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? asked in Social ScienceEconomics · 1 decade ago

Is it true ? boj is not responsible for the stability of the price ?

An economist says Bank of Japan is not responsible for the stability of the price, economic growth or employment while FRB in US is.

Is it true ? Could someone tell me ?

2 Answers

  • 1 decade ago
    Favorite Answer

    The Bank of Japan does not have the same responsibilities as the U.S. Federal Reserve.

    In particular, it is not responsible of economic growth, though the Fed is, but it is responsible for price stability.



    On the other hand, the BoJ is nowhere near independent as the Fed or other banks targeting inflation.


    In fact, its charter explicitly notes:

    "The Bank of Japan shall, taking into account the fact that currency and monetary control is a component of overall economic policy, always maintain close contact with the government and exchange views sufficiently, so that its currency and monetary control and the basic stance of the government's economic policy shall be mutually compatible."

    In general, governments and politicians don't like stable prices. They want inflation.

    Also, the BoJ distinguishes between commodity price deflation (consumer price index, etc.) and asset price deflation (real estate values)


    The Fed also makes that distinction and deliberately ignored asset price inflation when people warned it about the dot-com bubble and then the prime rate mortgage bubble.


  • Anonymous
    1 decade ago

    The economy of Japan while quite strong is only about 10% the size of the U.S. economy. The State of California alone is the 4th largest economy in the world. If the United States fails (economically), then the rest of the world will go down deep and fast. There is an old but true euphemism that goes: "When the U.S. catches a cold, all of Asia gets pneumonia.

    Source(s): M.A. Economics 1968
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