# The Bank of Japan's window-guidance machine

The hidden steering wheel of postwar Japan: the Bank of Japan and Ministry of Finance use loan ceilings, credit allocation, policy-board control, and window guidance to shape the economy directly.

*This story parallel: The central bankers and the road to war*
*This story part of: Princes of the Yen: Japan built, bubbled, and broken*
*This story part of: Money and finance*

## 10 October 1882 — Founding of the Bank of Japan

The Meiji government establishes the Bank of Japan to centralize note issue and stabilize the currency after inflationary war finance. It becomes the model-driven central bank of Asia's first industrial economy.

## 1920s to 1945 — Wartime consolidation of Japanese banks

To simplify credit allocation, the number of Japanese banks was drastically reduced from about fourteen hundred at the end of the 1920s to sixty-four by the end of the Second World War, organized under the National Financial Control Association.

> "To simplify the credit allocation regime, the number of banks was drastically reduced, from about fourteen hundred by the end of the 1920s to a mere sixty-four by the end of the Second World War."
> — Princes of the Yen

## 1924 — Reichsbank made independent after hyperinflation

After the German hyperinflation of 1924 the Reichsbank was made independent from the government, leaving it free to impose credit controls as it wished; inflation had been brought under control by 1924.

> "Since the Reichsbank had been made independent from the government after the hyperinflation of 1924, it could do as it wished."
> — Princes of the Yen

## 1924 to 1930 — Schacht's reign as Reichsbank president

Hjalmar Schacht headed the Reichsbank from 1924 until his resignation in 1930, wielding credit controls so powerful that contemporaries called him a credit dictator and the Reichsbank Germany's second government.

> "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 crucial for Germany’s later development."
> — Princes of the Yen

## 1937 — Temporary Funds Adjustment Law

With the reform bureaucrats in power after hostilities opened in China, the Temporary Funds Adjustment Law of 1937 brought banks' investment and loan decisions under strict control by the central bank and the Ministry of Finance.

> "This law brought banks and their investment and loan decisions under strict control by the central bank and the Ministry of Finance. Funding through the stock market was reduced to a trickle, and the banking system was relied upon for resource allocation."
> — Princes of the Yen

## April 1939 — Dividend increase permits required

Beginning in April 1939, firms with dividend rates of 10 percent or more needed a Ministry of Finance permit to raise their dividend rate, making stock investment less attractive.

> "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 the Ministry of Finance to increase their dividend rate."
> — Princes of the Yen

## 1942 — Bank of Japan Law of 1942

The Bank of Japan Law was introduced in 1942, largely as a translation of Hitler's Reichsbank Law of 1939. The Ministry of Finance later fought off attempts to change it while the BoJ kept sole charge of window guidance.

> "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 as a translation of Hitler’s Reichsbank Law of 1939), the Bank of Japan remained solely in charge of window guidance."
> — Princes of the Yen

> "After his "parachute" study, which was published in 1942, Morrison's attention score and the research it generated seem not to be referred to again in the professional literature."
> — Life in Classrooms

## 1942 to 1991 — Credit quantity as BoJ's central policy tool, 1942-1991

Research cited by the author shows the Bank of Japan used the quantity of credit creation as its central monetary policy operating and target variable at least from 1942 to 1991.

> "Most importantly, as Werner (1998d, 1999a, 2002a) has shown, the central bank has used the quantity of credit creation as its central monetary policy operating and target variable at least throughout the period from 1942 to 1991."
> — Princes of the Yen

## 1942 — National Financial Control Association established

In 1942, as the mobilized war economy was fully implemented, the National Financial Control Association was established as the nerve center of wartime credit allocation, with Ichimada as its first secretary-general.

> "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 implemented and the National Financial Control Association was established."
> — Princes of the Yen

## 1944 to 1945 — Creation of the main bank system

In 1944 key military suppliers were designated munitions companies, and in 1945 over six hundred firms were assigned designated banks by the Ministry of Finance under a compulsory lending system; these main bank relationships lasted into the present.

> "In 1944, key producers of military supplies were designated as “munitions companies.” In 1945, over six hundred firms received necessary funds to fulfill their production quota via one or two banks that had been allocated to them by the Ministry of Finance."
> — Princes of the Yen

## August 1945 to October 1945 — Araki appointed BoJ deputy governor, then governor

Immediately after Japan's defeat in August 1945, Eikichi Araki, former wartime head of the Banking Department, was appointed deputy governor of the Bank of Japan, and two months later governor.

> "Immediately following Japan’s defeat in August 1945, he was appointed deputy governor of the Bank of Japan. Two months later, he was appointed governor."
> — Princes of the Yen

## March 1946 — Bank of Japan freezes loan balances

The Bank of Japan's Banking Department instructed that banks could not in principle increase their outstanding loan balances beyond the level of 20 March 1946 without a permit from the Bank of Japan and the government, blocking low-priority claims on scarce resources.

> "The Bank of Japan’s control had already been asserted a year earlier, when the director of the Banking Department had issued instructions that “in principle” banks were not allowed to increase their outstanding loan balance beyond the balance of 20 March 1946 without a permit from the Bank of Japan, as well as the government."
> — Princes of the Yen

## 1947 — Priority lending regulations of 1947

With the 1947 Regulations on the Provision of Funds by Financial Institutions, announced by the Ministry of Finance, the government reestablished the wartime priority production system, ranking 460 types of business into lending categories.

> "Second, the government planners took the initiative to reestablish the priority production system from the wartime era with the 1947 Regulations on the Provision of Funds by Financial Institutions (Kinyū Kikan Shikin Yūzū Junsoku), announced by the Ministry of Finance."
> — Princes of the Yen

## 1947 — Temporary Interest Rates Adjustment Law reintroduced

In 1947 the occupation reintroduced the wartime interest-fixing law as the Temporary Interest Money Rates Adjustment Law, enabling the BoJ and Ministry of Finance to set interest rate ceilings; it remained 'temporary' until the 1980s.

> "The Temporary Money Rates Adjustment Law, which fixed interest rates, was reintroduced in 1947 by the occupation as the Temporary Interest Money Rates Adjustment Law. It enabled the BoJ and MoF to set maximum ceilings on interest rates."
> — Princes of the Yen

## 1947 to 1949 — Temporary Law for Credit Allocation enacted and rescinded

In 1947 the Temporary Law for Credit Allocation moved the Bond Committee to the central bank; in 1949 the law was rescinded and the Ministry of Finance reclaimed oversight of private-sector bond issuance.

> "In 1947, the Temporary Law for Credit Allocation moved the Bond Committee (Kisai Kai) to the central bank, putting it in charge of bond issuance. In 1949, the Temporary Law for Credit Allocation was rescinded, and MoF reclaimed oversight of private-sector bond issuance, which was subject to approval by its securities bureau."
> — Princes of the Yen

## 1949 — Bank of Japan Policy Board introduced

A nominal Policy Board was introduced at the Bank of Japan in 1949, but Ichimada ensured it was placed inside the central bank and under its control, creating a sleeping board that made no important decisions.

> "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 had been introduced in 1942, when the control bureaucrats were in charge."
> — Princes of the Yen

## June 1949 — Bank of Japan Policy Board established

The Bank of Japan's Policy Board was established in June 1949, the only change made to the wartime BoJ Law of 1942 until that law was scrapped in 1998; it was widely known as a sleeping board.

> "The Policy Board was established in June 1949—the only change made to the BoJ Law of 1942 until it was scrapped in 1998."
> — Princes of the Yen

## 1954 — Abolition of the Loan Coordination Division announced

To appease critics and fend off Ministry of Finance influence, the abolition of the Bank of Japan's Loan Coordination Division was announced in 1954, while all credit control powers were quietly retained by the Banking Department.

> "To appease critics, and fend off attempts by the Ministry of Finance to influence its policies, its abolition was announced in 1954."
> — Princes of the Yen

## 1958 — Committee recommends monetary policy freedom for the BoJ

In 1958 the government committee recommended that the BoJ should be free to decide monetary policy, with MoF only able to request a delay, and that price stability become the main policy objective.

> "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 decision. It also recommended that price stability should become the main objective of BoJ policy."
> — Princes of the Yen

## October 1958 — BoJ publicly abolishes window guidance

In October 1958, while the government committee deliberated the BoJ Law, the Bank of Japan removed window guidance from public view by officially abolishing it, though the credit controls continued in practice through reserve requirements.

> "Already in October 1958, when the government committee deliberated the BoJ Law, the BoJ had removed window guidance from public view by abolishing it under the pretense that it had become ineffective."
> — Princes of the Yen

## 1962 — Sasaki becomes de facto head of the Bank of Japan

After heading the Banking Department from April 1951 to September 1954 and administering Ichimada's credit allocation regime, Tadashi Sasaki was appointed executive director and in 1962 became de facto head of the BoJ as deputy governor and later governor.

> "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 governor."
> — Princes of the Yen

## 1963 — Emergency Financial Order repealed

In 1963, as part of liberalization ahead of Japan's OECD entry, the Emergency Financial Order was repealed, removing a potential legal basis for Ministry of Finance involvement in credit allocation.

> "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 Sochi Rei) was repealed.63"
> — Princes of the Yen

## 1964 — BoJ reintroduces window guidance to slow the economy

In 1964 the Bank of Japan under Deputy Governor Sasaki suddenly reintroduced window guidance credit controls, broadening them to trust, regional, and mutual banks, and used them to slow the economy; growth fell from 11 percent in 1964 to 5.8 percent in 1965.

> "Having previously abolished window guidance, in 1964, the Bank of Japan, under Deputy Governor Sasaki, suddenly reintroduced the credit controls, broadened their scope to further include trust, regional, and mutual banks, and used them to slow the economy."
> — Princes of the Yen

## July 1965 — Window guidance abolished again

With window guidance attracting public attention after the Yamaichi episode, the Bank of Japan once more abolished the credit controls in July 1965, though the controls continued informally.

> "As window guidance had again caught some public attention, it was once more abolished in July 1965."
> — Princes of the Yen

## September 1967 to 1969 — Window guidance reintroduced and expanded

The Bank of Japan reintroduced window guidance credit controls in September 1967 and widened their scope in 1969 to cover all private-sector credit creators.

> "Window guidance was reintroduced in September 1967, and in 1969 the scope was widened to include all private-sector credit creators."
> — Princes of the Yen

## 1970s — Japan's first postwar bubble economy

In the 1970s the Bank of Japan used window guidance to order banks to expand credit to speculative real estate borrowers, causing land prices to soar and Japan's first postwar bubble, followed by recession.

> "Using window guidance, it ordered the banks to expand credit to speculative real estate borrowers. As a result, land prices soared and Japan found itself in the midst of the first postwar bubble economy."
> — Princes of the Yen

## 1973 to 1975 — BoJ imposes tight window guidance to end the credit boom

From the first quarter of 1973 the Bank of Japan imposed tight window guidance loan growth ceilings, ratcheting quotas down quarter after quarter, with the tight controls lasting until early 1975.

> "From the first quarter of 1973, it imposed tight window guidance loan growth ceilings. First, it reduced loan growth to the modest growth rate of 12.7 percent YoY."
> — Princes of the Yen

## 1974 — Alternating MoF-BoJ governorship tradition begins

The tradition of alternating the Bank of Japan governorship between Ministry of Finance alumni and trueborn BoJ men began in 1974, when BoJ governor Sasaki was succeeded by ex-MoF man Morinaga.

> "This tradition started in 1974, when trueborn BoJ governor Sasaki was succeeded by the ex-MoF man Morinaga."
> — Princes of the Yen

## 1975 — Fiscal stimulus packages fail to revive the economy

The government launched a string of fiscal stimulus packages in February, March, and June 1975 and repeatedly cut interest rates, but the economy did not respond while BoJ credit controls stayed tight.

> "Despite a string of fiscal stimulus packages, such as in February, March, and June 1975, and a repeated reduction in interest rates, the economy did not respond."
> — Princes of the Yen

## April 1975 to February 1978 — Mieno heads the BoJ Banking Department

From April 1975 to February 1978, Yasushi Mieno headed the Bank of Japan's Banking Department, in charge of implementing window guidance, during the recovery engineered by raising loan growth ceilings.

> "From April 1975 to February 1978, the head of the Banking Department, in charge of implementing window guidance, was Yasushi Mieno."
> — Princes of the Yen

## 1976 — Industrial production recovers after BoJ loosens credit

After the BoJ raised its window guidance loan growth ceilings in late 1975 and early 1976, industrial production recovered in late 1976, regaining its October 1973 peak and ending Japan's worst postwar slump.

> "In late 1976 industrial production finally recovered, and reached its previous peak levels of October 1973 again. Japan’s worst postwar slump was ending."
> — Princes of the Yen

## 1977 — Noguchi and Sakakibara publish 'Analysis of the MoF-BoJ Kingdom'

In 1977 MoF officials Yukio Noguchi and Eisuke Sakakibara published a pathbreaking article in Chuo Koron identifying Japan's economic system as the wartime system for total economic mobilization.

> "Twenty years before, in 1977, in a pathbreaking article (“Analysis of the MoF-BoJ Kingdom”) in the highbrow magazine Chūō Kōron, Noguchi and Sakakibara were the first and only public figures to clearly identify and acknowledge the true nature of Japan’s economic system."
> — Princes of the Yen

## 1978 — Bank of Japan introduces monetary targeting

In 1978 the Bank of Japan officially adopted monetary targeting, announcing growth targets for money supply measures such as M2+CD, a framework the author describes as a monetarist smoke screen for its window guidance credit controls.

> "In 1978, the Bank of Japan officially introduced monetary targeting, a procedure by which the central bank selects a certain measure of the so-called money supply, such as M2+CD, and at the same time announces a specific target for its growth rate that was to be attained in the next time period, such as the coming six months."
> — Princes of the Yen

## December 1978 — BoJ declares tighter quantitative control

In December 1978 the Bank of Japan declared tighter quantitative monetary control necessary, citing rapidly rising stock prices, sharply higher city-center land prices, and excess money circulating in the private sector.

> "In December 1978, the Bank of Japan declared that tighter quantitative monetary control was necessary, because stock prices “continue to rise rapidly, city center land prices have risen sharply and there is too much money [kane amari] circulating in the private sector.”"
> — Princes of the Yen

## 1980 to June 1991 — Window guidance operated continuously through the 1980s

Interviews with BoJ officials and bank officers unanimously confirmed that window guidance credit controls were conducted without interruption during the 1980s, in the same form as before, until at least June 1991.

> "The central bank and bank officers confirmed to us that window guidance was conducted without interruption during the 1980s, until at least June 1991. It took exactly the same form as the window guidance in the pre-1980 period: The Bank of Japan decided on an aggregate bank loan growth rate for the entire country, and then young BoJ staff calculated on their Excel spreadsheets how this could be divided up among all the bank types (city banks, trust banks, regional banks, etc.) and by individual bank (Fuji Bank, Sanwa Bank, etc.)."
> — Princes of the Yen

## December 1981 — BoJ announces abolition of window guidance controls

In December 1981 the Bank of Japan announced that window guidance controls would be abolished from January 1982, saying it would instead 'respect' banks' lending plans, though officials testified the controls were not really ended.

> "In December 1981, the central bank announced that window guidance controls would be abolished beginning in January 1982. Instead of dictating loan growth quotas to the banks, the BoJ said it was going to “respect” their lending plans."
> — Princes of the Yen

## 1984 — BoJ announces complete abolition of window guidance

In 1984 the Bank of Japan announced the complete abolition of any form of window guidance, part of a series of official pronouncements the author argues misrepresented the continued use of the credit controls.

> "In 1984, the BoJ announced the complete abolition of any form of window guidance.4"
> — Princes of the Yen

## 1985 — Endaka recession

In 1985 Japan's economy was in the endaka (strong yen) recession, leaving pent-up demand for money as loan officers began working to meet high window guidance quotas.

> "The economy had been in the endaka recession of 1985, and there was pent-up demand for money."
> — Princes of the Yen

## 1986 to 1987 — BoJ orders banks to expand lending during the bubble

According to bank officer testimony, especially in 1986 and 1987 the Bank of Japan used window guidance to push banks to lend more than they wanted, telling them to use larger quotas because of the recession.

> "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 used not just to make borrowing smaller, but also to make it bigger."
> — Princes of the Yen

## 1986 — Mieno warns the Diet about excess money

In 1986, as the bubble began under his own window guidance, Deputy Governor Mieno testified to the Diet that he was worried about excess money (kane amari) in the economy, creating what the author calls an alibi.

> "Already in 1986, when the bubble was started by Mieno’s window guidance, Deputy Governor Mieno testified to the Diet that he was worried about the problem of excess money in the economy (kane amari).40"
> — Princes of the Yen

## September 1986 to May 1989 — Fukui heads the Banking Department during the bubble

From September 1986 to May 1989 Toshihiko Fukui headed the Bank of Japan's Banking Department, administering the window guidance credit controls during the bubble years while being groomed as the next 'prince.'

> "From September 1986 to May 1989, longer than average, the head of the Banking Department was Toshihiko Fukui."
> — Princes of the Yen

## December 1986 — Window guidance quotas tightened amid land price surge

The Nikkei reported in December 1986 that window guidance quotas were tightening and that the BoJ was aware of surging land prices, excess liquidity, and strong bank lending to the real estate sector.

> "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, excess liquidity (kane amari), and the strong expansion of bank lending toward the real estate sector.16"
> — Princes of the Yen

## 1987 — Window guidance extended to foreign-currency loans

From 1987 the Bank of Japan's credit controls were also imposed on non-yen (impact) loans, which previously had only been reported.

> "Only from 1987 were credit controls also imposed for non-yen (impact) loans."
> — Princes of the Yen

## February 1987 — Executive Board cuts the discount rate to 2.5 percent

In February 1987, under Ministry of Finance pressure, the Bank of Japan's Executive Board decided to reduce the official discount rate to the low rate of 2.5 percent.

> "In February 1987, the Executive Board decided, under MoF pressure, to reduce the ODR to the low rate of 2.5 percent."
> — Princes of the Yen

## July 1987 — Fukui defends expanding bank loans in Nikkei interview

In July 1987, just after setting off the bubble as head of the Banking Department, Toshihiko Fukui told the Nikkei Financial Daily that the BoJ would not tighten loan quantities, justifying loan expansion by the need for long-term structural adjustment.

> "When Toshihiko Fukui was head of the Banking Department, he was interviewed by the Japanese-language Nikkei Financial Daily in July 1987, just after he had kicked off the bubble."
> — Princes of the Yen

## July 1987 — Fukui endorses continued monetary easing to implement structural reform

In July 1987, shortly after the second Maekawa report, Toshihiko Fukui, head of the department implementing window guidance, said the right central bank policy for structural transformation was to continue monetary easing and expand bank loans.

> "We saw above that the head of the department that implemented window guidance credit controls, Toshihiko Fukui, had said in July 1987, soon after the publication of the second Maekawa report, that suitable central bank policy to implement the structural transformation of Japan’s economy was to “continue with the monetary easing policy” and, explicitly, for “bank loans to expand.”"
> — Princes of the Yen

## 1988 to 1989 — Window guidance begins tightening before Mieno's governorship

Window guidance was already tightening in 1988 and 1989, well before Mieno officially became governor, while Governor Sumita knew little about the policy reversal.

> "Window guidance was already tightening in 1988 and 1989, well before Mieno became official governor.32"
> — Princes of the Yen

## June 1989 — BoJ tightens window guidance and ends the bubble

The Bank of Japan ended the bubble by suddenly tightening its window guidance credit controls in June 1989, an act the author identifies as the trigger of the recession of the 1990s.

> "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 1990s.1"
> — Princes of the Yen

## 1990 — Ministry of Finance total volume regulation of bank lending

In 1990 the Ministry of Finance imposed its sōryō kisei, a rare total volume regulation of bank lending, though it was administered by the Bank of Japan and followed the BoJ's earlier tightening of 1988-89.

> "The Ministry of Finance’s sōryō kisei (total volume regulation of bank lending) of 1990 caught the public attention, as it was a rare intervention by the ministry in the quantity of bank lending, but it was also administered by the Bank of Japan; more importantly, it only followed the tight window guidance policy that the Bank of Japan had already adopted much earlier, in 1988 and 1989."
> — Princes of the Yen

## 1991 — Bank of Japan declares window guidance abolished

In 1991 the chief of the Bank of Japan's Banking Department, Tamura, told the press that the abolition of window guidance was final and that it would never be reinstituted.

> "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 real and that “in the future, window guidance will under no circumstances be re-instituted.”"
> — Princes of the Yen

## July 1991 — BoJ announces immediate abolition of window guidance

In July 1991, shortly after publishing an English-language report claiming window guidance had not been applied since 1982, the Bank of Japan announced that window guidance would be abolished immediately.

> "Soon after its publication, the BoJ spoke its final, though somewhat contradictory, word on window guidance, announcing in July 1991 that window guidance would be abolished immediately."
> — Princes of the Yen

## March 1995 — Yen hits postwar high of 79.75

In March 1995 the Bank of Japan oversterilized the Ministry of Finance's record foreign exchange intervention, sending the yen to its postwar high of 79.75 per dollar and dealing a severe blow to the economy.

> "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 economy and the ministry."
> — Princes of the Yen

> "he will have logged a little more than seven thousand classroom hours by the time he is ready for junior high school"
> — Life in Classrooms

## 1996 — Big Bang financial deregulation conceded

By late 1996 the Ministry of Finance had lost the battle over regulation policy and had to concede full-blown deregulation of the financial sector, known as the Big Bang, which abolished the license system.

> "By late 1996, MoF had lost the battle for regulation policy, having to concede a full-blown deregulation of the financial sector, known as the “Big Bang.” This abolished the license system, one of MoF’s main power bases."
> — Princes of the Yen

## 1997 — Bill to revise the Bank of Japan Law submitted

In 1997 the Hashimoto coalition government, blaming MoF for Japan's troubles, submitted a bill to the Diet to revise the Ministry of Finance Establishment Law and the Bank of Japan Law.

> "In 1997, the coalition submitted a bill to revise the Ministry of Finance Establishment Law and the Bank of Japan Law to the Diet."
> — Princes of the Yen

## 1997 to April 1998 — BoJ reorganizes its credit control departments

In 1997 the BoJ split its Credit and Market Management Department, and in a further reorganization in April 1998 the tasks of the former Banking Department were dispersed across several new departments, obscuring the center of credit control policy.

> "In 1997, the Credit and Market Management Department was split into the Financial Market Operations and Surveillance Department. Another reorganization took place in April 1998."
> — Princes of the Yen

## 1997 — Hashimoto administration's 1997 structural reforms

In 1997 the Hashimoto government tightened fiscal policy and enacted structural reforms, including legal independence for the Bank of Japan, dismantling the Ministry of Finance, and creating an independent Financial Supervisory Agency.

> "In 1997, it tightened fiscal policy and deemphasized monetary policy, while implementing structural reforms, including granting the Bank of Japan legal independence from the government, dismantling the Ōkurashō (Ministry of Finance), establishing an independent Financial Supervisory Agency, and rendering key government agencies directly responsible to the prime minister."
> — Princes of the Yen

## June 1997 to April 1998 — Revised Bank of Japan Law passed

In June 1997 a revised Bank of Japan Law was passed, effective April 1998, giving the central bank independence from the Ministry of Finance after half a century of subordination.

> "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 been struggling to gain for half a century—independence from MoF, and, for good measure, from anyone else (more on this in chapter 18)."
> — Princes of the Yen

## 1998 — Bank of Japan independence and creation of the FSA

In 1998 monetary policy was placed in the hands of the newly independent Bank of Japan, and financial-sector regulation was given to the new independent Financial Services Agency, ending the Ministry of Finance's dominance.

> "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 the hands of the independent Financial Services Agency (FSA)."
> — Princes of the Yen

## 1998 — Ministry of Finance stripped of its powers

In 1998 MoF lost its monopoly on budgeting, control over banking supervision to an independent financial supervisory authority, its licensing power through the Big Bang deregulation, and monetary policy to the independent BoJ.

> "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 first time in the postwar era, it was politicians who drew up the stimulus packages."
> — Princes of the Yen

## 1998 — Prosecutors raid the Ministry of Finance

In early 1998, public prosecutors raided the Ministry of Finance for the first time, amid scandals, arrests of senior bureaucrats, and public demonstrations against the ministry.

> "In early 1998, public prosecutors for the first time actually raided the most powerful of Japan’s ministries."
> — Princes of the Yen

## April 1998 — Bank of Japan stops publishing sectoral loan data

In April 1998, upon gaining legal independence, the Bank of Japan stopped publishing the monthly sectoral bank loan data it had compiled since 1942 as the basis of its window guidance credit allocation.

> "In April 1998, when it gained legal independence, the Bank of Japan stopped publishing the monthly data for sectoral bank loans, which it has been compiling and using as the basis for its credit allocation since 1942."
> — Princes of the Yen

## April 1998 — New Bank of Japan Law makes the BoJ independent

The new BoJ Law took effect in April 1998, stripping the Ministry of Finance of the power to set monetary policy and making the Bank of Japan legally fully independent.

> "The new BoJ Law became effective in April 1998, stripping MoF of the power to set monetary policy and making the BoJ legally totally independent."
> — Princes of the Yen

## June 1998 — Financial Supervisory Authority opens and closes LTCB and NCB

Bank supervision was transferred from the Ministry of Finance to the new independent Financial Supervisory Authority, which began business in June 1998 by closing the LTCB and NCB banks.

> "The new FSA began business with a vengeance in June 1998, closing two amakudari banks, LTCB and NCB."
> — Princes of the Yen

## January 2001 — Abolition of the Ministry of Finance (Okurasho)

In January 2001 the Okurasho was abolished, ending over half a century of the ministry's dominance and leaving only a rump institution.

> "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 century."
> — Princes of the Yen

## January 2001 — Abolition of the Okurasho name

In January 2001 Japan's Ministry of Finance lost its historic name Okurasho as part of a government reorganization, ending a long institutional history.

> "Not noticed by many English-speakers, to whom the old Ōkurashō was simply known as the Ministry of Finance, a long and illustrious history ended abruptly in January 2001."
> — Princes of the Yen

## January 2001 — The Okurasho loses its historic name

In January 2001 the Ministry of Finance lost its grand old name, the Okurasho, as part of administrative reform.

> "To add insult to injury, in January 2001 MoF even lost its grand old name. Today, the Ōkurashō does not even exist."
> — Princes of the Yen