Re: Yen still overvalued\Japanese "Keynsianism"

["Charles Jannuzi" <jannuzi@xxxxxxxxxxxxxxxxxxxxxxxxx>]

> (BTW, I understand that much of Japan's trade surplus is due to its
economic
> stagnation, at least according to the recent article in MONTHLY REVIEW by
> Halevi and another author.)

I haven't read the article, so this comment doesn't necessarily pertain to
the particular theory they have. However, I've been hearing for over a
decade about how Japan's trade surpluses are a consumption problem. I don't
buy it.

Even as the economy has tanked still further, the trade surpluses have
actually gone down. The trade deficit with China actually decreased
recently, and that, in fact, is a very good indicator that consumption is
down.
>
> If an active Keynesian fiscal stimulus program is failing, that's
> earth-shaking to the Keynesian perspective.
>
> Krugman, who dismisses fiscal stimulus out of hand, never uses the "fiscal
> policy has failed to stimulate demand" line. Instead, he complains about
the
> worthless investment projects the Japanese government engages in (bridges
> that go nowhere, etc.)

Krugman knows nothing much about this. He's just repeating what he has read
in the western press.

I would argue that a seemingly worthless tunnel that links two villages in
rural Japan is ultimately more economically worthwhile than most military
spending. I studied a couple of these seemingly worthless projects and found
something else quite different going on to justify the project. One tunnel
connected two small towns and brought tremendous benefit to the people in
the area in numerous ways, for the handicrafts industries there (one town
was a paper center and the other a lacquerware center). For the farmers,
whose small land holdings were actually scattered and almost impossible to
manage without a better road. Also, one reason why the tunnel was built was
that it was also combined with a major project to make slopes likely to
collapse in the next earthquake safer for all the villages at the foot of
the moutain.

I'm not saying that a lot of money wasn't wasted or inefficiently spent. But
I am saying that just how wasteful or useless a lot of this spending was got
exaggerated.

And you see such boondoggle projects everywhere, they are not unique to
Japan.

Moreover, some of the stupidest projects undertaken were done during the
bubble years, these by consortia of gov't and companies.

Charles Jannuzi