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...stately neo-baroque building in Tokyo, nine men may vote to end of one of the oddest periods in the history of central banking?and send one of the clearest signals yet that Japan's economy has finally emerged from 15 years of stagnation. Led by governor Toshihiko Fukui, the monetary-policy committee at the Bank of Japan (BOJ) will vote on whether to raise its overnight lending rate to 0.25% or leave it at zero, where it has been for more than five years. That shift would not just demonstrate that the BOJ believes the world's second largest...

Author: /time Magazine | Title: Japan Takes Flight | 7/10/2006 | See Source »

...companies were hobbled by so many other problems, like bloated payrolls and debt-laden balance sheets. Under the reform agenda initiated by Prime Minister Junichiro Koizumi in 2001, however, Japanese industry began to modernize and streamline. Taking the helm of the BOJ in 2003 as Koizumi's handpicked favorite, Fukui led central-bank intervention into uncharted waters. His predecessor frequently claimed impotence, saying there was little a central bank could do to stoke an economy's fires once it had lowered rates to zero. But Fukui stepped up or initiated a series of unorthodox "quantitative easing" programs designed to flood...

Author: /time Magazine | Title: Japan Takes Flight | 7/10/2006 | See Source »

...enjoying one of its longest postwar expansions. GDP grew 3.2% in the last fiscal year and the Nikkei stock index is up 66% in three years. Spending is up, wages are up, even property prices are rising again, and unemployment is at an eight-year low. With conditions improving, Fukui has made no secret of his desire to end the anomalous zero-interest era, saying he favors acting early and in small steps. In March, the BOJ declared an end to its quantitative-easing campaign, and it has since tightened the money supply considerably, draining an astonishing $181 billion from...

Author: /time Magazine | Title: Japan Takes Flight | 7/10/2006 | See Source »

...Things are looking so rosy, in fact, that the BOJ has begun to fret that the biggest danger is that the economy will expand too rapidly. BOJ policy-board member Kiyohiko Nishimura has warned that low rates could promote "useless, excessive investment," and Fukui has vowed to raise rates "without delay" should investment become rampant. Those fears may be coming to pass. Last week's much-watched Tankan business-sentiment survey indicated that Japan's largest companies plan to increase investment at the quickest pace in 16 years. "The Tankan survey showed the economic climate is slightly overheated," says Takeo...

Author: /time Magazine | Title: Japan Takes Flight | 7/10/2006 | See Source »

...Although the BOJ is officially independent, its governors are subject to far more government influence than U.S. or European central bankers. Complicating matters is a scandal over Fukui's personal finances that could further weaken his ability to withstand political pressure. Fukui has been in the hot seat since revelations last month that he invested in a fund run by shareholder activist Yoshiaki Murakami, who recently admitted to insider trading. Although Fukui made the investment in 1999 when he was working in the private sector, and the BOJ had no regulations for incoming officers to put their assets...

Author: /time Magazine | Title: Japan Takes Flight | 7/10/2006 | See Source »

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