The document discusses the impact of the global financial crisis on Japan's economy from 2007-2009. It led to rising inflation, bankruptcies, and unemployment. GDP declined sharply and the trade balance shifted to a deficit. The Bank of Japan adopted negative interest rates and bond purchases to stimulate lending and growth, while the government implemented large stimulus packages. By late 2009, exports and production began increasing again, aided by economic recovery overseas and public investments from stimulus funds.

1. December,2018
Monetary and Finance
BANK OF JAPAN
Lecturer: Đặng Trần Linh
Group 6:
Bồ Lệ Thi 2160548
Huỳnh Mỹ Phụng 2160519
Vũ Hoàng Khôi Nguyên 2160460
Nguyễn Ngọc Phương Linh 2151683
Lê Như Quỳnh 2160541
Cung Hồng Ân 2151527

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TABLE OF CONTENT
I. About The Bank Of Japan .............................................................3
1. General Information
2. History
3. Organization Chart
4. The Bank Officers
5. Regulation Of The Bank’s Organization
II. Functions Of The Bank .................................................................7
III. Price Stability And Monetary Policies............................................8
1. Price Stability
2. Monetary Policies
IV. Activitiy of the bank- maintain negative interest rate ......................9
V. Japan serious recession due to the impact of global crisis ..............10
VI. Reference ...................................................................................14

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I.ABOUT THE BANK OF JAPAN
1. General Information
The Bank of Japan (日本銀行 Nippon Ginkō, BOJ, JASDAQ: 8301) is the central
bank of Japan. The bank is oftencalled Nichigin (日銀) for short. It has its headquarters
in Chūō, Tokyo.
Logo: en.wikipedia.org
Established in 1882
Headquarters: Tokyo, Japan
Governor: Haruhiko Kuroda (March 20, 2013 - )
Official Currency: Janpanese Yen (JPY)
 3rd most traded currency
 Also used as reserve currency after the U.S dollar, the Euro, and the Pound
sterling
Bank rate: 0% - 0.10%
Website: http://www.boj.or.jp/en/index.htm/

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2. History
The Japanese government started issuing paper money early in the Meiji Period (1868–
1912). However, the outbreak of the Seinan Civil War in 1877 and a flood of paper
money issued to finance the war provoked hyperinflation. To overcome the situation,
the government decided to withdraw old paper money from circulation and establish a
central bank as the sole issuer of new, highly credible banknotes. The Bank was
established under the Bank of Japan Act, which was promulgated in 1882, and began
business operations on October 10, 1882. This Act was completely revised to produce
the current Bank of Japan Act of 1997, which went into effect in April 1998.
Table 1: History of bank of Japan

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3. Organization chart
Table 2 boj_pamphlet.pdf

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4. The Bank’s officers
The Bank's officers are the Governor, Deputy Governors, Members of the Policy Board,
Auditors, Executive Directors, and Counsellors. Of the above, the Governor, Deputy
Governors, and Members of the Policy Board make up the Policy Board.
The Governor, Deputy Governors, and Members of the Policy Board are appointed by
the Cabinet, subject to the consent of the House of Representatives and the House of
Councillors. Auditors are appointed by the Cabinet. Executive Directorsand Counsellors
are appointed by the Minister of Finance based on the Policy Board's recommendation.
For duties and powers of the Bank's officers, see table below.
5. Regulation of the Bank’s Organization
The principal regulator is the Financial Services Agency of Japan (FSA). Its authority
to supervise banks in Japan is delegated by the Prime Minister.
The FSA is responsible for ensuring:
• The stability of Japan's financial system.
• Protectionof depositors, insurance policyholders and securities investors.
• Orderly financial operations.
This is done through measures including:
• Planning and policy-making concerning the financial system.
Table 3: Duties and Powers of the bank's officers

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• Inspection and supervision of private-sector financial institutions, including
banks.
Planning and policy-making activities include establishment of:
• Rules to be observed by financial institutions (through legislation, such as the
Banking Act, and amendment or abolishment of finance-related statutes and
regulations).
• A stable and dynamic financial system and development of efficient and fair
financial markets (for investors to conduct asset management and for corporations to
efficiently raise funds and capital).
The FSA can require a bank to report the status of its business activities and property,
and audit its relevant books and records if it finds it necessary to ensure the sound and
appropriate management of the bank's business in light of the status of the bank's
business activities and property (Articles 24 and 25, Banking Act). Considering the
management of a bank's business, the FSA can order a bank to:
• Improve its management.
• Suspend its business in whole or in part.
• Take other remedial actions necessary for the purposes of supervision.
II. FUNCTION OF CENTRAL BANK OF JAPAN.
The three functions of the Bank—as the issuer of banknotes, bank of banks, and bank of
the government due to the business operations it executes—are described as follows.
 Issuer of banknotes
The Bank is the sole issuer of banknotes in Japan, that is, it has a monopoly on
the issuance of banknotes. All banknotes bear in Japanese the imprint “Bank of
Japan Notes.” As described on page 4, the Bank oversees banknotes’ entire life
cycle, from issuance to circulation, and destruction when banknotes are no longer
fit for recirculation.
As the central bank of Japan, the Bank of Japan issues banknotes (Bank of Japan
notes). The Bank currently issues Bank of Japan notes are 10,000 yen, 5,000 yen,
2,000yen, and 1,000 yen, and works to ensure their smooth circulationthroughout
the economy. The amount outstanding of banknotes in circulation totaled about
77 trillion yen as of the end of March 2010.
 Bank of banks
The Bank accepts deposits from banks and other private financial institutions in
the Bank’s current accounts, and makes loans to financial institutions. Since the
Bank’s banking services are similar to those of private financial institutions, the

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Bank is also called the “bank of banks.” Financial institutions use these deposits
to settle transactions with other financial institutions by means of funds transfers
between their current accounts at the Bank.
 Bank of the government
The Bank is also called the “bank of the government” because it provides service
related to the Japanese government, such as managing the government’s deposits,
receiving tax payments and making pension payments, and providing services
related to JGSs. As a rule, however, the Bank is prohibited by law to make loans
to the government or to underwrite securities issued by the government.
III. PRICE STABILITY AND MONETARY POLICIES
1. ‘Price Stability Target’ of 2 Percent
The Bank of Japan Act states that the Bank's monetary policy should be "aimed at
achieving price stability, thereby contributing to the sound development of the national
economy."
"Price" denotes the overall level of prices of various goods and services. Price stability
is important because it provides the foundation for the nation's economic activity. In a
market economy, individuals and firms make decisions on whether to consume or invest,
based on the prices of goods and services. When prices fluctuate, individuals and firms
find it hard to make appropriate consumption and investment decisions, and this can
hinder the efficient allocation of resources in the economy. Unstable prices can also
distort income distribution.
On this basis, the Bank set the "price stability target" at 2 percent in terms of the year-
on-year rate of change in the consumer price index (CPI) in January 2013, and has made
a commitment to achieving this target at the earliest possible time.
2. Monetary Policy
As the central bank of Japan, the Bank of Japan carries out currency and monetary
control to achieve price stability, thereby contributing to the sound development of the
national economy. To this end, the Bank encourages short- and long- term interest rates
to remain at target levels and purchases assets, mainly through open market operations.
In general, the effects of monetary policy on economic activity, through a decline or a
rise in real interest rates, are as follows.

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When interest rates decline, financial institutions can procure funds at low interest rates.
This enables them to reduce their lending rates on loans to firms and households. Given
the linkage between various financial markets, there is also a decline in interest rates at
which firms borrow directly from the market, such as in the form of corporate bond
issuance.
In this situation, firms find it easier to procure working capital and fixed investment
funds, and households also find it easier to borrow funds, such as for purchasing housing.
As a result, firms’ and households’ economic activity picks up, and this stimulates the
economy. Upward pressure on prices is also generated in turn. Such monetary policy
measures, aimed at stimulating the economy, are called monetary easing.
On the other hand, when interest rates rise, financial institutions must procure funds at
higher interestrates, and raise their lending rates onloans to firms and households. Firms
and households find it difficult to borrow funds, which makes their economic activity
sluggish. This, in turn, contains overheating of the economy and exerts downward
pressure on prices. Such monetary policy measures, aimed at containing an overheating
of the economy, are called monetary tightening.
IV. NEGATIVE INTEREST RATES
1. What are negative interest rates?
Negative interest rates mean depositors pay money to save their money, a reversal of the
normal rules of economics.
In this case, the depositors are banks. Like regular people keeping accounts at a local
bank, lenders hold their unused cash at central banks like the United States Federal
Reserve, the European Central Bank and the Bank of Japan. Normally, they receive a
small amount of interest in return.
But with negative rates, central banks charge a fee instead. The idea is to encourage
banks to put their money to more productive use, lending it to households and businesses.
Negative rates are supposed to then ripple through economies by lowering the cost of
borrowing for everyone — something that should encourage economic growth.
2. What sort of countries have negative rates?
Those with ultra-low inflation or deflation, meaning falling prices associated with weak
economic growth. The European Central Bank, which oversees monetary policy for

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countries that use the euro, introduced negative rates in 2014. Denmark, Sweden and
Switzerland, which are not part of the eurozone, also have negative rates.
Japan’s central bank followed in January, announcing that it would charge commercial
banks a fee of 0.1 percent on a portion of their reserves that they keep with it.
3.What does the Bank of Japan hope to accomplish?
The bank is trying to lift consumer prices, which have been sliding for most of the past
20 years. Falling consumer prices hurt corporate revenues, keeping companies from
raising wages or spending on new projects.
But the bank’s efforts are foundering. Its main tool has been an extensive bond-buying
program, similar to policies adopted by the Federal Reserve in the United States and the
European Central Bank. Bond-buying injects money into a country’s financial system.
From there, it is supposed to flow to the rest of the economy.
It worked for a while, but recently the effect has faded. Prices are falling again, and the
bank needed to try something new.
4. Are negative rates working?
Money was already cheap in Japan, and negative rates have succeeded in making it even
cheaper. The yield on 10-year government bonds, for instance, fell below zero in
February, meaning investors are lending the government money knowing that they will
not be repaid in full.
Yet deflation has not vanished: Core consumer prices fell 0.5 percent in July. Nor has
there been an explosion of new bank lending, as businesses say they can’t find enough
profitable uses for funding, even if the money is cheap.
And deflation itselfundermines the effectiveness of negative rates. If corporate revenues
are shrinking because of falling prices, companies will find that even the most generous
loan becomes harder to repay. Many potential borrowers are still telling bankers, “No
thanks. Keep your cash.”
V. SERIOUS RECESSION DUE TO THE IMPACT OF THE
GLOBAL FINANCIAL CRISIS
After Prime Minister Koizumi term, Japan's economy fell into stagnation. Economic
difficulties piled up since late 2007: Inflation, bankruptcies and mass unemployment.
The basic inflation rate had risen to a new record high of 1.2% in March,2008 in the
context of energy and food price escalation. It was the strongest increase since March,
1998. Fiscal year 2007-2008 (ending on 31/3/2008), Japan had 11,333 companies went
bankruptcy, increased 18,4% compared to the previous fiscal year, the highest level
since fiscal year 2000-2001.

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Causes
The direct causes leading to this situation is the rising energy and raw material prices,
the high in currency and the Japanese government changed the Building Standards Law
had made this area freezed.
When companies constantly went bankruptcy, many people had been pushed into
unemployment, declining income, the quality of worker’s life went down continuously.
Accompanied with it is the consequences of education and culture when life becoming
increasingly difficult. According to the record, Japan’s technology industry was
missing about 1 million engineers. Although the unemployment rate on the rise, but
again there was shortage of skilled workers, especially in engineering and technology.
Young Japanese oftentend to choose the field of high paying and more attractive such
as finance or medicine. Japanese companies had started to recuit foreign engineers, but
the number of workers may not be enough to make up for the number of workers are
missing.
Consequences
The most visible impact of the global financial crisis for the Japanese economy (as well
as for other economies) is the decline of the GDP growth, bankruptcies of companies
and unemployment on the rise, market price instability.
The data were the Japanese Cabinet Office announced on 20/5/2009 showed that the
GDP of the second largest economy in the world this quarter decreased 4% from the
previous quarter and decreased by 15.2% compared the same period of 2008. the main
reason is due to the demand for automobiles, electronics and many other items from
Japan plummeted amid the global economic recession. Generally in the 2008 fiscal
year (to the end of 3/2009), according to official figures released, Japan's GDP for the
first time in 7 years fell at a record -3.5%.
Along with inflation and unemployment situation unstable raw material prices make it
difficult for the manufacturing industry. Raw material price escalation has forced
Japanese businesses have strong adjusted production cost structure. As announced by
businesses in the Tokyo stockmarket date 15/5/2008, revenues in fiscal 2008 and sales
fell sharply in the next fiscal year also had to adjust. The automobile manufacturing
enterprises and household electrical appliances under pressure and rising raw material
in steel prices makes investment costs for production increase. Meanwhile, the selling
price was not allowed to rise respectively by competition from other manufacturers.
According to statistics from the Ministry of Finance, Japan, in fiscal 2008 for the first
time after 28 years (since 1980 - shortly after the oil crisis 2nd), foreign trade balance
of Japan has a deficit , to 725.3 billion yen. During the years from 2002 to 2007, the

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foreign trade surplus of Japan has reached around 10 trillion yen. Thus, we can say, the
impact of the global financial crisis has made foreign trade balance of Japan from
where there are huge surpluses into deficit in just a very short time period.
Solution
To cope with the challenges of the global financial crisis, the Government of Japan has
4 times launched economic stimulus packages totaling more than $ 300 billion. Japan's
central bank has lowered the base rate to yen to a record low of 0.1%, at the same time
buying commercial paper and corporate bonds, provide funds at low interest rates for
commercial banks trading ... Thanks to those efforts, the Japanese economy since the
second half of 2009 have been positive signals
Aiming at economic recovery, since March 4/2009 the Japanese economy started to
stop the decline; production and exports gradually increase again. The main factors that
helped the Japanese economy didn’t continuously go down is the restorationof
production and exports, especially in the automotive industry and electronics:
- The production and export of Japanese cars since late 2009 has solved the
problem of inventory, especially as the overseas inventory.
- Foreign orders for electronics components and spare parts to Japan also
increased sharply, the inventory clearance both in domestic and abroad.
Especially restoredthe needs of China-a big market for Japanese electronic
goods.
- Public investments also increase significantly due to the implementation of the
economic stimulus package by the Government. Especially the economic
stimulus package passed last month with 5/2009 worth nearly 144 billion
dollars. This is the fourth economic stimulus package since August 8/2008 and
also the largest value so far in the history of the Japanese economy.
The factors contributing to this growth is the economic stimulus package by the
Government and the restorationof import demand of other countries (Japan), especial
China.
In the period from 12/2008 to 6/2009, the Government of Japan has spent 3,830 billion
yen (nearly 40.8 billion US dollars) to support businesses affected by the financial
crisis globally through emergency loans as well as plans to buy corporate bonds.
Though Japan's economy has made a very positive signal, we need to recognize this
issue carefully. Because of these factors helped Japan's economy grew last factors are
not sustainable. Meanwhile, the basic factor of sustainable growth as the recovery of
domestic production and increased investment by the private sector is still very limited.

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In addition, the Japanese economy is still facing many difficulties and challenges.
There is unemployment, deflation, and declining domestic demand

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REFERENCES
 Accounting Standards Board of Japan (ASBJ) (2008a), Deliberations Regarding
Measurement of Fair Value and Reclassification of Debt Securities, 28 October.
 Accounting Standards Board of Japan (ASBJ) (2008b), Tentative Solution on
Reclassification of Debt Securities, PITF No. 26.
 Bank of Japan (2009), “Financial Statements of Japanese Banks for Fiscal Year
2008”, Bank of Japan Review, 2009-E-5.
 Takatoshi Ito, Hugh Patric, David E. Weinstein. 2005. Reviving Japan’s
Economy: Problems and Prescription. Massachusetts Institute of Technology,
USA.
 Takeo Hoshi and Anil K Kashyap, 2004. Japan’sEconomic andFinancial Crisis:
An Overview. The Journal of Economic Perspectives, Winter.
 https://www.boj.or.jp/en/about/outline/data/foboj04.pdf
 https://www.boj.or.jp/en/announcements/education/data/boj_pamphlet.pdf
 https://en.wikipedia.org/wiki/Bank_of_Japan
 https://www.boj.or.jp/en/about/activities/act/ar2017.htm/
 https://www.nytimes.com/2016/09/21/business/international/japan-boj-negative-
interest-rates.html