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.
HIGH-RISK GROUP: After the latest outbreak, family members of workers exposed to infection would from tomorrow be eligible for government-funded vaccines The Central Epidemic Command Center (CECC) yesterday reported four local COVID-19 cases: three family members of an infected worker at a quarantine hotel and a family member of an infected pilot. The new cases bring the number of infections involving China Airlines Ltd (中華航空) pilots and the Novotel Taipei Taoyuan International Airport hotel, where many of the airline’s crew members quarantined, to 24. Minister of Health and Welfare Chen Shih-chung (陳時中), who heads the center, said three of them are the husband, son and daughter of case No. 1,129, a woman in her 60s, who works at the hotel. The son is in
NEXT STEP? The contract chipmaker said it would decide whether to add more plants based on operation efficiency, cost economics and demand Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is planning to build several more chipmaking fabs in the US state of Arizona beyond the one already planned, three people familiar with the matter said. TSMC, the world’s largest contract chipmaker, announced in May last year that it would build a US$12 billion fab in Arizona. The 12-inch wafer fab in Phoenix is expected to start mass production in 2024, the Investment Commission said in December, when it approved the plan. Three sources familiar with the matter, speaking on condition of anonymity as they were not authorized to speak to the media, said that up
VIRUS CURBS: Visiting people staying at healthcare and long-term care facilities in Taipei, New Taipei City and Taoyuan is banned until May 17, the CECC announced The Central Epidemic Command Center (CECC) yesterday banned visits to patients or residents at healthcare and long-term care facilities in three cities until May 17. It also reported six imported cases of COVID-19 and two cases with unclear infection sources. As the number of locally transmitted cases rises, some of whom have visited many places in Taipei, New Taipei City and Taoyuan, enhanced disease prevention measures have to be implemented in the three cities, said Minister of Health and Welfare Chen Shih-chung (陳時中), who heads the center. “Visiting people staying at healthcare and long-term care facilities in Taipei, New Taipei City and
TAKING NOTICE: In the first time that G7 foreign ministers have mentioned Taiwan in a joint communique, they called for ‘peace and stability across the Taiwan Strait’ The Presidential Office yesterday thanked the G7 foreign ministers for their strong support of Taiwan after the group in its joint statement on Wednesday called for the nation’s participation in the WHO, and the importance of peace and stability across the Taiwan Strait. The ministers in a communique issued at the end of their three-day meeting declared support for “Taiwan’s meaningful participation” in WHO forums and the World Health Assembly (WHA). “The international community should be able to benefit from the experience of all partners, including Taiwan’s successful contribution to the tackling of the COVID-19 pandemic,” it said. The statement included a section