Yuan must be revalued

I’m quite sorry that the US-China Strategic and Economic Dialogue finished all the program but not to discuss deeply the renminbi flexibility.

Since the financial meltdown in 2008, China has adopted a dollar-peg policy to stabilize its economy. But this policy has been accused as a beggar-thy-neighbor policy by the US and EU, as well as as a unfair exporting policy by other developing countries that competes with China in exporting goods and services to developed countries.

Other policy issues have made the US reluctant to exert pressures on China on this issue. Treasury Secretary Timothy Geithner deferred the publication of a currency report to the Congress that was supposed to be unveiled in April, mainly because the US feared that it couldn’t get a support from China on the sanction on Iran in the UN Security Council. At this time, I suppose, the US need to get support on other important issues such as the stabilization of the European financial market and the security in the Korean Peninsula so that the US wasn't harsh on the currency issue.

But I think it is a good time now to consider the revaluation of the Chinese renminbi. The dollar has been relatively rising so that the revaluation of the renminbi is not so risky for Chinese economy. In other words, if China doesn’t let the renminbi more flexible, the currency policy will be really unfair so that it deserves the criticism above.

Some thoughts on decision making in the Japanese Government

I’m back to write again in this blog. During the semester, I was too busy to write an article, but I have a plenty of time now. A bunch of events that have interested me happened - such as the European debt crisis, IMF’s suggestion that Japan should raise its VAT, Prime Minister Hatoyama’s decision on the relocation of US marine base in Okinawa, and so forth. Today I’m writing some thoughts on the US marine air base relocation problem.

I’m sorry that Prime Minister Yukio Hatoyama has just confused this problem. It seems to me that he tells his thought without thorough consideration. He might not have realized the importance of the US-Japan alliance and the strategic importance of US base in Okinawa to maintain security in East Asia. I think it’s not a bad thing to review decisions that was made in the former administrations, but it’s totally ridiculous to make policy direction public without some review and negotiation. As a result, he decides only slight adjustment to the current relocation plan. His remarks so far have just undermined the relationship between the two nations and got on Okinawan nerves.

Moreover, decision making process within the government has got childish after the DPJ took office last summer. Ministers express their opinions without harmonizing views within the cabinet and the party. Some argues this process is more transparent, but I think it indicates the DPJ’s inability to talk with one voice. It is also the lack of responsibility.

I sincerely want the DPJ to make decision in a considerate manner; otherwise the party will be likely to lose upper-house election this summer, which will cause again a divided government and disturb all the important decision making in Japan.

Cultural difference

I do not watch TV these days. Of course, when I was in Japan, I watch TV sometimes, but I stop watching TV in the US, because I think it is time-consuming and it costs here. Anyway, I heard from my friend that Toyota delivers commercial message on TV, where it admits its failure of braking system and apologizes for it. It seems to me that it is common and natural for Japanese companies to do in this way, but to my friend it is awkward. He has never seen before such an ad. What causes this gap?

This difference might come from the difference of law system between in two countries. In Japan, it is not usual to sue this kind of company as long as it apologizes and responds in a sincere manner. In the US, however, you sue it to recover your loss! The US enterprises, therefore, tend to respond to its failure without apologizing, at least in public relations. What a cultural difference! This Toyota’s TV commercial would expose it to the risk that it will not deny its responsibility in the US court.

My friend thinks that this ad would improve its image to the general public, but it is risky. I am very interested in how US people will respond to it.

Accord Required

Today President Obama and leading lawmakers from both Republic and Democratic Party met in the White House, looking for a chance to cooperate on main political issues. After the loss of Massachusetts Senate seat last month, it is substantially impossible for Democrats to pass bills as they want.

I support Obama’s intention on healthcare overhaul. It’s kind of ridiculous to lose your coverage whenever you lose your job, especially considering that US employment market is highly liquid. But I think Democrats have to put greater importance on bipartisanship even before losing super majority in the Senate. Of course, the attitude of Republican have not been also cooperative, but Democrats have relied heavily on their super majority, thereby irritating the nations.

There still seems to be big difference on Obama’s agenda between both parties, but I hope this summit would help the US politics go forward.

Happy e-mail!

I have got admission to the Applied Economics program at my university as a dual degree student! From next term, I have to study much harder…but it is a great chance to study economics. Anyway I am happy and really relieved with this news!

G-7 goes less official!

I was really surprised by the fact that the G-7 finance ministers meeting goes less official. The G-7 members held only a joint press conference at Iqaluit, and they didn’t present communiqué.

Yes, it’s an undeniable fact that the G-7 member countries have lost their dominant power in the world, especially after the global financial crisis. The G-7 meetings were overshadowed by the G-20. As the paper prepared for the press conference by the G-7 shows, however, the G-7 can mobilize quickly in a crisis, share views relevant to rich nations, act as a forum to discuss development and serve as a catalyst for ideas to be discussed by the G-20.

This style change might aim at a revival of closed but substantial talk among the G-7 countries as currency mafias, as it was before the Plaza Accord. If this is the case, it is important to think about how to treat the Chinese renminbi, i.e. whether this forum includes China.

The Chinese economy has been growing faster and constituted an important fraction of the world economy. But the renminbi is not a hard currency and under heavy management. Moreover, the size of the Chinese economy itself has become huge but the GDP per capita is still low, which means it is still a developing country. It seems to be difficult for this forum to include China.

In my view, the G-7 members should serve as an important role of leading discussion in the G-20, as shown in the former document. The G-20 meeting, including China, will treat a broader issue, so the G-7 meeting is forced to change its role.

US unemployment rate was improved, but…

The US unemployment rate fell sharply to 9.7% last month, from 10% in December. As well, a broader unemployment rate, which includes those who want to work but have stopped looking for, declined to 16.5%, from 17.3% in December.

This statistics is a sign of hope. But is US economic recovery for certain? Another survey shows that 20,000 jobs were eliminated last month, which contradicts with the fact of job recovery. We can’t be relieved with this sign of hope. We need to observe deliberately US economy to judge whether it is on the right track.