What can Kan do?
Mixed reaction from major European banks to appointment of Naoto Kan as new Japanese finance minister. ING is pretty scathing, saying the appointment sidesteps a process of change Japan must undertake to avoid further stagnation or a fate far worse.
“PM Hatoyama has appointed someone with no experience in economic management… Mr. Kan takes on the finance minister role without a well documented, deeply considered policy agenda. Here we rely on reports of positions he has taken in the Cabinet, and from public statements on economic management. These suggest his instincts are to pursue a stimulus strategy involving higher government spending; a weaker yen and ultra-loose monetary policy. Mr. Kan appears tone deaf to microeconomic reform or to the threats to financial stability posed by high public debt.”
The implication, ING says, confirms its worries about Japanese government bonds.
Kan’s first big foray onto the stage in his new role, meanwhile, was to talk down the yen. He said many Japanese firms were in favour of dollar/yen around 95 yen, which is a weaker rate for the yen than recently. Barclays Capital found something positive in this.
“His comments may mark a shift of Japanese FX policy towards weakening the JPY, in our view. Such a stance seems to be appropriate for Japan, considering the weak growth prospects, particularly in the first half of 2010, which will see less economic stimulus measures and, therefore, a strong need for exports to push up the whole economy.”
So, a Kan-do or a Kan’t-do kinda guy?