The Bank of Japan made no headlines on the historic day.

In the coming week, Japan's central bank governor Haruhiko Kuroda will become the country's longest-serving central bank governor.

Kuroda started in 2013 with aggressive purchases of government bonds in order to drive out deflation in the country.

But after eight and a half years, the bank is celebrating the anniversary unspectacularly.

On Wednesday, it left the expansionary monetary policy unchanged and, as expected, decided on a complicated “green” loan program to help companies with ecological restructuring.

Big words were no longer connected with it.

Patrick Welter

Correspondent for business and politics in Japan, based in Tokyo.

  • Follow I follow

The difference between the monetary policy bang in 2013 and the modest sobriety today shows how much the Bank of Japan has disappointed expectations. "The past few years have shown that monetary policy has not been effective in solving Japan's economic problems," says Martin Schulz, chief economist at Fujitsu. The most important indicator for this is that the bank has missed the targets it had set itself by miles. The inflation target of 2 percent, which Kuroda wanted to have achieved within two years, is a long way off sometime after 2023. After all, the bank no longer sees any deflationary tendencies in the economy today. She expects growth this year as a backlash to the pandemic slump of almost 4 percent. In the medium term, however, it should fall back to just over 1 percent.The expansionary monetary policy did not bring about a lasting improvement in growth.

New maneuvers

Kuroda came at a time when the chairman of the US Federal Reserve, Ben Bernanke, was shaking the financial markets with the idea of ​​reducing bond purchases.

The euro crisis was raging in Europe, and the President of the European Central Bank, Mario Draghi, promised to do "whatever it takes" to save the euro.

In this situation, Kuroda began what Schulz called “the greatest macroeconomic experiment”.

The Japanese opted for drastic quantitative easing and wanted to double the monetary base within two years.

The yen depreciated, equity investors cheered, earnings rose, but the rebound has been shaky and inflationary pressures have failed to materialize.

Like a chameleon, Kuroda switched from quantitative control to negative interest rates three years later and surprised with the new interest rate curve control when the market distortions from the purchase of bonds and securities became greater and the limits of quantitative expansion became apparent. Since 2020, the Bank of Japan has been pumping loans into the economy as part of a special program to support companies affected by the pandemic. This has drastically expanded the central bank's balance sheet again. All of the bank's loans last amounted to 133 trillion yen (one trillion euros).

Kuroda has used all the instruments in his arsenal to support demand and growth, comments the former chief economist of the International Monetary Fund, Olivier Blanchard.

“That wasn't enough to bring inflation back.

But that's most of what the bank could do. "

Keywords: