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Central Bank Independence in Times of High Fiscal Risk: The Case of Japan

In: Central Banking and Financial Stability in East Asia

Author

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  • Franz Waldenberger

    (German Institute for Japanese Studies)

Abstract

The Bank of Japan Act of 1997/1998 grants the Bank of Japan (BoJ) operational independence regarding the conduct of monetary policy. This independence is legally constrained and has also been questioned politically by the Abe administration’s recent usurpation of monetary policy as part of its overall economic policy. The deflationary environment characteristic of the Japanese economy over the last 20 years has, to date, avoided fiscal and monetary policy goals coming into conflict. The real test for central bank independence in Japan will come once deflation has been overcome and the harmonious relation between price stability and fiscal, as well as financial system, stability comes to an end. Price stability may still be maintained as long as fiscal consolidation is synchronised with the reduction in the non-public sector’s saving-investment balance.

Suggested Citation

  • Franz Waldenberger, 2015. "Central Bank Independence in Times of High Fiscal Risk: The Case of Japan," Financial and Monetary Policy Studies, in: Frank Rövekamp & Moritz Bälz & Hanns Günther Hilpert (ed.), Central Banking and Financial Stability in East Asia, edition 127, pages 87-100, Springer.
    • Handle: RePEc:spr:fimchp:978-3-319-17380-1_5
    DOI: 10.1007/978-3-319-17380-1_5
    as

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