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Japan: Evaluating Aggressive Monetary Easing and Economic Performance

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  • Ramana

Abstract

Japan has had an outsized influence on global monetary policy. Avoiding becoming Japan has been a powerful force for Quantitative Easing. This paper argues, that despite popular perceptions, Japanese economic performance has not been a calamity; living standards have risen consistently over time and a full-fledged deflationary spiral avoided. These outcomes render making judgements about the Bank of Japan’s (BOJ) track record challenging despite the failure to meet the inflation target. The BOJ’s conceptual evolution on monetary policy and the various measures adopted over time are analysed for a fuller assessment of the effectiveness of monetary policy in Japan. The paper discusses the nascent, but increasingly influential academic research on the limitations of QE and its collateral effects on the economy, and what that portends for future BOJ policy.

Suggested Citation

  • Ramana, 2018. "Japan: Evaluating Aggressive Monetary Easing and Economic Performance," Cambridge Working Papers in Economics 1837, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:1837
    Note: rr122
    as

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    File URL: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1837.pdf
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    References listed on IDEAS

    as
    1. Masazumi Hattori & Steven Kong & Frank Packer & Toshitaka Sekine, 2016. "The effects of a central bank's inflation forecasts on private sector forecasts: Recent evidence from Japan," BIS Working Papers 585, Bank for International Settlements.
    2. Gauti B. Eggertsson & Michael Woodford, 2003. "The Zero Bound on Interest Rates and Optimal Monetary Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 139-235.
    3. Paul R. Krugman, 1998. "It's Baaack: Japan's Slump and the Return of the Liquidity Trap," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 137-206.
    4. Ramana Ramaswamy & Christel Rendu, 2000. "Japan's Stagnant Nineties: A Vector Autoregression Retrospective," IMF Staff Papers, Palgrave Macmillan, vol. 47(2), pages 1-5.
    5. Davide Porcellacchia, 2016. "Wage-Price Dynamics and Structural Reforms in Japan," IMF Working Papers 16/20, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Quantitative Easing; Bank of Japan; deflation;

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F3 - International Economics - - International Finance

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