Associated Press
TOKYO — When Masaru Hayami became Japan’s top banker three years ago, he promised a more independent central bank with a mission to move away from the super-easy lending policies of the past decade.
Now Japan’s counterpart to U.S. Federal Reserve Chairman Alan Greenspan is under growing pressure to revert to the near-zero interest-rate policy that he helped end in August.
Adding to Hayami’s problems yesterday, the benchmark Nikkei Stock Average nose-dived 3.3 percent to close at a new 15-year-low of 12,261.80 points. The plunge came after the government released figures showing unemployment at a record-high 4.9 percent, and stagnant consumer spending in January.
The downward spiral in stocks came despite Hayami’s effort to push the long-ailing Tokyo market back to life with an interest-rate cut Wednesday, although not to near zero.
In testimony before Parliament, he could promise only vague steps to prop up the floundering economy. "We will consider various steps in accordance with developments in the economy," Hayami told the budget committee.
The reversal of course is a humiliation for Hayami, a devout Christian in a nation of Buddhists, who is reputed to be something of an independent thinker.
The 75-year-old former president of a major trading company reportedly shops at Uniqlo, a hip discount store for youngsters, and attends parties thrown by upstart dot-coms to keep abreast of the times.
His predecessor resigned in disgrace in 1998 after the Bank of Japan became embroiled in a bribery scandal over leaking government data to banks.
Hayami’s resistance to super-low interest rates — which stimulate the economy by making borrowing cheaper — lies in his conviction that what Japan needs is a more fundamental economic change, such as streamlining government regulations, freeing up the market and encouraging competition.
He also is impatient with how Japanese banks have taken their time cleaning up problem loans, which total nearly $545 billion.
Hayami’s maverick approach has made him unpopular with old-style politicians who have governed Japan almost continuously since the end of World War II, largely by dishing out pork-barrel public spending to keep the economy growing and the voters happy.
The Bank of Japan’s decision to raise interest rates in August set off a flurry of criticism from politicians.
Akio Makabe, chief economist at Dai-Ichi Kangyo Research Institute in Tokyo, said it was just a matter of time before the Bank of Japan returns to the zero interest-rate policy.
"The Bank of Japan is merely looking for the best timing, because it’s one of the last cards it has left to lay on the table," Makabe said.
Prospects aren’t good for the Nikkei’s recovery anytime soon.
The slowdown in the U.S. economy is stripping Japan’s chances for resorting to exports as an engine for growth.
And Japanese companies have been revising their earnings forecasts downward as global demand for electronics and other goods dwindles.
"There simply isn’t enough good news from companies yet," said Junji Kanegawa, spokesman for Matsushita Electric Industrial Co., which slashed its earnings forecast for the fiscal year ending in March to $450 million, nearly half its initial figure.
On the street, Japanese say it’s a vicious cycle: The bad economy crimps spending, and people not spending makes the economy worse.
"I know three people who lost their jobs," said Chiharu Manita, a 35-year-old trucking company worker. "You never know what’s going to happen next, so I save."
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