The debate over monetary policy in Tokyo is shaping up to be the mother-of-all-battles over economic policy. The latest skirmish began when Bank of Japan Gov. Masaru Hayami spoke out in favor of ending Japan's zero-interest policy.
The ongoing struggles to restore life to Japan's moribund economy have contributed to a loss of credibility of its political class and government officials in its most prestigious institutions while burdening future generations with massive debts. Besides questions of competence, the Bank of Japan and the Ministry of Finance also suffered from corruption scandals. Restoring the BOJ's lost luster requires an assertion of its newly-granted immunity from outside interference.
While deflecting criticism from local political authorities, monetary policy makers are also having to fend off sniping from foreign economic ideologues like U.S. Treasury Secretary Larry Summers and MIT economist Paul Krugman. Happily, Hayami seems to be well inoculated from their entreaties and is willing to steer his own course.