Did the Nikkei just collude with Aso to interfere with BOJ independence?

Bloomberg’s Japan coverage, from this morning:

All Nippon, United Parcel Forge International Cargo Deal, Nikkei Reports

All Nippon Airways Co. and United Parcel Service Inc. agreed to handle each other’s international shipments to help better position each company economically, Nikkei English News reported, without citing anyone.—-
BOJ May Have to Cut Rate as Investors See `Done Deal’ (Update1)

Oct. 30 (Bloomberg)—The Bank of Japan may have little choice but to cut interest rates tomorrow after a newspaper report raised investors’ expectations that it would.


Bloomberg, you’re not supposed to sound so obviously disgusted with another news outlet!

Sure, Bloomberg also runs stories sourced anonymously when the information is good. But the Nikkei’s case is extreme. This is just a guess, but the Nikkei’s pages often seem to contain more anonymous quotes than attributed ones.

Catching wind of a new business tie-up might be fair game, but considering the huge significance of monetary policy, and the potential for dirty tricks, there really is no business giving political insiders anonymity for the sake of a scoop, no matter who the source is. And who might that source be?

``The government is the one who wants the Bank of Japan to cut rates this week to show Japan is coordinating with other nations to ease turmoil in markets,’’ Mari Iwashita, chief market economist at Daiwa Securities SMBC Co. in Tokyo. Still, ``the economy and markets could worsen further even after they reduce interest rates and that’s what the central bank has to think about at the meeting this week.’‘

Considering the Aso government’s lack of respect for the improvements in Japan’s economic bureaucracy over the past decade, it isn’t surprising that they show no hesitation to interfere with monetary policymaking.

To be sure, Aso has generally been cooperative in taking steps to deal with the crisis, but that’s because he is listening to the FSA, perhaps the authority on managing financial crises, and anyone could be doing that. And the effects of a potential rate cut are reported to be mostly psychological and would not take much from the BOJ’s already limited wiggle room on the policy rate.

But there is a risk that Aso’s bloviating and posturing for political gain could take a dangerous turn, such using recapitalization money to force banks to lend to insolvent small businesses or pushing for even easier money to help his election prospects. That’s what makes it so disappointing that the Nikkei, far from playing the role of watchdog, is actively enabling Aso’s backroom maneuvering.

It’s enough to make you sympathize with Koizumi-era economics brain Heizo Takenaka, who has argued for years that Japanese democracy just doesn’t work. He thinks tough decisions should be left to a single strong leader, with the Diet and bureaucrats relegated to supporting roles.

UPDATE: Oh that’s right, the kind of underwhelming spending plan was already announced this morning:

In the new stimulus package, the government will provide a total of 2 trillion yen in fixed-sum benefits to all households, instead of introducing a fixed-sum tax cut, which had been considered key to the package. Based on the total number of households as of the end of March 2008, each household would receive about 38,000 yen.

For the housing loan tax cuts, the government is expected to reduce income and resident taxes by as much as a total of 6 million yen per person, a record high, for people who have housing loans of 50 million yen or less. About 500 billion yen to 600 billion yen is expected to be necessary for this measure.

The government will introduce a fixed-amount expressway toll system, in which expressway users are charged 1,000 yen on Saturday, Sundays and national holidays, regardless of the distance the driver travels on the expressway. Tolls for all kinds of vehicles, including trucks, will be reduced by 30 percent on weekdays. The Shuto Expressway and the Hanshin Expressway will be excluded from rate reductions. About 500 billion yen will be needed to cover the cost, with the measure expected to take effect within this year and continue through the end of 2010.


Considering that Japan is generally considered to be heading into an unavoidable but relatively mild recession, and the package is in fact relatively small and focused on populist handouts, has led people to dismiss this as a political ploy. But if it’s not doing any harm, maybe in this case we can let the baby have his bottle?

2 thoughts on “Did the Nikkei just collude with Aso to interfere with BOJ independence?

  1. BOJ independence will remain a farce, and that’s seemingly meant to be. From the April 1, 1998 revised Bank of Japan Law:

    Article 3:
    “The Bank of Japan’s autonomy regarding currency and monetary control shall be respected.”

    But Article 4 undercuts that:
    “In recognition of the fact that currency and monetary control is a component of overall economic policy, the Bank of Japan shall always maintain close contact with the government and exchange views sufficiently, so that its currency and monetary control and the basic stance of the government’s economic policy shall be mutually harmonious.”

    See, it’s all about being “harmonious.”

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