Published by Global Banking & Finance Review®
Posted on January 29, 2025
4 min readLast updated: January 27, 2026
BOJ policymakers doubted the 2014 stimulus expansion's effectiveness. The decision passed narrowly, highlighting internal debates over economic impacts.
By Leika Kihara
TOKYO (Reuters) - Some Bank of Japan policymakers began to lose faith in the power of former Governor Haruhiko Kuroda's "bazooka" stimulus less than two years after its introduction, with a decision to ramp up the programme in 2014 made by a narrow 5-4 vote, according to a full account of the deliberations released on Wednesday.
Under Kuroda, the BOJ deployed a massive asset-buying programme dubbed "quantitative and qualitative easing" (QQE) in April 2013 to pull Japan out of deflation and fire up inflation to its 2% target in roughly two years.
The BOJ expanded QQE in October 2014 to prevent slumping oil costs and weak consumption from delaying achievement of the price goal. Several more monetary easing steps failed to keep inflation durably around 2% for another decade, forcing the BOJ to prolong what was intended to be a quick-hit stimulus.
The BOJ releases a summary of discussions at each of its policy meeting about a month after it is held with the comments quoted anonymously. A full account of the deliberations, which identify which policymaker made the comments, is released 10 years after each meeting.
At the October 2014 meeting, some board members advocated expanding QQE on the view that failing to achieve the price goal within two years would put the BOJ's credibility at risk, the full minutes showed.
"Failing to adjust policy would lead to a crumble of trust in our commitment. It also means the accomplishments of QQE up till now could go to waste, something I cannot overlook," then Deputy Governor Hiroshi Nakaso was quoted as saying.
"It would be too late to act after risks materialise, so we must act pre-emptively by seizing the right opportunity to maximise the effect," he said.
Others, however, voiced doubts on whether ramping up an already huge stimulus would deliver enough benefits to justify the costs, such as the strain the bank's huge buying was causing in the bond market.
"The longer we continue with the current policy, the downward pressure on interest rates would strengthen. But the marginal boost to the economy and prices might diminish," board member Koji Ishida said, calling for a review of the pros and cons of QQE.
Another board member, Takehiro Sato, said it was "hard to understand" whether the risks the BOJ sought to forestall was worth the huge sacrifice of deploying a policy "where the cost did not meet the benefits," the minutes showed.
The biggest scrutiny from those cautions of ramping up QQE came from the key transmission channel of the policy: shocking the public out of deflation with a huge blow of stimulus.
While Nakaso described the impact on public sentiment as the "life line" of QQE, board member Takahide Kiuchi said such a psychological effect was "likely to be quite limited" - a view echoed by another board member Yoshihisa Morimoto.
"The positive effect on consumption from influencing public expectations will likely be limited. There's also questions about the sustainability," Morimoto said.
In proposing an expansion of QQE, Kuroda said the move was necessary to forestall the risk of further price falls delaying a shift in Japan's deflationary mindset, the minutes showed.
While Kuroda's stimulus failed to fire up inflation, supply constraints caused by the COVID-19 pandemic, as well as rising raw material costs from the weak yen and Russia's war in Ukraine lifted inflation above the BOJ's target in 2022.
The BOJ exited QQE and other remnants of Kuroda's stimulus in March last year, and raised short-term interest rates to 0.25 in July. The policy rate was hiked to 0.5% this month.
Under incumbent Governor Kazuo Ueda, the BOJ also conducted a review of past monetary easing steps in December and concluded that Kuroda's stimulus did not change consumer psychology as much as planned.
Kuroda defended his policies in a paper he contributed to a journal in January, saying the damage to regional banks' profits were limited and deteriorating bond market function was a necessary cost to sufficiently reflate growth.
(Reporting by Leika Kihara; Editing by Kim Coghill)
Kuroda's 'bazooka' stimulus refers to the massive asset-buying program known as quantitative and qualitative easing (QQE) introduced by the Bank of Japan in April 2013 to combat deflation and achieve a 2% inflation target.
Some BOJ policymakers began to doubt the effectiveness of QQE less than two years after its introduction, questioning whether the benefits of expanding the stimulus justified the costs and potential risks.
Concerns included the potential for diminishing returns on economic and price boosts, as well as the strain on the bond market caused by the bank's extensive asset purchases.
In December, the BOJ concluded that Kuroda's stimulus did not significantly change consumer psychology as intended, leading to further scrutiny of its long-term effectiveness.
After Kuroda's tenure, the BOJ exited QQE and raised short-term interest rates, increasing them to 0.25% in July and further to 0.5% in the following month.
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