No.38 - Discuss Japan

Archives : No.38

Apr 2017

Economy, No.38  Apr. 12, 2017

Is U.S.-Japan Trade Friction Avoidable? Blaming Trade Partners for Deficits Is Pointless

The new U.S. administration inaugurated in January 2017 is moving to restrict international trade by pursuing protectionist trade policy. Upon taking office, President Donald Trump declared his intention for the United States to withdraw from the Trans-Pacific Partnership (TPP) agreement and renegotiate the North American Free Trade Agreement (NAFTA). Furthermore, media reports show that the administration is moving to raise tariffs to correct bilateral trade deficits with certain trade partners, as the new administration considers the phenomenon to be quite problematic. The intent behind the sequence of moves is to protect U.S. producers from their foreign competitors. Many warn that such protectionist tilt could plunge the world economy into chaos. In the first place, why does a country’s attempt to protect domestic producers from foreign competitors pose the risk of chaos? In this article, I would like to explain how protectionist trade policies could ... ... [Read more]

Economy, No.38
Apr. 12, 2017

Excessive Pessimism about the Shrinking Society

Since the collapse of the bubble economy in 1991, the Japanese economy has remained stagnant for an unprecedented length of time. Initially, economists from various countries regarded this long-term stagnation as economic deceleration that was happening only in Japan due in part to poor policy responses. However, the financial crisis triggered by the Lehman Brothers’ collapse in 2008 involving Europe and the United States and the slowdown in the economic growth of various countries have led to the rise of the so-called secular stagnation theory, which argues that long-term stagnation is not exclusively a problem of Japan, but a structural slowdown in growth of the overall advanced economies. Factors such as the falling birthrate and the aging population demographic change and dwindling investment opportunities are regarded as common factors. However, discussions in Japan are excessively pessimistic. This has created a vicious circle, in which ... ... [Read more]

Economy, No.38
Apr. 11, 2017

Evaluating the “Comprehensive Assessment of Monetary Policy”Continued Easing To Overshoot 2% Inflation ― Introducing Short-Term and Long-Term Interest Rate Control

< Key Points > Deflation has been eliminated through large-scale monetary easing There is increased confidence in the ability to hit 2% inflation with an extraordinary commitment The formation of optimum interest rates is being encouraged in light of financial circumstances At its Monetary Policy Meeting held last week, the Bank of Japan undertook a comprehensive assessment of the monetary easing policies it has pursued to date and in light of the results, introduced a new framework of “Quantitative and Qualitative Monetary Easing with Yield Curve Control.” Money Supply in Japan, United States and Europe Source: Cabinet Office, Bank of Japan, FRB, BEA, ECB, Eurostat Three years ago, the Bank of Japan set the “price stability target” at 2% in terms of the year-on-year rate of change in the consumer price index, and to achieve this, introduced a policy of “quantitative and qualitative monetary ... ... [Read more]

Economy, No.38
Apr. 11, 2017

Do expectations raise prices? Expectations Have Hardly Had Any Impact on Wages, The Key Factor  ― Deflation is not a monetary phenomenon

< Key Points > The postponement of the timing of achieving the price target indicates the failure of the “different dimension” of easing. Expectations are not taken into consideration when prices and wages are determined. It is not the quantity of money but oil prices that cause prices to change. The “different dimension” of monetary easing that started in April 2013 has failed to achieve its target: a core CPI (all items less fresh food) inflation rate of 2% in two years. The latest core CPI inflation rate was negative 0.4%. This rate is lower than the level towards the end of the term of office of the former BOJ Governor Shirakawa Masaaki. Finally, at the Monetary Policy Meeting held on 1 November 2016, the Bank of Japan postponed the timing for achieving the 2% price target from “during FY2017” to “around FY2018.” The ... ... [Read more]

Politics, No.38
Apr. 10, 2017

PKO Cooperation Act with Serious Flaws Finally Improved after a Quarter Century Issues Left for Kaketsuke-Keigo in UN Peacekeeping Operations

A task known in Japan as kaketsuke-keigo (coming to the aid of a geographically distant unit or personnel under attack) will be added to assignments for the Self-Defense Forces (SDF) unit to be sent to South Sudan in November 2016, at the earliest. Armed forces dispatched by emerging nations will perform the role of guarding the United Nations (UN) peacekeeping operations in the country. The SDF unit will be mobilized in a limited way. However, changing the procedural standard is necessary for the SDF unit to properly perform the newly assigned task of kaketsuke-keigo.   Located in the center of the African continent, South Sudan, which gained independence in 2011, is the youngest nation in the world. Japan is involved in the UN peacekeeping operations (PKOs) aimed at helping the country build and stabilize itself. In July 2016, a large-scale armed conflict broke out ... ... [Read more]

Politics, No.38
Apr. 10, 2017

Passing Down The Significance of President Obama’s Visit to The Future

I thought that it would be the last chance. In May 2016, then U.S. President Barack Obama visited Hiroshima. Because I was convinced that a visit to Hiroshima from the president of the United States would be a historic event and the chance for such a visit would be strong while President Obama was in office, we continued to work for several years to realize the presidential visit. When it was decided that the Summit would be held in Japan in the year that President Obama leaves office, I thought that it would be the last chance for him to visit Hiroshima. Looking back, the first step was taken when former U.S. Ambassador to Japan John Roos, who took office in 2009, participated in the Peace Memorial Ceremony on August 6, 2010. We had also been advised that it would be better if a ... ... [Read more]

Economy, No.38
Apr. 9, 2017

Evaluating the “Comprehensive Assessment of Monetary Policy” The Preoccupation with Rationalization of the New Framework ― Messaging Lacks Introspection

< Key Points > There is a limit to demand brought-forward through monetary easing Fixing long-term interest rates is indivisible from Japanese government bond (JGB) management policy Improve messaging when trying to manage market expectations Quantitative and qualitative monetary easing (“QQE”) was a “decisive battle of brief duration” designed to achieve the two-percent inflation target within two years. But now three-and-a-half years after its introduction, since we still have a negative inflation rate and there is no reliable outlook for when that target will be achieved, the question of how to reorganize into a protracted battle has attracted considerable interest. *** *** In the “comprehensive assessment” it announced on September 21, the Bank of Japan asserted that with the natural rate of interest following a downward trend, it would need toraise inflation expectations, and in doing so further lower real interest rates. In light of ... ... [Read more]

Culture, No.38
Apr. 3, 2017

Making Use of an Empty House in the Countryside: The Soja Art House Project

You have inherited a house in your home town from your parents. It’s been empty for a while, but it’s not easy to knock down a house so full of family memories. This is an issue faced by many Japanese people who once left their home town in the countryside to live in the city. A survey in 2013 recorded 8.2 million empty houses across Japan. Since there are a 60.63 million houses in Japan, empty houses account for 13.5% of the total. The low birthrate is one factor, but there are many old houses across Japan which are empty, but which the owners are reluctant to demolish. Ikenoue Shinpei, who lives in Isehara City in Kanagawa Prefecture, is the owner of such a house. It was originally built in the same country and reconstructed in Soja City, Okayama Prefecture, by his great-grandfather during ... ... [Read more]