Nobel-winning US economist Paul Krugman has baffled the government by revealing an off-the-record conversation with Prime Minister Shinzo Abe, who has been making a show of meeting with prominent economists in preparation for the Group of Seven summit.
The private chat also saw Japan’s prime minister ask Krugman for advice on how to rally Germany to greater fiscal mobility.
The chat was published online when Krugman posted a link to a document titled, “Paul Krugman: Meeting with Japanese officials, 22/3/16,” on his Twitter account last month.
According to the memo, Abe said, “This is off the record, Germany has the greatest space for a fiscal mobility.”
Referring to his plan to visit Germany before hosting the G-7 summit from May 26 to 27, the prime minister said, “I will have to persuade them how they will come along with the policy for further fiscal mobilization. Is there any idea from you?”
Krugman said: “It is difficult,” as German Chancellor Angela Merkel “is preoccupied with other matters as well,” before adding, “brilliant diplomacy is not something I am an expert in.”
The memo also quoted a moderator at the end of the meeting as saying, “Of course, what was mentioned by Prime Minister remains confidential.”
The posting by Krugman, who is also known as an astute op-ed columnist for The New York Times, came as a shock to the Japanese government, which is used to a very strict off-the-record policy being observed by Japan’s pliable press corps.
The document gained attention after Japanese newspapers reported it Thursday.
On Friday, Chief Cabinet Secretary Yoshihide Suga declined to comment on the conversation.
“I believe it is a memo by professor Krugman himself, not a document drawn up by the government,” Suga said.
It is unclear why the City University of New York professor and a winner of the Nobel Memorial Prize in Economic Sciences made the conversation public.
But his Tweet on the document includes the comment, “Aftermath (no, I don’t enjoy this sort of thing),” with a picture of him surrounded by dozens of reporters.
Krugman was the third economist invited to Japan by Abe, who is highlighting meetings with global economic experts ahead of the G-7 summit and a high-profile tax hike decision.
At the summit, Abe hopes to show determination in stabilizing financial markets and raising economic growth. Tokyo also hopes to show leadership by adopting a more effective communique than the one at the G-20 summit in Shanghai in February, which pledged “all policy tools” to strengthen global recovery.
By meeting with top economists, he also hopes to get their views on the Japan and the 2 point tax hike scheduled for next April.
His Abenomics growth policy is losing steam while China’s economy continues to slow.
Krugman, and fellow Nobel-prize winning economist Joseph Stiglitz of Columbia University, who was also invited to Japan, recommended he delay the tax hike a second time.
Harvard University professor Dale Jorgenson, who spoke with Abe last month, said it was too early to decide on the timing of a tax hike but admitted that he and Abe didn’t discuss the issue.
The decision is crucial for Abe’s ruling coalition, which is gunning to win an Upper House election in July that could make it easier to revise the Constitution.
Even though Abe and his ruling party say the hike will be implemented as scheduled, economists and some of Abe’s aids doubt the Japanese economy is strong enough to take the impact. The Japanese economy sank into yet another recession after the 3-point tax hike in April 2014.
“Two years ago, Abe sought advice from domestic experts on the tax hike, but it failed,” said Toshihiro Nagahama, chief economist at Dai-Ichi Research Institute. “This time he wants to have more options for the timings by hearing from globally trusted economists.
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