Richard Katz

Expertise: Japan economy, Japan politics, U.S.-Japan relations

Richard Katz is Editor of The Oriental Economist Report (TOE), a monthly newsletter on Japan published by Japan Watchers LLC, the semi-weekly TOE Alert, and a New York City correspondent at Weekly Toyo Keizai, one of the three leadings Japanese business magazines.

Mr. Katz has taught about Japan’s economy as an Adjunct Associate Professor at the New York University Stern School of Business, and as a Visiting Lecturer in Economics at the State University of New York (SUNY) at Stony Brook.

Mr. Katz is the author of two books on Japan's economic travails. The first was Japan: The System That Soured--The Rise and Fall of the Japanese Economic Miracle (M.E. Sharpe 1998). A Japanese edition was published in 1999 under the title Kusariyuku Nihon To Iu System (Toyo Keizai Shimposa).

The book received favorable reviews from such publications as the Wall Street Journal, Business Week, Nihon Keizai Shimbun, Asahi Shimbun, Toyo Keizai, The Japan QuarterlyThe Journal of Japanese Studies and the Far Eastern Economic Review, among others. Toyo Keizai named it "one of the 20 books needed to understand the 21st century." In 2002, his second book was published, entitled Japanese Phoenix: The Long Road to Economic Revival (M.E. Sharpe) in English and Fushicho no Nihon Keizai (Toyo Keizai) in Japanese. It also received favorable reviewsBoth books have been widely used in university courses.

He has testified several times about Japan and Asia to Congressional committees. He has frequently been invited to meet with senior officials in both the US and Japanese governments to provide analysis. In the year 2000, he served on the Council of Foreign Relations' Task Force on the Japanese economy. He regularly lectures at universities and conferences.

Mr. Katz’s essays have been published by Foreign AffairsThe Washington Quarterly, The International Economy Magazine, Current History, Challenge and The American Prospect. Op‑eds have appeared in such papers as the New York Times, London Financial Times, Asian Wall Street Journal, Asahi Evening News, Christian Science Monitor and the Investors Business Daily. He is the author of the article on the Japanese economy in the Microsoft Encarta Encyclopedia. Mr. Katz's comments on Japan are frequently quoted in major publications, including the Washington Post, Wall Street Journal, New York Times, Los Angeles Times, London Economist, London Financial Times, Chicago Tribune, Time Magazine International, Newsweek International, and the San Jose Mercury, and he has been interviewed on CNN, The PBS Newshour with Jim LehrerMarketplace, Bloomberg TV, and BBC's The World.

Having received his B.A. degree in History from Columbia University in 1973, Mr. Katz went on to obtain his M.A. in Economics at New York University (NYU) in 1996.

Japan will eventually reform and revive. Its tragedy is that it is filled with smart, ambitious, creative individuals who are trapped in once vibrant but now ossified political and economic institutions. The whole is so much less than the sum of its parts. The country will revive when it finally undertakes the necessary institutional overhaul. But that takes a visionary leader; Shinzo Abe is not that leader.
Hits:
  • Japan’s economy could not recover without structural reform and structural reform would not occur until the emergence of genuinely contested elections.

  • The Koizumi economic boom would not last; there was less economic reform than analysts claimed

  • The JGB market would not crash (several times over the past decade or so when stories about imminent crashes emerged)

  • There would be no run on the banks in 2003

  • The rescue of Resona Bank in 2003 was the beginning of a real change toward solving the nonperforming loan crisis

  • The “decoupling” theory popular in 2006-07 was wrong and a recession in the US would cause a horrific recession in Japan, as it did in 2008-09

  • The Democratic Party of Japan (DPJ) would lose power if it passed the consumption tax

  • All of Japan’s nuclear plants would end up being shut down in the aftermath of the Fukushima disaster

  • China would not intentionally use military force to take Senkaku Islands and would pull back on economic pressure because it needs Japan just as much as Japan needs China

Misses:
  • While the Koizumi boom did peter out, as predicted in 7b, it took longer to occur than I had predicted

  • The DPJ would gain a single-seat majority in the Upper House in the 2010 elections (made shortly after the DPJ’s big Lower House win in 2009

  • The DPJ would not pass the consumption tax out of fear of losing power

  • The 2009 DPJ victory meant the emergence of a genuine two-party system in Japan (hinged on prediction a being correct) and, if the DPJ won the 2013 Lower House election, the Liberal Democratic Party (LDP) disappearing

What I Learned:

Foreseeing the direction of events is one thing; timing is a lot harder

Key points: - In January, real (price-adjusted) exports plunged by 9% from a year ago, the most severe downturn in three years; three-month average down 5% - Declining exports are a global problem for Japan, not a China problem - Nor does it seem a problem of a global slowdown in imports, but of a Japanese loss in market share ​- Credit Suisse sees GDP growing just 0.4% in calendar 2016 and falling 0.1% in 2017 (latter assumes tax hike is implemented on schedule in April 2017)
Key points: - GDP fell at 1.4% pace in Oct-Dec. - This is the eighth quarter of the last 16 in which GDP has fallen - GDP still 0.4% below pre-recession peak almost eight years ago - At this point, Japan’s recovery from 2008-09 slump no better than in Eurozone - US, UK and Germany all doing substantially better than Japan - Biggest hit to growth is ongoing slump in consumer spending; spending even lower than it was almost four years ago in Jan-March 2012 - Artificial stimulus of spending on consumer durables has gone into big reverse - Second arrow missing in action as government spending flat for last two years
Key points: - Abe Advisor Honda calls for postponement of consumption tax hike - Investment bankers increasingly see yen moving to ¥95-110/$ during 2016 - Even MOF intervention seen as creating only temporary interruption in yen rise ​- Separating out the fundamental and technical factors
Key points in Richard Katz's report include: - Kuroda’s negative rate policy presumes low rates will force firms, banks and households to shift to higher-return risky assets - But Kuroda’s premises about firm and household behavior have been consistently mistaken - They are based on theories about what a perfectly rational person would do rather than looking at what real-world firms and households actually do - Ever since the BOJ pushed interest rates to the floor, beginning in 1995, households have shifted out of higher return time deposits at the banks into cash and ordinary deposits, which pay almost no interest - They have not increased their purchases of insurance annuities - Pension funds have gone up because people have no choice ​- Households have been consistent sellers of stocks in the past decade, selling even more when the market is rising a lot
Key points of this TOE Alert include: - Real wages per worker fell 0.9% in 2015, marking the fourth decline in a row; - One of the most disappointing omens for the future in the December report was the 0.8% fall in nominal bonuses, a harbinger for a disappointing shunto negotiations on overall wages; ​- Some officials and economists keep blaming the data, rather than look at the reality

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Expertise

Japan economy, Japan politics, U.S.-Japan relations

Location

United States

Experience

Current Experience

Editor of The Oriental Economist Report

Past Experience

  • Visiting Lecturer in Economics at the State University of New York at Stony Brook.

Education

  • M.A. in Economics at New York University