The Kuroda-led Bank of Japan Was Responsible for Prolonged Deflation: A Monologue—The Battle Against Deflation

The book seeks to explore the inner workings and intentions of the BOJ under Kuroda, but the author points out that the same official line has been repeated at the Governor's press conferences and that there is little that is new. The review examines the course of the 20 years during which deflation persisted, linking it to internal assessments and the effects of policy.

The author discusses the impact of internal circumstances, including personnel changes involving the head of the Osaka Branch, when Kuroda took office as Governor in 2013, and argues that he pursued policies such as quantitative easing and negative interest rates with support from within the BOJ. The book presents the view that there were voices inside the BOJ seeking to overcome prolonged deflation, creating the background for the promotion of massive easing. These policies are assessed as potentially having had positive aspects that differed from the public perception of the market.

As factors behind deflation's 20-year duration, the author cites insufficient domestic investment rather than a deflationary mindset alone. During certain periods, insufficient demand for funds, the hollowing-out of industry and increased overseas investment depressed domestic investment, and there is an indication that most of the funds supplied by the BOJ under Kuroda flowed overseas. The argument is that this prolonged deflation.

Ultimately, the depreciation of the yen emerged as a side effect of the BOJ's policies under Kuroda, domestic investment declined, wages did not rise, and non-regular employment accounted for a large share of the jobs created. While suggesting that the BOJ might have achieved the best outcome by doing nothing, the author proposes cutting corporate taxes and increasing labor-market flexibility as measures to boost domestic investment.