Japan’s Monetary Policy: Accommodating Inflation Unconventionally (Simplified Chinese Version)
(6 pages of text)
Case (Pub Mat)
In January 2018, the governor of the Bank of Japan (BoJ), was preparing for a meeting of the policy board of the BoJ. While the broad macroeconomic indicators hinted at a Japanese recovery, Japan still continued to have an inflation rate well below its target of 2 per cent. The accommodative, unconventional monetary policy of quantitative and qualitative easing engineered by the governor in 2013 had resulted in a bloated balance sheet for the BoJ, with little success in overcoming deflation. Was it time to wind up Japan’s monetary stimulus? What would be the results of continued monetary stimulus, especially for businesses? Would the Japanese economy be able to recover from deflation without such monetary stimulus?
The case can be used in graduate or post-graduate-level courses on general management, in modules on business environment or international economics, or in a module on business, government, or international economy. The case provides students with a basic understanding of types of unconventional policy measures; unconventional monetary policies and the context in which they are used; and the advantages and disadvantages of monetary easing under unconventional policy measures. After working through the case and assignment questions, students will be able to do the following:
- Understand the use of monetary policy by central banks and the problem of the zero lower bound.
- Distinguish between conventional and unconventional monetary policies and the use of the latter in the context of deflation.
- Examine various unconventional policy instruments and their transmission mechanism, with reference to Japan.
- Appreciate the pros and cons of monetary easing from the viewpoint of business.
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