Bank of Japan (BOJ) Will Reevaluate Policy to Fight Two Decades of Deflation

Key Takeaways:

• The Bank of Japan, or BOJ, intends to evaluate and audit policies implemented over the previous several decades.
• Japan’s central bank has been trying to end deflation for almost two decades with little success – the economy has remained stagnant.
• The BOJ’s policy review will examine the effectiveness of its monetary policies over the past few decades.

WISCONSIN (CoinChapter.com) — According to the Sankei newspaper on Sunday, April 23^rd, the Bank of Japan (BOJ) intends to evaluate and audit policies implemented over the previous several decades, starting discussions at a two-day conference set for April 27^th and 28^th under newly-appointed governor Kazuo Ueda.

The first meeting with the incoming governor will take place this week, and one of the topics up for discussion will be a long-term assessment.

To develop successful policies under Ueda, the BOJ will investigate the factors supporting Japan’s stagnating economy. Since implementing zero interest rates in 1999, the central bank has loosened its stance.

Background of the BOJ’s Policy Reviews

The Bank of Japan has struggled to achieve its inflation target for quite some time.

The central bank has been trying to end deflation for almost two decades, but the economy has remained stagnant. As a result, the central bank introduced several unconventional monetary policies over the years, but they have yet to achieve their intended results.

The BOJ’s policy reviews have become more frequent in recent years.

In 2013, the central bank launched its quantitative and qualitative monetary easing policy (QQE), which expanded in 2014. In 2016, the BOJ introduced a negative interest rate policy to encourage banks to lend more by making it more expensive to hold excess reserves.

Reasons Behind Japan’s Stagnant Economy

The BOJ’s upcoming policy review will examine the reasons behind Japan’s stagnant economy. One of the main reasons behind Japan’s economic malaise is demographic. Japan’s aging population has led to a decline in the workforce, lower productivity, and a shrinking consumer base.

Another reason is the country’s high debt-to-GDP ratio. Japan has one of the highest debt levels in the world, which has strained its economy. The country’s public debt is over 200% of its GDP, which is unsustainable in the long run.

In addition to these factors, Japan’s economy has also been impacted by a need for more structural reforms. For instance, the country’s rigid labor market has made it difficult for businesses to hire and fire workers, leading to declining job security and wages.

BOJ’s Policy Options

The BOJ’s policy review will examine the effectiveness of its monetary policies over the past few decades. The central bank has introduced several unconventional policies, such as negative interest rates and QQE, to stimulate the economy.

However, these policies have had limited success, and the BOJ has struggled to achieve its inflation target of 2%. Therefore, one of the options that the central bank could consider is to adopt a more aggressive monetary policy.

The BOJ could also consider introducing fiscal stimulus measures to boost the economy. The government has recently introduced several fiscal stimulus packages, but these measures have failed.

Another option is to introduce structural reforms to the economy. For example, the BOJ could push for changes in the labor market to make it easier for businesses to hire and fire workers. This could lead to higher wages and job security.

However, the BOJ will need to act fast to avoid stagnation.