English: Shirakawa Masaaki 日本語: 白川方明 (Photo credit: Wikipedia)
The Tuesday Nihon Keizai Shimbun seemed to celebrate the news that two “easy money” economists have been nominated to fill vacancies on the Bank of Japan Policy Board. On June 11 the Government formally submitted for Diet approval the names off Kiuchi Takahide, 48, chief economist of Nomura Securities, and Sato Takehiro, 50, chief economist at Morgan Stanley MUFG Securities.
The BOJ’s Policy Board comprises nine members: the BOJ Governor, two deputy governors, and six counselors. Two of the counselor positions have been vacant since April 4. Such is the stature and influence of Policy Board positions, appointment of counselors—who serve five year terms—are subject to approval by both houses of the Diet.
In April the Diet rejected the government’s nominee, Kawano Ryutaro, chief economic at BNP Paribas. The reason: he was considered not sufficiently enthusiastic about pursuing more “expansionist” monetary policies.
The government seems to have learned a lesson. The two current nominees are on record as favoring more aggressive monetary easing and BOJ asset purchases with the aim of defeating deflation and stimulating growth.
The Bank of Japan, it may be noted, innovated “quantitative easing” and zero interest rate policies some thirteen years ago. It is debatable whether these policies have been successful. In a world where central banks seem prepared to throw caution to the wind and pursue increasingly risky “experimental” policies, BOJ is now seen as stodgily conservative.
BOJ governor Shirakawa Masaaki (a graduate of University of Chicago) has publicly voiced the prevailing BOJ view that there is a limit to what monetary policy can accomplish, and substantial risk of unintended consequences—if not collateral damage—from central bank and government market interventions.
Needless to say, such free market sentiments are not shared by most of Japan’s politicians, or even most of the business community. They favor loose money and stimulus. They are already cheering the new nominations.
The BOJ Policy Board operates on a majority vote. The terms of all three executive members—Governor Shirakawa and Deputy Governors Yamaguchi and Nishimura—will end in April and March of next year. Very possibly, with the new appointees, BOJ Policy Board could tilt strongly in favor of more expansionary monetary policies.
Would this be good news? I doubt it. I very much agree with Governor Shirakawa, in my view one of the best of the current pack of central bank governors.
What has and continues to impede growth in Japan excessive government market intervention and regulation. The way out of deflation and stagnation is free markets and regulation, not easier money.
What should be cheered are any signs that the chains of regulation are being removed, or loosened. So I am pleased to report some developments in a sector we all use: aviation.
On June 12 the maiden flight of Japan’s second low cost carrier (LCC), Jet-Star Japan, took off from Nartia Airport. Beginning July 3, Jet Star—a subsidiary of Japan Airlines--will begin regular service on six domestic routes out of Narita. In March the first Japanese LCC, Peace Aviation, a subsidiary of All Nippon Airways, began operating out of Kansai Airport. From August, another ANA group LCC, Air Asia Japan, will begin service from Narita.
2012 is being called “LCC gannen” (first year in an imperial reign). So far, however, routes and schedules are relatively few, and generally confined to domestic flights, though a few foreign LCCs have been allowed in to provide international links.
Japan’s aviation sector has long been criticized as overly restrictive and high cost. Government sponsored monopolistic, anti-competitive practices at Narita restricted access and kept landing fee prices sky high. A breakthrough was achieved in 2010 when the fourth runway was completed and regular international services begun at Tokyo’s Haneda International Airport.
Competition with Haneda has compelled Narita’s Chiba prefecture government to acquiesce to the industry’s long-desired increase in flight quotas. Total combined annual landing and takeoff quotas for Narita and Haneda are now slated to increase from 520,000 to 750,000.
Since last year the Japanese government has quickened the pace of negotiations of “free skies” agreements. An agreement with the U.K. to be implemented from 2014 was signed in January.
Last month, after loosening quarantine and inspection regulations, Kansai International Airport was chosen by Fedex as the U.S. carrier’s northeast Asian “hub.”
What Japan needs is not more easy money, but deregulation: more access, fewer restrictions, more price competition. This will drive growth. It is happening slowly in aviation. It is needed everywhere.
