Regime shifts in the effects of Japan’s unconventional monetary policies

Miyao, Ryuzo; Okimoto, Tatsuyoshi

doi:10.1111/manc.12323

Cited by 13 publications

(7 citation statements)

References 60 publications

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“…However, banks seem to have supported profitability by increasing noninterest income through charging other fees. 1 The direct costs of negative reserves on bank reserves are also quantitatively small relative to banks' balance sheets. Central banks can further reduce these direct costs by charging negative rates only at the margin: for example, required bank reserves are typically exempt from negative interest rates and the Bank of Japan charges negative rates only on a subset of other bank reserves.…”

Section: Negative Interest Ratesmentioning

confidence: 99%

Unconventional Monetary Policies in the Euro Area, Japan, and the United Kingdom

Dell’Ariccia

Rabanal

Sandri

2018

Journal of Economic Perspectives

174

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The global financial crisis hit hard in the euro area, the United Kingdom, and Japan. Real GDP from peak to trough contracted by about 6 percent in the euro area and the United Kingdom and by 9 percent in Japan. In all three cases, central banks cut interest rates aggressively and then, as policy rates approached zero, deployed a variety of untested and unconventional monetary policies. In doing so, they hoped to restore the functioning of financial markets, and also to provide further monetary policy accommodation once the policy rate reached the zero lower bound. In all three jurisdictions, the strategy entailed generous liquidity support for banks and other financial intermediaries and large-scale purchases of public (and in some cases private) assets. As a result, central banks’ balance sheets expanded to unprecedented levels. This paper examines the experience with unconventional monetary policies in the euro zone, the United Kingdom, and Japan. The paper starts with a discussion of how quantitative easing, forward guidance, and negative interest rate policies work in theory, and some of their potential side effects. It then reviews the implementation of unconventional monetary policy by the European Central Bank, the Bank of England, and the Bank of Japan, including a narrative of how central banks responded to the crisis and the evidence on the effects of unconventional monetary policy actions.

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Section: Negative Interest Ratesmentioning

confidence: 99%

Unconventional Monetary Policies in the Euro Area, Japan, and the United Kingdom

Dell’Ariccia

Rabanal

Sandri

2018

Journal of Economic Perspectives

174

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“…Furthermore, the study found that the financial market impact of QQE policy is relatively large, indicating that QQE policy is more effective in influencing the financial market performance than the previous UMPs. Notably, using the vector autoregressive (VAR) model, the financial market impact of QQE policy remained supported in the subsequent studies by Otsubo (2018), Koeda (2019), Ryou et al (2019) and Miyao and Okimoto (2020).…”

Section: Unconventional Monetary Policiesmentioning

confidence: 99%

“…The finding has important policy implications as it can inform the Bank of Japan on which policy effectively influences the Japanese financial market conditions. JFEP 15,3 Empirical studies by Otsubo (2018), Koeda (2019), Ryou et al (2019) and Miyao and Okimoto (2020) found that the Bank of Japan's QQE policies have exerted a significant influence on the Japanese financial markets. However, the findings suffer from aggregation bias.…”

Section: Introductionmentioning

confidence: 99%

The effect of different periods of unconventional monetary policies on Japanese financial markets

Lau

Yip

2023

JFEP

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Purpose This study aims to examine to what extent the Japanese financial markets are affected by the four periods of unconventional monetary policies (UMP) implemented by the Bank of Japan from 2013 to 2020. Design/methodology/approach Using the daily 10-year term spread as a proxy for monetary easing policy, this study uses four sub-sample periods from 2013 to 2020 to look into the effectiveness of UMP on the Japanese financial markets. Findings Our result shows that not all of the Bank of Japan's unconventional monetary policies are equally effective in influencing the Japanese financial markets. In particular, the QQE policy implemented from April 2013 to October 2014 effectively influenced the stock market, banking sector and foreign exchange market. However, the financial market impact of monetary policy is muted during the QQE expansion period. Likewise, the QQE with a negative interest rate policy influences only the banking sector. Finally, the QQE with its yield curve control policy effectively impacts the financial markets. Research limitations/implications This research can be expanded by studying the international spillover effect of the Bank of Japan's UMP on the financial markets in Asian countries. Practical implications The findings of this study enable investors to understand the causal relationship between the Bank of Japan's UMP and the financial market indicators, thereby helping them to position their portfolio investments. From the policy perspective, the finding is useful to inform the Bank of Japan on which policy is relatively effective in affecting the financial markets. In light of the empirical finding, the Bank of Japan should continue to pursue the QQE YCCP or revert to the initial QQE policy, as the two policies are relatively more effective than the QQE expansion and QQE NIRP in affecting the Japanese financial markets. Social implications The empirical finding highlights the importance of controlling for the impact of different QQE policies in the model. Future research may consider conducting sub-sample analysis to cater to the different QQE policy regimes. This approach provides a clearer picture and valid inferences on the financial market impact of each QQE policy. Originality/value This study provides a comprehensive analysis of the impact of Bank of Japan's QQE on the Japanese financial markets. For the market participants, the findings of this study suggest that investors should closely gauge the development of the unconventional monetary policies of the Bank of Japan because the monetary easing policy influences the decision-making process of commercial banks, pension funds, mutual funds, retail investors and other stakeholders in the financial markets. The policy twist will have future ramifications for their loan, investment and retirement fund portfolios.

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“…Kuo and Miyamoto (2016) find that QE increased employment, and the labor market has improved with unemployment falling steadily. Studies have also found that QE has stimulated economic output (Hausman and Wieland, 2014; Miyao and Okimoto, 2017).…”

Section: Unconventional Monetary Policy and The Bank Of Japanmentioning

confidence: 99%

Aging and the politics of monetary policy in Japan

Yamada

Park²

2022

Japanese Journal of Political Science

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This 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.

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Regime shifts in the effects of Japan’s unconventional monetary policies

Cited by 13 publications

References 60 publications

Unconventional Monetary Policies in the Euro Area, Japan, and the United Kingdom

Unconventional Monetary Policies in the Euro Area, Japan, and the United Kingdom

The effect of different periods of unconventional monetary policies on Japanese financial markets

Aging and the politics of monetary policy in Japan

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