BOJ's non-traditional monetary policies and their effects on the Japanese economy: comments and views on Harada

Naotsugu Hayashi ()
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Naotsugu Hayashi: Hosei University

International Journal of Economic Policy Studies, 2021, vol. 15, issue 1, No 4, 53 pages

Abstract: Abstract Since January 2013, the Abe administration had advocated Abenomics, which proposed three arrows: bold monetary easing, flexible fiscal policy, and growth strategy stimulating investment. In response, from April 2013, the Bank of Japan announced bold monetary easing, including maintaining zero interest rates, large-scale purchases of government bonds, positive and negative interest rates on excess reserves, yield curve control, and other measures. As a result, compared with the average real growth rate of 1.6% during the Izanami–Koizumi boom and that of 1.63% during the Democratic government, it had risen to 2.1% only in 2013, the first year of the Abe administration, and it seemed that the economy had been revitalized. However, right after the consumption tax hike in April 2014, the Japanese economy fell down to negative growth of real GDP in the three consecutive quarters, causing the consumption tax hike recession. The average real growth rate from then to the second quarter of 2019 had fallen to 1.1%, which was lower than those during the Izanami–Koizumi boom and the Democratic government. In terms of the Consumer Price Index, deflation continued at an average rate of − 0.5% during the Izanami–Koizumi boom and the Democratic era, but the Abe administration recovered it to an average rate of 0.8%, and it can be said that deflation has almost ended. But it is far from achieving the 2% inflation target. Harada (Int J Econ Policy Stud (Forthcoming), 2020) briefly explained the various measures of the BOJ's unconventional monetary policies. It analyzes what effects they have on the Japanese economy and insists that they had positive effects on employment, productivity, and capital investment in particular, but zero and negative interest rates are partly a consequence of past deflationary monetary policy and are a global trend. Then, it proposes to maintain the present policies. However, Harada does not explain clear reasons why the BOJ could not achieve the 2% inflation target. This article gives comments and views on important key issues of non-traditional monetary policies raised by Harada (2020), tries to clarify the reasons why the BOJ could not achieve the 2% inflation target and proposes desirable new policy measures to achieve the inflation target, to raise real growth rate and to restore monetary normalization.

Keywords: Quantitative easing; Zero interest rate policy; Negative interest rate policy (search for similar items in EconPapers)
JEL-codes: E3 E4 E5 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s42495-020-00047-w

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