Bank of Japan (BoJ)

The Bank of Japan (BoJ) is the Central Bank of JapanThe Yen was established to regulate the yen exchange rate and to conduct and oversee the country's monetary and financial policies.

The Japanese banking system was established in 1873 by the National Bank Act, similar to a similar law that had been passed in the United States in 1863. By 1870 the Japanese banking system included more than 150 banks.

The rapid growth of banks and the lack of emission controls have caused high levels of Inflation. In order to avoid a crisis in the economy, the Bank of Japan was established in 1882.

Structure and Objectives of the Bank of Japan

The functions of the supreme governing body of the Bank of Japan are entrusted to the Policy Determination Committee, which traces its history back to 1949. The Committee's exclusive prerogative is to determine the level of the discount rate, the lending rate, setting and amending the list of bills of exchange, lending terms, and other key issues within the bank's operations.

The Policy Determination Committee consists of seven people. At the head is the president of the Bank of Japan. One representative each from the Ministry of Finance and the Economic Government Authority, who have no voting rights. The head of the Bank of Japan and four other members of the Committee, who are appointed from among the most influential representatives of Japan's business community, approved by Parliament and approved by the Cabinet, take part in the voting.

The actual policy of the regulator is formed at meetings of the Governing Council, which take place daily. The Board of Governors consists of the President and Vice President of the Bank of Japan, who are appointed by the Cabinet for five years, and seven governors, who are appointed by the Minister of Finance on the basis of the submission of the Governor of the Bank of Japan. Their term of office is four years. Six of the governors are staff members of the Bank, and the seventh member of the Council is a representative of the Ministry of Finance. magazine notes that the Bank of Japan is a joint stock company with 55% shares owned by the Japanese government and 45% owned by financial institutions, insurance companies and private shareholders.

The Bank of Japan is responsible for three main tasks. The first task is the formation of the exchange rate Japanese yenThe second objective is to influence the money supply through changes in the amount of money in circulation and the stability of the value of the yen, both inside and outside the country. The second task is to influence money circulation by setting the interest rate and some other measures. Finally, the third task is to support the credit system.

Fig. 1. The building of the Bank of Japan, Tokyo.
Bank of Japan Building, Tokyo

Central Bank of Japan v. Ministry of Finance

It is no secret that in any state central banks have to resist the constant pressure of politicians of all stripes and ranks, who are trying to profit by using the financial system of the state.

The relationship between the Bank of Japan and the Ministry of Finance in this regard has been very complicated until recently. According to the Law on the Bank of Japan, its activities are aimed at "the exclusive performance of tasks pursuing public goals," and the bank's employees are equal to public servants. Under the same law, the head of the Ministry of Finance has the right to control the activities of the Bank of Japan, and it is within his competence to give orders of an administrative nature to the management of the regulator. The Minister of Finance also appoints the administrator, who performs the functions of supervision over the activities of the Bank of Japan. Without the permission of the Ministry of Finance the Bank of Japan has no right to establish additional branches, carry out transactions with financial and credit institutions of other countries, approve the articles of the annual budget and a number of other issues.

In the history of the Bank of Japan there are enough examples of how, despite the strongest pressure from influential politicians and government agencies, the presidents of the Bank of Japan adhered to the methods of maintaining price stability, which they considered the only correct one. Naturally, all this was the result not only of absolute confidence in their actions, but also of the high level of professionalism of the heads of the regulator and the rule developed over the years: "Regulation of monetary circulation is the exclusive prerogative of the Bank of Japan.

Figure 2. Bank of Japan Governor Haruhiko Kuroda.
Bank of Japan Governor Haruhiko Kuroda

The most recent of these heads was Masaaki Shirakawa, who served as the Bank of Japan from 2008 to 2013 and is known for his opposition to the policies of Prime Minister Shinzo Abe's government. Shirakawa's successor, Haruhiko Kuroda, who is Shinzo Abe's protégé, is currently setting the regulator's policy along the lines of "Abenomics." and in full compliance with the instructions of the government.

On you can read the accompanying statements of the Bank of Japan, as well as the minutes of its meetings as soon as they come out.

Useful links about the Bank of Japan

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