Asia Times: EDITORIAL: Amakudari is in order for Mr. Yen



	February 04, 1999	atimes.com

Japan Economy

EDITORIAL: Amakudari is in order for Mr. Yen

We have a well-meaning suggestion for Japanese Prime Minister Keizo Obuchi:Provide the vice minister for international affairs at the Ministry of Finance,Eisuke Sakakibara, with a golden parachute and have him ''descend from heaven''to run a local savings & loan institution in Saitama Prefecture.

In the apparent absence of any qualified Japanese spokesperson on international (or domestic) financial and economic affairs, the man they call ''Mr. Yen'' has been truly on a roll in the past several months, spouting some of the more extraordinary nonsense in recent memory.

Here are his latest gems, as reported, from a Tuesday speech at a symposium oninternational monetary affairs in Tokyo.

On Japan's finances: ''I think we'll be able to say in the next week or twothat Japan's financial crisis . . . is over."

On the U.S. economy: ''An economy that is too strong like the U.S. could fallsharply."

On the world economy: ''What I want to emphasize is that . . . we, includingthe U.S., haven't overcome the [global economic] crisis."

He also worries that trade tensions between the U.S. and Japan could grow''considerably'' in 1999.

Did he really say ''next week or two'', or was it ''next year or two''? If thelatter, we might regard his statement as somewhat optimistic, but at leastin the realm of the possible. The government has made available some 60trillion yen for financial sector rehabilitation and bank recapitalization,and that will have its positive effect even if banks continue to bereluctant to avail themselves of the public funds offered.

But, of course,the large sums for banks and pump-priming supplementary budgets have tocome from somewhere; huge amounts of government bonds will have to beissued over coming years, and fiscal deficits will reach 10 percent of GDP. By way of comparison, that's more than three times the portion of GDPallowed under the European Union's Maastricht criteria for sound governmentfinances.

As for the U.S. economy, Sakakibara-san surely should know (or quickly seekinstruction on) the differences between a strong and a bubble economy.Japan built the latter in the 1980s and is still paying for theconsequences; the U.S. underwent painful and in-depth restructuring in the'80s and has built an economy whose strength is based on investment ininnovative technologies and broad asset diversification and will not soonbe undermined.

In world economic and financial affairs, quick and decisive action by theU.S. Federal Reserve in lowering interest rates last fall averted adebilitating global liquidity crunch. If - as Sakakibara also said inTokyo - several Asian economies now appear to have a realistic chance toresume growth in the second half of this year, that's precisely because ofsuch action and because a strong U.S. economy is capable of absorbing growingamounts of Asian exports, including from Japan.

Trade tensions? When did Mr. Yen last look at the Japanese current accountbalance?

He apparently did not say so in Tokyo (or, at any rate, it was notreported), but Sakakibara - when it comes to global financial affairs -also co-advocates with new socialist German Finance Minister OskarLafontaine reform of international finances through the introduction oftarget zones (enforced by central banks) for dollar-yen-euro exchangerates.

Regarding this not-so-new notion of the Japanese and German statistsoul brothers, we recommend that Sakakibara have one of his ministry aidestranslate for him the full text of what MIT professor Rudi Dornbusch toldthe German daily ''Die Welt'' in an interview at the Davos World EconomicForum. Here are some brief excerpts.

Dornbusch: ''If Japan likes it [target zones], then it must be a bad idea.Let the German finance minister Lafontaine work out a target zone withJapan; then we can watch and see. The Japanese are the same sort of controlfreaks as Lafontaine . . . Our [the U.S.] Congress would under no circumstancesput monetary policy into the hands of some crazy Europeans. We don't haveenough in common and surely no confidence in what politicians on the otherside of the Atlantic Ocean intend to cook up."

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©1999 Asia Times Online Co., Ltd.