Home > Japan, Monetary Policy > A Masterclass from the Bank of Japan

A Masterclass from the Bank of Japan

There seems to have been some problem with the Bank of Japan’s translation department this morning.  Fortunately, I’ve discovered a secret feature of Google Translate which lets me translate from Central Bankerese into English.  This is how today’s BoJ announcement comes out:

The Bank of Japan conducts monetary policy based on the principle that the policy shall be aimed at “achieving price stability, thereby contributing to the sound development of the national economy.”

When we say “price stability” we mean exactly that.  No overall movement in the CPI level.  We hope this is very, very clear.  Mr. Shinzo Abe wants us to set a 2% inflation target.  Who does he think he is?

Mr. Abe talks about “targets”, but we like to talk about “aspirations”.   Specifically, “vague aspirations”.   What we really want is 0% inflation, as we said.  But because Mr Abe keeps nagging us, we are putting out this announcement to keep him happy.  So we’ll state clearly today that we have a vague aspiration towards hitting a 2% inflation target.

Because Mr. Abe is not content with mere announcements, he also wants us to take action.  He is keen on this idea of printing unlimited amounts of money.  So we’ll do that.  But not today!  Oh no!  Not tomorrow, either.   Nor next month.  Don’t be silly.  In fact the printing money business will have to wait until January 2014.  We are quite busy here at the Bank of Japan, you know!

By delaying the printing money business until 2014 we are sure you will appreciate that we have not compromised one iota in our intent to hit our 0% inflation target.  This also gives us a lot of time to think up some new excuses about why it’s really difficult and/or dangerous to hit a 2% inflation target.  Hopefully that annoying guy Abe will be gone by then as well.

This announcement continues in the long tradition of obfuscation and failure which we embrace here at the Bank of Japan.  Our motto remains: “The Worlds’ Most Inept Central Bank”.

Governor Shirakawa and friends

Bloomberg reports:

Governor Masaaki Shirakawa and six of his nine fellow board members voted for a 2 percent inflation target, to be achieved “at the earliest possible time” — a pace not sustained in Japan since the early 1990s. While judging that the “economy remains relatively weak,” and that consumer prices will be flat for the time being, the BOJ refrained from adding any immediate stimulus.

Consumer prices are expected to remain flat, and they’re not doing any stimulus.  Who could claim they are trying to inflate?

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Categories: Japan, Monetary Policy
  1. January 22, 2013 at 12:45

    Haha. They are trying to raise inflation expectations solely by talking about it. Trouble is that their credibility is already so shot to pieces that no-one takes any notice even when they DO actually do something. Announcing a higher target when their best efforts so far haven’t managed to get inflation anywhere near the current target is laughable.

    • January 22, 2013 at 13:02

      It depends what you mean by “credibility”. The BoJ has total credibility in stabilising the consumer price level, which is roughly same today as it was twenty years ago. They have achieved that by “doing things”. Today they showed their determination not to divert from that course. They expect prices to stay the same!

  2. January 22, 2013 at 15:17

    Cheap jibes. The BoJ had unofficially defined “price stability” as meaning an inflation rate of 1% several years ago, and made it an official goal in February last year. Why would they want to target zero?

    • January 22, 2013 at 15:41

      Cheap jibes are all they’re worth, Rebel. They are clowns.

      They expect the CPI to rise 0.3% to 0.6% in fiscal year 2013. Read their announcement text. Are they targeting 2%? No. They only expect to exceed 2% in FY14 because of the VAT rise. Maybe that’s the real reason they are delaying new action to that year – it’ll look easy then!

      Do you think this was a major shift in the BoJ policy stance?

  3. January 22, 2013 at 20:56
  4. asdasdasd
    January 23, 2013 at 08:06

    Goodhart’s policy recommendations have been dreadful during this crisis, e.g. he signed the letter in The Times calling for “austerity” in Feb 2010. Has he shown any contrition for advice that even the IMF now admits was counter-productive?

    I’m sure you’ve seen this, but Goodhart has a voxeu column that is wonderfully muddled.

    http://www.voxeu.org/article/monetary-targetry-might-carney-make-difference

    My personal favorite is:

    “The second problem is that an NGDP target would appear to run counter to the previously accepted tenets of monetary theory. Perhaps the main claim of monetary economics, as persistently argued by Friedman, and the main reason for having an independent Central Bank, is that over the medium and longer term monetary forces influence only monetary variables. Other real (e.g. supply-side) factors determine growth; the long-run Phillips curve is vertical. Do those advocating a nominal GDP target now deny that? Do they really believe that faster inflation now will generate a faster, sustainable, medium- and longer-term growth rate?”

    Translation: NGDP targeting is a bad idea because in the long run monetary policy can only affect nominal variables.

    I mean, the clue’s in the name: NOMINAL GDP targeting.

    This would be funny if fools like Goodhart and King weren’t influencing important decisions affecting millions of people.

    Britmouse – Goodhart’s flaw, nice, that’s a post that definitely needs to be written.

    Oh and your latest graph about Mervyn’s recovery, elegant work.

  5. Rajat
    January 23, 2013 at 11:27

    What’s the psychology of the BoJ? Why are they so averse to a little bit of inflation?

    • January 25, 2013 at 08:31

      I don’t know the BoJ well enough to comment, but for western central bankers, it seems like they are very, very scared of the 1970s. Read King’s speech from earlier in the week – that is what he is saying, quite clearly. Demand reflation will be a return to the 1970s.

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