The Bank of Japan Under Kuroda Has Abandoned the Reflationist Theory

Although the Bank of Japan (BOJ) under Kuroda initiated quantitative and qualitative easing policy, it failed to achieve its inflation target. While reflationist theory requires a more massive supply of monetary base, the BOJ reduced this supply and ceased its commitment to the inflation target. Instead, the BOJ introduced yieldYield curve control (YCC) curve control, in which the monetary base and the amount of long-term government bonds purchased are supplied in response to demand under a fixed interest rate, which reflationists have criticized, calling itThe Bank of Japan's (BOJ's) theory “the BOJ theory.” Kikuo Iwata[aut]Iwata, Kikuo, the deputy governor of the BOJ, criticized the BOJ’s explanation that deflation was caused by something other than monetary policy, calling it “the BOJ’s theory of deflationThe Bank of Japan's (BOJ's) theory of deflation.” However, Iwata and the BOJ under Kuroda pin the reason for the BOJ’s inability to achieve the inflation target on everything but monetary policy. In effect, both the theories and the policies of the reflationists have been abandoned. Nevertheless, to save their positions and reputationsPositions and reputations, the BOJ under Kuroda and reflationists pretended that monetary policy based on the reflationist theory continued and the Japanese economy was on its way out of deflation. Thus, wrong policy gave way to deceptive policy.