November 7, 2010
The Bank of Japan in its financial policy decision meeting on November 5 decided to start purchasing national bonds at the beginning of next week with a fund amounting to 5 trillion yen.
What the BOJ is going to buy includes such speculative financial assets as listed mutual funds linked to average stock prices and real estate investment trusts, which the BOJ has never bought before.
In addition to the zero interest rate policy which the BOJ resumed last month, Japan’s central bank is escalating its extraordinary easy money policy.
Is BOJ custodian of currency?
BOJ Governor Shirakawa Masaaki said that purchases by the BOJ of speculative financial assets have had no precedent in central bank policy. He admitted that a possible loss would result in more burdens on taxpayers and that such purchases could favor only specific industries or corporations.
In fact, an enormous sum of money remains in the hands of large corporations. Even if the BOJ supplies banks with more money, large corporations will not borrow the money and major banks are reluctant to lend money to small- and midsized enterprises. Far from assisting in economic recovery, funds supplied at ultra-low interest rates are used for speculative activities which cause more instability in the economy.
Now, in the new easy money policy, the BOJ is going beyond its self-imposed limit and is going to deal in speculative financial investments. This type of activity should be prohibited for the central bank, the custodian of the national currency.
The Federal Reserve Open Market Committee (FOMC) of the United States has decided on an additional easy money policy of buying up 600 billion dollar (48 trillion yen) U.S. bonds by the middle of next year. Initiating a vicious cycle, the U.S. easy money policy will cause a further appreciation of the yen against the dollar, which in turn will require an easier money policy in Japan.
For Japan to get out of the dilemma of a over-valued yen, it is necessary to change the economic structure that begets the strong yen, under which a limited number of large corporations increase their exports at the expense of workers and subcontractor small- and- midsized businesses, leading to the further appreciation of the yen. The need now is to change this structure and shift the economic focus from an export economy to a household economy and domestic demand.
-Akahata, November 7, 2010
In addition to the zero interest rate policy which the BOJ resumed last month, Japan’s central bank is escalating its extraordinary easy money policy.
Is BOJ custodian of currency?
BOJ Governor Shirakawa Masaaki said that purchases by the BOJ of speculative financial assets have had no precedent in central bank policy. He admitted that a possible loss would result in more burdens on taxpayers and that such purchases could favor only specific industries or corporations.
In fact, an enormous sum of money remains in the hands of large corporations. Even if the BOJ supplies banks with more money, large corporations will not borrow the money and major banks are reluctant to lend money to small- and midsized enterprises. Far from assisting in economic recovery, funds supplied at ultra-low interest rates are used for speculative activities which cause more instability in the economy.
Now, in the new easy money policy, the BOJ is going beyond its self-imposed limit and is going to deal in speculative financial investments. This type of activity should be prohibited for the central bank, the custodian of the national currency.
The Federal Reserve Open Market Committee (FOMC) of the United States has decided on an additional easy money policy of buying up 600 billion dollar (48 trillion yen) U.S. bonds by the middle of next year. Initiating a vicious cycle, the U.S. easy money policy will cause a further appreciation of the yen against the dollar, which in turn will require an easier money policy in Japan.
For Japan to get out of the dilemma of a over-valued yen, it is necessary to change the economic structure that begets the strong yen, under which a limited number of large corporations increase their exports at the expense of workers and subcontractor small- and- midsized businesses, leading to the further appreciation of the yen. The need now is to change this structure and shift the economic focus from an export economy to a household economy and domestic demand.
-Akahata, November 7, 2010
