The big difference between Japan and either Spain or the US is, of course, that Japan is a huge current account surplus country, and thus does not rely on external agents to soak up all its debt. But then again, at the time of going to press, Taro Aso is a much more convincing desperate madman at the steering wheel than Barack Obama is.
Aso's popularity continued to slide as he faces criticism -- even by some lawmakers within the LDP -- for his handling of the recession in the world's second-largest economy.The Mainichi Shimbun said support for Aso's government slipped two points from December to 19 percent, making him the second-least popular premier since the newspaper first conducted such polls in 1949.
A plan to print some Y50,000bn ($546bn) worth of a new currency to fund pump-priming projects has been drawn up by influential politicians in Japan in a sign of desperation in the ruling Liberal Democratic party over the country’s failing economy. To be released on Friday, the proposals to issue government notes come amid rising frustration among politicians with the independent Bank of Japan. It has been reluctant to bow to pressure to run the yen printing presses faster to stimulate the economy.
The politicians include Yoshihide Suga, deputy chairman of the LDP’s election strategy council and a close aide to prime minister Taro Aso, and want the government to issue its own notes to fund projects. The group wants Y30,000bn of the new money to fund programmes supporting new industries and infrastructure projects, including doubling the size of Tokyo’s Haneda airport. The remaining Y20,000bn would be earmarked for government purchases of stocks and real estate.
“We are facing hyper-deflation, so we need a policy to create hyper-inflation. We have to do something to undermine the central bank and government’s credibility or else we won’t be able to halt the yen’s rise. So, while we know this is drastic medicine, we will do it,” said Koutaro Tamura, an upper house Diet member who will chair the new group.
Naturally, the proposals are causing all sorts of controversy in Japan. Prime Minister Taro Aso said on Monday evening that "We are not at all at the stage of considering such an idea", while Chief Cabinet Secretary Takeo Kawamura warned that if the government prints money, it could lead to inflation and weaken the yen against other major currencies. BOJ Gov. Masaaki Shirakawa was also pretty critical of the proposal, saying it could "cause great damage" to the central bank's balance sheet and monetary policy as well as market confidence in the yen.
"The plan would require very careful consideration because it could result in jumps in Japan's long-term interest rates, with market participants losing trust in the government's commitment to repaying its debts," Shirakawa said.
Well basically weakening the yen, and raising market participants inflation expectations (or their fear that government will irresponsibly monetise its debt) is just what the Eggerston proposal is all about, so these two would hardly seem to be objections to the idea, and while it is unlikely that the plan will get very far in the short term (rather than prodding the BoJ into more aggresive action), Japan's crisis is very severe, and getting worse by the day, so clearly they are going to need to do something.
Oh dear me. It seems that the world has gone completely mad. And, what is even worse, the rich western world has gone crazy just because the living standards are going to drop by one, two, three or fifteen per cent. Ridiculous.
ReplyDeleteWell, just about seventeen years ago I worked as a construction worker, here in southeast Moravia, about a hundred miles north of Vienna, Austria. Two years after the fall of the Communists. And, dear friends, what I made in one hour was good enough for just over one (1) liter of gasoline. By the way, my father, a senior power plant control systems designer, earned just about three times as much. Half a tank of gasoline for a highly qualified days work.
Well, speaking about gasoline - my father did not need any. He bought his first car only about four yaers later. One funny thing, I can not recall anybody really complaining of "crisis", "bad times", "credit crunch" or the rest of all that crap.
What on earth do I mean? I believe that there is no reason to panic. The average Spaniard is going to be a little poorer, but by the standards of the wide world, he will still remain fairly rich. He will have the cash to buy a used car, a bottle of wine, a tankful of gasoline. Oh yes, there will be no second homes, no 200k euro mortgages, no shiny new cars, no trips to Barbados. So what?
It will just take a bit of de-leveraging, and maybe a bit of de-spoiling. But, compared to what I knew just two decades ago, and to what the average Ukrainian knows today, it will still be life in luxury.
So please stop panicking and start working, it really does not hurt that much.
Hello again Hynek,
ReplyDeleteThanks for sharing that perspective with us. Unfortuately central Europe is really going to take a mashing by the look of the latest data.
"So please stop panicking and start working, it really does not hurt that much."
I absolutely agree, let's simply roll our sleeves up and turn this situation around, we have a saying in Spanish - stolen by Real Madrid unfortunately, but still - "junto podemos".
Meantime I am naustalgically listening on YouTube to Renaud and "Dans Mon HLM" evoking a world I hoped we had lost but which I fear we may now be going back to.
The thing is the younger generation here have never known the world you describe (their parents did under Franco), I think they are in shock and awe about all this.
Incidentally, do you know the blog A Fistful Of Euros? You may find stuff that interests you there.