Bank of Japan (BoJ)
The Bank of Japan, based in Tokyo, is the central bank of Japan. It ensures the smooth settlement of funds among banks and other financial institutions and issues banknotes. The BOJ also carries out currency and monetary control, which is aimed at achieving price stability (understood as a 2 percent year-on-year rate of change of the consumer price index), thereby contributing to the sound development of the national economy. The BOJ’s highest decision-making body is the Policy Board.
The Bank of Japan is considered the most systematically important central bank in the world, together with the Fed and the ECB, due to the significance of the Japanese economy and the international use of the yen.
BoJ’s Official Gold Reserves
Gold reserves are gold held by the central bank as a store of value, as a guarantee of payment to depositors or as a way of securing the currency. Japan is the ninth largest gold owner in the world. The Bank of Japan has 765.2 tons of gold, which accounts for about 2.3 percent of its total foreign reserves. The level of gold reserves has been stable for several years.
Bank of Japan and Gold
The Japanese economy has not fully recovered from the burst of the financial bubble at the beginning of the 1990s, often facing price deflation. This is why the Bank of Japan was the pioneer in adopting an unprecedented monetary policy. It has maintained short-term interest rates at close to zero since 1999 and conducted quantitative easing as early as in the early 2000s. Under the leadership of Governor Haruhiko Kuroda, the BoJ took more active steps to stimulate the economy and curb deflation, expanding significantly its balance sheet. In January 2016, the central bank of Japan introduced negative interest rates. In the past, the dovish BoJ’s moves strengthened the asset markets and the U.S. dollar and thus were negative for the price of gold. However, gold responded positively to the introduction of the NIRP, as it was interpreted as an act of desperation of the Bank of Japan, resulting from the bad state of the global economy and reducing the odds for further Fed hikes.
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