2007年10月23日 星期二

Japan's economy and the Koizumi myth

Japan's economy and the Koizumi myth

Kiichi Murashima, chief economist of Nikko Citigroup in Tokyo, has just returned from London. He did not have much fun. After several meetings with investors in both Japanese government bonds and equities, he concluded: “People are losing interest in Japan.”

Lack of enthusiasm stems partly from the fact that Japan's less-than-exciting growth remains dependent on now-more-uncertain external demand. But underlying the disappointment is a deeper concern that political paralysis resulting from last month's collapse of Shinzo Abe's administration will lead to policy seizure.

Superficially, such fears are understandable. Last month Yasuo Fukuda, a 71-year-old man in a grey suit, was hustled into office by a few faction bosses of the ruling Liberal Democratic party. The selection smacked of old-style Japan before Junichiro Koizumi, the last-but-one prime minister, subverted convention by appealing directly to public support

Worse for the worriers, Mr Fukuda, a consensus-style politician, assumes office at a time of apparent backlash against “Koizumi reforms”. In July the ruling party was punished in upper house elections by voters in poorer parts of Japan, for whom five years of recovery has had little tangible effect.

Mr Koizumi, prime minister from April 2001 to September 2006, convinced the electorate – and not a few foreign investors – that there could be “no growth without reform”. Since his period in office coincided with the longest recovery in years, people concluded it must have been the reform that did the trick. The corollary of this simplistic analysis is that if reforms stop now, so will growth.

There is a misunderstanding about the nature of structural reform and what role, if any, it played in Japan's recovery. At the best of times, “reform” is a sloppy word used to mean “good change”, a convenient sanctuary for politicians unwilling to concede that not every new law they instigate is beneficial. In Japan, where it has been conflated to mean both fiscal consolidation and deregulation, the term is less illuminating still.

What role did either cutting budgets or pushing deregulation under Mr Koizumi have in boosting growth? Almost none. When he took over during a banking crisis in 2001, he promised to slash government borrowing. Fortunately, he did no such thing. To have done so would have risked tipping the deflation-riddled economy into even deeper recession. He did cut public works budgets. Towards the end of his tenure, he brought overall spending under control and raised revenue through stealth taxes.

This may have been good for the long-term health of Japan. But few economists, if any, have argued that it spurred recovery.

Deregulation can accelerate growth. But most Japanese deregulation – for example in the financial and retail sectors – was instigated before Mr Koizumi arrived on the scene.

When Mr Fukuda, who was Mr Koizumi's chief cabinet secretary, was asked about that administration's shining deregulatory success, he mentioned a change allowing the sale of cold medicines by non-pharmacists. Convenient as this far-reaching measure was for legions of handkerchief-clutching salarymen, few would claim it was a principal source of growth.
The real key to recovery under Mr Koizumi was the beneficial effect of a booming China on exporters and success in getting banks in shape. Exports were helped further by massive currency intervention to keep the yen low. Even in Japan's muddled debate, that policy was never classified as reform.

The biggest genuine Koizumi reform was postal privatisation. This did not start until a year after he left office and will not be completed until 2017. Yet foreign investors seized on postal privatisation in late 2005 as a reason to snap up Japanese equities, precipitating a near-40 per cent stock market rally.

Lehman Brothers writes in a recent note: “The excitement and rhetorical flourishes of the Koizumi era notwithstanding, the pace of structural reform did not particularly accelerate.” Since Mr Koizumi did not usher in a brave new world, concerns that Mr Fukuda may dismantle all the good work are misplaced.

On the fiscal side, for better or worse the new prime minister appears wedded to deficit-reduction efforts. There may be political pressure to redirect money to hard-pressed rural constituencies. But Mr Fukuda has ruled out spending more on public works and has reaffirmed the goal – reachable – of attaining primary fiscal balance, before debt service, by 2011. If anything, he appears keener on discussing an increase in sales tax from its current 5 per cent than either of his predecessors.

On deregulation, it is true, there is unlikely to be much headway while the opposition controls the upper house. If anyone was hoping for a slashing of farm tariffs or a relaxation of restrictions on foreign workers, think again. But very little was happening anyway. There is little threat of dismantling what has already been done. No politician, at least not yet, is suggesting clearing the supermarket shelves of cold relief capsules.

There are legitimate reasons to worry about Japan, not least the failure of wages to rise and consumer demand to stir. But concern that Mr Fukuda will tear up Mr Koizumi's reform manual is not one of them

位东京的日兴花旗(Nikko Citigroup)首席经济学家村岛喜一(Kiichi Murashima)刚刚从伦敦回国。他不是太开心。在与日本政府债券和股票的投资者们进行了几次会晤后,他得出了这样的结论:“人们正在丧失对日本的兴趣。”
缺乏热情在一定程度上源自于这样一个事实:日本不那么令人兴奋的经济增长,仍依赖于外部需求,而目前这种需求的不确定性更强了。但潜藏在这种失望情绪之下的,是一种更深层次的担忧:上月安倍晋三(Shinzo Abe)政府垮台所导致的政治瘫痪,将引发政策“痉挛”。
从表面上看,这种担忧是可以理解的。上月,执政的自民党(Liberal Democratic party)内一些派系领导人将现年71岁、身穿灰色西装的福田康夫(Yasuo Fukuda)推上了台。此次选举带有小泉纯一郎(Junichiro Koizumi)之前那种老式的日本味道。小泉是安倍前一任首相,他通过直接吸引公众支持而打破惯例。

雷曼兄弟(Lehman Brothers)在最近一份报告中写道:“尽管小泉时代出现了令人兴奋的现象和浮华的繁荣,但结构改革的步伐并未明显加速。”既然小泉没有开创一个勇敢的新世界,担心福田可能废除全部有益工作就无从谈起。