Japan Press Weekly

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2014 March 19 - 25 [ECONOMY]

BOJ Governor Kuroda in line with Abe gov’t position

On March 20 of the previous year, Kuroda Haruhiko became the Bank of Japan Governor under the prodding of the Abe government. Since then, Kuroda has promoted “monetary easing in new dimensions”, targeting a 2% inflation over the next two years. What did this policy bring about in people’s lives and Japan’s economy?

More and more people feel that the economy is deteriorating. A BOJ survey shows that 21.5% of the general public in December 2013 answered that their lives “worsened” compared to a year ago.

The BOJ last April implemented monetary easing steps with the intent to double the amount of money in circulation in just two years. This accelerated the depreciation of the yen. Expected export expansion, thanks to the weak yen, should have created more jobs and stimulated small- and- medium-sized business activities. However, it did not bring about export expansion.

Kiuchi Takahide, a BOJ Policy Board member, pointed out that it is because the prolonged decline in domestic demand gave impetus to corporations to advance overseas and these business entities increased the overseas supply rate.

Meanwhile, the cheap yen invited a rise in prices of imported goods, pushing up domestic prices. Most people abhor price increases. According to the BOJ data, 80% of the respondents said that rising prices negatively affect their daily lives.

In addition to the price hikes due to the drop in the value of the yen, the consumption tax rate will increase to 8% in April from the current 5%. An opinion poll released by Asahi Shimbun on March 18 indicated that those who answered that the heavier consumption tax will impose a burden on family budgets either to a certain extent or to a large extent reached 79%. In the same poll, 68% expressed opposition to a further increase in the consumption tax rate to 10% scheduled for October 2015.

In contrast, BOJ Governor Kuroda keeps making bold statements that even after the consumption tax rate becomes10%, the Japanese economy will continue to grow. He is in tune with the Abe government line

Even among market players, some began calling on the BOJ to stop taking the me-too stance toward the government and to shift its monetary policy in order to expand domestic demand.