In 2015, the Bank of Japan announced that it would begin buying exchange-traded funds (ETFs), provided that the stocks included in the funds had been issued by firms that were “proactively making investments in physical and human capital.” The Japanese government had been urging firms to increase their investment spending. An editorial in the Wall Street Journal observed:
“Using the central bank’s powers to promote the government’s political goals also runs the risk of misallocating resources, which would harm growth. It sets a precedent that could undermine the bank’s independence.” Briefly explain whether you agree that these actions by the Bank of Japan might undermine its independence.