Commentary by William Pesek
Feb. 18 (Bloomberg) -- I don’t know which cold medication Shoichi Nakagawa is taking, but I want some.
Anyone who has seen the video of Japan’s finance minister at last weekend’s Group of Seven meeting in Rome may be having similar thoughts. Nakagawa resigned yesterday even after insisting he wasn’t drunk. It was cold meds, he claimed.
Few in the Japanese media bought his story. It didn’t help that Asahi Television dug up a November 2006 video in which Nakagawa, then head of the Liberal Democratic Party’s policy- making board, looked wasted giving a speech.
The public’s anger isn’t about some red-faced man slurring his words and having difficulty fielding questions. It’s that Taro Aso’s government isn’t up to the challenge of running Asia’s biggest economy. It also reflects Japan’s revolving-door politics; the next finance chief will be the fifth in two years.
Of course, if I were in charge of this rapidly shrinking economy -- at an annual 12.7 percent pace last quarter alone -- I’d be tempted to hit the bar, too. The high won’t last very long, mind you. Japanese data of late are way too sobering. Talk about an economic hangover.
Here are five reasons why Japanese leaders might be excused for drinking in excess these days.
1. Things will get far worse. You know an export-driven economy is in trouble when exports plunged an unprecedented 13.9 percent last quarter. The collapse in demand for Corolla cars and Bravia televisions comes as the G-7 says the global slump will last for much of 2009. It’s probably more like 2010, too.
Big losses are forecast at Toyota Motor Corp., Sony Corp. and Hitachi Ltd., all of which are firing thousands of workers. That will accelerate the drop in household spending and deepen the recession. The current quarter could be even uglier.
Bartender, another round please!
2. Leadership is nowhere to be found. Nakagawa’s wobbly, droopy-eyed performance became an Internet hit and made Japan the butt of jokes. More importantly, though, his replacement, Economic and Fiscal Policy Minister Kaoru Yosano, recently cast doubts on whether Japan will get its act together by April, when the Group of 20 nations meets in London. Call it a two-month do- nothing binge.
Aso’s 9.7 percent approval rate -- according to a Nippon Television survey -- explains why U.S. Secretary of State Hillary Clinton met with opposition leader Ichiro Ozawa in Tokyo yesterday. Why bother with Aso when his days are numbered? And another question: Who will take Japan seriously if it has a new finance minister every few months? (Pub quiz: Name the last four Japanese finance chiefs?)
Hey barman, got something stronger this time?
3. Even party bigwigs are turning on you. Media are in a tizzy over Junichiro Koizumi’s public rebuke of Aso’s bungling. A pro-reform prime minister who served from 2001 to 2006, Koizumi is credited with shaking up Japan’s business world and privatizing the massive postal system, which also housed the nation’s biggest savings bank.
Koizumi recently spoke for many of Japan’s 127 million people when he attacked Aso for what he called “appalling” and “laughable” blunders. He suggested that their party, the ruling LDP, may lose this year’s election.
Let’s face it, the LDP deserves to lose badly. The party serves only itself, not Japan’s people and certainly not the investors looking for opportunities in this $4.4 trillion economy.
Yo barkeeper, just leave the bottle!
4. A woman is kicking your butt. In the annals of practicing what you preach, Yuko Obuchi deserves a mention. She is the minister responsible for increasing the nation’s birthrate. And now, she’s pregnant, expecting her second child in September.
Obuchi clearly takes her role in stopping a decline in the population seriously; the National Institute of Population and Social Security Research says the number of Japanese may shrink 26 percent by 2050.
Japanese leaders have rarely lifted a finger to empower women. Score one for Obuchi, who is also in charge of gender equality. Unlike the change-resistant men who run Japan, Obuchi is getting rave reviews for inspiring a national debate about whether more women can have a family and a career.
Oh garcon, got something without alcohol?
5. The yen will rise no matter what happens. For 10 years now, Japan’s ultra-low interest rates funded borrowings that were moved overseas into higher-yielding markets. Japanese companies and investors, hungry for fatter returns, ventured overseas. All that money is now coming back to Japan. The dollar’s weakness is exacerbating the problem.
That’s a crisis for an economy that lives and dies by exchange rates. There’s nothing the Finance Ministry or Bank of Japan can do about it. That’s why Japan isn’t intervening in currency markets to cap the yen.
Whether Aso’s LDP hangs on to power -- which is highly doubtful -- or Ozawa’s Democratic Party of Japan grabs the reins, the yen will strengthen. A strong currency is normally a sign of confidence in an economy. In Japan’s case, it’s a contrarian indicator of growth prospects in a world fast losing altitude.
Nightcap, anyone? It may help leaders in Tokyo deal with Japan’s un-happy hour.
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net
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