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22-11-2014, 05:09 PM
Abe Friend Is Strong Voice Of 'Reflation'
By Eleanor Warnock
805 words
21 Nov 2014
The Wall Street Journal Asia
AWSJ
English
Copyright © 2014 Dow Jones & Company, Inc. All Rights Reserved.
TOKYO -- Lawmaker Kozo Yamamoto, a tango enthusiast, is doing a dance of victory this week. His friend Shinzo Abe, the prime minister, has recommitted himself to the cause of doing whatever it takes to stamp out 15 years of deflation.
Mr. Yamamoto stands out in Japanese politics not just for his bright pink French-made ties, but also for the radical policies he advocates. Long before the ideas went mainstream, he called for "reflationist" policies such as having the central bank purchase huge quantities of assets and set an inflation target.
Now that is Japan's official policy. And the hand of Mr. Yamamoto appeared clear again Tuesday when Mr. Abe said he would delay a planned sales-tax increase. Sounding like Mr. Yamamoto a decade ago, the prime minister said that raising the tax "would jeopardize ending deflation."
"Abenomics has come back to its roots," said Mr. Yamamoto in an interview this week. "If you can't get out of deflation, you can't do anything else."
Mr. Yamamoto is one of a group of ex-central bankers, economists and lawmakers who made the reflationist fight into an election-winning platform that turned around Mr. Abe's political career.
Mr. Abe, 60 years old, and Mr. Yamamoto, 66, started to get to know each other better in 2011. The two Liberal Democrats weren't a natural pair. Mr. Abe, a career politician who inherited his father's seat in parliament, was more interested in defense and known for his hawkish views. Mr. Yamamoto came from the Ministry of Finance and was obsessed with central-bank policy.
Their styles differed too -- the stolid Mr. Abe, usually seen in a conservative suit or golf wear on the course, versus Mr. Yamamoto, a bon vivant who loves Italian food, fine pottery and his tango lessons.
What they shared was a feeling of being on the outs. Mr. Abe's first stint as prime minister ended disastrously, as health issues and scandals involving his cabinet forced him to step down after just a year, in 2007. Mr. Yamamoto had been grilling Bank of Japan officials for years in parliament, demanding monetary easing with little success.
Mr. Yamamoto and others in the reflationist camp went to work on Mr. Abe, persuading him that Japan needed a more aggressive central bank and weaker yen to turn around two decades of sluggish growth.
After the 2011 earthquake and tsunami, Mr. Yamamoto invited Mr. Abe to become chairman of the "Reconstruction Without Tax Increases" multiparty caucus, which argued that the funds to repair devastated regions should come from special bonds, not higher taxes. That caucus morphed into a study group led by Messrs. Abe and Yamamoto to discuss central-bank issues.
The next year, Mr. Abe swept to power on a deflation-fighting platform. He brought some of the study group's faces into the prime minister's office to push for a more aggressive central bank. By April 2013, reflationist Haruhiko Kuroda was in charge of the Bank of Japan and introduced his "bazooka" of funds to buy assets and flood the economy with cash to achieve the bank's 2% inflation target.
It was so successful that Mr. Yamamoto thought the economy could survive higher taxes -- normally anathema to the reflationists. Mr. Abe went ahead with an increase in the national sales tax to 8% in April from 5%. The economy tanked.
Mr. Yamamoto, who had favored a further increase to 10% next year, came to think it was a bad idea.
"The economy is picking up, but the pickup has been a bit slow, so it's best not to make any more headwinds," he said in an interview in September. "Exports haven't grown as much as I expected."
Once he switched gears, he used all his powers to press his new stance. It was time for another study group, this time to advocate a delay in raising taxes. He started one in October, calling it the "Group for Making Abenomics Successful," and within a month it got its way.
On Tuesday afternoon, Mr. Yamamoto strode triumphantly into the prime minister's residence dressed in a magenta tie, blue-and-white striped shirt and navy blazer. He spent 15 minutes with Mr. Abe and handed him his study group's proposals.
They included delaying the tax increase for a year and a half -- a plan Mr. Abe adopted hours later -- and a 3 trillion yen ($25.55 billion) stimulus package to support household spending.
"If we put the increase off until April 2017, the BOJ should have achieved its 2% target and real wages will be rising," Mr. Yamamoto said. "Until then, we can't endanger the exit from deflation."
http://www.djreprints.com/link/DJRFactiv...1120000055
Dow Jones & Company, Inc.
Document AWSJ000020141120eabl0001b
By Eleanor Warnock
805 words
21 Nov 2014
The Wall Street Journal Asia
AWSJ
English
Copyright © 2014 Dow Jones & Company, Inc. All Rights Reserved.
TOKYO -- Lawmaker Kozo Yamamoto, a tango enthusiast, is doing a dance of victory this week. His friend Shinzo Abe, the prime minister, has recommitted himself to the cause of doing whatever it takes to stamp out 15 years of deflation.
Mr. Yamamoto stands out in Japanese politics not just for his bright pink French-made ties, but also for the radical policies he advocates. Long before the ideas went mainstream, he called for "reflationist" policies such as having the central bank purchase huge quantities of assets and set an inflation target.
Now that is Japan's official policy. And the hand of Mr. Yamamoto appeared clear again Tuesday when Mr. Abe said he would delay a planned sales-tax increase. Sounding like Mr. Yamamoto a decade ago, the prime minister said that raising the tax "would jeopardize ending deflation."
"Abenomics has come back to its roots," said Mr. Yamamoto in an interview this week. "If you can't get out of deflation, you can't do anything else."
Mr. Yamamoto is one of a group of ex-central bankers, economists and lawmakers who made the reflationist fight into an election-winning platform that turned around Mr. Abe's political career.
Mr. Abe, 60 years old, and Mr. Yamamoto, 66, started to get to know each other better in 2011. The two Liberal Democrats weren't a natural pair. Mr. Abe, a career politician who inherited his father's seat in parliament, was more interested in defense and known for his hawkish views. Mr. Yamamoto came from the Ministry of Finance and was obsessed with central-bank policy.
Their styles differed too -- the stolid Mr. Abe, usually seen in a conservative suit or golf wear on the course, versus Mr. Yamamoto, a bon vivant who loves Italian food, fine pottery and his tango lessons.
What they shared was a feeling of being on the outs. Mr. Abe's first stint as prime minister ended disastrously, as health issues and scandals involving his cabinet forced him to step down after just a year, in 2007. Mr. Yamamoto had been grilling Bank of Japan officials for years in parliament, demanding monetary easing with little success.
Mr. Yamamoto and others in the reflationist camp went to work on Mr. Abe, persuading him that Japan needed a more aggressive central bank and weaker yen to turn around two decades of sluggish growth.
After the 2011 earthquake and tsunami, Mr. Yamamoto invited Mr. Abe to become chairman of the "Reconstruction Without Tax Increases" multiparty caucus, which argued that the funds to repair devastated regions should come from special bonds, not higher taxes. That caucus morphed into a study group led by Messrs. Abe and Yamamoto to discuss central-bank issues.
The next year, Mr. Abe swept to power on a deflation-fighting platform. He brought some of the study group's faces into the prime minister's office to push for a more aggressive central bank. By April 2013, reflationist Haruhiko Kuroda was in charge of the Bank of Japan and introduced his "bazooka" of funds to buy assets and flood the economy with cash to achieve the bank's 2% inflation target.
It was so successful that Mr. Yamamoto thought the economy could survive higher taxes -- normally anathema to the reflationists. Mr. Abe went ahead with an increase in the national sales tax to 8% in April from 5%. The economy tanked.
Mr. Yamamoto, who had favored a further increase to 10% next year, came to think it was a bad idea.
"The economy is picking up, but the pickup has been a bit slow, so it's best not to make any more headwinds," he said in an interview in September. "Exports haven't grown as much as I expected."
Once he switched gears, he used all his powers to press his new stance. It was time for another study group, this time to advocate a delay in raising taxes. He started one in October, calling it the "Group for Making Abenomics Successful," and within a month it got its way.
On Tuesday afternoon, Mr. Yamamoto strode triumphantly into the prime minister's residence dressed in a magenta tie, blue-and-white striped shirt and navy blazer. He spent 15 minutes with Mr. Abe and handed him his study group's proposals.
They included delaying the tax increase for a year and a half -- a plan Mr. Abe adopted hours later -- and a 3 trillion yen ($25.55 billion) stimulus package to support household spending.
"If we put the increase off until April 2017, the BOJ should have achieved its 2% target and real wages will be rising," Mr. Yamamoto said. "Until then, we can't endanger the exit from deflation."
http://www.djreprints.com/link/DJRFactiv...1120000055
Dow Jones & Company, Inc.
Document AWSJ000020141120eabl0001b
