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Monetary Policy in the 1990s: Bank of Japan's Views Summarized Based on the Archives and Other Materials

Author

Listed:
  • Masanao Itoh

    (President, Otsuma Women's University (E-mail: masaitoh@otsuma.ac.jp))

  • Yasuko Morita

    (Director and Senior Economist, Institute for Monetary and Economic Studies, Bank of Japan (currently, Yamazaki Gakuen Educational Foundation, Email: y_morita@yamazaki.ac.jp))

  • Mari Ohnuki

    (Deputy Director and Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: mari.oonuki@boj.or.jp))

Abstract

This monographic paper summarizes views held by the Bank of Japan (hereafter BOJ or the Bank) in the 1990s regarding economic and financial conditions as well as the conduct of monetary policy, based on materials compiled during the period mainly in its Archives. The following points were confirmed in writing this paper. First, throughout the 1990s, the Bank's thinking behind the conduct of monetary policy had shifted toward emphasizing the transparency of its policy management. The basic background to this seemed to be the growing importance of dialogue with market participants, reflecting a change in the target for money market operations from official discount rate changes to the guiding of money market rates. In addition, the fact that the revised Bank of Japan Act (hereafter the Bank of Japan Act of 1997) came into effect in April 1998 under the two principles of independence and transparency accelerated the trend of attaching importance to transparency. Second, on the back of the emphasis on transparency, the Bank enhanced its communication by increasing its releases in the second half of the 1990s, particularly after the enforcement of the Bank of Japan Act of 1997. Thus, the materials, especially those referred to in the latter half of this paper, consist mainly of the Bank's releases. And third, in the 1990s, the Bank faced a critical situation in which it needed to conduct monetary policy while paying due attention to the functioning of the financial system. Therefore, this paper includes numerous references to the issues regarding the financial system, mainly the disposal of nonperforming loans.

Suggested Citation

  • Masanao Itoh & Yasuko Morita & Mari Ohnuki, 2020. "Monetary Policy in the 1990s: Bank of Japan's Views Summarized Based on the Archives and Other Materials," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 38, pages 55-168, November.
    • Handle: RePEc:ime:imemes:v:38:y:2020:p:55-168
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    File URL: https://www.imes.boj.or.jp/research/papers/english/me38-3.pdf
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    References listed on IDEAS

    as
    1. Ben S. Bernanke & Vincent R. Reinhart & Brian P. Sack, 2004. "Monetary Policy Alternatives at the Zero Bound: An Empirical Assessment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(2), pages 1-100.
    2. Ben S. Bernanke & Vincent R. Reinhart, 2004. "Conducting Monetary Policy at Very Low Short-Term Interest Rates," American Economic Review, American Economic Association, vol. 94(2), pages 85-90, May.
    3. Masanao Itoh & Ryoji Koike & Masato Shizume, 2015. "Bank of Japan's Monetary Policy in the 1980s: A View Perceived from Archived and Other Materials," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 33, pages 97-200, November.
    4. Ben S. Bernanke & Frederic S. Mishkin, 1997. "Inflation Targeting: A New Framework for Monetary Policy?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 97-116, Spring.
    5. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-167, March.
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    More about this item

    Keywords

    Monetary policy conduct; Disposal of nonperforming loans; Financial system crisis; Bank of Japan Act of 1997; Zero interest rate policy;
    All these keywords.

    JEL classification:

    • 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
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East

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