Five Reasons for Japan’s Leaders to Get Drunk

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 (...)
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 13.9percent 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.
2. Leadership is nowhere to be found. Nakagawa’s wobbly,droopy-eyed performance became an Internet hit and made Japan thebutt of jokes. More importantly, though, his replacement,Economic and Fiscal Policy Minister Kaoru Yosano, recently castdoubts 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.
3. Even party bigwigs are turning on you. Media are in atizzy over Junichiro Koizumi’s public rebuke of Aso’s bungling. Apro-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.
5. The yen will rise no matter what happens. For 10 years now, Japan’s ultra-low interest rates funded borrowings that weremoved overseas into higher-yielding markets. Japanese companies and investors, hungry for fatter returns, ventured overseas. Allthat 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 byexchange rates. There’s nothing the Finance Ministry or Bank of Japan can do about it. That’s why Japan isn’t intervening incurrency markets to cap the yen. Whether Aso’s LDP hangs on to power -- which is highlydoubtful -- 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.
(Commentary by William Pesek)