An Open Letter To Bank of Japan Governor Haruhiko Karada: I Love You

A Benjamin Cole post

This is How You Do it

From the The Business Times, Singapore:

Headline: Bank of Japan chief sets no limit on balance sheet growth

“The Bank of Japan has no ceiling in mind for adding to its balance sheet and no firm date to achieve its 2% inflation target, Governor Haruhiko Kuroda told lawmakers. He also expressed continued confidence in the bank’s stimulus program, saying there have been ‘no discussions in the board that our stimulus was ineffective, could be ineffective or that the program should be altered.’”

Contrast that to the omnidirectional mush we get, both in policy and guidance, from Fed Chief Janet Yellen and the FOMC.

Interesting to observe that the Nikkei 225 and Dow Jones Industrial Average are in similar trading ranges, north of the 18,000 mark. However, the Nikkei 225 is up about 25% in last year, has passed the DJIA, and now is moving away.

My only complaint: Governor Harada should dump his inflation target (IT) for an aggressive NGDP target, or failing that, say that BoJ has an IT of “around 3%–the precise amount is not that important.”  A hard 2% IT target could become a noose—and a monetary noose is not what Japan ever needs again.

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