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"First Arrow": Monetary policy

At the first CEFP meeting in January 2013, Abe declared that the Bank of Japan should follow a policy of monetary easing to achieve a target of 2 percent inflation. Abe maintained pressure on the Bank's governor, Masaaki Shirakawa, who was reluctant to set specific targets, into agreeing to the policy. In February, after Abe publicly speculated that the government could legislate to strip the bank of independence, Shirakawa announced he was leaving office prematurely before his term expired. Abe then appointed Haruhiko Kuroda as governor, who had previously advocated inflation targets, and who has pursued the government's policies of monetary easing.

After the first meeting of the Bank's monetary policy committee after he had taken office in April, Kuroda announced an aggressive program of easing intended to double the money supply and achieve the 2 percent inflation target at "the earliest possible time". Over the first six months of the second Abe Cabinet, the Yen fell from a high of ¥77 to the dollar to ¥101.8, and the Nikkei 225 rose by 70 percent.

In a surprise move in October 2014, Kuroda announced that the BOJ would boost the monetary easing program and accelerate asset purchases, the monetary policy committee split by five votes to four but supported the policy. This was interpreted as a response to disappointing economic figures in the aftermath of the increase in the consumption tax to 8 percent, inflation has fallen to 1 percent from its peak of 1.5 percent in April.