Expect more of the same policies from the Bank of Japan (BOJ) for the indefinite future. The BOJ will continue to keep the short-term interest rate at or near zero and afford modest growth in the monetary base. \nThe interesting thing is that on Friday the BOJ gave a somewhat sanguine outlook about the country's growth prospects when it forecast that the economy will grow by 2.5 percent through the fiscal year 2003, which ends in March next year. \nStill, BOJ Governor Toshihiko Fukui said that he views the economy through "cautious eyes." The problem, as he must see it, isn't growth; it's deflation, which is defined as a sustained fall in the consumer price or producer price level. Many economists view deflation as seriously as the collapse of the nation's banking sector. \nThe BOJ report forecasts consumer price deflation will endure past the March end of the fiscal year. The median forecast of BOJ's nine-member board calls for a drop of 0.3 percent in prices for the current fiscal year. \nFukui takes this very seriously. On Friday he said, "The Bank of Japan aims at putting Japan's economy back on a sustainable growth path by firmly maintaining the quantitative easing policy based on clear and concrete commitment with reference to the CPI." Now how could it be the case that an annualized decline of 0.3 percent in prices could achieve such importance in monetary policy? There's something unsettling about the price of goods falling on a consistent basis. People sense something must be wrong with the economy. This may be a legacy from the Great Depression, when falling prices became a symbol of the economic crisis. \nStock prices go up and down. When the price of rice or potatoes drops year after year, consumers have to wonder what's wrong with the economic system. \nThe cure offered by the authorities is often worse than the disease. While the phenomenon originates from monetary policy -- insufficient growth in the money supply -- governments often react by trying to control the price of goods and the level of production. \nThat's what was so tragically wrong about the policies of president Franklin D. Roosevelt's administration in the 1930s. \nThe New Deal policies tried to cure the depression by keeping prices from falling to protect producer profits. This in turn protected jobs. \nOnly a scoundrel would cut his price, so it was thought, and so it was enacted into law. \nThis idea is a fast trip to the belief that competition among suppliers is a harmful exercise. Follow this and you'll end up with no measurable deflation and no growth, either. \nJapan today may have been a victim of the same knee-jerk reaction to deflation that prolonged the US depression in the 1930s. When prices fall, governments become protectionist. \nThe Japanese government's reaction to the last 13 years of economic malaise and accompanying deflation has been to block the competitive reconstruction of the economy. \nYou see this everywhere you look, in the forestalling of corporate bankruptcies and in banks continuing to lend to non-performing loan clients. The country has been on a mission to save companies from having to face competitive forces. \nIf prices need to fall, they need to fall. And if businesses are pressed by falling prices, then they need to be pressed. \nExtending credit and other lifelines to companies that are technically insolvent does no one a favor. \nFor its part, the BOJ is right to continue to expand the money supply. That part is axiomatic, though it is far from certain that the BOJ has done enough money creation to curb falling prices. \nThe rest is experience. And this much is clear: A little bit of deflation can be the father of a great deal of very harmful policy response.
As China waged extensive military exercises off Taiwan, a group of US defense experts in Washington was focused on their own simulation of an eventual — but for now entirely hypothetical — US-China war over the nation. The unofficial what-if game is being conducted on the fifth floor of an office building not far from the White House, and it posits a US military response to a Chinese invasion in 2026. Even though the participants bring a US perspective, they are finding that a US-Taiwan victory, if there is one, could come at a huge cost. “The results are showing that under
WRONG TIMING: The delegation’s trip has not only disappointed Taiwanese, but could send a wrong message to the global community, Tsai Ing-wen said Chinese Nationalist Party (KMT) Vice Chairman Andrew Hsia (夏立言) yesterday left with a delegation for a trip to China, drawing fire for visiting at a time when Beijing has been conducting intensive military drills to pressure Taiwan. Before boarding, he told reporters that the delegation would be visiting Taiwanese communities and students in China, and possibly meet with Chinese officials. The Mainland Affairs Council on Tuesday night said that it was not the right time for political party members to visit China, as Beijing has been conducting military exercises since Thursday last week. President Tsai Ing- wen (蔡英文), chairperson of the Democratic
ORDNANCE: Under a five-year plan, the Chungshan Institute would make about 200 Hsiung Feng II and III/IIIE, and Hsiung Sheng missiles, an official said The Ministry of National Defense plans to counter the Chinese navy by producing more than 1,000 anti-ship missiles over the next five years, a defense official familiar with the matter said yesterday. The comments came after China’s People’s Liberation Army Navy began a series of military drills in a simulated naval blockade of Taiwan proper following a visit to Taipei by US House of Representatives Speaker Nancy Pelosi. Although China has in the past few years rapidly produced many warships and added them to its navy, these large vessels are more suited for warfare on the open sea than in the narrow
The organizers of WorldPride 2025 have canceled the Kaohsiung event because its licensing group, InterPride, demanded that it remove “Taiwan” from the event’s name, they said in a statement yesterday. Kaohsiung was to host WorldPride Taiwan 2025 after being granted the right by the global LGBTQ advocacy group. However, the WorldPride 2025 Taiwan Preparation Committee said that InterPride recently gave “abrupt notice” asking it to change the name of the event and use “Kaohsiung” instead of “Taiwan,” even though it applied for the event using “Taiwan” in its name. The name was initially chosen for its significance to the Taiwanese LGBTQ community, as