追加金融緩和 日銀は政権のしもべか [英字新聞]

--The Asahi Shimbun, July 30
EDITORIAL: BOJ must free itself from the shackles of state policy
(社説)追加金融緩和 日銀は政権のしもべか

The Bank of Japan has decided to open the monetary spigot further. The central bank said July 29 that it will double its annual purchases of exchange-traded funds (ETF) to 6 trillion yen ($58.8 billion).

The BOJ’s action came as a response to a request for further monetary expansion from the Abe administration, which will soon unveil a huge package of policy measures to stoke economic growth. The program will come in at 28 trillion yen.

The central bank has already taken radical steps to pump money into the economy, by setting negative interest rates and making massive purchases of government bonds. As experts have warned that expanding these measures would be ineffective and even harmful, the BOJ, apparently under pressure to play ball with the government, resorted to one of the few remaining options.

The thinking behind the monetary policy is to ensure that the Japanese economy will continue stable and sustained growth.

It is doubtful whether the central bank’s latest move will serve this purpose.

In the latest of its quarterly “Outlook for Economic Activity and Prices” report, released on July 29, the BOJ said the economy “has continued its moderate recovery trend” and “is likely to be on a moderate expanding trend.”

A clutch of economic indicators confirmed the BOJ’s assessment, indicating the economy is on a stable footing. The ratio of job offers to job seekers has risen above 1 in all the 47 prefectures for the first time since such records started being kept.

Even though there is a degree of uncertainty in European and emerging economies, no compelling case can be made for putting together an outsized package of economic stimulus measures at this moment. The BOJ should have taken exception to the administration’s plan, but the central bank has instead provided support to the administration through the additional monetary easing.

The BOJ deserves to be criticized for following the government’s lead into a questionable move.

Two of the nine members of the BOJ’s Policy Board, which makes the bank’s policy decisions, voiced opposition to the proposal to increase the purchases of ETFs, investment vehicles traded on stock exchanges.

They argued, quite reasonably, that the step would have negative effects on price formation in the market. But such dissenting voices within the central bank’s policy-making body are now more unlikely to be heard than before because the Abe administration has replaced retiring members with supporters of the prime minister's "Abenomics" economic policy. The two members opposed to the latest action are both private-sector economists who joined the Policy Board before Shinzo Abe returned to power in December 2012.

If the Policy Board is dominated by similar-minded members, it will lose its ability to check the aggressive and controversial “different dimension” monetary expansion policy that has been promoted by BOJ Governor Haruhiko Kuroda.

We are concerned that the BOJ might become even more inclined to adopt a monetary policy supportive of the administration’s agenda.

But the Policy Board should be given credit for refraining from an expansion of the negative interest rate policy, which could put an additional strain on the financial health of banks, and also from an increase in the amount of government bonds bought by the BOJ, which could be seen as the central bank’s attempt to finance government spending.

Markets had warned that failing to take these steps would trigger the yen’s upswing as well as a major stock market decline. But this view itself reflects a distorted relationship between monetary policy and financial markets.

The BOJ’s excessive monetary expansion is now doing more harm than good to both companies and households.

The negative interest rate policy has delivered a serious blow not just to banks but also to pension funds whose investment plans have gone awry due to the measure.

To bring its monetary policy back to a normal state, the BOJ should start mapping out an exit strategy for its different dimension monetary easing program as soon as possible.

ASEAN会議 中国の国際法無視が目に余る [英字新聞]

The Yomiuri Shimbun
China’s disregard for international law glaringly apparent at ASEAN
ASEAN会議 中国の国際法無視が目に余る

Beijing continues to reject the court of arbitration’s decision dismissing the country’s self-serving claims that its sovereignty covers almost all the area in the South China Sea. We believe such a high-handed stance can never be accepted.

Foreign ministers gathered for meetings of the East Asia Summit — Japan, the United States, China and Southeast Asian countries are among the members — and the ASEAN Regional Forum.

Regarding Beijing’s moves to militarize the South China Sea, U.S. Secretary of State John Kerry called for China to respect the ruling, saying, “It is an arbitration, the results of which ... is legally binding.”

Foreign Minister Fumio Kishida followed suit, stressing, “Parties concerned should comply with the court of arbitration, which will contribute to solving the issue.”

It is crucial for Japan, the United States and other countries concerned to work together to keep urging China to abide by the ruling.

During a meeting with Kishida, Chinese Foreign Minister Wang Yi called for Japan to be discreet in word and deed because Tokyo is “not a party concerned in the South China Sea issue.” This cannot be overlooked.

It is nothing less than in the common interest of the international community to maintain order in the South China Sea based on the rule of law, and ensure freedom of navigation. We regard Wang’s claims as unreasonable.

Following the ruling, Beijing announced that it had sent new bombers on patrol around the Scarborough Shoal in the South China Sea, which is close to the Philippines. The country said it will regularly conduct such missions, and has also expressed a policy to continue building artificial islands in the area. A series of such moves will only heighten tension.

Apparent maneuver

Ahead of the EAS meeting, foreign ministers from the Association of Southeast Asian Nations issued a joint statement at their gathering, which said they “remain seriously concerned” over current developments in the South China Sea. The document failed to directly refer to the ruling because of strong opposition from Cambodia, which receives huge amounts of economic assistance from China.

“Only one country mentioned the court of arbitration during this meeting,” Wang said, with an eye on the Philippines. Chinese President Xi Jinping’s administration, which suffered a serious diplomatic setback from the ruling, apparently believed that it was able to regain lost ground by splitting ASEAN members.

We suspect that China is also drawing up a scenario to woo the Philippines, which has just undergone a change of administration, to set aside the ruling and hold talks.

Wang announced that China had set a target of completing the establishment of a code of conduct with ASEAN — which would legally bind moves by countries concerned in the South China Sea — by the first half of next year. Beijing’s reluctance has so far hampered talks on the envisioned set of rules between the two sides.

China presented the target apparently with the aim of fending off criticism from ASEAN. We cannot believe that China, which disregards international law, will seriously engage in the establishment of multinational rules. Countries concerned should beef up pressure on China to give the code of conduct more teeth.

(From The Yomiuri Shimbun, July 27, 2016)