Q&A with experts on BOJ Governor Kuroda's 10-year evaluation and challenges of the new system

We interviewed two experts about their assessment of the 10-year monetary policy management under Governor Kuroda and the issues facing the new system of the BOJ.

It is summarized in Q&A format.

“Efforts to reduce the side effects of monetary easing and normalize”

We asked Takahide Kiuchi, executive economist at Nomura Research Institute, who served on the Bank of Japan's deliberation committee from 2012 to 2017.

Q. How do you evaluate the Bank of Japan's conduct of monetary policy over the past 10 years?

A. What we can appreciate is that the excessive appreciation of the yen has been rectified, the competitiveness of exporting companies has returned, and profits have increased.

The problem, on the other hand, was that it had serious side effects.

Despite aggressive monetary easing, policies aimed at raising productivity and growth potential through growth strategies and structural reforms were weak.

As a result, it seems that monetary easing has become a hindrance to policies that are truly necessary, resulting in a large opportunity loss.

Q. What is your impression of the new Governor Ueda?

A. Answers are logical and explanations are given in easy-to-understand words.

I have high hopes that the company will carefully engage in dialogue with the market.

I have the impression that many of his remarks in the Diet were cautious, but as a whole he indicated that he would maintain monetary easing, while also pointing out a number of problems with the current policy.

It seems that the idea is to change policies in a gradual manner while facing the market and reduce side effects.

Q. What are the future challenges of the BOJ and what is expected of the new Governor Ueda?

A. Over the past decade, monetary easing was prominent with the goal of overcoming deflation. I feel taken.

Going forward, the Bank of Japan will be required to take measures to normalize the economy, such as reviewing the policy framework while reducing the side effects of monetary easing.

On the other hand, the government and companies are required to continue efforts to increase economic growth potential so as not to rely too much on monetary policy, and to strengthen the Japanese economy.

“Continue monetary easing until we are confident that we will be able to achieve the price stability target.”

We asked Takeshi Kataoka, Chief Economist of PwC Consulting, who served as a deliberative committee member of the Bank of Japan from 2017 to July last year.

Q. How do you evaluate the conduct of monetary policy over the past 10 years?

A.In the first five years, when Abenomics started, it was taken as a surprise by the implementation of large-scale monetary easing measures that exceeded expectations.

Since his inauguration, he has boldly launched an extremely sensible monetary policy aimed at achieving the price stability target of 2%.

Under Governor Kuroda's monetary policy management, deflation has been overcome, and the effects of correcting the excessive appreciation of the yen have been particularly significant. Above all, employment has improved significantly.

Q. Why was 2% not achieved?

A.The consumption tax hike in April 2014 triggered an unexpected economic downturn.

The Japanese economy is no longer deflationary, employment has improved significantly, and the real economy has turned around, but the price stability target of 2% has not been achieved at all, and the policy is changed to tenaciously continuing monetary policy. Became.

Large-scale monetary easing is one of the three arrows framework of Abenomics, along with fiscal policy and growth strategy.

Through these three arrows, Japan's policy was to lead from stagnation to stable growth, but the current situation is that the two arrows other than monetary policy have not achieved their intended goals.

The understanding is that monetary policy has taken over for the failure of two other policies.

Q. What is your evaluation of Mr. Ueda's hearing and what do you expect from the new system?

A. I saw the opinion hearing, but I understood that it was a very safe driving.

Given the situation where it is difficult to say that the 2% price stability target has been achieved yet, it is a very reasonable judgment to say that the current monetary easing will be continued.

First of all, it is important to firmly achieve the price stability target of 2%.

I would like to ask you to never give in to pressure from the outside, such as whether it is time to tighten monetary policy before achieving the target.

It is important for the Bank of Japan to take responsibility as a keeper of prices, calmly assess the current trends in economic prices, and continue monetary easing at least until it is confident that the 2% price stability target can be achieved. I think that.