“a scandal like this could undermine credibility in the entire BOJ. The central bank is supposed to…”
by KOTARO FUKUOKA from Nikkei Asian Review:
TOKYO — A recent currency theft at the Bank of Japan has badly damaged confidence in the institution and revealed deep-rooted complacency. This is both disturbing and ironic, given that the central bank’s primary role is to be the chief guardian of the nation’s currency.
The central bank confirmed last week that an employee in the currency issuance department — the place with the sole responsibility for overseeing the circulation of notes and coins — had been fired for stealing valuable commemorative gold coins.
“We express utmost regret that this occurred within a core function of the Bank of Japan. We will work to restore trust as quickly as possible,” said BOJ Executive Director Nobuyasu Yoshioka at a May 15 news conference with a deep bow and a show of humility.
Over a five-month period to April this year, the former employee stole 38 commemorative gold coins worth a total of 3.75 million yen ($33,700). His method was low-tech — stealing the coins while checking commemorative issues that had been collected by the central bank from financial institutions and putting them into bags.
The BOJ fired the man and disciplined his superiors. It was the first currency theft by an employee since 1961.
The BOJ’s stated purpose is to maintain the stability of both prices and the financial system. The currency issuance division is responsible for ensuring the validity of notes and coins.
Hence the fear held by the institution’s management that because the division’s work is closely related to public activity, a scandal like this could undermine credibility in the entire BOJ.
The central bank is supposed to run a wide-reaching security system that includes a network of surveillance cameras and a rule of having two employees on duty at a time. But the surveillance cameras are only looked at after incidents occur, and the two-person rule has proved ineffective. The two employees work alongside each other but do not always monitor each other.
The central bank said the theft was made possible by “a gap in the system.” It has bolstered security measures, adding more security guards and introducing a new metal detector.
But even with these changes, it is unclear whether the central bank’s oversight system warrants full public trust. No matter how many new security measures are introduced, breaches could reoccur unless there is adequate follow-through.
“The bank’s strength has been the level of professionalism of its staff,” said a former BOJ policy board member, originally from the private sector.
But resting on the legacy of former bank staff may have planted the seeds of complacency at the institution, allowing this latest incident to occur.
Governance reform has been making rapid progress in Japan’s private sector. An even stricter regime is essential at the BOJ.