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Working Paper
Quantitative easing and Japanese bank equity values
One of the primary motivations offered by the Bank of Japan (BOJ) for its quantitative easing program -- whereby it maintained a current account balance target in excess of required reserves, effectively pegging short-term interest rates at zero -- was to maintain credit extension by the troubled Japanese financial sector. We conduct an event study concerning the anticipated impact of quantitative easing on the Japanese banking sector by examining the impact of the introduction and expansion of the policy on Japanese bank equity values. We find that excess returns of Japanese banks were ...
Working Paper
Foreign exchange intervention when interest rates are zero: does the portfolio balance channel matter after all?
The Japanese zero-interest rate period provides a "natural experiment" for investigating the effectiveness and transmission channels of sterilized intervention when traditional monetary policy options are constrained. This paper takes advantage of the fact that all interventions in the JPY/USD market during the zero-interest rate period are sterilized sales of JPY and, therefore, none of these interventions can signal a future interest rate decrease. In order to further assess through which transmission channel these interventions work, the analysis integrates official daily Japanese ...
Conference Paper
Financial deregulation and the demand for money in Japan
Conference Paper
Monetary policy in a life-cycle economy
Conference Paper
Summary panel: Japan's experience with zero interest rates
The current policy stance of the BOJ has an automatic stabilizer element in it despite the fact that we have hit the zero rate bound. That is to say, the promise to "keep the zero rate until deflationary concerns are over" puts downward pressure on long-term interest rates when people see negative signs about the economy because they expect the zero rate to stay for a longer period of time. A similar thing will happen anyway. But the current commitment seems to have strengthened the effect.
Conference Paper
Monetary policy, intervention, and exchange rates in Japan
Journal Article
Japan's approach to monetary policy
The goal of monetary policy as conducted by the Bank of Japan is to contribute to the sound development of the national economy through the pursuit of price stability. The objective of price stability, however, is not precisely defined as it has been for other central banks. Following the implementation of the new Bank of Japan Law in 1998, the monetary policy framework is characterized by central bank independence, the primacy of the price stability objective, instrument independence, and policy decisions made by a monetary policy committee with regular meetings and published minutes. At its ...
Journal Article
Testing the expectations hypothesis: some new evidence for Japan
The deregulation of the Japanese financial markets and the adoption of an interest rate policy instrument by the Bank of Japan prompted a number of empirical investigations of the expectation hypothesis (EH) of the term structures of interest rates in Japan. This paper is a continuation of this research. It deviates from the previous work on the EH in Japan in two respects. First, it tests the EH by estimating a general vector autoregression (VAR) of the long-term and short-term rates and testing the restrictions implied by the EH on the VAR using a Lagrange multiplier test. Second, the issue ...
Journal Article
Interest rate targets abandoned