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Japan Monetary Policy

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Submitted By marielangelica15
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Bank of Japan decides and implements monetary policy. Their aim is “achieving price stability, thereby contributing to the sound development of the national economy.” The monetary policy is decided at Monetary Policy Meetings (MPMs) by the Policy Board. For the implementation, BoJ uses money market operations as operational instrument to control the currency and the money in the money market. (Bank of Japan)
Price stability is significant in national’s economy. It prolonged inflation and deflation. In a market economy, the consumers and producers make their decision based on the prices of goods and services. If the price goes up, it would hard for them to make a decision, and this can get in the way for the efficient allocation of resources in the economy. This can also distort income distribution due to unstable prices. (Bank of Japan)
MPM is held once or twice a month, for one or two days. It is discussed and decided by Policy Board. Policy board has nine members, who consists of the governor, two deputy governors and six other members. They decide the monetary policy by a majority vote. MPM is held once or twice a month, for one or two days. The Policy Board discusses and decides the guidelines for the monetary market operations and the Bank’s monetary policy stance for the immediate future. The decision is announced right away after the meeting concerned. Through the money market operations, the bank controls the amount of funds in the money market. The bank would do funds-supplying operations, which the bank supplies funds to financial institutions which in return the institution will give collateral to the bank. (Bank of Japan)
During 1989, BoJ tightened the monetary because of burst bubble. Burst bubble happened during 1985-90. In 1983 to 1989 the stock price index and the land price index quadrupled and Nikkei 225 rose from 10,000 yen to 40,000 yen. The...

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