The Bank of Japan (BoJ) is the main financial and credit institution of the Country of the Rising Sun, the Central Bank of Japan.
The tasks of the Central Bank of Japan are to ensure stability in the country's price market, maintain a high level of the economy, conduct monetary policy, regulate the volume of money in circulation, change the interest rate (if necessary), form the exchange rate of the national currency, and so on.
The Bank of Japan is located in the most respectable area of the capital of Japan – Tokyo. Its distinctive feature is a high level of development, an ideal division of responsibilities between the structures of the bank, a clear implementation of the tasks set, a strong role of the state in the management of the Central Bank.
Official website of the Bank of Japan - https://www.boj.or.jp/en/index.htm/
History of the Bank of Japan
Since 1868, the era of Meiji's rule began in Japan, who became the founder of the entire banking system of Japan.
In 1868, the first paper currency appeared, which was called the "golden ticket" (kinsatsu in Japanese). The first denominations of the new banknotes are 1 "siu", 1 "bu", 1 "re", 5 and 10.
In 1869, the Japanese yen was first minted.
Since 1871, the Japanese yen has been officially recognized as the monetary unit of Japan. The active replacement of old money with new ones has begun.
In 1872, the first law was adopted, which explained the functions of the national bank. At the same time, commercial (private) structures were given the right to print currency. This led to an active issue of banknotes by non-state structures.
In 1876, amendments were made to the law on national banks, which made the issued monetary units non-convertible.
Since 1879, the new old clan monetary units have completely disappeared from circulation, giving way to a new national currency. By this year, there were already more than 150 banks in Japan.
In 1882 - the Bank of Japan was organized, the main purpose of which was to fight inflation.
Read more: Causes of inflation and scientific approaches to their study
Since 1885, the Central Bank of Japan began issuing money that changed not silver coins.
In 1889, a law came into force, according to which all paper money had to be covered with silver (there was only a small uncovered limit of 70 million yen).
Since 1897, it was decided to switch to the gold and foreign exchange system. At the same time, the issue of banknotes was handled exclusively by the Bank of Japan.
Since 1921, the exchange of the Japanese yen for gold has been discontinued.
In 1942, a law appeared, according to which the Central Bank of the country was completely controlled by the government.
1949 - the year of the formation of the Political Council. The task of the latter is to form the monetary policy of the state.
Since 1971, the Central Bank of the country has been conducting transactions on the bill market, making transactions with government bonds. The securities market is being formed step by step.
1979 - a change in the legislation and the assignment of an indefinite status to the Bank of Japan (previously, the period of validity of the Central Bank was constantly extended).
1998 - new legislation concerning the Central Bank of the country was developed. On April 1 of this year, the Bank of Japan became independent from the Ministry of Finance. According to the new law, the Central Bank of the country has its own capital in the amount of one hundred million Japanese yen. At the same time, 55% of the capital is in the hands of government structures, and 45% is distributed among private shareholders.
All holders of shares of the Central Bank receive a guaranteed profit of 4% per annum, which, with a normal profitability of a financial institution, reaches 5%. At the same time, private shareholders do not participate in the management process of the bank.
Functions of the Bank of Japan
The Bank of Japan plays the role of the main monetary regulator in the country. Its counterpart in the United States is the Federal Bank, in Germany – the Bundesbank, in the UK-the Bank of England. The main functions of the institution include:
1. The issue of the national currency of the country. The Bank of Japan has a monopoly on the issue of banknotes (Japanese yen).
2. Making changes to the monetary policy. Here, such tools as determining the official interest rate, adopting mandatory reserve norms, conducting currency interventions, and transactions with government bonds can be used.
3. Adjustment of the norms of obligations of commercial banks of the country regarding their reserves.
4. Influence on the exchange rate of the national currency, regulation of the volume of money supply in circulation.
5. Change (up or down) of the main interest rate. By changing this parameter, the Central Bank has the opportunity to influence the exchange rate of the national currency, inflation, rates on loans (deposits) in commercial banks, and the strengthening of the national currency. The Bank of Japan can change two interest rates:
- the interest rate on overnight loans is the level of interest at which commercial banks are credited, and loans are refinanced. This rate is the main one in Japan. The impact on the rate level is provided by making transactions with securities. Since 2010, this interest rate has been fluctuating at the level of – 0-0. 1%;
- the discount interest rate is the percentage at which commercial banks receive loans to maintain liquidity. This indicator is less significant than the previous one.
6. Conducting transactions on foreign financial markets.
7. Control of transactions and mutual settlements between commercial financial institutions and participation in this process.
8. Conducting transactions with government bonds, promissory notes. This is one of the main instruments of the Central Bank's monetary policy. The main task is to control the size of the monetary base, maintain interest rates on short-term loans.
9. Checking and monitoring the state of financial affairs in banks. The Central Bank conducts a study of statistical information, examines the business activity index, publishes data on price indices for corporate services and wholesale prices.
10. Conducting international activities to improve the image of the national currency and the country as a whole. Here we are talking about performing a number of tasks:
- providing accounts in the currency of Japan to financial institutions of other countries (including the Central Bank);
- performing currency interventions in case of unfavorable movement of the national currency exchange rate;
- conducting transactions with the purchase and sale of foreign currency, providing loans, making transactions on behalf of financial structures of other countries.
11. Implementation of works on conducting theoretical research, as well as performing economic analysis.
Structure of the Bank of Japan
The main regulatory functions for the work of the Central Bank of Japan are performed by the Board of the bank. In its composition:
1. The Political Council is one of the key bodies of the Bank of Japan. It is he who makes decisions in the following areas:
- the amount of interest rates;
- changes in the country's monetary policy;
- issues related to the financial control of the Japanese banking system;
- the size of reserves and so on.
All meetings of the Council have the form of meetings at which important decisions for the country are taken by voting. The Board has nine members, including 1 bank manager, 2 deputies and 6 advisers. The Chairman is chosen by the Council collectively from among the participants.
2. Auditors in the number of three people. These specialists are appointed for a certain period of time. The decision on the candidates is made by the Cabinet of Ministers.
3. Members of the Management Board (6 people).
4. Consultants (10 people).
The last two groups of specialists are appointed by the Ministry of Finance of Japan. The candidates are submitted for consideration by the Political Council. The number of consultants and auditors may be reduced.
The main person in the Bank of Japan is the head of the Management Board (President). His deputy is the Vice-president. The appointment of candidates for these positions is handled by the Cabinet of Ministers of Japan. The term for which the President and Vice-President of the Bank of Japan are elected is five years.
In addition to the heads, the Minister of Finance of the country appoints seven managers for a four-year term. One of these specialists is a representative of the Ministry of Finance, and the other six are bank employees.
Read more: Rich history of the Bank of England
Governors of the Bank of Japan
During the existence of the Bank of Japan, it has had many leaders:
1. From 1882 to 1887 – Yoshihara Shigetoshi, the first president of the Central Bank of Japan. He made history by introducing a system of bank checks and compound interest.
2. From 1887 to 1889 – Tetsunosuke Tomita. He is known for his desire to create a central discount rate. Due to constant attempts to change the policy of the Central Bank, Tomita was removed from office.
3. From 1889 to 1896 – Koihiro Kawada. In addition to the competent management of the Bank of Japan, he is remembered as a key person in the formation of the Mitsubishi company.
4. From 1896 to 1898-Yanosuke Iwasaki, the brother of the founder of Mitsubishi.
5. From 1898 to 1903 – Totsuo Yamamoto. During the years of his leadership, he managed to increase the budget deficit. After being "ousted" from office in 1903, he took the post of head of the Chamber of Peers.
6. From 1903 to 1911 – Shigeyoshi Matsuo. His merit is the successful containment of inflation in a rather difficult period for the country. During the years of his management, he earned respect among the heads of the largest commercial banks in the country.
7. From 1911 to 1913 – Takahashi Korekiyo. Since 1913, he was transferred to the Minister of Finance of Japan. It was under him that the "binding" of the national currency to gold was canceled in 1931.
8. From 1913 to 1919 – Yataro Mishima. He died in 1919.
9. From 1919 to 1928 – Johnnosuke Inoue.
10. From 1923 to 1927 – Otohiko Ichiki. He was suspended due to unsatisfactory work.
11. From 1928 to 1935 - Hisakira Hijikata. He had to manage the bank at a difficult time for the country (just at the time of the abolition of the gold standard).
12. From 1935 to 1937 – Eigo Fukai. He is known for his efforts to reduce the volume of military spending and limit monetary inflation.
13. 1937 - Seihin Ikeda. In 1938, he was appointed Minister of Finance of Japan.
14. From 1937 to 1944 – Tayotaro Yuki.
15. From 1944 to 1945 – Keizo Shibusawa.
16. From 1945 to 1946 and from 1954 to 1956-Eikichi Araki.
17. From 1946 to 1954 – Hisato Ichimada.
18. From 1956 to 1964 – Masamichi Yamagiwa. He left his post due to poor health.
19. From 1964 to 1969 – Makoto Usami.
20. From 1969 to 1974 – Tadashi Saaki.
21. From 1974 to 1979 - Telichiro Morinaga.
22. From 1979 to 1984 – Haruo Maekawa. He is known for his agreements with Saudi Arabia on the petrodollar system.
23. From 1984 to 1989 – Satoshi Sumita. It was noted that the Central Bank's monetary policy was too soft, which caused the price of property and stock assets to rise.
24. From 1989 to 1994 – Yasushi Mieno.
25. From 1994 to 1998 – Yasuo Matsushita.
26. From 1998 to 2003 – Masaru Hayami. He is remembered for his attempts to protect the country's monetary policy from pressure from politicians and its weakening. He managed to "put pressure" on monopolies in various sectors of the economy and thus achieved the economic recovery of the country.
27. From 2003 to 2008 – Toshiiko Fukui. A conservative, a supporter of the country's soft monetary policy.
28. From 2008 to 2013 – Massaki Shirakawa.
29. Since 2013 - Haruhiko Kuroda. Under his leadership, the Central Bank of the country abolished the "banknote rule", when the amount of funds purchased by the regulator could not exceed the total monetary turnover in the country.
Read more: The history of Federal Reserve (Fed) and its functions
Committees and departments of the Bank of Japan
Today, the Central Bank of Japan has the following divisions:
1. The secretariat of the Political Council is the highest governing body. Its task is to set the bank's discount rate, change the credit interest rate for other financial institutions, make changes to the list of traded securities (bills of exchange), account for collateral (those that are accepted as collateral for loans), adjust the conditions for issuing loans.
2. The Currency Affairs Department deals with issues related to the stabilization of the national currency exchange rate-carries out currency and financial activities, issues loans to the government in the form of short-term state-issued bonds.
3. The Internal Audit Service performs the functions of an internal controller of the Central Bank. The main task is to ensure the maximum efficiency of the structure's activities, to exclude violations of the current legislation, to control the execution of operations.
4. The Department of settlement and payment systems works in the field of improvement and introduction of new settlement systems. The main task is to create the most flexible and reliable tool that allows you to fulfill the bank's obligations on settlements and payments in a timely manner. In fact, the department performs an operator function in the system of interbank transactions, as well as transactions with government securities.
5. The Department of Supervision of Financial and Credit Institutions and the financial system conducts regular inspections of the work of commercial banks (every two years), ensures the stability of the banking and credit system, protects the interests of depositors. During the audit, an interview is conducted with bank managers, attention is drawn to measures to attract capital, current profitability, the effectiveness of risk control, and so on.
6. The Department of Statistics and Research studies the main Tankan index, which characterizes the business climate in the country. This indicator characterizes the state of Japan's industry in terms of large-scale production. When forming the index, various data are used – prices for imported and exported products, the level of employment, data on orders, and so on. With the help of the indicator, you can conduct a competent analysis of the level of employment in industry, the volume of orders of companies, the volume of industrial production, and so on.
7. The Financial Markets Department implements monetary policy, conducts operations on the open market, makes proposals for changing reserve requirements, basic interest rates.
8. The Monetary Issue Department is responsible for the issue of currency, the amount of money in circulation and its regulation.
9. The International Department conducts currency interventions in the foreign market of Japan. It works in coordination with the management of the Central Bank. The main time for conducting currency transactions on the market is from 19.00 to 3.00. If the intended goals are not achieved, the European Central Bank (ECB) can be involved in cooperation.
Read more: The European Central Bank (ECB)
In addition, the bank has a number of other departments - the operations department, the information systems service department, the personnel and corporate relations department, the public relations department, the administrative department, the Institute of Currency and Economic Research.