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Fukuda steps down, foreign media doesn’t get why

In an article published very recently, we read this:

Japan’s stock and bond markets will likely suffer another blow from the sudden resignation of Prime Minister Yasuo Fukuda

I guess that’s good news for those looking for a bottom, though it makes little rational sense. Here’s the kicker:

[Fukuda’s] departure is seen clouding the reform outlook and potentially spurring debt-funded spending.

Really? Fukuda was about as anti-reform as they come. Who does this reporter expect next - Ito Hirobumi?

My favorite part:

[A]nalysts said foreign investors will not be thrilled with Japan’s prime minister departing in surprise fashion

What surprise? Two weeks ago ago, Yoshiro Mori, the big gun and Kingmaker in the ruling Liberal Democratic Party, said that Fukuda was all but done - on national television, no less. There is no surprise here. Those of us who live in Japan and pay taxes here - and watch television - understand exactly why this happened now - the ruling Liberal Democratic Party needs more time to get its bills through the diet. Let me say it again: There is no surprise. Mr Mori said on national television that Fukuda was no good and that he wanted Aso in the position.

The article goes on to explain how Fukuda’s resignation will be bad for Japan’s equity markets (despite the fact that Japanese equity markets have already had two weeks to price in Fukuda’s resignation):

Since Fukuda took over from Abe nearly a year ago, the Nikkei share average has lost 22 percent — even more than the U.S. S&P 500 — as foreign investors have soured on Japan.

That sounds like good news to me. Get rid of the guy who oversaw a 22% loss in equity value while Japan’s longest post-war period of economic growth died. Good news!

The article then points out:

Fukuda’s likely successor, ruling party executive Taro Aso, is seen as someone who could boost the size of the government’s just-launched spending package to help households and small companies, but the length of his tenure is expected to be short.

Too bad the author doesn’t actually know Mr Aso’s current position, which is Secretary General of the LDP. Before that, he was one of the best Foreign Ministers Japan has seen in the post-war ear (not saying I support them man, not by any means, just that he was an excellent foreign minister).

The stock market is not the issue. Mr Fukuda’s resignation means that a special session of the diet will have to be called in addition to the extraordinary session. This gives the ruling party an extra 30 days to pass the bills they would otherwise not be able to get through in a shortened extraordinary session - this is a huge middle finger to the New Komeito Party and means that the extension to the refueling mission in the Indian Ocean should get fifity-nined through the diet.

Reform is not the issue. Reform in Japan is dead, and died a long time ago. We are looking at the LDP trying to stay alive. It’s not the economy, stupid - it’s pure politics.

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