Some Bank of Japan Policymakers Doubted Kuroda's 'Bazooka' Stimulus in 2014
In 2014, less than two years after the Bank of Japan (BOJ) implemented Governor Haruhiko Kuroda's aggressive "bazooka" stimulus, internal discussions revealed that some policymakers were losing faith in its effectiveness.
According to a newly released full account of deliberations, the decision to expand the quantitative and qualitative easing (QQE) program in October 2014 was narrowly approved with a 5-4 vote.
Board Members' Concerns
Deputy Governor Hiroshi Nakaso argued that failing to achieve the 2% inflation target within two years would undermine the BOJ's credibility and waste previous QQE efforts. He called for preemptive action to maximize the stimulus impact.
However, board members Koji Ishida and Takehiro Sato raised doubts about the benefits of further stimulus, given the downward pressure on interest rates and the potential diminishing returns on economic growth and inflation.
Takahide Kiuchi and Yoshihisa Morimoto questioned the psychological impact of QQE on public sentiment, suggesting its effects were limited and unsustainable.
Kuroda's Defense
Kuroda defended the decision to expand QQE, citing the risk of further price falls delaying a shift in Japan's deflationary mindset. He emphasized the need to forestall the negative consequences on expectations.
Legacy of Stimulus
Despite Kuroda's stimulus, inflation remained below the target for another decade. The BOJ eventually exited QQE in 2023 and has since raised short-term interest rates.
A review of past monetary easing steps under Governor Kazuo Ueda concluded that Kuroda's stimulus had limited impact on consumer psychology.
Kuroda has maintained that the damage to regional banks was minimal and that the decline in bond market liquidity was a necessary sacrifice for reflation.