Fukui new BoJ governor
New hope came when Toshihiko Fukui took office as governor of the Bank of Japan (BoJ) on March 19th and immediately called an emergency session that was held yesterday, March 25th. Investors hoped for drastic action and the Tokyo Stock Exchange went up before the meeting, even though most other large stockmarkets fell
because of the news from Iraq during the weekend. It seemed that Fukui was trying to jump-start the Japanese economy.
The result of the emergency meeting was therefore disappointing. The Bank of Japan voted 7-2 for an expansion of the half year old scheme to buy shares from commercial banks. The limit was raised from 2000 to 3000 billion yen ($25bn, €23.4bn, £15.9bn). The increase is only equivalent to 1/3 of a percent of the total Tokyo market capitalization.
This was not at all what investors had hoped for. Before the emergency meeting economist were predicting that BoJ would start to buy exchange-traded funds or foreign bonds. The last alternative would probably push down the yen exchange rate, promoting both inflation and exports.
After only one week, it is still too early to give up the hope that the new BoJ governor will bring drastic reforms. Toshihiko Fukui has a very long experience working at the Bank of Japan, before his resignation in 1998, and he made strong statements answering questions from the Japanese parliament early last week.
Outlook
The best hope to bring positive change to the Japanese economy is still the new leadership at the Bank of Japan. They have the best opportunity to break the dead-lock by creating inflation. But considering that Japan’s economic problems have been increasing for over ten years, it is reasonable to give Mr Fukui more than a week to force through further reforms.
