Japan Press Weekly

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2018 February 14 - 20 [ECONOMY]

Gov’t attempt to continue ‘different dimension’ easy money policy will trap Japanese economy in hell

The Abe government on February 16 submitted to the Diet a bill to seek parliamentary approval for reappointing Bank of Japan Governor Kuroda Haruhiko who promotes the monetary easing of a “different dimension”. If the Diet gives its nod, Kuroda will be the second person to serve more than one term as the BOJ governor.

If the bill is passed, the Japanese economy would be trapped in a difficult situation with no way out.

Since taking office in 2013, Kuroda has played a role in the formulation of financial policy under Abenomics. Kuroda’s “different dimension” monetary easing policy is the primary pillar of Abe’s economic policy package. This measure has greatly benefitted large corporations and the rich.

With the “different dimension” easy money policy, the BOJ has been pouring money into the market by purchasing a large amount of government bonds. As a result, stock prices doubled in the last five years and major companies have been making record high profits. The BOJ is also buying real estate investment trusts and mutual funds that are indexed for share prices. The BOJ’s public funds helped push up the prices of stocks and land, distorting the market.

Meanwhile, when taking a look at people’s livelihoods, nominal wages remain stagnant and real wages keep on going down. Five years ago, Governor Kuroda promised a 2% inflation rate in two years, but now there is no prospect of achieving this.

The BOJ adopted a negative interest rate policy as part of the monetary easing policy. As a consequence, deposit interest rates for ordinary people are at nearly zero. Small- and medium-sized financial institutions and local banks are struggling with narrow margins. Major banks are pushing forward with their downsizing schemes to get through this difficult situation.

Due to the “different dimension” policy, the BOJ now holds government bonds worth 450 trillion yen, which roughly equals 80% of Japan’s nominal GDP. It is uncommon for a central bank to have such a large amount of government bonds. Kuroda’s policy has done nothing but harm. If this policy remains unchanged, the populace and the Japanese economy overall will face sufferings of a “different dimension”.