AFTER THE FED AND ECB:
IT’S YOUR TURN, BOJ

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J. Soedradjad Djiwandono
J. Soedradjad Djiwandono, Emeritus Professor of Economics, Faculty of Economics and Business, Universitas Indonesia, and Adjunct Professor of International Economics, S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University (NTU), Singapore.

Jakarta, IO – In my previous column I wrote about a challenge that The Fed and ECB faced, in the effort to act judiciously and firmly on the looming problem of high inflation: 8 per cent plus per annum in both cases. 

In fact, the Bundesbank faced the same problem, and so did the Bank of England; the UK was already starting to enter a recession. Historically weaker economies, like those of Italy, Spain and Portugal, faced an even more dire situation. For Italy it had to have been painful for PM Mario Draghi, who was a former Head of the Central Bank of Italy and President of ECB, with so much experience in dealing with different problems, to steer financial stability for Italy and the EU before becoming the Italian Prime Minister. 

This time, a similar challenge faces the Bank of Japan, an institution which for many years has conducted a very loose monetary policy. Even so, inflation has stayed more controlled than in the two economies mentioned previously: it has been almost constant, at 2.5 per cent annually. The policy worked well under the steady hand of Governor Haruhiko Kuroda, who had also been Asian Development Bank or ADB President till his appointment as Governor of The Bank of Japan (BOJ).