On Friday, November 16, we announced the intention of Shinzo Abe, the probable next Japanese prime minister, to invite the central bank, after the elections, to accelerate the quantitative expansion programs of the currency, flooding the archipelago with liquidity to the point of transforming deflation into (moderate) inflation.
Abe increased the dose between yesterday and today, openly declaring that he will want to appoint a central bank governor open to this possibility. The intention is to have the Bank of Japan purchase all para-public bonds issued to finance construction and public works, so that the money created – and spent – goes directly into circulation. This policy, he said, must continue until the Japanese inflation rate (for years stubbornly below zero) reaches 2-3%.
Open up heaven! The usual right-thinking have torn their clothes. Attack on central bank independence, they said. But the central bank is indeed a technical and independent body, but its members are appointed by the government, and ultimately the guidelines must be dictated by the government and parliament, which are in direct contact with the will of the people.
The yen will drop to 200 against the dollar, others said. Inflation will gallop… and scare away. There are risks, certainly. But there are also greater risks in doing nothing and letting the economy continue to languish.
http://www.japantoday.com/category/politics/view/abe-criticized-over-plan-to-force-boj-to-buy-government-bonds
