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Top METI official: Day traders are “fools”

February 8, 2008
By Ken Worsley


A few days ago, we reported on remarks made by Ministry of Economy, Trade and Industry Vice Minister Takao Kitabata in late January. At that time, he characterized shareholders as “fickle and irresponsible” and faulted them for demanding high dividend payments (should shareholders just be satisfied with the annual box of fruit delivered to their doors?).

Now we have a report that on the next day, January 25, Kitabata told attendees of a meeting in Tokyo, “Day traders are typically the most corrupt shareholders. They are fools, capricious and irresponsible, so that voting rights need not be given to them.”

Before we even start to think about what this means for shareholder rights in Japan, and whether or not Kitabata’s comments are relevant or indicative of a broader line of thinking, let’s look at what Kitabata’s boss had to say.

Earlier today, METI Minister Akira Amari told reporters that he has advised Kitaba to “avoid making misleading remarks.” Kitabata then admitted that his comments were “inappropriate.” But here’s the kicker: According to the Nikkei, “[Kitabata] said the lecture was exclusively targeted at members of the institute and he did not expect that all of his remarks would be disclosed to outside parties.”

This is worrisome. Was Kitabata lying to the business leaders he spoke to on that day, or is this a sign of closed-door policy discussion? Either way, this incident shows a lack of transparency in policy making that Japan can ill-afford to be characterized by.

In January, overseas investors accounted for 69.2% of trading value at the nation’s top three exchanges, according to the Tokyo Stock Exchange. Trading by retail investors stood at just under 20% of the total, which was half of what it was two years ago. We’re not yet seeing individuals get back into the market, which we really should be at this point, given the discounted value of so many Japanese shares (though of course, there still may be some downside in prices to come in the following months).

We also saw hedge funds pulling 900 billion yen in assets out of Japan last year, which was the first time that figure had ever been negative.

Can it all be chalked up to subprime? Or are we seeing an erosion of confidence in Japan’s financial markets? If the latter is true (and both are to some degree), what effect will comments such as Kitabata’s have on international confidence in the nation’s equity markets?

And how will this damage the image of Prime Minister Yasuo Fukuda?

Filed Under Equity Markets, Finance 

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Comments

5 Responses to “Top METI official: Day traders are “fools””

  1. Ponzi on February 8th, 2008 6:01 pm

    Has there been another breakout of foot-in-mouth? Is it a seasonal thing? Aso got trumped by the new guy over in Osaka, so he’s probably due for something good soon.

  2. Passat on February 8th, 2008 11:26 pm

    This day trader doesn’t mind being called a fool, making money throughout the downturn. Whether the shares can vote or not, who gives a f*ck? I don’t hold them that long.

  3. Contrarian on February 9th, 2008 7:59 am

    While a lot of Japanese shares appear to be undervalued (I’ve seen some ridiculous bargains where shares appear to be trading at less than cash), I’m not one of the people proclaiming that the Japanese market is cheap. I just read a Nikkei column that claims Japanese stocks are cheap because they are at a 34 year low–FORWARD P/E (earnings projections are about as accurate as my guess at my next turd’s length). But, let’s humor them: Nikkei 225 was 15.18 x forward earnings, S&P 500 was 15.63 x forward earnings, and the DJIA was 13.48 times forward earnings.

    The Japanese market, as a whole is not cheap. It looks even less cheap to foreigners, who are left with nothing more than the impression that Japanese people and policy makers are a bunch xenophobic protectionists who believe that foreigners should feel lucky just to give their money to Japanese companies. The veracity of this is irrelevent because, as they teach you at orientation at Wall Street banks, there is a certain degree of influence awarded to perception (self-fulfilling prophecies).

    Japan needs an image make-over before foreigners decide to go bargain hunting under the rising sun.

  4. Garrett on February 9th, 2008 2:29 pm

    This is a political issue. Kitabata, much like almost every other high-ranking bureaucrat or politician in Japan seems to think that “you weren’t supposed to hear that” is a sufficient explanation for dumb remarks and should end the issue. Sounds a lot like Abe’s standby (I’m paraphrasing) - “That was meant for domestic consumption.”

    What scares me is that so many people in charge of running the country are so inept at dealing with a system that’s been in place for a century.

  5. Albrecht on February 9th, 2008 3:32 pm

    METI officials are fools, capricious and irresponsible, therefore speaking right should not be given to them.

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