Tuesday, October 30, 2007

Cast Your Vote for a New BoJ Governor

Takehiro Sato of Morgan Stanley in an Oct, 27th research piece (Hat Tip to JapanInvest) contemplated a scenario in which the domestic political situation in Japan might delay the appointment of a new Governor of the Bank of Japan, and result in perhaps several 2008 MPMs without a sitting Governor at the helm. Bitter and jaded as I've become in regards to any internationally socially responsible monetary policy outcome EVER occurring, the news will cause neither ululating crowds of protest, or hordes of Mrs. Watanabe's to stand before the hallowed headquarters clicking their tongues.

But it does give readers an absolutely fabulous opportunity to help the LDP (and DPJ) select from a short-list of potential candidates.

Here are my choices, and I encourage all participants to e-mail your favourite lobbyist with your selection:

Toyotaro Yuki (結城 豊太郎), Yuki Toyotaro,(1877 - 1951) was a Japanese banker. He was Governor of the Bank of Japan from 1937 to 1944. He also served as Japanese Minister of Finance for a short time in 1937. Asides from serving both the MoF and BoJ, and having a rather thankless task as Chief Money Guy when the war shit hit the imperial fan, he was apparently quite a guy in his own right visiting Europe, admiring their public Libraries and clean drinking water. He even has his own museum!!. But his biggest and best qualification for the Governorship of the BoJ is that he is deceased, for if lack of policy action is any measure of success, then as the only dead man on the short list, remains strongly qualified for the job, with the added bonus that, with his limited dietary and entertaining requirements, will keep a lid upon ministerial budgets.

Mr. Satoshi Sumita (BoJ Gov from 1984.12.17 - 1989.12.16) Will forever be know in History as Mr Bubble, eclipsing perhaps even the great AG. His easing of Japanese monetary policy, ostensibly to help stabilize the dollar after a nearly 50% plunge against the yen in the previous two years makes him well-qualified to return for another stint. During his tenure, the BoJ did its job with a zest never-before seen in the post war era when he lowered the discount rate from 6 percent to 2 1/2 percent. The money supply soared to well-into double digit rates *though this hardly qualifies him as even remotely eager by today's comparison). Normally, in pre-PBoC days, such monetary expansion would have been inflationary. But the Yen appreciation following the Plaza Accord of 1985 hampered attempts by Japanese producers to raise prices. CPI rose only slightly, from 100 in 1985 to 101.4 in 1988. Wholesale prices actually fell from 100 to 91.8 thanks to the strong yen and falling oil prices. So instead of raising the prices of goods and services, the excess liquidity instead caused the mother of all land-price and equity bubbles.

Interest rates became negative in real terms (something not only common today, but necessary to get elected. Credit was virtually free - sparking an unprecedented liquidity boom that beat all others (until the post millennial USD credit bubble). The Nikkei average rose at an annual rate of 45 percent per year from 1987 to 1989, and by Dec 1989 it had risen to almost 40,000 from a little over 10,000 in 1985. Tokyo land prices more than tripled sparking valuation comparisons between The Imperial Palace and the entire state of California.


No Face (カオナシ), - A central character in Hayao Miyazaki's "Spirited Away", Wikipedia best summarizes the enigmatic "No Face" as
an odd spirit that takes an interest in [the heroine]Chihiro . Chihiro lets No Face into the bathhouse through a side door. At first, he is a strange, cloaked, masked wraith that merely breathes and smiles. No Face is a lonely being who seems to sustain itself on the emotions of those he encounters, particularly their emotional reception to his gifts. He is helpful to Chihiro because she helped him, whereas after observing the bathhouse staff's reaction to gold and his own attempts to win them over with more gold, he reacts to their greed by becoming a grotesque monster which eats lots of food and some of the staff. He calms down and reverts to his former state after he leaves the bathhouse's influence. At the end, he stays with Zeniba as a helper.
It is easy to see why he would be so well qualified to take the reins, for really, all the new Governor needs to do is breathe and smile, and even the former qualification is not essential. His disregard for wealth and gold, and penchant for throwing it away would make one think he had spent his pre-spirit days working his way up the BoJ bureaucracy. And if in any doubt to No Face's suitability, just imagine the grandmotherly Zeniba, whose service he has entered into at the end of the film as The MoF!!


Hisamoto Masami (久本雅美 Osaka, 1960- ) In voting for Miss Hisamoto, one would be sanctioning change, but in a most apt way. For Hisamoto Masami (known as Matchami is not only one of the most popular female comediennes, but perhaps one of the most popular female personalities in all Japan. Skinny, and buck-toothed she is best known for her lack of shame when it comes to slapstick, and indeed this would be a most useful qualification for any BoJ Governor. And she can get down and dirty with the most raucous male counterparts (e.g Beat Takeshi or London Boots) and is often seen doing armpit or crotch jokes on variety shows. In the hard-hitting male-dominated world of Japanese finance, such skills are essential, with the added benefit of bringing new-found levity to G-7 and other international financial events. Moreover, Hisamoto would be an excellent role-model as her popularity with Japanese women has grown over the years as they've become more liberated and able to speak their minds. Polishing off her qualifications, she lists "drinking" as a hobby, and "the ability to have blackouts" as one of her skills. Undoubtedly they will be required of any new governor.

ASIMO! - Not wanting to bias any readers in their selection, I will tell you that I am partial to Asimo, for he is indeed most perfect for the job: He can be programmed by the MoF to do exactly as he's told; is unlikely to be susceptible to bribes; will never make a public gaffe, already has experience in meeting foreign dignitaries (seen here with the Czech Prime Minister); nor has any secret or dark family history such relatives who were Class-A war criminals. Go Asimo!

And a late addition courtesy of Macro-Man, who nominates
Zhou Xiaochuan, current Governor of the People's Bank of China. As MM points in the comment section of this post, Mr Zhou has been a world-leader at forcing domestic rates well into negative territory, though by precisely how much remains a mystery since there are no reliable fogures on inflation other than the Shanghai Stock Exchange, local real estate prices, the CRB Index, the price of a ton-o-steel or a metric ton of soya. With Japan itself continuing a slow, but inexorable process of industrial hollowing, and outsourcing the more labour intensive manufacturing processes, why not outsource monetary policy to the PBoC? Indeed, it is my opinion that the Prime Directive of BoJ policy is to insure the Yen sticks the RmB like a remora adheres to a shark (a whatever it can).

2 comments:

Macro Man said...

I vote that Japan derogates monetary policy responsibility to the People's Bank of China. PBOC has domestic interest rates sharply negative, a feat that not even the Zirp-a-thon managed. Plus Japan knows that they can rely on PBOC to maintain an undervalued currency and intervene heavily when need be. Mercantilists of the world, unite!

Ken said...

It should end up being Muto. With Ozawa out of the picture as DPJ leader, I don't see anyone else coming in with enough clout to hold up the nomination - which the Upper House could do, but it's not in their interest, as it would only make them look bad. Ozawa had his self-proclaimed mission of 'destroying the LDP', and no one else seems that extreme. They'll have to settle for Muto.