This paper reviews and evaluates the Bank of Japan (BOJ)'s monetary policy during the period 1998-2005. In doing so, it pays particular attention to the development of academic thinking on what central banks can do at or near zero interest rates and its relationship with the actual policy measures adopted by the BOJ. The paper argues that the BOJ has done most of the things recommended by academic economists. The most important of these is expectations management as crystallized in the so-called zero interest rate policy. The academic origin of this policy can be found in the seminal work of Krugman. The paper points out, however, that this fact, unfortunately, remained unnoticed by many, and explores reasons behind. The paper then goes on to survey the empirical literature on the effects of the measures adopted by the BOJ. The literature has found that the zero interest rate policy has had significant effects on the term structure of interest rates and supported the economy. Finally, the paper discusses possible reasons for the failure of such measures to stop the deflation of the economy within a short period of time. It points out some difficulties inherent in the expectations management approach and problems created by the impaired financial system.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. 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.
Publisher Info
Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number
CIRJE-F-375.
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)