Bank of Nara
|Established||April 1, 1969|
|Central bank of||Taihei Tengoku|
TTT (ISO 4217)
|Interest rate target||Floating, uses NGDP target|
|Interest on reserves||None|
|Interest paid on excess reserves?||No|
The Bank of Nara is the chief monetary authority Taihei Tengoku. It is an issuer of the national currency, the tael, manager of the national sovereign wealth funds, and the lender of last resort. It assumed its current form after the dissolution of the Central Bank of Taihei Tengoku in 1969.
The Bank of Nara descends from two institutions, the Central Bank of Taihei Tengoku and the Nara Junker Bank Company (NJBC).
The Nara Junker Bank Company dates to the 15th century from a industrial shipwrights' charter. The central Nara docks, in addition to building junks, also operated an insurance exchange and managed loans to finance construction of ships and mercantile journeys on credit. By the 17th century, finance was the primary economic activity of the old Nara junk docks, as actual shipbuilding moved out of the canals and into the bay. The docks were the first Yamato clearinghouse institution, as its location in the center of Nara near the Grand Trunk Canal made it a convenient and well-protected meeting place for auditors to ensure payments of contracts and loans. By the late 1600s, contact with Alisna spread Western theories of finance and banking to the shogunate, and the Nara Junker Bank Company was formally chartered in 1688, the first formal bank in the country. Despite being distrusted by the shogunate, the NJBC flourished in the period of national isolation and the Bakumatsu. The NJBC helped finance the rebels in the Heavenly Revolution and remained Taihei Tengoku's largest private bank thereafter. By the 1960s it provided the majority of foreign exchange to the Taihei economy.
The Central Bank of Taihei Tengoku (CBTT) was chartered in 1880 by the Final Court to assist the industrialization of the country and to ensure secure lines of credit to the government, and placed under the Wing King's domain. The CBTT was highly integrated with the Treasury and did not exercise significant autonomy, reflecting the Wing King's subordinate position. Monetary policy was thus dictated by the Court and regency council until the 1960s. During the Maredoratic Trade War, unfavorable balances of payment and scarce capital forced the bank to issue the sen liberally to the zaibatsu underpinning the Taihei National System.
After the Confronto, the ruinous state of the Taihei economy prompted radical changes in policy. Ri Kou You announced the abolition of the sen in 1969, followed by the merger of the CBTT and the NJBC two days later. This was effectively a takeover of the CBTT's mandate and special state powers by the NJBC, giving the new "Bank of Nara" both internal autonomy and a regular relation to the government. Its first act was to issue the tael, starting in 1970. This new currency was pegged at 1/100 of a florin and backed by the substantial stock of repossessed assets (then valued at 21% of the Taihei GDP) in the BON's possession. The tael was floated in 1974 when the last of its underlying assets were sold off. To avert fears of hyperinflation under a new fiat currency the BON simultaneously announced the world's first formal inflation rate target.
The BON's steady management of the tael contributed greatly to Taihei Tengoku's rapid economic growth. The economy, initially contracting due to the drastic reforms, expanded rapidly through the 1970s and at a slower pace in the 1980s. The Questarian Revolution caused a recession in 1990 due to the nationalization of significant Taihei investments, which threatened the Pensions Fund. After three quarters of contraction the Pensions Fund was stabilized by government borrowing and Taihei Tengoku has posted continual growth for 107 quarters and counting, the longest period of uninterrupted economic growth in the modern era. During the 2014 global financial crisis the BON abandoned its inflation target in favor of a nominal income target, averting a recession but significantly increasing prices. Inflation in 2014 reached 10%, the highest since 1969.
The Bank of Nara is tasked with maintaining the integrity of the Taihei Tael, the national currency of Taihei Tengoku, through judicious issue of banknotes and monitoring the issue of taels by other private banks. It functions as a lender of last resort, providing emergency funds to banks in order to clear their payments. It changes its interest rates to maintain an NGDP level target to achieve consistent nominal growth of the Taihei economy. It also issues physical banknotes, although only in the denomination of 10,000 taels.
Sovereign wealth funds
The Bank of Nara also jointly manages the national sovereign wealth funds along with the Ministry of the Treasury. There are three funds, the Pension Fund, the Hospital Fund, and the Revenue Fund. The capital of each fund consists of interest payments to the Bank of Nara by its debtors and surplus tax revenue deposited by the government, invested into a diverse basket of financial products. The Pension and Hospital Funds are primarily invested in government bond markets while the Revenue Fund is comprised of a more aggressive portfolio of index funds covering all major Maredoratic stock indices.
The Bank of Nara operates a private police force, the Customs Police (税関保安隊, Zeikan Hoantai), to provide security for its facilities, investigate white-collar crime and enforce its contracts. The Customs Police field both armed, uniformed agents to serve warrants on banks it serves as well as plainclothes investigators, auditors, and researchers.
The BON headquarters complex is located in the central Kozosen district of Nara. It consists of seven buildings centered around the old NJBC building. The campus occupies a city block adjacent to the Zosenjo Canal. At the eastern end of the BON complex is Building 1, the Second NJBC Building, completed in 1933 and renovated in 1995. Buildings are then arranged in a clockwise fashion, with the tower of Building 7 located directly behind Building 1.
In 1996 the BON acquired a controlling stake in the Mogami Press Company as the mint went bankrupt. As a result, the BON acquired its printing press outside Nara. The bank prints 10,000 tael bills primarily to provide physical cash for settling payments between banks. BON-marked "boat bills" are rare in public circulation and bills of certain years in the late 90s are often kept as collectibles due to their rarity.
The Bank has withstood considerable criticism to its quasi-private, quasi-public nature. As a nominally private body, the Bank enjoys full autonomy in its daily operations, but serves many of the functions of a central bank, including the ability to issue the national currency and to enforce sections of the law through the Customs Police.