BOJ Declines to Join Rare International Statement Backing Powell
The Bank of Japan didn’t sign a joint statement backing Federal Reserve Chair Jerome Powell because of rising political tensions. Officials talked to Japan’s government in private, but they didn’t get permission before the statement was supposed to be released to the rest of the world.
Government sources said that some of the hesitation was because they were worried about making diplomatic relations with the US government worse. The central bank didn’t want to talk to the public, and Japan’s top government spokesperson said it was up to the monetary authorities.
Source: Nikkei Asia
Global Central Banks Rally Behind Federal Reserve Independence
After the Trump administration threatened to charge Powell with a crime, central bank leaders from all over the world made a rare joint statement in his defense. The move brought to light widespread worries that political interference could hurt the credibility and independence of global central banks.
Kazuo Ueda, the head of the Bank of Japan, has talked about the importance of independence in the past, but he has not directly responded to President Trump’s criticisms. Analysts say that this silence fits with Japan’s history of staying out of political disagreements in other countries.
Longstanding Institutional Caution Shapes BOJ Public Positioning
In the past, the central bank has avoided talking about politically charged issues in order to keep its neutrality and stability at home. This method comes from times in the past when political pressure affected Japan’s decisions about monetary policy.
Takahide Kiuchi, a former board member, said that the choice is in line with protocol but shows that the government still has an effect on what the central bank does. He also said that speaking out against American policy could lead to Japan’s broader diplomatic agenda being put under pressure.
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Upcoming Japanese Election Adds Additional Political Sensitivity
A lot of people think that Prime Minister Sanae Takaichi will call an early national election in February. Her administration keeps in close touch with Washington, which makes people more sensitive to any action that seems to go against American leadership.
Analysts think the BOJ stayed away from the statement in part to keep campaign stories and diplomatic messages simple. Before an election, political stability often stops people from doing things that could cause problems with other countries or with the government.
Legal Independence Exists but Political Influence Remains Significant
The BOJ has formal independence under Japanese law since the financial restructuring period of the late 1990s. But the government chooses board members and suggests governors, who must then be approved by parliament.
Prime Minister Takaichi upset the markets when he said he could change the direction of monetary policy right after taking office. Later, her administration backed small increases in interest rates because they were worried about the value of the currency going down and the costs of imports going up.
Monetary Policy Debates Reflect Internal and External Pressures
Takaichi’s advisers keep warning against raising interest rates any more, saying it could hurt the economy’s recovery. Even though the government has recently tightened its policies to stabilize the yen and keep inflation expectations in check, it still prefers an accommodative policy.
If the ruling party wins, it could soon name two new members to the BOJ board. It might also affect who gets to be the next governor after Ueda’s term ends in early 2028.
Analysts Warn Central Bank Autonomy Faces Long-Term Challenges
Kiuchi said that Japan’s central bank is not immune to political pressures like those that the Federal Reserve is facing. Requests from leaders can change policy priorities and how institutions act over long periods of time, even if they are less confrontational.
He said that not making controversial statements is the safest way to keep things stable when the world is in a state of flux. This kind of caution shows strategic restraint instead of agreeing with the political leaders of other countries or the US.
