This paper was prepared for an invited lecture at the fall meeting of the Japanese Economic Association held at Osaka City University on 21 October 2006. The authors are grateful to Masaaki Shirakawa, Hiroshi Ugai and participants in the third BIS annual conference, 2005 NBER. Japan meeting, 2006 Japan Economic Society meeting and an anonymous referee for valuable comments on earlier versions of the paper and to Hiroshi Kobayashi and Ichiro Muto for excellent research assistance. All opinions expressed herein are those of the authors and are not those of the BOJ.
THE EFFECTS OF THE BANK OF JAPAN'S ZERO INTEREST RATE COMMITMENT AND QUANTITATIVE MONETARY EASING ON THE YIELD CURVE: A MACRO-FINANCE APPROACH*
Article first published online: 6 AUG 2007
Japanese Economic Review
Volume 58, Issue 3, pages 303–328, September 2007
How to Cite
ODA, N. and UEDA, K. (2007), THE EFFECTS OF THE BANK OF JAPAN'S ZERO INTEREST RATE COMMITMENT AND QUANTITATIVE MONETARY EASING ON THE YIELD CURVE: A MACRO-FINANCE APPROACH. Japanese Economic Review, 58: 303–328. doi: 10.1111/j.1468-5876.2007.00422.x
- Issue published online: 6 AUG 2007
- Article first published online: 6 AUG 2007
- Final version accepted 30 November 2006.
This paper empirically investigates the effects of the Bank of Japan's (BOJ) zero interest rate commitment and quantitative monetary easing on the yield curve. Applying a macro-finance approach, we decompose interest rates into expectations and risk premium components and extract the market's perception of the BOJ's policy stance. We make clear the counterfactual policy without the BOJ's commitment. We find some evidence that the commitment lowered interest rates and mat raising the reserve target may have been perceived as a signal indicating the BOJ's accommodative policy stance. The portfolio rebalancing effect has not been found to be significant.