Haruhiko Kuroda – The Pressure to “Do More” Rises
BoJ Leaves Policy Unchanged, but What Comes Next?
The Bank of Japan has employed QE programs since March of 2001 (in February of 2001, it still claimed that “QE will be ineffective” – it was right then, for the last time). These have had no effect apart from making a Keynesian government spending orgy possible that is unique in terms of its size in the post WW2 developed world. It is also unique insofar as it hasn’t yet blown up.
QE was briefly interrupted in 2006, when the BoJ reduced the monetary base by 25% within a few weeks (this barely affected the money supply, although we have to add the caveat that Japanese money supply data are not directly comparable to Western ones).
Kuroda demonstrating the loony-tunes 2% fetish of modern central bankers to journalists
Photo credit: Haruyoshi Yamaguchi / Bloomberg
After the GFC, governor Masaaki Shirakawa (白川 方明) reluctantly restarted QE; he was essentially convinced that monetary policy flim-flam of this sort would be useless, but a lot of pressure was exerted and he ultimately gave in. Following Shinzo Abe’s election, it was clear that a more pliant BoJ leadership would be appointed, and not surprisingly, under governor Haruhiko Kuroda (黒田 東彦), the BoJ has essentially decided to “go all in”.
The earlier QE programs that began in 2001 were considered “radical” at the time. We’re not sure what kind of adjective would be most fitting to describe the current exercise. “Completely lunatic” will probably do – click to enlarge.
Yesterday, the BoJ decided not to add to its existing monetary pumping program, but voted once again to maintain the parabolic pace in asset purchases already underway. The entire exercise is based on the widely accepted, unproven, and utterly absurd neo-Keynesian shibboleth that the purchasing power of money must decline by 2% per year, as anything less is not considered “price stability”.
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