Monetary Policies in Japan

2021-05-13 06:39:04
2 pages
476 words
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The Japanese monetary policy between 2008 and 2015 has remained largely constant amidst changing economic conditions. The country has been recovering from the global financial crisis of 2008 that left it badly hit against its European counterparts. Through the time, the Bank of Japan has instituted various measures to confront adverse economic challenge that has faced it. In particular, 2015 saw the bank establishing annual monetary market activity aimed at maintaining an increase of 80 trillion Yen by its monetary base level. The Bank Governor Kuroda made some adjustments aimed at expanding the monetary base of the country though the monetary policy remained largely unchanged. In this regard, the increase in monetary base did not constitute an increase in additional easing but rather simply a mechanism for enhancing the current policy simulation.

The Japanese GDP reduced by 1 percent in 2008 followed by another 5.5 percent decline in 2009. In 2010, the country enacting several policies that were grossly referred to as monetary easing policy but largely inferred to the old policies. Policies involved among others, the purchase of different classes of assets as opposed to the typical government securities and other collateralized lending. These measures were counterproductive forcing Kuroda to engage new regime change that would imply increased resilience of the economys financial sector but the measures were short of any success just like the formerly executed measures.

Another major spotlight for the Japanese monetary policy is the price stability mechanism that the company has been targeting a 2 percent realization in 2013. Price stability is very important as it provides a foundation for the economic activity of a country. BoJ through consistent monetary policy has maintained largely constant prices set at 2 percent level in 2013 (Evans & Mitra, 2015). The fluctuations by price levels is a major challenge to individual and corporate since it disturbs the prospects of companies in making the right consumption and investment decisions that may hinder efficiencies in allocation of resources in an economy. Unstable price levels may also create changes in income distributions. Price stability was maintained by the 2 percent set in 2013 by the BoJ (Evans & Mitra, 2015).

BoJ also sets up certain exchange limits that that may define future policy changes in the country. Similarly, the Federal Reserve presents essential information concerning factors influencing speed, scales and composition of purchases in form of securities. These purchases were particularly made in recent BoJ purchases program that ended in October, 2014. The latter project was appended to on September, 2012 though the Federal Reserve failed to pre-determine its duration or time of completion but directed that it should proceed until realization of an improvement in labor markets amidst growing price stability (Baker & Davis, 2015). Companies in Japan are however less motivated to plough back their reserves into investments in the country. The Japanese currency has however been credited with consistent loss against foreign currency such as the US$ since assumption of office by Prime Minister Shinzo.

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