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Political fallout over the Bank of Japan Governor debacle hitting the press, for better and worse

March 26, 2008
By Ken Worsley


Thanks to astute reader Garrett DeOrio for pointing out that the Yomiuri is currently on something of a roll with it’s odd editorials. The piece he links to begins with the headline, [DPJ] should absorb lessons from failed ‘Republican Revolution’, in reference to the events following the 1994 US midterm elections. My favorite part was this:

At a meeting with (Prime Minister Yasuo) Fukuda, who is also president of the Liberal Democratic Party, in November, DPJ leader Ichiro Ozawa agreed to form a grand coalition with the LDP because he apparently had taken [political] difficulties into consideration. However, since Ozawa gave up on the idea of forming a grand coalition after strong opposition from DPJ lawmakers, the DPJ has gone over the top in dealing with Diet business.

And who was the vested interest behind setting up this bound-to-fail meeting?

Mr DeOrio promises to have a fuller commentary on the piece up soon over at Trans-Pacific Radio.

Meanwhile, over at the Japan Times, Kevin Rafferty has published the most incisive take yet seen on the BOJ Governor nomination debacle - and more importantly, what it means for the future. In a piece entitled Scary signs in BOJ debacle. Two paragraphs in particular stood out to me:

The fact is that the BOJ governorship is a mere blip when it comes to the real economic and political challenges that Japan has to face over the next few decades, and if the leaders flunk them, as they have flunked the simple BOJ test, the country is in for a really rocky ride downhill…

…Above all there is a need for debate, exploration of the options, learning from the successes and the failures of other countries. Yet there is no sign of any creative or imaginative thinking to tackle pressing problems. And in the case of the BOJ governorship, no sign of any thinking at all.

This article puts things in a broader perspective, and is unafraid to assert that the ruling party is just as much, if not more, to blame for the current mess than the opposition is. It deserves a full read.

Filed Under Bank of Japan, Politics 

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Comments

2 Responses to “Political fallout over the Bank of Japan Governor debacle hitting the press, for better and worse”

  1. Contrarian on March 27th, 2008 9:39 am

    Ken:

    Do you think that this has had some effect on the USD/Yen exchange rate? I.e., with this distraction, do you think that the BOJ/MOF has not been focusing on forex intervention, thus the unwinding of the carry trade. When this is resolved, do you think that we might see intervention on the 2003 scale?

    Cheers,
    Matt

  2. Ken Worsley on March 27th, 2008 9:56 am

    Matt, it’s funny you should ask. I’ve been thinking about this, and there has been some weak commentary in the Japanese media thus far (nothing sure-sounding backed up with even anonymous sources), but I can’t choose a side yet. I so think, as your comment implies, that MOF won’t touch anything during the current “distraction” (by the way I agree with the term, this is not the Great Depression II).

    We’d probably agree that there is much else going on in indirect currency manipulation, especially the creation of 35 trillion yen over the past 15 months and its sale as government bonds, funding the purchasing of US Treasuries. But this is hardly having any intended effect at the moment as the Fed has successfully cheapened the dollar to such a degree. Will it be stepped up? I can’t say yet…

    I don’t expect to see anything happen for a bit, if it does. I think there could be some pressure, especially when FY07 figures come out (and it’s too late to boost those anyway).

    And then we have to wonder if it will happen without a BOJ Governor in place (I know, that shouldn’t matter).

    It’s amazing how fast that issue bled out of the news cycle.

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