Japan from the inside out

Wrong question, Mr. Noda

Posted by ampontan on Thursday, November 10, 2011

FOR those who suspect that I exaggerate about Financial Ministry manipulation of Japanese politicians and the unsuitability of those Japanese politicians for either higher office or important government posts, here’s an anecdote from the 7 October edition of the weekly Shukan Post.

After the Tohoku disaster this March, the Kan government discussed issuing more than JPY 10 trillion in bonds as a funding source for reconstruction and having the Bank of Japan accept the tranche. This was unacceptable to the Finance Ministry bureaucrats, who were intent on using the disaster as an excuse to raise taxes. They conveyed their position to then-Finance Minister Noda Yoshihiko, now the prime minister.

Mr. Noda declared at a news conference that it was against the law for the Bank of Japan to purchase Japanese government bonds, so he wouldn’t even consider it.

During Question Time in the lower house Financial Affairs Committee on 25 March, he was asked the following by LDP member Yamamoto Kozo, a former Finance Ministry official:

“Did you know that the Bank of Japan directly purchases a substantial amount of government bonds every year?”

According to the record, Mr. Noda replied:

“Directly? Uh, well…what the BOJ does is monetary policy, er…”

Asked again whether he knew that or not, the finance minister answered:

“No, I didn’t know that.”

Another LDP member then explained to Mr. Noda that while the law does prohibit BOJ purchases of government bonds, Article 5 of the law permits those purchases for specified reasons, within a specific monetary range, on the approval of the Diet. He also explained that the BOJ already purchases at least JPY 10 trillion worth of government debt issues every year, and this was well known by all government authorities involved with financial matters.

After the committee meeting, Mr. Noda complained to an aide, “Why didn’t they tell me about that?” He was referring to his tutors in the ministry.

More to the point is why Mr. Noda didn’t do his basic homework when the Finance Ministry’s puppeteering skills are so well known in Japanese political circles.

The DPJ government has had four finance ministers in the two years since they assumed power. The last three — Kan Naoto, Noda Yoshihiko, and Azumi Jun — knew less about economic and financial matters when they were appointed than my mailman. They were tutored by the Finance Ministry after they were given the job. (In Mr. Noda’s case, when he was appointed deputy finance minister in the Hatoyama Cabinet.)

The first was Fujii Hirohisa, who lasted all of three months at the post. He resigned, reportedly because he found it too difficult to keep up with the job at his age. There were also stories, however, of friction with Ozawa Ichiro (as well as a taste for liquor in the daytime).

Mr. Fujii was the exception, because he is an ex-Finance Ministry bureaucrat — from the Budget Bureau, no less, which is the locus of power in the ministry. He might have been one of the tutors for the other three. Indeed, it was reported that he told Mr. Noda that true political leadership meant listening to the experts in the Finance Ministry.

Unfortunately for the rest of us, Mr. Noda believed him.

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