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on 16 October 2016
"Princes of the Yen" surely ranks as one of the most important and astonishing books ever written on economics and modern history.

Werner goes an order-of-magnitude further into the detailed workings of the Japanese economic system than Richard Koo's extraordinary book written in 2005 ("The Holy Grail of Macroeconomics"). Werner shows a depth of understanding that Koo never reaches.

It would be impossible to do justice to this work by attempting a more detailed review. My only advice is to read this book cover-to-cover. And then study all Werner's other works.
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on 16 July 2018
This book is wonderful in the way it's structured and the way it explains its complex content. The combination of economics, history, policy, and politics makes it thrilling to read. After getting past the first 50 pages you will not be able to stop reading as you will crave to know what will happen next. This book is truly a masterpiece by professor Richard Werner. Highly recommended to read.
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on 10 February 2014
I am an expert on the financial-industrial system of Japan, and I have co-authored two books with John Carrington and written another two, but this book escalated my detailed knowledge of that system by several orders of magnitude.

This is an astonishing, timely and well-written book. Not only does it set out the Ministry of Finance/Bank of Japan investment credit creating policies that lie at the root of the Japanese economic miracle, but it also explains how the Japanese asset price bubble happened because of BoJ speculative credit creation. It discusses how the "lost decade" of the 90s occurred because the "Princes of the Yen" running the Bank of Japan sat on their hands and did not create the credit that would have put an early end to that long depression. The "Princes"  did that because the BoJ had the objective of "Structural reform" - of creating in Japan a US-style hire and fire economy, lowering average and median wages and prioritising profits, with privatisation and less welfare through reduced government spending - the entire inept and depression-creating neo-classical recipe for running an economy not for the benefit of the majority of its population. The book therefore corrects several prevalent misconceptions. Economists need to understand that money is not just a neutral medium of exchange, for the creation of money by the central bank is not neutral, it can be earmarked investment credit, stimulating productive investment and economic growth, or it can be speculative credit, forcing asset and land prices up and creating a subsequent misery-creating recession, with the possibility of the central bank not creating the necessary credit creation that can end depressions. This book argues that all central banks need to operate under democratic control and should not be independent, because if they are, they may (as the BoJ did) adopt and practise policies to the detriment of the economy and to all those who make their living by working in it. The failure of Japan's growth during the 1990s was not, as many western commentators assume, the failure of the Japanese investment-credit-creating growth model, but the predictable failure of Western neo-classical economics when the BoJ tried to force these policies upon an unwilling Japan. The additional topics that this book covers are many, but just to give a few headlines that can be covered in a brief review: this book illustrates a better investment-credit-creating method of running an economy; shows how the boom-and-bust cycle which is the blight of many economies could be reduced by limiting the central bank's credit creation for speculation; names the names of those responsible at the BoJ for the "Look no hands" credit-reducing depression-lengthening policies of the 1990s; indicates that the current AsIan zone of high economic growth are the countries which were occupied and controlled by the Japanese during the war, when the local leaders (mainly in South Korea and Taiwan) learned growth-accelerating investment credit creation during the wartime Japanese administration; and points out that the economic growth procedures adopted in post-war Japan were implemented by the same personnel who had piloted them during wartime while working in the Manchurian Railway Company.

Werner’s observations have a direct relevance to the European and American contexts. The Reichsbank has been reborn as the ECB and its processes of credit creation are outside democratic accountability and control. Europe’s long recession is being extended by the ECB’s obsession with low inflation when, as Werner points out, the ECB should be creating earmarked investment credit to produce higher investment, growth and employment. Werner observes that the independent Reichsbank previously caused the mass unemployment in 1930s Germany by insisting on the impossible - that firms which had invested bank loans in plant and equipment should nonetheless repay the loans earmarked for that purpose - with the inevitable result of bankruptcies, mass unemployment and the destruction of economic capacity. Werner argues that the independence of the central bank is no guarantee of their practice of appropriate policies and that inflation control is not the only economic objective. He concludes that whatever the failures of politicians, they are the elected authority which have the democratic right to determine the country’s economic policy, and central bank independence is unlikely to deliver that objective, because adequate investment credit has never been created by an independent central bank. The post-war German-Japanese financial-industrial systems created great economic growth.Werner shows how the Bundesbank was successful not because of its independence from the government, but because of its reduced independence compared to the unaccountable Reichsbank: the Bundesbank was made accountable to parliament (Bundestag) and its legislation, such as the stability and growth law of 1967. Bank independence has not produced comparable results. The American Federal Reserve is similarly not subject to any democratic accountability except for Alan Greenspan's and his successors' occasional talks to Congress
Above all, Werner uses the relatively recent technique of Granger Causality analysis to show that investment credit creation is the predictive egg that precedes the subsequent chickens of growth, and thus provides calculations of the predictive causality about how bank-generated finance can create real growth or speculative asset bubbles. (Sir Clive Granger, along with his colleague Robert Engle, was awarded a Nobel Prize for contributions to economics, perhaps for his development of Granger Causality Analysis, which tests the validity of predictive causative links between two items of economic data).

The author of this book - Richard Andreas Werner - was the first 1991 Shimomura Fellow but the Japanese, following their usual practice of concealing Dr Osamu Shimomura's (1910-89) great contribution to economic growth theory and practice from Westerners, apparently did not tell Werner who Shimomura was and why he was "Japan's most influential post-war economist." No matter - Werner has competently worked things out for himself, independently arriving at understandings similar to the Shimomura model of Japan, and producing  these by inductive reasoning from the economic data and demonstrating their validity through the Granger calculations. Werner's book reports upon more extensive results than Dr Osamu Shimomura's model of the Japanese economy does, because Shimomura only (only?) deals with how BoJ investment credit creation  increases economic growth while Werner also points out how growth in central bank credit creation can be misused to fund the speculation of an asset bubble, and how the lack of appropriate credit creation following a recession can create a long lasting depression. Werner's work could not be more relevant to today's economic circumstances.

If you are a student of economics, buy this book. Your teachers and lecturers, trapped in the prevalent neo-classical mindset, are unlikely to tell you anything as relevant as this book will. Challenge their complacency. And if you are a Professor of Economics, get yourself re-educated by buying, reading and understanding this book. If you are a member of the public or a civil servant or anyone interested in economic policy and how we could have a more flourishing economy, buy this book - it tells you about that. Finally, if you are a politician, please read this book, for it contains better growth-assisting policies than any being currently taught, reported upon, or practised in the West, and you should learn about these and how to to apply them.

A truly great book and a curtain-raiser for Werner's "New Paradigm in Macro-Economics" which is equally excellent."
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on 24 May 2018
This is quite simply the greatest non-fiction book you may ever read. It certainly is for me and I have read a huge number of books. I count myself as extremely lucky to have come across Princes of the Yen, for it truly explains the way in which the world works today.
An economics book, but this goes much deeper and spends a lot of its' time on political science and macroeconomic history (Not mentioning anthropology and sociology at times). If your economics interest was not large before hand, this will make you question why you have not taken an interest in macroeconomics your entire life, as this book shows how credit creation and its' use is the most important policy tool you have never heard of.
I sincerely hope a publisher runs a second edition of this book so I can buy second and third, cheaper copies.
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on 27 May 2013
I agree with the previous reviews of this book, and to Mr Bazlinton's comment about credit creation also affecting the stock markets, the point is also made in the book that it can affect exchange rates as well.

This really does throw the light on the "mystery" of "Japan's Lost Decade" (now two decades and counting), which is revealed to be no mystery at all, thanks to Professor Werner's breathtaking analysis.

Although what he reveals about Japan is significant enough, given the importance of Japan in the world's economy, he suggests that other (perhaps all) central banks, are working to similar agendas, and that they are either beyond, or almost beyond democratic control.

The current orthodoxy is that central banks need to be independent of government, or else inflation will ensue. Werner categorically disproves this, and we also now know that a lot of current economic orthodoxies have been found wanting.

This book was written before the financial and economic crash of 2007-2008, but makes clear that such crashes are inevitable given certain policies, and we have seen that just these policies (reckless lending to fund speculation and asset bubbles) will inevitably lead to such crashes.

We also know now from this book that central banks may say they are trying to generate a recovery, when they may be doing just the opposite, and prolonging a recession which they themselves have helped to create. So we should view with suspicion the words of the Fed, the ECB, and the Bank of England. Don't listen to what they say: watch what they do.
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on 22 August 2009
Updated review Aug 2009. Are you concerned as to where ultimate power lies in your nation? This book will show you. Richard Werner the author and top economist, communicates his inside knowledge of the Japanese economic scene during the 1990's until the book's publication in 2003. He takes the reader on a detailed history lesson since WW2 illustrating how bankers ruled Japan in a very secretive way. The democratically elected government imagined they were in control, pulling various economic and financial levers to achieve growth but it is clear that it was the top few rulers (The Princes) in the central bank, the Bank of Japan (BoJ) who did what they wanted regardless - even to the extent of prolonging the 1990s recession for their own purposes.

His constant refrain is that the handling of credit creation by the BoJ was the key to the fluctuation of the economic cycle. To non-economists (like me) who have never heard such a theory, this is a revelation and Werner's facts and reasoning are very convincing.

The tragedy is that most practicing economists, politicians and virtually all of the rest of us are unaware of these facts or think they are unimportant. Thus central banks everywhere have free rein to manage national economies according to their undemocratic authority using the credit creation tool at their disposal. This book is a real page turner. Do not let its price put you off - if you buy no other book this year buy this one, it will change your understanding of economics and the financial scene. Tell your friends and your MP about it. Werner was the man that first used the term 'quantitative easing' in Japanese, in 1995, when he espoused his solutions to Japanese problems. Werner claims that the rise and fall of stock markets too are governed by credit creation - so every fund manager, even every investor, needs to understand the story of this book. It is particularly relevant to any national economy anywhere in the current crisis, don't let the 'Japanese' tag put you off, there are many references to such as the USA, the EU & Germany. It has a compelling global and historical sweep and is an easy read. As you see, I think this book will open your eyes.
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on 26 June 2009
Although I have not yet finished reading this book I must start to review it as it seems so important to sorting the economic woes of our time. Richard Werner the author, communicates his inside knowledge of the Japanese economic scene during the 1990's until the book's publication in 2003. He reveals what was always a puzzle to most commentators, that is: how such a successful economy that rose from the ashes of devastating defeat after the 1939-45 war WW2, to such a height, peaking in about 1990, and for much of the time since has been so moribund. His constant refrain is that the handling of credit creation by the central bank (Bank of Japan) was the key to the fluctuation of the economic cycle. To non-economists (like me) who have never heard such a theory, this is a revelation and Werner's facts and reasoning are very convincing.

The tragedy is that most practicing economists, politicians and virtually all of the rest of us are unaware of these facts. Thus central banks everywhere have free rein to manage national economies according to their undemocratic authority using the credit creation tool at their disposal. This book is a real page turner. Do not let its price put you off - if you buy no other book this year buy this one, it will change your understanding of economics and the financial scene. Tell your friends and your MP about it. Werner was the man that first used the term 'quantitative easing' in Japanese, in 1995, when he espoused his solutions to Japanese problems. Werner claims that the rise and fall of stock markets too are governed by credit creation - so every fund manager, even every investor, needs to understand the story of this book. It is relevant to any national economy anywhere, don't let the 'Japanese' tag put you off, there are many references to such as the USA, the EU & Germany. It has a compelling global and historical sweep. As you see, I think this book will open your eyes.
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Werner's book is a fascinating insight into recent Japanese economic history - written by a long-time student of the Japanese economy and one of the few "gaijin" who entered the inner circle of Japanese decision-makers. While most foreign observers have always considered the Ministry of Finance or MITI behind much of Japanese economic policy, Werner shows that the gravity of power has shifted to an institution that has received barely passing attention by outside analysts: the central bank. Neo-classicial economists largely disregard the role that money and credit play in an economy. Terms such as "money illusion" serve to distract attention from the important and fundamental impact that money and credit creation play in any economy. Using the Japanese economy is a case study, Werner recounts a story that almost reads like a crime novel. The fact that his story smells like intrigue and conspiracy to some commentators does not suprise: the fact that Japan's famous "Mr. Yen" (the former Vice-Minister of Finance) basically attests to its accuracy leaves little doubt as to the sustance of Werner's story. For one, an economics books that will keep you awake at night!
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