Editorial Board
Shinzo Abe’s (Mostly) Sensible Plan for the Bank of Japan
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Japan’s new prime minister, Shinzo Abe, has promised to force the Bank of Japan to change its monetary policy, and he seems likely to get his way. Though Abe’s approach isn’t risk-free, he is mostly right.
Critics see Abe’s plan as a dangerous assault on the BOJ’s independence. These fears are overblown. The more pressing issue is Japan’s stagnant economy. Consumer prices have flatlined or fallen, which has held real interest rates above zero and made monetary policy too tight. Prices fell by 0.3 percent in 2011, were unchanged in 2012 and are expected by the International Monetary Fund to fall again in 2013.