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Mieno, Governor Who Pricked Japan’s Bubble Economy, Dies

Yasushi Mieno
Yasushi Mieno, former governor of the Bank of Japan. Source: Bank of Japan via Bloomberg

Yasushi Mieno, the Bank of Japan governor who stuck a pin in the nation’s real-estate and stock market bubble and presided over the start of a so-called lost decade of stagnation, has died. He was 88.

He died from heart failure in a Tokyo hospital on April 15, the central bank said in a statement today.

Mieno took the BOJ’s helm in December 1989 in the midst of a boom driven by speculative investment in land and stocks. Within a week, he’d begun raising interest rates. Then, as the economy cooled and headed into the doldrums, he dismissed calls from businesses and politicians for cuts.

Speaking at a farewell press conference in Tokyo in December, 1994, Mieno said he had “no regrets” and had always taken a mid- to long-term view of the economy and aimed to achieve “growth without inflation.”

“When I set monetary policy, I didn’t see the economy in a short-term span, or say, ‘We are in recession, so let’s take measures to spur the economy now,” Mieno said. “I have always tried to rectify the damage caused by the bubble and achieve economic growth without causing inflation.”

Under his leadership, the central bank raised the key rate from 3.75 percent to 6 percent within a year, before switching to reductions from mid-1991. The benchmark rate is currently between zero and 0.1 percent.

Bursting Bubbles

From a high of 38,915.87 on Dec. 29, 1989, the Nikkei 225 Stock Average slid more than 48 percent over his five-year tenure. The benchmark gauged closed at 9667.26 today, down 75 percent from the peak. It took Mieno longer to stop the bubble in property prices which continued to rise through 1991, until starting a 15-year slide in 1992.

A “double-whammy of interest-rate increases and limits on banks’ lending to real-estate industries caused the bubble to burst,” said Hideo Kumano, chief economist at Dai-Ichi Life Research Institute in Tokyo and a former BOJ official. “Rates were too high” after Mieno raised them to 6 percent, he said.

Current Governor Masaaki Shirakawa said that Mieno brought “calm decision-making” and “deep insight” to his management of policy. He had “deep feelings of mourning,” Shirakawa said in the statement.

Mieno was born in Oita Prefecture on the southern island of Kyushu, the local government said on its web site. His father worked for a think-tank attached to the South Manchurian Railway and Mieno lived as child in Dalian and other parts of Manchuria, then a Japanese colony, it said. After graduating from law school in Tokyo he joined the Bank of Japan in 1947, staying there for the rest of his career, it said.

‘Difficult Period’

Mieno was governor during “a difficult period for the Japanese economy, with the peak of the bubble and then soon the recession caused by its collapse,” Shirakawa said. “At the same time, there was the huge problem of large amounts of non-performing loans threatening the stable maintenance of the financial system.”

In 1993, Mieno commented that monetary policy alone wouldn’t kickstart the economy. Mieno said later that he was “under various forms of pressure” from politicians when he was governor, with some threatening to fire him in an attempt to force him to lower rates.

There are parallels with Shirakawa’s situation now. He, too, faces pressure from lawmakers who want his policy board to do more to support growth and says there are limits to what monetary tools can achieve.

“It’s the fate of a central banker to face pressure and criticism from politicians in any country and in any era,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management in Tokyo.

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