MR. YEN'S POLICIES ARE INSANE
By JOHN DIZARD
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THERE'S an odd convention in financial writing that the people you write about are assumed to be completely sane and rational, unless they're Internet investors. We know athletes' performances will crucially depend upon their emotional state. No one believes singers or actors to be automatons.
But when, for example, analysts and reporters try to fathom what Japanese officials are up to, the working assumption is that they have their seat backs and tray tables in the full upright and locked position. They're "technocrats" or "experts" or "strategists." This even when some of them should be "outpatients" or "analysands" or "subjects under observation."
Let's take, for example, Eisuke Sakakibara, vice minister of international affairs for Japan's Ministry of Finance. He is Larry Summers' counterpart in that country. The prospect of standing behind a one-way mirror and watching the two of them try to one-up each other would be tempting for a student of narcissistic personality disorder.
This isn't to say Mr. Sakakibara is unintelligent. He is clearly as smart as a number of the brightest people I have ever known - but many of them are in long-term, thus far unsuccessful, therapy.
Like them, though, even when you are not sure of the soundness of his moorings, Mr. Sakakibara displays real craftiness. For example, if you read the straight press, you would get the idea that he has been struggling manfully (personfully?) with the Bank of Japan to get them to pump up the money supply, reform the economy and get the whole country moving again. In other words, he is Part Of The Solution. Don't think so.
I know he'd be annoyed by an American presuming to use his first name, but I feel as though I've come to know Eisuke, even though he seems to have misplaced my home number. He wrote a book a few years ago, the English title of which is "Beyond Capitalism." It's another Third Way argument you can find in a lot of Harvard School of Government papers, flavored with Japanese racial exceptionalism.
Sakakibara thinks his people are in an undeclared war with the U.S. He believes that a strong yen, while squeezing the Japanese exporters and thwarting a recovery, keeps the American speculators from coming in to buy up Japan on the cheap. If they did that, then they might follow up by retiring the old management, including, indirectly, the old management at the Ministry of Finance.
As one friend of mine in the central-banking business says, "He thinks there is a war of the worlds going on between the U.S. model, which he calls 'laissez-faire fundamentalism,' and the Japanese model. He views the hedge funds as agents of evil, and rails against Julian Robertson and Louis Bacon. Oddly, he doesn't say the same things about George Soros." And, he adds, "a lot of Japanese think he is insane."
Of course we do not agree. Organizing and pushing through policies that result in the insolvency of much of your country's financial system, a collapse of economic growth, and unstable bond and currency markets - and continuing to do so in the face of clear evidence of the error of your methods - is not in itself proof of insanity. It's just another piece of circumstantial evidence, that's all.
Thanks to his position at the Ministry of Finance, Sakakibara is the best known face of Japanese-finance officialdom in the outside world. He likes his newspaper monicker "Mr. Yen," which does sound better than "Mr. Depression." He speaks good English, which as we all know is proof of high competence (hmmm), and stands out from stonewalling fellow officials for his willingness to take definite positions in public.
Sometimes that does not always work to his advantage. Two weeks ago, he opined that in two weeks the financial crisis, "in Japan at least," would be over. I kept quiet about my opinions of Eisuke for a couple of weeks on the chance that he would prove to be right. Not just yet, it would seem.
Part of the problem is that Sakakibara and some of his allies seem to have been kind of ham-handed in their relations with the Bank of Japan. Remember that protecting turf is far more important to any bureaucrat than getting the job done. The BOJ has been independent of the MOF for less than two years. Its bureaucrats, or at least many of them, know that they have to buy up Japan Government Bonds with fresh money to jump-start the system. But they think that if they do so in response to pressure from the politicians and the MOF officials, they'll lose face and independence. So instead the markets get halfhearted non-solutions, such as this week's buying long-dated bonds and selling shorter-dated bonds.
Come to think of it, opera singers and boxers seem pretty sensible in comparison.
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dizard@nypost.com
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