Comment
Hayami
will go, and even if Koizumi fail, it is "okay".
May 4, 2001
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Some time back, we painted two scenarios for Japan when BOJ governor initiated the end of ZIRP or Zero Interest Rate Policy. See "Japan navigates dangerous waters", August 17, 2000 The external environment has conspired against Hayami's strategy. But what if the global environment had been more supportive? Hayami move to end ZIRP would be correct. Unlike Greenspan (to some the jury is still out on him), Hayami miscalculated, but in view of contributing to Japan eventual recovery, she is not worse off. Unfortunately, life is not played this way. Whilst observers are concentrating on data releases, modeling scenarios based on articulated reform policies, it may be useful to point out that the ranks of reformers are growing. So in the event that Koizumi turned out to be a disappointment, this would be temporary. On reform, the train has actually left the station. The question is how fast it is running down the track and what naughty means vested interests are using to de-rail it. Meanwhile foreign investors would return to Japan, and as we said earlier, we expect the yen not to weaken remarkably. It may even strengthen on the back of foreign optimism. You see, there will always be many fund managers who behave like traders especially when they can convince their clients when they loose money that Japan a sure bet in the long run. Interestingly, the Japanese themselves are not so confident.
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