Princes of the Yen: Japan’s Central Bankers and the Transformation of the Economy

563 Pages·2003·3.135 MB·English

by  Richard A. Werner

PRINCES OF THE YEN
Comments on the Japanese edition of Princes of the Yen:
“A powerful work.”
—Eisuke Sakakibara, ex-Vice Minister of Finance
Weekly Economist, Tokyo
“This is no ordinary economics book. Readers will find the curtains pulled away from their eyes.
Given the time scale covered—the whole of the twentieth century—and its broad scope—looking at
central bankers’ actions worldwide—this superb book will make you marvel at how fascinating
economics really is. Richard Werner could see through the Bank of Japan’s smokescreens. The
process of disclosing all these facts step by step is as gripping as a thriller. His analysis has been
highly appraised internationally, being prominently covered in the Economist and read by Federal
Reserve chairman Alan Greenspan.”
—Takashi Tachibana, author of Shukan Bunshun
“This thought-provoking book sheds light on the masterminds of Japan’s economic policies. The
author gives stunning accounts of how a handful of the BoJ’s elite distorted the nation’s financial
policies with a view to reforming the country’s economic structure.”
—The Asahi Shimbun, Tokyo
“The book deals not just with economic problems, but also unmasks the true causes and power
brokers behind those very problems…. It depicts the BoJ princes’ clandestine battle to revive the
‘American-style liberalized economy,’ as it existed in the Japan of the 1920s, and to dismantle the
controlled war economy, which enabled the post-war high growth.”
—The Mainichi Newspaper, Tokyo
“This book makes for a fascinating read. Werner says the claims by the BoJ that they are doing all
they can to stimulate a recovery by lowering interest rates are ‘just not true.’ He goes as far as
including a mafia-like list of names and provides evidence about how Sasaki, Maekawa, Mieno and
soon-to-be installed Toshihiko Fukui have in an unbroken line been trying to control Japan. I first
met the author of this thought-provoking book eleven years ago. He already was a famously
accurate strategist, using his analysis to forecast stock market movements with a high degree of
precision.”
—Kiyoshi Imai, Professor of Economics, Tokyo
“Legitimate criticism of the Bank of Japan.”
—Kazuo Ijiri, Voice, Tokyo
“We are all baffled at why on earth Japan’s recession has continued for over ten years. Countless
scholars have come and gone explaining the causes and remedies for the recession. We should
seriously heed this author’s warnings.”
—Yoichi Masuzoe, Member of the House of Councilors,
Professor of International Politics
Denki Shinbun, Tokyo
PRINCES OF THE YEN
Japan’s Central Bankers and the
Transformation of the Economy
Richard A. Werner
First published 2003 by M.E. Sharpe
Published 2015 by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
711 Third Avenue, New York, NY 10017, USA
Routledge is an imprint of the Taylor & Francis Group, an informa business
Copyright © 2003 Taylor & Francis. All rights reserved.
No part of this book may be reprinted or reproduced or utilised in any form or by any electronic,
mechanical, or other means, now known or hereafter invented, including photocopying and
recording, or in any information storage or retrieval system, without permission in writing from
the publishers.
Notices
No responsibility is assumed by the publisher for any injury and/or damage to persons or property
as a matter of products liability, negligence or otherwise, or from any use of operation of any
methods, products, instructions or ideas contained in the material herein.
Practitioners and researchers must always rely on their own experience and knowledge in
evaluating and using any information, methods, compounds, or experiments described herein. In
using such information or methods they should be mindful of their own safety and the safety of
others, including parties for whom they have a professional responsibility.
Product or corporate names may be trademarks or registered trademarks, and are used only for
identification and explanation without intent to infringe.
Library of Congress Cataloging-in-publication Data
Werner, Richard A., 1967 –
Princes of the Yen : Japan’s central bankers and the transformation of the economy / by
Richard A. Werner.
p. cm.
“An East Gate Book.”
Includes bibliographical references and index.
ISBN 0-7656-1048-5 (alk. paper); ISBN 0-7656-1049-3 (pbk. : alk. paper)
1. Banks and banking, Central—Japan. 2. Monetary policy—Japan. 3. Japan—Economic policy
—1945- I. Title.
HG3326 .W476 2003
332.1′1′0952—dc21 2002030900
ISBN 13: 9780765610492 (pbk)
ISBN 13: 9780765610485 (hbk)
To Romi
Contents
List of Tables and Figures
Preface
Acknowledgments
Acronyms and Abbreviations, Note on the Representation of Personal Names
1. Japanese Lesson
2. The Total War Economy
3. Winning the Peace: An Economy at War
4. The Alchemy of Banking
5. Credit: The Economic High Command
6. The First Bid for Central Bank Independence
7. Japan’s First Bubble Economy
8. Mysterious Money: The Ebb and Flow of the Yen
9. The Great Yen Illusion: Credit Bubble and Bust
10. How to Prolong a Recession
11. The Battle of the Yen
12. At the Trigger of the Gun
13. The Princes of the Yen
14. The Goal of Monetary Policy
15. Back to the Future: The Return of U.S.-Style Capitalism
16. Reflation: Another Miracle in the Making
17. The Asian Crisis and the Central Bankers
18. More Power to the Princes
19. The Revival of the Reichsbank
Appendix: Japanese Fiscal and Monetary Policies in the 1990s
Notes
Bibliography
Author Index
General Index
About the Author
List of Tables and Figures
Tables
12.1 Window Guidance Loan Growth Quota (WG) versus Actual Loan Growth, 1974–1991
13.1 Bank of Japan Governors and Deputy Governors
13.2 The Six Postwar “Princes”
A.1 Estimation Results of GDP Model
A.2 Estimation Results of Private Demand Model
Figures
9.1 Bank Lending to the Real Estate Sector and Land Prices
9.2 Credit Creation Used for GDP Transactions and Nominal GDP in Japan
9.3 Net Long-Term Capital Flows and Bank Lending to Real Estate Firms
10.1 Bank of Japan Credit Creation
11.1 Yen/U.S.$ Rate and U.S.-Japan Interest Differential
11.2 Relative Credit Creation by Federal Reserve and Bank of Japan and the Yen/U.S.$ Rate
11.3 Credit Creation by Bank of Japan and Federal Reserve
12.1 Bank of Japan Window Guidance and Actual Bank Lending Three Months Later
15.1 Japanese Real GDP Growth
15.2 Import Share of Manufactured Goods
15.3 Articles with Keyword “Amakudari” in the Nikkei Newspapers
15.4 Articles with Keyword “Foreign-Domestic Price Differential” in the Nikkei Newspapers
15.5 Articles with Keyword “Deregulation” in the Nikkei Newspapers
16.1 Japanese Banks’ “Other Assets”
A.1 Ten-Year Government Bond Yield and Call Rate
A.2 Credit in the “Real Circulation” and Nominal GDP
A.3 Private and Government Demand
A.4 Bank of Japan Credit Creation and Call Rate
A.5 Fiscal Stimulation Funded by Bond Issuance