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Masaru Kaneko calls himself an “al-Qaeda” among economic academics, noting that his position has won him no sympathy from the mainstream.

The Keio University professor is harshly critical of mainstream economists, labeling them “market fundamentalists” who believe the market mechanism is omnipotent but cannot explain what is really going on.

A few years ago, Kaneko had already dismissed the idea of an economic recovery led by information technology while many economists were still praising the so-called IT revolution.

In his current best seller, “Choki Teitai” (“Long-term Stagnation”), Kaneko, 50, extends his arguments while analyzing the “first global recession in 70 years.”

He argues that Japan is already mired in long-term stagnation, in which a boom-and-bust cycle repeats itself at lower levels than before. He attributes this partly to mismanagement of the collapse of the economic bubble in the early 1990s.

The problem has grown to an uncontrollable degree, he says, because the government has failed to “forcibly” inject public funds into capital-depleted banks and to hold the banks’ managers responsible.

“My opponents were assuming there would be economic growth some day and that that growth would solve the problem,” he said in a recent interview.

The government — misguided by mainstream economists — has thus held to such “empty dreams” as deregulation, an IT revolution and a V-shaped U.S. economic recovery, delaying the search for a real solution in the process, he said. “All of this has failed.”

The government has administered “anesthetics” to ease the banks’ pain, giving them “shots in the arm” every March and September, when they close their books, he said, referring to the huge stock market surges that lift banks’ balance sheets just in time by boosting the value of their massive shareholdings.

“As this is repeated, banks have become even weaker,” he said, adding that their dismal conditions prompted the Bank of Japan to announce a plan last week to buy some of those stocks directly from the banks, a move unprecedented for any central bank in the industrialized world.

Given the circumstances, he said, the government had no choice but to postpone the full lifting of its guarantee on bank deposits, as announced earlier this month.

“There is no need,” he argued, to introduce the limited deposit protection until major banks’ management and bank regulators take responsibility for the bad-loan fiasco and the banking system is stabilized.

Instead of plunging a scalpel into major banks’ bad loans, the government has used the limited guarantee to weed out smaller banks and community lenders, he said. “The (limited protection) plan could trigger a depositor panic.”

What the government needs to do most is stringently assess the bad loans and have the banks put up sufficient loan-loss reserves, he said, noting this would require a huge capital injection into banks without their consent because their managers do not want to admit they are in trouble.

Major banks together have already received trillions of yen in public funds, so further capital injections would effectively nationalize them.

But Kaneko cautioned that even capital injections would not bring a quick turnaround at a time when Japan is trapped in a “quagmire of deflation.”

His heretical comments aside, Kaneko is a friendly celebrity. He takes every serious opportunity to make his points, whether in books, newspapers, magazines, TV or his own lectures across the country. “The king of knowledge discounting” is another self-proclaimed title.

“Because academia treats me like (the terrorist network) al-Qaeda, I have to draw consumers to my side by speaking directly to those willing to accept what I say.”

Kaneko said, in jest, that he thus personally respects consumers more than market fundamentalists do.

“The original idea behind economics was to save ordinary people from having economic difficulties. It is for them to decide whether my opinions are right or wrong.”

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