Koichi [Hamada] cited our late colleague Mike Mussa, who of course in addition to being brilliant, was the master of the quip and he at one point had said, “Putting Alan Greenspan in charge of bank supervision was like putting a conscientious objector in charge of the Marine Corps.”
Governor Shirakawa or Governor Hayami as head of an expansionary monetary policy is the same thing. They both took office and insisted that they could not do anything and that any attempts they made would fail and that when they made attempts that their heart wasn’t in it and it was contrary to their principles and it would only prove that their attempts would fail. Now, monetary policy is not merely a confidence game, but this meant that at every level throughout the BOJ and every time there was an innovation or an attempt at new policy, the governors themselves were undercutting it.
I have edited out a couple of errors in the transcription…. central bankers who insist that they cannot “do anything”, and anyway “doing something” would be a really bad idea? Does that sound familiar?
There’s a presentation from Abe’s adviser Koichi Hamada in there too (slides here), though it is a little hard to follow. He says the stock market rally and Yen devaluation since November disprove the arguments of those who argue “monetary policy doesn’t work” (right on), and also debunks the “currency war” rubbish; what would be really damaging is trying to align Japanese monetary policy with the needs of the American economy, rather than the domestic economy of Japan.