Editorial
National policy minister Naoto Kan needs to stand up and take additional stimulus measures
The government will incorporate countermeasures against the yen's rapid appreciation and a decline in share prices in the draft of the second supplementary budget for fiscal 2009 at the instruction of Prime Minister Yukio Hatoyama. Deputy Prime Minister and State Minister for National Policy Naoto Kan said the scale of the second extra budget will increase from 2.7 trillion yen as initially planned.
Hatoyama is poised to meet with Bank of Japan Gov. Masaaki Shirakawa shortly to exchange views on economic policy.
The government's quick response to growing uncertainty as a result of the rapid appreciation of the yen against the dollar and a sharp decline in share prices since Nov. 26, in close cooperation with the central bank, should be appreciated.
However, it is also necessary to calmly analyze the causes of the yen's appreciation and the share price decline.
The yen has witnessed a string of buying recently as it is widely viewed as relatively safe among various currencies in the world. Share prices have declined as investors reacted negatively to announcements by major companies, including banks and electric machinery firms, that they will increase their capital, because the moves will decrease profits per share. Some investors have pointed out that only Japanese shares have been left behind global market trends. However, Japanese shares are not particularly low if viewed in dollar terms, in other words, viewed by overseas investors.
By emphasizing these factors, the government should call on investors not to react nervously to short-term fluctuations of share prices. Therefore, the government should not implement short-term countermeasures, such as support for export-oriented companies.
Foreign exchange and stock market insiders are worried about uncertainty in the markets because the Hatoyama administration's economic policy lacks transparency. Taxpayers are also apparently worried about it. Some individual policy measures are unprecedentedly bold and likely to win sympathy from the public, but they are not well organized into a coherent system. The administration has chanted slogans like, "A shift in investment from concrete (construction) to people" and "A transformation of an external demand-oriented economy into one led by domestic demand."
However, so far, the provision of childcare allowances and the cancellation of major dam construction projects are the only policy measures that have materialized.
Instead, inconsistencies between individual policy measures stand out. For example, the government is calling for the creation of an environmental tax while trying to make expressway tolls free, thus encouraging more people to drive cars.
The government is required to restructure an economy that is vulnerable to short-term market trends, instead of implementing countermeasures against the yen's appreciation and the share price decline. Such efforts would help prevent deflation and lead to the reinforcement of Japan's economy in the mid- and long-term. The government should initiate such efforts when it drafts the second supplementary budget.
The efforts to restructure the economy will put the National Policy Unit, which leads Japan's economic policy, to the test. The strategy of its economic policy must be understood and supported by market insiders as well as taxpayers -- unlike efforts made by the Government Revitalization Unit's working group to identify wasteful government projects, which have drawn attention from the public because they are dramatic. The leadership ability of Deputy Prime Minister Kan, which has failed to stand out since the inauguration of the Hatoyama administration, will be tested.
(Mainichi Japan) December 1, 2009