An advisory body to the finance minister Feb. 6 proposed sweeping changes to the decades-old Bank of Japan Law that would give the central bank more autonomy in policymaking.

The Financial System Research Council, which set up a subcommittee in November to debate rewriting the law, made its recommendations in a final report. “While I’d like to leave it up to future generations to evaluate our work, I personally think we did a fairly good job given the limited time we had,” said Ryuichiro Tachi, head of the council and a professor emeritus at the University of Tokyo.

As a key step toward ensuring BOJ autonomy, the panel agreed the central bank’s Policy Board needs to be galvanized to increase policymaking autonomy and transparency. The proposed revisions would strip the finance minister of wide-ranging powers to give orders to the bank concerning its operations and would restrict the minister’s authority to call for probes of possible wrongdoing by the BOJ.

The suggestions are to be included in a bill to be submitted to the current Diet session by next month for implementation in April 1998. Passage would represent the first full change to the 1942 law. BOJ Gov. Yasuo Matsushita expressed satisfaction over the report, saying much effort was seen in providing the central bank with the greatest degree of autonomy possible under the nation’s legal system. “I believe this (new law) will serve as a powerful force as we press on with our own internal reforms toward the 21st century,” he told a news conference.

The council said the bank’s objectives should be to secure economic growth through price stability and to sustain order in the financial system through smooth settlements among financial institutions. The report stresses that while the BOJ’s independence over monetary policy should be secured, it is also necessary to ensure that sufficient information exchange takes place within the government. Under the new law, the Policy Board would comprise nine members: the BOJ governor and two deputy governors, and six people “of learning and experience.”

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