When you are trade minister and the economy is in trouble, the last thing you need is to get SLAMMED!!!
Thursday, February 12, 2009
ANALYSIS: Exit Strategy Needed As Govt Role Expands
TOKYO (Nikkei)–The Japanese government is becoming more active in combating the ongoing downturn, and while such efforts might be necessary, an exit strategy must be formed so that the economy is eventually able to thrive without life support.
The government is under immense pressure to take action amid the crisis. In early January, the Ministry of Economy, Trade and Industry (METI) hastily created a program to inject public funds into nonfinancial firms. Late last year, METI was flooded with complaints — not only from small and midsize companies, but also from big ones — about the difficulty of securing loans from banks and fundraising through the issuance of corporate paper and bonds.
The trend toward greater state involvement seems clear in Japan, with ruling-coalition lawmakers and business leaders now calling on the government to save jobs.
“Speed is essential,” said METI Minister Toshihiro Nikai. “Unless we do something now, we will be slammed (by criticism).”
Private-sector activity is essential to healthy markets. Without an exit strategy, the Japanese government and the BOJ will find it difficult to withdraw to their proper supporting roles, and the Japanese economy will be worse for it in the long run.
Given that the current crisis is arguably the worst since the Great Depression, the government and BOJ likely have little choice but to take action.
I realize this is a semi-serious argument against how offering protection to industry over short-term concerns could crowd out the private sector and possibly lead to a deleterious trade war. But Nikai has it wrong — come September at the latest, the LDP is going to get totally SLAMMED no matter what.
And weren’t “the Japanese government and the BOJ” already fulfilling a fairly intrusive role in the Japanese “markets”? Sure, many of the lost decade/Koizumi-era programs had been put to rest, but not that long ago. Japan remains full of so-called “zombie” companies kept afloat by previous bank bailouts and the like, but these new measures outlined in this article would presumably create a new breed of these – companies that would be insolvent without direct government support (or indirect through government-mandated loans). So while I share the Nikkei’s concern that the government of Japan will soon essentially become the “main bank” of a sizable number of companies, I just want to mention that rather than going from a state of being merely in a “supporting role” to an active role, these measures appear to push the GOJ from an already pretty active role to a very active role.