Japan’s Government Launches Review of Banking Law
The Japanese economy has not been itself lately at all! partly due to the grueling brush with the nuclear reactor accident and the many natural disasters that plagued the national economy during the last couple of years. Japan has been putting up a brave face to Chinese rants of taking over the hydrocarbon goodies in East-China Sea and well, the ailing economy since the late nineties itself!
After a gentle push from the G-7 and G-20 led negotiations on ‘bad financial behavior’ looks like the Tokyo government will very soon have to seriously consider revising legislation governing the Bank of Japan policies in order to boost trade and investment with the West. A few days ago there was news that the Bank of Japan would consider introducing a 2 per cent inflation target along with easing steps sought by the new government for economic recovery.
japan-banksThis is the most recent move by the new political government hoping to co-operate with the National Bank to ease Japanese deflation, which will potentially require the bank to purchase financial assets in potentially unlimited quantities until the year-on-year rate of growth in the consumer price index reaches 2 per cent. Chief amongst the moves are to safely decommission the Fukushima nuclear plant’s now defunct reactors so the local economy and power generation businesses can ‘move on’.
Japan is also looking at new laws aimed at promoting and facilitating a US-led trans-Pacific partnership free trade negotiations, in a bid which will also potentially help the US covertly secure its presence against China’s growing influence in the area. Lately the G20 has been less than happy with Japan’s deflation tactics but it is also true that Japanese Yen has been the worst performing major currency in the past six months.
It seems that the US supported soft stance is being adopted not just in covert sympathy for the bad state of the Yen and the Japanese economy, as Japan’s health and wealth is focal to keeping China at a defensive in regional politics. The G-20 and the G-7 have now confirmed that the Japanese can continue to pursue aggressive fiscal easing and monetary easing, through a manipulatively deflated yen. Japan is however expected to pursue the anti-deflation course through new BOJ laws slowly and diligently, if it hopes to have US support in the future against regional Chinese bullying.
The rather soft stance adopted by the G20, despite the fact that the weak yen gives Japan’s exporters a price advantage, seems no surprise given the fact that
President Obama is due to receive a visit from Japan’s recently elected Prime Minister Shinzo Abe on 22 February, 2013.The G20 agreeing to adopt a similar attitude towards Japan’s damaging and anti-competitive deflationary monetary policies could potentially mean the end of its maneuvering of export terms and making imports less profitable for the traders.