Takeo Hoshi Quoted in Bloomberg News
BOJ Reluctance to Finance Borrowing Is Tested as Japan Prepares to Rebuild
03/20/2011
Christopher Anstey and Aki Ito,
Bloomberg News
The Bank of Japan’s reluctance to fund government borrowing is set to be tested by the economy’s need for stimulus in the aftermath of the March 11 earthquake.
Prime Minister Naoto Kan’s bill for clearing wreckage and rebuilding roads, housing and utilities is forecast at 5 trillion yen ($62 billion) or higher by Nomura Holdings Inc., Morgan Stanley and Barclays Capital. With debt issuance poised to rise, BOJ Governor Masaaki Shirakawa warned last week the bank must avoid underwriting debt to retain its credibility.
The BOJ’s reluctance is an echo of the European Central Bank’s initial decision to refrain from buying government bonds as the euro-region’s sovereign-debt crisis spread a year ago, before it agreed to do so in May. As the scale of the efforts needed to restart an economy already shrinking at the end of 2010 becomes clear, Shirakawa and his colleagues may step up.
“This is something the BOJ should have done even before the earthquake,” said Takeo Hoshi, an economics professor at the University of California, San Diego and author of “Corporate Financing and Governance in Japan: The Road to the Future,” winner of Nikkei’s 2002 prize for best economics book. “It’s even more important for the Bank of Japan to support the recovery” in the aftermath of the earthquake, he said.
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Takeo Hoshi can provide commentary on Japan's financial system, bank regulation, macroeconomic conditions and macroeconomic policy.
