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As
central bankers lose sleep over inflation, one Japanese
politician has a decidedly contrarian take on things:
Bring it on.
“Inflation is inevitable, and we should accept it and
welcome it,” says Wataru Aso, governor of Fukuoka
prefecture in western Japan.
No, Aso
hasn’t lost his mind. Yet, he may just be the only
elected official in the developed world—or developing,
for that matter—who relishes the return of inflation.
The 69-year-old says rising costs will precipitate the
innovation that Japan so badly needs.
While
central bankers such as Masaaki Shirakawa of Japan, Ben
Bernanke of the United States and Jean-Claude Trichet of
Europe would disagree, Aso’s point has some historical
merit. It’s hard to think of an economy that had more
success in reducing energy use since the last oil shock
in the 1970s.
Japan is playing up that progress at this week’s Group of
Eight summit on the northern Japanese island of
Hokkaido.
“Superior technology and a national spirit of avoiding
waste give Japan the world’s most energy-efficient
structure,” Prime Minister Yasuo Fukuda said in a speech
last week. Japan, he said, “wants to contribute to the
world.”
Aso
wants Japan to contribute to its own economic outlook.
‘Mad
Max’ world
There’s
little doubt that soaring energy costs will undermine
growth in the short run. Sentiment among Japanese
merchants fell to a six-year low in June as higher oil
prices discouraged spending. The Economy Watchers Index,
a survey of barbers, taxi drivers and others who deal
with consumers, dropped to 29.5 in June from 32.1 the
previous month, Japan’s Cabinet Office said yesterday.
When
economists search for silver linings in accelerating
inflation, some argue it will create a buy-now mentality
that boosts spending. Taking a longer-term perspective,
though, Aso suggests the mere specter of a Mad Max world
is more of an opportunity for Asia than a problem. The
reference here is to the 1979 film starring Mel
Gibson—an apocalyptic tale about how society devolves as
oil becomes more scarce.
“It
certainly is one of those scenarios that would have
seemed highly unlikely a year ago,” says Takeo Sumino, a
managing director at Nomura Securities Co. in Tokyo.
“The rise in inflation will cause pain in the short
run.”
Adds
Roger Nusbaum, a portfolio manager at investment firm
Your Source Financial in Phoenix: “That society could
devolve into some sort of Mad Max movie, with gasoline
being the most prized thing, seems very difficult to
imagine.”
‘Rare
chance’
Even if
crude oil weakens from about $140 a barrel, the world
has been warned.
“We now
have a big incentive to change,” Aso says. “This is a
rare chance for Japan, and indeed, Asia, to embrace
innovation in ways that wouldn’t happen without
inflation.”
Aso
takes pride in a variety of Fukuoka companies that make
diesel fuel out of discarded edible oils, produce more
efficient hydrogen and solar energy and build businesses
to meet global demand for recycling technologies.
One such
company is Xenesys Inc., whose technology owes much to
research done at Saga University, located near Fukuoka.
The Tokyo-based company was created amid the realization
that existing energy supplies and technologies can’t
meet the needs of increasing demand. It produces
electricity from small differences in ocean
temperatures.
Japan’s
strengths
Former
Sony Corp. chief executive officer Nobuyuki Idei is
often quoted as saying that even if the world is
preoccupied by oil, the 21st century will be about
water. Earlier this year, he became an executive adviser
to Xenesys. It was a major coup for the company, given
that the mission of Idei’s two-year-old company Quantum
Leaps Corp. is raising the profile of innovators and
inspiring entrepreneurship.
“What
the company is doing is a reminder of how Japan can use
its strengths and profit from them,” Idei says.
The
strengths that Idei has in mind include the nation’s
impressive conservation record. Not only is it an
opportunity for Japan to play a rare leadership role on
a global issue, it’s also a potentially lucrative export
for an economy trying to compete with China, India and
Southeast Asian upstarts.
That’s
where Aso comes in. His government is helping to push
the idea of a Silicon Sea Belt, an Asian epicenter of
innovation akin to California’s. What Aso calls the
“semiconductor belt zone” includes Fukuoka in Japan;
Gyeonggi in South Korea; Beijing, Hong Kong and Shanghai
in China; Hsinchu in Taiwan; Singapore; Kuala Lumpur;
and Bangalore in India.
It’s
easy to dismiss such efforts: Asia is too disparate to
cooperate technologically, there’s too much distrust
among governments and oil prices will distract leaders
from longer- term thinking. Yet, Asia needs more
contrarians of Aso’s ilk. Rather than panicking over
rising prices and a Mad Max-like outlook, why not make
the best of them?
“We can
overcome this bottleneck,” Aso says. “There’s no reason
to be so pessimistic.” |
