Analysis

The Oscillating Policy Decisions of the Governor of the Bank of Japan 20 October 1999

Over a year and a half have passed since Masaru Hayami became the Governor　of the Bank of Japan. What changes has the monetary policy of the Bank of　Japan displayed during that period? There was speculation at the monetary policy decision meeting last month　that　the quantity of easy money would spread, but a posture of maintaining the status quo is being shown. At the meeting yesterday 13th October, in　response　to the surrounding criticism, there was finally unwilling agreement on the　quantity of relief measures. In the meantime the Obuchi administration has already made it clear that　they　are going to lay out a second supplementary budget of 5.0 trillion yen next　month in order to prevent the decline in the GDP that has been predicted　for　next year after the spring. As the accumulated debts increase, however, additional financial expenditures　are simply impossible given the 9 trillion yen shortage of tax revenues　last year. In addition this will result in long term interest rates getting higher and higher in order to increase the volume of national bonds. Naturally, the government is searching for a number of ideas for monetary policy in order to get out of this dilemma. Up until now, however, Governor Hayami has thought of interest policy as a policy support and will not listen to other policy measures. Governor Hayami's stubborn attitude in not looking at real interest rates is his unique decision standard.　According to this belief he has continued to say "No!" to quantitative easing. In the meantime Governor Hayami knows everything. There are observations being made that he is not venturing to make strategic policy decisions. Analyzing his statements until now, however, the latter speculations are not possible. Given the independence of the Bank of Japan a specialist with an extensive knowledge of monetary policy is required. Lack of confidence, however, causes insufficient disclosure of information. The minutes of the proceedings of the official monetary policy decision meeting are now published the month after. While publication the day after may be impossible, at least it can be done in two weeks.

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