Princes of the Yen

In 20th-century Japan, a period of remarkable economic growth and transformation unfolded, marked by rapid industrialization, technological advancements, and a shift from an agrarian-based economy to a service-oriented and high-tech nation. However, beneath the façade of this miraculous growth story, a more complex narrative emerged, centered around the role and influence of the central bank, the Bank of Japan (BOJ). "Princes of the Yen," a thought-provoking documentary, delves into this intricate world, shedding light on the often-misunderstood domain of central banking and its far-reaching consequences. Based on the book by Professor Richard Werner, the film offers a unique perspective on Japan's financial and economic trajectory, highlighting the pivotal role of the BOJ in shaping the nation's future. The documentary begins by introducing the audience to the concept of central banking and its functions. Through the lens of Japan's experience, the film reveals how the BOJ, under the tutelage of its powerful governors, manipulated interest rates, money supply, and exchange rates to achieve specific economic and social goals. The governors of the BOJ, often referred to as "princes of the yen," wield enormous influence, their decisions affecting countless lives and industries across the country. One of the key figures in this narrative is Professor Richard Werner, a renowned economist and author of the book that inspired the documentary. Werner's expertise provides a framework for understanding the mechanisms by which the BOJ has shaped Japan's economy. He highlights the significant role of quantitative easing (QE), a policy that involves injecting liquidity into the financial system by buying government securities. By creating an artificial demand for these securities, the BOJ effectively lowers interest rates and fosters a culture of borrowing and spending. However, as the film progresses, it becomes clear that QE has had unintended consequences. The artificially low interest rates led to an unprecedented asset bubble, where housing prices and stock markets skyrocketed to unsustainable levels. Meanwhile, the debt levels of individuals and corporations spiralled out of control. Werner suggests that this phenomenon, known as the "Widening of the Yield Curve," has created a self-reinforcing cycle, where low interest rates and easy credit fuel speculative investments, pushing asset prices further upward. The documentary also explores the role of the BOJ in shaping Japan's economic policies during the post-World War II era. The film examines how the bank's decisions, often motivated by the desire to promote economic growth and stability, have contributed to the nation's notorious "bubble economy" of the 1980s. The rapid appreciation of the yen, driven by the BOJ's hawkish monetary policy, crippled Japanese industry, particularly the manufacturing sector, which struggled to compete with cheap, imported goods. The resulting trade deficits, combined with the rising debt levels of individuals and corporations, threatened to destabilize the entire economy. In recent years, the BOJ has introduced new policies aimed at reversing the effects of the asset bubble. The documentary follows the development of Japan's "Abenomics" strategy, introduced by Prime Minister Shinzo Abe in 2013. This package of policies, which includes a combination of monetary easing, fiscal stimulus, and structural reforms, aimed to revitalize the ailing economy and boost growth. However, the film raises questions about the efficacy of these policies, highlighting the unintended consequences of monetary easing, such as the creation of a "bubble economy 2.0." Throughout the documentary, Werner's expertise shines through as he provides context and insight into the complex world of central banking. By analyzing Japan's experiences, the film offers a valuable lesson for countries seeking to navigate the challenges of modern economics. Ultimately, "Princes of the Yen" poses difficult questions about the responsibility of central banks to regulate economic activities and about the limits of monetary policy in addressing broader social and economic issues. As the film concludes, it leaves the audience with a profound understanding of the intricate relationships between central banking, economics, and politics in 20th-century Japan. By shedding light on the often-hidden mechanisms of power and influence within the BOJ, "Princes of the Yen" inspires viewers to question the assumptions underlying modern economic systems and to seek a more nuanced understanding of the complex forces shaping our world.