When Did The US Treasury Say This: "Japan Has Turned The Corner"

Tyler Durden's picture

This morning, as part of the US Treasury's report on global currencies, Secretary Lew made the following remark:


Which got us thinking... when have we heard the US Treasury say exactly the same thing... (for exactly the same "policy-based" reason)...


The answer is 10 years ago!

None other than then-Under-Treasury-Secretary John Taylor explained how "Japan has turned the corner"

John Taylor, U. S. Under Secretary of the Treasury for International Affairs, praised the spirit of cooperation--"especially financial cooperation"--between Japan and the United States. He also noted that the recent positive economic data presages Japan's return to economic health.


Why is he optimistic about the data now, after so many false positives in the past decade? For Dr. Taylor, the most important reason is the change in monetary policy. When the Bank of Japan announced, in March 2001, its intention to increase the money supply until inflation was greater than or equal to 0 percent, Japan's prolonged period of deflation began to be tempered, as the monetary base grew 68 percent, or 22 percent compounded annually. Said Dr. Taylor: "It is still too early to declare victory over deflation, but it's the right direction."


Dr. Taylor is also optimistic about the pace of reform in the banking and corporate sectors. He cited Resona Holdings and Ashikaga Bank as positive examples of effective resolution. He praised the measures put in place to value and capitalize bank loans. "Regulators and auditors will not go easy [on the banks]," he asserted. Moreover, on the corporate side, balance sheets seem better, debt ratios have come down, costs have been cut, margins have improved, and some corporate governance concerns have also improved, he said.
A third reason for Dr. Taylor's optimism is the shift in growth towards the private sector on the macro-economic side. Public sector capital expenditures are negative, in contrast to the stimulant infusion of $1 trillion from 1992 to 2000. Dr. Taylor summarized the lesson learned from Japan's public spending strategy: "It didn't work. This is a problem with old-fashioned Keynesian economics."


Dr. Taylor acknowledged that some structural issues in Japan's economy have yet to be resolved. He said Japan still relies too much on exports for growth, although he noted with satisfaction how deregulation initiatives had taken root in certain sectors, like cell phones and retailing, thus adding to domestic investment and consumption.


He also lamented that deregulation had not necessarily led to a culture of risk taking: "Entrepreneurship statistics are still low. NPLs (non-performing loans) are still a problem. People think [NPL resolution] could be done faster."


Finally, he noted there are still fiscal problems from the era of public spending. Here, Dr. Taylor praised Prime Minister Koizumi for "shepherding" Japan's change in thinking and expressed optimism for the future: "We see a hell of a debate on fiscal policy, pensions and aging; and based on these changes, a fiscal consolidation seems able to be brought about."


What effect do you think stronger growth in Japan will have on the U.S. current account deficit?


Dr. Taylor said it would generate more exports from the U.S. "We have stressed more growth in Japan--and also Europe." This would reduce the U.S. current account, because the imbalance of savings and investment would be redressed "largely through supply side measures," he explained.


Japan has a target for monthly purchases of JGBs [Japanese government bonds[--1.2 trillion--as part of the quantitative easing policy, but it exactly matches the amount maturing. Might it be useful to have a net target?


Yes, because purchases of assets add to liquidity and increases the monetary base, replied Dr. Taylor. Although there are still difficulties getting the base translated into broader aggregate increases, it is still the best focus, he asserted.


Investments in repos--are those effective?


Dr. Taylor said repos were effective as a first step. "Of course, different types of purchases have different types of impact. This is not a one-month operation. The best measure seems to be base."


Why is there so much focus on base money? The base money is up 61 percent, but M3 is up single digits over the same time frame. How can the transfer mechanism be improved? 


"It will take time, but base growth will get translated (M2+CD) into higher aggregates... You are seeing deflation turning around, even if you don't think the rates will exceed 0 percent over the next few months." Dr. Taylor said his expectations were validated by the U.S. experience in the 1930s and Sweden's experience in the 1980s.


The Bank of Japan seems to be becoming complacent and to have declared victory too early. Are you concerned?


Dr. Taylor reported good communication with the Bank of Japan and ongoing willingness to stick to their policy. "Markets expect to see 0 percent rates for awhile, even after deflation has substantially gone away," he cautioned.


As an economist, do you believe central bank purchases of foreign assets are an effective base money stimulus?


"Yes, it's the sum of assets, not the mixture," Dr. Taylor replied.


Fiscal stimulus didn't work in the U.S. What's your interpretation?


Public works spending is very different from tax reduction regimes; the latter brings more powerful effects, especially if they are permanent, because they create an expectation of a lower tax bill, said Dr. Taylor. He said that he and other economic advisers worked with President Bush during the 2000 campaign on changing the tax rates, especially marginal rates. That marginal tax cut was very timely and made the recession a lot less severe, he asserted.

So ten years later - nothing has been learned... nothing has changed... and the exact same indicators of a "turnaround" then (that was shown to be a total and utter failure) are once again put forward as evidence that the "turnaround" is here again...



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nope-1004's picture

Add Jack Lew to the long list of professional LIARS.  Memory past 4 score and 2.5 is a little off with the govvy.....



johnQpublic's picture

turning corner, down one way street, the wrong direction, into blind alley, where they are subsequently gang raped

buzzsaw99's picture

staggering down blind alley, bottle of MD 20 20 clutched in hand, turning corner into a dark sewer hole, stumbles down hole head first, eaten by mutant rats

Dareconomics's picture

Japan is about to reach an inflection point, but this is not the one that I had in mind. The BoJ will soon be purchasing 75% of Japan's new debt issuance.  


Thought Processor's picture

That's Awesome!


At least from an objective analytical standpoint, with regard to the history making event that it really is.

smlbizman's picture

when your running in a circle, you are always turning a corner...

spine001's picture

This is all basic management 101. Behaviors and what goes in the reports are determined ONLY by incentives and NOT by the truth or lack thereof of the statements made.

Durden, you tell me what would be the incentive of a treasury secretary to tell the truth? Why would he be better off if he followed a policy that favored the USA in detriment of the Banksters?

alphamentalist's picture

exactly. turning a corner down a dark alley. except there is no md20/20 in japan. the rock-bottom beverage seems to be cheap sake in glass jars with peel off lids. 

according to this site, though, md20/20 is the wino equiv of QE. so your anology is apt.


TheLooza's picture

Nothing shaking on shakedown street.....

FL_Conservative's picture

We all can see that this has worked well for Japan.   Does anyone other than those of us here ever review history?  It's really not that terribly difficult.

Thought Processor's picture



Japan has been constantly turning a corner-  It's called a circle, like the one that you are caught in as you are getting flushed down the toilet.   

Everyone knows where it leads to- down.  Only problem is one can circle the bowl for an awfully long time before one heads south.


kaiserhoff's picture

More like Crazy Coyote just looked down;)

Fish Gone Bad's picture

Of course they turned a corner, it was off the edge of a table.

LawsofPhysics's picture

Can you spot when the dollar "turned a corner"?



Skateboarder's picture

Watchu talkin about, Willis? Looks 'normal' to me. In fact, it looks like... *wait for it*... 'GROWTH!'

Bay of Pigs's picture

Looks like the Space Shuttle lifting off...

And as we know, velocity is going the other way, straight down.

In other words, FUBAR.

Panafrican Funktron Robot's picture

Now add the Dow trendline with a 3/1/2009 begin date for both lines, with the units "Index (Scale to 100)" for both lines.  Then marvel at how shitty the transmission mechanism has worked in practice. 

kchrisc's picture

"Roger, go at throttle up,..."

kralizec's picture

When?  I dunno.  Where?  Coming out of the bath house.

Everybodys All American's picture

Ha Ha What! Reminds me of the line Vince Vaughn and Owen Wislon say in the Google (Internship) movie. You know this would make a good book. Encapsulate all of the statements people make that are so fucking wrong or outright lies and publish it for all to see again.

Tinky's picture

To be fair, Japan has turned a corner...into a blind alley from which there will be no escape.

Panafrican Funktron Robot's picture

While their economy has been in one long, continuous decline since the late 80's, the move away from the USD as reserve currency should put a pretty big fucking nail in the coffin of their nominal valuation due to lack of a credible domestic military threat.  That is, if Fukushima doesn't kill them all first.  Japan is about to become re-aquainted with their ancesteral focus on surviving on rice and combat. 

Dre4dwolf's picture

Im sorry, but china is pretty much getting ready to invade Japan, I think they want pay-back for WWII.


Joebloinvestor's picture

Japan will keep "turning the corner" until it falls into the abyss or screws itself into the ground.

ebworthen's picture

And how much money has been stolen from the American People since then by the parasites on Wall Street and their Washington lackey's?


B.J. Worthy's picture

Cliffs are technically corners.

CHX's picture

To paraphrase Fama, a cliff is, topologically (in a mathematical sense, i.e.) the same as a flat plane, so, cliffs are really just neutral, nothing-to-see-there no-events. I just love to learn from the best. /sarc

Hedgetard55's picture

+55 kajillion.


Too bad I am the only hedgetard that appreciates your post.

Father Lucifer's picture

Ah Japan

Cosplay and really kinky sex

Now where's that corner I should turn at?

Don Diego's picture

anybody knows if Jack Lew is Lewish?

kchrisc's picture

"Turning the corner. I believe it, as there are several ways to "turn" a corner.

A guy in my high school one night "turned" a corner by going straight when the roadway veered left. The tree he hit was very unforgiving.

Iam Yue2's picture

That reminds me, wasn't it only on Tuesday that David Kelly of JPM told the FT that Europe "had turned a corner."


Utter crap, of course, but catching; in many ways it is the new green shoots of recovery, or our time.

suteibu's picture

Anyone who believes that Japan and the US have not been colluding, cooperating, and conspiring since Obama dumped Hatoyama is not paying attention.  

From downplaying Fukushima to protect the nuclear industry, to money-printing, to increased government secrecy and lack of transparency, to cash-for-clunkers and other stimuli, to Obama's pivot to Asia and Japan's abrogation of Article 9 of the constitution (allowing Japan troops to fight America's wars), to assault on the freedom of the internet.  The next step will be the integration of Wall street's FIRE economy, Big Ag, and Big Pharma into Japan via the TPP "Free" trade agreement.

Big Ben's picture

The implication being that if Abenomics (= massive QE) is good for Japan, it should be good for the US as well.

I'm sure Yellin is thinking the same thing. Taper is now vapor.

tuttisaluti's picture

But what is around that corner.......a wall?

SpeakerFTD's picture

Turn four corners, you're right back where you started.

Goldbugger's picture

What's around the corner are high levels of radiation and cancer for those down wind . But they continue to lie and deny about this tragedy,

Getting Old Sucks's picture

Uh, guess who's down wind?  And down stream.

patb's picture

Turn the corner and what's there?  A glowing reactor.