Japanese Prime Ministers and the Yen

June 2, 2010

Prime Minister Hatoyama resigned today after only 8.5 months in office.  Thirteen different men have been prime minister since the end of 1991, and Junichiro’s stewardship from April 2001 to September 2006 accounted for slightly more than 25% of that period.  The average term of the other dozen prime ministers was about 14 months.  This revolving door pattern of political leadership contrasts with other G-7 countries where in those 19-1/2 years there have been seven different Italian prime ministers, five Canadian prime ministers, four U.S. presidents, four British prime ministers, and three French presidents.  The nexus of policy authority in Japan resides in a cadre of bureaucrats.  Hatoyama had ironically prioritized breaking that pattern, but short and incomplete turns at being prime minister send a poor poor signal regarding how best to promote the relevance of elected politicians in policymaking.

The yen fell against most currencies on the news of Hatoyama’s resignation.  That was a typical market reaction whenever a government collapses unexpectedly and before its time.  But in the long run, the yen has not been hampered by the brevity of prime ministerial terms.  The yen is 47% stronger against the dollar than at end-1990, whereas sterling, the Canadian dollar and the DEM-translation value of the euro have fallen by 24%, 11.5% and 6.7% over those years.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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