Kidz Я the Cabinet
Posted by ampontan on Sunday, November 27, 2011
IGNORANCE of the law is no excuse, say the authorities, in their perpetual search for new handholds by which to seize us by the scruff of the neck and keep us docile and lowing.
If the authorities have it right, there’s no excuse for the presence in the Cabinet of Azumi Jun, the Boy Finance Minister who’s extended to three the DPJ string of finance ministers that know squat about finance and even less of the law. Then again, Kan Naoto and Noda Yoshihiko, numbers one and two in the sequence, used the position as a steppingstone to the premiership despite their comradeship in the blind mice brotherhood. There might be hope for Master Azumi yet. After all, his only job experience before becoming a national legislator was as an NHK newscaster, and he’s never held a major Cabinet post until now. Thus, his one marketable skill is the ability to read without stumbling over someone else’s script on camera or in public. What other qualification is there for serving as a politician these days?
It was Mr. Azumi’s turn to flunk the test during Question Time in the upper house of the Diet on the 15th. Kawakami Yoshihiro, a fellow traveler in the Democratic Party, was ragging on the Bank of Japan and their monetary policy due to the presence in that chamber of the bank’s Deputy Gov. Yamaguchi Hirohide. Pressing Mr. Yamaguchi on what he considered to be an insufficient money supply, Mr. Kawakami fumed, “The Bank of Japan is hindering the Democratic Party.”
Azumi the Lad quickly stepped up to their defense and explained:
Under the Bank of Japan Law, we cannot disregard (the objectives) of price stabilization and increasing the value of the currency. It is an important requirement to conduct monetary easing to the extent possible in that context.
It would seem that he is under the impression monetary easing is something central bankers are supposed to be in the habit of. He’s also confused about the provisions of the law regarding the Bank of Japan’s activities.
Article 1.1: The objectives of the Bank of Japan…are to issue banknotes and carry out currency and monetary adjustments.
Article 1.2: In addition to the provisions of the foregoing item, the Bank of Japan shall contribute to the maintenance of trust and order.
Article 2: When conducting currency and monetary adjustments, the Bank of Japan shall contribute to the sound development of the national currency through price stability.
There’s no mention anywhere in the law of “increasing the currency’s value”, so his answer raises the question of where he came up with that idea.
There’s only one possibility. His knowledge of fiscal and monetary matters before Mr. Noda thought he was just the man to be finance minister was no greater than the average convenience store clerk, and that means he requires tutoring by Finance Ministry bureaucrats. They’re only too glad to help. That allows them another handhold to seize fiscal policy by the scruff of the neck. Besides, how could he convincingly read his script without special instruction? (Kan Naoto made a point of getting up earlier than usual to make his 8:00 a.m. briefings.)
Thus, Mr. Azumi’s only source of information is his ministry minders. QED, they have convinced him a strong yen is a Good Thing. Japan’s major exporting companies are groaning from their yoga contortions to deal with the havoc the high yen has caused, but the Finance Ministry seems to think it’s copacetic. The limited monetary easing during the Koizumi administration was a factor in helping the economy recover, according to some observers, and the average rate then was 116 to the dollar. Yes, so much better for the nation at the mid-70 level, isn’t it?
But more to the point is that the two elements of the Azumi Definition of the BOJ role —- price stabilization and increasing the value of the yen — are incompatible. Under the purchasing power parity theory, if there is price stability in all the advanced industrialized countries with, for example, a 2% annual rate of increase, the currency would also stabilize and could not increase in value relative to the others.
While we’re on the topic of what Mr. Azumi doesn’t know, it was apparent from his response to an Eda Kenji question in the lower house on the 9th that his education hadn’t progressed to an explanation of credit default swaps yet.
That would be ever so helpful for a finance minister to understand. If any of the European sovereign debt falls, the American financial institutions that issued swaps against the debt —- you know, like Goldman Sachs — will be liable for gadzillions of dollars they don’t have, even after Mr. Obama bailed out his campaign financiers. That would put the U.S. financial system at risk of default.
The swaps are also important in Europe, too. Or at least they used to be.
But perhaps the biggest sin of the lot was effectively to render all credit default swaps (a form of insurance against default) on sovereign debt essentially worthless, or void, by making the Greek default “voluntary”.
This has made it impossible to hedge against eurozone sovereign debt purchases, and thereby destroyed the market. Worse, it’s made investors believe that the euro cannot be trusted, that it’ll repeatedly find ways of reneging on contract. That’s the point of no return. This is no longer a serious currency.
So, we’ve got the combination of people openly talking about the extinction of the Euro as a currency, other people openly talking about a global economic crisis worse than that of 2008, still others who think the collapse of the massive Chinese real estate bubble is underway, and Japan’s finances under the nominal stewardship of Azumi Jun.
Isn’t that just ducky?
An interesting theory was floated recently about all the pratfalls Japan’s “finance ministers” take on the Diet floor during Question Time. When Kan Naoto appeared before the Diet after his appointment as finance minister, it was obvious that knowledge of the multiplier effect was not part of his résumé. (Meanwhile, it was just at this time the English language media of the West was touting him as a “fiscal hawk”.)
Mr. Kan too was given daily instruction by the Finance Ministry bureaucrats. The story goes that he had trouble grasping the concept of the multiplier effect during his briefings. (That’s understandable; a lot of concepts can be slippery that early in morning if you’re nursing a hangover.) The LDP Diet member who asked the question that tripped Mr. Kan up is said to have close ties with ministry bureaucrats. Some people suspect that the ministry deliberately tipped off the questioner about the lacuna in Mr. Kan’s knowledge to make him look bad.
But why would they so blatantly humiliate a politician with whom they were working? The answer is that it was an object lesson to Kan Naoto in particular and all politicians in general. He had to have known the ministry deliberately handed a weapon to the political opposition to knife him in public. Unless he was forever after their humble and obedient servant, the ministry would find other ways to make life even more unpleasant for him…
Recall that the ministry has jurisdiction over the National Tax Agency. Was it coincidental that the tax problems of Hatoyama Yukio and Ozawa Ichiro came to light just two or three months after the DPJ formed a government in 2009 which promised to keep the bureaucrats from meddling in national governance? (Let’s assume for the moment they were serious about that promise, dodgy though the assumption may be.) Mr. Hatoyama had to pay the equivalent of $US six million in back taxes and penalties. The case against Ozawa the Real Estate Tycoon, who pulled the equivalent of roughly $US four million out of his safe at home in cash to give an aide so his political funds committee could buy some property, is still to be resolved.
And we can’t end without a mention of Kawakami Yoshihiro, yet another rare bird in the DPJ aviary. Did you notice from his question that he thinks the Bank of Japan is supposed to conduct itself as an arm of the Democratic Party government?
His background makes for entertaining reading. Originally an LDP lower house member, he was one of the MPs that Koizumi Jun’ichiro tossed from the party for opposing the Japan Post privatization. He later joined the opposition DPJ and won election to the upper house in 2007, two years later.
One of his pet causes is the integration of the residents of Chinese and Korean nationality into Japanese society. In fact, according to a 2010 interview with China’s Global Times newspaper, he favors the common administration (共同統治) of Japan with the Chinese and Korean permanent residents, who should be given full political rights. He also advocates closer ties to North Korea and thinks Mr. Koizumi’s two visits while prime minister should have resolved all the problems with that country. He’s been quoted as saying that it’s strange Japan doesn’t support (支援) North Korea.
Strange is in the eye of the beholder, it would seem. That a man with his background and incongruous combination of beliefs actually sits in the Diet, sponsored by the ruling party, is strange in itself.
Ben and Jun got them Young Boy Blues.