Comment on Richard Katz

Peter Tasker (Arcus Investment)

This article originally appeared in the "Japan-U.S. Discussion Fourm" (http://lists.nbr.org/japanforum) on February 7, 2003: posted here with the author's permission.

In his oped article on inflation targetting, Richard Katz wrote:

"......While many respected economists sincerely believe inflation targeting will help, its most fervent proponents in Japan are the opponents of reform. They want to use inflation to raise the price of stocks and real estate used as collateral for loans. That, they hope will obviate the need for real restructuring at chronic money losing borrowers."

Reluctant as I am to cross swords with the estimable Richard Katz, I do think he has the politics of the inflation targetting debate the wrong way round.

It is not the LDP dinosaurs who have been supporting inflation targetting, but Koizumi supporters such as Taku Yamasaki and of course Heizo Takenaka, who has probably been the keenest proponent of all. Nonaka, Aso, and other heavy hitters amongst the "forces of resistance" have gone out of their way to rubbish the idea. The reason being that they are looking ahead to the post-Koizumi era when all notions of reform have been safely discredited and pork barrel spending can be held up as the one alternative to economic decline. Like the Bank of Japan, they are scared that aggressive monetary policy might actually work.