March 22, 2024 - 10:00am
Tokyo
The Bank of Japan has finally announced an interest rate hike, its first in 17 years. After seemingly endless rumours, the country’s unconventional monetary easing policies are being unwound with the bank declaring that a new era of stable inflation has begun.
The reaction to the news here in Tokyo is generally, cautiously positive. After years of a sclerotic economy and, to quote Niall Ferguson, “institutionalised inertia”, at long last something is happening. The Keidanren (the most important of Japan’s business lobby groups) called it “the appropriate policy decision at the appropriate time”, while the Chamber of Commerce declared it “favourable”.
The negative rate policy, whereby banks pay to park their money at the central bank, originated in 2016 as part of the previous BOJ governor Haruhiko Kuroda’s attempt to tame deflation, a legacy of the post-bubble economy years. The same methods were employed by the European Central Bank and the Swiss National Bank.
There is not much evidence it did any good; but while the experiment was abandoned elsewhere, in Japan it endured, possibly due to Kuroda’s personality and his stubborn refusal to give up on his signature inflationary dream.
When Kuroda stepped down last April, the new broom was expected to sweep clean. He has taken his time, but successor Kazuo Ueda finally found the impetus for scrapping the world’s last negative rate policy when positive data indicated a healthy wage/price increase cycle. Salaries are up 5.28% according to Rengo, the largest labour organisation, as are prices, which were given a boost by the rising cost of imports following the outbreak of the Russia-Ukraine war.
The significance of the hike is probably less the immediate effect it will have on the Japanese economy — the yen actually fell when Ueda ruled out further rate increases — but more how it fits into what looks like a more flexible and dynamic approach to longstanding issues from the government of Fumio Kishida.
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Subscribe“new visa categories have been created, greatly facilitating the ingress of skilled and unskilled workers”
I hope they don’t make the same mistakes as we did in Western Europe. Japan has such a wonderful culture, near-untarnished by foreign influences. Migration can not be the solution to demographic problems.
Well, you can’t force people to get married nor force women to have children and they’ve got massive debts to service like us, so the new workers (even with AI) will have to come from somewhere.
As long as the new arrivals have to learn the language ( ie no multiculturalism) and they don’t allow wasters, criminals and terrorists (sorry ‘refugees’) to abuse the system, it’s not necessarily a disaster.
Japanese culture has been fairly resilient against outside influences but is nevertheless frequently a brilliant mash-up of the traditional and the newly and barely understood imports from outside.
Immigration is good and helps the economy. Open borders are the problem. Sovereign nations need to determine the level of immigration that is most beneficial to their unique needs.