Sophians Talk about Japan and the World

The Meandering Path of an Unwaveringly Focused Market Economist

Yasunari Ueno

An Epiphany

Yasunari Ueno Economist

Since my father was a legal professional and my high school grades weren't bad, it seems that everyone thought I would enroll in the faculty of law of a national university [laughs]. However, as I had liked history ever since having a good teacher at junior high school, I decided to study history at university. Sophia University had an international image and seemed very cool; I idolized the place, and longed to be a part of it.

I was especially interested in modern European history, with its multinational relations and complex changes often involving conflict, and I was delighted to attend classes given by Professor Akio Nakai, an authority in the field. I was also interested in languages and studied five in all: English, German, French, Spanish, and Italian.

As far as Sophia's international image went, unfortunately I didn't get to mix much with international students, since they all studied at the Ichigaya Campus in those days. I really envy the way everyone now studies together at the Yotsuya Campus [laughs]! Instead of getting my international experience on campus, I worked hard at vacation jobs in the winter and spring breaks, and from my second year I went backpacking each summer, mostly in Europe.

In the fall of my third year, I attended a career guidance session on the civil service examination and, despite having given no thought at all to employment until then, for some reason as soon as I left the hall I decided to take the exam. I furiously started studying the necessary subjects, such as law and economics.

As part of these efforts, I was able to attend the final lecture given by the constitutional studies specialist Professor Isao Sato before he retired, where he mentioned the Japanese saying hito no iku ura ni michi ari, hana no yama, which roughly translates as "there is a path less travelled, where you will find a mountain covered in flowers." It means that you can only get results if you act differently from others. While this applies to life in general, in the world of markets it is the most well-known proverb for teaching the basics of investment. Back then, I could never have imagined that I would end up in the job I now have, and encountering that saying in a class on the constitution might have been my epiphany.

A Sudden Change of Career Leads to My True Vocation

Yasunari Ueno Economist

After graduating from the Department of History, I enrolled in the Faculty of Law to study further for the civil service examination, and in the fall I was fortunate enough to pass the Level I exam for national public officials with the top ranking.

I chose to go to the Board of Audit of Japan (BOAJ). At my interview, I claimed that I made this choice because BOAJ is an important body with a special status determined by Article 90 of the Constitution and a supporter of justice that monitors the usage of tax revenue. But in reality, a major factor behind my decision was that BOAJ was the only government agency without regional offices, so there was hardly any possibility of being transferred. Having experienced the hardship of repeatedly changing schools, I didn't want to subject my own children to such disruption.

As it happened, the nature of the job drew my attention to economic trends, and my interest shifted to the dynamic markets that characterized the bubble era. Needless to say I was hesitant about the decision, but two years later in the spring I parted ways with the civil service and moved to a bank.

Just as I was finally starting to get used to the work of a dealer, which is so frantic that newcomers hardly even have time to go to the toilet, my hope of transferring to the research division was fulfilled. The main purpose of a market economist's work is making investment decisions, and we also analyze and comment on the economy. Since shifting to that work I have experienced twists and turns, but I have continued it for 25 years and feel I have found my true vocation.

For me, the most important thing in this job is to maintain a firm, unwavering focus. Even among market economists, there are many who are swayed by the trends of the moment and keep on changing their minds.

Naturally, our work is a process of trial and error that involves gathering and sorting information, writing scenarios, and revising them if they prove incorrect. Nevertheless, as we steadily accumulate knowledge, we find things we can confidently rely on. Having identified these guideposts, we constantly maintain our focus on them to keep extending our projections. If we couldn't do this, I don't think we could earn trust as professionals.

One of my focal points is to emphasize everyday perceptions. A recent example is the media reports we have seen suggesting that the economy is rebounding, based on a year-on-year rise in real wages in a particular month. However, consumers don't compare the present situation with that of a year ago when making spending decisions. Real wage indices have slumped, showing a drop of around 5% since 2010, and that sense of decline is closer to people's perceptions. I think we have to keep on pointing out these things.

Japan Should Face Up to Its Shrinking Population

Yasunari Ueno Economist

Another of my focal points takes into account the importance of population decline. According to the census, Japan's working-age population (those aged 15?64) peaked in 1995 and has continued to decline since then. As a result, consumer markets will keep on contracting and Japan will continue to be susceptible to fiscal imbalances.

This is why I have long stressed the urgent need for strong measures to address the falling birthrate from both monetary and infrastructure angles, for example the introduction of French-style tax incentives for child-raising and dramatic expansion of childcare facilities so that working women can place their second child in the same childcare center as the first. Moreover, well-considered measures to welcome immigrants are essential, and it is also important to strategically combine these with measures to promote tourism.

The Abe administration finally seems to have recognized this point, but we have yet to see any concrete reflection of this awareness in the policies of Abenomics. The only policies producing results are those relating to tourism, but these are merely components in the grand scheme of things.

I can't agree with the Bank of Japan (BOJ)'s approach of turning a blind eye to the realities of such population decline and single-mindedly aiming to end deflation and reflate the economy through quantitative easing powered by massive purchases of government bonds. I recall attending financial theory lectures at Sophia given by BOJ Deputy Governor Kikuo Iwata, now a leading light of the reflationary school of thought, where he expressed views that were pretty much the exact opposite [laughs]!

However, this problem is not confined to Japan. The power of the global economy to grow is clearly declining as innovation ebbs, developed-country populations age, and emerging-nation frontiers shrink.

Yet if governments adopt policies based on the assumption of low growth in line with such trends, they are bound to be regarded with anxiety by markets and other observers. Thus the stance of every country remains unchanged, targeting inflation of around 2% and so on. Since they try to achieve this through quantitative easing, the global monetary surplus is not resolved.

Amid these circumstances, the wild card of China has been added to the game. My view is that the global economy has reached a perilous situation of low visibility, where we don't know how long instability will continue or how far it will go.

Japan and the rest of the world need strong leadership to take the initiative in tackling difficult problems. Will people and countries capable of such leadership emerge?

Yasunari Ueno Economist
Yasunari Ueno

Chief Market Economist, Department of Financial Markets Research , Mizuho Securities Co., Ltd.
Graduated from the Department of History, Faculty of Humanities, Sophia University in 1985 and enrolled in the Faculty of Law before withdrawing after passing the Level I examination for national public officials (administration category) with the top ranking. Entered the Board of Audit of Japan in 1986. Shifted to Fuji Bank (now Mizuho Bank) in 1988 and became a foreign exchange dealer in the Treasury and Forex Department . From 1990, worked as a market economist in the forex, treasury, and fixed income sections. Appointed as Chief Market Economist at Fuji Securities Co., Ltd. in 1994. Took up current position in October 2000. Starting early each morning, Mr. Ueno writes research reports on domestic and international economies and markets. He has established a solid reputation, in particular, for speedy communication of information, precise identification of issues, unwavering focus in his opinions, and astute monitoring of the Bank of Japan.

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