The Bank of Japan's Governor Kuroda has been in office for 3115 days on the 28th, making him the longest in history, along with Hisato Ichimada and the former Governor.

We have continued large-scale monetary easing for eight and a half years, but we have not achieved the target inflation rate of 2%, and what kind of measures will be taken to achieve the target during the remaining one and a half years of office? The question is whether to show the way.

Kuroda's term of office was 28 days, which was 3115 days, the longest in history, along with Hisato Ichimada and former president who played a major role in controlling inflation after the war.

Governor Kuroda, who took office in March 2013, said that he would achieve the 2% inflation target in about two years, and drastically increased the purchase of government bonds, etc., and provided a large amount of funds to the market. Large-scale monetary easing I have come up with a plan.

This policy, also known as "Kuroda Bazooka," caused the yen to depreciate and stock prices to rise at once.

Furthermore, in January 2016, we introduced the first “negative interest rate policy” in the history of the Bank of Japan, and have continued large-scale monetary easing for eight and a half years while changing its form.

However, the price target of 2% has not been achieved, and monetary easing has been prolonged due to the pressure on profits of financial institutions that received ultra-low interest rates and the loss of national fiscal discipline due to the BOJ's large-scale purchase of government bonds. "Side effects" have also been pointed out.

In connection with the longest tenure in history, Governor Kuroda said at a press conference on the 22nd, "If we do not continue to carry out extremely large monetary easing, economic growth rate and inflation rate will be even lower, and employment will also be this. It wasn't as widespread as it was. Monetary policy was running correctly. "

Kuroda's term of office is until April next year, but according to the Bank of Japan, the inflation rate is not expected to reach the target of 2% during the term, and what kind of goals will be achieved during the remaining term of one and a half years? The question is whether to show the way.

Eight and a half years after Kuroda took office, the Bank of Japan has continued large-scale monetary easing, also known as "another dimension," in an attempt to achieve the price target of 2%.

Kuroda Bazooka

Governor Kuroda, who took office in March 2013, has announced a policy of significantly increasing the purchase of government bonds and supplying a large amount of funds to the market, saying that the price target of 2% will be achieved in about two years.

Due to this policy called "Kuroda Bazooka", the yen depreciated and stock prices rose at a stretch, and the rate of increase in the consumer price index, which had been negative until then, turned positive.

Introduced negative interest rate

However, prices did not rise by 2%, and in January 2016, we decided to introduce the first "negative interest rate policy" in the history of the Bank of Japan.

A negative interest rate is applied to some of the current accounts deposited by financial institutions, with the aim of increasing the amount of money circulating in the world, but the profits and asset management of financial institutions are being squeezed. The voices pointing out "side effects" gradually became stronger.

From "quantity" to "interest rate"

Under these circumstances, in September 2016, the Bank of Japan will shift the focus of policy management from "quantity" to "interest rates" while continuing large-scale monetary easing.

We have introduced a monetary policy of keeping short-term interest rates negative and keeping long-term interest rates at around 0%, and we are still continuing this framework.

“Prolonged” without indicating the time of achievement

In April 2018, Governor Kuroda, who entered the second term, stopped indicating the time to reach the 2% price target, which had been repeatedly postponed, and large-scale monetary easing will be prolonged.

Since last year, in order to support the economy affected by the new coronavirus, we have raised the upper limit of purchases of government bonds and multiple stocks, such as ETFs = exchange-traded funds.

Difficult to achieve during term

However, according to the latest economic and price outlook released by the Bank of Japan in July, the inflation rate in 2022 was + 0.9%, and in 2023 it was only + 1.0%, which was 2% during the term of President Kuroda. It is difficult to reach the goal.

"Side effects" due to prolonged monetary easing

Various "side effects" have been pointed out in the prolonged large-scale monetary easing for eight and a half years under President Kuroda.

As interest rates continue to be extremely low, the so-called “margin” of loans to companies is shrinking, putting pressure on the profits of financial institutions.

As of the end of August, the balance of government bonds held by the Bank of Japan was 536 trillion yen, accounting for about 40% of the total.

There are also criticisms that the BOJ will lose its fiscal discipline by buying large amounts of government bonds from the market.

In addition, the Bank of Japan also purchases ETFs = exchange-traded funds, which are made by collecting a large number of stocks, but as of the end of March, the amount of ETFs held was more than 51 trillion yen, which is the stock listed on the First Section of the Tokyo Stock Exchange. It has been pointed out that it is about 7% of the market capitalization and distorts the price formation of the market.

In order to curb these side effects, the Bank of Japan conducted an "inspection" of monetary easing measures in March and decided to review various measures, but it has been pointed out that monetary policy has become more complicated.

In addition, there are concerns that the swelling of government bonds and ETFs held by the Bank of Japan will have a greater impact on financial markets during the so-called "exit policy" that will reduce large-scale monetary easing. ..

Expert "The strong yen and low stock prices have been corrected to revitalize the Japanese economy."

Regarding the monetary policy of President Kuroda so far, Toshihiro Nagahama, chief economist of Daiichi Seimei Keizai Kenkyusho, said, "After taking office, we implemented bold monetary easing measures that exceeded market expectations, and the extreme appreciation of the yen and depreciation of stocks were corrected. It has revitalized the Japanese economy. "

He added, "While the BOJ may have independence in the means of monetary policy, economic policy is aimed at the common target of achieving the price target of 2% by uniting the government and the BOJ under Abenomics. It was a big feature that we operated in cooperation with each other. "

Regarding issues for the remaining term of one and a half years, Mr. Nagahama said, "It is difficult for the general public to realize the goal of a price increase of 2%, so monetary policy, such as targeting the rate of increase in wages and maximization of employment. We may need to find ways to make our goals flexible. "

Expert "Prove the limits of monetary easing Raise wages for economic recovery"

Mizuho Research & Technologies' executive economist Kazuo Kadoma, who was also involved in monetary policy as a board member of the Bank of Japan, said that Kuroda's large-scale monetary easing had a certain effect on getting out of deflation. The biggest goal of rising prices was eight years, which proved that monetary policy alone was difficult to achieve and that monetary easing was limited. "

"Initially, we aggressively expanded monetary easing and aimed to achieve our goals, but in the latter five years, consideration for side effects became the center of our policy," he said.

Regarding future issues, Mr. Kadoma said, "Although stock prices have improved and corporate profits have increased, it is important to raise wages and use them for household income in order to recover the economy, so broader discussion is necessary. It will be, "he said, pointing out the need to promote not only the BOJ's monetary policy but also the government and companies' efforts toward economic growth and wage increases.

Deputy Prime Minister and Finance Minister Aso "Thank you very much for your efforts."

Deputy Prime Minister and Finance Minister Aso said at a press conference after the Cabinet meeting that Mr. Kuroda had been in office for the longest time in history, "I am very grateful for all the efforts I have made so far."

Regarding the fact that the BOJ's target of 2% inflation has not been achieved, "In Japan, we cannot expect the inflation rate to rise unless consumer demand increases. Monetary policy alone has its limits. There is also an opinion that there is, and we must do it in both monetary and financial terms. "