I have been criticized as being a "Japan Basher" for my comments about the dysfunctional Japanese democracy. I'd like to point out that I criticize everything that I think is wrong and don't discriminate by nationality. I don't think Japan is the only country with problems. In fact, I think that many countries have similar problems with their democracy.
Some notes from Colin Powell's talk.
Colin Powell is turning the weapons inspection debate around and is saying that Iraq needs to account for the anthrax, the mobile labs, the delivery weapons and other weapons that the UN knows that it had. There are no tell-tale signs of disarmament. Iraq need to account for the weapons. The inspectors can't be expected to find the weapons. "Iraq must participate in disarmament process or be disarmed."
"We will not shrink from war if that is the only way to rid Iraq of its weapons of mass destruction."
"United States has no intention of invading North Korea... At the same time, we keep all of our options on the table."
Powell, is a great speaker and very convincing. He should be the President of the United States. He made me feel more supportive of US actions with his remarks about the thought process behind his decisions.
Comment from a fellow GLT: "Maybe Bush made Powell say he wouldn't run for President since he is so much more eloquent and much more likely to be successful in creating partnerships in Europe that he would be a threat to Bush and undermine his power." Interesting thought. That may be true. If that is true, maybe Powell will run for President once it becomes evident that Bush will not be able to win the next election.
Michael Porter was the moderator and I was the challenger for a 30 minute session with our Minister of Financial Services and Economy, Heizo Takenaka. I was allowed to ask one question to Takenaka-san. I told him about the conclusion of the two sessions from yesterday. The conclusion of the first session was that there was a basic lack of democracy and diversity causing many of the problems and creating a resistance to change. There was not multiple points of authority, only one. The LDP. There was an inability to criticize power without fear of retribution. Plans are easy, but execution is difficult. Execution is left to the bureaucracy which gets in the way and prevents execution. Media and the bureacracy were the problem according to the first session. The second session yesterday blamed the lack of political will. When Takenaka-san proposed a very aggressve plan to take care of non-performing loans last year, the press slammed him and mostly reported the position of the bank heads. The bureaucrats were not supportive and the LDP tried to crush it. The interesting thing was the a poll on the Monex site showed that 87% of individuals were supportive of Takenaka-san's plan but that was not reported by the press. (reported it on this blog) I asked Takenaka-san whether he thought it was an issue of political will or whether he felt that the bureaucracy, media and the LDP actively got in his way and whether this was a significant barrier to execution.
He said that Diet was in session and that this was a very sensitive time. He made a good point that the silent majority was supportive and that it was important to empower them. Having said that, he dodged my question, but the fact that he dodged the question was partially not to screw up the Diet process which is quite complicated and important. I think part of it was fear of retribution. I think his inability to respond was a response in itself.
Here are some notes...
Question: Japan lacks political will and requires BOJ and leadership
Answer: balance sheet problem requires balance sheet adjustment - NPL
We are in deflation - there are many reasons - demand shortage, demand supply gap is not that big - supply side problem may be big. China low wages... we can't stop that.
Deflation is fundamentally a monetary problem. Therefore monetary policy is important. Money supply is too low and we need to increase the money supply. We also have to pay special attention to nature of BOJ. BOJ is indepedent from the government so we are in discussion with them.
Question: BOJ would argue that the money supply need to get into the economy to do any good. Therefore the banking system needs to be fixed for that to happen. That's your job. What are you doing?
Answer: The amount of money being available by BOJ is growning, but the total money supply is low. The reason for the this difference is that the money intermediation process is broken in Japan. This is because of the NPL problem in banking sector. Now we have a very explicit plan to address the NPL. But, the total money supply is the responsibility of the BOJ.
Question: The government is in the position to influence the BOJ. Koizumi has the ability to choose the governor.
Answer: BOJ is independent from the government. The government and the BOJ should share common targets. Japan should be allowed to choose their own implementation tools. The BOJ established a new role three years ago and we are still in the process of developing the realtionship between the government and the BOJ.
Question: What inflation level target would be appropriate to deal with the deflationary problem.
Answer: The inflation target is not that important. The important point is to increase the money supply. BOJ may set a target. If the BOJ decides to increase money supply, then the target will be important.
Question: Yen is increasing when you are hoping that the exchange rate to stimulate the economy. Are you concerned.
Answer: I can't comment directly on the exchange rate. The rate should be set based on supply and demand. The impact of the exchange rate will be over 6 months later so I'm not worried about the short term impact.
Question: Is consumer demand a way to increase money supply.
Answer: Yes. BOJ can purchase assets and this will increase money supply. Banks say there is no need for lending. This is a good way for the BOJ to increase money supply.
I was chosen this year to be the moderator of the "talk show". I was VERY nervous. Takeuchi-san is by far the best at this sort of thing and I knew I would not be as good. Also, I don't know all of the people so it's hard for me to pick them out for questions. Anyway, I tried my best. I started out with a wrap up of the day's events and then went around and called an a variety of people to make comments. I asked Sadako Ogata, the former United Nations High Commissioner for Refugees, one of the most impressive people I know. She wrapped up with with a very strong comment about Japan's role in the world. I wish everyone in Japan could hear her speak. She allowed us to end on a tone that made me proud to be Japanese.
Overall, I think my speech was OK. I think my choice of speakers was weak. I didn't choose enough non-Japanese and I wasn't able to manage people who were talking too long. I don't know if they will ask me to do this again next year, but if they do, I'll make sure and study the attendee list and know the backgrounds of everyone in the room in advance.