Kabuki-nomics

3 April 2012 By Wayne Arnold

The bank talks about fighting deflation, but has done relatively little. Replacing two board members with inflation doves when the seats open on April 4 won’t end the impasse. As long as fears of higher borrowing costs stop the BoJ from printing money, the yen will defy gravity.

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Japan’s government on March 23 nominated Ryutaro Kono, chief economist for BNP Paribas in Tokyo, to join the Bank of Japan’s policy-setting board. Kono would replace Seiji Nakamura, whose term expires on April 4. Kono is considered an advocate of anti-deflation policies.
The Bank on Feb. 14 expanded its asset purchase program and for the first time set an inflation goal, of 1 percent.
Members of the BOJ’s policy board said March 28 that the Bank of Japan was ready to keep monetary policy loose for as long as necessary to beat deflation and support the economy, but rejected a Federal Reserve-style “Operation Twist” to cap long-term yields as unnecessary and unwise.

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