The unconventional monetary policy of the Bank of Japan during the period 2013–2018: comments and views on Shirai

Abstract

The aim of this paper is to comment on Overview of the Bank of Japan’s Unconventional Monetary Policy During the Period 2013–2018 (Shirai in Int J Econ POlicy Stud 13, 2019) presented by Sayuri Shirai, and to explain my view of the Quantitative and Qualitative Monetary Easing (QQE) which the Bank of Japan (BOJ) has conducted since April 2013. QQE is an unconventional monetary easing tool for overcoming long-term deflation. In addition, the BOJ has adopted various measures to complement QQE. Shirai has performed time series analysis of QQE in detail. She has pointed out the following: (a) the most important element of QQE is increasing monetary base; (b) the paying of 0.1% interest on the current account balance is effective measure for QQE; (c) the adverse side effects of Negative Interest Rate Policy excesses the benefits; (d) the introduction of yield curve control results from difficulty in purchasing Japanese Government Bonds (JGBs) at annual pace of 80 trillion yen; (e) the BOJ has carried out ‘implicit tapering’; (f) the BOJ should set the range of ± 1% for the central rate (2%) of inflation target, and so on. I agree with her views on (a), (c), (d), and (e), however, my views differ on (b) and (f) because the BOJ’s QQE is a sterilization policy. The BOJ, therefore, needs to gradually cease paying of 0.1% interest on the current account balance and it should reduce a huge amount of BOJ’s purchases. The Negative Interest Rate Policy should be suspended immediately because its side effects are too strong for financial businesses and households to manage. Setting an inflation range of 1–2% is a more suitable target to stabilize prices under current circumstances. The BOJ should adopt plural purposes, and it is expected to operate a balanced monetary policy.