Abenomics and The Bank of Japan
Japan’s ruling Liberal Democratic Party and Prime Minister Shinzo Abe are often called conservative political actors, a fair reflection of the LDP’S longevity. But in the context of economic policy, particularly monetary policy, it is singularly inappropriate. This timely and detailed analysis, based on extensive interviews with Japanese officials and close analysis of the words of leading bureaucrats and politicians, reveals a radical approach by Abe in challenging the policy-making conservatism of the Bank of Japan. By comparison with other central banks, the BOJ has been remarkably riskaverse and skeptical about the merits of loose monetary policy and “quantitative easing.” In the face of a post 1990s stagnant economy and the persistence of deflationary pressures, Abe from 2012 aggressively intervened through targeted personnel appointments, most notably his selection of Haruhiko Kuroda as BOJ governor. This decision, with the steady replacement of conservative-minded members of its policy board, has enabled Abe to re-shape the ideational perspective of an institution, which while nominally independent, has become a key supporting actor in promoting “Abenomics.”
This important comparative analysis highlights the Abe administration’s policy boldness but also how relatively slow Japan has been, until recently, to adopt other central banks’ more innovative approach.
This timely and detailed analysis reveals a radical approach by Abe.