Mr. Koji Omi, the new Finance Minister of Japan in the Abe government, judging first from the fact that he’s not a graduate of the University of Tokyo, that has heretofore supplied Japan with the bureaucrats that begat the deflation of the late ’90s and early ’00s, we might have a good thing. From his first few comments too, he seems to be on the right track… and this despite the fact that he has been a lifelong civil servant, having left university and having gone directly into the Ministry of International Trade and Industry, where he spent a goodly portion of his early career, and then when he went into the Diet back in ’83, where he’s held a seat ever since.
The one very worrying thing about him is that he has argued long and hard for an increase in the consumption tax in Japan in order to try to attempt to balance a terribly imbalanced budget. For those of us who were around for the last rise in the consumption tax and the almost immediate affect on public moral and the economy, we know this is a major concern. Thankfully, his boss, Prime Minister Abe takes a much different approach, believing that spending cuts are more reasonable and far better economics. That, however, is another item for another day. Omi made some interesting statements recently regarding deflation, which as been Japan’s bane for years. Speaking last week, Mr. Omi minced few words when he said that the battle against deflation is over; that deflation is vanquished and that Japan’s monetary authorities can turn their focus upon other concerns. As he said,
“Judging from the current state of the economy, we can declare Japan’s deflation over. I think it is a bit unnatural not to do so now… [for] the economy has improved so much”
By all accounts, he’s right. Corporate profits are rising; employment circumstances are getting better; the price of real estate has stopped falling and is in inner Tokyo especially, beginning to rise. Omi is right; it is “unnatural” not to admit that the deflation is over. Deflation is dead!