The Political Economy of Japanese Monetary Policy

Abstract

In The Political Economy of Japanese Monetary Policy, Cargill, Hutchison, and Takatoshi investigate the formulation and execution of monetary and financial policies in Japan within a broad technical, political, and institutional context. Their emphasis is on the period since the collapse of the Bretton Woods system of fixed exchange rates in the early 1970s, and on the effects of policies and institutions in shaping the modern Japanese economy. The authors present basic themes and recent developments, as well as their own research findings. They also review and integrate the large literature in the area. They consider theoretical arguments and empirical evidence for each topic discussed. Topics covered include Japan's low inflation record (despite the central bank's lack of formal independence from the government); politically motivated business cycles and the timing of elections; exchange rate policy and international policy coordination; the historical development of central banking; Japan's bubble economy of the 1980s; and the causes, magnitude, and regulatory responses to Japan's banking and financial crisis of the 1990s.