Cosgrove, Michael; Marsh, Daniel; Gasper, Louis
September 2008
Review of Business Research;2008, Vol. 8 Issue 4, p118
Academic Journal
Japan has experienced deflation for six of the past nine years, as measured by their CPI. The Bank of Japan's (BOJ) objectives include an explicit inflation target: maintaining "price stability." Price stability for the BOJ prior to 2006 apparently meant no inflation and no deflation. The BOJ considered both inflation and deflation as "...a threat to our daily lives." In its current monetary policy framework (since 2006) price stability to the BOJ supposedly means an approximate range in the year-over-year change in the CPI of between zero and two percent. Analysis of growth in monetary aggregates and stability of monetary demand measures, however, suggests that the BOJ is still pursuing a monetary policy that is consistent with bouts of deflation since 2006. BOJ officials may be aiming for periods of both mild deflation and mild inflation to approximate a minimal change in the price level over some medium-term time span. Monetary policy appears to lose its effectiveness at very low levels of inflation or deflation in Japan. The policy implication of this paper is that the Bank of Japan needs to achieve an inflation rate that approximates the upper end of its current target range, two percent. Such an inflation rate is likely to coincide with a more effective monetary policy, financial stability, and sustainable economic growth in Japan. It may be that Japan's deflation problem stems, in part, from the BOJ being unaware that the monetary relationships which held prior to 2000 no longer worked once Japan experienced near zero inflation or deflation in the post-1999 period.


Related Articles

  • Bringing an end to deflation under the new monetary policy framework.  // OECD Economic Surveys: Japan;Apr2008, Vol. 2008 Issue 4, p49 

    With the end of quantitative easing in 2006, the Bank of Japan introduced a new monetary policy framework that includes an understanding of price stability as 0 to 2% inflation and raised interest rates from zero to 0.5%, although most measures of inflation have remained negative. Given...

  • The difficulty of discerning what�s too tight: Taylor rules and Japanese monetary policy. Kuttner, Kenneth N.; Posen, Adam S. // North American Journal of Economics & Finance;Mar2004, Vol. 15 Issue 1, p53 

    Observers have relied increasingly on simple reaction functions, such as the Taylor rule, to assess the conduct of monetary policy. Applying this approach to deflationary or near-zero inflation environments is problematic, however, and this paper examines two shortcomings of particular relevance...

  • Ending deflation and achieving a self-sustained expansion.  // OECD Economic Surveys: Japan;Mar2005, Vol. 2005 Issue 3, p47 

    This chapter discusses the factors driving the current expansion and the economic outlook. Despite risks, such as rising oil prices and slowing demand in China, the upturn is projected to continue at a more moderate pace through 2006, helping to bring an end to deflation. The Bank of Japan...

  • Inflation Targeting for the Bank of Japan? Spiegel, Mark M. // FRBSF Economic Letter;04/07/2000, Vol. 2000 Issue 11, p1 

    Explores the implications of inflation targeting proposed by the Japanese government and the Bank of Japan. Adoption of inflation targeting to facilitate economic recovery; Countercyclical arguments for the adoption of an inflation-targeting regime; Benefits of inflation targeting in terms of...

  • Japan: BoJ Independence Under Threat.  // Emerging Markets Monitor;12/13/2010, Vol. 16 Issue 35, p11 

    The article presents the emerging market outlook of the Business Monitor International (BMI) for Japan for December 2010. It predicts that the independence of the Bank of Japan (BoJ) will be compromised by renewed political pressure, which is causing the government to exert greater influence...

  • Nikkei jumps as Bank of Japan makes aggressive growth move. Salih, Chris // Fundweb;4/4/2013, p21 

    The article reports that the Nikkei 225 rose sharply after the Bank of Japan (BoJ) said it would aggressively expand the country's asset purchase programme in a bid to stimulate growth and meet its inflation target of 2% until 2015. BoJ will revert to open-ended asset purchases as well as...

  • Fight Deflation with Deflation, Not with Monetary Policy. Leightner, Jonathan E. // Japanese Economy;Summer2005, Vol. 33 Issue 2, p67 

    The Japanese government has pinned its hopes of defeating deflation on monetary policy. This article applies a new analytical technique, reiterative truncated projected least squares, (RTPLS) to monthly Japanese data from January 1970 to January 2003. In this application, RTPLS produces a...

  • Editorial. Schrett, Wolfram // Economic Bulletin;2001, Vol. 38 Issue 10, p303 

    The article presents the author's comments on the dependence of economists and finance minister of Japan on the Bank of Japan (BoJ) to act resolutely against deflation. According to the author, the hope of those despairing about the BoJ is now focusing on the exchange rule of the yen. A strong...

  • Bank of Japan on hold...unless? Al Hammoury, Nour Eldeen // Banker Middle East;Nov2015, Issue 178, p10 

    The article offers information related to the monetary policy of Japan. It is stated that the Bank of Japan (BoJ) has not introduced monetary easing despite stagnaancy of economic situation in Japan, deterioration in inflation over the past few months and stallment of the global growth. It is...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics