LEX This is moral hazard in action. Japanese finance minister Hirohisa Fujii, having observed what a policy of quantitative easing can do to a currency, is keen for Japan to follow the US and UK in cranking up the presses. Bank of Japan governor Masaaki Shirakawa has also observed what QE can do to an economy: not a lot, in Japan’s case, in the early noughties. Weeks of briefings and counter-briefings culminated in an unscheduled monetary policy meeting of the BoJ on Tuesday.
What has emerged is a fudge. The meeting dissolved with a pledge to provide Y10,000bn ($115bn) of short-term funds to commercial banks at a fixed interest rate. To the governor, this probably fits the definition of QE, or ryoteki kanwa, in the broadest sense. But it was less aggressive than the other possible steps such as ramping up outright purchases of long-term government bonds, running at about Y1,800bn a month, or promising to maintain low interest rates for longer than markets had priced in. Investors, noting a rare invocation of Article 17 of the Bank of Japan Act to call an unscheduled meeting, might have expected something meatier.
