Summit Notebook
Exclusive outtakes from industry leaders
Short-term hopes, long-term gloom
By Tomasz Janowski
Optimism that Japan’s economy will bounce back from a post-quake slump and pessimism about its long-term prospects is the prevailing message of economists addressing the Reuters Rebuilding Japan Summit.
The reasons for the near-term optimism are well known: strides made by Japanese manufacturers in restoring production and supply networks ripped apart by the March 11 earthquake and tsunami and expectations that sooner or later hundreds of billions of dollars spent on rebuilding the ravaged northeast coast will grease the wheels of the stuttering economy.
There is also little doubt about what has been holding back Japan, which has been in and out of deflation and recessions over the past decade.
Its society is aging faster than any other nation, the productive (and consuming) population is shrinking, its manufacturers keep shifting operations abroad where wages are lower and markets grow and its debt burden makes it impossible for Tokyo to engage in any grand-scale pump-priming.
Now, one can also add concerns that a shift away from nuclear power will bring higher costs and doubts about reliability of electricity supply and possibly accelerate the hollowing out of the manufacturing sector.
Suntech eyes Japan growth
By Leonora Walet
Suntech Power may be the world’s biggest solar panel maker but it trails Sharp, Kyocera, Panasonic and Mitsubishi Electric in the fast-growing Japanese solar market.
Now, the company is set to take on these Japanese rivals on their home turf and aims to double its market share in the country to 10 percent next year.
The catalyst? The expected adoption of a special tariff, now being discussed by lawmakers, on power from solar panels to lure investors to bigger projects.
Japan’s ambitious plan, if implemented, to get solar panels on the roofs of every new building would of course also give the market a hefty boost.
“We need to take market share from the top four. Our immediate goal is to pass Mitsubishi,” Yutaka Yamamoto, Suntech Power Japan president, told the Reuters Rebuilding Japan Summit in Tokyo.
Perils of disaster fixation
By Tim Kelly
Fixated on reviving the shattered northeastern seaboard, Japan risks neglecting growth in the rest of the economy, warns Takeshi Niinami, CEO of Lawson, Japan’s second-biggest convenience store operator.
“The question is what do you do about the other 95 percent of the economy,” Niinami told the Reuters Rebuilding Japan Summit in Tokyo.
His remedy: throw Japan open to the rest of the world and deregulate, policies more in vogue before Japan’s March 11 earthquake than since.
Niinami wants Japan’s politicians to rediscover their pre-quake appetite to thrust Japan into trade pacts either with Southeast Asian economies or the Trans-Pacific Partnership, a policy that Prime Minister Naoto Kan enthused about at the start of the year but since March 11 has dropped.
Opening up Japan is not just about letting foreign people, ideas and capital in, he says, but also about companies moving out.
Hard road on Japan’s nuclear policy
By Kevin Krolicki
Suddenly Taro Kono doesn’t look like quite the lonely maverick in Japan’s Liberal Democratic Party.
Kono, a member of the lower house of parliament, has been an unrelenting critic of Japan’s pursuit of nuclear power since he was first elected in 1996. That made him an odd fit with the LDP, which ruled Japan almost continuously from the mid-1950s to 2009 and put nuclear power at the center of Japan’s energy policy.
“For the past 15 years, it has felt like Taro Kono against the LDP,” he told the Reuters Rebuilding Japan Summit.
But since the Fukushima Daiichi accident triggered by the March 11 earthquake and tsunami, Kono’s call to scrap nuclear in favour of renewable energy and conservation has moved from the fringe to something closer to the mainstream of political opinion.
About 50 lawmakers attended a recent study group he sponsored on energy policy, out of 722, and Kono sees a prospect for a kind of “green alliance” between sympathetic LDP lawmakers and some in the Democratic Party of Japan.
Ag committee chair says new faces mean new dynamic on Capitol Hill
They are new, enthusiastic and changing the environment on Capitol Hill.
House Agriculture Committee Chairman Frank Lucas says “do not underestimate the effect” of the large number of freshmen lawmakers on his committee, which will sit down to overhaul U.S. farm subsidies next year.
“This session of Congress is a little different from the ones I’ve participated in previously. A huge number of new members,” Lucas said at a Reuters Global Food and Agriculture Summit. “I’ve got a very enthusiastic bunch of new faces.”
It turns out that half of the House Agriculture Committee is new — 16 of 26 Republicans and 7 of 20 Democrats.
“Now, granted, freshmen Democrats are hard to come by,” he said, not missing a beat in taking a swipe at Democrats who were pounded in the November elections and lost control of the House of Representatives to Republicans.
“So literally 23 of the 46 members of the committee — no committee experience, no Farm Bill experience. It’s a slightly different dynamic as we go through the course of this year and next year,” Lucas said.
He said the large number of newbies will allow a focus on some issues that would perhaps have been more difficult if there were more senior members on the committee, with their own favorite causes. “It gives me an opportunity, with a very enthusiastic bunch of fresh faces, to conduct a lot of very necessary oversight on the committee this year.”
CFTC’s Gary Gensler just one of the “Little Monsters”
Christopher Doering found there is more to the CFTC chairman than markets.
When he’s not scaring Wall Street and big banks to make sure they follow the rules, there’s a chance the head of the U.S. Commodity Futures Trading Commission is moonlighting as a “Little Monster.”
The haunting moniker, used by American pop singer-songwriter Lady Gaga to describe her fans, aptly applies to the hard-working Gary Gensler who was among the thousands of fans who attended the popular performer’s show in Washington last week.
“Do you want to know how Lady Gaga was?” he asked reporters at the Reuters Future Face of Finance Summit.
“It was terrific. It was really terrific,” said Gensler. He did not go to the show with his three daughters, but shied away from identifying his concert-going companion(s).
“She’s a great vocalist. She really is … savvy performer,” he said of the 24-year-old known for her monster hits such as “Just Dance” and “Poker Face.”
Photo credit: Reuters/Lucy Nicholson (Lady Gaga at the Grammy Awards in Los Angeles, Feb. 13)
Bank regulator Walsh has pragmatic philosophy on financial crisis repeat
John Walsh has spent many years in Washington — having worked at the Senate Banking Committee, the Treasury Department, and now as acting Comptroller of the Currency — and has a bit of perspective on government reaction to crises over the years.
So he has a fairly pragmatic philosophical approach on whether U.S. efforts will succeed in making sure the financial crisis does not recur.
“It is hubris to imagine that we can anticipate all the things that can go wrong and prevent them. That has never happened in human history, I don’t know why it would happen here,” Walsh said at the Reuters Future Face of Finance summit.
The Dodd-Frank set of Wall Street reforms includes components that are “on point to try to avoid such a thing happening again,” he said.
The Federal Reserve and other bank regulators are “absolutely right” to add liquidity during a crisis, but that is different from having an expectation that large financial institutions must be saved from failing, Walsh said.
“It’s that challenge of trying to figure out who’s the dead guy in the crowd as the whole boat seems to be headed for the bottom — how do you keep the boat afloat but still weed out the bad actors on the boat that have gotten themselves into insolvency?” he said.
And with a bit of a twist on philosopher George Santayana’s famous saying, Walsh adds: “Those that have studied financial history know we’re doomed to repeat it.”
Senator Reed sees need for speed to chase bad guys
Ann Saphir takes a look at Senator Jack Reed’s comments on cars and trading.
With traders buying and selling at dizzying speeds these days, underfunded U.S. regulators can’t hope to keep up unless they get more funding, better resources, and faster technology — think cars, Democratic Senator Jack Reed says.
Reed, who drives a 1991 Ford Escort, says he loves his car for city driving.
But if he had to take on a race car, he’d need to upgrade – and the same goes for the Securities and Exchange Commission and the Commodity Futures Trading Commission, which are stuck using outdated technology even as their policing obligations pile up after Dodd-Frank financial reform.
House Republicans have moved to block funding increases for the regulators, saying they don’t want to add to the federal deficit.
“If I’ve got a 1991 SEC, CFTC trying to catch high frequency traders, it’s never going to happen,” Reed told the Reuters Futures Face of Finance Summit. “We’ve got to get them, maybe not up to Ferrari level, but at least up to a Fusion.”
But is that fast enough?
So how plugged in is the SEC chair? (technologically speaking)
Securities and Exchange Commission Chairman Mary Schapiro says her agency has its work cut out to compete with the massive amounts of money that private firms, policed by the SEC, pour into the latest technology.
“Can we keep up with Wall Street? I think we have a fighting chance. We’ll never have, under any circumstances, the kind of budgets that would allow us to spend a billion dollars a year on technology as some firms do, I mean that’s just not going to happen, and I totally understand that,” she said at the Reuters Future Face of Finance Summit.
“If we can build a forensics lab for our enforcement people to be able to download data off of iPhones and iPads and other instruments, then we will be a lot better able to pursue insider trading potentially and other securities law violations,” she said.
So how technologically plugged in is the SEC chair personally?
“I have an iPad,” Schapiro said.
“No I don’t do Twitter, I don’t have a Facebook page. You know, in my position it would be complicated,” she said with a laugh. “So maybe I’m kind of middling in terms of technology.”
Her agency has a Twitter feed and a Facebook page in development.
The SEC is at least ten years behind Wall Street. They have nowhere near the resources that Wall Street can bring to bear on manipulation of markets. By the time they catch up to the bad actors, either the statutes of limitations are already expired, or the thieves have taken their loot and disappeared to South America.
U.S. Treasury’s Wolin on tying debt limit to fiscal discipline debate: Don’t
Deputy Treasury Secretary Neal Wolin is urging lawmakers not to tie the U.S. debt limit to the debate on fiscal discipline.
Arguing about the future fiscal path of the United States is fine, but playing games with the debt limit can hurt U.S. creditworthiness, he warned.
The Treasury has said it will reach the statutory debt limit sometime between April 5 and May 31. Once that limit is reached, the Treasury would no longer borrow to meet day-to-day spending needs, including payment of interest on Treasury bills and bonds.
Many Republican lawmakers want to use the debt limit as leverage to push the Obama administration into deeper spending cuts.
Wolin had a message for Congress: keep the discussion over the future fiscal path of the United States separate from what to do about the debt limit.
“This is an issue on which Republicans and Democrats should come together and agree that the basic creditworthiness of the United States should not and cannot be put in question and jeopardy,” he said at the Reuters Future Face of Finance Summit.
“We should have our discussions, our debates and even our fights over what the fiscal future of the United States ought to be and those are happening,” Wolin said.
