3, 13. 2006
The Bank of Japan (BOJ)held its Policy Board Meeting on monetary policy on March 9, 2006 and decided to lift five-year old quantitative easing. The assessment of this measure is, however, quite contrasting. Newspaper reports on the 10th were sharply divided. While Mainichi, Sankei and others welcomed it calling it “a step towards normalization”, the Asahi called for “caution so as not to relapse to deflation”.
First step towards normalization of monetary policy
Japanese papers don't concur on the BOJ's decision.
Quantitative easing is an unprecedented ‘extraordinary monetary policy’ and Nikkei, Mainichi and Sankei have welcomed its lifting.
Nikkei’s editorial bore the caption ‘A step towards normalization of monetary policy’ and criticized the LDP and the government as it holds that ‘undue political pressure on the BOJ is undesirable’. Headline of the “Opinion” column of Sankei read ‘Lifting of quantitative easing-A step towards normalization of monetary policy’. It said ‘We welcome the first step towards normalization of monetary policy through quantitative easing”. In its general news too, Sankei pointed that ‘Interest rates regulate the flow of money in the society and control the economic trend. Rock-bottom interest rate for a prolonged duration when the economy is on a recovery trail runs the risk of causing inflation or economic bubble due to investment or consumption heat-up”.
MainichiMainichi also in its editorial welcomed the decision. It wrote “It (quantitative easing) halted deflation and was an unprecedented and extraordinary attempt to support the banking system that was on the verge of collapse. Hereafter, government will revert to monetary policy based on interest rates. We welcome this as an evidence of national economy having got rid of deflation and as the first step towards normalization of monetary policy.”
Strong resistance to ending the zero interest rate policy
On the other hand, conservative bore the caption bore the caption Asahi’s editorial bore the caption bore the caption.Even concerning quantitative easing, unlike Nikkei and Sankei; it highlights its positive side. “For once, there was a concern that deflation could be unstoppable. There was also optimism that the financial system instability would be curbed and there will be no hike in interest rates for the time being. It definitely had certain amount of positive effect.”
Yomiuri’s stance is subtly different. Its editorial says “Only the future trend will tell whether or not the decision is correct.” Apart from quantitative easing, it calls for clarifying the continuance of zero interest rate. Its stance is somewhat similar to that of the Asahi.
Majority of entrepreneurs have welcomed the decision. In the quick survey of 100 entrepreneurs carried out by the Nikkei, nearly 70% replied that “It has been called off at the opportune time. Even concerning monetary policy they say “It should be left to the BOJ” and majority seem to approve of the ending of zero interest rate policy.
However, media seems to have resistance to ending of zero interest rate policy. It is sure there will be a heated debate for sometime regarding the validity of the decision.