Bank of Japan

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Bank of Japan
BOJ.gif
Founded Oct. 10, 1882
Headquarters Tokyo
Products Japanese Central Bank
Web site www.boj.or.jp

The Bank of Japan (BOJ) is the central bank of Japan. The BOJ's mission is to ensure price stability and the stability of financial systems. It does this through the issuance and management of bank notes, implementation of monetary policy, providing settlement services, Treasury and government securities-related operations, international activities, and economic analysis and research activities.

The Bank is capitalized at 100 million yen in accordance with the Bank of Japan Act. About 55 percent of the capital is subscribed by the government.[1] It is a top-five owner of 81 companies in Japan’s Nikkei 225 Stock Average.

History

The Bank of Japan was established under the Bank of Japan Act (promulgated in June 1882) and began operating on Oct. 10, 1882 as the nation's central bank. The Bank was reorganized on May 1, 1942 in conformity with the Bank of Japan Act (later the Act of 1942), promulgated in February 1942. The Act of 1942 was amended several times after World War II. Such amendments included the establishment of the Policy Board as the Bank's highest decision-making body in June 1949.

The Act of 1942 was revised in June 1997 under the principles of "independence" and "transparency." The revised act came into effect on Apr. 1, 1998.[2]

The bank began an asset purchasing program in 2010 and continued to expand on that program in the following years.[3]

The central bank pumped billions into the financial system in March of 2011 to quell fears that the country's banks could be overwhelmed by the impact of massive earthquakes and tsunamis.[4] The BOJ eased monetary policy and poured a record 15 trillion yen ($184 billion) of cash into the financial system on March 14 of 2011. This was the equivalent of 30 percent of the size of the Federal Reserve's QE2, but in a single day instead of over a period of months.[5]

As he boosted the central bank’s asset-purchase program by 5 trillion yen, then-Governor Masaaki Shirakawa warned the BOJ had to avoid underwriting government debt to maintain its credibility.[6]

The bank took further monetary easing action twice in October of 2012.

In July of 2016 the bank announced a thorough review of its policy and the effects, triggering a sharp bond sell-off because of investor fear that the central bank could reduce its government bond purchases. It had been buying about 110 trillion yen in bonds each year to meet its promise to expand cash and deposits in circulation by an annual 80 trillion yen ($790 billion).[7]

People

  • Haruhiko Kuroda, Governor

Coordinated Action With Federal Reserve

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank in November of 2011 announced coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions was to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.

The central banks agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points so that the new rate would be the U.S. dollar overnight index swap (OIS) rate plus 50 basis points. This pricing would be applied to all operations conducted from December 5, 2011. The authorization of these swap arrangements was extended to Feb. 1, 2013. In addition, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank would continue to offer three-month tenders until further notice.

As a contingency measure, the central banks agreed to establish temporary bilateral liquidity swap arrangements so that liquidity could be provided in each jurisdiction in any of their currencies should market conditions warrant the situation.[8]

References

  1. Outline of the Bank. Bank of Japan.
  2. History. BOJ.
  3. Bank of Japan Expands Quantitative Easing (Again) While Economy Misses Forecasts (Again). Business Insider.
  4. Japan feeds more money to banks as stocks slump. Associated Press/Yahoo! News.
  5. The Bank of Japan Can Produce Liquidity, Not Electricity. Barron's.
  6. Japan Stock Rout Threatens Deeper Economic Pain, Pressures BOJ. BusinessWeek.
  7. Bank of Japan money target up for debate in policy review: sources. Reuters.
  8. Press Release. FRB.