Monetary Policy In Japan Research Articles

Macroeconomic effects of monetary policy in Japan: an analysis using interest rate futures surprises

AbstractWe estimate the effects of monetary policy on the aggregate economy in Japan during the last three decades when the effective lower bound (ELB) on interest rates was occasionally binding. We use monetary policy surprises from the interest rate futures market as the external instrument to identify monetary policy shocks in the vector autoregressive model. We find that monetary policy has been effective in Japan during the last three decades, and the effect was more persistent in the ELB regime than in the non-ELB regime. In a simulation exercise, we further show that a New Keynesian model with forward guidance can replicate our empirical finding.

Monetary Policies in Japan: Structural Challenges and Evolutions from The Lost Decades to Post-COVID Dynamics

Monetary Policies in Japan: Structural Challenges and Evolutions from The Lost Decades to Post-COVID Dynamics

Causes of Housing Bubble in Japan

To find ways to facilitate the development of the real estate economy, this paper examines the Japanese housing bubble of the 1980s, one of the most representative in history. Japan's housing bubble provides us with a good economic model, for which we need to discuss the impact of monetary policy on the housing bubble. Through monetary policy, combined with Taylor's rule, it is analyzed that most of the monetary policy in Japan during that period was in a loose state. Loose monetary policy brought about a series of crises that are detrimental to economic development, such as the rise in land and stock prices, coupled with a series of social problems such as the aging of the population, which ultimately led to the occurrence of the real estate bubble. Japans bubble economy provided a good reference for future generations: the government needs to control the degree of easing and strengthen supervision and risk management.

Fiscal and Monetary Policies Interaction in Crisis: An Insight Into Japan

In this study, we explore the interaction between fiscal and monetary policies in Japan over a period including the Global Financial Crisis (GFC) and a phase of the Covid-19 pandemic under the presupposition that policy regimes are fixed and there are random switches between the two regimes. Using the Regime switching model, the results show that fiscal policy is more active in Japan than monetary policy, especially during the GFC and the Covid-19 pandemic. By using the Bayesian VAR model, we continue to further analyze the response of macroeconomic factors to an expansionary fiscal policy to verify the above findings once again. The results indicate that government expenditure helps boost the economy in the short-run. The positive impact of a government expenditure shock on GDP, PPI, and Investment lasts about three to four quarters, while private consumption only increases in one next quarter. These positive responses can increase the inflation rate and make the local currency overvalued, reflected in the increase in the effective exchange rate. A fiscal policy shock does not have much impact on the monetary policy, specifically, the money supply and interest rates of long-term government bonds still tended to decrease as expected by Japan. This is the basis for studying policy implications for some countries pursuing similar policies to Japan. JEL Classification: C23, C54, E42, E62, E63

Testing the Effectiveness of Unconventional Monetary Policy in Japan and the United States

The effective lower bound (ELB) on a short term interest rate may not constrain a central bank's capacity to achieve its objectives if unconventional monetary policy (UMP) is powerful enough. We formalize this 'irrelevance hypothesis' using a dynamic stochastic general equilibrium model with UMP and test it empirically for the United States and Japan using a structural vector autoregressive model that includes variables subject to occasionally binding constraints. The hypothesis is strongly rejected for both countries. However, a comparison of the impulse responses to a monetary policy shock across regimes shows that UMP has had strong delayed effects in each country.

Aging and the politics of monetary policy in Japan

AbstractThis paper explores how Japan's aging population impacts the politics of monetary policy. Previous research suggests that the elderly have a variety of distinct policy preferences. Given that elderly voters also have higher voting rates, the rapid greying of the population could have significant effects on distributive struggles over economic policy across much of the developed world. In Japan, aging is advancing rapidly, and the central bank has engaged in massive monetary stimulus to induce inflation, which existing work suggests the elderly should oppose. Analyzing results from three surveys, this paper has three central findings: (1) the elderly tend to have higher inflation aversion, (2) the elderly display some opposition to quantitative easing (QE), and (3) despite such policy preferences, the concentration of elderly in electoral districts has no significant effect on the preferences either of legislative incumbents or candidates. The third finding is attributable to the fact that elderly opposition to QE is moderated by their partisan identification. Elderly Liberal Democratic Party (LDP) voters have systematically lower opposition to QE, likely reflecting that these voters have aligned their preferences with the LDP's policies.

Macroeconomic Effects of Monetary Policy in Japan an Analysis Using Interest Rate Futures Surprises

Macroeconomic Effects of Monetary Policy in Japan an Analysis Using Interest Rate Futures Surprises

The macroeconomic effects of monetary policy: Evidence from Japan

This study examines the macroeconomic effects of monetary policy in Japan. We apply the new identification strategy proposed by Bu et al. (2021) to the Japanese case and estimate monetary policy shocks that bridge periods of conventional and unconventional monetary policymaking. We show the macroeconomic effects of monetary policy; a contractionary monetary policy shock significantly decreases output and inflation rates even under the effective lower bound. However, because the shorter-term and longer-term nominal interest rates are already close to zero, the magnitude of monetary policy shocks on the macroeconomic variables is modest.

Japanese monetary policy and its impact on stock market implied volatility during pleasant and unpleasant weather

We investigate the effect of Japan's Monetary Policy Meeting releases on the intraday dynamics of the Nikkei Stock Average Volatility Index and its futures during pleasant and unpleasant weather. We show that at the time of a monetary policy release when the temperature is pleasant, there is a significant decline in Japanese equities' implied volatility and futures, which lasts for about 10 min and 5 min, respectively. This decline is longer and exhibits a greater variation when releases occur during cold days. Finally, we emphasize the achievable economic profits and losses, given the reaction of Nikkei VI futures to the Japanese monetary policy releases during pleasant and unpleasant weather days, respectively. In particular, taking a short position at the start of the trading day on pleasant days and closing this position at the end of the trading day generates an average annual return of 5.6%.

Money and its circulation in Russia and abroad: trends and modernity

Money is studied through the prism of new approaches to the interpretation of its essence and taking into account the retrospective data on the nature and causes of money. The dynamics and structure of cash in circulation are presented, and the features of its circulation in the national financial system are revealed. The article examines the issues of money classification in the context of changing the strategy of their use in money circulation. The article analyzes the structure of banknotes and coins in monetary circulation in Russia. A comparative assessment of the dynamics of cash in the Russian circulation system for the period from 2020 to 2021 is given. The article describes the foreign practice of implementing the refundable cash benefit mechanism in the system of regulation and control of the cash supply in circulation as a tool for improving the efficiency of innovation activities. The priorities of cash distribution in the leading countries of the world are identified, on the basis of which the article concludes that the monetary policy in Japan, Switzerland and the United States is prioritized in the system of solving problems to improve the quality of money distribution in the global financial space. The article examines the positive experience of Brazil in adapting the money circulation system after the COVID-19 pandemic to the new realities and prospects for the development of the global money market. The policy of concessional lending and the provision of financial assistance at the expense of the resources of the national banking system through the implementation of government programs reflects the result of the transformation of the money supply into a system of social transfers.

The Macroeconomic Effects of Unconventional Monetary Policy: Evidence from Japan

This study examines the macroeconomic effects of unconventional monetary policy in Japan. We apply the new identification strategy proposed by Bu et al. (2021; JME) to the Japanese case and show the macroeconomic effects of unconventional monetary policy; a contractionary monetary policy shock significantly decreases output and inflation rates even under the effective lower bound. However, because the shorter-term and longer-term nominal interest rates are already close to zero, the magnitude of monetary policy shocks on the macroeconomic variables is modest.

Twenty Years of Unconventional Monetary Policies

The Bank of Japan has used unconventional monetary policies to fight deflation and stabilize the financial system since the late 1990s. While the Bank of Japan’s reflation efforts have evolved over time, inflation and inflation expectations have remained stubbornly low. This paper examines the evolution of monetary policy in Japan over the past twenty years, in order to draw relevant lessons and propose ways to strengthen the Bank of Japan’s policy framework. In doing so the analysis focuses on three aspects of monetary policy: objectives and goals; policy strategies; and the communication framework. Moreover, the paper discusses coordination between monetary, fiscal, and financial policies, and how the corresponding institutional design could be strengthened.

The impact of (un)conventional expansionary monetary policy on income inequality – lessons from Japan

ABSTRACT This paper analyzes the impact of conventional and unconventional monetary policy on income inequality in Japan, using hitherto unexplored data from the Japan Household Panel Survey. Empirical evidence shows that expansionary monetary policy in Japan has contributed to diminishing the gender pay gap through an increase in working time of women relative to men, but also to increasing the education pay gap. These effects may have materialized via the aggregate demand channel and the labour productivity channel. In contrast, expansionary monetary policy has had no significant impact on the development of the age pay gap.

Twenty Years of Unconventional Monetary Policies: Lessons and Way Forward for the Bank of Japan

The Bank of Japan has used unconventional monetary policies to fight deflation and stabilize the financial system since the late 1990s. While the Bank of Japan's reflation efforts have evolved over time, inflation and inflation expectations have remained stubbornly low. This paper examines the evolution of monetary policy in Japan over the past twenty years, in order to draw relevant lessons and propose ways to strengthen the Bank of Japan's policy framework. In doing so the analysis focuses on three aspects of monetary policy: objectives and goals; policy strategies; and the communication framework. Moreover, the paper discusses coordination between monetary, fiscal, and financial policies, and how the corresponding institutional design could be strengthened.

Estimating the Monetary Policy Measures of Japan in Shadow/ZLB Term Structure Model

In this paper, we follow the estimation methodology proposed by Krippner (2015) and use Japanese government bond yield curve data to estimate a shadow/ZLB term structure model. This model provides three estimated monetary policy measures, SSR, ETZ and EMS, which can be used to gauge the stance of monetary in a consistent way in both ZLB and non-ZLB environment. Japan has experienced a long period of the ZLB since 1999. The policy rate has already lost its function as an appropriate quantitative measure of monetary policy. The SSR estimated from the shadow/ZLB term structure model can evolve to negative level in the ZLB environment and provide consistent view of the stance of monetary policy as the positive short policy interest rate dose in the normal non-ZLB environment. The ETZ answers the question that how long the short interest rate will be expected to be restricted by the ZLB, which can be useful for the central bank as a reference for exit strategy of unconventional monetary easing or forward guidance on public expectation formation. The EMS measures the stance of monetary policy, relatively tight or relatively loose, in a consistent and comparable way under both ZLB and non-ZLB environment. The analysis shows that all three measures exhibit very good traceability of monetary policy in Japan, which can also be used as the proxy variables for the stance of monetary policy in other econometric procedures for policy evaluation.

Data-driven structural BVAR analysis of unconventional monetary policy

We apply a novel Bayesian structural vector autoregressive method to analyze the macroeconomic effects of unconventional monetary policy in Japan, the US and the euro area. The method exploits statistical properties of the data to uniquely identify the model without restrictions, and thus enables formal assessment of the plausibility of given sign restrictions. Unlike previous research, the data-based analysis reveals differences in the output and price effects of the Bank of Japan’s, Federal Reserve’s and European Central Bank’s balance sheet operations.

Unconventional Monetary Policy in Japan: Empirical Evidence from Estimated Shadow Rate DSGE Model

The Zero Lower Bound (ZLB) on short nominal interest rates has imposed serious constraint on stimulating and stabilizing economy of major central banks. Analysis of monetary policy by Dynamic Stochastic General Equilibrium (DSGE) models under the existence of ZLB has also been an important issue from both practical and academic views for central banks and macroeconomists. However, the nonlinearity of ZLB constraint makes linear solution and estimation techniques of DSGE models unreliable and impractical. In many recent empirical works, it has been proved that the shadow rate can be used as an accurate proxy to represent the stance of unconventional monetary policy in the ZLB environment. We use shadow rate to estimate a medium-scale DSGE model based on the theoretical foundation proposed by Wu and Zhang (2016). A shadow rate New Keynesian model (No. w22856). National Bureau of Economic Research, and conduct counterfactual simulation exercises to quantify the macroeconomic effects of unconventional monetary policy implemented by Bank of Japan (BoJ). Compared with the estimation results of pre-ZLB sub-sample (1980Q1–1998Q4), the structural parameters estimated from full-sample (1980Q1–2016Q3) with the shadow rate still have very reasonable values that are consistent with most related medium-scale DSGE literature. The statistical properties of model dynamics implied by two groups of estimation are also very close. Counterfactual simulation shows that without the unconventional monetary policy, macroeconomic variables would have worse performance than their actual realizations.

The Effectiveness of Unconventional Monetary Policy in Japan

:Since the global financial crisis of 2007–2008, central bankers around the world have been forced to abandon conventional monetary policy tools in favor of unconventional policies such as quantitative easing, forward guidance, and even lowering the interest rate paid on bank reserves into negative territory. Japan, which faced a crisis in its banking sector and came up against the theoretical zero lower bound on interest rates nearly a decade earlier, was a pioneer in the use of many of these unconventional policy tools. This article analyzes the effectiveness of Japan’s bold experiment with unconventional monetary policy. Using a panel of bi-annual bank data covering the full universe of Japanese commercial banks over a fifteen-year period, this study analyzes the effectiveness of quantitative easing policy on the bank lending channel of monetary policy transmission. Our findings suggest that Japan’s unconventional monetary policy worked: there is a bank lending channel of monetary policy transmission in Japan. These results are robust to the inclusion of time fixed effects and generalized method of moments analysis.

Peril of the Inflation Exit Condition

Recent empirical evidence on monetary policy in Japan suggests that exits from the zero-interest-rate policy triggered by policy shocks can be expansionary. This paper provides theoretical examples of such expansionary policy-induced exits. The examples suggest that the exit condition (the Bank of Japan’s stated commitment of not exiting from the zero-rate regime unless the inflation rate rises above a certain threshold) may have made it difficult for the economy to escape from the liquidity trap.

Progress and Implications in the Research of Population Aging and Monetary Policies

Population aging is a major challenge faced by all the human beings in the 21st century. By 2017, the global population-aging rate has reached 8.70%, and by 2030 and 2050, this figure is expected to climb further to 11.66% and 15.82% respectively, among which developed countries are the highest, with 22.93% and 26.62% respectively. Obviously, the rapid accumulation and amplification of life cycle characteristics of individual behaviors will lead to significant macroeconomic effects and policy adjustment pressure, and monetary policy regulations are no exception. In countries and regions with the highest rate of population aging, monetary policies in Japan and the European Union have gone further and further on the road of quantitative easing” in recent years, but economic performance has been lackluster. Therefore, a paramount question is: what effect does the evolution of the population age structure have on monetary policies? As one of the countries with the fastest aging speed and the largest number of elderly people in the world, how should Chinese monetary policies adjust to cope with the tide of aging population? In this paper, we review some literature about the relationship between population aging and the final goal, intermediate target and conduction effects of monetary policies, and present the main content, research method and perspective for the majority of researchers and policy-makers. Then, based on the actual economic development in China, some decision-making suggestions are put forward. The results show that the impact of population aging on monetary policies is mainly reflected in the following aspects. First, from the perspective of the final goal of monetary policies, population aging will lead to a decline in the inflation rate and the level of potential economic output, increase the unemployment rate, trigger international capital flows and asset price fluctuations, and then breed financial risks. Second, from the perspective of the intermediate target of monetary policies, the decline of the fertility rate and the extension of life expectancy will change the dynamic relationship between capital and labor, and lead the marginal rate of return on capital, and then the natural interest rate to decline, thus resulting in the narrowing or even failure of the traditional monetary policy space, and the increase of the risk of economic sliding into liquidity trap”. Finally, the aging population tends to weaken the monetary policy interest rate transmission channel and the credit transmission channel, while the wealth effect channel may gradually strengthen. In China, the time node of aging crisis” will be between 2020 and 2060, and it is still in the front end”. Based on the lessons from developed countries, this paper proposes that China’s monetary policy authorities should strengthen the estimation of the natural interest rate, explore more accurate intermediate targets, dredge transmission channels, and pay attention to the coordination of various regulatory policies to enhance the effectiveness of monetary policies under the shock of aging.