Repost! The stock market plunge was a fiasco caused by the Ministry of Finance and the Bank of Japan

The following is from Yoshiko Sakurai's serialized column in the latter section of Shukan Shincho, released yesterday.

This article also proves that she is a "national treasure," as defined by Saicho, the supreme national treasure.

It's not just for the people of Japan, but for a global audience, making it a must-read for anyone interested in the world's affairs.

This paper, in particular, word for word, is a must-read for all Japanese citizens.

Therefore, I dare to urge everyone to read it closely, with as many passages as possible as the title.

To complement Mr. Sakurai's efforts, I present a photograph of a landscape I captured yesterday, a visual representation of Japan's national treasures.

 

The stock market plunge was a fiasco caused by the Ministry of Finance and the Bank of Japan.

Stock prices crashed in the Tokyo stock market beyond Black Monday.

The Nikkei Stock Average dropped 2,216 yen on Friday, August 2, and fell another 4,400 yen or more on Monday, August 5, to below 32,000 yen.

Prime Minister Fumio Kishida has expressed concern about the yen's depreciation.　

The market upheaval immediately made me think of those who invested using the new NISA (New Small Amount Investment Exemption Scheme), which the government launched with much fanfare in January of this year.

The government encouraged people to shift their focus from savings to investments by exempting investment income (gains on sales, dividends, and distributions) from taxes, and 7.5 trillion yen was invested over the past six months. According to data from the Financial Services Agency, as of the end of March, NISA accounts exceeded 23.22 million.

At a rough estimate, this means that one out of every five Japanese has invested in NISA.

The most significant number is in their 40s, followed by those in their 50s and 30s, with a substantial number in their 20s.

The younger generation has to raise and educate their children, while the middle-aged have mortgages and parents to care for.

The Kishida administration, encouraging these people to invest in NISA, may now effectively remove them from the ladder.　

NHK, Asahi Shimbun, Nihon Keizai Shimbun, and other newspapers reported that the decline in Japanese stock prices was due to a sharp drop in the major stock indexes in the U.S. stock market.

The series of reports has taken the Ministry of Finance's commentary and ignored the errors in the Japanese government's policies.

Etsuro Honda, a member of the planning committee of the National Institute for Basic Studies (NIKK), one of the fathers of Abenomics, and a former counselor to the Cabinet Secretariat, pointed out that, "In addition to the impact of the U.S. market, the U.S. economy has also been affected by the fall in the price of rice in the evening."　

In addition to the influence of the U.S. market, it would be reasonable to assume that the policy announcement by Bank of Japan Governor Kazuo Ueda was a significant factor in the evening."　

On July 31, Ueda announced that the policy rate would be raised from 0.1% to 0.25% and that new purchases of government bonds would be gradually reduced from the current ¥6 trillion per month to ¥3 trillion at the beginning of next year.

He added, "The rate hike will not have a significant negative impact on the economy," and "The idea is to continue to raise interest rates. In doing so, we are not particularly conscious of the 0.5% barrier," he said.

Negative Impact　

"He suggested that there would be a rate hike above 0.5%, so that should go without saying. The timing was also terrible. Inflation in the U.S. has begun to subside a bit, and the Federal Reserve is poised not to raise interest rates any further. Then, the BOJ raised interest rates and even mentioned the possibility of further rate hikes. If the interest rate gap between Japan and the U.S. narrows, investment money will naturally move toward the yen, and the yen will strengthen," said Honda.　

The Japanese economy has recovered under the Abenomics program launched by Prime Minister Shinzo Abe.

However, Mr. Honda continued, saying the economy has not yet entirely escaped deflation.　

"Although there was a significant wage increase during the Spring Struggle, real wages have remained negative for the past 26 months. Real GDP growth has also been negative. However, the BOJ expects wages to continue rising. For example, Deputy Governor Shinichi Uchida believes that the BOJ can achieve a price inflation rate of 2% next year and the year after. The BOJ can automatically end deflation through demand-pull (prices rise with increased demand). "

That is too optimistic.　

Both the Bank of Japan and the Ministry of Finance and Mr. Kishida, under the influence of the Ministry of Finance, dislike a weak yen.

However, the former cabinet counselor who supported the Abenomics policy believes that there is no need to reverse the cycle of increased corporate profits, higher wages, and rising stock prices.

To begin with, the Bank of Japan and the Ministry of Finance have left the nation and its people in the cold of a low-growth economy for an uncanny number of years.

They vehemently resisted when Prime Minister Abe promoted a reflationary policy to overcome deflation.

Now that Abe is gone, they are again trying to return to the fossilized P.B. (primary balance) equilibrium.　

Mr. Kishida said he will continue the Abe line, including Abenomics.

The first step is a complete break from deflation. 

Still, Kishida, who has watched the latest policy decisions by the Bank of Japan and the Ministry of Finance from the sidelines, has not conveyed his desire to end deflation.　

He said, "Even though he says in words that he will continue the Abe line, I think Mr. Kishida wants to do something different from what Mr. Abe did. One example is the selection of the Bank of Japan's advisory board members. Mr. Abe recommended Mr. Toshihiro Nagahama, a reflationist. Mr. Kishida chose Mr. Hajime Takata. The Ministry of Finance recommended him and is negative about reflationary policies," said Mr. Honda.　

Hideo Tamura, a member of the National Institute of Economic Research Y.K. and special reporter for the Sankei Shimbun, is concerned about the negative impact Ueda's comments could have on the U.S. and other international communities.

At the press conference, Ueda referred to "a weaker yen, higher import prices, and upside risks to prices.

The Wall Street Journal (WSJ) editorialized on the right's remarks, commenting, "Mr. Ueda has become the only principal central bank official to admit to being concerned about the exchange rate."

Fiscal authorities essentially have the role of correcting the exchange rate, and monetary authorities must refrain from intervention.

 

Apologize to the people.　

"Trump has been a strong critic of the yen's weakness, and the WSJ noted that the U.S. Treasury Department has added Japan to its watch list of currency manipulators, noting that the trade issues on Trump's mind are tied to those of the 1980s and 1920s, and then concluded that a second Trump administration would address the currency issue The 1980s was a time when the U.S. suffered from a considerable trade deficit and the Plaza Accord forced Japan to adopt a policy of sharp yen appreciation, which robbed Japan of its surplus.

In the 1920s, the U.S. triggered the Great Depression.　

Mr. Ueda has been so preoccupied with correcting the yen's weakness that he may have forgotten that it is taboo for monetary authorities to touch foreign exchange," Tamura said.　

Fiscal and monetary policies are moderately challenging to understand.

Yet what is clear is that the Ministry of Finance has failed to grow our economy for almost 30 years.

Their policies were fundamentally wrong.

As a result, our GDP has been crawling on the ground and unable to keep up with the steady growth of other major countries.

Starting with Ryutaro Hashimoto and continuing through to Yoshihiko Noda after the change of administrations, all successive prime ministers have been constrained by the Ministry of Finance's insistence on fiscal balance, which has stifled economic growth.　

The Ministry of Finance and the Bank of Japan must first admit to the errors of their policies.

Apologize to the people.

Then, they should draw a bright outlook for enriching people's lives and strengthening the economy.　

One example is the aforementioned stock prices.

Some people call 40,000 yen a bubble, but the price-to-earnings ratio (PER) is 16 to 17 times, almost the same as 15 times, which is considered appropriate.

Looking back to the bubble era, when the price was around 70 times, there is no need to think that 40,000 yen is more than Japan can afford, nor is there a need to rush to correct the yen's depreciation.

You should have more faith in Japan's strength and think of ways to develop that strength and protect the lives of the Japanese people.

 

August 8, 2024 in Fukuyama