【What are the three roles of the Bank of Japan?】
In April of this year, the Japanese government appointed Ueda Kazuo, an academiceconomist and former Bank of Japan Policy Board member, as the next Bank of Japan governor. Therefore, the trend of the Bank of Japan has been reported almost every day.
However, when it comes to what the Bank of Japan does, and what role it plays in the Japanese economy, many people seem to be scratching their heads. We will learn about the background of the Bank's establishment and its role.

【The Bank of Japan was established in 1882 (Meiji 15)】
After the Meiji Restoration, Japan actively promoted new industrial development. However, the Meiji government, which was not yet financially stable, had to rely on the issuance of *inconvertible banknotes to raise funds. Under these circumstances, the Seinan War broke out in 1877. To procure the war expenditures, the government issued a large number of inconvertible banknotes, causing severe inflation.
In 1881 (Meiji 14), Matsukata Masayoshi, who became Okurakyo (now Minister of Finance), adopted a deflationary policy to overcome inflation and proposed the establishment of a central bank that would issue convertible banknotes, modeled after the central banks of European countries. A central bank is a financial institution that is at the center of a country's monetary and banking system. The B ank of Japan was established under the Bank of Japan Act, which was promulgated in June 1882, and began operating in October 1882.

【Outline of the Bank of Japan】
The Bank of Japan is the central bank of Japan. It is a juridical person established based on the Bank of Japan Act and is not a government agency or a private corporation. The Bank of Japan is a juridical person authorized by the government of Japan, but it is neutral and independent from the government in order to avoid being under pressure to adopt easing policies.
The Banking Act a lso stipulates that "the Bank of Japan's officers and employees are deemed to be those engaged in public service pursuant to laws a nd regulations." They are called "deemed public servants," and a high level of ethics is required.
The Japanese government appointed Ueda Kazuo as the next Bank of Japan governor. Thegovernor of the Bank of Japan is appointed by the Ca binet, subject to the consent of both houses of the Diet: the House of Representatives and the House of Councillors.

【The Policy Board is the Bank's highest decision-making body】
The Bank of Japan has three major roles.
(1) Issuer of banknotes;
(2) Bank of the government;
(3) Bank of banks.
The Policy Boardis the Bank's highest decision-making body. Important matters concerning monetary policy and the Bank's business operations, as well as other basic policies for the execution of operations, are decided by the Policy Board. The Policy Board comprises the Governor, two Deputy Governors, and six Members of the Policy Board. It also has the authority to supervise the execution of duties by officers such as auditors (up to three), executive directors (up to six), and counsellors (a few).

【What are the three roles of the Bank of Japan?】
Look at the banknote in your hand. The words "NIPPON GINKO KEN" are printed on the face of the banknote. As Japan's sole issuer of banknotes, the Bank of Japan issues, circulates, and maintains banknotes. The Bank of Japan notes are manufactured by the National Printing Bureau. The new banknotes, delivered from the National Printing Bureau to the Bank of Japan, are put into general circulation through financial institutions. The Bank also handles coins issued by the government.
The Bank of Japan handles the Japanese government's funds. It serves as the "government's bank." The Bank accepts treasury funds from the government as government deposits. Treasury funds consist of revenues from the public, such as national taxes and social security premiums, and government expenditures, for example, payments such as public works expenditures and public pensions. The Bank provides some of the government’s business services entrusted by the government, such as those related to Japanese government securities and foreign exchange.
The Bank does not accept deposits from individuals or firms, but accepts deposits from private banks and other financial institutions that hold current accounts at the Bank. Because the relationship between the Bank and private financial institutions is similar to that between banks and firms or individuals, the Bank is referred to as the " bank of banks." The Bank o f Japan Financial Network System (BOJ-NET) is a computer network operated by the Bank. The BOJ-NET F unds Transfer System t ransfers funds between fi nancial institutions' current account deposits at the Bank and processes transactions and funds settlements. This is the fastest and most reliable method.

【Aiming for the sound development of people's lives】
The Bank of Japan decides and implements monetary policy with the aim of maintaining price stability. The Bank of Japan Act states that the Bank's monetary policy should be "aimed at achieving price stability, thereby contributing to the sound development of the national economy." Price stability is an indispensable foundation for the economy to achieve stable and sustainable growth, and in this aim, the Bank fulfills its role of contributing to the sound development of the national economy.
The Japanese economy has been plagued by a prolonged recession, and the Russian invasion of Ukraine has caused significant price volatility in global markets over the past year. We will be watching closely how the newly formed Bank of Japan, in cooperation w ith t he g overnment, responds to the severe economic situation in Japan.

*Convertible banknote and Inconvertible banknote
Convertible banknote is money that can be converted into standard currency on demand. It can be converted into gold or silver. Inconvertible banknote is money that cannot be converted into standard currency. It cannot be converted into gold or silver.