Central bank's surprise policy and its potential to change people's deflationary mindset: evidence from the yen-dollar exchange market

Koichiro Kamada

No DP2025-015, Keio-IES Discussion Paper Series from Institute for Economics Studies, Keio University

Abstract: This paper reviews the Bank of Japan’s (BOJ) monetary policy from the perspective of surprise observed in the foreign exchange market and investigates the potential of central bank’s surprising announcement as a policy tool to change people’s deflationary mindset. We propose a surprise measure that is based on the daily candlestick-chart data on the yen-dollar exchange rate and identify surprise that occurred in the Tokyo and New York markets. Using the identified surprise, we evaluate monetary policies of BOJ governors and compare them with those of Fed chairs. We present statistical evidence that shows that under the command of Governor Haruhiko Kuroda, the BOJ was strongly dependent on surprise policy in the course of the quantitative and qualitative monetary easing. We also show that the surprise generated during the Kuroda term succeeded in raising the trend inflation rate, but failed to steepen the slope of the Phillips curve and to enhance the pass-through of the foreign exchange rate.

Keywords: deflationary mindset; monetary policy surprise; exchange rate; candlestick chart; trend inflation (search for similar items in EconPapers)
JEL-codes: C54 C58 E52 E58 G15 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2025-07-14
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ies.keio.ac.jp/upload/DP2025-015_EN.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:keo:dpaper:dp2025-015

Access Statistics for this paper

More papers in Keio-IES Discussion Paper Series from Institute for Economics Studies, Keio University Contact information at EDIRC.
Bibliographic data for series maintained by Institute for Economics Studies, Keio University ().