The Biggest Economic Policy Story In The World Is Happening In Japan

Moneybox
A blog about business and economics.
Dec. 26 2012 1:06 PM

The Biggest Economic Policy Story In The World Is Happening In Japan

158719891
Newly appointed Japanese Prime Minister Shinzo Abe answers a question during his first press conference at his official residence in Tokyo on December 26, 2012. The powerful lower house named the 58-year-old as the country's new leader following a resounding national election victory for Abe's Liberal Democratic Party earlier this month over the booted Democratic Party of Japan (DPJ). AFP PHOTO / TOSHIFUMI KITAMURA (Photo credit should read TOSHIFUMI KITAMURA/AFP/Getty Images)

Photo by TOSHIFUMI KITAMURA/AFP/Getty Images

I wrote at the end of the November about Shinzo Abe's prospects for shaking Japan out of its economic dolrums, and since Election Day in Japan it seems to be working. The yen's been falling on rumors of monetary easing, and the Nikkei put up a week of gains. Then there were two days of givebacks but Christmas and today have seen a return to form—yen falling, Nikkei rising with Abe officially sworn in today and making it clear that he will force the Bank of Japan to ease and produce inflation if necessary.

Scanning Google News I note that most of the western press is focusing on Abe's hawkish foreign policy views rather than his dovish monetary ones. To get a bit speculative, I think there may be a conncection here. Observationally, it seems that fat and happy political establishments have an irrational preference for slow growth, tight money, and balanced budgets. From time to time sheer economic desperation will give us a Junichiro Koizumi or a Franklin Roosevelent but Koizumi didn't last and FDR plunged the country back into recession in 1937 with contractionary policy. Foreign policy crisis is the main thing that drives a national establishment toward heterodoxy and growth. Nobody tried to finance either world war on a sound money basis, and in most respects Keynesian theory followed wartime practice rather than vice versa. And during the Cold War it was very important to elites in the United States and Western Europe to not merely establish that market capitalism could push the production possibility frontier outwards, but that it would actually deliver sustained improvements in living standards and an approximation of full employment.

Advertisement

A perception that between a fast-growing China and a possibly-retrenching USA, Japan is facing a growing national security crisis is exactly the kind of thing that can rouse a country from its dogmatic slumbers.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Culturebox

The End of Pregnancy

And the inevitable rise of the artificial womb.

Doctor Tests Positive for Ebola in New York City

How a Company You’ve Never Heard of Took Control of the Entire Porn Industry

The Hot New Strategy for Desperate Democrats

Blame China for everything.

The Questions That Michael Brown’s Autopsies Can’t Answer

Foreigners

Kiev Used to Be an Easygoing Place

Now it’s descending into madness.

Technology

Don’t Just Sit There

How to be more productive during your commute.

There Has Never Been a Comic Book Character Like John Constantine

Which Came First, the Word Chicken or the Word Egg?

  News & Politics
The Slate Quiz
Oct. 24 2014 12:10 AM Play the Slate News Quiz With Jeopardy! superchampion Ken Jennings.
  Business
Moneybox
Oct. 23 2014 5:53 PM Amazon Investors Suddenly Bearish on Losing Money
  Life
Outward
Oct. 23 2014 5:08 PM Why Is an Obscure 1968 Documentary in the Opening Credits of Transparent?
  Double X
The XX Factor
Oct. 23 2014 11:33 AM Watch Little Princesses Curse for the Feminist Cause
  Slate Plus
Working
Oct. 23 2014 11:28 AM Slate’s Working Podcast: Episode 2 Transcript Read what David Plotz asked Dr. Meri Kolbrener about her workday.
  Arts
Brow Beat
Oct. 23 2014 6:55 PM A Goodfellas Actor Sued The Simpsons for Stealing His Likeness. Does He Have a Case?
  Technology
Technology
Oct. 23 2014 11:47 PM Don’t Just Sit There How to be more productive during your commute.
  Health & Science
Bad Astronomy
Oct. 24 2014 7:00 AM Gallery: The Partial Solar Eclipse of October 2014
  Sports
Sports Nut
Oct. 20 2014 5:09 PM Keepaway, on Three. Ready—Break! On his record-breaking touchdown pass, Peyton Manning couldn’t even leave the celebration to chance.