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Monetary Policy Expectations and Money Market in Japan : Analysis of Non-traditional Monetary Policy Regimes

Author

Listed:
  • Takayasu Ito

    (Meiji University, Scool of Commerce)

Abstract

When the Bank of Japan (BOJ) adopts interest rate targeting under a comprehensive easing policy, the yield curve up to 12 months in the Japanese money market is driven by a single trend. It is caused by monetary policy expectations. The regime of interest rate targeting gives a sense of comfort to market participants that the regular transmission mechanism works in the yield curve of the money market. Thus, monetary policy expectations are fully transmitted to the yield curve end. On the other hand, monetary policy expectations are not fully transmitted to the yield curve end under either the quantitative and qualitative easing policy or the negative easing policy. The quantitative and qualitative easing policy and the negative interest rate policy paralyze the market function in the short-term money market. Central bankers should always keep it in mind that the transmission of interest rates along the yield curve is an integral part of the mechanism through which monetary policy affects the economy.

Suggested Citation

  • Takayasu Ito, 2019. "Monetary Policy Expectations and Money Market in Japan : Analysis of Non-traditional Monetary Policy Regimes," Proceedings of International Academic Conferences 8710640, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iacpro:8710640
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    File URL: https://iises.net/proceedings/iises-international-academic-conference-copenhagen/table-of-content/detail?cid=87&iid=021&rid=10640
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    More about this item

    Keywords

    Monetary Policy Expectations; Money Market; Non-traditional Monetary Policy;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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