, TURNING A BLIND EYE TOWARD XENOPHOBIA AND RAISING JAPAN’S MILITARY POSTURE SO YOKOTA MEGUMI, YOKOTA MEGUMI, YOKOTA MEGUMI!!!"

Here is prime example of Yokota Megumi being dragged in in order to supposedly prove a point, drawn from a major political tract by a famous author:

After the Dhaka Incident of September 1977, Kume Yutaka of Ishikawa Prefecture was kidnapped and taken to the Democratic Republic of North Korea. The police authorities of the time arrested the perpetrator. However, knowing that the perpetrator was involved in a covert operations organization of the Democratic People's Republic of Korea, the police let him go out of fear of a dispute arising with 'peace-loving peoples of the world.'

Because of this, what occurred? Two months later, in November, Yokota Megumi was kidnapped from the seaside of Niigata Prefecture. Had the Government of Japan at the time [of the Kume disappearance] chosen the path of confronting the Government of the DPRK, would not Megumi-san still be living her life in Japan?"

In the end, Japan's postwar system, as symbolized by the Constitution of Japan, could not safeguard the life of a 13 year-old girl. And for us, even now, this problem remains [unresolved].

A flimsy free association of various humiliations of Japan occurring in the autumn of 1977, including the purported Kume kidnapping, which has never been acknowledged by the DPRK, if Kume's disappearance was even a kidnapping. The spinelessness of the Fukuda government toward the Dhaka hijackers leads to the disappearance of Kume in Ishikawa which leads to the release of the police's top person of interest in the Kume disappearance which leads to kidnapping of "Megumi-san" two months later in Niigata City.

Indubitably.

The passage includes a sarcastic quotation from the preamble of the Constitution ("We, the Japanese people, desire peace for all time and are deeply conscious of the high ideals controlling human relationship, and we have determined to preserve our security and existence, trusting in the justice and faith of the peace-loving peoples of the world"). The quote seems a demonstration of an adolescent desire for applause for cleverness. While feeling contempt toward Constitution and its naïve faith in the good intentions of peace-loving peoples of the world is a valid emotional reaction, this contempt should be expressed openly, not hinted at by the snide use of quotation marks.

So why should I or anyone else be give a damn about this snarky connect-the-dots bit of weirdness reminiscent of the histrionic performances of American embarrassment Glenn Beck, one culminating in the author's making a maudlin appeal to sympathy for Ms. Yokota in an absurd bit of speculative history? Because you will find it on page 252 of Toward a New Country (Atarashii kuni e) -- a book published earlier this year by a certain Mr. Abe Shinzo, prime minister of Japan.

Now I understand what my body has been telling me all these years: when in an argument with someone over the appropriateness of the Japanese government's taking a new position as regards security, or its plans to adopt an unprecedented new mode of operation, at the very first utterance of "Yokota Megumi" I should relax, smile and go prepare to go home.

The argument is over. Indeed, there was never any argument on the other side at all.

----------------------------------

* On November 8, the Tokyo Shimbun reprinted the entire working text of the official secrets bill, highlighting the 36 times the lazy authors of the bill had ended their sentences with "and so on and so forth, et cetera" (sono ta).

Thursday, October 03, 2013

Abe Shinzo's Friends Indeed

"It is called the Unbegun Symphony. It used to be called the Pathetic Symphony. Now these names as you may know, like the Jupiter Symphony and the Eroica Symphony...now these names as you may know, they are usually not given by the composer. They are given by friends or the musicians and stuff. This name, the Pathetic Symphony, was given to the piece by some of my old friends.

(Pause)

Well, I have a new set of friends now...and we're calling it the Unbegun Symphony."

- Peter Schickele, "The Unbegun Symphony" (1966) *

Well, he has a new set of friends now...

When I hear Abe Shinzo arguing for a stimulus package (taking cash out of the national treasury and distributing it to politically important constituencies) in order to offset the likely downturn in individual and corporate spending after the consumption tax rise (raised in order to pay for the higher health and pension costs associated with a larger population of retirees) so as to not derail the economic growth associated with Abenomics monetary policy (which, by targeting inflation, will eat away at the spending power of those on fixed incomes and/or living off their savings, i.e., retirees) and fiscal policy (which by accelerating the rate of increase of the national debt, threatens jumps in interest rates demanded by borrowers, which will increase the percentage of the national budget consecrated to debt service, decreasing the amount of money available for everything else, most importantly pensions and healthcare for the elderly) all against the advice of economists Honda Etsuro and Hamada Ko'ichi, the two identified "fathers of Abenomics," whilst simultaneously trying to drum up support globally for an as yet unknown set of structural reforms to be decided on...soon...because the set of reforms his brain trust of supposedly market savvy and creative CEOs produced for the big June announcement were either trivial (Link) or so nakedly self-serving (Rakuten CEO Mikitani Hiroshi going so far as to threaten to quit Abe's industrial competitiveness council if the sales of drugs and medical equipment over the Internet were not in included in the June announcement) as to embarrass the PM -- I blackly remember Professor Schickele's sardonic, "Well, I have a new set of friends now..."

In his return to power a year ago, Abe Shinzo seems to have secretly made a deal with himself and his eminence grise Suga Yoshihide. Abe would nod in the direction of old coterie of supporters and allies, the so-called "Friends of Abe" like Taka'ichi Sanae, Furuya Keiji and Inada Tomomi -- and yes, even the duplicitous and too glib Aso Taro -- relying upon them as the backbone for his challenge to the status quo within the Liberal Democratic Party. The muscle and momentum for the takeover of the party and the government, however, would come from the zaikai, with new style but still establishment business moguls like Mikitani, Takeda Phamaceuticals CEO and Keizai Doyukai head Hasegawa Yasuchika, JR Central Chairman Kasai Yasuyuki, Fuji Film CEO Komori Shigetaka as a set of "New Friends of Shinzo" -- persons whom when you talked to them seemed full of ideas on how to transform Japan into an economic powerhouse, a state capable of paying for the kind of raw politico-military power Abe had seemingly previously thought could only come through the imposition from above of a hair-trigger patriotic, paranoid obedience to authority -- you know, like the mindset the Chinese seem to be fostering.

The New Friends seemed full of the promise of a revived fukukoku kyohei, but a fukoku kyohei for the Facebook Age -- with the New Friends of Shinzo providing the ideas and capital for the fukoku and the Old Friends providing the applause for the Abe/Suga duarchy's tentative tiptoeing toward the kyohei.

As I watch Abe's epic, manic, economic speedballing -- meeting everyone, asking everyone's advice, with resulting announcements of new economic policies off-setting the effects of previous economic policies offsetting the effects of yet earlier policies engaged to counter the consequences of even older policies, with frenetic searches for new statistics demonstrating earlier that the latest policies are indeed working (Link) or that the current policies need yet newer policies to offset them -- I find myself worrying, "Won't the pressures of finding a path through the bewilderingly numerous, numbingly complex and often mutually contradictory plans of the New Friends of Abe cause the man to break down -- just like the unseemly power-grabbing and intransigence of the Old Friends did?"

A disconcerting thought for a sunny day.


Later - It is not a sign of the Apocalypse, but when the Yomiuri Shimbun, which is as a rule sycophantic in its coverage of the policies of the LDP prime ministers, is like me in shaking its head at the PM's mutually negating proposals (Link) then the sum of the parts of the current administration's ideas is clearly less than a whole.

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* The album An Hysteric Return: P.D.Q. Bach at Carnegie Hall is available here.

Wednesday, September 18, 2013

Not Even With Free Money May This Land Be Healed



Where macroeconomic policy making meets psychology, unhappily: Kathleen Chu's and Katsuko Kuwako's look at Japan's brain bursting housing and land markets. (Link)

Hint to world: after a housing bubble bursts, destroying the equity and/or the virtual savings of everyday folk, be not surprised if weird, interest-rate and market-clearing-mechanism-defying resistance should move in...and never leave. Even in the most densely populated environs on the planet.

Hoarding is what Chu & Kuwako describe...but the hoarding of a vacuum, the lost value of land and buildings owners never had a chance to hold in their hands.

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Image: Conjunction of Venus, Jupiter and the Moon above the Kanda River on 30 November 2008.
Image courtesy: MTC

Thursday, September 05, 2013

What Could Really Kill Abenomics

My admiration for Yale University professor Hamada Ko'ichi, the acknowledged intellectual father of the first two arrows of Abenomics (Link), has been, for the most part, non-existent.

Until today. (Link)

And yes, my newfound appreciation is based in his seeing the data the same way I do, as unsupportive of a declaration of victory.

By contrast, thanks to reporting by the same financial news service, my faith in the economic reasoning at major financial institutions has plummeted. In a survey of 32 economists at financial giants like JPMorgan Chase & Co and Nomura Securities, 22 thought that Japanese stock markets would suffer a significant fall if Prime Minister Abe Shinzo decides next month to delay or cancel the April 2014 rise in the consumption tax from 5% to 8%. (Link)

Because...

1) It would diminish the capacity of the Bank of Japan to buy government bonds (What???)

2) Because it would reduce the credibility of the reforms in Abenomics growth package (What???)

Unless the 22 economists with a negative view can offer a mechanism that would cause the relative value of owning shares to fall vis-a-vis other investment opportunities -- which would have to be opportunities outside of Japan as the value of the main domestic alternative, Japan government bonds, will likely be crushed by any hint the government will not even attempt to keep its promises on finding a way of repaying the debt -- then those economists should not answer the phone the next time Bloomberg calls.

As for the so-called Abenomics growth strategy (which is not a strategy since strategy involves choice and sacrifice), its vacuity, not a failure to raise taxes, seems the most imminent and likely cause of a crushing of investor sentiment. In response to a massive letdown after the official Third Arrow announcement in June (Link), the government and its advisors seemingly have chosen the paths of least, or possibly no, effort:

a) Canvassing the public for ideas as to what policy changes should be in the growth strategy (Link) -- as if a grab bag of a hundred little ideas, all of which would require regulatory or legal changes, could even be implemented, much less coalesce into coherent programs, and

b) Doubling down on the announced plans, assigning to the Abe government brain trust the task of making the June proposals seem more than what they are (Link - J) -- the infamous recommendation of the "Plan B is to make Plan A work" school of management.

Oh, fabulous...

Thursday, July 04, 2013

The July 21, 2013 Election - Where Are The Opposition's Economists?

The heads or co-heads of the parties had their pre-election warm-up debate at the National Press Club yesterday. (Link)

From the snippets broadcast on television or transcripted to be read on paper or on a screen, the impression is that opposition parties, despite having a raft of issues to run upon -- a crash national program favoring renewable energy sources and steering away from nuclear power, constitutionalism, a real discussion of the pros and cons of the Trans Pacific Partnership, the plan to lower the corporate income tax rate while raising the consumption tax -- issues where the majority of the populace agrees with the positions taken by opposition parties -- are either not serious about or not capable of running against the Liberal Democratic Party.

Prior to the election, commentators will review the positions the parties hold. I cannot...and not just because I am lazy.

The opposition parties do not have positions; they have poses. Whether it is the Your Party with its insistence on reform of the bureaucracy; the Japan Renewal Party (Nippon Ishin no Kai) with its love of decentralization and regionalism; the Democratic Party and the Life Party and their purported defense of people's livelihoods; the Communists and the Socialists with their "Article 9 Now and Forever, No TPP And More Daycare Centers Too" -- all are too easily dismissible with a "Yes, but what are the projected results of doing things your way?"

What marks the opposition parties as lightweights? The inability of their leaders to either quote or be seen in the company of economists.

If once, just once, Kaieda Banri or Shii Kazuo or Watanabe Yoshimi -- who purportedly runs on an economic liberalization program -- could say, "Professor So-and-so of the Department of Economics of Wossamatta U. says..." the voters would have the chance to say, "Hey, this party has considered the reality of there being trade offs. They've tried to think this all through."

Instead the voters are treated to brain-freezing tautologies of the sort, "The inflationary policies of Abenomics are going to lead to price rises, which is going to affect people's livelihoods."

Then again, a lack of serious engagement with economics seems may be the identification badge for those seeking to be seen as ready to clip the LDP's wings. Take the editorial (Please!) The Japan Times published on July 2:
...the right-leaning political forces inclined toward market fundamentalism — as represented by the Liberal Democratic Party, the Japan Restoration Party and Your Party — have already become powerful. If they become lopsidedly strong, voters will be deprived of meaningful political choices. The DPJ must clearly explain to voters the problems that market fundamentalism brings about, namely the expansion of the gap between the rich and the poor, and the shrinking of welfare and other public services provided by the government sector. Such an outcome will only serve further destabilize Japan’s economy and society.
(Link)

The LDP leaders believe in many things...but "market fundamentalism"? OK, Takenaka Heizo is back...but only as an advisor on the economic growth council, sitting alongside a bunch of CEOs who themselves are on the council in order to suggest sweetheart deals for their own industries (Yeah, I said it). Nakagawa Hidenao, the big man when it came to the Koizumi Revolution, bugged out long ago and took the spirit of free markets with him.

Who could the editors of The Japan Times be talking about? And if not individuals or factions, about which policies of the current government? And how would the editors propose to remedy the problems of inequality and loss of the ability to fund welfare?

If the thinking were any woollier, it would be a sweater.

Friday, May 31, 2013

What I Learned At The Economist’s Conference

Yesterday I had the privilege (and indeed it was a privilege) to attend the Economist Group's Bellweather 2013 Japan conference.

My key takeaways from the panels:

Don't Call It Structural Reform

Whatever the contents of the Third Arrow of Abenomics, due for release next week, it will not be a package of structural reforms for various problematic sectors of the economy.

Instead, if the vision laid out yesterday by Parliamentary Vice Minister of Economy Trade and Industry Sato Yukari is accurate, the third arrow is an economic growth plan, light to the point of insult on deregulation and liberalization and heavy on the picking and choosing of winners and losers among industries. The centrality of dirigisme in the presentation almost had me singing La Marsellaise in response.

[Come to think of it, "Allons enfants de la Patrie/Le jour de gloire est arrivé!" pretty much encapsulates the Abe Shinzo message to his people and the world this year.]

This made me wonder:

1) do Abe, the members of his Cabinet and his advisers understand that the rise in the equities markets and the willingness of bondholders to sit tight as the Bank of Japan rampages through the bond market require a faith that structural reform is in the offing, meaning that there will be a real payoff for investing in Japan?

2) Senator Sato started out her political career as an assassin for free markets enthusiast Koizumi Jun'ichiro. Prior to that she was an economist with JP Morgan and Credit Suisse First Boston, presumably in favor of deregulation and the end of protectionism.

Now she does P.R. for industrial policy.

Hmmm...

"Ending deflation" does not mean what you think it means

Until yesterday, I had thought that the Abe Cabinet's and the Bank of Japan's goal of "leaving behind deflation" meant fiscal and monetary policy and maybe structural reform leading to a 2% rate of CPI inflation by 2014.

I was (some would add in an "of course" here) mistaken.

"Leaving behind deflation" is not inflation. It is Inflation+ ™ .

Literally.

As explained yesterday by Bank of Japan Governor Nakaso Hiroshi, simply having 2% inflation in 2015 will not suffice. There has to be

2% CPI inflation + increased corporate profits + increased wages and bonuses

before the standard of what constitutes "leaving behind deflation" will be met.

Again the urge to rise from my seat gripped me, this time in order to shout, "But that's cheating. You're moving the goal posts!"

The core argument of the "Whip deflation now" crowd has always been that deflation was a primary cause of economic malaise. Whip deflation and the country could get on its feet again. (Link)

Now the BOJ activist wing, as represented by Nakaso, seems to saying that no, reigniting inflation does not do the magic trick. One needs more. Indeed you need the items – higher incomes and corporate profits -- that the deflation voodoo skeptics kept saying were the real targets worth the shooting for.

The activists, now that they are in control of the levers of the economy, are admitting that they were being disingenuous. Deflation was not in and of itself a cause of economic malaise. At least part of deflation, perhaps even most of it, was a symptom of decay.

Supporters of the new Inflation+ ™ formula might counter, "It was never a simple end deflation/you will have economic growth" situation. Inflation, were it to return, would always had to had "demand-pull" in addition to "cost push." (Link)

Yes, but that is not how the deflation fighting mantra went, at least not until the deflation fighters seized the reins this past winter.

Sunday, May 19, 2013

A More Serious Slapping Around of Abenomics Cheerleading

Edward Hugh has a sharp review of the negative view of Abenomics, or perhaps more properly the dismissive-as-irrelevant-and-possibly-quite-harmful view of Abenomics:

The Real Experiment That Is Being Carried Out In Japan

Particularly thought-provoking are the quotations from Keynes, showing both the incredible brilliance of the man and the continuing validity of the old saw, "There is nothing new under the sun."

I agree with almost everything in the post, particularly with the quotations from the speeches of former Bank of Japan governor Shirakawa Masaaki, whom the Kool Kids in this blessed land's business and media elites all feel free to disdain and revile. Shirakawa is revealed to be who he is and what he always was: a central banker blessed with intelligence, humility and a conscience.

With all that is good (and there is a lot of it) I think Hugh does himself a disfavor with the cheap shot at the what may be the most important goal of the creation of inflationary expectations: pressing savers to convert their assets in to real goods or put them into higher risk/higher return investments. A critic would point out that "Uh, that's sort of the point of the program. Duh."

The demographic angle of the story is that while there is a vast pool of cash that could be deployed in lifting the economy to a higher level of activity, almost all of it is in the hands of persons over 60 years of age. Seniors are very, very conservative about their assets and cash, clinging to low-or-negative return real estate or money kept in bank accounts...or in the safe at home.

The government is trying some direct methods to get older citizens to turn over their savings to younger citizens, the most famous/infamous being the tax free accounts for the education of grandchildren (a plan which has been widely derided as just a tax avoidance scheme for the extremely wealthy). Increased taxation of the assets of retirees would be the one, absolutely effective, politically lethal (those damn retirees vote, a lot) solution.

Debasing the currency and creating the desire to convert cash into something that is meaningful and useful is an actual, non-ridiculous goal of induced inflation...the caveat being "but what if instead of increased consumption and domestic investment the result of debasing of the yen is capital flight, with savers sheltering the current value of their money in overseas accounts and assets?"

I guess we have to keep an eye on the yen. I am sure if someone popped an inquiry into Richard Katz's mailbox he would have something to say about what the yen level should be, using trade-adjusted figures.

Later - Richard Katz responds in comments. He corrects my incautious claim that he would know at what level the yen should be.

No one knows this, save, supposedly Mr. Market.

What Richard Katz can tell you is what the long-term average real exchange rate has been, and whether or not the Abe governments disengenuous program to crush the "high yen" has firm intellectual roots.

Nota Bene: All comments to Shisaku are moderated, except my own.