In other words, the historically close ties between the two institutions are unlikely to be severed overnight by a piece of legislation. Even so, the FSRC's recommendations, which are expected to meet little resistance in the Diet and, if approved, take effect in April next year, are a positive and necessary step. Historically, Japan has gone its own way with impressive results. Monetary policy, an active instrument of the government, was coordinated with fiscal policy. The authorities made funds available at low interest rates for industry to grow and prosper.
Recent developments suggest it is time for a change in Japan.
But the central bank kept interest rates high and growth stagnated. Today, they are nearly as low as they can go and, with the nation's economic recovery faltering, monetary policy is not an issue. The question is how rapidly central bank rates will be raised, once a recovery is in full swing, to head off a boom-bust repeat. The FSRC likely had this in mind when it made its recommendations. It proposes that monetary policy be set by a nine-member board comprising six individuals from the private sector and three from the central bank.