monetary policy in japan

7/29/2019 MONETARY POLICY IN JAPAN

1/13

Chart 1

Real GDP Growth Rate and Output Gap

Sources: Cabinet Office; Bank of Japan.

Chart 2

Price Developments

Source: Ministry of Internal Affairs and Communications.

-10

-8

-6

-4

-2

0

2

4

6

8

10

-10

-8

-6

-4

-2

0

2

4

6

8

10

1990 92 94 96 98 2000 02 04 06 08 10 12

Output gap (left scale)

Real GDP (right scale)

% y/y %

.

Year

-4

-3

-2

-1

0

1

2

3

4

5

1990 92 94 96 98 2000 02 04 06 08 10 12

Core CPI (excluding fresh food)

CPI (all items)

y/y %

Year


2/13

Chart 3

Current Account Balance at the Bank of Japan and Overnight Call Rate

Source: Bank of Japan.

Chart 4Impacts of the Quantitative Easing (QE) Policy

0

5

10

15

20

25

30

35

40

45

-0.05

0.00

0.05

0.10

0.15

0.20

Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06

Uncollateralized overnight callrate (left scale)

Final target 30-35trillion

(right scale)

tril. yen%

Initial target 5 trillion(right scale)

Expanding the size of

the balance sheet(monetary base)

Forward guidance

Altering the asset

composition of thebalance sheet

Loweringtherisk

premiums

Lowering theexpectations

forthefuturepathof

shortterminterestrates


3/13

Chart 5

Japanese Yen Exchange Rates

Source: Bloomberg.

40

60

80

100

120

140

160

180

200

1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12

Vis--vis U.S. dollar

Vis--vis euro

Nominal effective exchange rate of the yen

2000=100, reversed

Appreciation of the yen

Depreciation of the yen

Year


4/13

Chart 6

Monetary Base in Major Economies

(1) Japan

(2) United States

(3) Euro Area

Sources: Cabinet Office; Bank of Japan; Federal Reserve; European Central Bank; Eurostat.

0

10

20

30

40

50

0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

150

1990 92 94 96 98 2000 02 04 06 08 10 12

In yen (left scale)

In % of GDP (right scale)

tril.yen % of GDP

Year

Zero interest

rate policy

38 tril.9% of GDP

< 2012> 123 tril.26% of GDP

0

10

20

30

40

50

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1990 92 94 96 98 2000 02 04 06 08 10 12

In U.S. dollars (left scale)


tril. U.S. dollars % of GDP

Year

$ 0.2 tril.5% of GDP

< 2012>$ 2.6 tril.

17% of GDP

0

10

20

30

40

50

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2000 01 02 03 04 05 06 07 08 09 10 11 12

In euros (left scale)


tril. euros % of GDP

Year

0.5 tril.7% of GDP

< 2012> 1.7 tril.18% of GDP


5/13

Chart 7

Transmission Mechanism of Quantitative Easing (QE)

Second

stage

First

stage

Financialandcapitalmarkets

Monetary easing

Purchaseof JGBsandotherassets

TBills

JGBs

Otherfinancial

assets

Realeconomyandgeneralprices

Interbank

transactions

Zerointerestratepolicy

Forwardguidance

Bankloans


6/13

Chart 8

Bank Loans in Major Economies

(1) Japan

(2) United States

(3) Euro Area

Sources: Cabinet Office; Bank of Japan; Federal Reserve; European Central Bank; Eurostat.

0

20

40

60

80

100

120

140

0

100

200

300

400

500

600

700

800

900

1,000

1995 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12

In yen (left scale)


tril.yen

Year

% of GDP

535 tril.106% of GDP

398 tril.84% of GDP

0

20

40

60

80

100

120

140

0

2

4

6

8

10

12

14

1995 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12

In U.S. dollars (left scale)


tril. U.S. dollars

Year

% of GDP

$ 2.4 tril.

34% of GDP

$ 7.1 tril.45% of GDP

0

20

40

60

80

100

120

140

0

2

4

6

8

10

12

14

2000 01 02 03 04 05 06 07 08 09 10 11 12

In euros (left scale)


tril. euros

Year

% of GDP

5.3 tril.82% of GDP

9.9 tril.104% of GDP


7/13

Chart 9

Size of the Asset Purchase Program

Note: Dates indicate the intended timescale for completing the increase.

Chart 10

Transmission Mechanism of the Comprehensive Monetary Easing (CME)

20

30

40

50

60

70

80

90

100

110

120

9 12 3 6 9 12 3 6 9 12 3 6 9 12

Maximum amount of the Program

Actual amount of increase

2010 11 12 13

End-Dec.

(2013)

101 t ril.yen

tril. yen

Mar. (2011)40 tril.yen

Aug.

50 tril.yen

Oct.

55 tril.yen

Started inOct. (2010)35 tril.yen

Feb. (2012)

65 tril.yen

Apr.

70 tril.yen

Sep.

80 tril.yen

Schedule

Oct.

91 tril.yen

Dec.

101 tril.yen

JGBs,TBills

CP,Bonds

ETFs,JREITs

Zerointerestratepolicy

Monetary easing

Financialandcapitalmarkets


Purchaseofdiverseassets

Second

stage

First

stage

Forwardguidance


8/13

Chart 11

Interest Rates

(1) Bond Yield Curves (2) Lending Rates on New Loans

Sources: Bank of Japan; Bloomberg.

Chart 12

Demographic Changes in Japan

Sources: National Institute of Population and Social Security Research; Ministry of Internal Affairs and Communications.

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

2007 0 8 0 9 1 0 1 1 1 2

Long-term

Short-term

%

Year

0.0

0.1

0.2

0.3

0.4

O/N 3M 6M 1Y 2Y 3Y 5Y

(a) Sep. 30, 2010 (before the CME policy)

(b) Dec. 12, 2012

%

(b)

Interest rate applied to the deposit facility (0.1%)

(a)

20

40

60

80

100

120

140

1990 95 2000 05 10 15 20 25 30

Children and elderly population

Working-age population (15-64 years)

Total population

Forecast

mil. of persons

Year


9/13

Chart 13

Total Fertility Rates in Japan, the United States, and Europe

Note: The figure refers to the number of children per woman if she bears children in accordance with current age-specific fertility rates.

Source: United Nations.

Chart 14

Elderly Dependent Ratios in Japan, the United States, and Europe

Note: The figure refers to the ratio of the elderly dependent population (65 years and over) to the working-age population (15 to 64 years).


0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

3.0

1990-94 95-99 2000-04 05-09

Japan Germany

Italy United States

Year

5

10

15

20

25

30

35

40

45

1990 92 94 96 98 2000 02 04 06 08 10 12 14

Japan Germany

Italy United States

Year


10/13

Chart 15

Life Expectancy at Birth in Japan, the United States, and Europe

(1) Female

(2) Male


70

72

74

76

78

80

82

84

86

88

90

1990-94 95-99 2000-04 05-09

Japan Germany

Italy United States

Year

years

70

72

74

76

78

80

82

84

86

88

90

1990-94 95-99 2000-04 05-09

Japan Germany

Italy United States

Year

years


11/13

Chart 16

Projected Working-Age Population Trends in Japan, the United States, and Europe

Sources: United Nations;National Institute of Population and Social Security Research; Ministry of Internal Affairs and Communications.

Chart 17

Projected Total Population Trends in Japan, the United States, and Europe

Sources: United Nations;National Institute of Population and Social Security Research; Ministry of Internal Affairs and Communications.

90

100

110

120

130

140

150

1990 95 2000 05 10 15 20 25 30

Japan Germany

Italy United States

Year

Year1990 = 100

70

80

90

100

110

120

130

140

1990 95 2000 05 10 15 20 25 30

Japan Germany

Italy United States

Year

Year 1990 = 100


12/13

Chart 18

Real GDP Growth Rate in Japan

Note: The growth rate in the number of workers from 2011 onward is calculated using the projected future population (medium variant)

and labor force participation rates (assuming that the labor force participation rates in each age/sex group remain the same as in

2010).

Sources: Cabinet Office; Ministry of Internal Affairs and Communications; National Institute of Population and Social Security Research.

Chart 19

Potential Economic Growth and Firms' Economic Growth Expectations

Note: Expected growth rate (corporate) refers to the outlook for real demand growth rate three years ahead for industry in the

Annual Survey of Corporate Behavior (Cabinet Office).

Sources: Bank of Japan; Cabinet Office.

-1

0

1

1

2

2

3

3

4

4

5

1990 93 96 99 2002 05 08 11

Potential GDP growth rate

Expected growth rate (corporate)

%

Fiscal year

+0.5%-0.2%

-0.6% -0.8%

-1.2%

+0.9%

+0.8%

-2

-1

0

1

2

3

4

5

6

1970s 80s 90s 2000s 10s 20s 30s

Productivity growth (per-worker real GDP growth)

Growth in the number of workers

Real GDP growth

y/y % chg.

Forecast


13/13

Chart 20

Inflation Expectations in Japan

Sources: Nishizaki, Kenji, Toshitaka Sekine, and Yoichi Ueno, "Chronic Deflation in Japan," Bank of Japan Working Paper Series,

No. 12-E-6, 2012; Consensus Economics Inc.

Chart 21

Bank of Japan's Efforts to Cope with Structural Issues

-3

-2

-1

0

1

2

3

4

1990 92 94 96 98 2000 02 04 06 08 10

Trend inflation (Nishizaki et al. [2012])

Trend inf lation (Saito et al. [2012])

Consensus forecast (6-10 years)

Year

y/y, %

Aggressivemonetaryeasing

Accommodativefinancialconditions

Firststage

Secondstage

CMEPolicy

GrowthSupportingFunding

Facility

Totalamount:5.5trillionyen

StimulatingBankLendingFacility

Totalamount:Unlimited

Government

Firms

Financialinstitutions

Assetpurchase

Zero

interest

rate

policy

LoanSupportProgram

BankofJapan


monetary policy in japan

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