Noah is skeptical

Noahpinion has a laugh at the expense of MMs who think Abe could make a diference in Japan.

According to Noah.

Abe is mainly interested in social and cultural issues. He is the Japanese style of socio-cultural conservative, sort of a Newt Gingrich type . As prime minister in 2006-7, he enacted a law requiring public schools to teach “patriotism”,  mounted a vigorous denial of Japan’s WW2 “comfort women” sex-slavery, gave gifts to the nationalist Yasukuni Shrine (angering China), and pushed to de-emphasize Japan’s WW2 war guilt in school textbooks. His lifelong quest has been the revision of Japan’s “pacifist” constitution to allow Japan to have a normal military.

I of course don’t mean to imply that Abe’s cultural conservatism makes him unlikely to experiment with monetary policy (unlike in America, in Japan “hard money” is less of a conservative sacred cow). Instead, what I mean is that Abe really just does not care very much at all about the economy. I mean, of course he wants Japan to be strong, and of course he doesn’t want his party kicked out of power. But his overwhelming priority is erasing the legacy of World War 2, with the economy a distant, distant second.

And he may well be right, although we should not forget Bernanke s own about face since becoming Fed Chairman! But what is very wrong in Noah s post is the claim that

The LDP, which thrived in the 60s, 70s, and 80s, has always been a mercantilist outfit, weakening the currency to pump up exports, using the surplus from exports to support Japan’s corporatist social model in the so-called “two-tiered economy”. In Japan’s days as a high-quality low-cost export powerhouse, this worked marvelously and kept everyone happy, allowing the LDP to keep power for generations. The recent strength of the yen, however, has been looking like the final nail in that system’s coffin.

Just before the end of Bretton Woods in the early 1970s, the Yen was 360 to the dollar. Three months ago it bottomed at 75. Now it s at 83. In all those decades there was only a brief  3 year period – 1995 to 1998 – that the Yen, like every other currency, depreciated againt the dollar, driven by high productivity growth in the US and flight to safety from crises in Asia and Russia. So, if they have tried to weaken the currency through all those years they were pretty incompetent. Maybe this time it will be different.

Chart Update:



HT David Levey

One thought on “Noah is skeptical

  1. This is a little off the topic, but I have a question about how Japan might go about solving its monetary problems from an NGDPLT perspective since it has experienced a trend of negligible NGDP growth for the last two decades. Supposing the BoJ adopted NGDPLT, would it just announce a target to start a new trend line around 5% or would it need more for a few years and then stabilize at 5%? Is 5% even a good target for Japan?

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