When the Bank of Japan ended its 18-month-old “zero-interest-rate” policy it capped speculation over the controversial shift in monetary policy.
Defying political pressure, the BOJ decided to tilt its policy toward guiding short-term interest rates higher. In doing so, the central bank has asserted its independence as assured under the revised Bank of Japan Law of 1998. As an independent entity, the BOJ made the decision free of political influence.
The decision as such by the nine-member BOJ Policy Board must be given due regard. Still, the policy-setting panel is held fully accountable for its decision and must be prepared to explain its new policy decision in easy terms to market participants both at home and abroad.
Ahead of the panel’s Aug. 11 meeting, a fierce outcry was raised by the government and the ruling coalition as well as the business community and private think-tanks. They feared an adverse impact of higher interest rates on the economy.
Indeed, pessimism abounds in the international financial community over economic prospects in Japan. Foreign investors turned net sellers of Japanese stocks in April, after having stayed net buyers for 17 months. They logged net sales of 2.6 trillion yen in April-July.
Perhaps it’s time for Japanese government offices to launch a publicity program to help foreign investors get a clear perspective of the Japanese economy. Otherwise, foreign investors who are unable to obtain a firsthand look at the economic reality in Japan will find it extremely difficult to assess the outlook for the economy.
Unmistakably, Japan has extricated itself from the prolonged recession and is getting its economy back on track. Still, the nation is faced with an overriding need to press forward with sweeping structural reforms and clear deflationary pressures.
Although there is little dispute that the nation has seen the worst, the rest of the journey can hardly be expected to pass uneventfully. The nation cannot neglect publicity efforts if it expects foreign investors to see the Japanese economy in a more objective light.
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