Steve
On Tue, 4 May 1999, Henry C.K. Liu wrote:
> Americans are not capable of understand or advising Japan, becasue they think
> its logical for the Japanese to help restore the collapsing American economic
> empire.
> The Japanese have a very different agenda which they never openly discuss with
> Americans because they do not like confrontations culturally and certainly not
> before the time is ripe.
> Japan sees the current financial/economic crisis, which for Japan has been
> building for more than a decade, as the gradual collapse of the post-war
> American world order and an opportunity for Japan to become an independent power
> again. Japan is prepared to suffer and can afford to suffer the pain in order
> to srike a better deal for itself in the coming new world order.
> They see all the advice and prescriptions coming their way from America as
> self-serving strategies that help America more than they help Japan. And
> Japanese officials will pay lip service to these advice and prescriptions and
> pretend they are trying their best to follow them. The few Japanese initiatives
> that Japan did propose had been categorically shot down by American officials
> (one in the WB/IMF meeting in Hong Kong in October, 1997, and the latest one in
> the G7 meeting in Bonn a few months ago.)
> The Japanese government has a strategy of absorbing from the general public the
> pain caused by the economic stagnation. For Japan, it can go on like this for
> another decade, if the starting point after the collapse will put Japan on a
> more even footing. They are living on their debt interest income from America.
> Americans think quarterly, Japan thinks in 50 year cycles. That is why
> Greenspan/Rubin don't trust them and resist Japanese leadership in Asian
> affairs.
> The US is opposed to Japanese leadership in ASEAN. Rubin turned down a US$100
> billion rescue package for Asia in October 1997 during the World Bank/IMF
> meeting in Hong Kong.
> He also turned down a Japnese/EU proposal to stabilized the 3 currencies during
> the G7 meeting in Bonn in January, 1999.
>
> Summers, whose credibility has been irrevocably tarnished internationally by his
> inept handling of the global financial crisis in the past two years, gave
> another admonishing speech in Japan on February 26, 1999, warning Japan not to
> depend on a weak yen to boost its economy, using worn-out slogans such as:
> "the exchange rate cannot be a substitute for policy."
>
> Its an amazing posture after Rubin/Summers turned down a Japanese/EU joint
> proposal for a 3 currency stabilization regime at the G7 meeting in Bonn. Being
> a bit humbled by his own dismal record of first diagnosing the Asian crisis as
> merely transient, then IMF off-the-shelve conditionalities as the only cure, and
> finally non-intervention of free financial markets as a inviolable guiding
> principle, Summers declared vaguely this time the Krugman cure:
> "What I think is crucial is the recognition that the goal of price stabily
> include the responsibility to avoid deflation."
> He and Rubins declared only a month earlier that while free markets are not
> perfect, all other forms intervention alternatives are worse. He then went to
> Japan and again asked the Japanese to intervene in their economy with
> interventionist monetary policies.
> Yukihiko Ikeda, a senior member of the ruling Liberal Democratic Party, reported
> told the press: "Mr. Summers says, do this, do that. But we will continue with
> steps already in the works."
> Japanese officials are generally of the opinion that reflationary policies would
> further weaken the yen, due to pressure on the value of the yen from any
> increased supply. It may lead to further currency devaluations in other parts
> of Asia.
> The BOJ, Japan's central bank, thinks Krugman/Summers are offering snake oil
> cures in the notion of fighting deflation with easing money supply.
> Meanwhile, the prime minister of Malaysia is publicly urging Japan to dump its
> US Treasry holding to show Asia's displeasure on US nationalistic globaliztion
> policies.
>
> With Rubin/Greenspan successfully resisting stabilized global exchange rates,
> the effect of foreign governments printing money will not create inflation in
> the US. It only means the Thai baht and the Brazilian real will fall in value
> against the dollar.
> Hyperinflation will not help Japan. Krugman is wrong. Because both the debtors
> and creditors in Japan are Japanese and they both use yens. There will be no
> indirect debt forgiveness through inflation, only currency devaluation replacing
> asset deflation, At the end of the day, Japanese assets will end up being worth
> less. Deflation increases Japanese trade competitiveness without devaluing the
> yen. Reflation will not solve any problem for Japan. It only pushes the policy
> ballon from a direction that currently catches the fancy of Krugman/Smmers.
>
> American globalization created bubbles all over the world that burst in 1997.
> The EU is on the way down. The American domestic bubble continues to expand
> from the "salutary" effect (Greenspan) of the global crises that started in
> Asia. Japan is waiting for the American bubble to burst from which to build a
> more equal footing for Japan in the new economic order. In the mean time, Japan
> has a good excuse not to buy from America while building up a handsome trade
> surplus. Rubin is right about one thing: America cannot be the sole engine for
> the whole world economy. It will have to overheat and blow a piston sooner or
> later. The Japanese know that all bubble burts, some only later.
>
> Henry C.K. Liu
>
>
>
>
>
> James Baird wrote:
>
> > >
> > > Dennis is correct. The Japanese are playing a different game to
> > reposition
> > > themselves for the long haul while playing dumb with American advice.
> > None of
> > > the countries that followed American/IMF prescriptons are doing that well.
> > >
> > > Henry C.K. Liu
> >
> > But is that what Krugman is recommending? He's spent the last six months
> > saying that Japan needs a decent dose of inflation as a kick start - not
> > exactly IMF orthodoxy.
> >
> > Jim Baird
>
>