Bank of Japan facts for kids

Quick facts for kids
Bank of Japan
日本銀行

Headquarters in Chūō, Tokyo
Headquarters	Chūō, Tokyo, Japan
Coordinates	35°41′10″N 139°46′17″E / 35.6861°N 139.7715°E / 35.6861; 139.7715
Established	27 June/10 October 1882
Governor	Kazuo Ueda (9 April 2023 – present)
Central bank of	Japan
Currency	Japanese yen JPY (ISO 4217)
Reserves	US$ 1.12 trillion (October 2023)
Bank rate	+0.10%

The Bank of Japan (or BOJ) is like the main bank for the country of Japan. Its Japanese name is 日本銀行 (Nippon Ginkō). People often call it Nichigin for short. Its main office is in Nihonbashi, Chūō, Tokyo.

The BOJ is a special organization that works independently from the Japanese government. This means it can make decisions about money without political pressure. This independence helps the bank make good long-term choices for Japan's economy. It ensures the country's money system stays stable and fair for everyone.

What is the Bank of Japan?

What are the Bank of Japan's Main Goals?

In 1998, the rules for the Bank of Japan were updated. These new rules clearly stated the bank's main goals. These goals are to keep prices stable and to make sure the financial system is strong. This update also made the bank more independent from the government. Before this, during World War II, the bank's goal was to support the nation's war efforts.

The BOJ makes important decisions about money at special meetings. These are called Monetary Policy Meetings (MPM). The Policy Board attends these meetings, which happen every other month.

Keeping Prices Stable

The BOJ works to keep prices stable. This means making sure prices don't go up too fast (inflation) or fall too much (deflation). They aim for a small increase in prices each year, usually around 2%. They try to reach this goal by changing the main interest rate. This rate affects how much it costs to borrow money.

For a long time, since the 1990s, Japan had a problem with prices falling or not rising enough. This is called deflation or disinflation. Many people think this was a big reason for Japan's slow economy. So, for the past 20 years, a main goal for the BOJ has been to get prices to rise steadily.

Making Sure the Money System is Safe

The financial system is how money moves around. This includes how people and businesses pay, lend, and borrow money. When the financial system is stable, it means it works well. People and businesses can trust that their money is safe and that transactions will go smoothly. The BOJ works to keep this system strong and reliable.

What Does the Bank of Japan Do?

The Bank of Japan does several important jobs to achieve its goals:

• It is the only organization that prints all the money (banknotes) for Japan. It also manages these notes.
• It manages how much money is in circulation. It does this by changing interest rates and other financial tools. This helps to keep prices steady and the economy strong.
• It acts like a "bank for banks." Financial institutions have accounts with the BOJ to make transactions with each other. Regular people and businesses cannot open accounts here.
• It manages money for the Japanese government. This includes handling payments and receipts for public funds.
• It helps keep the financial system stable. It makes sure money moves smoothly between banks. It also acts as a "lender of last resort." This means it can lend money to banks if they run into big trouble.
• It works with other central banks and organizations around the world. This includes dealing with foreign exchange markets.
• It gathers and shares important information about Japan's economy. It also publishes economic statistics.

How the Bank of Japan Has Managed Money

The Bank of Japan has faced many challenges over the years. Here's a look at some of its key decisions:

• In 1971, when the US dollar changed its value, the BOJ kept the Japanese yen's value fixed for a while. This led to too much money in the economy and caused prices to rise quickly. To fix this, they raised interest rates, and prices eventually settled down.
• In 1979, during an energy crisis, the BOJ quickly raised interest rates. This helped Japan's economy recover fast. After the crisis, they lowered rates again.
• In 1985, major countries agreed to lower the value of the US dollar. This made the Japanese yen much stronger. To prevent prices from falling too much, the BOJ cut interest rates several times. However, this also led to a "bubble" in the economy, where real estate and investments became too expensive.
• After 1990, the bubble burst, and the stock and real estate markets fell. The BOJ worked to fix this problem.
• In 1995, a big earthquake hit Japan. The Japanese yen became very strong. The BOJ lowered interest rates to help the yen recover. This period also marked the start of deflation (falling prices) in Japan.
• In 1999, the BOJ tried a "zero-interest-rate policy." This meant borrowing money was almost free. They stopped this policy briefly but brought it back in 2001 when the economy struggled again.
• From 2003 to 2004, the Japanese government took big steps to help the economy. The BOJ ended its zero-interest-rate policy in 2006.
• In 2008, a big financial crisis hit the world. Japan's economy got worse. The BOJ lowered interest rates again and started buying government and company bonds to help.
• In 2013, the new head of the BOJ, Haruhiko Kuroda, started a huge program. It involved buying many different types of assets, including stocks. This was called "quantitative and qualitative easing" (QQE).
• In 2016, the BOJ started a "negative interest rate policy." This meant banks had to pay a small fee to keep money at the BOJ. They also started "yield curve control" to manage long-term interest rates. The BOJ became the biggest owner of Japanese stocks.
• In 2024, after Japanese companies announced good wage increases, the BOJ ended its negative interest rate policy. It set new short-term interest rates between 0% and 0.1%.

Curbing Deflation

After Shinzō Abe became Prime Minister in 2012, he pushed the Bank of Japan to fight deflation. Deflation is when prices keep falling, which can hurt the economy. In October 2012, the BOJ announced it would take more steps to boost the economy.

In April 2013, under new Governor Haruhiko Kuroda, the BOJ said it would buy a lot of bonds and other assets. The goal was to double Japan's money supply in two years. However, by 2016, it was clear that these efforts had not fully stopped deflation. So, the Bank of Japan decided to review its money-boosting plan.

History of the Bank of Japan

The Bank of Japan was created after the Meiji Restoration. Before this, different parts of Japan used their own types of money. In 1871, Japan created a new currency called the yen. At first, many private banks could print money. But this caused problems.

So, the Bank of Japan was officially started on October 10, 1882. It was based on ideas from banks in other countries. The bank was given the sole right to control the country's money supply in 1884. It took another 20 years for all the old types of money to be replaced by yen notes.

The Bank of Japan printed its first banknotes in 1885. There were some small issues, like rats eating the paper because of an ingredient used to prevent fake money! But overall, it worked well. In 1897, Japan joined the gold standard. By 1899, all the old banknotes from private banks were gone.

The Osaka branch of the Bank of Japan is seen in the top right of this 1930 aerial photograph. The wide street in front of the bank is part of the Mido-Suji.

Since it began, the Bank of Japan has always had main offices in Tokyo and Osaka.

Changes Over Time

The Bank of Japan was reorganized in 1942. Its operations were briefly stopped after World War II during the Occupation of Japan. In 1949, it was restructured again.

In the 1970s, Japan's economy changed a lot. It moved from a fixed exchange rate to a system where the value of the yen could change freely. The BOJ had to adapt to these new conditions.

For many years after the war, the BOJ managed money by telling commercial banks how much credit they could offer. This method was very important in creating Japan's "bubble economy" in the 1980s.

In 1997, the Bank of Japan Act was updated again. This was done to give the bank more independence. However, some people thought the bank already had too much independence. The new law says that the BOJ should work closely with the government. They should share ideas so that their money policies and the government's economic plans work well together.

Even with the new law, the Bank of Japan has sometimes refused government requests to boost the economy. This shows its independence.

Where is the Bank of Japan?

The main office of the Bank of Japan is in Nihonbashi, Chūō, Tokyo. This area used to be a place where gold coins were made. It's also close to the famous Ginza district, which means "silver mint." The main building in Tokyo was designed in 1896. It has a grand, old-fashioned style.

The BOJ's branch in Osaka, located in Nakanoshima, is also very famous. Many people see it as a symbol of the bank itself.

Governor

Governor of the Bank of Japan
Incumbent Kazuo Ueda since 9 April 2023
Style	His Excellency
Appointer	The Prime Minister
Term length	Five years
Inaugural holder	Yoshihara Shigetoshi
Formation	6 October 1882

The governor of the Bank of Japan is a very important person. They have a lot of power over Japan's economic policies.

List of Governors

Monetary Policy Board

As of April 9, 2023, nine people make up the board that sets the BOJ's money policies:

• Kazuo Ueda, Governor of the BOJ
• Uchida Shinichi, Deputy Governor of the BOJ
• Himino Ryozo, Deputy Governor of the BOJ
• Adachi Seiji
• Nakamura Toyoaki
• Noguchi Asahi
• Nakagawa Junko
• Takata Hajime
• Tamura Naoki

What the Bank of Japan Owns

The Bank of Japan owns a part of the Tokyo Stock Exchange. Since 2020, it has owned more of the market than any other group.

Images for kids

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  The head office of the Bank of Japan located in Nihonbashi Hongokucho, Chuo-ku, Tokyo

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  The Bank of Japan Osaka Branch

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  The Bank of Japan Otaru Museum in Otaru, Hokkaido

See also

Template:Kids robot.svg In Spanish: Banco de Japón para niños

• Japanese yen
• Economy of Japan
• Japan Mint
• List of central banks