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Japan Press Service Co., Ltd. is the only news agency providing information of progressive, democratic movements in Japan

BOJ ends 'quantitative-easing' policy but will keep 'zero-interest rate'

The Bank of Japan on March 9 decided to end its five-year quantitative monetary easing policy. The central bank will begin regulating interest rates but will maintain the "zero-interest rate" policy.

While major banks will not end their near-zero interest rates on deposits for now, they are considering increasing interest rates on housing loans.

Akahata in its editorial on March 9 commented on the BOJ decision as follows:

"BOJ director Shirakawa Masaaki in the House of Councilors stated that the ultra-easy monetary policy affected the household economy to the extent that the loss of interest income up to 2004 is estimated at 304 trillion yen, assuming that the interest rate of 1991 continued.

It stands to reason that the extraordinary monetary policy of siphoning off interest on money people deposited in banks should be ended.

The ultra easy monetary policy has benefited major banks that have used money they collected from small depositors at near-zero interest rates to lend money to large corporations that have enjoyed cutbacks in their payments of interests on their debts. Small depositors are the big losers.

It is outrageous that ordinary people today get only 0.5 percent of what they received as interest on their deposits in 1991. Banks must raise their interest rates to return to the general public what they plundered in the past.

The "quantitative easing" policy along with the promotion of an early write-off of bad loans held by banks is what the Japanese government promised to the U.S. Bush administration. Prime Minister Koizumi Jun'ichiro in a summit meeting pledged to U.S. President George W. Bush to expand the ultra-easy monetary policy and accelerate the disposal of bad loans.

The extra money generated under the ultra-easy monetary policy flowed into the U.S. stock and bond market to help the United States reduce its fiscal and trade deficits and boost U.S. stock price as well as increase the profits of the Japanese banks.

As the BOJ acknowledges, the policy had certain negative effects, with abundant money in the Japanese market having turned the stock market into a "casino market" and widening the income gap between large shareholders and ordinary people without stock shares.

The BOJ's monetary policy has robbed the people of interest on their deposits in order to help large corporations, major banks, and the United States, widening the income gap in Japan. This is what the "quantitative easing" is really all about.

The Koizumi Cabinet used the BOJ's monetary policy to mitigate the deflationary pressure of "structural reform" policies such as forcing the disposal of the banks' bad loans and imposing extra burdens on the public. But personal incomes continue to decline, with unemployment and bankruptcy worsening, followed by the spread of unstable jobs.

The trick of using the BOJ's monetary policy to cover up the failure of the government's economic policy no longer works. The policy must drastically change from sponging money off household economies to one of supporting them.
- Akahata, March 9, 10, 2006