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.

Grant Shapps on the campaign trail. Photo: Getty
Show Hide image

Grant Shapps resigns over Tory youth wing bullying scandal

The minister, formerly party chairman, has resigned over allegations of bullying and blackmail made against a Tory activist. 

Grant Shapps, who was a key figure in the Tory general election campaign, has resigned following allegations about a bullying scandal among Conservative activists.

Shapps was formerly party chairman, but was demoted to international development minister after May. His formal statement is expected shortly.

The resignation follows lurid claims about bullying and blackmail among Tory activists. One, Mark Clarke, has been accused of putting pressure on a fellow activist who complained about his behaviour to withdraw the allegation. The complainant, Elliot Johnson, later killed himself.

The junior Treasury minister Robert Halfon also revealed that he had an affair with a young activist after being warned that Clarke planned to blackmail him over the relationship. Former Tory chair Sayeedi Warsi says that she was targeted by Clarke on Twitter, where he tried to portray her as an anti-semite. 

Shapps appointed Mark Clarke to run RoadTrip 2015, where young Tory activists toured key marginals on a bus before the general election. 

Today, the Guardian published an emotional interview with the parents of 21-year-old Elliot Johnson, the activist who killed himself, in which they called for Shapps to consider his position. Ray Johnson also spoke to BBC's Newsnight:


The Johnson family claimed that Shapps and co-chair Andrew Feldman had failed to act on complaints made against Clarke. Feldman says he did not hear of the bullying claims until August. 

Asked about the case at a conference in Malta, David Cameron pointedly refused to offer Shapps his full backing, saying a statement would be released. “I think it is important that on the tragic case that took place that the coroner’s inquiry is allowed to proceed properly," he added. “I feel deeply for his parents, It is an appalling loss to suffer and that is why it is so important there is a proper coroner’s inquiry. In terms of what the Conservative party should do, there should be and there is a proper inquiry that asks all the questions as people come forward. That will take place. It is a tragic loss of a talented young life and it is not something any parent should go through and I feel for them deeply.” 

Mark Clarke denies any wrongdoing.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.