The Great Intervention and Massive Money Injection: The Japanese Experience 2003-2004
AbstractFrom the beginning of 2003 to the spring of 2004, Japan's monetary authorities conducted large-scale yen-selling/dollar-buying operations in what Taylor (2006) has labeled the "Great Intervention." This paper examines the relationship between this "Great Intervention" and the quantitative easing policy the Bank of Japan was pursuing at that time. First, we find that about 40 percent of the yen funds supplied to the market by yen-selling interventions were not offset by the BOJ's monetary operations and remained in the market for a while; this is in contrast with the preceding period, when almost 100 percent were immediately offset. Second, comparing interventions and other government payments, the extent to which the funds were offset was much smaller in the case of interventions, suggesting that the BOJ differentiated between, and responded differently to, interventions and other government payments. These two findings indicate that it is likely that the BOJ intentionally did not sterilize yen-selling interventions to achieve its policy target of maintaining the current account balances of commercial banks at the BOJ at a high level. Finally, we find that an unsterilized intervention had a greater impact on the yen-dollar rate than a sterilized one, suggesting that it matters whether an intervention is sterilized or not even when the economy is in a liquidity trap
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo in its series CARF F-Series with number CARF-F-266.
Length: 28 pages
Date of creation: Dec 2011
Date of revision:
Other versions of this item:
- Watanabe, Tsutomu & Yabu, Tomoyoshi, 2013. "The great intervention and massive money injection: The Japanese experience 2003–2004," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 428-443.
- F30 - International Economics - - International Finance - - - General
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-03 (All new papers)
- NEP-IFN-2012-01-03 (International Finance)
- NEP-MAC-2012-01-03 (Macroeconomics)
- NEP-MON-2012-01-03 (Monetary Economics)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Gerlach, Petra & McCauley, Robert N. & Ueda, Kazuo, 2012.
"Currency intervention and the global portfolio balance effect: Japanese lessons,"
WP442, Economic and Social Research Institute (ESRI).
- Petra Gerlach-Kristen & Robert N McCauley, 2012. "Currency intervention and the global portfolio balance effect: Japanese lessons," BIS Working Papers 389, Bank for International Settlements.
- Bernal, Oscar & Gnabo, Jean-Yves, 2009. "Announcements, financial operations or both? Generalizing central banks' FX reaction functions," Journal of the Japanese and International Economies, Elsevier, vol. 23(4), pages 367-394, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.