Japan Press Weekly

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2014 November 5 - 11 [ECONOMY]

BOJ pumping huge amount of money into private banks in vain

With the aim of achieving the target of 2% inflation set by Prime Minister Abe Shinzo’s administration, the Bank of Japan (BOJ) started to implement additional monetary easing measures this month.

Under the name of “monetary relaxation in new dimensions”, the central bank has provided a huge amount of money to private banks since April 2013 by buying up long-term government bonds from them, which amount to 50 trillion yen a year.

BOJ executives had insisted that the policy would help commercial banks lend more money to private companies, and that would urge those companies to make more investments and consequently encourage economic activities overall.

However, the amount of loans which city banks gave to private businesses has increased by only 2% in the past 18 months. Meanwhile, the current account balance at the BOJ, which shows the total amount of deposits made by private banks, has almost tripled to 168 trillion yen in the same period of time.

Personal consumption in Japan has remained sluggish due to declining workers’ wages and the sales tax hike which was implemented in April. This economic situation has discouraged private enterprises from making new investments. In actuality, city banks have been putting the enormous amount of money provided by the BOJ into their accounts at the central bank.

At the end of October, the BOJ approved a policy to further increase its purchase of long-term government securities to 80 trillion yen a year. The central bank is about to repeat the same mistake on a larger scale.


Past related article:
> BOJ Governor Kuroda in line with Abe gov’t position [March 21, 2014]