2010-8-5
Correction

In “The Turntable of Civilization,” in my discussion of a hegemonic power, I initially wrote that the dividends would amount to two trillion yen when 100 trillion yen was directed into stock purchases. I calculated that figure using only the 100 trillion yen and omitted the amount already held.
As stated in the correction, the total would be 296 trillion yen, so the dividends would be 5.92 trillion yen.
Even two trillion yen (tax-free when accompanied by receipts proving that it was spent on consumption) would make deflation vanish.
At 5.92 trillion yen, it goes without saying that not only deflation but also “Japan’s lost twenty years” would vanish.

The resulting expansion of domestic demand would be several times greater, and Japan would move from being a financial power toward becoming a population power. Thus, in accordance with the order ordained by God, its prosperity as an economic hegemonic power would continue for another 170 years.

It is in this “Turntable of Civilization” that the presence of God—that is, true freedom and intellect—resides.

We should immediately stop writing and speaking as though God resides in something called “the market.”

To show how badly that can lead a country astray, I place an article on the front page of today’s Nikkei alongside a Reuters report.

Nikkei
“Crises always arrive in changing forms. What the market, which has suddenly begun targeting Japan, is exploiting is the absence of politics and policy.”

Reuters
“According to the Tokyo Stock Exchange, the average daily value of stock trading has fallen by more than half over the past three years and has recently remained at a little over one trillion yen. This trader at a bank affiliated with a Japanese bank is reducing the weighting of Japanese stocks by selling Japanese shares and buying Hong Kong H-shares. The trader is critical of the government and financial authorities, saying, ‘While other countries, including South Korea, are actively working to weaken their own currencies, Japan alone appears to be standing by.’ The trader says that if there is additional monetary easing or foreign-exchange intervention, ‘I will buy Japanese stocks again.’

I think the Nikkei’s conclusion is right on the mark.
The problem is its use of the word “market.”
If an abstract idea called “the market” could target Japan or exploit its vulnerabilities, we would be living in a cartoon.

Foreign investors are… This should be written much more concretely… Europe, the United States, South Korea, and perhaps China are steering their own currencies downward, while concentrating their attack on Japan and driving up the yen. Japan has spent twenty years proving itself the world’s most foolish country in financial matters. That is what should be written.

A further rise in the performance of their export industries is now assured…
They must have launched an aggressive sales drive at the same time as they drove up the yen…
They make enormous profits on foreign exchange, followed by further gains from business performance.

Meanwhile, our country says that its performance in the second half of the year is uncertain and cause for concern because of the strong yen.

At a meeting of the House of Representatives Committee on Financial Affairs on the 3rd, Finance Minister Yoshihiko Noda said of the yen’s rise in the foreign-exchange market, “The basic principle is that exchange rates are determined by the market,” while also stating, “Excessive exchange-rate fluctuations and disorderly movements adversely affect economic and financial stability. I want to watch the market’s daily movements closely.”
On the possibility of foreign-exchange intervention, he said only, “I will refrain from commenting,” but added, “The new growth strategy we put together contains the words ‘avoid an excessively strong yen.’ Naturally, I intend to keep that in mind as I consider the matter.”

Mr. Noda.
Is the market something abstract?
Is the market run by God?

It is high time you stopped showing the world that yours is a government with no financial strategy at all.

When Hatoyama was prime minister, a magazine printed the words “A fool came by plane” in huge letters on an advertisement hanging inside a subway train. But you people, who do not even recognize that Japan is a capitalist country and are absorbed in writing about, picking apart, and making a commotion over people’s verbal slips, marriages, and so on, are the greatest fools of all.
Below I set out the results of the past twenty years, during which the politicians you kept writing about and kept dancing with came to believe that the market was God.

The unfulfilled hopes of the four million who died for us in a short period;
The 1,500 trillion yen in national wealth built through relentless work from the ruins of a devastated country has fallen to 1,400 trillion yen;
GDP, which stood at 550 trillion yen twenty years ago, is now around 460 trillion yen;
If the outstanding government bonds issued to cover deficits have quadrupled over these twenty years and now amount to 900 trillion yen, then 450 trillion yen of such debt was created during that period…
In other words, the country’s economic strength and tax revenue were reduced by the equivalent of 450 trillion yen, and the recession was allowed to continue… That is what happened.