Informality, monetary authorities
and monetary policy: the pre-1998
A son who wins entry to the MOF's elite track at the age of 22 or 23 earns his family as much distinction as if he had won a Nobel Prize … MOF men truly are Nobel-caliber: brilliant, creative, tenacious, public-spirited. Many of them would probably win Nobel Prizes if they chose careers that tend to catch the eye of the Royal Swedish Academy of Sciences.
E. Fingleton (1995)
In this chapter, the organisation in general and informal policies in particular of the two major monetary authorities in Japan – the Ministry of Finance (MoF) (Ōkurashō) and the Bank of Japan (BoJ) (Nihon Ginkō) – until 1998 will be discussed. The year 1998 is chosen because in my view it was a turning point in the post-war development of the Japanese financial system and monetary policy. In this year the major reform programme dubbed the 'Big Bang' started, a new version of the Bank of Japan Law was adopted, bank supervision was removed from the MoF to a new independent organisation (Financial Supervisory Agency), other important reorganisations of the MoF and BoJ were implemented, the issuance of tsūtatsu was restricted and last, but certainly not least, measures were implemented to solve finally the severe banking crisis. In this respect, this chapter serves as a yardstick for the assessment of the post-war informal mode of policy implementation in Japan, which, as I shall assert in subsequent chapters, to a large extent caused the banking problems of the nineties and led to the major reforms that will be discussed in chapter 6. Furthermore, the analysis aims to clarify the institutional framework that forms the basis for further empirical analysis in chapters 7 and 8. More specifically, the relevance and importance of informal instruments, i.e. tsūtatsu or published administrative guidance and unpublished administrative guidance (see chapter 3), for the implementation of Japanese monetary policy will be investigated. Attention will also be paid to the informal