In 1997, the Japanese Diet revised the Bank of Japan law thereby granting the central bank greater independence in monetary policy making. The revision was an attempt by Japan's political class to weaken the authority of the powerful Ministry of Finance over the central bank and augment its own influence. The Bank of Japan, however, gained more autonomy than politicians ever intended, leading to frequent confrontations between the government and the central bank over monetary policy. This paper explores the new strategic relationship that emerged between the Bank of Japan and government and the nature of monetary policy implemented in the post-reform period. We demonstrate that several factors contributed to the Bank's unexpected ability to enhance its independence: the astute leadership of the first post-reform governor Hayami Masaru; the Bank's ability to turn politicization of monetary policy to its advantage; and its pursuit of a ‘power through knowledge’ strategy achieved by augmenting its own research capacity. On a theoretical level, our findings show that the passage of a new legal framework only marks the completion of one stage of institutional change and the start of the next; post-enactment politics have as much importance as pre-enactment politics in shaping outcomes. In the post-enactment phase, various factors, including the state of the economy and informal institutions or processes, matter greatly and may shift the direction of institutional change away from the intended path.
Arvid Lukauskas is the executive director of the Picker Center for Executive Education and the MPA in Economic Policy Management (MPA-EPM) program at the School of International and Public Affairs, Columbia University. He also directs SIPA’s summer program offered in collaboration with the School of Continuing Education.
Lukauskas teaches and conducts research on international and comparative political economy, with a focus on the political economy of finance and trade policy. His books are the Handbook of Trade Policy for Development, edited with R. Stern and G. Zanini (Oxford University Press, 2013); The Political Economy of the East Asian Crisis and its Aftermath, edited with F. Rivera-Batíz (Edward Elgar 2001); and Regulating Finance: The Political Economy of Spanish Financial Policy from Franco to Democracy (University of Michigan 1997). His articles have appeared in various scholarly journals, including Comparative Politics, Comparative Political Studies, International Studies Quarterly, Japanese Journal of Political Science and Review of International Political Economy. He is currently working on a book-length project examining the links between economic and social development in East Asia.
Through the Picker Center, Lukauskas has helped develop or direct a number of major executive training programs in Brazil, Chile, China, Egypt, Republic of Georgia, Hong Kong, Malaysia, Mexico, Singapore, and Thailand as well as for UNDP and the World Bank. He was the principal investigator for a four-year USAID grant, in conjunction with the East-West Management Institute, to develop educational capacity in the Republic of Georgia. He has served as a consultant to UNDP and the World Bank Institute.
Lukauskas received a BA from University of Wisconsin, Madison, an MPA from University of Oklahoma, and his PhD from University of Pennsylvania.