Sunday, September 11, 2005

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Koizumi wins in Japan

Both the exit polls and the early returns suggest that Japanese PM Junichiro Koizumi has won a handy victory in parliamentry elections -- reversing a decade-long decline in the fortunes of the ruling Liberal Democratic Party and paving the way for privatization of the postal savings system, which has been a corrupt albatross on the Japanese economy.

From a U.S. perspective, this is a huge win. A staunch U.S. ally has been re-elected, and if Koizumi's proposed reforms are implemented, then Japanese growth could finally escape its 15-year doldrums. Since Japan is a natural market for U.S. exports, a growing Japanese economy would be a very good thing.

Some reporters will credit Koizumi's charismatic leadership as the key to victory.

I choose to credit the lipstick ninjas.

posted by Dan on 09.11.05 at 12:40 PM


The Japanese economy seems to be have a flock of corrupt albatrosses, to judge by this webpage:
Why are Prices in Japan So Damn High??

posted by: godoggo on 09.11.05 at 12:40 PM [permalink]

I certainly hope Japanese growth can accelerate, japanese domestic demand can be sustained more readily (and what demand there is not be so dependent on sustained fiscal deficits), and the end of deflation will allow positive nominal interest rates. All would be good for japan, and the world.

The record of Latin america over the past 15 years suggests, at least to me, though that we need to be cautious in asserting a strong (short-term) link between market oriented reform (of the liberalize prices/ privatize firms/ stabilize the exchange rate or inflation kind) and growth. Hausmann basically finds no connection -- and is no longer convinced of the "if growth is slower than expected, that just means you need to reform faster" mantra. He points of El salvador -- tons of reforms, no growth.

Japan obviously is not Latin america. But Germany (which has made some important reforms in my judgement) offers a note of caution from industrial countries. Labor market reforms led to job market uncertainty, slow wage growth and made consumers more cuatious even as they made Germany firms more competitive in third party markets. that pattern in Japan wouldn't help solve US imbalances -- we need a certain kind of growth, not just growth. See Rogoff and Obstfeld as well.


posted by: brad on 09.11.05 at 12:40 PM [permalink]

If Koizumi has lost, the New York Times would have told us it was a repudiation of the Bush administration.

posted by: Matt Duffy on 09.11.05 at 12:40 PM [permalink]

Sorry about the bad link.

posted by: godoggo on 09.11.05 at 12:40 PM [permalink]

"Japan is a natural market for US exports"??

Dan, where do you get /that/?

The US has had a trade deficit with Japan for almost 40 years straight. A _big_ trade deficit, second only to the one with China.

A Japanese economic recovery may well be a net good thing, but it's very unlikely to help with the US trade deficit.

Doug M.

posted by: Doug Muir on 09.11.05 at 12:40 PM [permalink]

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