Incumbency ain’t what it used to be

The president is using his office to impress his supporters, and annoy everyone else




DONALD TRUMP’S campaign rallies have had a makeover. Though most of their signature features are still evident— the MAGA hats on sale, the testaments to Mr Trump’s generosity by warm-up speakers, his dramatic arrival by helicopter, Elton John and the Stones blaring out to make everyone feel young again—the production has been brought up to presidential standards. The merchandise stands at the Trump rally Lexington attended last week in Panama City Beach, in Florida’s Panhandle, were NFL quality; everyone in the large crowd seemed to have visited one. The praise singers, who once consisted of a bunch of oddballs and Jeff Sessions, were Florida’s congressional delegation. “Thank God for President Trump!” hollered Senator Rick Scott. “He cares about Florida like nobody else!” The helicopter is now Marine 1. To the seventies music Mr Trump’s stage managers added a magnificent firework display. When Trump comes to town, it’s the 4th of July!

In a Panhandle county that gave him 71% of the vote in 2016, he could count on a warm welcome. Even so, the emotions the president induced in the lily-white crowd, wearing Trump-branded T-shirts and shorts on a balmy evening, were impressive. “I love him, I love, I love him,” said Darrell, an air-force veteran. “I love him because he cares the most about the people. Democrats don’t care. They want to take money away instead of giving it to our people.” He must have liked what he was about to hear. Mr Trump began his speech by boasting of the “billions” in disaster relief his administration “has given” to Florida, after its recent hurricanes. And he promised there would be more to come, despite (he falsely claimed) Democratic efforts to stop him.

By way of a gratuitous comparison, he then slammed Puerto Rico, which has suffered even worse storm damage, unleashing a vast exodus of islanders to Florida, for being greedy and corrupt. Candidate Trump dog-whistled on race by making wild claims about immigration; as president, he can merely cite his spending priorities. Ninety minutes into Mr Trump’s speech, in which he talked up the latest jobs numbers, lambasted his enemies and joined in the hilarity that a heckler caused by suggesting he “shoot” Latino immigrants, the crowd was still cheering him.

There has been much speculation about the electoral boost Mr Trump could get next year from being the sitting president. This is understandable. He won in 2016 by a whisker, few of his supporters have since deserted him, and the benefits of incumbency, in terms of name recognition, the mystique of the office and the many opportunities it presents to blend governing and campaigning, have long been recognised. Throughout presidential history, by one calculation, incumbency has been worth around three percentage points on average. No president has failed to win re-election since George H.W. Bush in 1992, and before him Jimmy Carter in 1980, both of whom were saddled with an economic downturn. Moreover, as his performance in Florida suggested, Mr Trump will milk his office for every advantage he can.

He will claim to have done things for his audiences that he has not (the disbursement of relief spending to Florida has in fact been slow), and promise incredible things. He will mix politics and governing shamelessly. The pretext for his Panhandle visit was his desire to inspect a storm-damaged air-force base that the Pentagon thought about closing but which he has vowed to rebuild at vast cost. Yet though he stands to benefit from such ploys, the incumbency effect in 2020 will probably be weaker than in the past.

That is because what Mr Trump’s supporters love about him—including the bullying public persona he has used his office to inflate—almost everyone else loathes. He has therefore gained even fewer supporters than he has lost. His approval ratings are as stable as they are low. And the Democrats, as their bumper turnout in the mid-terms indicated, are as motivated to remove him as his supporters are to keep him in place. Mr Trump is therefore unlikely to get a three-point boost from his incumbency, or anything close to that, because it is unclear whether such a large group of swing voters even exists. The election is likely to be decided by whichever side does a better job of mobilising its supporters—just as Barack Obama’s re-election was in 2012—with the presidency among the tools that Mr Trump will have at his disposal.

This is risky for a Republican because the Democrats have more supporters, which is why they tend to win the popular vote. Yet the electoral college mitigates that advantage (which is how Mr Trump won in 2016). It should also be noted that, even if Mr Trump’s hyper-partisanship makes him an extreme case, his two immediate predecessors both ran less inclusive campaigns the second time round. This underlines the fact that the depletion of swing voters, and consequent reduction in the incumbency advantage, is a long-running trend. Even in the alternative universe in which Mr Trump could restrain himself and count on incumbency and the strong economy to see him home, there might not be enough persuadable centrists left for the strategy to pay off.

The bully pulpit

Despite his low ratings, Mr Trump’s more divisive style could turn out to be a better bet at this juncture. In particular, it might be his best hope of tying in the voters who have gone most wobbly on him: a group of working-class whites—the so-called Obama-Trump voters—in Midwestern states such as Michigan and Pennsylvania which he won by tiny margins and needs to win again. Given that these voters have not felt much of a boom in their wages and had no great qualms about Mr Trump’s boorishness in 2016, it is not obvious that they would be likelier to stick with him if he were to tone it down and lead with the economy. Ripping into his opponents, after all, is what Mr Trump is best at—and he is anxious to get on with that. “I’ll take any,” enthused the president in Florida, after denigrating the main Democratic primary contenders. “Let’s just pick somebody please, and let’s start this thing.”

The New German Anti-Semitism

For the nation’s estimated 200,000 Jews, new forms of old hatreds are stoking fear.

By James Angelos


One of Wenzel Michalski’s early recollections of growing up in southern Germany in the 1970s was of his father, Franz, giving him some advice: “Don’t tell anyone that you’re Jewish.” Franz and his mother and his little brother had survived the Holocaust by traveling across swaths of Eastern and Central Europe to hide from the Gestapo, and after the war, his experiences back in Germany suggested that, though the Nazis had been defeated, the anti-Semitism that was intrinsic to their ideology had not. This became clear to Franz when his teachers in Berlin cast stealthily malicious glances at him when Jewish characters — such as Shylock in “The Merchant of Venice” — came up in literature. “Eh, Michalski, this exactly pertains to you,” he recalls one teacher telling him through a clenched smile. Many years later, when he worked as an animal-feed trader in Hamburg, he didn’t tell friends that he was Jewish and held his tongue when he heard them make anti-Semitic comments. And so Franz told his son Wenzel that things would go easier for him if he remained quiet about being Jewish. “The moment you say it, things will become very awkward.”

As a teenager, Wenzel defied his father’s advice and told a close friend. That friend quickly told his mother, and the next time Wenzel saw her, she reacted quite strongly, hugging him and kissing his face: “Wenzel! Oh, my Wenzel!” Now a stocky, bearded 56-year-old, Wenzel recalled the moment to me on a recent Saturday afternoon. He raised the pitch of his voice as he continued to mimic her: “You people! You are the most intelligent! The most sensitive! You are the best pianists in the world! And the best poets!” In his normal voice again, he added, “Then I understood what my father meant.”

Wenzel Michalski is now the director of Human Rights Watch for Germany. He and his wife, Gemma, an outgoing British expat, live in a cavernous apartment building in the west of Berlin. In their kitchen, Gemma told me that after arriving in Germany in 1989, she often got a strangely defensive reaction when she told people she was Jewish; they would tell her they didn’t feel responsible for the Holocaust or would defend their grandparents as not having perpetrated it. And so, to avoid conversations like these, she, too, stayed quiet about being Jewish.



Gemma and Wenzel Michalski, Solomon’s parents, at their home in Berlin.CreditJoakim Eskildsen/Institute, for The New York Times


Recently, the Michalskis’ youngest son became the third generation of the family to learn that telling people he is Jewish could cause problems. The boy — whose parents asked that he be called by one of his middle names, Solomon, to protect his privacy — had attended a Jewish primary school in Berlin. But he didn’t want to stay in such a homogeneous school for good, so just before he turned 14, he transferred to a public school that was representative of Germany’s new diversity — a place, as Gemma described it, where he “could have friends with names like Hassan and Ahmed.”
The first few days there seemed to go well. Solomon, an affable kid with an easy smile, bonded with one classmate over their common affection for rap music. That classmate introduced him to a German-Turkish rapper who would rap about “Allah and stuff,” Solomon told me. In return, he introduced the classmate to American and British rap. Solomon had a feeling they would end up being best friends. On the fourth day, when Solomon was in ethics class, the teachers asked the students what houses of worship they had been to. One student mentioned a mosque. Another mentioned a church. Solomon raised his hand and said he’d been to a synagogue. There was a strange silence, Solomon later recalled. One teacher asked how he had encountered a synagogue.


“I’m Jewish,” Solomon said.

“Everyone was shocked, especially the teachers,” Solomon later told me about this moment. After class, a teacher told Solomon that he was “very brave.” Solomon was perplexed. As Gemma explained: “He didn’t know that you’re not meant to tell anyone.”

The following day, Solomon brought brownies to school for his birthday. He was giving them out during lunch when the boy he had hoped would be his best friend informed him that there were a lot of Muslim students at the school who used the word “Jew” as an insult. Solomon wondered whether his friend included himself in this category, and so after school, he asked for clarification. The boy put his arm around Solomon’s shoulders and told him that, though he was a “real babo” — Kurdish slang for “boss” — they couldn’t be friends, because Jews and Muslims could not be friends. The classmate then rattled off a series of anti-Semitic comments, according to Solomon: that Jews were murderers, only interested in money.

Over the next few months, Solomon was bullied in an increasingly aggressive fashion. One day, he returned home with a large bruise from a punch on the back. On another occasion, Solomon was walking home and stopped into a bakery. When he emerged, he found one of his tormentors pointing what looked like a handgun at him. Solomon’s heart raced. The boy pulled the trigger. Click. The gun turned out to be a fake. But it gave Solomon the scare of his life.

When Solomon first told his parents about the bullying, they resolved to turn it into a teaching moment. They arranged to have Wenzel’s father visit the school to share his story about escaping the Gestapo. But the bullying worsened, Gemma told me, and they felt the school did not do nearly enough to confront the problem. The Michalskis went public with their story in 2017, sharing it with media outlets in order to spark what they viewed as a much-needed discussion about anti-Semitism in German schools. Since then, dozens of cases of anti-Semitic bullying in schools have come to light, including one case last year at the German-American school where my own son attends first grade, in which, according to local news reports, students tormented a ninth grader, for months, chanting things like “Off to Auschwitz in a freight train.” Under criticism for its handling of the case, the administration released a statement saying it regretted the school’s initial response but was taking action and having “intensive talks” with the educational staff.

The principal of Solomon’s school, in an interview with the German newspaper Die Welt, also said his school had made a concerted effort to resolve the problem. When the reporter asked him if the bullying illustrated the “unreflective behavior of pubescent youths” or “rooted anti-Semitism,” the principal paused to say this was a “very dangerous” question but then answered: “It’s very possible that anti-Semitism is the motive. But we can’t look inside the heads of these students.” (When asked for comment, a representative for the Berlin Senate Department for Education, Youth and Families, which oversees Berlin’s public schools, said it had put into place anti-discrimination measures such as training courses and workshops for students and faculty.)

For the Michalskis, all this was evidence that German society never truly reckoned with anti-Semitism after the war. Germany had restored synagogues and built memorials to the victims of the Holocaust, Wenzel said: “So for a lot of mainstream, middle-class people, that means: ‘We’ve done it. We dealt with anti-Semitism.’ But nobody really dealt with it within the families. The big, the hard, the painful questions were never asked.” In Wenzel’s view, the Muslim students who tormented his child were acting in an environment that was already suffused with native anti-Semitism. “A lot of conservative politicians now say, ‘Oh, the Muslims are importing their anti-Semitism to our wonderful, anti-anti-Semitic culture,’ ” he said. “That’s bull. They’re trying to politicize this.”

Jewish life in Germany was never fully extinguished. After the Nazi genocide of six million Jews, some 20,000 Jewish displaced persons from Eastern Europe ended up settling permanently in West Germany, joining an unknown number of the roughly 15,000 surviving German Jews who still remained in the country after the war. The new German political class rejected, in speeches and in the law, the rabid anti-Semitism that had been foundational to Nazism — measures considered not only to be morally imperative but necessary to re-establish German legitimacy on the international stage. This change, however, did not necessarily reflect an immediate conversion in longstanding anti-Semitic attitudes on the ground. In the decades that followed, a desire among many Germans to deflect or repress guilt for the Holocaust led to a new form of antipathy toward Jews — a phenomenon that came to be known as “secondary anti-Semitism,” in which Germans resent Jews for reminding them of their guilt, reversing the victim and perpetrator roles. “It seems the Germans will never forgive us Auschwitz,” Hilde Walter, a German-Jewish journalist, was quoted as saying in 1968.

Holocaust commemoration in West Germany increasingly became an affair of the state and civic groups, giving rise to a prevailing erinnerungskultur, or “culture of remembrance,” that today is most prominently illustrated by the Memorial to the Murdered Jews of Europe, a funereal 4.7-acre site near the Brandenburg Gate in Berlin, inaugurated in 2005. But even as Germany’s remembrance culture has been held up as an international model of how to confront the horrors of the past, it has not been universally supported at home. According to a 2015 Anti-Defamation League survey, 51 percent of Germans believe that it is “probably true” that “Jews still talk too much about what happened to them in the Holocaust”; 30 percent agreed with the statement “People hate Jews because of the way Jews behave.”

The reactionary, far-right Alternative for Germany, or A.f.D., entered the German Parliament for the first time in 2017 — becoming the third-largest party — with an anti-immigration, anti-Islam platform, while politicians in the party also railed against Germany’s remembrance culture. A.f.D. politicians have often relativized Nazi crimes to counteract what some of them call a national “guilt cult.” In a speech last June, one of the party’s leaders, Alexander Gauland, referred to the Nazi period as “only a bird poop in over 1,000 years of successful German history.”

Now some 200,000 Jews live in Germany, a nation of 82 million people, and many are increasingly fearful. In a 2018 European Union survey of European Jews, 85 percent of respondents in Germany characterized anti-Semitism as a “very big” or “fairly big” problem; 89 percent said the problem has become worse in the last five years. Overall reported anti-Semitic crimes in Germany increased by nearly 20 percent last year to 1,799, while violent anti-Semitic crimes rose by about 86 percent, to 69. Police statistics attribute 89 percent of all anti-Semitic crimes to right-wing extremists, but Jewish community leaders dispute that statistic, and many German Jews perceive the nature of the threat to be far more varied. Slightly more than half of Germany’s Jewish respondents to the E.U. survey said they have directly experienced anti-Semitic harassment within the last five years, and of those, the plurality, 41 percent, perceived the perpetrator of the most serious incident to be “someone with a Muslim extremist view.”


Fears within the Jewish community of what some call “imported anti-Semitism” or “Muslim anti-Semitism” brought into the country by immigrants from the Middle East and often entangled with the conflict between Israel and the Palestinians emerged after 2000, when during the Palestinian uprising known as the Second Intifada, a wave of anti-Jewish attacks rippled across parts of Europe. The large-scale influx of refugees into Germany from countries such as Syria and Iraq that began in 2015 further fueled worries. Amid the early wave of pride many Germans felt over the welcoming of refugees, Josef Schuster, the head of the Central Council of Jews in Germany, the country’s largest umbrella Jewish organization, urged caution. “Many of the refugees are fleeing the terror of the Islamic State and want to live in peace and freedom, but at the same time, they come from cultures in which hatred of Jews and intolerance are an integral part,” he told a reporter from Die Welt.



The Neukölln district of Berlin, near the Fraenkelufer Synagogue, is also home to large numbers of Turkish and Arab immigrants.CreditJoakim Eskildsen/Institute, for The New York Times


The exact nature of the anti-Semitic threat — and indeed, whether it rises to the level of an existential threat at all — is intensely debated within Germany’s Jewish community. Many see the greatest peril as coming from an emboldened extreme right that is hostile to both Muslims and Jews, as the recent shootings by white supremacists in synagogues in Pittsburgh and Poway, Calif., and mosques in Christchurch, New Zealand, horrifically illustrated. Multiple surveys suggest that anti-Muslim attitudes in Germany and other European countries are more widespread than anti-Semitism. At the same time, a number of surveys show that Muslims in Germany and other European countries are more likely to hold anti-Semitic views than the overall population. The 2015 Anti-Defamation League survey, for instance, found that 56 percent of Muslims in Germany harbored anti-Semitic attitudes, compared with 16 percent for the overall population. Conservative Jews see the political left as unwilling to name this problem out of reluctance to further marginalize an already marginalized group or because of leftist anti-Zionism. The far right, anti-Islam A.f.D. — the very political party that, for its relativizing of Nazi crimes, many Jews find most noxious — has sought to exploit these divisions and now portrays itself as a defender of Germany’s Jews against what it depicts as the Muslim threat.

An incident that garnered considerable attention and highlights some of the complexities of this new dynamic occurred on a Berlin street in April 2018, when a 19-year-old Syrian of Palestinian descent took off his belt and flogged a young Israeli man named Adam Armoush, who was wearing a yarmulke. The attacker yelled “Yehudi!” — Arabic for “Jew.” Armoush recorded the attack with his phone for “the world to see how terrible it is these days as a Jew to go through Berlin streets,” as he later put it in a television interview. Schuster advised Jews in cities against openly wearing yarmulkes outside. Almost lost in the uproar was Armoush’s bizarre admission that he was not Jewish but rather an Israeli Arab. He said he received the yarmulke from a friend along with a caveat that it was not safe to wear outside. Armoush said he initially debated this. “I was saying that it’s really safe,” he said. “I wanted to prove it. But it ended like that.”
Many Muslims criticize the notion of “Muslim anti-Semitism” as wrongly suggesting that hatred of Jews is intrinsic to their faith. Muhammad Sameer Murtaza, a German scholar of Islam who has written extensively on anti-Semitism, argues that European anti-Semitism was exported to the Middle East in the 19th century and was only “Islamized” starting in the late 1930s, a process later catalyzed by the Arab-Israeli conflict. Anti-Semitism is indeed a mainly European invention with a proven capacity to mutate. Often intertwined with economic and social resentments, demonization of Jews was long part of Christian tradition, and, with the growth of European nationalism in the 19th century, it took on delusive notions of race. Now as a worldwide resurgence of racist tribalism fuels a rebellion against the liberal democratic order, Germany’s renewed confrontation with anti-Semitism will say much not just about the fate of its unnerved Jewish communities but also about the endurance of any nation’s capacity to build a tolerant, pluralistic society resistant to the temptations of ethnonationalism.


Sigmount Königsberg, the Anti-Semitism Commissioner for the Jewish Community of Berlin.CreditJoakim Eskildsen/Institute, for The New York Times


The early signs are mixed. Sigmount Königsberg is the anti-Semitism commissioner for Berlin’s Jewish Community, the organization that oversees synagogues and other aspects of local Jewish life. At a cafe next to the domed New Synagogue, which was spared destruction during the pogroms of November 1938, Königsberg, an affable 58-year-old, told me his mother had been liberated from the Bergen-Belsen concentration camp and had intended to move to Paris. Instead, she became stranded in the German border town of Saarbrücken, and she soon met Königsberg’s father, also a Holocaust survivor. Like other Jewish families, they were ambivalent about remaining in Germany. Königsberg employed an often-used metaphor to describe this unsettledness: Until the 1980s, he said, German Jews “sat on a packed suitcase.” After East and West Germany reunified, many Jews feared a nationalist revival. Despite a wave of racist attacks on immigrants, that revival did not seem to materialize. In fact, the European Union, which was created to temper those impulses, was ascendant. Jews felt more secure, Königsberg told me: “We unpacked the suitcase and stored it in the cellar.”

Now, he believed, that sense of security has eroded. People aren’t heading for the exits yet, he said, but they are starting to think, Where did I put that suitcase?

On a cool, overcast day in late 2017, Yorai Feinberg, an Israeli citizen, then 36, was standing in front of the Israeli restaurant he owns in central Berlin, bundled up in a down coat and smoking a cigarette, when a middle-aged German man stopped on the sidewalk and declared, “You people are crazy.”

“Why?” Feinberg asked, as a friend filmed the encounter on a mobile phone.

“Very simple,” said the man. “Because you’ve warred against the Palestinians for 70 years.”

“Oh, so this is a left-wing story,” Feinberg said.

“I’m not a leftist,” the man said, leaning in toward Feinberg. “You’re leading a war. And you want to install yourselves here.” The man became increasingly belligerent. “Get out of here!” he went on. “This is my homeland. And you have no homeland.”

Feinberg asked him to back off.

“You’ll get your reckoning in 10 years. In 10 years you won’t be living,” the man said. He then added: “What do you want here after ’45?”

It seemed like a rhetorical question, but Feinberg, taking a drag of his cigarette, ventured an answer. “With so many people like you, that’s a very good question.”


Yorai Feinberg outside his restaurant in Berlin.CreditJoakim Eskildsen/Institute, for The New York Times

The Rising Threat in Central Asia

The threat from Islamic extremism is growing, and leaders appear increasingly worried.

By Ekaterina Zolotova


Something’s stirring in Central Asia. Nearly a year ago, we wrote an article about the threat of Islamist radicalism in the region. Central Asia has long been vulnerable to such destabilizing movements, in part because of events that have unfolded over several years. In Afghanistan, the U.S. has effectively given up on trying to rid the country of jihadists and is now looking for a way to leave without sacrificing any more blood or treasure. In Tajikistan, Kyrgyzstan and Uzbekistan, Islamic State fighters are returning home, experienced, motivated and facing uncertain futures. But a number of more recent developments have forced us to take a harder look at the region and examine whether it’s now reaching a turning point.

The most recent event that caught our eye was a riot on May 19 in a Tajik prison where Islamic State militants are being held. According to the Ministry of Justice, the rebellion, which killed three guards and 29 prisoners, started late Sunday in the city of Vahdat, located 10 kilometers from the capital. The ministry claims that the riot was organized by 35 Islamic State fighters, including Behruz Gulmurod, a former military leader for IS and the son of the former commander of the Tajik special forces.

Similar incidents have happened before. In November 2018, 21 prisoners and two officers were killed in a prison riot in the northern city of Khujand. The Islamic State took responsibility for that incident as well, but thus far, the group hasn’t carried out attacks in Tajikistan outside of prisons – but it might be only a matter of time before it does. Last week, Tajik President Emomali Rahmon called on the international community to increase efforts to fight IS in Afghanistan, noting that members of the group have been transferred to Afghanistan for a specific purpose. Having gained combat experience in Syria and Iraq, they can now use that experience to help destabilize the región.



 
According to Tajikistan’s border guard, there are roughly 16,000 militants (including some from the Islamic State) in northern Afghanistan near the Tajik border, 6,000 of whom are foreign fighters. But the reliability of these figures and the general level of the terrorist threat in this part of the world is still unclear. Tajikistan has every reason to play up the threat, hoping to win support for any counterterrorism operations it might launch in the future. The country has relatively few resources at its disposal, and it needs to encourage outside actors – whether Russia or the United States or even China – to help keep Islamic extremist threats at bay. Russia and China, in particular, may have an interest in helping Tajikistan, as they themselves may become the next target for extremist groups that gain a foothold in Central Asia. Indeed, the destabilization of Tajikistan would affect many nearby countries that are much larger than Tajikistan and therefore more attractive targets. Kazakhstan, Uzbekistan, Russia and China could all see a flood of Tajik refugees as well as a larger IS presence on their own soil. Even if the figures are accurate, the militants may be scattered, making it difficult for them to coordinate, plan attacks and grow into anything resembling what IS managed to establish in Syria and Iraq.

But there is a ring of truth in Rahmon’s comments. If the militants are able to establish a more permanent presence in the region, the threat to Central Asian countries will increase. Many of these fighters are looking for the kinds of power vacuums that Islamic extremists have taken advantage of in the past. Central Asia’s brittle, post-Soviet republics are a tempting target, and Rahmon knows it.

Indeed, Rahmon isn’t the only significant figure to call attention to this issue. On Tuesday, the director of Russia’s Federal Security Services said there were about 5,000 Islamic militants who had fought in Syria now in northern Afghanistan. And last week, a senior Russian general warned of the worsening security situation in Central Asia. He said the number of Islamic State militants in Afghanistan has tripled since 2016, when they numbered roughly 1,900, and that the situation could reach crisis levels by next year. The overall number is fairly small, but the speed at which it’s growing and the experience of the newest recruits should not be underestimated.

Uzbekistan, one of Central Asia’s most powerful and politically dynamic countries, is also worried about the situation in Afghanistan. On May 14, Uzbekistan held snap drills in Surkhandarya region, near the Afghan border, and military units there were put on the highest level of combat readiness. Uzbekistan, the region’s most populous country, is in the midst of a major political transition and is also hoping to attract foreign investment. To do so, it has considered loosening government control by, for example, easing internet censorship and offering cautious support to religious education institutions to give observant Muslims an alternative to the religious ideology offered by the Islamic State.

None of the recent developments suggest that Central Asia has reached a breaking point. And it’s important not to treat Central Asian countries as a monolith – a country like Uzbekistan has more resources at its disposal to hold back extremist groups than a country like Tajikistan, which needs all the help it can get from not just Russia but even regional heavyweights like Kazakhstan and Uzbekistan. Moreover, this is one issue that ironically may boost cooperation among Central Asian states, just as it did in the Middle East, where the rise of the Islamic State forced countries like the U.S. and Iran, or Israel and Saudi Arabia to work together – even if temporarily.

Still, the threat is growing, and Central Asian countries are worried that a peace deal between the U.S. and the Taliban could only make things worse. China also must keep a watchful eye on these developments, as Central Asia is a linchpin in its Belt and Road Initiative. For China, jailing and brainwashing Uighurs is one way to make sure its borders are well protected. In the meantime, the Islamic jihadists in Central Asia are gathering strength and biding their time.

Japan’s Central Bank Shows How Not to Buy Stocks

After nine years of ETF purchases, the Bank of Japan doesn’t have much to show for it

By Mike Bird





Japan’s central bankers have had more success buying bonds than stocks.

Some of the Bank of Japan’s novel strategies for revitalizing a sluggish economy, most notably massive government-bond purchases, blazed a trail for its counterparts in the U.S. and Europe. But its stock-market approach isn’t one central bankers elsewhere should follow too closely.

Speaking to lawmakers in the country’s parliament Tuesday, BOJ Governor Haruhiko Kuroda noted that the central bank now owns more than three-quarters of the country’s exchange-traded funds, the result of a program begun in 2010 and ramped up in 2013.

The main goal was to lower Japan’s equity-risk premium—the extra returns investors expect for buying stock rather than simply parking their money in riskless government debt. A lower premium should raise stock prices and make equity financing easier for listed companies.

But at 6.94%, Japan’s premium remains stubbornly above the U.S.’s 5.96%—with the gap little changed in six years—according to Aswath Damodaran, professor of finance at New York University’s Stern School of Business.




The Sage of Tokyo Photo: Yoshio Tsunoda/Zuma Press


We can’t know what might have happened without the ETF purchases, but their impact certainly isn’t easily visible in Japanese stock valuations. Share prices have actually fallen as a multiple of earnings during the course of the program, while they have risen for U.S. and even European stocks.

Nor does it appear the policy encouraged global investors to buy the country’s increasingly cheap stocks. Instead, they have been persistent sellers.

Worse than ineffective, the policy has been problematic. The BOJ has recently tipped purchases toward the market-weighted Topix index, but many ETFs are benchmarked to the Nikkei 225, which like the Dow Jones Industrial Average isn’t market-weighted. That has left the BOJ with outsize stakes in companies overrepresented in the Nikkei—for example, 20% of Uniqlo owner Fast Retailing Co.at the end of February.

Unlike the bonds that the BOJ owns, which will eventually mature, the equity is the bank’s until it sells. This creates an overhang problem for investors considering a bet on companies like Fast Retailing: Their strategy could be waylaid by a change in central-bank policy.

If benchmark interest rates are still at or near zero when the next financial crisis hits, the question of whether central banks should buy stocks will come to the fore. The Fed should avoid repeating Japan’s mistakes.