Bank of Japan
Before 1868, Japan's feudal fiefs issued their own money called hansatsu. These notes came in incompatible denominations that made trade difficult across regions. The New Currency Act of Meiji 4 changed everything by establishing the yen as a new decimal currency. This act also gave the yen parity with the Mexican silver dollar. Former han became prefectures and their mints turned into private chartered banks. For a time both the central government and these national banks issued money.
Finance minister Matsukata Masayoshi proposed creating the Bank of Japan in March 1882. The bank was formally founded on the 10th of October 1882 through the Bank of Japan Act. Its design drew inspiration from the National Bank of Belgium established in 1850. By 1883 all national banks lost their right to issue banknotes. The Bank of Japan gained monopoly control over money supply in 1884. It took another twenty years before retired notes disappeared completely. In May 1884 convertible bank note regulations passed allowing first issuance in 1885. Rats ate some bills because konjac powder mixed in paper made them delicious to rodents.
The Bank of Japan underwent major reorganization in 1942 under new legislation promulgated the 24th of February 1942. Full implementation occurred after the 1st of May 1942. During Allied occupation functions were suspended while military currency circulated. Restructuring happened again in 1949 when peace returned. The operating environment evolved throughout the 1970s as Japan shifted from fixed exchange rates to variable ones. Credit controls became the primary tool for monetary policy until at least 1991. These controls imposed growth quotas on commercial banks and served as a model for China's central bank system.
Toshihiko Fukui headed the bank during bubble years from 1986 to 1989. Financial and fiscal regulation led to widespread overvaluation of real estate and investments. The Plaza Accord agreement between G5 nations changed USD to Yen rates from 240 yen per dollar to 200 yen by end of 1985. By late 1987 the rate reached 125 yen per dollar. The bank kept official bank rate at 2.5% until May 1989. Stock market and real asset markets fell sharply after 1990. The Great Hanshin earthquake struck January 1995 causing yen strength reaching 80 yen per dollar before recovery began.
Haruhiko Kuroda announced new quantitative easing program in 2013 while serving as head of the Bank of Japan. The bank purchased securities and bonds at 60-70 trillion yen annually starting the 5th of April 2013. This aimed to double Japan's money base within two years. Yield curve control started in 2016 along with negative interest rates policy. The BOJ became largest owner of Japanese stocks holding 4.7% of public equity. In 2024 following announcements about 5% wage growth by major companies the bank ended eight years of negative rates setting short term targets between 0 and 0.1 percent.
Tatsuno Kingo designed Tokyo headquarters building in eclectic style completed in 1896 under Shibusawa Eiichi direction. The site housed former gold mint Kinza near famous Ginza silver mint district. Engineer Nagano directed repairs after 1923 Great Kantō earthquake. Extensions added northern and eastern sides using reinforced concrete during 1930s. Eastern extension remains extant while northern replaced by larger Matsuda Hirata Architects building finished 1973. South annex erected 1982, 1984 houses Currency Museum and Institute for Monetary and Economic Studies. Branch buildings appeared in Osaka 1903 Kyoto 1906 Otaru 1912 and other cities throughout early twentieth century.
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Common questions
When was the Bank of Japan founded and what act established it?
The Bank of Japan was formally founded on the 10th of October 1882 through the Bank of Japan Act. Finance minister Matsukata Masayoshi proposed creating the institution in March 1882 before its establishment.
Who designed the Bank of Japan headquarters building and when was it completed?
Tatsuno Kingo designed the Tokyo headquarters building which was completed in 1896 under Shibusawa Eiichi direction. The site housed former gold mint Kinza near famous Ginza silver mint district.
What monetary policy did Haruhiko Kuroda announce for the Bank of Japan in 2013?
Haruhiko Kuroda announced a new quantitative easing program while serving as head of the Bank of Japan starting the 5th of April 2013. The bank purchased securities and bonds at 60-70 trillion yen annually to double Japan's money base within two years.
How did the Bank of Japan gain monopoly control over money supply in 1884?
By 1883 all national banks lost their right to issue banknotes allowing the Bank of Japan to gain monopoly control over money supply in 1884. Convertible bank note regulations passed in May 1884 enabling first issuance in 1885.
When did the Bank of Japan end eight years of negative interest rates in 2024?
The Bank of Japan ended eight years of negative rates following announcements about 5% wage growth by major companies in 2024. The institution set short term targets between 0 and 0.1 percent after this decision.