Raw Japan

Slices of Japanese business, politics and life

What can the Bank of Japan do?


Japanese interest rates have already dropped to just 0.1 percent, leaving the Bank of Japan with few traditional weapons to fight its corner of the global financial crisis as it meets on Wednesday and Thursday this week to review monetary policy.

It could, of course, return to zero interest rates, but Japanese policymakers are not convinced that this worked last time they tried it and, with rates already so low, how much difference would moving to zero make?

BOJ governor Masaaki Shirakawa

As Hideyuki Sano writes in our preview of the BOJ’s policy board meeting this week, Governor Masaaki Shirakawa and his advisers are more likely to consider less traditional ideas that are increasingly the weapons of choice for central banks, such as buying commercial paper from otherwise strong companies that can no longer raise funding themselves in gummed-up markets.

The BOJ’s policy could increasingly resemble that of the U.S. Federal Reserve, which has expanded its balance sheet with various securities from markets.