Monetary Policy In Japan Research Articles

The Role of Monetary Policy in Japan: A Break in the 1990s?

This article documents time series evidence suggesting the case for a possible structural break in the role of Japan's monetary policy during the 1990s. It uses a simple vector autoregressive framework and offers some suggestive results: While a persistent effect of monetary policy on real output is detected over the full sample of 1975–1998 and the subsample that ends in 1993, such effect disappears with the recent subsample of the 1990s. The stability analysis also provides more specified evidence that there is a break in the reduced form dynamic system in 1995. Some interpretations are offered to intuitively support these findings. J. Japan. Int. Econ., December 2000, 14(4), pp. 366–384. Research Institute for Economics and Business Administration, Kobe University, Rokko, Nada, Kobe 657-8501, Japan Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: E52, E32.

Recent Developments in the Analysis of Monetary Policy Rules

After a brief review of key developments in application of monetary theory to policy analysis, Bennett T. McCallum describes the central aspects of the typical framework used to analyze monetary policy rules. He reviews the methods used to study the effects of policy behavior and provides an example of how two rules (the McCallum rule and the Taylor rule) can be used to investigate recent monetary policy in Japan. His example shows why it may be important for central banks to develop monetary policy procedures based on monetary-aggregate as well as interest-rate instruments.

Trade restraints and Japanese direct investment flows

This paper analyses the factors determining the scale and location of Japanese foreign direct investment (FDI) over the 1980s. We use a pooled cross-section time-series annual data set covering investment in the individual EC countries and the United States. Our results suggest that, controlling for market size and relative labour costs, investment was significantly influenced by trade protection measures, and in particular by the level of anti-dumping actions initiated in the last decade. An additional effect from the cost of finance in Japan is found, suggesting that the tightening of monetary policy in Japan in 1989/90 contributed significantly to the observed slowdown in FDI in the early 1990s.

Monetary Policy in Japan: A Structural VAR Analysis

This paper studies the objectives and operating procedures of the Bank of Japan (BOJ) during the period 1975–1994. It uses a modified version of the structural VAR of Bernanke and Mihov, which nests several alternative hypotheses concerning central bank behavior. The approach allows for separate identification of the anticipated and unanticipated components of monetary policy, and it is capable of distinguishing between interest rate targeting and various types of reserve targeting. Three main results emerge from the analysis. First, no single target can explain the BOJ's behavior. Instead, the BOJ appears to weight both variation in the call money rate and variation in nonborrowed reserves, with the weight on the call money rate increasing over time. Second, there is strong evidence that at times the BOJ has employed “moral suasion” to counter shocks in the demand for borrowed reserves. However, by the second half of the 1980s, this procedure was no longer being used. Third, plots of the overall stance of monetary policy and its unanticipated component clearly reveal that a sharp monetary contraction occurred between early 1990 and late 1992, with an equally sharp expansion since then. Perhaps surprisingly, both the contraction and the subsequent expansion appear to have occurred largely in response to prevailing economic conditions, rather than as an unanticipated change in policy.J. Japan. Int. Econ., September 1997,11(3), pp. 275–295. Federal Reserve Bank, of San Francisco, 101 Market Street, San Francisco, California 94105; and Department of Economics, Santa Clara University, Santa Clara, California 95053.

Monetary policy in Japan: Internal or external targets?

The comparative economic performance of the United States and Japan during the period of flexible exchange rates has been one of the most extensively studied topics in international economics. The conduct of monetary policy in Japan is studied to see if there are policy-, as opposed to purely structural, based reasons for the differences in economic performance. Our central results is that Japanese monetary policy since 1973 has served to accomodate inflation. We also present evidence, although not as compelling, that Japanese monetary policy has, in addition, stabilized the real exchange rate.

A Monetarist View

Friedman examines the quantity theory of money and the recent application of monetary policy in Japan, the United Kingdom, and the United States. In all three countries, the reduction of monetary growth has reduced inflation. In the United States, in 1983, the renewed expansion of the money supply raises the distinct possibility that inflation will resume in 1984 or 1985, according to the author.

Monetary Policy in Japan

There are many countries in which monetary policy is conducted under conditions that diverge substantially from those assumed by the standard monetary, financial, and investment theories. In these countries financial markets are not well developed, financial flows are primarily allocated by financial institutions on a bilateral basis, supply and demand for finance is not equilibrated exclusively by the interest rate, and financial institutions operate in a half-collusive, half-competitive oligopolistic environment.

Monetary Policy in Japan. A Review of its Conduct During the Past Ten Years

Die Geldpolitik in Japan. Ein Rückblick auf das letzte Jahrzehnt Dieser Beitrag beschreibt die Geldpolitik in Japan während des letzten Jahrzehnts. Im Gegensatz zu der vorangegangenen Dekade, als das Hauptziel der Geldpolitik in der Drosselung eines übermäßigen Wirtschaftswachstums und der Korrektur der Handelsbilanzdefizite lag und die Kreditkontingentierung das Hauptinstrument der Geldverknappung war, machten nun einige wichtige Veränderungen in der japanischen Wirtschaft eine Modifikation des geldpolitischen Instrumentariums notwendig. Als erste dieser Änderungen trat der Öffentliche Sektor als ein großer Nettoschuldner auf den Finanzmärkten auf. Die zweite bestand in der ständig wachsenden Bedeutung der außenwirtschaftlichen Einflüsse auf die inländische Geldentwicklung, ausgelöst durch die wachsende Integration der japanischen Wirtschaft in die Weltwirtschaft. Die dritte war eine abgeschwächte autonome Nachfrage nach Beendigung eines starken Wirtschaftswachstums bei gleichbleibendem Nachfragedruck. Angesichts dieser Veränderungen unternahm die Bank of Japan verschiedene Versuche, die monetäre Politik und ihre Instrumente der neuen Situation anzupassen. In jüngster Zeit bemühte man sich verstärkt um die Zinsliberalisierung, so daß die Zinsen einen größeren Einfluß auf die Geldverteilung sowohl auf den öffentlichen als auch auf den privaten Sektor nehmen konnte. 1978 ging die Bank of Japan dazu über, die projizierte Wachstumsrate von M₂ für das laufende Quartal zu veröffentlichen, um damit in der Öffentlichkeit ein größeres Verständnis für die Bedeutung der Geldversorgung zu wecken. Die strikte Geldmengensteuerung wird für die Bank of Japan eine wichtige Aufgabe bei den Bemühungen zur Erreichung von Preisstabilität, bei gleichzeitig angemessener hoher Wachstumsrate und Förderung des Zahlungsbilanzgleichgewichtes bleiben.

THE BANK OF JAPAN: A CASE STUDY IN THE EFFECTIVENESS OF CENTRAL BANK TECHNIQUES OF MONETARY CONTROL*

THE PURPOSE OF this study is to examine the effectiveness of monetary controls by the Japanese central bank-the Bank of Japanand to analyze the relative importance of various instruments of central bank control. The study is concerned with the description and analysis of monetary policy in Japan in the tight-money periods of 1953-55 and 1957-58 only as this is necessary to demonstrate the efficacy of monetary controls in this particular institutional and environmental context. In Part I the hypothesis is examined that Bank of Japan monetary policy can be an effective means of implementing economic stabilization policy, especially in the restriction of realized business investment under conditions of excessive domestic demand. This hypothesis is significant because, (a) given its factor proportions, Japan has had to rely structurally upon imports for economic growth and, (b) given success in meeting capital formation requirements, the major operative constraint on stable growth has been periodic balance-of-payments crises emanating from excessive domestic demand and attendant inflationary pressures. The analysis focuses on corporate business reliance on external funds to finance investment activities and the reliance of the commercial banking system on central bank financing. Internal generation of funds by corporation business has been insufficient to finance the high level of business-planned investment emanating from the rapid growth of the economy. Capital markets have been relatively undeveloped; consequently, business has relied heavily on borrowing from the banking system, especially from the city banks. Under conditions of relatively interest-inelastic demand for funds and relatively low maximum legal lending rates, the availability of funds from the banking system, rather than simply their cost, has been an important determinant of realized business investment.