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Special report: After a bashing, BOJ weighs "big bang" war on deflation (Bank of Japan) [View All]

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No Elephants Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Nov-30-12 06:02 AM
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Special report: After a bashing, BOJ weighs "big bang" war on deflation (Bank of Japan)
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Special report: After a bashing, BOJ weighs "big bang" war on deflation

By Leika Kihara

TOKYO | Thu Nov 29, 2012 8:01pm EST

(Reuters) - Bank of Japan Governor Masaaki Shirakawa was feeling the heat in February when he was summoned to parliament five times to explain what he planned to do to get Japan out of its deflation doldrums.

Shirakawa tried to defend his cautious approach to easing monetary policy, but his tremulous voice was often drowned out by jeers from the benches. "We need a new governor," one MP shouted during one session. Some angry lawmakers even questioned whether the Bank of Japan should retain its independence from the government.

{Excuse this interruption from no elephants, but note the use of "even," as though a bank subject to government review were some sort of outlandish idea.}

<snip>

The threat from lawmakers to withdraw the BOJ's charter granting its independence was what changed his mind, the sources said. So the central bank surprised the markets in February by setting an inflation target for the first time of 1 percent and announcing a $122 billion increase in its asset-buying program.

Those five days of intense grilling and the ones that have followed have been among the most intense ever faced by a Japanese central bank governor. Shirakawa has been summoned 29 times so far in 2012, a decade-long record. And the pressure is having a big impact: it was the catalyst for a radical rethink in central bank policy. The full effect of that pivot is expected after April when Shirakawa is due to step down, according to more than a dozen interviews with those involved in the process.

<snip>

The 63-year-old Shirakawa, a University of Chicago-trained economist, insists monetary policy can have only a limited impact in the battle against persistent deflation that has come to define two decades of Japan's economic stagnation. Pumping unlimited amounts of cash into the banking system or underwriting government debt, the solutions pushed by his critics, could thrust Japan into a financial crisis, he says.


http://www.reuters.com/article/2012/11/30/us-japan-boj-...

Twenty years of a stagnant economy and a tsunami followed quickly by a nuclear plant failure. And they are not in the streets, as in Spain, Greece, etc.? Impressive.
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