The Bank of Japan has been criticizing as too conservative for a long time. There is complaint says that the central bank could have boosted Japan’s economy if it had increased its balance-sheet more rapidly during the financial crisis. On February 14th the BOJ finally tried to disprove its critics.
First, it changed its wording on price stability. Instead of calling it an “understanding” among the nine individual policy-board members, it now refers to price stability as a “goal” of the institution.
Second, the BOJ increased its ongoing credit-easing programme by agreeing to purchase an additional ¥10 trillion ($130 billion) in long-term Japanese government bonds by the end of 2012. That triples the amount of its monthly purchases and brings the overall amount of credit easing to ¥65 trillion.
Yet as we read in our class materials, the economy still faces some severe problems: a declining and aging population, sluggish global growth and a still-strong yen that eats into corporate profits. Plus the reconstruction needs after the disaster last year, I would anticipate the recovery of Japanese economy still has a long way to go, and BOJ obviously needs to do more.
2 comments:
It is interesting to see how Asian central banks fight for deflation/recession, especially for Japan, where it has been is a severe disaster of deflation for decades. The credit easing instrument implemented by the BoJ is definitely a common method for central banks to use to boost economy. However, if people are still scared of spending and firms are still weary about investing, the effect from spending may be slow and less expecting.
Especially in this situation where BOJ is still accused of being to conservative in credit easing. One reason might be that they that they are quite cautious about the method.
Bank of Japan has been criticizing since its bad decision on 1989 when it restricted the monetary policy and increases the discount rate, which causes the already formed economic bubble burst. It's interesting to see whether the recently actions the central bank of Japan has taken will help recovering the suffered economy.
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