Looking Optimistic Side Only

 “I don’t swing between joy and sorrow along with ups and downs of stock market.” That has been the ordinary comment of Prime Minister on the market affected by politics. This Prime Minister is different. “Stock market proved that my policy is correct,” says Shinzo Abe. He looks so confident on his handlings of economics that he ignores the inferiority of the inflation targeting.

Encouraged by current trend of rallying in Tokyo Stock Market, Abe is getting even arrogant in his comments at the parliament. “There is no golf player who uses patter in a guard banker, being afraid of deep valley behind the green,” told Abe in a discussion at the Budget Committee of the House of Representatives, when he explained former policy as ridiculously incorrect and his inflation targeting policy as appropriate. Though one can remember Tiger Woods sometimes use a spoon in his approach shot around green, it is obviously too extreme to argue patter in a banker.

The Minister of Finance, Taro Aso, also defended Abenomics with an extreme example. “I have an experience to live in Brazil for a year. At that time, that nation suffered from hyperinflation. Prices of commodity in the morning had gotten unbelievably high in the evening. That can not happen in Japan,” in the discussion at the committee.

Although political leaders insist that there are a number of economies which introduced inflation targeting policy, all of them except Japan is targeting lower level of current price. To get rid of deflation, Japan is targeting the price to stabilize at a higher level than now. Abe names the policy “the great unprecedented effort in economic history.” Good luck, prime minister.

But, everybody now has a question; “How do you control the price when it gets uncontrollably high?” Abe’s answer is “That is the job of the Bank of Japan.” That meant he had no idea on it. Oh, are you serious, prime minister?

There are skepticisms on Abe’s inflation targeting policy. Akihiko Reizei, a Japanese novelist living in US, raises at least two points in his blog. One is the possibility of shifting US monetary policy from quantitative easing to monetary tightening. Quoting Bernanke’s skepticism on continuous supply of liquidity, Reizei indicates the end of cheap-dollar policy early in 2013. Another possibility is revaluation of Renminbi, as a diplomatic card of China toward US. If those two elements come at a time, the value of Japanese yen may be tumbling down, he warns.

The target has been changed in Abe’s words. He set the target from 2 to 3 percent last fall. Now he says 2%, and denies 3% target as too high. Currently he upholds “within two percent.” So it is crystal clear that the prime minister is thinking only raising commodity price and ignores the impact of his policy.