Archive for the Category Japan

 
 

Japan doesn’t have easy money, but it needs it

Sometimes you can only shake your head at the confusion surrounding monetary policy.

The BOJ has a set a 2% inflation target.  While inflation has risen a little bit, it’s still well short of the target.  More importantly, market indicators suggest that Japan is unlikely to hit the 2% target going forward.  Thus this story makes no sense:

“The BOJ’s board members expect that prices will reach 2 percent around fiscal 2019. If this happens, there’s no doubt that we will consider and debate an exit,” Bank of Japan Governor Haruhiko Kuroda told parliament.

Can someone explain to me why the BOJ would believe that inflation will soon hit 2%? Ten-year bond yields are currently close to zero, vs, 2.9% in the US.

With prolonged easing straining bank margins, some analysts have called on the BOJ to raise rates before inflation hits 2 percent, arguing that it was too high a level to aim for in a country that has suffered from two decades of deflation.

If the BOJ tightens policy by raising rates before hitting 2% inflation, within a year or two they’ll be back down to zero.

PS.  Can someone tell me if I’m reading this table correctly?  Are forward discounts on the dollar quoted in basis points?  Does this table imply the 30-year forward dollar is trading at only about 50 yen?

Films of 2017

Let’s hope my life finally hit rock bottom in 2017. (At age 62, fat chance!) I’m looking forward to wrapping up my two book projects by mid-2018, and then starting to actually live again.  Reading books, buying CDs, figuring out how to watch films on the internet.  (BTW, is Netflix as awful as it looks, or am I missing something?  Their selection of good films seems virtually nil.  Where are the good films on the internet?)

Ross Douthat is a brilliant essayist who has a blind spot when it comes to sex.  His newest piece is titled:

Let’s Ban Porn

I’m trying to visualize how this would be implemented.  Perhaps Jeff Sessions will sit in a room all day, screening X-rated art films from France, Italy and Japan, trying to determine whether they are pornographic.  (I say yes, but in a good way.)  What would Jeffrey make of In the Realm of the Senses? There’s an amusing Atom Egoyan film that gets at the internal contradictions of censorship.  If watching porn really does turn us into bad people, as Douthat seems to think, then under his proposed regime the actual censorship decisions will be made by moral degenerates.

Despite the fact that the proposal is silly on many levels, it would not surprise me at all if Douthat wins in the long run.  The US is going downhill in so many different ways—why should this be any different?  [I’m striking a blow against the New Puritanism by topping my list with a film I was not allowed to see.  I liked the previews, and was really looking forward to it.]

In fairness to Douthat, I do see one silver lining in his proposal.  There was a time, way back in the 1960s, when lots of Americans did go to see foreign films.  Especially foreign art films.  That brief golden age occurred at the point in time when we’d liberalized enough to allow in “erotic” Swedish and France films, but not so much as to allow “porn” (Which I define as erotic art films for the working class. Yes, there’s a lot of class snobbery in the new puritanism.)  Once Americans were given access to their own home grown porn in the 1970s, they stopped going to see films by Godard, Bergman and Antonioni.  Wouldn’t it be funny if Douthat got his way, and Americans were once again forced to watch long boring art films, just to catch a glimpse of skin!

2017 Films

I Love You, Daddy.  (US)  4.0  I’m hoping this will be what Woody Allen films should be, but aren’t.  Something a bit more Kubrick-like.

Stalker (Russia, 1979) 4.0 Not just my favorite Tarkovsky, my all-time favorite European film. Geoff Dyer said it best:

it’s not enough to say that Stalker is a great film – it is the reason cinema was invented.

Twin Peaks Part II (US) 3.9 Not as good as part one, but then that was the best TV show of all time. Reminds me of “In the Mood For Love” in the way the director used the posture of actresses in a very evocative way. Check out the scene where Lynch and the two FBI women are out on the porch having a cigarette. Nothing is said for about 2 minutes, and it plays no role in the plot. But it’s stupendous filmmaking—an example of what makes cinema magical. And let’s not even talk about Naomi Watts, who is brilliant throughout the series.

I searched online and found someone else who liked the scene on the porch as much as I did:

http://ew.com/recap/twin-peaks-season-3-episode-9/3/

The series is also a critique of the anti-cigarette hysteria on the rise in America.

Thelma (Norway) 3.7 A very enjoyable Norwegian film, very skillfully directed. Doesn’t break any new ground, but I was engrossed throughout the entire 2 hours.

After the Storm (Japan) 3.7 Another gem from Kore-eda, my favorite living Japanese director. This one is probably worth seeing twice, as there’s a lot going on right below the surface.

Sweet Bean (Japan, 2015) 3.6 Directed by Naomi Kawase, another great Japanese director that I had somehow overlooked. Reminds me a little bit of the style of Kore-eda. A beautiful understated film; the polar opposite of what gets produced in Hollywood these days. Now I need to find her earlier films.

Star Wars: The Last Jedi (US) 3.6 The best Star Wars film since the first two. They finally found a director who is more than just a corporate clone. It still fell short of what it might have been—Mark Hamill is not a good actor and the depictions of alien planets continue to be quite unimaginative.

Intimacies (Japan, 2012) 3.6 A nearly 4½ hour film by the director of Happy Hour. The first half shows people putting together a theatrical production and is pretty slow going. After intermission we see the play itself, which becomes increasingly engrossing. I have no interest in theatre, but I enjoy seeing filmed plays. This is a director to watch.

Full Metal Jacket (US, 1989) 3.6 This uneven Kubrick film is saved by the intense final battle.

The Square (Swedish) 3.6 A film that is full of ideas, and lots of sharp observation, although it doesn’t have the sustained artistic vision of something by Lars von Trier, Kubrick, Haneke, etc. It’s a tweener, but a pretty engrossing 2 ½ hours. In its defense, the satire of the art world and liberalism more broadly is not always as obvious as it might seem. Strongly recommended for people who (unlike me) like their cinema mixed with social commentary.

Brimstone and Glory (Mexican) 3.6 Documentary about a small town in Mexico that puts on a stupendous fireworks festival each year. Imagine the running of the bulls in Spain, except at night with dazzling fireworks.   Soon after the film was completed, many people in this town died in a fireworks accident.

Vanishing Time: A Boy Who Returned (Korea) 3.5 A charming Korean crowd pleaser, which I found myself enjoying more than I expected. The director (Tae-hwa Eom) is someone to watch.

Columbus (US) 3.5 I’m tempted to say that this film is not for people who have short attention spans. But then maybe it’s not about attention spans at all, but rather a question of interest—more specifically it’s for people with an interest in architecture. (The character I stole this line from was the most interesting person in the film, but he only had a small role.)

Blade Runner 2049 (US) 3.5 This is an outstanding film in many ways, especially the visual effects. So why do I rate it slightly below the original? I’m not quite sure. Maybe it’s just a question of originality—the first one had a fresh (and sublime) vision, and this one just recycled that vision. Originality seems especially important in sci-fi. Or perhaps it tried to do too much. The last half hour dragged on, and seemed somewhat pointless.

Lolita (US, 1962) 3.5 This uneven Kubrick film is saved by Peter Seller’s inspired performance. (A warm-up for Strangelove.)   It’s probably unfair to compare the film to the book. Kubrick and Nabokov are very different artists, and hence the film should not be anything like the book. And it isn’t.

David Lynch: The Art Life (US) 3.5 A very interesting documentary about David Lynch. He did not direct the film, but there are moments when it feels like he did. Lots of glimpses of his graphic art.

Blade of the Immortal (Japan) 3.4 The 100th film by Takashi Miike. I’ve only seen two, which leaves 98 to go. Not my favorite genre (lots of blood) but it’s nice to see a real craftsman at work.

Youth (China) 3.3 The sort of film Spielberg would make if he had been born in China. Tries to do too much, but it’s fairly engrossing.  If I were Chinese I’d rate this lower–too emotionally manipulative.

March of Fools (Korea, 1975) 3.2 Interesting coming of age film from a director I had not seen before.

La La Land (US) 3.0 With all the talent in Hollywood, do they really have to rely on so many clichés? Her dream is living in Paris? Even Chinese directors use Prague.

Your Name (Japan) 3.0 This animated feature was a smash hit in Japan. It’s good, but I found it to be somewhat derivative.

The Swindlers (Korea) 2.9 This entertaining film is full of twists and double crosses, but in the end it didn’t make much sense (at least to me.)

Woman of Fire (Korea, 1971) 2.8 At times it’s one of those campy “so bad it’s good” films, at other times it’s somewhat engrossing. And sometimes it’s just bad. Might be of some interest to Tarantino fans.

Baby Driver (US) 2.8 Mildly entertaining, but also rather silly. I would have given it 3.0 rating if the film had ended with Dave Edmunds’ 1970s pop classic “Deborah” playing over the credits. (The two stars kept trying to think of a great pop song with “Deborah” in the title.)

Dreams That Money Can Buy (US, 1947) 2.5 Not very good, but interesting in what it tells us about progress in the cinema. While certain types of films (comedy, drama, noir, etc.) have made almost no progress since the 1940s, visionary film-making improved dramatically between 1947 and 1968, when 2001: A Space Odyssey came out (not to mention Tarkovsky). Here’s what Wikipedia says:

Dreams That Money Can Buy is a 1947 experimental feature color film written, produced, and directed by surrealist artist and dada film-theorist Hans Richter.

The film was produced by Kenneth Macpherson and Peggy Guggenheim.

Collaborators included Max ErnstMarcel DuchampMan RayAlexander CalderDarius Milhaud and Fernand Léger. The film won the Award for the Best Original Contribution to the Progress of Cinematography at the 1947 Venice Film Festival.

Saint Terrorist (Japan, 1980) 2.2 Nihilistic punk filmmaking from Japan. Not my cup of tea.

Abenomics after 5 years

Abe won a massive election victory in December 2012 on a promise of higher inflation.  He was subsequently re-elected in 2014 and 2017, again by a huge margin.  This sort of political success is actually very unusual in Japan, where PMs tend to come and go.  It’s also unusual that he made such a big issue of inflation, in a country full of elderly savers.  (So much for armchair public choice theory.)  So how’s he doing after 5 years, apart from being highly popular?

The most important impact of Abenomics was on NGDP, which had been trending downwards prior to his election:

It’s actually better than this Fred graph shows, as Q2 NGDP was revised up to 544.9 trillion yen, and the third quarter came in at a very strong 549.2 yen.

According to market monetarist theory, strong NGDP can be useful in solving 2 problems, excessive debt burdens and high cyclical unemployment.  Abenomics has been very successful on both fronts.  Unemployment had fallen to 2.7%, the lowest level in 23 years.  And the public debt to GDP ratio has leveled off, after soaring higher at a dangerous rate in recent decades.

The debt ratio achievement is especially impressive given the extremely unfavorable demographics facing Japan:

Normally a rapidly falling population makes the debt situation worse, and also makes it more difficult to boost NGDP.  Abe overcome this obstacle on both fronts.  The boost to NGDP also occurred during a period of fiscal austerity, which of course contradicts the Keynesian model.

The BOJ has an inflation target of 2%, and this is one area where they have fallen somewhat short.  Prices are up about 5% in five years, which is certainly better than the deflation that preceded Abenomics, but well short of success:

Don’t pay too much attention to the year-to-year changes, as the inflation rate in 2014 was boosted by a sales tax increase, and the inflation rate after 2014 was held down by plunging oil prices.  Most forecasters see an inflation rate of just under 1% going forward.  Over at Econlog I explain why that’s still too low, even though the Japanese economy can do fine with 1% inflation.

To summarize:

1. NGDP was a big success

2. The debt situation is dramatically improved.

3. The labor market is far stronger

4. Inflation is higher, but well short of the 2% target.

I’d say that Abenomics deserves a B+ on monetary policy.  I don’t know enough to comment on the other aspects of his policy, although obviously I don’t agree with his nationalism.

PS.  I’d like to thank Ralph Benko for his very generous comments in Forbes.  I still feel pretty good about the prediction I made in “An Even Greater Moderation”, which he links to.

The truth that dare not speak its name (or perhaps two truths?)

There’s a very good new post by Benn Steil and Benjamin Della Rocca that explains why the BOJ does not emphasize the exchange rate channel in their monetary stimulus:

In September 2016, the Bank of Japan adopted a new strategy to boost the flagging Japanese economy: “yield curve control,” or YCC. The aim was to widen the gap between long- and short-term interest rates, by keeping shorter-term (10-year) government bond (JGB) rates at 0%, as a means of encouraging bank lending. . . .

BoJ Governor Haruhiko Kuroda has trumpeted the policy’s success in boosting lending. As shown in the bottom left figure, though, lending did not increase because of the mechanism underlying YCC—that is, a widening of the gap between what banks pay to borrow funds short-term and what they receive from borrowers longer-term. . . .

What happened, then? After YCC was announced, the BoJ’s pledge to hold 10-year JGB rates at 0% pushed bond investors to find yield outside Japan. . . .this caused the yen to fall sharply, which boosted exports. . . .

[S]hortly after Prime Minister Shinzo Abe took office, the Obama administration admonished Japanese authorities for public statements calling for yen depreciation. Abe and Kuroda learned the important lesson that one may only target the exchange rate if one does not speak of it.

Off topic, I don’t often blog on the Lucas Critique.  I wonder if anyone has commented on its applicability to the concept to sexual harassment.  Suppose that over a period of decades society does not take charges of sexual harassment very seriously.  In that environment, there may well be very few false claims of sexual harassment.  However if policy changes in such a way that accusations are presumed to be true, and also result in severe consequences, then the Lucas Critique predicts a sizable increase in false accusations.

That does not mean that harassment charges should not be taken more seriously than in the past, and also result in serious consequences.  (On balance I think they should, despite the Lucas Critique problem.)  Rather it suggests that this is not an easy black and white issue.  There is almost certainly some degree of presumption of guilt that would be counterproductive.  Imagine a world where everyone (and I’m including men, as this group is also sexually harassed fairly frequently) could destroy the lives of anyone they disliked.  No one would want that kind of world, which means that no one who claims that accusations should always be believed is telling the truth.  We are all skeptics, it’s just a matter of degree.

The world (and especially the internet/media) is like a giant high school, where we are all expected to conform to popular belief.  When that consensus changes, we are expected to dutifully fall in line.  I transferred from that high school to utilitarianism when I was in my 20s.

PS.  Here’s Scott Alexander:

About 30% of the victims of sexual harassment are men.

Abe reasons from a price change

Here’s the FT:

Shinzo Abe has demanded Japanese companies lift pay by three per cent next year as he uses his big victory in last week’s election to intensify his push to boost the country’s economy.

The Japanese prime minister’s decision to give a specific number marks a deepening of government interference in private sector wage settlements. Last year, Mr Abe simply called for pay rises at least as great as the year before.

Would higher wages be good for the Japanese economy?  It depends.  If the higher wages are achieved through more aggregate demand, then they might be associated with higher employment.  If implemented via less aggregate supply (as Abe proposes), they will lower employment.

Consider the following two options:

If the BOJ adopts an expansionary monetary policy, boosting NGDP, then the demand for labor will increase.  This will boost growth, increase wages, and employment will rise to point B.

If the BOJ does not boost NGDP but Abe pressures firms into raises wages anyway, then employment will decline to point C.

It’s very demoralizing that top officials in Japan the US and Europe continue to make the EC101 error of reasoning from a price change.  Over and over again.

Why do we even bother teaching EC101 in colleges?  What’s the point?

PS.  Now that taxes are in the news let me agree with Jeff Flake, who is calling for tax reform, not tax cuts.

Tax reform would be one of the very best things the GOP could do right now.  Tax cuts would be among the very worst moves they could make.

It’s often said that the modern GOP exists for one purpose only, to enact tax cuts.  I don’t think people have fully internalized the implication of that truth.  If and when the GOP does enact tax cuts and/or reform, it will no longer have a reason to exist.  Tax reform might end up being a major achievement, or it might not.  But either way the enactment of a major tax bill will mark the end of the modern GOP.  They will no longer have a reason to exist.

I have no idea what will take it’s place.  Perhaps a white nationalist Bannonite party.  National socialists.  But whatever it is, it won’t be the modern GOP—which will be dead.

PPS.  On the graph, I forget to label points B and C as a 3% wage gain.