Any doctors in the house?Koichi Hamada, professor emeritus at Yale University, is lauded as the architect of “Abenomics,” a vigorous mix of fiscal and monetary policies aimed at ending Japan’s deflation and its lost decades and reviving the glory of Japan Inc. Critics of the ultra-loose and profligate monetary policy sarcastically address him as the ringleader of followers chasing a bubble to be blown up by Abenomics, which happens to have sent stocks to multiyear highs and the local currency to multiyear lows.
A longtime critic of the hapless attempts of previous governments and central bank leaders to fix and rejuvenate the moribund economy, Hamada helped shape economic policies for Abe when he was running for the prime ministership for the second time last year. He now serves as nonpermanent special adviser to the Abe cabinet, traveling across the Pacific to help expedite his set of prescriptions to re-inflate the economy.
Hamada became acquainted with Abe while working for a think tank run by former foreign minister Shintaro Abe, who is Shinzo Abe’s father.
Hamada’s name may not be familiar in Korea but he has been dubbed the most promising candidate among Japanese scholars for the Noble Prize in Economics. His books diagnosing the problems of the Japanese economy and suggesting prescriptions to save it are bestsellers in Japan. Their author enjoys celebrity status in Japan.
His prescriptions are not that difficult: Push the Japanese economy out of deflation through a bold quantitative easing policy and reverse the steep appreciation of the yen. Born in 1936, when British economist John Maynard Keynes published his landmark “The General Theory of Employment, Interest and Money,” Hamada is a self-proclaimed champion of Keynesian theory, which advocates a mixed economy with a greater role for the government and public intervention during times of recessions or economic slowdowns.
Hamada argues that Japan will be safely out of its deflationary spiral when annual inflation of 2 to 4 percent is attained. Critics warn that would actually spell stagnation.
Above all, Hamada’s prescriptions clashed with the judgements of Masaaki Shirakawa, a former governor of Bank of Japan who was forced to retire before his term ended after Abe took office.
Hamada and Shirakawa shared the same ideas when they were teacher and student but now stand poles apart. Hamada recalled that he was impressed by Shirakwa’s brilliance while he was teaching at the University of Tokyo. The economist, frustrated with the over-timidity and inactivity of the central bank, sent his book “Japan’s Bubble, Deflation, and Long-term Stagnation”(2010) to recommend a much bolder monetary policy.
Shirakawa returned the book to his former teacher with the polite yet tart reply that he would buy the book if he wanted to read it. Hamada became more outspoken in criticizing Shirakawa after that, calling him “a canary that forgot how to sing.” The teacher and his pupil have become public enemies to one another.
Hamada encourages Japanese authorities to go all-out and use “all the policy measures imaginable” to generate momentum to save the Japanese economy as if it was their last chance. He urges them not to care about the “beggar-thy-neighbor” criticisms from countries affected by the weaker yen. According to his belief, currency wars are the prerogative of every country with something to gain and the means to fight them. His clear-cut rhetoric and slogans are refreshing to the ears of far-right groups in Japan. They promise greatness again. The conservative media and publishing houses are busy hyping his doctrine of a phoenix-like rise.
But Hamada should not be confused with the simple-minded and radical Abe. His prescriptions may come across as simple and rough, but they nevertheless originate from long study and experience. Hamada survived fierce debates in the rough and tumble world of economists. He has all responses at the ready about concerns over hyper-inflation or a second Japanese asset bubble.
Economics is different from physical sciences. It can’t be lab tested. It’s hard to tell whether measures will work until they are tried. And damage can be done.
But one thing is for sure: Abenomics has succeeded in reversing the gloomy markets in Japan. Shares are hitting multiyear highs and private spending also is picking up. Some are already coming up with a forecast that the Japanese economy will perform better than Korea’s - for the first time in 15 years. That explains why Abe enjoys a remarkable popularity rating of 70 percent or more.
We do not necessarily have to have economic growth higher than Japan’s. That comparison doesn’t have much meaning. Shares can come down as quickly as they climb. What we envy, however, is Japan having a passionate veteran economist who will defy any criticism for the sake of shaking awake a comatose economy.
Here at home, our president and politicians are still discussing an ambiguous concept of trying to make a “creative economy” and taking their time about it while boosting welfare spending like advanced economies. Meanwhile, the real economy is sinking fast. Is there a doctor in the house?
* The author is an editorial writer of the JoongAng Ilbo.
by Nam Yoon-ho