Japan GDP Contraction Sparks Policy Debate: Stimulus and BoJ Outlook

## Overview The Bank of Japan (BoJ), established in 1882, is the nation’s central bank and the sole issuer of the Japanese yen[1][6][7]. Its primary missions are to maintain price stability and ensure the stability of the financial system, roles it fulfills through monetary policy, currency issuance, and oversight of financial institutions[5]. The BoJ is headquartered in Tokyo and plays a central role in shaping Japan’s economic landscape, influencing everything from inflation and interest rates to foreign exchange markets[5][7]. ## History The BoJ was founded to unify and stabilize Japan’s previously fragmented monetary system, which was plagued by numerous private banks issuing their own currencies[3]. Modeled after European central banks, the BoJ gained a monopoly on money supply control in 1884 and began issuing banknotes in 1885[1]. Its early years were marked by Japan’s adoption of the gold standard in 1897 and the gradual consolidation of national currency issuance[1]. The bank underwent significant reorganization during the 20th century, especially after World War II, when its functions were briefly suspended during the Allied occupation[1][4]. The 1942 and 1949 reforms redefined its structure, including the establishment of the Policy Board[2]. For much of the post-war period, the BoJ relied on “window guidance” credit controls, which were later criticized for contributing to the asset bubble of the 1980s[1]. The 1997 Bank of Japan Act granted the BoJ greater independence while emphasizing collaboration with the government[1][2]. ## Key Achievements The BoJ has navigated numerous economic challenges, including the oil shocks of the 1970s, the asset bubble and subsequent bust of the late 1980s and 1990s, and the prolonged deflationary period that followed[3][4]. In response, it pioneered unconventional monetary policies, such as the