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Monetary Policy in the Japanese Economy Incorporating Energy Prices

In: Monetary Policy and the Oil Market

Author

Listed:
  • Naoyuki Yoshino

    (Asian Development Bank Institute (ADBI))

  • Farhad Taghizadeh-Hesary

    (Keio University)

Abstract

Japan has reached the limits of conventional macroeconomic policies. Recently, the Bank of Japan, in order to overcome the deflation and achieve sustainable economic growth, set the inflation target at 2 % and implemented aggressive monetary policy to achieve this target as soon as possible. Although prices started to rise after the Bank of Japan implemented monetary easing, the main reason for this price elevation may not come directly from easy monetary policy, but other sources such as higher oil prices. High oil prices in yen, which is the result of a depreciated yen, is one of the main causes of the inflation. Moreover, this chapter shows that quantitative easing may not stimulate the Japanese economy. Aggregate demand that includes private investment did not increase significantly in Japan when the interest rate was lowered. Private investment displays this unconventional behavior because of uncertainty about the future and the aging population. We believe that the remedy for the Japanese economy is not monetary policy. The government needs to look for serious structural changes and growth strategies.

Suggested Citation

  • Naoyuki Yoshino & Farhad Taghizadeh-Hesary, 2016. "Monetary Policy in the Japanese Economy Incorporating Energy Prices," ADB Institute Series on Development Economics, in: Naoyuki Yoshino & Farhad Taghizadeh-Hesary (ed.), Monetary Policy and the Oil Market, edition 1, chapter 0, pages 93-106, Springer.
    • Handle: RePEc:spr:adbchp:978-4-431-55797-5_6
    DOI: 10.1007/978-4-431-55797-5_6
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    Cited by:

    1. Taghizadeh-Hesary, Farhad & Yoshino, Naoyuki & Chiu, Alvin, 2019. "Internal and External Determinants of Housing Price Booms in Hong Kong, China," ADBI Working Papers 948, Asian Development Bank Institute.

    More about this item

    Keywords

    Easing monetary policy; Japanese economy; Zero interest rate policy; Abenomics; Energy prices;
    All these keywords.

    JEL classification:

    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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