marctomarket.com / By Marc Chandler / March 12, 2013
Threats by Japan’s Prime Minster Abe to changed the BOJ’s charter faced broad criticism for threatening the independence of the central bank. Some officials reacted more strongly to this than to the bilateral exchange rate targets some officials were suggesting.
Abe has since backed away from changing the BOJ’s mandate, as his candidate to head up the BOJ has promised to deliver the goods–aggressive expansion of the asset purchase scheme and possibly before the April 3-4 regularly scheduled meeting. The willingness of Iwata, a nominee for one of the deputy slots at the BOJ, to accept a change in the BOJ’s mandate, is being seized upon by the opposition DPJ to oppose the appointment.
The UK appears to be adopting similar tactics. The BOE has embraced a depreciation of sterling, though stopping shy of providing bilateral targets, either against the dollar or the euro. Cameron and Osborne have agreed to replace the BOE Governor, whose term is expiring, with the head of the Bank of Canada who has promised a more activist monetary policy to offset the austerity upon which the government has staked its future.
Changing personnel may not be sufficient for Cameron and Osborne. There are moves afoot to change the BOE’s charter. Recall that although the BOE is the second oldest central bank in the world after Sweden’s Riksbank, it was not granted independence until Labour did so in 1998. Reports have circulated that the direction of the changes being contemplated is to give the BOE greater scope to tolerate higher inflation for longer.