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.

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.

The Prime Minister's New Plan, Sir

It is a rare foggy morning here, appropriate weather for the release of the interim plan for the "Dynamic Engagement of All Citizens" - the Abe government's grab bag of proposals to meet its New Three Arrows goals.

For those willing to rush in where angels fear to tread, here is the link to the Prime Minister's Residence proposal text. (Link)

Whether this text is the Request from the Liberal Democratic Party regarding an "Urgent Proposal for Realizing the Dynamic Engagement of All Citizens" (Link); the proposal from the Komeito on "Realizing a Society in which Every Single Person Can Shine and Play an Active Role"(Link); a conflation of the Request and the Proposal; or none of the above, I do not know.

The Kantei text seems to be a flash-translation with little-to-no input from any native speakers of English. The result is an excruciating to the point of being humorous ("Dream-Weaving Childcare"? Somebody call Gary Wright, he has a theme song to sell) read.

Of course, the clumsy English could be part of a Sirius Cybernetics strategy, where the superficial deficiencies of the language mask the deep and fundamental deficiencies in the thinking.

The busy might want to skip to the last page of the ostensibly brief (19 page) plan. Here on a single slide is the whole report, in what wags might call inimical Japanese Powerpoint style.

As for those who slog through the swamp of the text and peer into its forest of lofty notions and ambitious timetables, they might find themselves reprising in their heads the exchange between Colonel Kurtz and Captain Willard in Apocalypse Now:

Kurtz: Did they say why, Willard, why they want to terminate my command?

Willard: I was sent on a classified mission, sir.

Kurtz: It's no longer classified, is it? Did they tell you?

Willard: They told me that you had gone totally insane, and that your methods were unsound.

Kurtz: Are my methods unsound?

Willard: I don't see any method at all, sir.

What Womenomics Can Achieve

I have on-gain/off-again Twitter wars with the opinionated Professor Noah Smith of Stony Brook University on subjects Japanese. In a recent exchange I lost patience with the good doctor, for which I am only slightly sorry.

Dr. Smith asked a simple question: why did Japanese women's fertility (number of births per woman) fall when the level of participation of Japanese women in the workforce was still low? To which I offered a simple answer: because age of first marriage rose. (Link)

In the economics explanation women have fewer children based upon calculations marginal utility and opportunity cost. While in agricultural societies children represent potential increases in labor force and output, in industrial and post-industrial societies children represent zero increase in output. Furthermore, for the woman in developed societies the birth of each child represents an economic subtraction, time and energy that could have been spent furthering their careers or increasing their take-home pay.

In Japan's case, however, declines in fertility preceded and exceeded possibilities of tradeoff between work and childbirth.

Hence my answer -- that in East Asia behavioral effects of calculations of marginal utility and opportunity cost are small compared to the effects on fertility of later marriage and the social stigma/economic catastrophe of out-of-wedlock birth. In contradistinction to the economic explanation, married women in Japan are having children at the same rate they always have -- lost economic opportunity turns out to be a feeble predictor of Japanese fertility.

The policy implications of this for the second of the Abe Administration's New Three Arrows -- raising the number of births from 1.4 per woman to 1.8 -- are clear. More day care, including day care centers inside corporate buildings (Link- J)? Largely irrelevant for fertility. Relevant for the workforce participation rate? Sure, flattening the infamous "M Curve" (Link). But largely irrelevant for fertility.

To raise fertility, the government can:

1) Convince Japanese to marry in their early twenties like they did in the 1970s.

2) Eliminate the social stigma and economic consequences of out-of-wedlock birth.

3) Increase the rate at which women above 35 years of age have children or extend the window of fertility by a delay in the onset of menopause, or

4) A combination of all three.

Good luck with the above.

But don't take my word for it. Check out the amazing slide presentation of Saito Jun of the Japan Center for Economic Research on Japan's capacity to overcome its lower fertility and shrinking population (Link). The whole (expletive deleted) argument over Japan's demographic limits to growth is laid out in detail.

Those with a little more time can check out the Tokyo on Fire videos for discussions of these matters. Like this one perhaps.

Class dismissed.


Later - There are many, many debates where I am rooting for Dr. Smith, such as the one he is currently having with John Cochrane on inter-generational fairness. (Link)

Where We Go After Down

US Dollar versus JPY over the last eleven hours

After a Monday of global stock market instability and collapse the Abe government will be facing questions about what it can do to protect Japan’s economy from damage. The Cabinet will have its regularly scheduled Tuesday meeting. Afterward media organizations will ask Chief Cabinet Minister Suga Yoshihide what if anything the Abe government intends to do to restore confidence in Japanese markets. Prime Minister Abe likely faces as similar fate in the Diet, the opposition homing in on the unfair but entirely reasonable question of what he as prime minister will order his subordinates to do.

The answer Suga and Abe will not own up to is that there is virtually nothing the Abe government can do except watch the screens with dread. This government is tapped out when it comes to either deploying cash or inspiring confidence. Increased fiscal stimulus was already in the cards for this autumn; it is now a virtual certainty. Such fiscal stimulus is designed, however, to cope with the heretofore obstinate refusal of the Japanese economy to respond to the ministrations of the Bank of Japan, not to quell current market turmoil.

Liberal Democratic Party hacks will be tempted to argue that the public need not be worried, that equities markets are wrong and Japan's future is bright because of the yet-to-be realized growth effects of the Third Abenomics or robotics or some other such rigmarole. I am waiting for some peppy puppy (please, please, please let it be Liberal Democratic Party Policy Research Council Chair Inada Tomomi) to say, "Just look at how much the yen strengthened yesterday! It is a sign that global investors appreciate the opportunities and stabilities created by the Abe program!" That the effect any of the major proposals of the Third Arrow would be deflationary, exacerbating the market's fears about growth, will not trouble any part of the soft squishy heads of the Abe True Believers, of course.

Had we a ruthless, determined opposition in this blessed land, television shows this morning would feature street smart and mean-looking (yes, I am thinking of Renho) MPs complaining that the Japanese government would have the capacity to deploy assets to calm markets, making Japan the global leader Abe Shinzo always blabs about, a except of course that Team Abe robbed the national piggy bank to inflate the profits of its zaikai and construction industry friends.

That Japan lacks a serious opposition means of course the country will not be tying itself into knots, each side blaming the other. Of course it also means that the country will generate zero ideas on what it is that the government must do, as members of the parties in power will merely keep repeating the idiot mantra, "Markets go up. Markets go down. The important thing is to not panic. Wait for the government's current policies to bear fruit."

Image courtesy: Yahoo! Finance Japan

Coming Up For Air - A Brief Discussion Of The Ontology Of Abe's Womenomics

Shisaku is still on hiatus. However, I just had a conversation with Professor Noah Smith of Stonybrook on Twitter which is not entirely without interest. I nearly bring the exchage to a halt at one point with what is in retrospect is only a mildly amusing jest. To his immense credit, Professor Smith ignores my feeble attempt at humor and furthers the investigation.

Here's an even better chart of smoothed female & male working-age labor force participation in Japan and the U.S. pic.twitter.com/By3Z5JDkXS

— Noah Smith (@Noahpinion) May 3, 2015

@MichaelTCucek A disproportionate share of fire-able workers are women.

— Noah Smith (@Noahpinion) May 3, 2015

@MichaelTCucek But if there has been a trend break, then Womenomics is winning big.

— Noah Smith (@Noahpinion) May 3, 2015

@MichaelTCucek That has happened in the U.S.

— Noah Smith (@Noahpinion) May 3, 2015

@Noahpinion Yes but that would have implied transition out of trend that survived 2008 GFC without hiccup.

— Michael Thomas Cucek (@MichaelTCucek) May 3, 2015

@Noahpinion Agreed. When they hit 99% they tend to flatline. ; - )

— Michael Thomas Cucek (@MichaelTCucek) May 3, 2015

@MichaelTCucek I think Womenomics is only one piece of the wider overhaul of the Japanese corporation.

— Noah Smith (@Noahpinion) May 3, 2015

@Noahpinion Yes, and as forever in the history of this blessed land, the "if" is always preceded by a sigh.

— Michael Thomas Cucek (@MichaelTCucek) May 3, 2015

@Noahpinion Agree again. However, we must still try to disambiguate demographic shifts, policy changes pre-Abe and policy changes post-Abe.

— Michael Thomas Cucek (@MichaelTCucek) May 3, 2015

@Noahpinion Which would leave for Abe and Company the credit -- and it is no mean achievement -- for at least not messing up a recovery.

— Michael Thomas Cucek (@MichaelTCucek) May 3, 2015

Very Kind Of Them #54 - Local Elections Edition

The latest installment of Langley Esquire's "Tokyo On Fire" series of YouTube videos/ITunes podcasts on burning issues in Japanese politics was an incredible gas to record. I was forever at the brink of talking way too much (Since when have you ever had a sense of proportion in matters pertaining to Japanese politics? - Ed.) but was pulled back by presenter Timothy Langley and fellow guest Dr. Nancy Snow.

Please check it out: Tokyo on Fire: Episode 8 - Japan's Local Elections

Two small errors:

1) I am an Adjunct Fellow, not Professor, at Temple University Japan's Institute for Contemporary Asian Studies, 

[Memo to Me, Memo to Me: compose announcement regarding changes along these lines for publication later]

and

2) I say at one point that 23% of prefectural and municipal assemblies have no women in them at all. That number is too high. The correct number is 21% of Japan's 1788 assemblies have no women members. (Link)

Snap Back - This Month's NHK Poll Numbers

Prime Minister Abe Shinzo presiding over the special economic zones advisory commission on 3 March 2015. Image courtesy the Prime Minister's Residence.


If Abe Shinzo is looking for reassurance on the public's continued confidence in his leadership (I would suspect that after December's romp in the House of Representatives election he might not) then yesterday's release of the results of NHK's weekend polling results would leave him feeling bereft.

Support for the Cabinet March 6-8 (February 6-8)

Support 46% (54%)

Do Not Support 37% (29%)

Down and up 8% represent major movements in both numbers. These big moves in public sentiment may be one offs, reflecting public disgust with "money and politics" scandals seared into recent memory by the resignation last month of Agriculture, Forestry and Fisheries Minister Nishikawa. Sadly most of the attention of Nagata-cho residents seems to have already moved from campaign finance scandal to Shukan Shincho's photos of Nakagawa Shoi'ichi's widow Yuko (Hokkaido #11 and currently Parliamentary Vice Minister for Agriculture, Forestry and Fisheries) on-the-street snogging with the younger and married Kado Hirofumi (Kinki proportional - no jokes here please).

It's the scandal du jour.  Well, it was actually du soir -- indeed the very night that Nishikawa turned in his resignation...but I digress.

More likely, however, the numbers reflect a return to reality for the Abe administration. Looking back, they are not very different from the support/do not support numbers of the Abe government in July of last year, before the Cabinet reshuffle and November, before the calling of a snap election. In between, the Cabinet's numbers have been goosed upward by positive feelings about the large number of women appointed to the Cabinet in the reshuffle and by what was likely a mild "rally round the flag" effect as a result of the hostage crisis.

Just what Prime Minister can do now to bump up his Cabinet's numbers is anyone's guess.

The survey (Link - J video) also shows a rare switch in the ranking of issues the public wants the government to tackle. The usual top answer is keiki taisaku "countermeasures against the deterioration in the economy." Tops this month, however, is the perennial #2 answer, "Fixing the social welfare system." These findings, however, came before Monday's release of revised figures for the Q4 2014 GDP growth to 1.5% annualized from 2.2%, with the resulting calendar year 2014 GDP growth figures negative. (Link)

Later - NHK's surprisingly low numbers put Abe back in a race again, between himself and bad news. The outlook is largely positive for him in the short run, if negative for the country. Beyond the June end of the Diet session (a question mark there - committee work is so behind schedule most folks in the know say the session will be extended well into July) the outlook for the PM is not so sanguine.

Abe and his appointees have pulled every economic lever: extreme quantitative easing, fiscal profligacy and shifting the nation's pension assets from Japan government bonds to Japanese equities. The Bank of Japan under Abe-selected Kuroda Haruhiko has gummed up the JGB market so thoroughly that the prices of bonds no longer contain any information. The GPIF and the Post Office are doing their dangest to achieve a similar result in equities markets. Soon, if not already, the price of a share in a listed Japanese company will say nothing about the capital stock, labor force, management, technology or special advantages of that company. Instead the price will only reflect only what government and government-linked investment behemoths are willing to pay for the shares, right now.

Despite the Abe government's every effort to game the system, the public has not responded. Neither the puffed up indicators of a coming prosperity nor the government's promises are reassuring. The voters currently does not have much of a choice as to alternate visions keeping Japan a player on the world stage. However, unless the economy turns, the stagnation-despite-steroids will set the eyes of the electorate to searching for another leader.

Live Blogging The Robert Shiller Press Conference

Are We Headed for Another Financial Crisis?
Robert J. Shiller
Economist and Nobel Laureate
Foreign Correspondents' Club of Japan
11:00~12:00
------------------------------------------------------

11:06 Shiller presentation: Of course there is going to be a crisis, the history of the last 800 years is a cascade of crises.

11:08 My view is that financial crisis is a crisis of human emotions, the loss of confidence, a psychological effect.

11:09 In 2005, the new edition of Irrational Exhuberrence focused on the housing market, rather than the stock market (first edition focus)

11:10 The weakness/source of concern now is bond markets, where prices of bonds seem way out of line.

11:11 So talk today is about stock markets, housing markets and then some observations of  world bond markets, where the yields are startingly low.

11:15 Cyclically adjusted price earnings (CAPE) in U.S. markets are at their third highest marks in history, second only to the 2000 millenium boom and the 1929 Roaring Twenties.

11:16 Japanese CAPE ratios were astronomical in the EARLY 1980s but now shrunk to global norms.

11:18 Japanese confidence in rising share prices remains aberrantly positive.

11:20 U.S. economy is now in deflation.

11:21 Trend in yields in U.S. bonds in relentless downward, and downward at an almost constant rate for the last 30 years.

11:24 Psychologically, loss of confidence, less of a sense of security, from 1) capitalist ideology (everyone for himself/herself)

11:22 Trends in bond yield declines are a global phenomenon, somewhat irrespective of the particular actions of central banks.

11:24 2) computer technology,

11:25 The result is excess savings and the bidding up of the prices of existing businesses and governments.  The lack of security is thus leading people to cut back spending and/or starting their own businesses.

11:27 Entrepreneurial and development successes are receding, leading to weakness in confidence that is often called secular stagnation.

11:29 Q: How much can politics can change economic psychology? (Abe reference)

11:31 The "Three Arrows" are actually concrete proposals, not an attempt to talk up the economy. That is what makes the proposals worthwhile, as just cheerleading has a poor record of success.

11:33 Shiller - NASDAQ high yesterday, adjusted by CPI inflation, is not at historic highs. So not so significant.

11:34 Japanese confidence bled into world markets, distorting international flows toward Japan, in the same way that overconfidence in tech magic led to NASDAQ historic highs.

11:37 Shiller - I had a conversation with Prime Minister Abe a year ago - unfortunately I (Shiller) did most of the talking so I have little so say about Mr. Abe's thinking about Abenomics.

11:38 (Says an interesting thing about labor force security - MTC here). Shiller sees the easier firing of Japanese workers as a good thing for efficiency. Intriguing...really?

11:42 In the U.S., there is a socialist economy in the housing markets.

11:44 Schiller - Decision to create the euro was politically an act of genius and not an act of genius economically. Euro is important as a symbolic act, but one with too many economic consequences. Symbolism is good.

11:47 Income inequality - Piketty, capital accummulation; Shiller, technological inequality.

11:48 Shiller quotes Norbert Wiener on whether the nuclear weapon or the computer is more dangerous. Worries about robots replacing human labor.

11:50 Abe advisor and fellow Yale economics professor Hamada Koichi is offering commentary on the presentation.


Hamada Koichi
FCCJ press conference of Robert Shiller on 3 March 2015

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

11:51 Hamada: "There is a rosy future for the Japanese economy."

11:52 Hamada: "Mr. Abe is holding back, allowing the figures to speak."

"Oil prices are a positive. A million workers have entered the labor force. Wage are increasing. But Abe must do reforms, overcoming obstacles."

11:54 Hamada+Shiller  - Womenomics is important. Shiller: it is inspiring. Hamada: numbers are returning (???) to the job market.

[Nota bene: the % of women in the Japanese workforce is higher than the participation rate for U.S. women - MTC)

11:57 Q: with true declines in populations and aging of populations, is not there no exit out of slowing or contracting economies?

Shiller: government policy to combine career and family is an important step to reversing or slowing decay in confidence.

11:59 If you want to end inequality, you should have career insurance -- takes care of the insecurity of life planning. Governments must have a plan to tax the wealthy and subsidize work, do it now for the future rather than try to deal with inequality (worsening?) in 20 year's time.

Very Kind Of Them #35

David Pilling delivers a huge thumbs up to the post of December 6. (Link）

Best not tell Professor Noah Smith of Stonybrook. He asked over Twitter what alternatives Japan had. I told him Abenomics done in an integrated way.

As for the article, I disagree with Professor Gerald Curtis (see him at the FCCJ on December 15) who says the two party system has fallen apart. I see a great deal of hope down the line, in two years' to three year's time.

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.

Come Lambaste, Taunt and Scoff

Sometime between now and Monday 8 December 2014 at 12:30 p.m. I will have to get my act together. Because...

Professional Luncheon: "After the Election – What Happens Next?" by Cucek & Toshikawa

Monday, December 08, 2014, 12:30 - 14:30

Michael Thomas Cucek, Adjunct Fellow, Temple University Japan, ICAS

Takao Toshikawa, Editor in Chief of Insideline and Tokyo Bureau Chief of the Oriental Economist

Language: The speech and Q & A will be in English and Japanese with English interpretation.

"After the Election – What Happens Next?"

Prime Minister Shinzo Abe's surprise decision to call a snap general election has succeeded in at least one of its aims – it has caught Japan's divided political opposition on the hop. Abe is betting that he can persuade voters to return him to power with a stronger mandate, despite the fact that the country is technically in recession.

His conservative government wants to cut corporate taxes, boost defense and reduce Japan's huge public debt by raising the sales tax by two percent next year. He launched his cabinet in late 2012 with a three-pronged plan of fiscal expansion, loose money and economic reforms – known as "Abenomics." His opponents say the plan is dead. Abe says he is only getting started.

Will Abe's gamble pay off, and what can we expect after the election? As always at the FCCJ, we have invited some of Tokyo's best political thinkers to explain the likely outcome of the election. Michael Thomas Cucek runs the highly respected political blog Shisaku, a must-read for anyone interested in the machinations of Kasumigaseki. He is also an adjunct fellow of Temple University Japan, ICAS.

Toshikawa is a founder and editor-in-chief of Tokyo Insideline, a bi-weekly publication. One of the most astute and well-informed observers of Japanese politics, he is a well-known figure through his reporting and frequent TV appearances. His books include "Kasumigaseki; The Secret of MOF Power," "Japan-U.S. Power Line," and "Power Game Nagata-cho."

http://www.fccj.or.jp/events-calendar/calendar/icalrepeat.detail/2014/12/08/2293/-/professional-luncheon-after-the-election-what-happens-next-by-cucek-toshikawa.html

Abe Shinzo's Mock Test Election

Yesterday Prime Minister Abe Shinzo dissolved the Diet and called an election of the House of Representatives. Constitutionally, the Emperor dissolved the Diet upon receiving the request of the full Cabinet. Realistically, this was one man's decision, that man being Prime Minister Abe.

In his speech explaining his decision to dissolve the Diet to the members of his party, Mr. Abe insisted that the name of this Diet dissolution is "the Abenomics Dissolution" -- and that the election is a de facto referendum on his whole economic program：

"Will Abenomics go forward? Will it come to a complete stop? That is what this election is asking. Are our economic policies mistaken? Are they correct? Is there some other choice? That is what I wish to ask the voters."

(Link - J)

This statement is, of course, a concatenation of nonsense. The origins and evolution of Abe's decision to dissolve the Diet are known and they have little to do with putting to the voters a decision on the success or failure of the Three Arrows of Abenomics. (Link)

Abe's adamant attachment of a name to dissolution is not an idle exercise, however. First, it satisfies the cultural imperative for a label explaining the cause of the dissolution, differentiating the current dissolution from its predecessors. There has been a lively, mostly sarcastic, debate in the press and online over what this particular dissolution should be called. Candidates have included the "Life Extension Program Dissolution," the "'The Reason for Dissolution is Classified' Dissolution,"the "Moron's Dissolution" and "I've Got Personal Problems Dissolution."

Second, and more importantly, Abe has probably succeeded in focusing the purported debate in this election on his economic program. One has to say "purported" because there cannot be a real debate on Abenomics, not in the existing political environment.

If Abe wanted a real debate, he would want a real debating partner. However, none of the potential main opponents in this election -- the Democratic Party of Japan, the Japan Innovation Party or the Communists -- have the full set of weapons necessary to take the fight to Abe and the ruling Liberal Democratic Party/Komeito coalition. The DPJ has the national organization and the gravitas but has a terrible leader, no alternative economic program and an insufficient number of candidates running. The JIP has two good leaders in Hashimoto Toru and Eda Kenji and is a regional power but is still seen as a lightweight organization nationally. It also will be running too few candidates. The Communists have the candidates, the alternative plan and the national reach. No one could ever accuse them, however, of being seriousness in terms of policy.

Abe has furthermore stacked the deck in setting his pass/fail level in the number of seats at an absurdly low level. The ruling coalition had 326 of 480 seats in the just dissolved House of Representatives -- a greater than two-thirds majority. However, in his speech announcing his dissolution plan, Abe said he would consider the coalition's holding on to a majority in the new slimmed-down 475 member Diet -- i.e., 238 seats -- as his victory line.

The thought that a prime minister could voluntarily call an election, see 88 of his allies go down to defeat, then blithely go on about his business is absurd. The secretary-generals of the ruling parties, meeting after Abe's declaration, came up with a figure of 270 seats as the pass/fail line -- four more than the crucial 266 seats required to have dictatorial control over all the committees of the House of Representatives.

The chances of the ruling coalition losing 88 seats is unimaginable. That it will lose even 56 requires a vivid imagination.

What Abe, the ruling coalition and Abenomics are going to is not a real test. The test is on a fictional subject of the prime minister's choosing; it is (essentially) impossible to fail. In Japanese, this should be the 模擬試験解散　(mogi shiken kaisan): the Mock Test Dissolution.

I expect Abe-san to pass it.


Photo image credit: MTC

Very Kind Of Them #31 And #32

It was nice to have a long exchange with Elaine Kurtenbach on the dissolution and the delay in the consumption tax. It was even nicer that she found something in our interaction worth sharing. (Link

Rather humbling is it for this electronic scratch pad's having received the attention of Andy Sharp, who found my assigning Prime Minister Abe Shinzo an "A" for effort and content worthy of mention. (Link)

Kickstarting Abenomics: A Possible Scenario

Click on below image to open in a larger window.





Later - Oh, serendipitous coincidence. (Link - J)

Original photo image courtesy: Sankei Shimbun

In Review- The Abe Announcements

All in all, Abe Shinzo just gave a pretty damn spirited and sound defense of his Cabinet's economic policies. Most importantly for the PM, in response to the idiotic "Abenomics has failed" argument, Abe went straight to the nub of the problem and asked his critics, rhetorically, "If not what I am doing, what is it that you would do?"

The first of the two weak points in the whole affair was when the PM reiterated his bogus proposition that the great failure of the Democratic Party of Japan was its having violated its campaign manifesto in voting for a rise in the consumption tax without doing as he is doing, dissolving the Diet and asking the people their opinion of the change of plans first. That the DPJ changed its plans due to its having been boxed in by decades of LDP profligacy and because it could not escape the accusation from the LDP of baramaki ("throwing money around") in its own attempts at stimulus...and that raising the consumption tax was one of the few legislative items it could push through both Houses of the Diet, specifically because it was AN LDP MANIFESTO PROMISE, the PM did not...shall we say, "make clear"?

The second weak moment was when the second questioner in the Q&A called him out on his bogus proposition regarding the DPJ and calling an election. The PM became testy and wasted a good 3-4 minutes explaining why his proposition was defensible.

My grade for Prime Minister Abe's performance: A

for both substance and effort.

I admit, a bias...but in a negative direction. After hearing what he said to the Japanese press in Brisbane and his attacks on Edana Yukio and the DPJ in the Diet I had very, very low expectations for tonight's press conference.

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.

In Case You Were As Confused As I Was Re The Dissolution And The Delay

After a spell in the FCCJ library looking at magazines and newspapers, here are my conclusions:

1) The now certain dissolution of the Diet (Link) and the delay in the raising of the consumption tax are two different initiatives. Prime Minister Abe Shinzo has wanted a dissolution for about three weeks now. Chief Cabinet Secretary Suga, or persons thinking and feeling on his behalf like Yamamoto Kozo, has desired the delay for a bit longer.

2) Abe wants the dissolution because he reshuffled the Cabinet only two months ago and one cannot reshuffle a reshuffle. Dissolution is the only way to rid himself of the cast of clowns who jumped aboard the Abe administration bus in September.

3) Suga and/or folks like him want the delay because the second quarter GDP and retail sales figures seem to have confirmed the warnings of last fall from Honda Etsuro and Hamada Ko’ichi that April's rise in the consumption tax would severely dampen the economy's animal spirits. Big business, bloated non-profit and government establishments (a.k.a., The Establishment) were of the (seemingly mistaken) opinion the economy was strong enough to take the hit. Since fundamentally it is idiotic to run two mutually contradictory economic programs at once, in this case QQE and large fiscal outlays for growth and increases in the consumption tax for fiscal consolidation, going full out for growth seems the better idea, at least in the short term.

4) Rather than fess up to having been fooled not just once but twice, the Abe/Suga duarchy dawdled on the framing of their respective projects, this even after Shukan Bunshun blew the lid off of the duarchy's plans ten days ago (many thanks to Dan Harada for pointing out the article). Not even the Yomiuri Shimbun, the cheerleader for Team Abe, had a plausible set of explanations for a dissolution (check out paragraph 8 of the Yomiuri editorial -- sadly the English translation does not do the original justice) to publish/leak. This left the field open for practitioners of the arts of tactical mendacity (my euphemism for H. G. Frankfurt's third form of communication) to offer explanations of what Abe and Suga were up to -- which news media dutifully published despite none of it making a jot of sense.

So...

a) Is the policy mix now going to be too rich, i.e., are we going to have inflation well in excess of the Bank of Japan's goals?

b) What will the news media and Abe's rivals inside the Liberal Democratic Party concede is an Abe win in a December 14 House of Representatives election?

c) Whatever you criticisms you may want to level at Abe and Suga, "unwilling to quickly cut their losses and move on" ain't one of them.


Oh, by the way, if you are an analyst or a journalist, and you borrow any of the above, acknowledge the source, please.

Photo image credit: MTC

Very Kind Of Them #29

Friday's announcements by the Bank of Japan and the Government Pension Investment Fund have dispelled any rumors that Kuroda Haruhiko and Abe Shinzo are lacking in chutzpah. The sudden moves certainly provides incentives for members of the opposition to take a good look during the long three-day weekend at a strategy to pound away on the dodgy accounts books of Liberal Democratic Party members in next Tuesday's House of Councillors Budget Committee session, rather than substantive issues.

However, scandal mongering has been a winner for the opposition in the past. They may just go ahead and bang away at LDP Diet members for

1) their failure to have real accountants check their accounts and for

2) their lack of familiarity with the very complex election regulations they themselves wrote.

The bold declarations of the AbeKuroda Komplex, however, have definitely changed the conversation in the street. Last week, the discussion was about delay, distraction and decay, as I suggeest to Elaine Kurtenbach, writing for the AP:

News of possible election law and political funding violations forced the resignations last week of Abe's justice and trade ministers, both among the five women who had just taken office in the early September Cabinet reshuffle that showcased Abe's commitment to stronger roles for women in leadership.

"It's a serious setback. So much of the Abe Cabinet's shine was due to its aura of invincibility and inevitability," said Michael Cucek, a Tokyo-based analyst and fellow at Temple University Japan.

Troubles over campaign funds and related issues have long contributed to Japan's famous "revolving door" politics. Abe's first term as prime minister, in 2006-2007, ended when he was driven from office by scandals and health problems after just a year.

Abe got a rare second chance when his Liberal Democrats regained power from the Democratic Party in December 2012. Since then, the LDP's coalition with the Buddhist-affiliated Komeito, or Clean Government Party, has established majorities in both houses of the parliament.

This time around, Abe has cultivated a confident, relaxed style of leadership, repeatedly declaring "Japan is back!" while his chief Cabinet Secretary Yoshihide Suga endeavors to keep their gaffe-prone allies more or less in line.

"Until this crisis it looked pretty certain he was just going to cruise," Cucek said. "Now that politics as usual has returned we could see the same sort of decay that we've seen in the past," he said.

(Link)

By Tuesday, however, the conversation may no longer about a few million yen's worth of missing fund report entries or S&M bar tabs. When you start talking about expanding BOJ bond purchases by an addition 10 trillion yen annually, you are talking real money -- and that gets the people's attention.