Princes of the Yen

Richard A. Werner

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Cited by (290)

Abolition of the Okurasho name whole source
Not noticed by many English-speakers, to whom the old Ōkurashō was simply known as the Ministry of Finance, a long and illustrious history e…
Bank of Japan monetary contractions of the 1990s whole source
At crucial junctures, such as in 1992, 1993, early 1995, and much of 1999, the Bank of Japan (BoJ) even actively reduced the amount of money…
New Bank of Japan Law proposed whole source
The new Bank of Japan Law was proposed in 1997 as part of Prime Minister Hashimoto’s administrative reform program.
Bank of Japan independence and creation of the FSA whole source
In 1998 monetary policy was put into the hands of the newly independent Bank of Japan and regulation of the financial sector was put into th…
Yasushi Mieno becomes Bank of Japan governor whole source
The same unanimous case was made by the media and well-informed observers before Yasushi Mieno became governor in 1989, and ten years before…
Fukui's failed bid for the BoJ governorship whole source
In May 2001, in the same week this book was published in Japanese, Toshihiko Fukui, head of the Fujitsu Research Institute, staged an attemp…
Koizumi pledges an anti-deflation BoJ governor whole source
Perhaps as a result, Prime Minister Koizumi stated in late December 2002 that he would appoint as governor of the Bank of Japan only someone…
Toshihiko Fukui appointed Bank of Japan governor whole source
The fact that he was duly appointed, despite contrary statements by the prime minister and by an administration famous for surprise appointm…
Bank of Japan Law of 1942 whole source
While the ministry won the first political battle and avoided a change in the Bank of Japan Law (which had been introduced in 1942, largely…
Japan's first postwar bubble economy whole source
Using window guidance, it ordered the banks to expand credit to speculative real estate borrowers. As a result, land prices soared and Japan…
Japanese capital floods world markets whole source
From around 1986 until 1990, Japanese money flooded the world. From real estate in New York, Hawaii, and Australia to corporate takeovers in…
Japan becomes a net capital importer whole source
The plot thickened in 1991, when Japan suddenly turned from being the biggest net capital exporter ever to a net importer of capital.
Peak of the Japanese asset bubble whole source
In 1989, the little plot of land surrounding the Imperial Palace in Tokyo had the same market value as the entire state of California. It wa…
Collapse of the Japanese bubble whole source
This is what happened from 1990 onward. Bank loan growth slowed. As asset prices fell, speculators were bankrupted and banks were left holdi…
Yen hits postwar high of 79.75 whole source
In March 1995, the central bank oversterilized and so sent the yen to its postwar high of ¥79.75. This delivered another severe blow to the…
Asian financial crisis whole source
In 1997, investors pulled out. Simultaneously, the central banks forced the commercial banks to restrict credit creation. The bubbles burst.
Japan's defeat in World War II whole source
The defeat of 1945 is often regarded as a watershed that heralded the beginning of a new Japan.
U.S. occupation of Japan whole source
The U.S. occupation, officially in charge until 1952—longer than in Germany—implemented the U.S. program of reeducation and democratization…
New York stock market crash of 1929 whole source
The fallout from the New York stock market crash of 1929 was borderless. Worldwide, distressed banks withdrew their loans, bankrupting large…
Japanese military fitness survey of the early 1930s whole source
A countrywide survey conducted by the military in Japan in the early 1930s found that a high percentage of young men were physically unfit f…
Hirota cabinet puts economy on quasi-war footing whole source
In 1936, the Hirota cabinet agreed to put the economy on a quasi-war footing. The first step was to boost the budget for military expenditur…
Foreign exchange control laws of 1932 whole source
The 1932 foreign exchange control laws were used to restrict imports. They had represented the first set of reforms that would eventually cr…
Full-scale war with China begins whole source
When hostilities with China turned into full-scale war in 1937, the military pushed through major changes under the cover of emergency war l…
Konoe cabinet promulgates three wartime control laws whole source
The 1937 promilitary cabinet of Konoe (the grandfather of 1993 prime minister Hosokawa) promulgated three wartime control laws. The Export-I…
Cabinet Planning Board established whole source
Overall coordination lay in the hands of the Cabinet Planning Board, set up in October 1937. It was designed as the economic general staff o…
National General Mobilization Law whole source
In April 1938, the sweeping National General Mobilization Law was put to the Diet. It allowed the mobilization of all physical things in the…
Proclamation of the New Economic Order whole source
With such legal powers in their hands and with the approach of Japan’s entry into World War II, the Konoe cabinet in 1940 proclaimed the New…
Industrial Patriotic Societies established whole source
The doctrine of the firm as an “organic organization” binding employers and employees together and serving for the public benefit was offici…
Dividend increase permits required whole source
Beginning in April 1939, firms with dividend rates of 10 percent or more—about two-thirds of large firms at the time—required a permit from…
Munitions Corporation Law promulgated whole source
Thus as part of the 1943 Measures to Strengthen the Domestic System, the corporate law was changed and a new Munitions Corporation Law was p…
Creation of the Munitions Ministry whole source
The planners’ powers were also strengthened, when in November 1943 the Cabinet Planning Board was united with the Ministry of Commerce and I…
Share dividends capped at 5 percent whole source
In March 1944, the annual share dividend was decreased to 5 percent. Any residual influence by shareholders over profit allocation, fund-rai…
Wartime health insurance laws whole source
The National Health Insurance Law of 1938 and the Personnel Health Insurance Law of 1939 provided virtually complete health coverage to empl…
Workmen's Annuity and Insurance Law whole source
The 1942 Workmen’s Annuity and Insurance Law for the first time required the payment of annuities in case of old age, disability, or death.…
Creation of the main bank system whole source
In 1944, key producers of military supplies were designated as “munitions companies.” In 1945, over six hundred firms received necessary fun…
National Savings Promotion Campaign launched whole source
In April 1938, a National Savings Promotion Campaign was launched that aimed at boosting the savings rate to 30 percent of GNP.
Wartime transformation of the Japanese economy whole source
The changes implemented between 1937 and 1945 reshaped the function of the firm. Under the slogan “Public interest above individual interest…
Manchuria placed under direct army rule whole source
They had gained invaluable experience in implementing and running this system when they were experimenting with its prototype in Manchuria,…
Occupation Order No. 3 continues economic controls whole source
Certain wartime legislation was officially reintroduced soon after the war, especially by MITI and MoF: the Order No. 3 of the occupation fo…
Munitions Ministry and Home Ministry broken up whole source
The Munitions Ministry, at the heart of the war economy, was broken up in December 1945. So was the powerful Home Ministry, with its police…
U.S. reverse course on occupation policy whole source
Already by 1947, General MacArthur’s democratization policies had been seriously undermined. Although there was no official announcement, a…
Foreign Exchange and Foreign Trade Control Law whole source
The Foreign Exchange and Foreign Trade Control Law, promulgated in 1949, was merely a continuation of the laws that started with the Capital…
Enterprise Rationalization Promotion Law whole source
The Enterprise Rationalization Promotion Law of 1952 established a depreciation system for important machinery with very high rates of depre…
Kishi and Sato premierships whole source
Kishi and his brother, Eisako Sato (a former railway bureaucrat), were prime ministers for altogether ten years, between 1957 until 1972.
Formation of the Liberal Democratic Party whole source
It remains to say that the unification of several parties to create the so-called Liberal Democratic Party in 1955 established the one-party…
Purge of the zaibatsu families whole source
The zaibatsu owners were forced to sell their stocks to the public, and the holding companies were forbidden entirely (until 1998).
Anti-Monopoly Law enacted whole source
An Anti-Monopoly Law and a Law for the Elimination of Excessive Concentration of Economic Power were enacted in 1947.
Deconcentration program abandoned whole source
Of the 325 firms scheduled for dismantling in 1948, only 18 were actually split up.
Anti-Monopoly Law watered down whole source
By 1953, just a year after the departure of the U.S. occupation, the Anti-Monopoly Law had already been drastically watered down. Restrictio…
Occupation restricts trade-based unions whole source
In July 1948 it restricted the right to form trade-based unions and abolished the right of civil servants to engage in strikes.
Industrial Standardization Law whole source
Quality control had been a major concern of the military, which rigorously enforced norms and standards set by the Industrial Standardizatio…
End of the Bretton Woods system whole source
At the time, much of the world had fixed exchange rates with the U.S. dollar under the Bretton Woods system (until 1971).
Japan joins GATT whole source
In 1955, just in time for GATT membership in September of that year, the Diet revised and amended Paragraph 2 of Article 280.
Commercial Law Article 280 amended whole source
“The new provision allowed the board of a company to issue additional shares and assign them to each other—that is, they dilute the present…
Cross-shareholding program completed whole source
By 1966, the program to boost stable cross shareholdings was virtually completed. To prevent the possibility of criticism from abroad, the b…
Asymmetric cross-border acquisitions of 1988 whole source
In 1988, Japanese companies acquired 315 firms abroad. Foreigners, however, bought only 11 firms in Japan.
End of the Showa era whole source
It was not even half-time of the official calendar, the Showa era, which ended only in 1989, sixty-four years after Hirohito began his reign…
Central banks abandon monetary targets whole source
By the mid-1980s, both the Bank of England and the U.S. Federal Reserve had announced that they had lost faith in the M1, M2, or M3 type of…
Sung Dynasty launches the world's first paper money whole source
The world’s first paper money was launched in the tenth century in China by the ruling Sung Dynasty.
Marco Polo in Kublai Khan's China whole source
It is at this time that a detailed description was delivered to Europe in the form of Marco Polo’s report of his twenty years spent in Kubla…
Founding of the U.S. central bank whole source
Until the advent of central banks (in the United States as recent as 1913), private banks therefore printed and issued paper money when some…
Wartime switch to bank funding whole source
In the period from 1940 to 1950, on average 60 percent of firms’ liabilities consisted of bank borrowing and only 40 percent consisted of eq…
Reichsbank made independent after hyperinflation whole source
Since the Reichsbank had been made independent from the government after the hyperinflation of 1924, it could do as it wished.
Schacht's reign as Reichsbank president whole source
Governments fell at a hectic pace, but Schacht remained firmly enthroned from 1924 until he resigned in 1930, a period that turned out to be…
Temporary Funds Adjustment Law whole source
This law brought banks and their investment and loan decisions under strict control by the central bank and the Ministry of Finance. Funding…
Wartime consolidation of Japanese banks whole source
To simplify the credit allocation regime, the number of banks was drastically reduced, from about fourteen hundred by the end of the 1920s t…
Ichimada appointed Bank of Japan governor whole source
In 1946, with the approval of the U.S. occupation, a young Bank of Japan official named Hisato Ichimada was appointed BoJ governor.
National Financial Control Association established whole source
The time to make full use of his knowledge and experience came in 1942, when the system of a mobilized war economy was being fully implement…
Economic Stabilization Board established whole source
The Cabinet Planning Board was revived in the form of the powerful but short-lived (1946–52) Economic Stabilization Board (ESB or Keizai Ant…
Reconstruction Finance Bank established whole source
In January 1947, it was separated and established as the public Reconstruction Finance Bank (Fukkō Kinyū Kinko), whose job was to provide pr…
Priority lending regulations of 1947 whole source
Second, the government planners took the initiative to reestablish the priority production system from the wartime era with the 1947 Regulat…
Bank of Japan freezes loan balances whole source
The Bank of Japan’s control had already been asserted a year earlier, when the director of the Banking Department had issued instructions th…
Nine-Point Economic Stabilization Program whole source
Ichimada’s views were heard in Washington, which first instructed SCAP (the Supreme Commander for the Allied Powers) to issue a Nine-Point E…
Dodge mission and the Dodge plan whole source
Washington next sent Joseph Dodge, president of Detroit Bank, to Japan with the rank of minister from February to April 1949 as adviser to S…
Bank of Japan Policy Board introduced whole source
Apart from the marginal change that resulted from the introduction of the nominal Policy Board in 1949, the law was still the same one that…
Postal-savings-funded government banks created whole source
It established the principle that henceforth government banks, such as the Japan Export Bank (1950) or the Japan Development Bank (1951), wo…
Abolition of the Loan Coordination Division announced whole source
To appease critics, and fend off attempts by the Ministry of Finance to influence its policies, its abolition was announced in 1954.
Ichimada becomes Minister of Finance whole source
In 1954, having been the longest-serving Bank of Japan governor, Ichimada became minister of finance. Now his control over monetary policy w…
Government committee established to review Bank of Japan Law whole source
In 1956, the LDP government established an investigation committee to consider changes in the Bank of Japan Law.
Committee recommends monetary policy freedom for the BoJ whole source
In 1958, it recommended that the BoJ should have freedom to decide monetary policy, while MoF would only be able to request a delay of a BoJ…
BoJ publicly abolishes window guidance whole source
Already in October 1958, when the government committee deliberated the BoJ Law, the BoJ had removed window guidance from public view by abol…
Finance Minister Sato declines to revise the BoJ Law whole source
In April 1960, the new finance minister, Eisaku Sato (brother of Prime Minister Nobosuke Kishi and nephew of their uncle Yosuke Matsuoka, th…
Ikeda becomes prime minister with the income doubling plan whole source
When Hayato Ikeda became prime minister in 1960 and his cabinet made the “income doubling plan” its major policy aim, fiscal expenditures in…
Emergency Financial Order repealed whole source
In 1963, as part of the liberalization policies in the run-up to Japan’s entry into the OECD, the Emergency Financial Order (Kinyū Kinkyū So…
BoJ reintroduces window guidance to slow the economy whole source
Having previously abolished window guidance, in 1964, the Bank of Japan, under Deputy Governor Sasaki, suddenly reintroduced the credit cont…
Run on Yamaichi Securities and forced BoJ rescue whole source
As small investors pulled their money out of the market, the fourth biggest broker, Yamaichi Securities, experienced a run by its customers.…
Window guidance abolished again whole source
As window guidance had again caught some public attention, it was once more abolished in July 1965.
First postwar Japanese government bonds issued whole source
In November 1965, the first batch of Japanese government bonds (JGBs) came onto the market. This change tipped the power balance between MoF…
Bank of Japan introduces monetary targeting whole source
In 1978, the Bank of Japan officially introduced monetary targeting, a procedure by which the central bank selects a certain measure of the…
First round of Japanese trade liberalizations whole source
The first round of trade liberalizations had taken place in 1961, but the U.S. side was dissatisfied and demanded abolition of Japanese impo…
Japan becomes the world's second-largest economy whole source
By 1970, Japan had overtaken Germany and soared from the ashes to become the number two economic power in the world.
Zenith files dumping suit against Japanese television makers whole source
In 1970, the U.S. television maker Zenith filed a suit charging that Japan was dumping television sets in the United States.
Nixon shock ends dollar-gold convertibility whole source
Consequently, in August 1971, in what is often called the “Nixon shock,” the United States had to suspend the convertibility of dollars into…
Smithsonian Agreement fixes the yen at 308 per dollar whole source
Then, the yen rose, triggering the short-lived Smithsonian Agreement, which fixed it at ¥308/$ in December 1971.
Japan's first bubble economy in land and stocks whole source
Land prices exploded in 1972 and 1973. Capital gains on land holdings produced substantial paper profits.
Oil shock hits Japan whole source
All this happened before the oil shock of November 1973. The sudden jump in oil prices did not assuage the situation (although it was mitiga…
Inflation peaks with 26 percent consumer price rise whole source
In 1974, the consumer price index rose 26 percent year-on-year (YoY) and the wholesale price index 37 percent.
BoJ imposes tight window guidance to end the credit boom whole source
From the first quarter of 1973, it imposed tight window guidance loan growth ceilings. First, it reduced loan growth to the modest growth ra…
Japan sinks into its biggest postwar recession whole source
Real GDP growth dropped precipitously from around 15 percent in the 1960s to virtually nil in 1974—and Japan sank into its biggest postwar r…
Bank runs on credit associations whole source
As this became apparent, a number of shaky credit associations faced full-scale bank runs. The Ministry of Finance and the Bank of Japan wer…
Fiscal stimulus packages fail to revive the economy whole source
Despite a string of fiscal stimulus packages, such as in February, March, and June 1975, and a repeated reduction in interest rates, the eco…
Mieno heads the BoJ Banking Department whole source
From April 1975 to February 1978, the head of the Banking Department, in charge of implementing window guidance, was Yasushi Mieno.
Industrial production recovers after BoJ loosens credit whole source
In late 1976 industrial production finally recovered, and reached its previous peak levels of October 1973 again. Japan’s worst postwar slum…
Noguchi and Sakakibara publish 'Analysis of the MoF-BoJ Kingdom' whole source
Twenty years before, in 1977, in a pathbreaking article (“Analysis of the MoF-BoJ Kingdom”) in the highbrow magazine Chūō Kōron, Noguchi and…
U.S.-Japan Wise Men's Group calls for open Japanese markets whole source
The so-called U.S.-Japan Wise Men’s Group reported in 1981 that there was a need for Japan to make much greater efforts to open its domestic…
MITI's 'samurai plan' aircraft leasing scheme whole source
In 1979, MITI thought that the scheme was a “trump card in reducing the surpluses” by an estimated $800 million in fiscal 1979 alone.17 The…
Liberalization of gold transactions whole source
The authorities’ liberalization of gold transactions in 1982 had set off the process. MoF also gave the licenses for the gold accounts, and…
Japan buys three-quarters of U.S. Treasury auctions whole source
Japanese money mopped up a staggering 75 percent of all Treasury bonds auctioned off in 1986.9
Record Japanese long-term capital outflows whole source
In 1987 another record was set when a tide of $137 billion swept over the exchanges, followed by outflows of $ 131 billion the following yea…
Japan becomes the world's top direct investor whole source
In 1990, at $48 billion, foreign direct investment had taken the lead over portfolio investment and Japan became the world’s number one prov…
Benchmark revision of the foreign exchange law whole source
Indeed, legal regulations were eased gradually over the 1980s, with benchmark changes of the foreign exchange law in 1980.
Japanese foreign investment tide reverses whole source
In 1991, as the Japanese current account was heading for new record surpluses, topping $90 billion, net long-term capital outflows had sudde…
Japanese asset price bubble inflates whole source
Between January 1985 and December 1989, stocks rose 240 percent and land prices 245 percent.
Official discount rate held at 2.5 percent whole source
It is often said that the low official discount rate of 2.5 percent, maintained from February 1987 to May 1989, was the cause of the bubble.
Nikkei peaks at all-time high of 38,915 whole source
From 1984 to 1989, the Nikkei 225 stock index rose on average by 30 percent per annum. In December 1989, it peaked at an all-time high of ¥3…
Unemployment hits record low of 2 percent whole source
Unemployment hit a record low of 2 percent in March 1990.
Asset prices collapse and the bust begins whole source
Between January 1990 and December 1994, stock and land prices halved. Many companies and individuals who had borrowed money to purchase land…
Banks aggressively expand credit creation whole source
From about 1986 onward, banks increased credit creation aggressively. Loan growth of the city banks averaged about 15 percent in the late 19…
Bubble lending reaches 27 percent of all bank loans whole source
In total, “bubble” loans already summed up to 27 percent of total loans, an absolute sum of ¥98.9 trillion or 25 percent of 1989 nominal GDP…
Banks suddenly restrict loan growth whole source
In mid-1989, banks suddenly restricted loan growth. Half a year later, stock prices peaked. Then land prices stopped rising.
Nikkei falls 32 percent in one year whole source
In 1990 alone, the stock market, as measured by the Nikkei 225 index, dropped a precipitous 32 percent. Land prices also started their sharp…
Japan slides into its longest postwar recession whole source
Thus, from 1991 onward, Japan’s economy slid into the longest and deepest postwar recession since the 1930s. Unemployment soared to postwar…
Credit crunch hits small firms whole source
From 1992 onward, small firms suffered from a credit crunch.23
Yen rises 106 percent whole source
Despite the enormous capital outflows, the yen did not weaken. To the contrary, it rose 106 percent from 1985 to 1987.29
BoJ begins cutting the official discount rate whole source
The Bank of Japan lowered the official discount rate (ODR) ten times in the 1990s, beginning with the first reduction in July 1991, before w…
Yen surges to around 80 per dollar whole source
The yen had risen to around ¥80/$—unthinkable for many just half a year earlier. Exporters were under pressure, demand in the economy falter…
Brief recovery of 1996 whole source
Unexpected by most observers, the economy staged a sudden recovery in 1996, growing by around 4 percent. But this was not sustained: The eco…
Yen collapses to nearly 147 per dollar whole source
It collapsed to nearly ¥147/$ on June 15, 1998, around 80 percent weaker than its peak in April 1995.
Zero interest rate policy introduced whole source
In February 1999, it fell to 0.1 percent—what at the time was called a “zero interest rate policy.”
Short-lived recovery of 1999 and relapse whole source
Yet most observers were once again surprised by a sharp recovery of the economy in 1999 and a more than 50 percent rise in the Tokyo stock m…
Decade of fiscal stimulus packages whole source
During the 1990s, over a dozen large-scale government spending packages had been implemented, amounting in aggregate to over ¥145 trillion—a…
Credit creation turns negative and nominal GDP shrinks whole source
Credit creation remained minimal and even turned negative in late 1994—resulting in negative nominal GDP growth in early 1995—for the first…
BoJ sharply boosts credit creation whole source
In March 1998, the Bank of Japan suddenly boosted credit creation sharply. Our index reached the highest level since January 1974, when the…
BoJ shifts to expanding the quantity of credit whole source
In June 2001, the central bank changed its monetary policy once more and sharply increased the quantity of its credit creation.17
Ex-MoF vice minister Sumita serves as BoJ governor whole source
From 1984 to 1989, an ex-MoF vice minister, Satoshi Sumita, was even governor of the Bank of Japan.
Mieno becomes BoJ governor whole source
This is similar to the picture painted of Yasushi Mieno, governor of the Bank of Japan from December 1989 to 1994.
Mieno's 'Christmas present' rate hike ends the bubble whole source
He decided to end the bubble and raised the official discount rate only a fortnight after becoming governor, delivering the infamous “Christ…
Bill to revise the Bank of Japan Law submitted whole source
In 1997, the coalition submitted a bill to revise the Ministry of Finance Establishment Law and the Bank of Japan Law to the Diet.
New Bank of Japan Law makes the BoJ independent whole source
The new BoJ Law became effective in April 1998, stripping MoF of the power to set monetary policy and making the BoJ legally totally indepen…
Ministry of Finance stripped of its powers whole source
The year 1998 went down in Japanese history as the year in which the Ministry of Finance lost its main power—its monopoly on budgeting. For…
The Okurasho loses its historic name whole source
To add insult to injury, in January 2001 MoF even lost its grand old name. Today, the Ōkurashō does not even exist.
Four massive fiscal stimulus packages whole source
Between 1992 and 1994, four massive fiscal stimulus packages amounting to ¥45 trillion were added on to regular government spending.
Record foreign exchange intervention to weaken the yen whole source
In the second half of 1994, this amounted to U.S. $7 billion. In February and March 1995 it reached U.S. $19 billion, one of the largest qua…
Yen hits historic high of 79.75 per dollar whole source
During the months from January to April 1995, the yen rose by 20 percent, hitting a historic high of ¥79.75/$ on April 19, 1995.
BoJ credit withdrawal strengthens the yen despite record interventions whole source
This credit shrinkage strengthened the yen to close to ¥100/$ by the end of 1999, despite new record foreign exchange interventions ordered…
Unemployment reaches a postwar high whole source
In the first quarter of 1995, unemployment had reached a postwar high, creating human misery. The actual number of jobless probably topped f…
U.S. recession of 1991 and rapid Fed reflation whole source
In 1991, real GDP contracted by approximately 1 percent. How long this recession was going to last was in the hands of one institution—the F…
BoJ announces abolition of window guidance controls whole source
In December 1981, the central bank announced that window guidance controls would be abolished beginning in January 1982. Instead of dictatin…
BoJ announces complete abolition of window guidance whole source
In 1984, the BoJ announced the complete abolition of any form of window guidance.4
Window guidance quotas tightened amid land price surge whole source
December 1986: Window guidance quotas tighten. The Bank of Japan is aware of the surge in land prices, the high growth of the money supply,…
BoJ announces immediate abolition of window guidance whole source
Soon after its publication, the BoJ spoke its final, though somewhat contradictory, word on window guidance, announcing in July 1991 that wi…
Window guidance operated continuously through the 1980s whole source
The central bank and bank officers confirmed to us that window guidance was conducted without interruption during the 1980s, until at least…
BoJ orders banks to expand lending during the bubble whole source
Especially in 1986 and 1987, for around one year, the Bank of Japan said: ‘Use more, because we have a recession.’ Window guidance can be us…
Federal Reserve abandons monetary targeting whole source
Eventually, it capitulated: In 1982 it abandoned M1 targeting and in 1987 targeting altogether, as it felt that it could not control both th…
Endaka recession whole source
The economy had been in the endaka recession of 1985, and there was pent-up demand for money.
BoJ tightens window guidance and ends the bubble whole source
It was the Bank of Japan that ended the bubble by suddenly tightening window guidance in June 1989 and then created the recession of the 199…
BoJ reorganizes its credit control departments whole source
In 1997, the Credit and Market Management Department was split into the Financial Market Operations and Surveillance Department. Another reo…
Alternating MoF-BoJ governorship tradition begins whole source
This tradition started in 1974, when trueborn BoJ governor Sasaki was succeeded by the ex-MoF man Morinaga.
Executive Board cuts the discount rate to 2.5 percent whole source
In February 1987, the Executive Board decided, under MoF pressure, to reduce the ODR to the low rate of 2.5 percent.
Mieno publicly defies the Finance Ministry whole source
Then, in 1990, Mieno surprised the establishment by engaging in a rare high-profile disagreement with the Finance Ministry over monetary pol…
Matsushita appointed governor with Fukui as deputy whole source
In 1994, Governor Mieno was followed by MoF man Matsushita. The deputy position went to BoJ insider Toshihiko Fukui.
Araki appointed BoJ deputy governor, then governor whole source
Immediately following Japan’s defeat in August 1945, he was appointed deputy governor of the Bank of Japan. Two months later, he was appoint…
Araki indicted by war crimes prosecutors and resigns whole source
However, as with many members of the Manchurian elite, in June 1946 he was indicted by the war crimes prosecutors and had to resign.
Ichimada rules the BoJ for eight and a half years whole source
His “infallible” decrees about who would or would not receive money ruthlessly controlled the economy for eight and a half years, from June…
Araki appointed ambassador to the United States whole source
in 1952, Araki was appointed ambassador to the United States, almost straight from being under investigation for war crimes.
Araki returns as BoJ governor whole source
Araki switched surprisingly smoothly back from U.S. ambassador to central banker and controlled Japan’s economy again as BoJ governor from 1…
Sasaki becomes de facto head of the Bank of Japan whole source
After this, Sasaki was appointed executive director and, in 1962, became the de facto head of the Bank of Japan as deputy governor and then…
Fukui heads the Banking Department during the bubble whole source
From September 1986 to May 1989, longer than average, the head of the Banking Department was Toshihiko Fukui.
Window guidance begins tightening before Mieno's governorship whole source
Window guidance was already tightening in 1988 and 1989, well before Mieno became official governor.32
Mieno warns the Diet about excess money whole source
Already in 1986, when the bubble was started by Mieno’s window guidance, Deputy Governor Mieno testified to the Diet that he was worried abo…
Fukui resigns with Governor Matsushita whole source
Although Fukui had to resign together with governor Matsushita in early 1998, he had since been vying to take over from interim Governor Hay…
Bank of Japan adopts quantitative easing whole source
The central bank performed a sudden policy U-turn on March 19, 2001, now officially pursuing what it calls a policy of “quantitative easing”…
Sasaki calls for a five-year plan to transform Japan's economy whole source
Having handed the BoJ baton on to Prince Maekawa, Sasaki had become head of the Keizai Dōyūkai (Japan Association of Corporate Executives),…
Fukui defends expanding bank loans in Nikkei interview whole source
When Toshihiko Fukui was head of the Banking Department, he was interviewed by the Japanese-language Nikkei Financial Daily in July 1987, ju…
Hayami tightens monetary policy as the economy recovers whole source
To this type of argument, Governor Hayami countered in May 2000: “When the economy recovers, as is now happening, it might well be the case…
Maekawa hands over BoJ monetary policy control to Mieno whole source
After ten years in charge of monetary policy, Haruo “Mike” Maekawa handed over the control levers of the economy to Mieno in December 1984.
Nakasone forms the Maekawa advisory group whole source
On October 31, 1985, Japan’s prime minister, Yasuhiro Nakasone, formed the Study Group on Adjusting the Economic Structure for International…
Maekawa report submitted to the prime minister whole source
Over the coming five months, the Advisory Group met nineteen times, and on April 7, 1986, it submitted its recommendations to the prime mini…
Second Maekawa report announced whole source
In May 1987, a new, updated Maekawa report was announced. This report had been expanded from eleven pages to forty-one and basically reitera…
Third Maekawa report announced whole source
A third version of the report was announced in June 1988. It was entitled “The New Economic Plan—The Japan that Lives Together with the Worl…
Fukui endorses continued monetary easing to implement structural reform whole source
We saw above that the head of the department that implemented window guidance credit controls, Toshihiko Fukui, had said in July 1987, soon…
Death of Haruo Maekawa whole source
Maekawa passed away in 1989, but his successors remained in power.
Mieno links the recession to structural transformation whole source
In 1993, when the recession had already started (triggered by window guidance), Mieno pointed out that thanks to this recession everyone was…
Big Bang financial deregulation conceded whole source
By late 1996, MoF had lost the battle for regulation policy, having to concede a full-blown deregulation of the financial sector, known as t…
Revised Bank of Japan Law passed whole source
In June 1997, a revised Bank of Japan Law was passed, which became effective in April 1998. This finally gave the Bank of Japan what it had…
Prosecutors raid the Ministry of Finance whole source
In early 1998, public prosecutors for the first time actually raided the most powerful of Japan’s ministries.
Financial Supervisory Authority opens and closes LTCB and NCB whole source
The new FSA began business with a vengeance in June 1998, closing two amakudari banks, LTCB and NCB.
Abolition of the Ministry of Finance (Okurasho) whole source
In January 2001, the Ōkurashō was abolished. The remaining rump is a far cry from the powerful institution that it had been for over half a…
Japan's overseas production exceeds exports whole source
In financial year 1995, Japan produced more abroad than it exported from its shores.
Far-reaching deregulation package announced whole source
The shock of the yen at ¥80/$ convinced even die-hard conservatives that Japan had no choice but to deregulate. Thus only weeks after the hi…
Big Bang begins with foreign exchange deregulation whole source
The Big Bang started in April 1998 with the deregulation of the foreign exchange law. That, indeed, symbolizes the end of the war economy, b…
Telecommunications sector deregulated whole source
In 1993, the telecommunications sector was deregulated, which created a significant boom in mobile phones and boosted employment in the info…
Hosokawa administration reforms the electoral system whole source
The 1993 Hosokawa administration changed the electoral system and thus politics, which is now catering more to city dwellers.
Rice market forced open whole source
The rice market was forced open in 1993, thanks to the government’s reduction in official rice supply stocks to the lowest level on record i…
Product liability law favors consumers whole source
Japan’s new product liability law of 1995 for the first time explicitly favors consumers. In case of dispute, the burden of proof has now be…
Japan adopts market value accounting whole source
Fiscal year 2001 was the first in Japanese history that company books were calculated according to market value accounting.
Koizumi becomes prime minister whole source
Many observers are still convinced that the reform plans of Junichiro Koizumi, who became prime minister in April 2001, would be positive fo…
Bush loses reelection amid economic pessimism whole source
The prevailing pessimism over the U.S. economy is generally considered an important reason why in November 1992 George Bush lost his bid for…
Bank of Japan begins rapid money creation whole source
The Japanese economy recovered temporarily in 1999, because the Bank of Japan suddenly—and, as it turned out, temporarily—switched on the pr…
Bank of Japan withdraws credit in 1999 whole source
The Bank of Japan reduced its credit creation sharply in 1999, actively withdrawing credit from the economy for most of the year. The yen mo…
Bank of Japan reflates under Koizumi whole source
That is why the princes switched on the printing presses again. In May 2001, purchases of commercial paper rose by over 500 percent YoY. Bon…
First Japanese bond bubble whole source
The first Japanese bond bubble began in early 1995, when benchmark bond yields stood at 4.7 percent, and lasted until September 1998, when b…
Public money injected into Japanese banks whole source
Banks brought at least ¥33 trillion through derivatives and other methods onto their balance sheets, and they received around ¥10 trillion i…
BoJ announces stock purchases; Yanagisawa replaced by Takenaka whole source
He paid for it with his job: in September 2002, the central bank surprised the world with its announcement that it would be prepared to purc…
Bank of Japan announces quantitative easing whole source
We saw that in May 2001, later than its March 2001 official announcement of “quantitative easing,” the Bank of Japan once again boosted its…
Surprise recovery in late 2002 whole source
Given the normal time lag, this meant that by late 2002, industrial production, as well as domestic consumption, and hence real GDP, staged…
Japan liberalizes capital flows whole source
There is no doubt that, as with Japan’s liberalization of capital flows in December 1980, this marked a major departure from the old economi…
Thailand deregulates capital account and creates the BIBF whole source
In that year, Thailand implemented a policy of aggressive deregulation of the capital account and the establishment of the Bangkok Internati…
Surge of private capital inflows into Asia whole source
Net private capital inflows into Asia surged from U.S. $54.3 billion in 1993 (sharply up from U.S. $20.9 billion in 1992) to U.S. $98.3 bill…
Asian currency crisis erupts whole source
In 1997, the currencies of the key Southeast Asian countries could not maintain their fixed exchange rates with the U.S. dollar. They collap…
Thai baht crisis breaks in Bangkok whole source
Soon after the baht crisis broke in Bangkok in May 1997, the Thai finance minister and the prime minister felt that they should simply borro…
Thai finance minister seeks Japanese help in Tokyo whole source
Hence on July 16, the Thai finance minister, Thanong Bidaya, took a plane to Tokyo. He met the most senior government and Finance Ministry f…
Washington blocks Japan's Asian Monetary Fund proposal whole source
But Washington stopped Japan’s initiative. It unambiguously let Tokyo know that it was not allowed to rescue its Asian neighbors. Any soluti…
Bank of Korea reflates sharply whole source
Credit creation by the Bank of Korea in mid-1998 shot up by the biggest amount in twenty-five years—quite parallel to the BoJ’s reflation. A…
Russia defaults on domestic debt whole source
On August 17, 1998, Russia defaulted on domestic debt. Next, Brazil teetered on the verge of collapse.
Mahathir imposes capital controls in Malaysia whole source
But in September 1998, Mahathir imposed controls on short-term capital movements and hence stabilized the exchange rate. Simultaneously, his…
New York Fed organizes LTCM bailout whole source
At the end of September, William McDonough, the chairman of the New York Fed, summoned some of the most powerful men of world finance to the…
Enron bankruptcy whole source
The 2001 Enron bankruptcy, followed by other high-profile accounting and fraud scandals, further blurred the distinction between Asian-style…
EMEAP central bank club formed whole source
Already in 1991, the eleven central banks of the East Asia and Pacific region formed an exclusive club, called the Executives’ Meeting of Ea…
Landmark EMEAP governors meeting in Tokyo whole source
Since a landmark meeting of all the governors hosted by the Bank of Japan in Tokyo on July 19, 1996, cooperation has been tightened further.
Asian leaders call for currency union whole source
The head of the Hong Kong Monetary Authority argued in May 1999 that Asia should move toward currency union. This was endorsed in June 1999…
German hyperinflation under the Reichsbank whole source
It is well known that the German central bank, then called the Reichsbank, created too much money in 1922 and 1923, and hence caused hyperin…
Maastricht Treaty lays foundations for European monetary union whole source
The most forceful case in favor of central bank independence was made in the Maastricht Treaty of 1992, which laid the foundations for monet…
Mieno retires and lobbies for a new Bank of Japan Law whole source
The grounds for this argument had already been laid by Mieno, who had devoted much of his public life after his 1994 retirement to lobbying…
European Central Bank begins operations whole source
The treaty described the role and function of the European Central Bank (ECB), which started operations as scheduled, on January 1, 1999, an…
Bank of Japan stops publishing sectoral loan data whole source
In April 1998, when it gained legal independence, the Bank of Japan stopped publishing the monthly data for sectoral bank loans, which it ha…
The Great Depression and the Fed's inaction whole source
However, the Fed failed to take the policies that were necessary to create a recovery for almost a decade. Instead of intervening and implem…
"One Market, One Money" study published whole source
Published in 1992 under the name “One Market, One Money,” the study purported to demonstrate that central bank independence leads to low inf…
German economy slows down whole source
When the German economy started to slow down visibly in 2001, German politicians, including finance minister Hans Eichel, increasingly felt…
Euro cash introduced; national currencies abolished whole source
On January 1, 2002, new paper money and coins were introduced in most of Europe. What still seemed an unlikely scenario to many observers as…
Foundation of the Reichsbank whole source
This independence existed to a great extent de facto since its foundation in 1875, because the central bank was largely privately owned and…
Reichsbank independence written into law whole source
Independence was explicitly written into law in May 1922 and lasted until 1939.22
New banking law confirms Reichsbank independence whole source
In August 1924, a new banking law again confirmed the Reichsbank’s independence from the government—”but greatly increased the influence ove…
Reichsbank credit tightening and credit crunch whole source
The first phase of credit tightening, between 1924 and 1926, was followed by an even worse credit crunch in 1931. In both periods, thousands…
U.S. deposit withdrawals throw Germany into depression whole source
When U.S. banks pulled their deposits from German banks in the aftermath of the U.S. credit crunch that began in 1929, the Reichsbank insist…
Schacht reappointed head of the Reichsbank under Hitler whole source
The highly acclaimed monetary technician Hjalmar Schacht, for one, used his skills and legal powers to actively and purposely hand Germany o…
German parliament passes the Stability and Growth Act whole source
In 1967, ten years after the founding of the Bundesbank, the parliament passed the Stability and Growth Act, which clearly set out the objec…
Tight Bundesbank policy linked to fall of three chancellors whole source
The downfall of three chancellors—Ludwig Erhard in 1966, Kurt Georg Kiesinger in 1969, and Helmut Schmidt in 1982—was directly or indirectly…
United States overtakes Britain economically whole source
America did not fare badly without a central bank: It was the fastest-growing emerging market at the time and by 1900 had just about overtak…
Founding of the U.S. Federal Reserve whole source
The Federal Reserve was founded only in 1913 and remains half privately owned. A reluctant Congress was finally persuaded to agree to its es…
Greenspan's irrational exuberance speech whole source
Thus Greenspan, through his interest rate policies, has publicly given the impression that he wanted to slow the economy most of the time fr…
ECB orders record shrinkage of Bundesbank credit creation whole source
It ordered the Bundesbank to shrink its credit creation by record amounts in 2002. As the amount of money circulating in the economy shrank,…
Japan's decade of fiscal stimulation packages whole source
Since 1992, ten fiscal stimulation packages amounted to ¥146 trillion.
Call rate lowered to near zero whole source
The lowering of the overnight call rate to about 0.3 percent in September 1998 coincided with a drop in ten-year government bond yields to 0…
Japan's national debt reaches record high whole source
Adding the new borrowing of ¥60.36 trillion during 2001, the most recent national debt figures record a new high of ¥582.46 trillion, about…
High-powered money contracts despite falling rates whole source
Using this analysis, Iwata points out that the central bank tightened monetary policy too late and then failed to stimulate the economy for…
Bank of Japan granted independence whole source
Since the central bank was granted independence in terms of its operational and policy goals from the democratically elected government in 1…
Sharp reduction in Japanese credit creation begins whole source
It further demonstrated that the cause of Japan’s recession has been the sharp reduction in credit creation that began in 1992 and was trigg…
Hashimoto administration's 1997 structural reforms whole source
In 1997, it tightened fiscal policy and deemphasized monetary policy, while implementing structural reforms, including granting the Bank of…
Big Bang financial deregulation begins whole source
The reforms also included a sweeping financial sector deregulation program (Big Bang), beginning in 1998.
Post-reform contraction of 1997-98 whole source
To the contrary, before the reforms, in 1996, growth recorded 4 percent. The 1997 reforms were immediately followed by the largest postwar c…
Sasaki and Maekawa reports on structural reform whole source
The reports by commissions headed by former key Bank of Japan governors, namely, the Sasaki report of 1983 and the Maekawa reports of 1986 a…
Japanese suicides peak amid recession whole source
Suicides rose to 31,755 in 1998 (National Police Agency).
Temporary Materials Ordinance and Price Control Ordinance whole source
In October 1946, the Temporary Materials Ordinance was enforced, similar to the wartime laws (it was repealed in 1952). In the same year the…
Joseph Grew serves as U.S. ambassador to Japan whole source
Joseph C. Grew, married to the cousin of Wall Street banker John Pierpont Morgan, was ambassador to Japan from 1932 until 1942.
Premierships of Kishi and Sato whole source
Kishi was prime minister from February 25, 1957, to July 19, 1960, Sato from November 9, 1964, to July 6, 1972.
Schacht appointed Reichsbank president whole source
It was this commission that handpicked and appointed Schacht in 1923 as Reichsbank president against the wishes of the Reichsbank executives…
Hitler dismisses Schacht and nationalizes the Reichsbank whole source
But in 1939 Hitler sacked Schacht as Reichsbank president after disagreements, taking more direct control over the central bank through the…
Nationalization of the Bank of England whole source
The British Labor government followed suit in 1946 by nationalizing the Bank of England.
Emergency Measures Law of March 1947 whole source
With the Emergency Measures Law of March 1947, they were fully implemented.
Bank of Japan Policy Board established whole source
The Policy Board was established in June 1949—the only change made to the BoJ Law of 1942 until it was scrapped in 1998.
Temporary Law for Credit Allocation enacted and rescinded whole source
In 1947, the Temporary Law for Credit Allocation moved the Bond Committee (Kisai Kai) to the central bank, putting it in charge of bond issu…
Temporary Interest Rates Adjustment Law reintroduced whole source
The Temporary Money Rates Adjustment Law, which fixed interest rates, was reintroduced in 1947 by the occupation as the Temporary Interest M…
Ichimada serves as finance minister whole source
Ichimada was appointed as finance minister to the first Hatoyama cabinet on December 10, 1954. He was reappointed to the second Hatoyama cab…
Yen fixed at 360 per dollar whole source
What is known is that Detroit bank president Joseph Dodge recommended the establishment of a single fixed exchange rate, which was set at ¥3…
Window guidance reintroduced and expanded whole source
Window guidance was reintroduced in September 1967, and in 1969 the scope was widened to include all private-sector credit creators.
BoJ declares tighter quantitative control whole source
In December 1978, the Bank of Japan declared that tighter quantitative monetary control was necessary, because stock prices “continue to ris…
Japanese banking crisis of 1927 whole source
Japan actually had an earlier banking crisis in 1927, partly triggered by the aftereffects of the 1923 Great Kanto earthquake.
Tax money injected into Japanese banks whole source
Tax money was actually injected into banks in early 1999. The Koizumi government proposed further tax money injections into banks in late 20…
Bank of Japan announces reserve targeting ('quantitative easing') whole source
On 19 March 2001, the Bank of Japan announced that it was switching from a policy of targeting the overnight call rate (they had already rea…
Deposit interest rate deregulation begins whole source
Liberalization of capital flows in December 1980, gradual deregulation of deposit interest rates from October 1985, increased creation of de…
Bank of Japan declares window guidance abolished whole source
No wonder Bank of Japan Banking Department’s chief, Tamura, had to emphasize in 1991 to the press that “this time” the abolition was for rea…
Ministry of Finance total volume regulation of bank lending whole source
The Ministry of Finance’s sōryō kisei (total volume regulation of bank lending) of 1990 caught the public attention, as it was a rare interv…
Window guidance extended to foreign-currency loans whole source
Only from 1987 were credit controls also imposed for non-yen (impact) loans.
U.S.-Japan Security Treaty pushed through the Diet whole source
Kishi even sacrificed his political career when his U.S. friends asked him to push the U.S.-Japan Security Treaty through the Diet in 1960,…
MacArthur arrives at Atsugi; BoJ money accepted whole source
Legend has it that Haruo Maekawa was one of the monetary officials who met General MacArthur with a suitcase full of banknotes upon his arri…
Mieno appointed governor of the Bank of Japan whole source
On the occasion of Mieno’s appointment as official governor of the Bank of Japan in 1989, an informed Nikkei reporter pointed out many of th…
Hayami becomes BoJ governor after 1998 resignation scandal whole source
Masaru Hayami had stepped in as governor when deputy Fukui and governor Matshushita had to resign in early 1998 due to a scandal.
Omnibus Act abolishes cartel exemptions whole source
With the 23 July 1999 promulgation of the Omnibus Act to Repeal and Reform Cartels and other Systems exempted from the Application of the An…
Tokyo High Court rules against bid-rigging whole source
In a landmark decision on 31 May 1996, the Tokyo High Court decided against bid-rigging involving electrical equipment installation work ord…
Japan's 1993 rice crisis whole source
However, the government reduced stock piles further in 1992, to only 194,000 in 1993. This amounted to an abandoning of the counter-cyclical…
Havenstein becomes Reichsbank president whole source
Rudolf von Havenstein, for instance, became president of the Reichsbank in 1908 and strongly defended the principle of central bank independ…
Reichsbank renamed and subordinated to the Reich government whole source
In January 1939, the Reichsbank Law was changed, with the central bank renamed the Deutsche Reichsbank and made directly accountable and sub…
Karl Schiller forced out over Bundesbank dispute whole source
For instance, in 1972, when economics and finance minister Karl Schiller correctly argued that the excessive credit creation by the United S…
Bank of Japan begins 1990s rate-cutting cycle whole source
The Bank of Japan lowered the ODR ten times in the decade of the 1990s, beginning with the first reduction in July 1991, before which it sto…
Zero interest rate policy adopted whole source
Three years later, in October 1998, the Bank of Japan lowered the call rate to a new low of 0.33 percent. In February 1999, it fell to 0.1 p…
Swiss central bank briefly imposes negative rates whole source
The Swiss central bank briefly lowered short-term interbank rates into negative territory in early 1979.
Credit quantity as BoJ's central policy tool, 1942-1991 whole source
Most importantly, as Werner (1998d, 1999a, 2002a) has shown, the central bank has used the quantity of credit creation as its central moneta…
Reichsbank's monetized fiscal policy under Schacht whole source
This is effectively the policy combination adopted by the Reichsbank from 1933 to 1937.
Structural Impediments Initiative whole source
For detailed suggestions of U.S. structural reform demands, see, for instance, the reports by the bilateral Structural Impediments Initiativ…