The central bank independence refers to the freedom of the monetary policymakers to exercise their policies without any political interference or control from the government. In the Bank of Japan, the independence came in the 1997 revision of the Bank of Japan Act. This revision allowed the government officials to attend meetings and submit their proposals but they were not allowed to vote. This paper is going to focus on the leadership and how the activities of the central bank are directed.
How are the activities of the bank directed?
The Bank of Japan is organized into two main parts; the policy board and the bank’s officers. The policy board is the highest decision making body of the bank. The monetary policies and basic principles of the bank’s operation are directed by this board. It also oversees the Bank’s officers with the exception of the auditors and counsellors. Under the policy board, there is a governor, two deputy governors and six other members of the board. The governor controls the business operations in accordance to the decisions made by the board. The deputy governor assists the governor in accomplishment of his duties. The auditors audit the operations of the bank and may submit the results to the concerned department if they deem right.
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The compliance committee ensures that all the employees discharge their duties fairly as stipulated in the laws and regulations. The information systems services department is concerned about the bank’s computers and communication systems. The administration department takes care of the bank’s facilities, transportation, security and supplies. The bank branches carry out the following functions; research and analysis of the economy, banking operations and currency business operations.
To whom is the leadership accountable, if anyone?
The Ministry of Finance was the body that oversaw the operations of the leadership of the Bank of Japan but with more amendments on the Act, the Ministry has limited authority over the policy board. The leadership, therefore, is not accountable any superior authority. Nonetheless, the Ministry of Finance still has control over the Bank’s budget. Although this is the case, the bank is still accountable to the public and they publish all the decision-making operations in their daily, monthly and annual reports.
How can the executive leadership and/or board be removed, and by whom?
Earlier, the Minister of Finance had the right to dismiss the members of the board but with the new law, the sitting senior officials in the board may not be dismissed before the end of their tenure against their will. This is in accordance with the Bank of Japan’s Act.
Who determines what the agenda and priorities of the bank will be?
The Policy Board makes the final decisions on the bank’s proceedings. The board, composed of the governor, deputy governor and six other members, determines the bank’s priorities and sets the basic principles for attaining these priorities. The decision making is done through votes. This is after a thorough discussion among the Policy Board members in board meetings. All the nine members express their views as independent members of the board. After the agendas and priorities of the bank have been decided, the governor and the two deputy governors are responsible for executing those mandates.
Conclusively, the Bank of Japan’s Act made the bank independent from any political or government influence. The Bank is controlled by the Policy Board composed of nine members responsible for important decision making. Members of this board may not be relieved of their duties against their will. There are other various departments in the bank setting responsible for various specific functions that keep the operations running smoothly.
References
Hossain, A. A. (2012). Central banking and monetary policy in the Asia-Pacific . Edward Elgar Publishing.
