Bank of Japan

Ben McLannahan

“Inflation expectations appear to be rising on the whole.”

Check out the last 11 policy statements from the Bank of Japan: you’ll find the same line, an upgrade from a milder assertion about “some indicators” last July.

But according to the second round of the BoJ’s survey of companies’ expectations for price rises – the grand-sounding “inflation outlook of enterprises”, published on Wednesday – expectations are not rising. If anything, they’re falling. Read more

Claire Jones

Throughout its campaign to convince everyone that the eurozone is not about to fall into deflation, the European Central Bank has drawn a distinction between two different sorts of episodes of falling prices.

The first involves a short period during which prices fall. In its monthly bulletin, published on Thursday, the ECB tries to define it, not as deflation, but as “negative annual inflation”. In the ECB’s view, a few months of falling prices will do little long-term damage to the economy. Indeed, the eurozone has already experienced this sort of deflation in the autumn of 2009.

The more dangerous sort of deflation, which the bulletin labels “outright deflation”, can, however, cause lasting pain. If what Mr Draghi has recently dubbed a “pernicious negative spiral”, triggered by ever weaker demand, was to emerge, all hope of the currency bloc’s economy returning to health anytime soon would be shot.

So how can you tell one from the other? Read more

Ben McLannahan

Next week’s policy meeting at the Bank of Japan is expected to be much like the 14 others since the dawn of “quantitative and qualitative easing” (QQE) last April: plenty of upbeat talk about recovery, but no change to the scale or the pace of easing.

And some think the inaction will extend a lot longer. Expectations of another shot of stimulus – “QQE2” – have been shifting back all year. According to the latest Nikkei survey, almost one-tenth of market participants now expect no further action at all. Here are four reasons why: Read more

Claire Jones

Forward guidance is central banking’s latest fad. Since the nadir of the crisis, all four of the major central banks have adopted their own version of it.

But is this fashion for keeps? That depends on whether the policy works.

Guidance involves saying what you’re going to do, before doing it. This, central banks hope, will temper markets’ uncertainty about what happens to interest rates.

Whether it works or not, then, depends on how much markets trust policy makers to do what they say they’re going to do. If investors think policy makers are lying, or central banks lose credibility by reneging on their pledges, then the guidance could harm reputations for a long time to come.

So does it work? According to a paper, published by the Bank for International Settlements today, it does. Well, sort of.

Yet the research also flags that if forward guidance does succeed, it could end up doing more harm than good. Read more

The Bank of Japan delivered a statement of intent on Thursday. Under its new governor, Haruhiko Kuroda, the central bank intends to eliminate the persistent deflation of the past 15 years within a two-year horizon. The FT news story provides the main details, save to say that in planning to double the monetary base (notes and coins, plus electronic money created by the BoJ) by the end of 2014, Mr Kuroda means business. Central bank communication does not often use words such as “massive”. Here are five answers to the big questions. Read more

Claire Jones

Foreign exchange intervention has long had a bad reputation; it earned the beggar-thy-neighbour tag back in the 1930s. Now, even actions that aren’t explicitly aimed at influencing the exchange rate, such as the Federal Reserve’s quantitative easing, prompt accusations that central banks are provoking a “currency war”.

A fascinating piece of research, published by the Bank for International Settlements on Tuesday, claims this bad rep is no longer fair. Read more

Claire Jones

The Bank of Japan’s announcement today of an additional Y10tn ($126bn) of quantitative easing caught markets off guard. Many had expected action next month, when the central bank will release its latest projections for growth and inflation.

But for seasoned Japan watchers the timing of the decision will come as little surprise. The BoJ may have been in the QE game for far longer than any of the other major central banks. But in recent years it has been a case of where the Fed leads, the BoJ follows. Or, more aptly, when the Fed acts, the BoJ retaliates. Read more

Claire Jones

It is often said that China will grow old before it gets rich. The argument goes that China’s rapidly-aging population and gender imbalance – a result of its one-child policy  – will stymie growth  before economic living standards have caught up with those in advanced countries.

But could China’s aging problem also result in a spectacular property collapse? The Bank of Japan’s deputy governor Kiyohiko Nishimura thinks so. Doing his bit for Sino-Japanese relations, Mr Nishimura on Tuesday claimed that Chinese property prices are about to go into the “danger zone” because of this demographic trend.

In a fascinating talk at a Bank for International Settlements and Reserve Bank of Australia conference in Sydney on Tuesday, Mr Nishimura argues that so-called “malign” property bubbles, ie those which result in a spectacular collapse, are often a result of demographic transition from a “population dividend”, when the working-age population is at its height, to the “burden of an ageing population”. Read more

Claire Jones

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Bernanke testimony

Fed chairman Ben Bernanke faces Congress next week for the central bank’s twice-yearly Monetary Policy Report to the Senate and the House of Representatives.

Will Mr Bernanke offer any clues that the launch of QE3 is imminent? This from the FT’s US economics editor Robin Harding: Read more

Claire Jones

The People’s Bank of China has not cut rates twice in a month solely because the domestic economy is showing signs of slowing down.

Officials in Beijing, and elsewhere in Asia, are easing monetary policy in part because they are intent on getting ahead of the curve should things get much worse in the eurozone and global trade collapse in the way in did in the months following Lehman Brothers’ failure.

Two fascinating speeches made in recent days by Federal Reserve and Bank of Japan staff highlight just how grave central bankers believe the threat from Europe actually is. Read more

Claire Jones

Our week ahead email helps you to track the most important events in central banking. To see all of our emails and alerts visit

BoE minutes Read more

The Bank of Japan’s monetary policy decision on Friday has been powerfully talked up by analysts and officials alike, with the bank under real political pressure to satisfy market expectations and announce new easing measures that target inflation and growth.

The BoJ surprised markets on February 14 when it announced an increase in its asset-purchasing programme to Y65tn from Y55tn, and an explicit inflation target of 1 per cent. But at its last policy meeting on April 10 it decided not to implement additional monetary easing.

Now however, the bank’s officials seem desperate to talk down the yen while nearly everyone else appears content to believe they can do more than just talk.

 Read more

Robin Harding

Masaaki Shirakawa, the governor of the Bank of Japan, gave a subtle and interesting speech this weekend that may not have been totally comfortable for his hosts at the Federal Reserve.

Mr Shirakawa set out four problems with aggressive monetary easing in the wake of a financial crisis. These are closely mirrored in the US debate about Fed policy but on several points he took the argument further: Read more

Claire Jones

Our week ahead email helps you to track the most important events in central banking. To see all of our emails and alerts visit

Bernanke goes back to school

Ben Bernanke, Fed chairman, next week delivers the first two of four lectures to undergraduates at the George Washington University School of Business. Read more

Claire Jones

As most suspected, the Bank of Japan did little today to step up its fight against deflation.

Bar some tinkering with its special lending facilities, the BoJ kept policy on hold with the size of its asset purchase programme remaining at Y65tn.

However, there are signs that the central bank could do some proper easing in the coming months.

 Read more

Claire Jones

Our week ahead email helps you track the most important events in central banking. To see all of our emails and alerts visit

FOMC/ BoJ votes

The Federal Open Market Committee and the Bank of Japan’s policy board both vote on Tuesday. Will either panel back a change in course?  Read more

Claire Jones

If there was ever any doubt that the Bank of Japan’s adoption of an inflation “goal” owed everything to political pressure and nothing to economic theory, then it was removed  by Masaaki Shirakawa.

The BoJ’s “goal”, announced last Tuesday, was seen by some as a sign that the central bank would step up its fight against deflation.

However, to others, the central bank’s odd take on inflation targeting always looked more like a move to appease a Diet intent on reining in the central bank’s independence than a genuine change in the BoJ’s thinking on monetary policy.

It was an impression that the BoJ governor did little to dispel in comments made late last week, which signalled that the central bank stance on deflation will be little changed. Read more

Fifteen years ago, a little-known tragedy hit the Bank of Japan. In the mid 1990s – or during the early stages of Japan’s banking crisis – BoJ officials decided to use some of the central bank’s own yen to prop up a failing finance company, in a desperate effort to paper over problems and buy time.

But the company went bust, and the money was lost, creating a hole in the BoJ balance sheet for the first time since the second world war. Haunted by shame, the senior official in charge committed suicide, in a move that has left scars on the collective psyche of central banks’ leadership that last, even today.

 Read more

Claire Jones

Central banks are nothing if not dedicated followers of fashion. Less than a month after the Federal Reserve opted for an explicit inflation target, the Bank of Japan has followed suit.

However, the BoJ’s adoption of an inflation target probably owes more to political pressure than the whims of its central bankers; unlike Ben Bernanke, BoJ governor Masaaki Shirakawa has never been a proponent of the framework.

And this perhaps explains why the BoJ has been more original than most on how it plans to target inflation.  Read more

Claire Jones

Our week ahead email helps you track the most important events in central banking. To see all of our emails and alerts visit

Inflation Report

The Bank of England’s Inflation Report is out on Wednesday, and with it the Monetary Policy Committee’s eagerly awaited forecast for inflation. Read more