Bank of Japan announces massive asset-purchase programme

£90bn of government assets purchased each month starting in January 2014.

The Bank of Japan has made its much-foreshadowed move to attempt to end the years of deflation the country has faced. This morning, it announced that it was repositioning its inflation target from 1 per cent to 2 per cent, and that it would aim to achieve that rate "at the earliest possible time".

The plan involves more than just expectations management, as well. Until the end of this year, the bank will continue with its ¥101trn round of quantitative easing, but from January 2014 it will begin buying ¥13trn — over £90bn — of assets, mostly short-term government debt, each month. The hope is that the massive burst of asset purchases will act to spike inflation, but there are indications that the government also plans to use some of the revenue this monetary policy will accord to it for fiscal stimulus.

As well as being higher than it was before, the inflation target is also stronger, replacing a "vaguely-worded “goal” for price stability over the medium to long-term", according to the Financial Times. That goal was not thought to be symmetrical, either: it merely targeted a positive rate of inflation below 2 per cent. Non-symmetric targets tend to inspire a tendency to undershoot (because if 1.9 per cent is OK but 2.1 per cent is terrible, no bank will aim for 2 per cent inflation), compounding the problems.

The news is not likely to please Germany's chief banker, Jens Weidmann, who yesterday warned of the danger of a government intervening too strongly in the actions of a central bank. Weidmann said in a speech at a Deutsche Boerse event that:

Already alarming violations can be observed, for example in Hungary or Japan, where the new government is interfering massively in the business of the central bank with pressure for a more aggressive monetary policy and threatening an end to central bank autonomy. A consequence, whether intentional or unintentional, could moreover be an increased politicisation of exchange rates.

But Weidmann is complaining into dead air, at this point. Japan's popular nationalist new prime minister, Shinzo Abe, is determined to restore the country to growth by any means possible. A recent tax bill, passed before his election, contains a (non-binding) target of 3 per cent nominal growth and 2 per cent real growth (implying a 1 per cent rate of inflation), which he is likely to adopt as a target for his own government. To achieve that, he needs some aid from the Bank of Japan — aid which he has secured. The question now is whether the bank will be allowed to return to independence when its job is done.

The Bank of Japan. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: André Spicer
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“It’s scary to do it again”: the five-year-old fined £150 for running a lemonade stand

Enforcement officers penalised a child selling home-made lemonade in the street. Her father tells the full story. 

It was a lively Saturday afternoon in east London’s Mile End. Groups of people streamed through residential streets on their way to a music festival in the local park; booming bass could be heard from the surrounding houses.

One five-year-old girl who lived in the area had an idea. She had been to her school’s summer fête recently and looked longingly at the stalls. She loved the idea of setting up her own stall, and today was a good day for it.

“She eventually came round to the idea of selling lemonade,” her father André Spicer tells me. So he and his daughter went to their local shop to buy some lemons. They mixed a few jugs of lemonade, the girl made a fetching A4 sign with some lemons drawn on it – 50p for a small cup, £1 for a large – and they carried a table from home to the end of their road. 

“People suddenly started coming up and buying stuff, pretty quickly, and they were very happy,” Spicer recalls. “People looked overjoyed at this cute little girl on the side of the road – community feel and all that sort of stuff.”

But the heart-warming scene was soon interrupted. After about half an hour of what Spicer describes as “brisk” trade – his daughter’s recipe secret was some mint and a little bit of cucumber, for a “bit of a British touch” – four enforcement officers came striding up to the stand.

Three were in uniform, and one was in plain clothes. One uniformed officer turned the camera on his vest on, and began reciting a legal script at the weeping five-year-old.

“You’re trading without a licence, pursuant to x, y, z act and blah dah dah dah, really going through a script,” Spicer tells me, saying they showed no compassion for his daughter. “This is my job, I’m doing it and that’s it, basically.”

The girl burst into tears the moment they arrived.

“Officials have some degree of intimidation. I’m a grown adult, so I wasn’t super intimidated, but I was a bit shocked,” says Spicer. “But my daughter was intimidated. She started crying straight away.”

As they continued to recite their legalese, her father picked her up to try to comfort her – but that didn’t stop the officers giving her stall a £150 fine and handing them a penalty notice. “TRADING WITHOUT LICENCE,” it screamed.


Picture: André Spicer

“She was crying and repeating, ‘I’ve done a bad thing’,” says Spicer. “As we walked home, I had to try and convince her that it wasn’t her, it wasn’t her fault. It wasn’t her who had done something bad.”

She cried all the way home, and it wasn’t until she watched her favourite film, Brave, that she calmed down. It was then that Spicer suggested next time they would “do it all correctly”, get a permit, and set up another stand.

“No, I don’t want to, it’s a bit scary to do it again,” she replied. Her father hopes that “she’ll be able to get over it”, and that her enterprising spirit will return.

The Council has since apologised and cancelled the fine, and called on its officials to “show common sense and to use their powers sensibly”.

But Spicer felt “there’s a bigger principle here”, and wrote a piece for the Telegraph arguing that children in modern Britain are too restricted.

He would “absolutely” encourage his daughter to set up another stall, and “I’d encourage other people to go and do it as well. It’s a great way to spend a bit of time with the kids in the holidays, and they might learn something.”

A fitting reminder of the great life lesson: when life gives you a fixed penalty notice, make lemonade.

Anoosh Chakelian is senior writer at the New Statesman.