Noah is cold water to the face in the Abe euphoria. First of all he argues that Abe is not very admirably politically.
"You see, unlike most Americans who weren't watching back in 2006-2007, I remember Shinzo Abe's first term as PM. So I know what a walking facepalm this man represents. A brief refresher course: Abe's agricultural minister killed himself after a corruption scandal, and another of his cabinet ministers resigned after another such scandal. His health minister, Hakuo Yanagisawa, managed to hang on despite a wave of negative publicity after he called women "baby-making machines".
Abe is mainly interested in social and cultural issues. He is the Japanese style of socio-cultural conservative, sort of a Newt Gingrich type . As prime minister in 2006-7, he enacted a law requiring public schools to teach "patriotism", mounted a vigorous denial of Japan's WW2 "comfort women" sex-slavery, gave gifts to the nationalist Yasukuni Shrine (angering China), and pushed to de-emphasize Japan's WW2 war guilt in school textbooks. His lifelong quest has been the revision of Japan's "pacifist" constitution to allow Japan to have a normal military.
http://noahpinionblog.blogspot.com/2012/12/trust-not-in-shinzo-abe-ye-monetarists.html
From how Noah describes it, Abe likely would never get my vote-though there's the rub: in Japan there is much less electoral choice. Abe's ruling Liberal Democratic party ruled Japan for 55 years if you can believe it. After Abe was defeated roundly following his first term-that Noah argues was very ill-fated-they are back after just a few years in the wilderness.
Still whether we like his politics or not doesn't directly bear on whether or not he will give us good monetary or fiscal policy as Noah admits. For more on the one party nature of Japan's politics see this very interesting essay that Noah linked to.
http://www.studentpulse.com/articles/296/the-liberal-democratic-party-in-japan-explaining-the-partys-ability-to-dominate-japanese-politics
However, Noah further argues that he Abe really doesn't care about monetary policy: while his talk of taking away the central bank's independence and forcing it to raise it's inflation target from 1% to 2%, in reality this is just talk. Abe is just playing a short term game of tanking the Yen-he doesn't know or care about say NGDP targets or even inflation targets.
As Noah goes on to explain-very interesting piece, he does know a lot about Japanese politics-historically Abe's party has hung onto power by "clientalism" where they give business low exchange rates to boost exports while getting the support of the construction industry to keep the party in power.
Noah warns that after this short term goal is completed, Abe will likely lose interest:
"I of course don't mean to imply that Abe's cultural conservatism makes him unlikely to experiment with monetary policy (unlike in America, in Japan "hard money" is less of a conservative sacred cow). Instead, what I mean is that Abe really just does not care very much at all about the economy. I mean, of course he wants Japan to be strong, and of course he doesn't want his party kicked out of power. But his overwhelming priority is erasing the legacy of World War 2, with the economy a distant, distant second.
"This is why Abe allows himself to be surrounded by corrupt and incompetent people. He is entirely focused on his cultural conservative quest. The other day Abe called Obama "Bush". He just deeply, truly, does not care about stuff that does not involve boosting Japanese nationalism."
Still as Krugma points out keeping the exchange rate low is beneficial in itself:
"Shinzo Abe has taken Japan off in a surprisingly Keynesian direction. Noah Smith points out, again, that he’s probably doing it for disreputable reasons, mainly old-fashioned LDP pork-barrel (katsu barrel? tofu barrel?) politics. But this may not matter."
http://krugman.blogs.nytimes.com/2013/01/12/worthwhile-japanese-initiative/
http://krugman.blogs.nytimes.com/2013/01/11/is-japan-the-country-of-the-future-again/
Noah also asks if Japan needs stimulus as it's unemployment is after all only 4.2%. However, this has never been Japan's problem but a 20 year deflation funk. Of course, as Krugman points out, what stands in the way of Japan truly becoming the "country of the future" again is grim demographics. It has a declining birthrate and a draconian anti immigration policy fueled by Japanese xenophobia.
Ironically, this may be Japan's long term downfall. If Abe really wanted Japan's long term glory why not rethink this? Of course, such an idea is probably dreaming in the Japanese cultural landscape.
Krugman points out-not noticed by Noah-that inflation expectations have spiked since the Summer begging the question of whether they are finally out of their 20 year deflationary funk.
"The big move actually came before Abe took office, maybe reflecting the sense that the political environment had changed and that the Bank of Japan’s freedom to impose monetary orthodoxy was about to end. Whatever caused it, this is a remarkable change — it’s the kind of upward move in inflation expectations advocates of radical monetary policy in the US can only dream of. And coupled with a fiscal boost, it could mean that Japan’s long deflationary era is finally coming to an end."
"So while I very much dislike what Abe stands for on cultural issues, and take very seriously Noah Smith’s warning that he may be basically about patronage politics, none of that matters on the macro front; it sure looks as if Japan is, for whatever reason, doing the kinds of things an economy still stuck in the Lesser Depression should be doing."
That would be like the 30s again in that only Hitler-for his own far more malign intentions than even Abe-provided adequate stimulus for the German economy-unlike in the Allied nations. Of course, it's easier to keep the unemployment rate down when anyone who won't do the work the government wants done is sent to a work camp.
Sumner is now cooling to Abe as he doesn't like his fiscal stimulus:
"Obviously fiscal stimulus hasn’t worked in the past. Japan has run massive budget deficits, producing a mindbogglingly large national debt, and has seen NGDP fall for 20 years—perhaps the worst long term aggregate demand performance by a developed country in recorded history. That’s right, the worst—and in a country where the national debt has soared to over 200% of GDP. When you have a central bank that repeatedly raises interest rates during a period where (GDP deflator) inflation is negative, you aren’t going to get any “ooomph” from deficit spending."
http://www.themoneyillusion.com/?p=18632&cpage=1#comment-219579
It's not so "obvious" as he wants it to be. Japan never had adequate fiscal stimulus and actually was a pioneer in QE. In any case Josh-along with Tim Duy-think that Abe's intentions are actually towards austerity-long term:
Has he Monetarist hero suddenly become a New Keynesian icon? For the time being,
maybe so, but I maintain my reservations about the mid-to-long term stimulative
plans of this government. Fortunately, for me, Noah Smith also remains pessimistic given
Abe’s and the LDP party’s history of waste and favoritism accompanying stimulus
measures:
Anyway,
the tweaked electoral system, lower "clientelist" pork spending, and the
disastrous unpopularity of Abe's first tenure as prime minister helped ushed the
DPJ into power, breaking the LDP's 55-year run. But now the LDP is back, and
they need to re-establish their base of support. This means re-establishing the
back-scratching relationship with those construction firms (and, by extension,
rural Japan, right-wing Tea Party type groups, and the mafia). The LDP needs to
say "Hey, guys, things are back to the way they were." This, I suspect, is the
main reason for the "emergency stimulus".
…To
sum up: Once again, I think that Abe's appearance as a bold Keynesian
experimenter is a cover for a program of traditional mercantilism and
corporatism. I guess we'll see how well that program
works.
http://bubblesandbusts.blogspot.com/2013/01/shinzo-abe-monetarist-or-keynesian-hero.html
Yglesias, gives us a very upbeat view of the latest fiscal stimulus:
"Given the track record of Japan's LDP and past fiscal stimulus efforts I think it's reasonable to believe there's going to be a lot of pork and waste in this package. But what Abe seems to be showing throughout his brief second tenure as prime minister is what Ben Bernanke wants called "Rooseveltian Resolve." He's determined to use every channel available to him—whether that's currency depreciation or deficit spending or expectations-targeting by messing with the Bank of Japan—to get things moving. It's exactly the kind of spirit the rest of the world needs to learn from."
http://www.slate.com/blogs/moneybox/2013/01/11/_10_3_trillion_yen_stimulus_plan_for_japan.html
Show us the way to the future, Japan!
I think I saw somewhere where the fiscal stimulus was 16 T Yen which is like 160B $. Not a drop in the bucket but not massive by any stretch of the imagination. Of course Sumner thinks that 16Y Yen being equal to 160B $ means that japans prices are 100x ours.
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