Bank of Japan:

 https://mainichi.jp/english/articles/20201218/p2g/00m/0bu/072000c

Ideas:

The Bank of Japan strategy is nothing new or not unexpected is this pandemic situation.

The Bank of Japan and the Japanese government need to coordinate their strategies for the best result for the economy, business, large and small, and for those who really need help.

The Bank of Japan, for many years, had maintained an "ultra-loose" monetary policy. Even the negative interest rate strategy is nothing new.

Back in 2010 the EU tried and negative interest rate strategy as a way to stimulate economic growth during the prolonged 2008 global financial crisis and the Greece crisis.

The negative interest rate strategy, while not exactly saying it is signaling to companies, which are sitting on or were sitting on before the pandemic  to "use your excess cash or lose it" over time. What the BOJ was/is trying to do is to get the large companies to use their excess cash and give salary increases to their employees.

The ideas is if workers get an increase in salaries, then they might feel good enough to actually use it, spend it in the economy instead of just saving all of it, and increase inflation, meaning the more demand their is in the economy, the more spending there is, the more money moving through the economy there might be an increase in inflation.

It as been the BOJ's strategy to get inflation up to the 2 percent level. The inflation in the Japanese economy has been around 1 percent almost forever, it seems. Most central banks want to see inflation between 2 and 4 percent, as that indicates there is a lot of movement in the economy and a lot demand. 

Since 2013 the BOJ has tried to increase inflation but without much success.

But then we have to ask the question, is a 2 percent inflation rate really needed for the Japanese economy. The economy overall, is very stable economy and even during the pandemic doesn't appear like it is going to collapse or go into a deep depression. 

Yes maybe a recession now but there have always been some kind of recession. But again, even in a recession, an economy is so complex you still have positives and negatives.

So the question again, is the goal of trying to reach a 2 percent inflation rate really that important for the economy to keep growing or moving forward? In theory it might help some business and sectors. But then their is the chicken and the egg idea? Which came first the chicken or the egg?

In other words does the economy need a 2 percent inflation rate to grow or does just need more demand, which creates the 2 percent.  

The BOJ in previous years as said it hasn't been able to reach 2 percent but that it is not going to abandon the strategy.

Regarding consumer prices, again a very complex measure as you are looking at an overall index of the entire economy and not individual sectors or even individual companies and their prices.

The 0.6 decrease of course might mean less consumer spending on some products and or changes in prices related to external situations such as producer situations related to supply and demand. 

For example, if the growing season for fruit and vegetables was very good there might be an overall supply or surplus of some products. As such producers will be forced to lower their prices because they have too much supply for the marketplace and as such they need to offload their excess supply or lose out

And at the same time, if demand is down for their products they might be forced to lower their prices if there is not enough demand, in order to maintain a certain amount of profits.

And then if the growing season for fruit and vegetables was not so good, they might have a shortage meaning they can't supply enough for demand in the market. Either way produces will raise prices in order to maintain a certain level of profits as if they had enough supply for the market.

The "yield control curve" is nothing more than attempt to keep borrowing costs low in order to keep enough borrowing in order to keep enough money moving through the economy to keep the economy moving and not move into a stagnant or not growing mode.

But again the Japanese economy seems like its been a very stable economy and despite whatever the BOJ tries to do, the economy just keeps moving forward, but of course not at at the rate the BOJ or even the Japanese government wants. We might say again, the Japanese economy is very stable but at the same time, maybe its not operating 100 percent at its full potential, and of course not during the pandemic.

The BOJ as with any central bank is always looking for new monetary tools and strategies to keep the economy moving in the right direction especially during this protracted pandemic period.

Yes again the economy maybe has picked up or improved but there are probably many sectors that haven't.  In a normal economy there are always positives and negatives but during the pandemic of course there are more negatives than positives than positives. 

Liquidity in the financial system is very important during a recession and in this case a pandemic recession. In 2008, in the US, banks were afraid to lend because they were afraid they might go out of business which many did. Because demand for borrowing was at an all time high during that time, banks had almost completely stopped lending as they were afraid. As such there was not enough money moving through the economy to help the economy grow or get out of the 2008 global financial crisis.

As such the US government had to step in and provide enough needed to funds to keep the banking industry happy so that they would start lending again to businesses to who needed extra money to survive.

The BOJ seems to have learned that as it is making sure Japanese banks have enough liquidity to meet the demand of companies and families who need money to survive the pandemic.

Again the BOJ seems to be doing everything it can to sustain the banks in order to help companies survive. 

It doesn't want banks to get into a position of feeling that they are afraid to lend like with what happened in the US in 2008/2009. 

The idea of zero interest loans of course are not a favorite of bank, but the BOJ has put enough funds into the banks as to offset any bank losses or minimize bank losses from the zero interest rate strategy.

Of course the zero interest rate strategy is an incentive for companies to borrow, not just for survival, but to keep enough money moving through the economy.

An economy needs to have a certain amount of turnover or movement. If not economies go into recessions or even worse. So central banks are always looking to make sure there is enough money movement to keep an economy moving at the right amount. 

Most likely the only thing the BOJ and the Japanese government can do for the services sector is to keep giving them massive handouts or supplement budges to help as many as it can from going under. 

Its doubtful that the BOJ or Japanese government can help every business but it can try to do as much as it can.

And again this no time for the idea of "let the market decide" like in normal market and economy times when the market can sort out the positives and negatives or winners and losers depending on consumer demand, products, quality customer service and so on.

It seems most central banks have gone to a zero interest rate strategy to help businesses survive. 

And again central banks using the 2 percent inflation strategy or benchmark as way to signal an economy is working somewhat efficiently. 

Have a nice day and be safe!