Tumultuous Times: Central Banking in an Era of Crisis

A career central banker provides a rare insiders account of the inner workings of the Japanese economy, and the Bank of Japan's monetary policy, during a period of low inflation, low growth, and low interest rates.

Format: Hardback
Length: 536 pages
Publication date: 03 September 2021
Publisher: Yale University Press

The Japanese economy, once the envy of the world for its dynamism and growth, experienced a significant decline after a financial bubble burst in the early 1990s and further plummeted during the Global Financial Crisis in 2008. The country suffered even more damage in 2011 when a severe earthquake triggered the Fukushima Daiichi nuclear disaster. Despite these challenges, the Bank of Japan remained steadfast in its commitment to combat low inflation, low growth, and low interest rates. In many ways, it served as a laboratory for actions taken by central banks in other parts of the world. Masaaki Shirakawa, who led the bank as governor from 2008 to 2013, offers a rare insiders account of the workings of Japanese economic and monetary policy during this period and how it challenged mainstream economic thinking.

The Japanese economy, known for its rapid growth and stability in the past, faced a series of challenges in the late 1990s and early 2000s. A financial bubble burst in the early 1990s, leading to a sharp decline in stock prices and a recession. The country's economy continued to struggle in the aftermath of the crisis, with low inflation, low growth, and low interest rates.

In response, the Bank of Japan (BoJ) took a number of measures to stimulate the economy. These included quantitative easing, which involved the purchase of government bonds and other assets to increase the money supply and lower interest rates. The BoJ also implemented a zero-interest rate policy (ZIRP) for an extended period of time to encourage borrowing and spending.

Despite these efforts, the Japanese economy remained sluggish. In 2008, the Global Financial Crisis hit, causing a further decline in stock prices and a global economic downturn. The Japanese economy was particularly hard hit, with its exports declining and its economy shrinking.

To address the crisis, the BoJ again took action. It implemented a massive stimulus package, including government spending and tax cuts, to boost economic growth. The BoJ also lowered interest rates to near zero and continued its quantitative easing program.

These measures helped to stabilize the Japanese economy, but they did not lead to a sustained recovery. The country continued to struggle with low inflation, low growth, and high debt levels.

In 2011, another major event occurred that further impacted the Japanese economy. A severe earthquake struck off the coast of Japan, causing a nuclear disaster and widespread destruction. The disaster led to a decline in consumer confidence and a further slowdown in economic growth.

Despite these challenges, the BoJ continued to implement its monetary policy. It maintained its zero-interest rate policy and continued its quantitative easing program. The bank also took steps to support the affected areas, such as by providing financial assistance to businesses and individuals.

In conclusion, the Japanese economy has experienced a series of challenges in recent years, including a financial bubble burst, a global economic downturn, and a nuclear disaster. The Bank of Japan has taken a number of measures to stimulate the economy and stabilize it, but the country continues to struggle with low inflation, low growth, and high debt levels. The bank's policies have been a subject of debate and criticism, with some arguing that they have not been effective in promoting sustainable economic growth. However, others argue that the BoJ's actions have been necessary to prevent a deeper economic crisis and that it has served as a model for other central banks around the world. As the Japanese economy continues to evolve, it will be interesting to see how the bank continues to navigate these challenges and shape its monetary policy in the future.

Weight: 918g
Dimension: 169 x 244 x 37 (mm)
ISBN-13: 9780300258974