Tokyo markets are obsessing over whether Bank of Japan Governor Haruhiko Kuroda will get a second term come April. Why not promote him instead?
The BoJ, let’s face it, has done what it can to defeat deflation. Sure, we may see policymakers tweaking the basket of bonds they buy in 2018. Expect some modest tapering, at most. But given the dearth of inflation or wage gains, a computer program could do Kuroda’s job into 2019.
Kuroda’s talents are being underutilized at a moment when Abenomics needs some serious brainstorming. Abe should elevate Kuroda to finance minister or a newly created role as economic-retooling czar. Yes, Japan already has three men on the case, but one is, frankly, less inspiring than the next.
Finance chief Taro Aso is better known for dozing off in meetings than bold ideas. And who, with all due respect, could name Japan’s two other economic bigwigs? (For the record, they are Hiroshige Seko or Toshimitsu Motegi).
Kuroda’s background makes him a better fit to plot, prioritize and accelerate moves to loosen labor markets, catalyze a startup boom, tweak taxes, deregulate industry and buttress Japan Inc.’s confidence to share surging profits with workers.
After a lengthy and active stint at the Ministry of Finance, working on international issues, Kuroda moved to Manila to run the Asian Development Bank. With its 67-member countries around the globe and 3,000 employees, the ADB’s mission is to spread the benefits of rapid Asian growth. From 2005 to 2013, Kuroda traveled constantly, gathering intelligence on how to get more mileage out of reform and stimulus.
Those years in the trenches using limited resources to overcome market inefficiencies and attack inequality left the 73-year-old with a unique skill set by Tokyo standards.
Kuroda has spent the last 1,759 days back in Tokyo and on the frontlines of an epic deflation battle. Despite massive easing beyond anything (as a ratio of gross domestic product) seen from the Federal Reserve or European Central Bank, inflation is a long way from 2%.
The reason, as Kuroda knows better than anyone at this point, is a focus on the symptoms of Japan’s two-decades-long malaise, not the underlying cause. The malady is this: low confidence that living standards in an aging nation will be higher five years from now amid rampant global competition.
The malady is this: low confidence that living standards in an aging nation will be higher five years from now amid rampant global competition
Abenomics has thrown trillions of dollars at the problem, sending equities soaring. It failed to upend a model that thrived in 1985, but which feeds complacency 33 years later.
Tokyo’s weak yen policy, the BoJ’s largesse and modest corporate governance tweaks have the Nikkei 225 at its highest levels since the early 1990s. It’s not trickling down, though. In fact, inequality is widening even as the economy has its longest run of growth since the mid-90s.
Large stockholders and landowners are thriving, while average workers are largely walking in place. And Japan’s growth, remember, is largely a product of a buoyant external sector (exports jumped 16.2% in November alone), not domestic demand.
Things are playing out exactly as Kuroda’s BOJ predecessor, Masaaki Shirakawa, warned. In 2013, before Kuroda got to work, Shirakawa said ultra-low monetary policy would make little difference as the population shrinks and Japan falls behind competitively in Asia. Japan’s problem, he cautioned, isn’t the level of the money supply, but the uses for the yen which the BoJ creates.
Abe could keep Kuroda at the BoJ keyboard, hitting “ENTER” every few days to sustain liquidity. Or, the prime minister could empower Kuroda to lead a structural-upgrade revolution. What, let’s be honest, has Abe done with his big October election win? Other than talk of cheaper health care and education, and helping Hitachi sell nuclear power plants abroad, not much.
Abe’s focus is on revising the pacifist Constitution and beefing up military readiness, not on an Abenomics reboot. With one staffing change, he could alter the narrative – and put some real foundations under a Nikkei racing ahead of wage gains. Why not give Kuroda a call?
Do these writers ever re-read their articles to check for basic logic thread, or just use big words that they do not understand. Japan is rebooting — again? Put more hope in "loosening markets" or other "reforms" that are brining nothing new. Deflation IS the key to rich getting richer, while population starves. Noboy will share their loot with others, that is human nature. When any system is tilted beyond repair in favor of some interts, those interests think that it is all due to their smarts and provesse. They cannot acknowledge that it is due to the system allowing them plunder — on purpose. Based on a theory that something will trickle down. Well, it will not. There is no logic in it. Business is not a charity, and if allowed, they would demand that people work without pay, and demand that state pays them wellfare. Not that this is not already happening — most people on welfare in US are working poor, that is corporations are underpaying, forcing Government to then use taxes population pay to keep the lower income population afloat. ‘What do these writers think — that the contract based IT labor is a natural thing, and that individuals that invested so much in their career and have to keep up investing, are disposable on a whim — when a business cannot get out of their contracts for goods they purchased but no longer need. We provide protection to commodities that we do not provide for people.
If corporations are persons under law, so should be the real persons, and the laws should be the same. We have to make up our minds about the legal model we are using, and this is where reforms should be most needed. Individual should have same business rights as corporation, deduct its entire cost of living, education and family raising from taxes, as well as demand that the corporation cannot contract him/her without a compensation for dismissal. At least a year’s salary worth We individuals are no longer employees, as in the old model. We are business entities, and as such, need equal protection corporations have in dealing with each other contractually. Or think of another model — anything but the one that does not work. Loosening labor markets — or firing for convenience of the employer, will not work. It is a remnant of the employment system of yester year, to which our leaders cling — as they themselves can just tweek. They canot change anything. None of them. Changes will emerge as the situation eventually deteriorates, and the elite gets so much out of touch with their tweeting.
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