Macroscope | Western hypocrisy over Japan’s sensible monetary policy shows Asia needs its own IMF

The IMF has learned nothing from its failures in the 1997 Asian financial crisis and continues to try to dictate how Asian countries pursue their interests

Asia needs greater autonomy to make its own financial decisions without Western meddling, but better China-Japan cooperation is needed for that to happen

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The headquarters of the Bank of Japan in Tokyo on October 27, 2022. The Japanese central bank’s monetary policy has come under criticism by the International Monetary Fund despite appearing more responsible than that of other members. Photo: AFP

Published: 9:00pm, 4 Feb 2023

The International Monetary Fund (IMF) is at it again, lecturing Asian countries on how they should run their monetary, fiscal or other policies despite the fact that the actions of certain key IMF member states are at least partly responsible for the distressed state of the global economy.

This time, the specific target of the “policy advice” is Japan, or more specifically the Bank of Japan (BOJ). The IMF has never been shy about telling Asian countries what they need to do, only to incur criticism later for its actions.

In a report on the latest of its Article IV consultations with Japanese authorities, the IMF advised the BOJ that “to better manage risks given increased uncertainty regarding inflation, more flexibility in longer-term yields should be considered”. This might sound too technical to be of interest to anyone beyond the confines of academia, yet by mentioning it the IMF stepped into a minefield of controversy over whether monetary policy should be officially determined or left to the marketplace.

This issue is better discussed in detail elsewhere, but the irony is that central banks in the United States, Britain and other Western members of the IMF first let inflation rip and then choked it off suddenly, risking global recession. Despite this, Japan is being castigated for behaving more responsibly.

Japan is not suffering from the kind of inflation that has wreaked havoc on Western economies in recent times. In fact, deflation or disinflation has long been the main problem in Japan, yet the IMF still feels free to tell Japan how to behave.

In recent months, the BOJ has been in a pitched battle with investors and speculators that are determined to force Japan’s interest rates and currency into line with those of nations where prudent monetary policy has been abandoned.

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.css-1m2rp1p{color:#34b8b5;}Macroscope | Western hypocrisy over Japan’s sensible monetary policy shows Asia needs its own IMF

Macroscope | Western hypocrisy over Japan’s sensible monetary policy shows Asia needs its own IMF