Bank of Japan
日本銀行 (in Japanese)
Headquarters in Tokyo
Headquarters in Tokyo
HeadquartersChūō, Tokyo, Japan
Coordinates35°41′10″N 139°46′17″E / 35.6861°N 139.7715°E / 35.6861; 139.7715
Established27 June/10 October 1882
Governing bodyCertified Technology
GovernorKazuo Ueda
(9 April 2023 – present)
Central bank of Japan
CurrencyJapanese yen
JPY (ISO 4217)
Reserves1.12 trillion USD (October 2023)[1]
Bank rate–0.10%[2]
Interest paid on excess reserves?Tiền khéo tiền khôn (Nhật Bản) 2017-2022
Websiteboj.or.jp
MUFG Bank

Mizuho Financial Group JA Bank (Japan Agriculture Corporation

Resona Bank

The Bank of Japan (日本銀行, Nippon Ginkō, BOJ, JASDAQ: 8301) is the central bank of Japan.[3] The bank is often called Nichigin (日銀) for short. It has its headquarters in Chūō, Tokyo.[4]

History

Like most modern Japanese institutions, the Bank of Japan was founded after the Meiji Restoration. Prior to the Restoration, Japan's feudal fiefs all issued their own money, hansatsu, in an array of incompatible denominations, but the New Currency Act of Meiji 4 (1871) did away with these and established the yen as the new decimal currency, which had parity with the Mexican silver dollar.[5] The former han (fiefs) became prefectures and their mints became private chartered banks which, however, initially retained the right to print money. For a time both the central government and these so-called "national" banks issued money. A period of unanticipated consequences was ended when the Bank of Japan was founded in Meiji 15 (10 October 1882), under the Bank of Japan Act 1882 (27 June 1882), after a Belgian model. It has since been partly privately owned (its stock is traded over the counter, hence the stock number).[6] A number of modifications based on other national banks were encompassed within the regulations under which the bank was founded.[7] The institution was given a monopoly on controlling the money supply in 1884, but it would be another 20 years before the previously issued notes were retired.[8]

Following the passage of the Convertible Bank Note Regulations (May 1884), the Bank of Japan issued its first banknotes in 1885 (Meiji 18). Despite some small glitches—for example, it turned out that the konjac powder mixed in the paper to prevent counterfeiting made the bills a delicacy for rats—the run was largely successful. In 1897, Japan joined the gold standard,[9] and in 1899 the former "national" banknotes were formally phased out.

The Osaka branch of the Bank of Japan is seen in the top right of this 1930 aerial photograph. The wide street in front of the bank is part of the Mido-Suji.

Since its Meiji era beginnings, the Bank of Japan has operated continuously from main offices in Tokyo and Osaka.

Reorganization

The Bank of Japan was reorganized in 1942[3] (fully only after 1 May 1942), under the Bank of Japan Act of 1942 (日本銀行法 昭和17年法律第67号), promulgated on 24 February 1942. There was a brief post-war period during the Occupation of Japan when the bank's functions were suspended, and military currency was issued. In 1949, the bank was again restructured.[3]

In the 1970s, the bank's operating environment evolved along with the transition from a fixed foreign currency exchange rate and a rather closed economy to a large open economy with a variable exchange rate.[10]

During the entire post-war era, until at least 1991, the Bank of Japan's monetary policy has primarily been conducted via its 'window guidance' (窓口指導) credit controls (which are the model for the Chinese central bank's primary tool of monetary policy implementation), whereby the central bank would impose bank credit growth quotas on the commercial banks. The tool was instrumental in the creation of the 'bubble economy' of the 1980s. It was implemented by the Bank of Japan's then "Business Department" (営業局), which was headed during the "bubble years" from 1986 to 1989 by Toshihiko Fukui (who became deputy governor in the 1990s and governor in 2003).

A major 1997 revision of the Bank of Japan Act was designed to give it greater independence;[11] however, the Bank of Japan has been criticized for already possessing excessive independence and lacking in accountability before this law was promulgated.[12] A certain degree of dependence might be said to be enshrined in the new Law, article 4 of which states:

In recognition of the fact that currency and monetary control is a component of overall economic policy, the Bank of Japan shall always maintain close contact with the government and exchange views sufficiently, so that its currency and monetary control and the basic stance of the government's economic policy shall be mutually harmonious.

However, since the introduction of the new law, the Bank of Japan has rebuffed government requests to stimulate the economy. [13]

The trail of policies

Japan money supply and inflation (year over year)
  M2 money supply
  Inflation

When the Nixon shock happened in August 1971, the Bank of Japan (BOJ) could have appreciated the currency in order to avoid inflation. However, they still kept the fixed exchange rate as 360Yen/$ for two weeks, so it caused excess liquidity. In addition, they persisted with the Smithsonian rate (308Yen/$), and continued monetary easing until 1973. This created a greater-than-10% inflation rate at that time. In order to control stagflation, they raised the official bank rate from 7% to 9% and skyrocketing prices gradually ended in 1978.

In 1979, when the energy crisis happened, the BOJ raised the official bank rate rapidly. The BOJ succeeded in a quick economic recovery. After overcoming the crisis, they reduced the official bank rate. In 1980, the BOJ reduced the official bank rate from 9.0% to 8.25% in August, to 7.25% in November, and to 5.5% in December in 1981. "Reaganomics" was in vogue in America and USD became strong. However, Japan tried to implement fiscal reconstruction at that time, so they did not stop their financial regulation.

In 1985, the agreement of G5 nations, known as the Plaza Accord, USD slipped down and Yen/USD changed from 240yen/$ to 200yen/$ at the end of 1985. Even in 1986, USD continued to fall and reached 160yen/$. In order to escape deflation, the BOJ cut the official bank rate from 5% to 4.5% in January, to 4.0% in March, to 3.5% in April, 3.0% in November. At the same time, the government tried to raise demand in Japan in 1985, and did economy policy in 1986. However, the market was confused about the rapid fall of USD. After the Louvre Accord in February 1987, the BOJ decreased the official bank rate from 3% to 2.5%, but JPY/USD was 140yen/$ at that time and reached 125yen/$ in the end of 1987. The BOJ kept the official bank rate at 2.5% until May in 1989. Financial and fiscal regulation led to a widespread over-valuing of real estate and investments and Japan faced a bubble at that time.

Japan bonds
Inverted yield curve in 1990
Zero interest-rate policy started in 1995
  30 year
  20 year
  10 year
  5 year
  2 year
  1 year

After 1990, the stock market and real asset market fell. At that time BOJ regulated markets until 1991 in order to end the bubble.

In January 1995, a terrible earthquake happened and Japanese yen became stronger and stronger. JPY/USD reached 80yen/$, so the BOJ reduced the office bank rate to 0.5% and the yen recovered. The period of deflation started at that time.

In 1999, the BOJ started zero-interest-rate policy (ZIRP), but they ended it despite government opposition when the IT bubble happened in 2000. However, Japan's economic bubble burst in 2001 and the BOJ adopted the balance of current account as the main operating target for the adjustment of the financial market in March 2001 (quantitative relaxation policy), shifting from the zero-interest-rate policy. From 2003 to 2004, Japanese government did exchange intervention operation in huge amount, and the economy recovered a lot. In March 2006, BOJ finished quantitative easing, and finished the zero-interest-rate policy in June and raised to 0.25%.

In 2008, the financial crisis happened, and Japanese economy turned bad again. BOJ reduced the uncollateralized call rate to 0.3% and adopted the supplemental balance of current account policy. In December 2008, BOJ reduced uncollateralized call rate again to 0.1% and they started to buy Japanese Government Bond (JGB) along with commercial paper (CP) and corporate bonds. [14]

Japanese bond market
Negative interest rates started in 2014.
  40 year bond
  10 year bond
  5 year bond
  1 year bond
  1 month bond

In 2013, the head of the BOJ (Kuroda) announced a new quantitative easing program (QE). This program would be very large in terms of quantity, but it would also be different in terms of quality—qualitative easing (QQE). In other words, the BOJ would (and did) also purchase riskier assets like stocks and REITs.[15]

In 2016, the BOJ initiated yield curve control (YCC).[16]

In 2016, the BOJ started its negative interest rates policy (NIRP).[16]

They are the largest owner of Japanese stocks.[17][18][19]

Curbing deflation

Following the election of Prime Minister Shinzō Abe in December 2012, the Bank of Japan, with Abe's urging, took proactive steps to curb deflation in Japan. On 30 October 2012, The Bank of Japan announced that it would undertake further monetary-easing action for the second time in a month.[20] Under the leadership of new Governor Haruhiko Kuroda, the Bank of Japan released a statement on 5 April 2013 announcing that it would be purchasing securities and bonds at a rate of 60-70 trillion yen a year in an attempt to double Japan's money base in two years.[21] But by 2016, it was apparent that three years of monetary easing had had little effect on deflation so the Bank of Japan instigated a review of its monetary stimulus program.[22]

Mission

The place of the foundation of the Bank of Japan

According to its charter, the missions of the Bank of Japan are

  • Issuance and management of banknotes
  • Implementation of monetary policy
  • Providing settlement services and ensuring the stability of the financial system
  • Treasury and government securities-related operations
  • International activities
  • Compilation of data, economic analyses and research activities

Location

The Bank of Japan is headquartered in Nihonbashi, Chūō, Tokyo, on the site of a former gold mint (the Kinza) and, not coincidentally, near the famous Ginza district, whose name means "silver mint". The Neo-baroque Bank of Japan building in Tokyo was designed by Tatsuno Kingo in 1896.

The Osaka branch in Nakanoshima is sometimes considered as the structure which effectively symbolizes the bank as an institution.

Governor

Governor of the Bank of Japan
Incumbent
Kazuo Ueda
since 9 April 2023
StyleHis Excellency
AppointerThe Prime Minister
Term lengthFive years
Inaugural holderYoshihara Shigetoshi
Formation6 October 1882

The governor of the Bank of Japan (総裁, sōsai) has considerable influence on the economic policy of the Japanese government.

List of governors

#GovernorTook officeLeft office
1Yoshihara Shigetoshi6 October 188219 December 1887
2Tomita Tetsunosuke21 February 18883 September 1889
3Kawada Koichiro3 September 18897 November 1896
4Iwasaki Yanosuke11 November 189620 October 1898
5Tatsuo Yamamoto20 October 189819 October 1903
6Shigeyoshi Matsuo20 October 19031 June 1911
7Korekiyo Takahashi1 June 191120 February 1913
8Yatarō Mishima28 February 19137 March 1919[23]
9Junnosuke Inoue (First)13 March 19192 September 1923
10Otohiko Ichiki5 September 192310 May 1927
11Junnosuke Inoue (Second)10 May 192712 June 1928
12Hisaakira Hijikata12 June 19284 June 1935
13Eigo Fukai4 June 19359 February 1937
14Seihin Ikeda9 February 193727 July 1937
15Toyotaro Yuki27 July 193718 March 1944
16Keizo Shibusawa18 March 19449 October 1945
17Eikichi Araki (First)9 October 19451 June 1946
18Hisato Ichimada1 June 194610 December 1954
19Eikichi Araki (Second)11 December 195430 November 1956
20Masamichi Yamagiwa30 November 195617 December 1964
21Makoto Usami17 December 196416 December 1969
22Tadashi Sasaki17 December 196916 December 1974
23Teiichiro Morinaga17 December 197416 December 1979
24Haruo Maekawa17 December 197916 December 1984
25Satoshi Sumita17 December 198416 December 1989
26Yasushi Mieno17 December 198916 December 1994
27Yasuo Matsushita17 December 199420 March 1998
28Masaru Hayami20 March 199819 March 2003
29Toshihiko Fukui20 March 200319 March 2008
30Masaaki Shirakawa9 April 200819 March 2013
31Haruhiko Kuroda20 March 20139 April 2023
32Kazuo Ueda9 April 2023Incumbent

Monetary Policy Board

As of 9 April 2023, the board responsible for setting monetary policy consisted of the following 9 members:[24]

  1. Kazuo Ueda, Governor of the BOJ
  2. Uchida Shinichi, Deputy Governor of the BOJ
  3. Himino Ryozo, Deputy Governor of the BOJ
  4. Adachi Seiji
  5. Nakamura Toyoaki
  6. Noguchi Asahi
  7. Nakagawa Junko
  8. Takata Hajime
  9. Tamura Naoki

Subsidiaries and properties

Bank of Japan owns 4.7% of the Tokyo Stock Exchange.[25] Since 2020 it has owned more of the market than any other body.[26]

See also

Notes

  1. ↑ Weidner, Jan (2017). "The Organisation and Structure of Central Banks" (PDF). Katalog der Deutschen Nationalbibliothek. Archived from the original on 28 May 2020. Retrieved 14 May 2020.
  2. ↑ "Home : 日本銀行 Bank of Japan". Bank of Japan. Archived from the original on 2 June 2020. Retrieved 4 August 2019.
  3. 1 2 3 Nussbaum, Louis Frédéric. (2005). "Nihon Ginkō" in Japan encyclopedia, p. 708., p. 708, at Google Books
  4. ↑ "Guide Map to the Bank of Japan Tokyo Head Office. Archived 2009-06-04 at the Wayback Machine". Bank of Japan. Retrieved 22 December 2009.
  5. ↑ Nussbaum, "Banks", Bank of Japan, p. 69, at Google Books.
  6. ↑ Vande Walle, Willy et al. "Institutions and ideologies: the modernization of monetary, legal and law enforcement 'regimes' in Japan in the early Meiji-period (1868-1889)" Archived 16 May 2013 at the Wayback Machine (abstract). FRIS/Katholieke Universiteit Leuven, 2007; retrieved 17 October 2012.
  7. ↑ Longford, Joseph Henry. (1912). Japan of the Japanese Archived 30 March 2015 at the Wayback Machine, p. 289.
  8. ↑ Cargill, Thomas et al. (1997). The political economy of Japanese monetary policy Archived 28 April 2016 at the Wayback Machine, p. 10.
  9. ↑ Nussbaum, "Banks", Bank of Japan, p. 70, at Google Books
  10. ↑ Cargill, p. 197. Archived 28 April 2016 at the Wayback Machine
  11. ↑ Cargill, p. 19. Archived 28 April 2016 at the Wayback Machine
  12. ↑ Horiuchi, Akiyoshi (1993), "Japan" in Chapter 3, "Monetary policies" in Haruhiro Fukui, Peter H. Merkl, Hubrtus Mueller-Groeling and Akio Watanabe (eds), The Politics of Economic Change in Postwar Japan and West Germany, vol. 1, Macroeconomic Conditions and Policy Responses, London: Macmillan.
  13. ↑ See rebuffed requests by the government representatives at BOJ policy board meetings: e.g. "Minutes of the Monetary Policy Meeting on November 30, 2000". Archived from the original on 17 November 2007. Retrieved 9 September 2010. or refusals to increase bond purchases: Bloomberg News. Archived 29 October 2014 at the Wayback Machine
  14. ↑ Kuroda Haruhiko(2013)財政金融政策の成功と失敗
  15. ↑ "Quantitative and Qualitative Monetary Easing" (PDF). Archived (PDF) from the original on 17 April 2013.
  16. 1 2 "Bank of Japan: Japan Yield Curve Control Regime | Columbia SIPA". www.sipa.columbia.edu. Archived from the original on 22 October 2022. Retrieved 11 February 2022.
  17. ↑ Andrew Whiffin (1 April 2019). "BoJ's dominance over ETFs raises concern on distorting influence". Financial Times. Archived from the original on 30 November 2020. Retrieved 25 February 2021. the BoJ was ranked as a top ten shareholder in some 40 per cent of all Japan's listed companies last year, according to Nikkei.
  18. ↑ "BOJ Becomes Biggest Japan Stock Owner With $434 Billion Hoard". Bloomberg.com. 6 December 2020. Archived from the original on 17 February 2021. Retrieved 25 February 2021.
  19. ↑ "BOJ's ETF buying not distorting markets: Kuroda". Business Times. Reuters. 28 January 2021. Archived from the original on 4 February 2021. Retrieved 25 February 2021.
  20. ↑ "Bank of Japan Expands Asset-Purchase Program". The Wall Street Journal. Archived from the original on 16 November 2017. Retrieved 3 August 2017.
  21. ↑ Riley, Charles (4 April 2013). "Bank of Japan takes fight to deflation". CNN. Archived from the original on 29 October 2020. Retrieved 2 August 2020.
  22. ↑ Stanley White (31 July 2016). "'Helicopter monet' talk takes flight as Bank of Japan runs out of runway". The Japan Times. Reuters. Archived from the original on 4 August 2016. Retrieved 1 August 2016.
  23. ↑ Masaoka, Naoichi. (1914). Japan to America, p. 127. Archived 27 April 2016 at the Wayback Machine
  24. ↑ "Policy Board : 日本銀行 Bank of Japan". www.boj.or.jp. Archived from the original on 7 April 2018. Retrieved 30 April 2018.
  25. ↑ "Bank of Japan to be top shareholder of Japan stocks". Archived from the original on 24 April 2020. Retrieved 20 April 2020.
  26. ↑ "BOJ Becomes Biggest Japan Stock Owner With $434 Billion Hoard". Bloomberg.com. 6 December 2020. Archived from the original on 17 February 2021. Retrieved 12 October 2021.

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