ID :
54868
Fri, 04/10/2009 - 23:43
Auther :
Shortlink :
https://oananews.org//node/54868
The shortlink copeid
FOCUS: Results rather than action -- Shirakawa's tougher 2nd year begins+
TOKYO, April 10 Kyodo - Masaaki Shirakawa ended the first of his five years as Bank of Japan governor this week, with analysts giving him passing marks for his handling of the global credit turmoil and subsequent economic downturn.
But they say his second year in office will be tougher as the central bank,
which they regard as having taken action to fight the crisis, is required to
produce solid results in its attempt to prevent the Japanese economy from
spiraling further into recession.
Initially assuming a BOJ deputy governor post, Shirakawa, a former Kyoto
University professor, was promoted to the governor's post April 9 last year
after a series of government nominees for the job were rejected by opposition
parties in Diet voting.
At his first press conference, Shirakawa vowed efforts ''to keep stability in
prices and maintain prudence'' to sustain Japan's economic growth.
Shirakawa, also a former BOJ executive director, is widely seen as ''monetary
policy geek.'' He was quick to dive into the deep end of the community of
international finance, utilizing his connections with old central banker
friends in the United States and Europe.
His first six months as BOJ chief were relatively quiet. Though the subprime
mortgage meltdown in the summer of 2007 unsettled major U.S. and European
financial institutions, it was merely a ''fire on the other side of the
river,'' a BOJ official say.
But things started changing after the bankruptcy in September last year of U.S.
investment bank Lehman Brothers Holdings Inc.
Waves of financial instability hit the Japanese financial system, which the BOJ
earlier said was relatively stable.
On Sept. 18, three days after the Lehman failure, Shirakawa decided to have the
BOJ join forces with central banks in Europe and the United States to provide
dollar liquidity in money markets under a $60 billion currency swap agreement
with the Federal Reserve Bank of New York, the first such move in the BOJ's
history.
The BOJ has extended the policy twice, now offering unlimited dollar funds to
financial institutions operating in Japan through biddings.
On Oct. 31, Shirakawa stepped up his battle against the financial turmoil,
making apparently the most important decision in his first year. The BOJ cut
its key interest rate from 0.5 percent to 0.3 percent, the first reduction in
over seven years.
The decision gave the impression to the market that the BOJ had abandoned its
earlier policy of seeking higher interest rates against the backdrop of Japan's
longest economic expansion since World War II.
But critics say Shirakawa was slow to make that decision.
The BOJ only stood aside on Oct. 8, when six other central banks, including the
U.S. Federal Reserve, the European Central Bank and the Bank of England,
lowered their key rates in an unprecedented policy coordination.
Critics say Shirakawa failed to explain how he changed his mind during the 23
days.
At a press conference Tuesday, he declined to comment when asked how he sees
his first year as governor.
''I personally have my own assessment,'' he said. ''But I decline to reveal it
here. How the economy proceeds will amount to an assessment.''
The BOJ sanctioned another rate cut -- from 0.3 percent to 0.1 percent -- in
December and has since moved into the area of unorthodox, emergency measures to
battle the credit crunch, such as outright purchases of corporate debt from
financial institutions, which could damage the BOJ's own balance sheet.
Analysts say Shirakawa actually took some action to fight the turmoil, and that
he deserves a certain level of credit for what he has done the past year. But
they add he must achieve solid results in his second year.
The BOJ ''has benefited from the fact that the world economy has slowed down as
a whole -- not only Japan,'' said Hiromichi Shirakawa, chief economist at
Credit Suisse in Japan, who added that attention should now focus on likely
deflation in the country.
Year-on-year changes in the key consumer price index have remained around zero
percent the last few months. But many economists forecast they will turn
negative between this summer and fall.
Credit Suisse's Shirakawa said that to stimulate the Japanese economy and
prevent prices from falling sharply, the BOJ may face pressure from the
government to cut interest rates again and bring key borrowing cost to zero
percent and, furthermore, to reinstate ''quantitative easing,'' a policy to
flood the banking system with liquidity.
BOJ executives, including Governor Shirakawa, seem skeptical of the
effectiveness of the quantitative easing.
''Anyway, a crucial period has begun for the BOJ,'' the economist added.
Hideo Kumano, chief economist at the Dai-ichi Life Research Institute, echoed
the view, saying that even with the central bank's emergency measures,
corporate debt markets have yet to recover their stability as companies,
especially smaller ones, have faced trouble raising operating capital in the
market.
''In the first year under Governor Shirakawa, the BOJ was required to take
action and he managed to link the BOJ's policy with that of central banks
overseas,'' Kumano said.
He indicated the BOJ was able to make itself look good only by coordinating
with European and U.S. central banks.
''In the second year, however, the BOJ must achieve results, and it will be
very important to stimulate the economy and help recover stability in financial
markets,'' Kumano said.
The BOJ is also required to improve its skill in communicating with the public
and market participants.
As for monetary policy, experts say central banks must take care in terms of
when they roll out new policy, how they make appeals for it and how they
explain it in a manner that enables everyone to understand.
''We have not done those tasks sufficiently,'' said another BOJ official, who
asked not to be named. ''The current governor is not good at explaining the
bank's position with catchy words'' as done by ECB presidents or Fed chairmen.
''But unassuming personality is one of his charms. So all we can do may be
explain our policies repeatedly and politely,'' the official said.
==Kyodo
2009-04-10 22:40:22
But they say his second year in office will be tougher as the central bank,
which they regard as having taken action to fight the crisis, is required to
produce solid results in its attempt to prevent the Japanese economy from
spiraling further into recession.
Initially assuming a BOJ deputy governor post, Shirakawa, a former Kyoto
University professor, was promoted to the governor's post April 9 last year
after a series of government nominees for the job were rejected by opposition
parties in Diet voting.
At his first press conference, Shirakawa vowed efforts ''to keep stability in
prices and maintain prudence'' to sustain Japan's economic growth.
Shirakawa, also a former BOJ executive director, is widely seen as ''monetary
policy geek.'' He was quick to dive into the deep end of the community of
international finance, utilizing his connections with old central banker
friends in the United States and Europe.
His first six months as BOJ chief were relatively quiet. Though the subprime
mortgage meltdown in the summer of 2007 unsettled major U.S. and European
financial institutions, it was merely a ''fire on the other side of the
river,'' a BOJ official say.
But things started changing after the bankruptcy in September last year of U.S.
investment bank Lehman Brothers Holdings Inc.
Waves of financial instability hit the Japanese financial system, which the BOJ
earlier said was relatively stable.
On Sept. 18, three days after the Lehman failure, Shirakawa decided to have the
BOJ join forces with central banks in Europe and the United States to provide
dollar liquidity in money markets under a $60 billion currency swap agreement
with the Federal Reserve Bank of New York, the first such move in the BOJ's
history.
The BOJ has extended the policy twice, now offering unlimited dollar funds to
financial institutions operating in Japan through biddings.
On Oct. 31, Shirakawa stepped up his battle against the financial turmoil,
making apparently the most important decision in his first year. The BOJ cut
its key interest rate from 0.5 percent to 0.3 percent, the first reduction in
over seven years.
The decision gave the impression to the market that the BOJ had abandoned its
earlier policy of seeking higher interest rates against the backdrop of Japan's
longest economic expansion since World War II.
But critics say Shirakawa was slow to make that decision.
The BOJ only stood aside on Oct. 8, when six other central banks, including the
U.S. Federal Reserve, the European Central Bank and the Bank of England,
lowered their key rates in an unprecedented policy coordination.
Critics say Shirakawa failed to explain how he changed his mind during the 23
days.
At a press conference Tuesday, he declined to comment when asked how he sees
his first year as governor.
''I personally have my own assessment,'' he said. ''But I decline to reveal it
here. How the economy proceeds will amount to an assessment.''
The BOJ sanctioned another rate cut -- from 0.3 percent to 0.1 percent -- in
December and has since moved into the area of unorthodox, emergency measures to
battle the credit crunch, such as outright purchases of corporate debt from
financial institutions, which could damage the BOJ's own balance sheet.
Analysts say Shirakawa actually took some action to fight the turmoil, and that
he deserves a certain level of credit for what he has done the past year. But
they add he must achieve solid results in his second year.
The BOJ ''has benefited from the fact that the world economy has slowed down as
a whole -- not only Japan,'' said Hiromichi Shirakawa, chief economist at
Credit Suisse in Japan, who added that attention should now focus on likely
deflation in the country.
Year-on-year changes in the key consumer price index have remained around zero
percent the last few months. But many economists forecast they will turn
negative between this summer and fall.
Credit Suisse's Shirakawa said that to stimulate the Japanese economy and
prevent prices from falling sharply, the BOJ may face pressure from the
government to cut interest rates again and bring key borrowing cost to zero
percent and, furthermore, to reinstate ''quantitative easing,'' a policy to
flood the banking system with liquidity.
BOJ executives, including Governor Shirakawa, seem skeptical of the
effectiveness of the quantitative easing.
''Anyway, a crucial period has begun for the BOJ,'' the economist added.
Hideo Kumano, chief economist at the Dai-ichi Life Research Institute, echoed
the view, saying that even with the central bank's emergency measures,
corporate debt markets have yet to recover their stability as companies,
especially smaller ones, have faced trouble raising operating capital in the
market.
''In the first year under Governor Shirakawa, the BOJ was required to take
action and he managed to link the BOJ's policy with that of central banks
overseas,'' Kumano said.
He indicated the BOJ was able to make itself look good only by coordinating
with European and U.S. central banks.
''In the second year, however, the BOJ must achieve results, and it will be
very important to stimulate the economy and help recover stability in financial
markets,'' Kumano said.
The BOJ is also required to improve its skill in communicating with the public
and market participants.
As for monetary policy, experts say central banks must take care in terms of
when they roll out new policy, how they make appeals for it and how they
explain it in a manner that enables everyone to understand.
''We have not done those tasks sufficiently,'' said another BOJ official, who
asked not to be named. ''The current governor is not good at explaining the
bank's position with catchy words'' as done by ECB presidents or Fed chairmen.
''But unassuming personality is one of his charms. So all we can do may be
explain our policies repeatedly and politely,'' the official said.
==Kyodo
2009-04-10 22:40:22
