Masaaki Shirakawa
Governor of the Bank of Japan
Japan's Economy and Monetary Policy
Speech at the Kisaragi-kai Meeting in Tokyo
Bank of Japan
November 4, 2010
Introduction
I am privileged to have an opportunity to speak before such a large audience. Having said that, the timing of today's speech has become somewhat uneasy for me. The Policy Board of the Bank of Japan has decided last week to bring forward the next Monetary Policy Meeting to today and tomorrow to discuss and decide the principal terms and conditions for purchases of exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) with a view to starting such purchases promptly. Therefore, in my speech today, based on the Outlook for Economic Activity and Prices released last week, I will talk about the developments in the global economy, and then mainly about Japan's economic and price
developments and the Bank's "comprehensive monetary easing." While I make clear at the beginning that there will be no information that implies the decision to be made at tomorrow's Monetary Policy Meeting, I hope that my speech today will be of any use in enhancing your understanding on economies at home and abroad, as well as on the Bank's monetary policy.
I. Developments in the Global Economy
The developments in the global economy since the failure of Lehman Brothers
I will start with the developments in the global economy.
The global economy plunged after the failure of Lehman Brothers in September 2008.
Behind that economic downturn were two factors. The first factor was a panicky
contraction of economic and financial activity due to the financial crisis triggered by the failure of Lehman Brothers. That brought about acute effects on the economy. The second factor, which could be said as more fundamental, was the unwinding of various excesses that had been accumulated globally up to the mid-2000s mainly in the United States and Europe. That was a disposal process of excesses such as excess debt in the household sector, excess production capacity in firms, and impaired assets of financial institutions. Namely, the process of repairing and adjusting balance sheets. During the repair and adjustment process, spending activity of each economic entity will be restrained. Consequently, chronic downward pressure will be exerted on the economy for a protracted period.
To read more: http://www.boj.or.jp/en/type/press/koen07/data/ko1011a.pdf
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