For those interested in seeing my first ever TV appearance, the video is available at CNBC's website, here.
Showing posts with label BOJ succession crisis. Show all posts
Showing posts with label BOJ succession crisis. Show all posts
Wednesday, April 9, 2008
Speaking of democracy
Addressing the DPJ's rejection of the nomination of Watanabe Hiroshi to be deputy governor of the Bank of Japan at a press conference Wednesday, Chief Cabinet Secretary Machimura Nobutaka commented upon the internal dynamics of the DPJ. He said, "Although a majority of the DPJ's investigatory subcommittee on joint personnel decisions approved the nomination, I want to say that there is no democracy within the party. This is truly a complicated and mysterious party."
Yes, Mr. Machimura, chief cabinet secretary of the LDP-led coalition government and titular head of the LDP's largest faction, is questioning the democratic bona fides of the DPJ.
How does one even begin describing how inappropriate it is for Mr. Machimura to comment upon the lack of democracy in the DPJ? One could start with last September's LDP presidential election and go from there, but I'm not going to do that, because since when did political parties have to make internal decisions democratically?
No, Mr. Machimura's comments are particularly galling because of the current government's attitudes about democracy in the political system at large. In the same press conference, Mr. Machimura noted that the LDP and Komeito are considering revising the law governing the Bank of Japan, enabling HR decisions on the Bank's leaders take precedence.
On Wednesday, the LDP-Komeito "investigatory committee concerning the way joint personnel decisions ought to be" held its first meeting to look into changing the BOJ law so that the bank's succession is never again challenged by the HC.
This is typical of how the LDP has viewed DPJ control of the HC. If the DPJ can't be made to shut up and do what the government tells it to do, then it and the HC should be circumvented and ignored. If the DPJ uses the powers accorded to the HC, then remove those powers bit by bit, all while claiming to be acting in the name of the national interest, to be putting country before party, to be desirous of compromise.
I hope the DPJ loudly opposes this move, not because of its immediate significance but because of its symbolic importance. The DPJ's control of the HC is an important moment for Japanese democracy, certainly more important than the question of whether Mr. Shirakawa or Mr. Muto was named governor of the BOJ.
Democracy is a process by which those out of power can keep those in power honest and accountable. It may not always result in good policymaking, but when it works properly it enables the outs to challenge the sagacity, the morality, and the competence of the government over the course of making and executing policy.
With the DPJ in control of the HC, an opposition party is finally in a position to question the government and hold up policy when it feels that the government is lacking on one or all of the above-mentioned counts.
Ozawa Ichiro replied in this manner to Fukuda Yasuo, who criticized the DPJ for "misusing its power" (as if the LDP is the arbiter for the proper use of power). He said, "The government has a majority in only one of two houses. The government has not reflected sufficiently on the kind of situation that arose from last summer's election."
As Mr. Machimura's and Mr. Fukuda's comments and the governing parties' actions show, the LDP and the Komeito haven't made their peace with the conditions of Japan's evolving democracy.
Yes, Mr. Machimura, chief cabinet secretary of the LDP-led coalition government and titular head of the LDP's largest faction, is questioning the democratic bona fides of the DPJ.
How does one even begin describing how inappropriate it is for Mr. Machimura to comment upon the lack of democracy in the DPJ? One could start with last September's LDP presidential election and go from there, but I'm not going to do that, because since when did political parties have to make internal decisions democratically?
No, Mr. Machimura's comments are particularly galling because of the current government's attitudes about democracy in the political system at large. In the same press conference, Mr. Machimura noted that the LDP and Komeito are considering revising the law governing the Bank of Japan, enabling HR decisions on the Bank's leaders take precedence.
On Wednesday, the LDP-Komeito "investigatory committee concerning the way joint personnel decisions ought to be" held its first meeting to look into changing the BOJ law so that the bank's succession is never again challenged by the HC.
This is typical of how the LDP has viewed DPJ control of the HC. If the DPJ can't be made to shut up and do what the government tells it to do, then it and the HC should be circumvented and ignored. If the DPJ uses the powers accorded to the HC, then remove those powers bit by bit, all while claiming to be acting in the name of the national interest, to be putting country before party, to be desirous of compromise.
I hope the DPJ loudly opposes this move, not because of its immediate significance but because of its symbolic importance. The DPJ's control of the HC is an important moment for Japanese democracy, certainly more important than the question of whether Mr. Shirakawa or Mr. Muto was named governor of the BOJ.
Democracy is a process by which those out of power can keep those in power honest and accountable. It may not always result in good policymaking, but when it works properly it enables the outs to challenge the sagacity, the morality, and the competence of the government over the course of making and executing policy.
With the DPJ in control of the HC, an opposition party is finally in a position to question the government and hold up policy when it feels that the government is lacking on one or all of the above-mentioned counts.
Ozawa Ichiro replied in this manner to Fukuda Yasuo, who criticized the DPJ for "misusing its power" (as if the LDP is the arbiter for the proper use of power). He said, "The government has a majority in only one of two houses. The government has not reflected sufficiently on the kind of situation that arose from last summer's election."
As Mr. Machimura's and Mr. Fukuda's comments and the governing parties' actions show, the LDP and the Komeito haven't made their peace with the conditions of Japan's evolving democracy.
All's well that ends well; or, much ado about nothing?
As expected, the DPJ-led House of Councillors approved the nomination of Shirakawa Masaaki, the acting governor of the Bank of Japan, to serve as the full-fledged governor, thus ending Japan's three-week nightmare with only an acting governor at the helm of the BOJ. Mr. Shirakawa will make his debut on the international stage later this week at the meeting of G7 finance ministers and central bankers in Washington Friday.
Also as expected, the HC rejected the nomination of Watanabe Hiroshi, former administrative vice minister of finance and professor at Hitotsubashi University, to serve as a deputy governor.
Not surprisingly, the government responded to the DPJ's rejection of Mr. Watanabe by complaining about the DPJ's prioritizing politics over the public interest. As Ibuki Bunmei, the LDP secretary-general, said, "One can think only that this decision prioritizes party interests at the expense of national interests."
In stating the DPJ's reasons for opposing Mr. Watanabe, Hatoyama Yukio, DPJ secretary-general, said (somewhat pathetically, as noted by Jun Okumura), "It is President Ozawa's strong desire to not accept amakudari."
As Okumura writes, Mr. Ozawa actually outmaneuvered his DPJ rivals on this vote. Many of the hardline anti-Muto DPJ members were willing to support Mr. Watanabe's nomination, but Mr. Ozawa nixed that idea on the same grounds that his rivals opposed Mr. Muto (thereby forcing Mr. Ozawa to take a harder line on the BOJ succession than he was prepared to take initially). In the end, only three DPJ HC members voted in favor of Mr. Watanabe. It is unclear how the DPJ can punish the three, given its slim hold on the HC.
It is worth noting that the BOJ's monetary policy committee decided to leave interest rates unchanged in light of worsening economic conditions at home and abroad. For all the alarm that greeted the non-vacancy vacancy at the BOJ, the international economic "narrative" has been considerably less important than the domestic politics narrative.
This fight was about each party's trying to position itself in advance of the next general election and to a lesser extent about the future of Japanese governance. Hence the LDP has to this day used this fight to emphasize the DPJ's lack of concern for the national interest. Hence to this day the DPJ has emphasized that it is standing against amakudari government and the pervasive influence of the Ministry of Finance.
I think that the DPJ comes out looking better over the long term — and that is a good thing for Japanese democracy. The DPJ was able to say no to the government (and the MOF) and make it stick. The DPJ got exactly what it demanded. The new BOJ governor is a thirty-year veteran of the BOJ and he is the third consecutive BOJ OB to be named governor. The DPJ's rejection of all MOF OBs may now have been taken to an irrational extreme by Mr. Ozawa's response to intra-DPJ opposition — as even his opponents recognize — but it's preferable to rolling over and accepting whoever the government sends over to the Diet.
It's unlikely that the LDP will change its ways and become more accommodating of the DPJ after this battle, but the DPJ should take every opportunity to remind the government that there are two houses in the Diet, one of them is controlled by the opposition, and the government can't govern solely by Articles 59-61. The DPJ should continue doing what an opposition party, especially an opposition party with some power, should do: question, cajole, expose, and undermine the government at every turn. That's democracy. It should, of course, connect its actions to a broader message, but it should not feel compelled to govern. The upside of controlling the upper house is that it is unreasonable to expect the DPJ to act like a governing party. The DPJ's access to the bureaucracy is still less than the LDP's, so it is at a disadvantage in terms of policy formulation. The government's budget took precedence due to Article 60. The HC has no way around HR approval for its approved bills. Control of the weaker chamber by an opposition party is good for little more than harrying the government and forcing it to change its ways to accommodate the opposition.
I suspect that media's refrain that the public will vote against the DPJ if it is too obstructionism is vastly overblown. The LDP's failures — like the still-vanished pensions, for example — will be more than enough to dampen whatever concerns voters have about the DPJ's doing what an opposition party should be doing.
Also as expected, the HC rejected the nomination of Watanabe Hiroshi, former administrative vice minister of finance and professor at Hitotsubashi University, to serve as a deputy governor.
Not surprisingly, the government responded to the DPJ's rejection of Mr. Watanabe by complaining about the DPJ's prioritizing politics over the public interest. As Ibuki Bunmei, the LDP secretary-general, said, "One can think only that this decision prioritizes party interests at the expense of national interests."
In stating the DPJ's reasons for opposing Mr. Watanabe, Hatoyama Yukio, DPJ secretary-general, said (somewhat pathetically, as noted by Jun Okumura), "It is President Ozawa's strong desire to not accept amakudari."
As Okumura writes, Mr. Ozawa actually outmaneuvered his DPJ rivals on this vote. Many of the hardline anti-Muto DPJ members were willing to support Mr. Watanabe's nomination, but Mr. Ozawa nixed that idea on the same grounds that his rivals opposed Mr. Muto (thereby forcing Mr. Ozawa to take a harder line on the BOJ succession than he was prepared to take initially). In the end, only three DPJ HC members voted in favor of Mr. Watanabe. It is unclear how the DPJ can punish the three, given its slim hold on the HC.
It is worth noting that the BOJ's monetary policy committee decided to leave interest rates unchanged in light of worsening economic conditions at home and abroad. For all the alarm that greeted the non-vacancy vacancy at the BOJ, the international economic "narrative" has been considerably less important than the domestic politics narrative.
This fight was about each party's trying to position itself in advance of the next general election and to a lesser extent about the future of Japanese governance. Hence the LDP has to this day used this fight to emphasize the DPJ's lack of concern for the national interest. Hence to this day the DPJ has emphasized that it is standing against amakudari government and the pervasive influence of the Ministry of Finance.
I think that the DPJ comes out looking better over the long term — and that is a good thing for Japanese democracy. The DPJ was able to say no to the government (and the MOF) and make it stick. The DPJ got exactly what it demanded. The new BOJ governor is a thirty-year veteran of the BOJ and he is the third consecutive BOJ OB to be named governor. The DPJ's rejection of all MOF OBs may now have been taken to an irrational extreme by Mr. Ozawa's response to intra-DPJ opposition — as even his opponents recognize — but it's preferable to rolling over and accepting whoever the government sends over to the Diet.
It's unlikely that the LDP will change its ways and become more accommodating of the DPJ after this battle, but the DPJ should take every opportunity to remind the government that there are two houses in the Diet, one of them is controlled by the opposition, and the government can't govern solely by Articles 59-61. The DPJ should continue doing what an opposition party, especially an opposition party with some power, should do: question, cajole, expose, and undermine the government at every turn. That's democracy. It should, of course, connect its actions to a broader message, but it should not feel compelled to govern. The upside of controlling the upper house is that it is unreasonable to expect the DPJ to act like a governing party. The DPJ's access to the bureaucracy is still less than the LDP's, so it is at a disadvantage in terms of policy formulation. The government's budget took precedence due to Article 60. The HC has no way around HR approval for its approved bills. Control of the weaker chamber by an opposition party is good for little more than harrying the government and forcing it to change its ways to accommodate the opposition.
I suspect that media's refrain that the public will vote against the DPJ if it is too obstructionism is vastly overblown. The LDP's failures — like the still-vanished pensions, for example — will be more than enough to dampen whatever concerns voters have about the DPJ's doing what an opposition party should be doing.
Tuesday, April 8, 2008
Observing Japan on CNBC Asia
I will be appearing on CNBC Asia's "Asia Squawk Box" to discuss the BOJ succession at around 8:40am Japan time Thursday.
It is my understanding that American viewers can watch it on CNBC World at approximately 7:40pm EDT.
It is my understanding that American viewers can watch it on CNBC World at approximately 7:40pm EDT.
Tuesday, March 18, 2008
Without a clue
LDP proposes, DPJ disposes — again.
As MTC points out, the LDP did the exact same thing in introducing the nomination of Tanami Koji as it did with the nomination of Muto Toshiro: it failed to consult with the DPJ beforehand.
Indeed, showing that it has learned absolutely nothing and suggesting that the government is in fact not above playing politics, it submitted, in the words of Hatoyama Yukio, DPJ secretary-general, a man with the "same career history as Mr. Muto."
Little wonder that the DPJ has rejected this latest, feeble effort to avoid a vacancy in the leadership of the BOJ.
While the DPJ has once again stated that the reason for the rejection is fears about the independence of the BOJ from the Ministry of Finance, this fight is not about central bank independence. It is about the LDP's persistent inability to come to terms with the idea that the Diet is divided and that it needs to consult with the DPJ beforehand, especially in cases like this in which it has no recourse to the Article 59 override used in the MSDF refueling mission case.
Heading into the midst of the worst economic conditions since World War II without a central banker may be harrowing, but maybe it will be the only way the government will learn that treating the opposition with condescension doesn't work when the opposition has a major stake in the policymaking process. For all the complaints about DPJ intransigence, the government bears much of the blame for a failure to find a way to compete short of mutually assured destruction or cooperate short of a grand coalition.
As MTC points out, the LDP did the exact same thing in introducing the nomination of Tanami Koji as it did with the nomination of Muto Toshiro: it failed to consult with the DPJ beforehand.
Indeed, showing that it has learned absolutely nothing and suggesting that the government is in fact not above playing politics, it submitted, in the words of Hatoyama Yukio, DPJ secretary-general, a man with the "same career history as Mr. Muto."
Little wonder that the DPJ has rejected this latest, feeble effort to avoid a vacancy in the leadership of the BOJ.
While the DPJ has once again stated that the reason for the rejection is fears about the independence of the BOJ from the Ministry of Finance, this fight is not about central bank independence. It is about the LDP's persistent inability to come to terms with the idea that the Diet is divided and that it needs to consult with the DPJ beforehand, especially in cases like this in which it has no recourse to the Article 59 override used in the MSDF refueling mission case.
Heading into the midst of the worst economic conditions since World War II without a central banker may be harrowing, but maybe it will be the only way the government will learn that treating the opposition with condescension doesn't work when the opposition has a major stake in the policymaking process. For all the complaints about DPJ intransigence, the government bears much of the blame for a failure to find a way to compete short of mutually assured destruction or cooperate short of a grand coalition.
Sunday, March 16, 2008
The BOJ battle's winners and losers
The big news of the day is, of course, the government's decision to submit a new candidate for the BOJ governorship in place of Muto Toshiro. It is still unclear who the government will submit in his place — the LDP is reportedly sounding out the plausibility of Mr. Fukui's staying in office, although the DPJ has nixed it. But a compromise is likely to emerge any day now.
So who won, who lost?
Obviously the biggest loser is Muto Toshiro, who was rejected for the scantiest of reasons, guilt by association with the Ministry of Finance. Then again, with the Bear Stearns blowout and its likely ramifications, maybe he's the biggest winner of all, given that he won't have to the helm of the BOJ in the midst of a rapidly worsening global financial crisis.
Did the government and the LDP win or lose? Politically, the LDP lost, simply because it conceded. But by conceding, the government can spin its concession as an illustration of its willingness to compromise with the opposition and its desire to put the national interest before political opportunism.
As for the DPJ, in simple political terms, the DPJ won. It forced the government to withdraw Mr. Muto, and showed that it will not be ignored by the LDP, especially on appointments.
But it is necessary to look at the winners and losers within the DPJ. This is not a victory for Mr. Ozawa, who found as the BOJ fight intensified that his hands were tied by hardline Muto opponents who are also opponents to Mr. Ozawa's leadership. The anti-Ozawa group will likely emerge from this fight emboldened, more confident in its ability to pressure Mr. Ozawa to bend to their wishes — and more prepared to unite behind a candidate to oppose Mr. Ozawa in the September leadership election.
So who won, who lost?
Obviously the biggest loser is Muto Toshiro, who was rejected for the scantiest of reasons, guilt by association with the Ministry of Finance. Then again, with the Bear Stearns blowout and its likely ramifications, maybe he's the biggest winner of all, given that he won't have to the helm of the BOJ in the midst of a rapidly worsening global financial crisis.
Did the government and the LDP win or lose? Politically, the LDP lost, simply because it conceded. But by conceding, the government can spin its concession as an illustration of its willingness to compromise with the opposition and its desire to put the national interest before political opportunism.
As for the DPJ, in simple political terms, the DPJ won. It forced the government to withdraw Mr. Muto, and showed that it will not be ignored by the LDP, especially on appointments.
But it is necessary to look at the winners and losers within the DPJ. This is not a victory for Mr. Ozawa, who found as the BOJ fight intensified that his hands were tied by hardline Muto opponents who are also opponents to Mr. Ozawa's leadership. The anti-Ozawa group will likely emerge from this fight emboldened, more confident in its ability to pressure Mr. Ozawa to bend to their wishes — and more prepared to unite behind a candidate to oppose Mr. Ozawa in the September leadership election.
Thursday, March 13, 2008
Signs of compromise?
With the end of Fukui Toshihiko's term as BOJ president rapidly approaching, there are signs that the LDP and the DPJ might be able to come to terms on the nomination of his successor.
Messrs. Oshima and Yamaoka, Diet strategists for the LDP and DPJ respectively, met once more on Thursday and agreed that a vacancy at the BOJ is undesirable. The two reportedly discussed an idea, emerging from within the LDP, to revise the BOJ law to allow for a temporary extension of the BOJ president's term. There is also the possibility that Shirakawa Masaaki, a Kyoto university professor already confirmed by both houses as vice president, could serve as acting president until the parties agree on a BOJ president.
In the meantime, the LDP has announced that it will wait until Monday to submit Mr. Muto's nomination once again, giving the parties time to pursue a compromise while ensuring that the BOJ presidency will not be vacant. Sankei suggests that there are signs that the LDP might be willing to reconsider its support for Mr. Muto.
On the gasoline tax front, Mr. Fukuda alluded to the possibility of a compromise in deliberations at the HC Budget Committee Thursday, although he provided to details on what a compromise might entail. Ota Akihiro, Komeito head, suggested that the compromise could entail shortening and trimming the 10-year, 59 trillion yen road-construction plan, directing more gasoline tax revenue to the general fund, and putting a shorter time limit on the temporary tax. Koishi Azuma, the head of the DPJ group in the HC, dismissed Mr. Ota's suggestions off hand.
Compromise on this issue has proved elusive even among the LDP's and DPJ's young reformers, who agree on so much else. At a debate on Thursday, each party's Young Turks repeated the party line: LDP members emphasized the importance of road construction for rural areas, DPJ members emphasized the importance of redirecting road construction funds into areas that have even more importance for the lives of Japanese citizens. The DPJ reasons — not inappropriately, I think — that it stands to gain from letting the gasoline tax lapse, at least for the month until the HR can automatically pass it again. Local governments will be unhappy with the DPJ, of course, but then with so many local governments in LDP hands, should the DPJ be bothered by their criticism? What matters is how voters will respond, and I find it hard to believe that they will be too irate about a tax break.
Koizumi Junichiro has used the stalemate to continue raising his political profile. The former prime minister, speaking in Hamamatsu on Thursday, appealed to the leaders of both the LDP and the DPJ to compromise for the good of the nation. Will Koizumi power be enough to break the deadlock? I'm skeptical.
Messrs. Oshima and Yamaoka, Diet strategists for the LDP and DPJ respectively, met once more on Thursday and agreed that a vacancy at the BOJ is undesirable. The two reportedly discussed an idea, emerging from within the LDP, to revise the BOJ law to allow for a temporary extension of the BOJ president's term. There is also the possibility that Shirakawa Masaaki, a Kyoto university professor already confirmed by both houses as vice president, could serve as acting president until the parties agree on a BOJ president.
In the meantime, the LDP has announced that it will wait until Monday to submit Mr. Muto's nomination once again, giving the parties time to pursue a compromise while ensuring that the BOJ presidency will not be vacant. Sankei suggests that there are signs that the LDP might be willing to reconsider its support for Mr. Muto.
On the gasoline tax front, Mr. Fukuda alluded to the possibility of a compromise in deliberations at the HC Budget Committee Thursday, although he provided to details on what a compromise might entail. Ota Akihiro, Komeito head, suggested that the compromise could entail shortening and trimming the 10-year, 59 trillion yen road-construction plan, directing more gasoline tax revenue to the general fund, and putting a shorter time limit on the temporary tax. Koishi Azuma, the head of the DPJ group in the HC, dismissed Mr. Ota's suggestions off hand.
Compromise on this issue has proved elusive even among the LDP's and DPJ's young reformers, who agree on so much else. At a debate on Thursday, each party's Young Turks repeated the party line: LDP members emphasized the importance of road construction for rural areas, DPJ members emphasized the importance of redirecting road construction funds into areas that have even more importance for the lives of Japanese citizens. The DPJ reasons — not inappropriately, I think — that it stands to gain from letting the gasoline tax lapse, at least for the month until the HR can automatically pass it again. Local governments will be unhappy with the DPJ, of course, but then with so many local governments in LDP hands, should the DPJ be bothered by their criticism? What matters is how voters will respond, and I find it hard to believe that they will be too irate about a tax break.
Koizumi Junichiro has used the stalemate to continue raising his political profile. The former prime minister, speaking in Hamamatsu on Thursday, appealed to the leaders of both the LDP and the DPJ to compromise for the good of the nation. Will Koizumi power be enough to break the deadlock? I'm skeptical.
Wednesday, March 12, 2008
Bank chaos
The fight between the LDP-Komeito governing coalition and the DPJ over the leadership of the Bank of Japan shows no sign of abating.
On Wednesday, of course, the DPJ-led House of Councillors formally rejected the government's nomination of Muto Toshiro to be the new president of the BOJ. The government has resubmitted Mr. Muto's nomination in response. In his daily press conference Wednesday, Chief Cabinet Secretary Machimura Nobutaka professed an inability to understand the DPJ's reasoning and once again highlighted the urgency of a smooth transition to a new BOJ president given prevailing financial conditions.
I must agree with MTC: the DPJ does not bear the blame for this "crisis" alone. For all of Mr. Fukuda's willingness to cooperate with the opposition, his party and his government have failed to come to terms with new masters of the Upper House. They have refused to accept that they actually have to consult with the DPJ, instead of presenting them with proposals as faits accompli (as they did in the case of Mr. Muto). Not surprisingly, Kitagawa Kazuo, Komeito secretary-general, used this occasion to complain about the constitutional defect of the HC's role in personnel appointments, illustrating the disdain with which the government still views the opposition's control of the HC.
If the government is so concerned about a vacancy at the bank, it should have been both (a) making the case for Mr. Muto persistently and loudly starting months ago and (b) exploring alternatives with the DPJ. The LDP is always talking about urgent national problems and yet now, when faced with one, it seems that the government has no plan B. It's Muto or nothing. Is there really only one man qualified to serve as BOJ president? If so, Japan must be in even worse shape than I thought.
So the HR will pass the Muto nomination again this afternoon, daring the HC to once again reject it. If it does, will the government nominate Mr. Muto a third time? And will the DPJ suffer political consequences as a result of holding fast in its opposition to Mr. Muto?
On Wednesday, of course, the DPJ-led House of Councillors formally rejected the government's nomination of Muto Toshiro to be the new president of the BOJ. The government has resubmitted Mr. Muto's nomination in response. In his daily press conference Wednesday, Chief Cabinet Secretary Machimura Nobutaka professed an inability to understand the DPJ's reasoning and once again highlighted the urgency of a smooth transition to a new BOJ president given prevailing financial conditions.
I must agree with MTC: the DPJ does not bear the blame for this "crisis" alone. For all of Mr. Fukuda's willingness to cooperate with the opposition, his party and his government have failed to come to terms with new masters of the Upper House. They have refused to accept that they actually have to consult with the DPJ, instead of presenting them with proposals as faits accompli (as they did in the case of Mr. Muto). Not surprisingly, Kitagawa Kazuo, Komeito secretary-general, used this occasion to complain about the constitutional defect of the HC's role in personnel appointments, illustrating the disdain with which the government still views the opposition's control of the HC.
If the government is so concerned about a vacancy at the bank, it should have been both (a) making the case for Mr. Muto persistently and loudly starting months ago and (b) exploring alternatives with the DPJ. The LDP is always talking about urgent national problems and yet now, when faced with one, it seems that the government has no plan B. It's Muto or nothing. Is there really only one man qualified to serve as BOJ president? If so, Japan must be in even worse shape than I thought.
So the HR will pass the Muto nomination again this afternoon, daring the HC to once again reject it. If it does, will the government nominate Mr. Muto a third time? And will the DPJ suffer political consequences as a result of holding fast in its opposition to Mr. Muto?
Sunday, March 9, 2008
The looming empty chair "crisis"
Following the government's formal nomination of Muto Toshiro for the post of BOJ president on Friday, the LDP launched a war of words over the weekend to paint the DPJ as irresponsible and pressure it to accept Mr. Muto to prevent a vacancy at the BOJ.
On Saturday, Tanigaki Sadakazu, LDP policy chief and former finance minister, criticized the DPJ's argument that a former MOF bureaucrat is unfit for the BOJ presidency by stating that there are many examples of European central bank presidents who came out of finance ministries.
Ibuki Bunmei, LDP secretary-general, took a different approach on Saturday. Speaking in Sapporo, he trotted out the well-worn line cautioning the DPJ about "misusing" its power: "The DPJ obtained the power of the majority in last summer's Upper House election. It is now being tested whether it will be an 'upstart in power' or whether it will use its power correctly on behalf of the nation. We hope that from the start of the week they will not abuse their power and will solemnly choose to exercise good sense."
Mr. Ibuki also appeared on NHK on Sunday to declare that Mr. Fukuda has rejected the DPJ's offer of face-to-face talks in exchange for the government's nominating another candidate in place of Mr. Muto.
Ota Akihiro, head of Komeito, has also criticized the DPJ for its inflexibility.
The DPJ has responded blow for blow. On Saturday, Hatoyama Yukio, the DPJ secretary-general, criticized Mr. Muto's appointment as an "amakudari appointment," and made the offer that was subsequently rejected by Mr. Bunmei. Kan Naoto, the DPJ's acting president, emphasized on NHK Sunday that the DPJ's position is unchanged — there will be no compromise on Mr. Muto.
It is possible to overstate the importance of a vacancy at the Bank of Japan. Both politicians and commentators have assumed that because of the global financial situation, a vacancy at the Bank of Japan would be a disaster. I don't quite buy this argument. As Wolfgang Munchau argues in the FT, "For as long as this financial crisis persists, interest rates will be determined by toxic market conditions, not central bankers. Among the various channels through which monetary policy affects the real economy, the credit channel is one of the most important. If real-world interest rates are determined independent of a central bank’s monetary policy, the effect of monetary policy on economic growth is correspondingly reduced."
Of course, Munchau does not argue that central banks are totally irrelevant — nor do I — but the practical impact of a failure to nominate a new BOJ chief by March 19 is not particularly great. Even the symbolic impact of a BOJ vacancy on the markets may be overstated: there are other, more enduring factors determining the flow of money in and out of Japan at the moment.
As the weekend's rhetoric makes clear, this battle is a preview of a general election campaign. Both the LDP and the DPJ have imposed their "narratives" on this issue. Can you really trust the DPJ with the government, the LDP asks. Look at the LDP, the DPJ says. In bed with the bureaucrats. Not much room for a compromise here, particularly because each side has escalated, much like in the fight over the MSDF refueling mission. In particular, there is no easy way for the DPJ leadership to back down, because Mr. Ozawa's fiercest opponents within the DPJ are also the fiercest opponents of the Muto nomination.
On Saturday, Tanigaki Sadakazu, LDP policy chief and former finance minister, criticized the DPJ's argument that a former MOF bureaucrat is unfit for the BOJ presidency by stating that there are many examples of European central bank presidents who came out of finance ministries.
Ibuki Bunmei, LDP secretary-general, took a different approach on Saturday. Speaking in Sapporo, he trotted out the well-worn line cautioning the DPJ about "misusing" its power: "The DPJ obtained the power of the majority in last summer's Upper House election. It is now being tested whether it will be an 'upstart in power' or whether it will use its power correctly on behalf of the nation. We hope that from the start of the week they will not abuse their power and will solemnly choose to exercise good sense."
Mr. Ibuki also appeared on NHK on Sunday to declare that Mr. Fukuda has rejected the DPJ's offer of face-to-face talks in exchange for the government's nominating another candidate in place of Mr. Muto.
Ota Akihiro, head of Komeito, has also criticized the DPJ for its inflexibility.
The DPJ has responded blow for blow. On Saturday, Hatoyama Yukio, the DPJ secretary-general, criticized Mr. Muto's appointment as an "amakudari appointment," and made the offer that was subsequently rejected by Mr. Bunmei. Kan Naoto, the DPJ's acting president, emphasized on NHK Sunday that the DPJ's position is unchanged — there will be no compromise on Mr. Muto.
It is possible to overstate the importance of a vacancy at the Bank of Japan. Both politicians and commentators have assumed that because of the global financial situation, a vacancy at the Bank of Japan would be a disaster. I don't quite buy this argument. As Wolfgang Munchau argues in the FT, "For as long as this financial crisis persists, interest rates will be determined by toxic market conditions, not central bankers. Among the various channels through which monetary policy affects the real economy, the credit channel is one of the most important. If real-world interest rates are determined independent of a central bank’s monetary policy, the effect of monetary policy on economic growth is correspondingly reduced."
Of course, Munchau does not argue that central banks are totally irrelevant — nor do I — but the practical impact of a failure to nominate a new BOJ chief by March 19 is not particularly great. Even the symbolic impact of a BOJ vacancy on the markets may be overstated: there are other, more enduring factors determining the flow of money in and out of Japan at the moment.
As the weekend's rhetoric makes clear, this battle is a preview of a general election campaign. Both the LDP and the DPJ have imposed their "narratives" on this issue. Can you really trust the DPJ with the government, the LDP asks. Look at the LDP, the DPJ says. In bed with the bureaucrats. Not much room for a compromise here, particularly because each side has escalated, much like in the fight over the MSDF refueling mission. In particular, there is no easy way for the DPJ leadership to back down, because Mr. Ozawa's fiercest opponents within the DPJ are also the fiercest opponents of the Muto nomination.
Friday, March 7, 2008
The LDP acts to shift the blame
In a transparent attempt to shift the blame for the Bank of Japan "crisis" from the government to the DPJ, today the Fukuda Cabinet officially submitted its nomination of Muto Toshiro to be the next BOJ president. If a Mr. Muto or another candidate is not confirmed within the next twelve days, the post will be vacant.
Without the agreement of the DPJ-controlled HC, any nomination is a non-starter.
The Fukuda government seems increasingly desperate to see this battle concluded in its favor, and to that end is pursuing two strategies simultaneously. One strategy calls for Mr. Fukuda to discuss the issue with Mr. Ozawa in the hopes of reaching an agreement. Yamaoka Kenji, Ozawa loyalist and DPJ Diet strategist, nixed this idea completely on behalf of Mr. Ozawa, suggesting that the DPJ will consider Mr. Muto's nomination itself and then answer the government. The other strategy is, of course, what the government did today: nominating Mr. Muto in an attempt to place the burden for a vacancy on the DPJ.
According to Mainichi, the DPJ recognizes that the government's move has put it in a tough position, as the party neither wants to bear the blame for a vacancy nor roll over for the government. We may be reaching the point at which the DPJ's latest wave of momentum dissipates — a point made by Jun Okumura here. Although the DPJ has indicated that it will not consent to Mr. Muto's nomination, the possibility of an about-face remains.
It will ultimately depend on Mr. Ozawa's read of the political situation. If Mr. Ozawa reckons that the domestic political consequences of opposing the government's nomination are slight, the DPJ will without question say "damn the markets" and reject the nomination. If he concludes that obstructing Mr. Muto's elevation to the BOJ presidency will play into the LDP's efforts to construct a general election narrative that paints the DPJ as little more than a noisy rabble unfit for government, the DPJ may step back from the brink of obstruction, make some show of having vetted Mr. Muto and declared him not tainted by his MOF past, and move on to the next issue. Doing so would entail not just a defeat for the DPJ, but also move the DPJ closer to an open fight over the leadership of the party, as anti-Ozawa DPJ members — some of whom have been leading critics of Mr. Muto's nomination on the basis of his MOF past and concerns for BOJ independence — may react by taking their desire to see Mr. Ozawa unseated in the September party leadership election out into the open.
This situation is typical of the DPJ's strategy since winning the HC election. Faced with what appears to be an opportunity to undermine the government, the DPJ throws all of its energy into exploiting it, only to overextend itself and leave itself vulnerable to public backlash and charges of fecklessness from the government.
A large segment of the public may be ready to vote against the LDP in a general election, but I reckon an even greater segment of the public wants the government and the Diet to work on their behalf.
Regardless of the resolution of this "crisis" — I use the quotation marks because aside from a slight shudder in the market, the world will not end if there is a vacancy at the BOJ — one thing is certain: it will prompt a new wave of articles in the foreign press lamenting the consequences of Japan's supposedly byzantine politics.
Without the agreement of the DPJ-controlled HC, any nomination is a non-starter.
The Fukuda government seems increasingly desperate to see this battle concluded in its favor, and to that end is pursuing two strategies simultaneously. One strategy calls for Mr. Fukuda to discuss the issue with Mr. Ozawa in the hopes of reaching an agreement. Yamaoka Kenji, Ozawa loyalist and DPJ Diet strategist, nixed this idea completely on behalf of Mr. Ozawa, suggesting that the DPJ will consider Mr. Muto's nomination itself and then answer the government. The other strategy is, of course, what the government did today: nominating Mr. Muto in an attempt to place the burden for a vacancy on the DPJ.
According to Mainichi, the DPJ recognizes that the government's move has put it in a tough position, as the party neither wants to bear the blame for a vacancy nor roll over for the government. We may be reaching the point at which the DPJ's latest wave of momentum dissipates — a point made by Jun Okumura here. Although the DPJ has indicated that it will not consent to Mr. Muto's nomination, the possibility of an about-face remains.
It will ultimately depend on Mr. Ozawa's read of the political situation. If Mr. Ozawa reckons that the domestic political consequences of opposing the government's nomination are slight, the DPJ will without question say "damn the markets" and reject the nomination. If he concludes that obstructing Mr. Muto's elevation to the BOJ presidency will play into the LDP's efforts to construct a general election narrative that paints the DPJ as little more than a noisy rabble unfit for government, the DPJ may step back from the brink of obstruction, make some show of having vetted Mr. Muto and declared him not tainted by his MOF past, and move on to the next issue. Doing so would entail not just a defeat for the DPJ, but also move the DPJ closer to an open fight over the leadership of the party, as anti-Ozawa DPJ members — some of whom have been leading critics of Mr. Muto's nomination on the basis of his MOF past and concerns for BOJ independence — may react by taking their desire to see Mr. Ozawa unseated in the September party leadership election out into the open.
This situation is typical of the DPJ's strategy since winning the HC election. Faced with what appears to be an opportunity to undermine the government, the DPJ throws all of its energy into exploiting it, only to overextend itself and leave itself vulnerable to public backlash and charges of fecklessness from the government.
A large segment of the public may be ready to vote against the LDP in a general election, but I reckon an even greater segment of the public wants the government and the Diet to work on their behalf.
Regardless of the resolution of this "crisis" — I use the quotation marks because aside from a slight shudder in the market, the world will not end if there is a vacancy at the BOJ — one thing is certain: it will prompt a new wave of articles in the foreign press lamenting the consequences of Japan's supposedly byzantine politics.
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