What Is the Mandate of the Bank of Japan?
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The Bank of Japan (BOJ), like many central banks worldwide, has a defined mandate to guide its monetary policy decisions and ensure stability within the Japanese economy. The BOJ's primary objectives are outlined as follows:
Price Stability
This is the core objective, aiming to maintain stable prices and prevent excessive inflation. The BOJ strives to achieve a consumer price index (CPI) target, which has recently been set at around 2%.
Financial System Stability
The BOJ is responsible for maintaining a healthy and stable financial system in Japan. This includes monitoring credit conditions and implementing measures to prevent systemic risks.
Economic Growth
While not explicitly stated as a primary objective in its legal mandate, the BOJ recognizes that a stable economy typically leads to sustainable growth. Its policies are designed to support economic expansion while ensuring price stability.
Currency Stability
The BOJ aims to stabilize the value of the yen and foster confidence in the currency. This objective is particularly important for an export-driven economy like Japan's.
Legal Framework
The BOJ's mandate is governed by the Bank of Japan Act, which provides the legal framework for its operations. This includes setting monetary policy targets and defining the responsibilities of the BOJ in managing the Japanese economy.
Summary
In summary, the Bank of Japan's mandate centers on maintaining price stability, ensuring financial system stability, and supporting economic growth through appropriate monetary policies.