Asia Times: EDITORIAL: On preaching



	March 04, 1999	atimes.com

Japan Economy

EDITORIAL: On preaching

It's a dilemma faced by all preachers: You feel compelled to reform the sinners, but how many times can you repeat the same sermon before all concerned get bored and just tune out?

Among the most fervent preachers over the past 20 months of global financial turmoil and dislocation have been the U.S. Treasury's number two man, Larry Summers, and the International Monetary Fund's number two, Stanley Fischer - and their favorite recent target is no longer Asian crony capitalists but Japanese economic policymakers.

Here's the gist of their sermon script:

First, a little sop: ''Japan is the world's second largest economy.'' (As if the Japanese didn't know - but let's say it anyway; it may make them feel good about their accomplishments and soften them up for what's to come.)

Then another sort of sop: ''Unless Japan, by far Asia's largest economy, takes the lead, the rest of Asia cannot recover.'' (Some more make-feel-good praise, but now spiked with a reminder of the responsibility that goes with greatness.)

Then the core of the sermon: ''Japan must strengthen domestic demand.'' (In other words: Don't you guys dare to try yet again to export yourselves out of crisis. Spend, spend, spend - and import - and stop that foolish and selfish over-saving.)

And, finally, the prescriptions for gaining absolution: ''Expand monetary policy; have your central bank buy bonds.'' (i.e., print money and spend it - on anything you like.)

We've heard much - too much - of that again at Tokyo's National Press Club (Summers) and at a World Bank Tokyo symposium (Fischer) over the past several days. Not that it's all wrong. As with most sermons, it's mainly right (and righteous). But by now the poor Japanese sinners no longer just listen politely and doze off; by now, they are starting to get cross, get up and walk out and gather around the corner and start talking back - albeit mainly among themselves.

When Bank of Japan Governor Masaru Hayami returned from a recent Bonn G-7 confab, he briefed the bank's policy board on the demand that Japan do more. Promptly the board decided to do nothing - and reiterated that more bond buying was out.

When the Economic Strategy Council delivered its report late last week, it said, yes, recovery comes first - but without higher taxes and fiscal consolidation soon, Japan will sink. And on Sunday, Economic Planning Agency chief Taichi Sakaiya on TV said the impossible, that the consumption tax may have to be increased.

In part, all that is reaction to too much preaching and policy interference from those gaijin. But in part it's also driven by concerns that one should take more seriously, not just dismiss. There is a rather deep-rooted suspicion among Japan's elite samurai bureaucrats that once they open the spending spiggot too far, the LDP's pork barrel politicians (i.e., most of the party faithful) will not let them shut it off again. And in that, we think, the austere bureaucrats are absolutely right.

The problem is that all this leaves Japan without clear policy directions or a longer-term strategy for economic recovery. What Summers and Fischer AND the Japanese bureaucrats fail to see is that neither fiscal nor monetary policies are really of primary significance for longer-term economic development - that such policies can, at best, create a supportive environment for the kind of technology-driven economic revolution the United States is experiencing and practicing at this point.

In January and February U.S. economic indicators were again up even over unexpectedly high 1998 fourth quarter results - and with inflation at a 35-year low.

Well, now we are lapsing into our own sermon. Time to quit.

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©1999 Asia Times Online Co., Ltd.