The Effects and Side Effects of Unconventional Monetary Policy: Summary of the First Workshop on the "Review of Monetary Policy from a Broad Perspective"

On December 4, 2023, the first workshop on the "Review of Monetary Policy from a Broad Perspective," entitled "The Effects and Side Effects of Unconventional Monetary Policy," was held at the Bank of Japan's Head Office. At the workshop, economists and financial and economic experts participated in a lively discussion on the effects and side effects of monetary policy over the past 25 years, focusing on four topics: financial markets, the financial system, the Bank of Japan's balance sheet, and unconventional monetary policy. Session 1 provided an overview of domestic financial markets over the past 25 years and the impact of monetary policy on the degree of market functioning. Participants discussed whether it would be possible to assess the impact of monetary policy from a broader perspective, for example by broadening the scope of the analysis. Session 2 focused on the impact of the low interest rate environment on the risk-taking behavior of financial institutions. Participants discussed issues such as developments in the demand for funds and the allocation of funds. Session 3 looked at issues concerning central bank finances. Participants discussed topics such as central banks' external communication. Session 4 examined the impact of unconventional monetary policy on factors such as economic activity and prices. Participants discussed a range of issues, including issues not covered in the presentations at the workshop such as the formation mechanism of inflation expectations and linkages between wages and prices. The panel discussion in Session 5 mainly covered issues such as methods for analyzing the effects and side effects of monetary policy and the mechanisms underlying price developments. Participants pointed out that it was difficult to assess the effects and side effects of unconventional monetary policy in a comprehensive manner given that multiple policy tools were used at the same time, and that it was therefore important to gather experts with different backgrounds to discuss a variety of issues, as in this workshop. Furthermore, participants also noted that in assessing the impact of monetary policy, it was necessary to deepen the analysis not only of the formation of inflation expectations but also of firms' behavior and its impact on economic developments and the formation of wages and prices.