IR2014-3
Evaluation of Monetary Easing Policy in Japan:
Integration between the US and Japanese markets
Hideaki Ohta*
24 September 2014
*立命館大学国際関係学部教授
著作権や内容・意見は執筆者に属し、国際関係学会の示すものではない。尚、無断転載を禁ずる。
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
Evaluation of Monetary Easing Policy in Japan:
Integration between the US and Japanese markets
Hideaki Ohta1
Abstract
This paper examines the effectiveness of monetary policy on domestic monetary and
financial markets and the real economy in Japan, based on the VAR (Vector autoregressive)
model from 2001 to 2014, covering the period of the Quantitative Monetary Easing Policy
(QE, 2001-2006), Comprehensive Monetary Easing (CME, 2010-2011), as well as the
Qualitative and Quantitative Monetary Easing (QQE) Policy (2013～) in Japan.
The result shows that monetary easing policy has become increasingly less effective in
controlling the domestic market, and it has become more difficult for BOJ to put postive
effect on the real economy in Japan through the current QQE under increasing international
capital flows, that have been accerelated under the Federal Reserves’ QE2 and QE3. It is
clear that the abundant liquidity provided by BOJ is not effectively utilized for productive
investment even under the extremely easy monetary policy in Japan. This could be
accounted for by the fact that the liquidity has been invested in the monetary and financial
markets in the US and Japan, which have become more associated each other recently after
the Global Financial Crisis. The analysis based on Granger Causality Test and Impulse
Response Functions shows that the base money and money stocks, as well as other
variables in Japan have increasingly associated with that of the USA, and both markets
have become significantly integrated.
1.Introduction
This paper examines the effectiveness of Bank of Japan (BOJ)’s monetary policy in
both the domestic and the US monetary and financial markets as well as the real economy,
based on the VAR (Vector autoregressive) model from April 2001 to June 2014, covering
the periods of QE (2001-2006), CME (2010-2012) and the QQE(2013-).
Bank of Japan initiated the Quantitative Monetary Easing Policy (QE) in 2001, which
was terminated in March 2006, while BOJ continued the ‘Zero interest-rate’ policy
introduced in 1999. BOJ introduced ‘Comprehensive Monetary Easing’ since October
2010, which is followed by ‘Quantitative and Qualitative Monetary Easing (QQE), the
program of asset purchase with US$1.4 trillion in two years, initiated in April 2013. The
QQE policy pushed up stock prices with depreciation of exchange rate of Yen byMay 2013.
However, monetary easing, especially QQE, has not directly increased in bank lending for
domestic production. The Federal Reserve (FRB) also introduced monetary easing policy
with Large Scale Asset Purchases[LSAPs], and its effects on the markets in the US and
Japan have become substantialy large, as shown in this paper. It is widely recognized that
Professor at the College of International Relations, Ritsumeikan University (Kyoto, Japan). Email:
hoviolin@fc.ritsumei.ac.jp
1
1
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
the Federal Reserve’s Quantitative Easing, especially QE2( Nov. 2010 –June 2011) and
QE2 (Sept. 2012-), has influenced on the monetary policy in many countries. Such an
extremely monetary easing accelerated liquidity supply in the global market though carry
trade and other financial transactions. The market in Japan is also considered to be
increasingly influenced by the capital flows under the QE2 and QE3.
Extremely easy monetary policy, therefore, may not be directly effective in putting
positive impact upon the domestic economy and market in Japan, since cross-border capital
flows have significantly increased especially after the Global Financial Crisis (2008/9),
when monetary easing policies were adopted by major advanced economies, including
Japan and the USA. That could have facilitated capital/ financial investment in the US and
other markets2.
The effects of monetary easing policies on the financial market and the real economy
in Japan have been studied by several scholars particularly during the Quantitative Easing
period (2001-2006). Although international capital flows have put significant impact upon
the domestic market and the real economy, the major past studies have not taken up the
aspect of international context, including the effects of capital flows on the domestic
monetary policy and financial/ monetarymarkets in Japan3. Also, there has not been any
study on the effects of monetary easing policyof theUS FRB’s extremely monetary easing
on the markets in the US and Japan.
This paper examines the effects of BOJ and FRB’s monetary easing policy on the US
and Japanese markets, based on the analysis of VAR model, including variables such as
monetary base(the US/Japan), BOJ Current account (including foreingbanks’ excess
reserve), as well as money stocks (M2), bond yields, and the stock prices in the US and
Japan during April 2001 to June 2014. The major findings of the analysis obtained in this
paper include: (i)The BOJ’s monetary policy has become increasingly ineffective, in the
sense that monetary policy instrument (BOJ Current Account, Base Money) has put
insignificant effect on the monetary and financial market as well as the real economy over
the whole period4; (ii) The monetary easing in both the US and Japan has bidirectional
Garnger Causality in money stocks and monetary base and other variables in the market.
The impulse response functions of various varibles also indicate that the related variables
have influenced on the other markets and real economies bot not positively in both
countries. This could be due to capital flows under the BOJ’s comparehensive monetary
easing and Quantitative and Qualitative monetary easing, as well the monetary easing
policy under QE2 as well as QE3.
The monetary easing policy of FRB’s QE2 also has not been proved as directly related to the US real
economy. Martin Feldstein argues that QE2 led to a rise in the stock market, which in turn contributed to
increasing consumption and the strong performance of the US economy in late 2010 (Statement on 24
February 2011). However, QE2 has put significant effect on the pressure for currency appreciation and
inflation, and the higher commodity prices in the global market, while the effects on the domestic economy
is not significant. The effect of QE3 is also questioned by Mr. Fischer, Governor of Dallas Reserve Boad
(See Bloomberg dated 10th April, 2013)
3 In this regard, Miyao(2006) shows that monetary policy had become ineffective in the 1990s through the
analysis based on VAR model.
4 Noguchi(2013a) maintais that monetary easing policies in Japan as well as that in the USA have not
resulted in positive effect on the real economy.
2
2
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
2．Research on the Effects of Monetary Policy in Japan
A number of studies have been undertaken on monetary policy and its effects on the
monetary/financial market as well as the real economy in Japan, but past studies have
focused mostly on the period of Quantitative Monetary Easing Policy [QE] (2001-2006),
and almost all the studies have not examined the effects of monetary easing policy after the
‘Lehman Shock’ (2008), including the BOJ’s Comprehensive Monetary Easing (CME) and
the current QQE Policy Phase since Spring 2013.
Several studies suggest that QE (2001-2006) in Japan put the bond yield lower and
had certain effects on the maturity and yield curve of the bonds, thereby stabilizing the
market5. However, several studies pointed out that the effect of QE on the real economy
was insignificant6.
Major analyses based on VAR models on the monetary policy in Japan have been
initiated in the 2000s, including the work by Teruyama (2001), which shows monetary
policy had become ineffective, but the period of the analysis was confined to the analysis in
the 1990s. Other studies based on the VAR models are basically analyses on the
Quantitative Monetary Easing Policy period (2001-2006), but not covered more recent
period until today. Harada and Masujima (2008) pointed out the effectiveness of the
Quantitative Monetary Easing(2001-2006) on the real economy through stock market,
based on the VAR model. Honda, Kuroki and Tachibana (2010) also show the effectiveness
of monetary easing policy during 2001-2006 by adopting variables of CPI, industrial
production, call rate, BOJ Current Account, Nikkei stock prices, and industrial production,
based the VAR models. The study by Honda and Tachibana (2011) extended the covered
period from 1996 to March 2010, including dummy variable for the period of Quantitative
Monetary Easing (2001-2006), and claims that monetary policy was effective in increasing
industrial production through the route of stock market.7 However, the significant rise of
stock price in Tokyo, reached its highest level in the past few years in Spring 2013, might
be the resul of investors’ expectation of the Japanese authority’s stance in the monetary
policy and depreciation of Yen, rather than the actual change in the monetary base, and the
effect of monetary easing has already been faded away in the market since the mid-2013
until today.
Therefore, the results of previous studies may not be valid for the discussion on the
effectiveness of monetary easing that has significantly increased in the post Global
Financial Crisis(2008). Ohta(2013) alreadysuggested that BOJ’s monetary easing policy has
not provided significant effects on the real economy as well as the domestic financial
market, and that could be caused by increase in short-term capital flows. This paper
examines not only the effects of increasing monetary base in Japan and shows that
Okina and Shiratsuka (2004) and Baba et al. (2006) indicated that the monetary easing policy did lower
the yield curve of the government bond (JGB) with longer period, but the effects on the price levels and the
real economy were limited. Ugai (2006) also suggested that the monetary easing had some effect in terms
of lower risk premium during the QE period (2001-2006).
6 Shiratsuka et al. (2010) also pointed out that QE might put expectation of easing policy to be positive
among the private sector, but the effect on the real economy is limited.
7 Honda(2014) maintains the effectiveness of asset effect, however, the monetary easing since 2006 has
not directly linked to stock prices in Japan, as the anaylisis of this paer shows.
5
3
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
monetary policy has become ineffective in activating the real economy and that no
significant influences on the financial and monetary markets. This paper also focuses on the
increasing causality between the Japanese and the US markets in terms of foreign banks’
BOJ’s Current Account, as well as monetary base and money stocks, which have significant
inpact upon both markets that have become closely associated recently.
3．Monetary Policy and Financial Market in Japan
Monetary base, including Bank of Japan(BOJ) Current Account, have increased
significantly, especially under the current Quantitative and Qualitative Monetary
Easing(QQE), and the amount reached to ¥242 trillion and ¥151 trillion, respectively in
August 2014 (Fig.1). On the other hand, bank lending has not increased substantially,
despite of massively increased monetary base since 2013 (Fig.1). The size of the monetary
base and BOJ Current Account in Japan are almost 40% of GDP (estimated by Author) and
21.3%, higher than that of the USA with 21.7% and 13.3%, respectively(Fig.2）.
(¥ tn) Fig.1: Monetary Base/ BOJ Current
Account & Bank Lending (Japan)
250
Bank
Lending
(RHA)
200
150
100
(y/y, %)
0
1999
2002
Source: Bank of Japan
2005
45
4
40
2
30
35
25
(Japan & USA)
MB(Japan)
Reserve(Japan)
MB(US)
Reserve(US)
20
-2 15
-4
BOJ Current
Account (LHA)
50
6
0
Monetary Base
(LHA)
(%, GDP) Fig.2: Monetary Base & Reserve
2008
2011
10
5
-6
0
-8
Note: Fiscal Year (Japan) and Calendar year (USA)
Sources: Bank of Japan, Cabinet Office of Japan ,
Federal Rserve Board, BEA (USA)
2014
1999 2001 2003 2005 2007 2009 2011 2013
Even under such a monetary easing policy, industrial production has not increased
substantially until today, and monetary base is not associated with the Nikkei stock prices
(Fig.3&4). There is no positive correlation and association between the stock prices and
industrial production, nor money stocks(M2) and industrial production(Fig.5&6).
Monetary easing policy after the Global Financial Crisis in the US market seems to
have achieved better performance in terms of stock prices and production, as compared
with that in Japan (Fig.7&8). This could be due to the fact that the US economy is more
influenced by asset effects of the stock prices, as compared with Japan. However, its is still
not clear that the US monetary easing policy, including QE 2 and 3 has directly put positive
impact upon the productive activities, as discussed later.
4
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
(2010
=100)
120
110
100
90
80
70
60
1999
Fig.3: Monetary Base & Industrial
Production (Japan)
(¥,trillion )
260
Production
240
(SA,LHA)
220
200
180
160
Monetary
140
Base(RHA)
120
100
80
60
2002
2005
2008
2011
2014
100
15,000
90
13,000
11,000
80
Nikkei
LHA)
9,000
70
7,000
5,000
1999
60
2002
2005
2008
2011
2014
Fig.7: Monetary Base & Ind. Production
(US$ bn)
(USA)
110
4,060
90
1999
2,560
110
2002
2005
2008
2005
2008
2011
2014
(y/y, %)
30
20
Production
(RHA)
10
0
-10
-20
M2
(LHA)
2002
2005
-30
-40
2008
2011
2014
Fig.8 Monetary Base & Stock Price
(US$ bn)
(USA)
4,560
4,060
3,560
US
Stock
Prices
(LHA)
3,060
2,560
2,060
1,560
1,060
70
560
50
1999
60
2011
2002
90
1,060
Monetary Base (RHA)
5,000
1999
3,060
1,560
95
7,000
130
2,060
100
9,000
150
3,560
105
11,000
170
4,560
US
Production
(SA, LHA)
13,000
(2005=100)
(2010=100)
115
15,000
Sources: Bank of Japan, International Financial Statistics (IFS)
database (IMF)
Sources: Bank of Japan, IFS)database (IMF), Nikkei Profile
120
17,000
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
1999
110
17,000
240
220
200
180
160
140
120
100
80
60
Monetary
Base (RHA)
19,000
(y/y, %)
120
Production
(RHA)
Nikkei Stock
Prices(LHA)
21,000
Fig.6: M2 & Industrial Production (Japan)
Fig.5: Stock Price & Industrial
(S.A.2005
Production (Japan)
(2005=100)
=100)
19,000
23,000
Sources: Bank of Japan, International Financial Statistics (IFS)
database (IMF), Nikkei Profile
Sources: Bank of Japan, International Financial Statistics (IFS)
database (IMF)
21,000
Fig.4: Monetary Base & Stock Price(¥ bn)
(Japan)
260
(¥)
25,000
2014
560
Monetary Base (RHA)
2002
2005
2008
2011
60
2014
Sources: nternational Financial Statistics (IFS) database (IMF)
Source: International Financial Statistics (IFS) database (IMF)
There are several reasons why the BOJ’s monetary easing policy has not been
effective in influencing positively on the real economy. This could be partly explained by
the fact that bank lending to the productive sector has not increased, irrespective of increase
in the banks’ BOJ current account. It is also important to note that substantial capital have
flown in the domestic market, which increased money stocks, and influenced on the
5
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
monetary base provided by the BOJ. The liquidity provided by the BOJ has also been flown
out to the international markets. Capital inflows from the external markets should also have
influenced in the domestic market in Japan. It is shown by the fact that the changes in M2
have significant correlation with capital flows, especially after September 2008 (Fig.9).
This could indicate that money stock held in the domestic financial sector is associalted
with the capitalflows that originated from liquidity in the global market,especially the US
market. This trend has become significant in recent years after the Global Financial Crisis.
Thus, money stock is now closely linked to the overseas market under the current regime of
capital market liberalization. As shown in Fig.9, and the coefficient of determination (R2)
and coefficient of the regression of M2 on capitals flows is fairly high (0.369) in recent
years. It is necessary, therefore, that Monetary policy should be analysed under the
context of capital flows that put significant effects on the domestic market.
(Trilion yen )
Fig.9 : Capital Flows (Net) and M2 (Japan)
(y/y, %)
1,500
Capital Flows (LHA)
500
5
4
-500
3
-1,500
2
-2,500
1
M2(RHA)
-3,500
-4,500
0
2000
2002
2004
2006
2008
2010
2012
2014
Source: Bank of Japan, ternational Financial Statistics (IFS) database (IMF)
(2001.4-2008.8)
CapFlows ⇒ M2
(2001.4-2008.8)
Y = -0.01X + 677.5
(-3.445) (131.8)
R2= 0.120
(figures in parenthisis are t-value)
(2008.9-2014.7)
CapFlows ⇒ M2
(2008.9-2014.7)
Y = 0.022X + 819.9
(6.346) (170.1)
R2= 0.369
(figures in parenthisis are t-value)
In order to examine the above mentioned facts, the analysis is made based on
Vetororautoregressive (VAR) model, to identify the overall ineffectiveness of recent BOJ’s
monetary easing policy and increasing association between the Jpanese and the US market
in the following sections.
4．Vector Auto regression (VAR) Model and Analysis on Monetary Policy
4.1 General Explanation of the Analysis
This section is devoted to explanation on the VAR (Vector auto regression) model to be
used for analysis on the effects of monetary policy on monetary and capital/ financial
market, foreign exchange, as well as the real economy in Japan in the next section
(Section5) . The effects of US monetary easing on the US domestic and the Japanese
market s are also examined in Section 6.
The whole period (2001-2014) is divided into four periods:
6
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
(i)
(ii)
(iii)
(iv)
Quantitative Monetary Easing Period [April 2001- March 2006]
Period until ‘Lehman Shock’ [April 2006 – August 2008]
Post-Global Financial Crisis Period [September 2008 – February 2011]
Comprehensive Monetary Easing (CME) and Quantitative and Qualitative
Monetary Easing (QQE) by Japan [March 2011 – June 2014] 8
The sources of variables are shown in the table given below.
Variables
Abbreviation
Sources
Bank of Japan Current Account
BOJ AC
Bank of Japan (major data series)
BOJ Monetary Base
Monetary Base (MB) Bank of Japan (major data series)
Money Stocks (Japan)
M2
Bank of Japan (major data series)
Government Bond Yields (JPN)
Yield
International inancial Statistics (IFS) database (IMF)
Real Effective Exchange Rate (JPN)REER
BIS effective exchange rate indices
Consumer price index (JPN)
CPI
Statistical Office (Japan), IFS database (IMF)
Nikkei Stock Prices
Stock(Nikkei)
Nikkei Profile database
Bank Lending
Lending(y/y)
Bank of Japan (major data series)
All Industry Activity Indices
Index
Ministry of Economy & Industry, Japan
Industrial Production
Production(Prod)
IFS database (IMF), Ministry of Economy & Industry, Japan
The US Monetary Base
USMB
IFS database (IMF), FRB
The US Money Stock (M2)
USM2
IFS database (IMF), FRB
Real Effective Exchange Rate (US) USREER
BIS effective exchange rate indices
T-Bill yield (10 years maturity)
TB10Y
Federal Reserve Borad
T-Bill yield (2 years maturity)
TB2Y
Federal Reserve Borad
The US Stock Prices
USShare
IFS database (IMF)
Industrial Production (US)
USProd
IFS database (IMF)
4.2 VAR(Vector autoregressive) Model
The VAR model used in this paper is basically based on the equation given below. The first
shock is provided by the monetary policy instruments (variables), including BOJ Current
Account (BOJAC), Monetary Base (Japan and the US) , ForeignBanks’ excess reserve of
BOJ current account (FEXRESV) against other market variables such as money stocks(M2,
Japan and the US), average government bond yield (Yield), and Stock Prices(Japan and the
US). The variables on the market in Japan include Banks’ lending (Lend), Real Effective
Exchange Rate (REER), Consumer Price Index (CPI), All Industry Activity Index (Index),
and industrial production (Prod) 9..
Yt = c + A1Yt-1 + A2Yt-2 + … + ApYp-l + Bεt
Where c is constant vector matrix; At ：
（n×n）matrix; εt：
（n×1）Shock Vector;
B：εt（n×l）
：matrix for changing the disturbance term vector (ut）(ut =Bεt)
The order of each variables of the VAR model is determined by the shock of the
monetary policy and the impact on the market and the real economy. Most of the variables
used for the analysis are with first-order difference to have stationality. The lag order is
determined by SIC (Schwarz criterion, or Bayesian information criterion, BIC).
The models used in the following sections are as follows:
(i)Effects of monetary easing on the market and real economy in Japan
Although Comprehensive Monetary Policy by BOJ was initiated officially inOctober 2010, monetary base
had not increased significantly until February 2011, so that the period of expansionally monetary policy is
set from March 2011 to date in this paper. The QE2 initiated from November 2010 to June 2011, but in
this paper the US monetary market trend during the periods of 2008-2011 and 2011-2014 are similar to
that in Japan. Therefore, the same period during March 2011 and 2014 June is used for the analysis on
the US market, which covers the whole period of QE2 and QE3..
9 The variables and their sources are shown in the table at the end of the main text.
8
7
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
Model1(Fig.10-1,2,3): BOJ Current Account (or Monetary Base or Call Rate) ; Real
Effective Exchange Rate (REER); Bank Lendig (Lend); Stock Prices (Nikkei);
Industrial Production (Prod)
Model2(Fig.11-1,2,3): BOJ Current Account (or Monetary Base or Call Rate); Money
Stocks (M2); CPI; average Government Bond Yield (Yield); All Industry Activity
Index (Index)
(ii)Effects of BOJ’s monetary easing on the US market and the real economy
Model3(Fig.14-1.2): Monetary Base (Japan) (or Foreign Banks’ Excess Reserves of
BOJ Current Account[FEXRESV]); US Monetary Base (USMB); US Money
Stocks(USM2); Trerasury Bill yields of 10 years maturity (TB10y);Treasury Bill
yield of 2 years maturity (TB2Y); US stock prices (USShare); US Industrial
Production (USProd)
(iii)Effects of the US monetary easing on the market and the economy in theUS and Japan
Model4(Fig.15-1,2): US Monetary Base (USMB) (or US Federal Fund Rate [FF]); US
Real effective exchange rate (USREER); US Money Stocks (USM2);
Trerasury Bond yields (TB10y); US stock prices (USShare); US Industrial
Production (USProd)
Model5(Fig.16,17): US Monetary Base (USMB) (or US Federal Fund Rate [FF]);
BOJMonetary Base (JPNMB); Foreign Banks’ Excess Reserves of BOJ
Current Account(FEXRESV); Call Rate(Japan); M2(Japan); Government
BondYield (Japan); Nikkei Stock Prices (Japan)
5. Ineffectiveness of Monetary Pollicy instrumens in Japan
VAR Models are for estimating the impact of monetary easing shocks on the domestic
monetary/financial markets and industrial production (for Model 1 [see 4.3]) and that of
monetary policy on the foreign exchange, as well as overall production activity via stock
markets (for Model 2 [see 4.3]).
5.1 ADF test and Stationarity of variables
Prior to the analysis based on VAR models, stationarity of the variables involved in the
regression is tested by ADF (augmented Dickey-Fuller) method for the unit root tests. FDI
and Derivatives have unit root without first lag during the covered period. The ADF test
results show that unit root is rejected for the first lag of other variables, which is expressed
as I (1). The stationarity of each variable is also confirmed by the Johansen test for
cointegration that allows for more than one cointegrating relationship.
The variables which are confirmed stationarity with the first lag are as follows:
Portfolio; Other Investment; BOJ Current Account; Monetary Base; Real effective
exchange rate (REER, US and Japan); Money Stock (M2); Nikkei Average(Nikkei); CPI
(y/y); Average Government Bond yield (Yield); Bank Lending (Lend); Industrial
Production (Prod); All Industry Activiety indices(Index) in Japan;US monetary Base
(USMB); US money stock(USM2); US stock prices (USShare), and US industrial
production (USProd). The analyses based on the VAR models used the variables with first
order difference, depending on the ADF test results.
8
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
5.2 Granger Causality Test
Granger causality tests are used to verify the effects of changes in monetary policy variable
(BOJ Current Account, Monetary Base, and Call Rate) on other variables. The results of
Granger Causality test of each variable (the average of F-value of the first, 2nd, 3rd and 4th
lags) are summarized in Table1. The Granger Causality in this analysis is based on bivariate model with pairwise causality test. Therefore, the variable of the leftest row indicate
the first causal shock against the variable of each column (Table1).
Table 1: Japan：Granger Causality (2001-2014)
BOJAC
MB
Call Rate REER
2001-2006
BOJAC
2.829 * 0.648
1.625
MB
0.561
3.373 * 1.661
Call Rate
1.047
0.613
0.632
REER
2.425
1.927
2.405
CPI
0.492
0.398
0.989
1.816
M2
0.589
0.783
0.723
3.987 **
Yield
0.421
0.278
2.437
0.608
Nikkei
1.967
2.651 * 1.901
1.082
Lend
2.003
1.330
0.231
0.364
Prod
1.364
1.038
0.858
1.701
Index
3.038 * 5.208 ** 0.585
0.619
Call Rate REER
2006-2008 BOJAC
MB
BOJAC
1.064
0.881
0.117
MB
2.070
1.543
0.132
Call Rate
0.561
0.496
0.942
REER
2.732 * 1.221
0.429
CPI
0.536
0.331
0.347
0.313
M2
1.386
0.628
0.452
1.183
Yield
0.685
1.593
0.186
1.492
Nikkei
0.700
0.263
0.837
2.847 *
Lend
2.463 * 2.046
0.729
0.813
Prod
0.461
0.699
2.671 * 2.065
Index
1.624
3.648 ** 2.463
0.748
Call Rate REER
2008-2011 BOJAC
MB
BOJAC
0.781
1.027
0.595
MB
1.017
0.965
1.656
Call Rate
2.690 * 1.180
2.042
REER
2.516 * 1.235
4.516 **
CPI
0.188
0.354
0.415
0.436
M2
1.248
1.621
0.942
0.286
Yield
0.788
0.317
0.730
0.906
Nikkei
2.727 * 2.313
4.614 ** 2.038
Lend
2.267
0.783
2.895 * 0.701
Prod
6.121 *** 1.888
1.959
2.539
Index
7.702 *** 2.563 *
2.67 *
5.15 **
Call Rate REER
2011-2014 BOJAC
MB
BOJAC
2.106
3.450 * 0.492
MB
1.661
2.584 * 0.363
Call Rate
5.453 ** 5.335 **
1.431
REER
0.957
0.670
1.469
CPI
0.242
0.183
0.234
0.156
M2
0.777
0.492
0.350
0.641
Yield
0.461
0.791
0.542
0.471
Nikkei
0.973
0.844
0.233
5.698 ***
Lend
1.041
1.158
1.718
0.466
Prod
2.635 * 1.972
3.209 * 2.925 *
Index
1.372
1.006
1.443
2.395
CPI
0.433
0.574
0.476
1.338
0.431
1.308
0.208
0.514
0.629
0.585
CPI
0.226
0.580
0.462
0.819
1.519
3.135 *
0.233
1.352
1.193
1.157
CPI
0.678
0.246
0.589
1.719
0.233
0.936
0.764
0.840
0.757
1.67
CPI
0.335
0.730
0.151
0.258
1.056
1.211
0.036
1.210
0.563
2.703 *
M2
2.247
2.273
2.710 *
0.976
2.491 *
1.033
0.532
1.383
1.291
1.577
Nikkei
3.705 **
0.829
0.918
1.904
1.355
0.161
1.695
0.58
0.258
1.302
M2
Nikkei
3.713 ** 0.507
5.326 ** 0.655
0.344
1.453
0.724
0.877
2.285
2.301
4.224 **
0.704
0.516
2.532 *
1.719
0.455
0.525
0.846
0.410
0.614
M2
Nikkei
0.113
5.604 **
0.500
3.614 **
0.891
0.904
1.134
1.963
2.572 * 0.804
0.660
1.018
1.507
0.581
0.358
1.291
1.514
0.746
2.102
0.658
M2
Nikkei
1.634
1.072
1.382
1.083
0.953
1.472
0.950
0.872
1.220
0.170
1.122
1.623
2.106
1.474
1.525
0.294
0.219
1.131
0.142
0.507
Lend
0.755
1.372
0.978
0.537
1.355
2.907 *
1.737
1.418
1.19
3.298 *
Lend
0.365
0.316
1.762
1.228
1.436
1.311
0.349
1.226
0.892
0.419
Prod
0.652
1.665
1.974
0.203
0.572
1.429
2.607 *
3.317 *
0.089
0.072
Prod
0.445
0.699
0.312
0.752
1.782
0.324
0.235
0.350
4.079 **
0.601
Prod
0.365
0.560
0.359
0.529
0.710
8.146 ***
1.828
5.989 ***
0.559
1.227
5.590 *** 1.305
0.115
0.288
1.734
2.385
3.146 *
0.567
0.309
1.204
Lend
Prod
2.079
0.666
1.395
0.467
0.604
0.675
2.023
0.451
0.540
1.029
0.271
2.641 *
0.492
0.133
1.940
0.983
3.618 **
3.885
2.978 * 0.829
Lend
Index
1.634
3.521 **
1.970
1.751
1.993
0.374
1.012
Index
0.700
0.543
0.714
1.056
1.342
0.368
0.654
0.274
2.427
0.763
Index
1.088
1.504
11.98 ***
7.088 ***
1.503
0.854
0.697
6.024 ***
3.204 **
9.236 ***
Index
0.665
0.701
0.844
0.217
1.065
2.732 *
0.554
0.366
3.703 **
1.730
Note: 1 The period is from April 2001 to March 2006; April 2006 to August 2008; September 2008 to Feburary 2011, and March 2011
to June 2014.
2 Calculation based on the average of 1st to 4th lags of the variables
3 Figures are F-value. ***, **, * denote significance at 1%, 5%, and 10%.
Sources: Author's calculation based on IFS database (IMF), Bank of Japan
BOJ Current Account(hereafter BOJAC) Granger causes Nikkei stock prices (Nikkei),
and Nikkei has Granger Causes industrial production (Prod), which indicates that there was
9
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
causality route from BOJAC to industrial production through the stock market during the
period 2001-2006. However, causality from BOJAC to Nikkei and from Nikkei to
industrial production became insignificant since 200610. In this regard, the period 20082011 was some special period when the Global Financial Crisis hit the global market, so
that the significant causality from BOJAC to Nikkei was not positive but negative one, as it
is shown in the next section of impulse response functions. This could be accounted for by
the fact that BOJAC and Monetary Base have no significant causality with domestic
monetary market variables, and this could be caused by global monetary flows including
between the Japanese and US markets after the Lehman shock.
Bank lending Granger causes industrial and overall production in a limited scale
during 2006-2014 ; however, Monetary base (or BOJ Current Account) itself has no causal
rlationaship with the Bank lending. Also, REER has no causality with BOJ Current Account
(BOJAC) during the same period, which is examined in the impulse response functions.
5.3 Impulse Response Functions: Effects on theMarket and Real Economy
The order of the variable in the Model 1 and 2 is determined by the first shock of monetary
easing, followed by the spread route which is theoretically assumed, as fllows:
For Model 1, expansion of monetary base will put some pressure on the exchange
rate(REER), and the increase in base money (or BOJ’s current account) should influence on
banks’ lending activities, which may induce productive activities that would put positive
effects on expectation of rising stock prices. As a result, production may expand, induced
by some asset effects. Model 2 assumes that monetary easing will result in expansion of
overall money stocks, and the liquidity increase will have influence on the price levels, as
well as the market indices, including JGB yield and stock prices. The change in the order of
each variable does not change the overall results of the impulse response functions of each
variable.
The actual results of the impulse response functions are quite different from that of
theoretical assumptions given above. Over the period 2001-2014, the response functions of
industrial production and all industry activities to BOJ Current Account(BOJAC) and
Monetary Base (MB) are not positive but rather negative, though statistically insignificant
(Fig.10-1, 10-2, 11-1, 11-2)11. The monetary easing had not put real effective exchange
depreciated significantly except the perid of QE(2001-2006), and the result is contrary to
the theoretically expected results since 2008 as shown in Fig.10-1and Fig.10-2. Although
massive propaganda of ‘Qualitative and Quantitative Monetary Easing (QQE)’ policy since
2013 might have induced currency depreciation, that could be caused by interntional capital
flows, determined by foreing investors at that period mainly. The monetary expansion of
the BOJAC and MB put rather negative response to stock prices since 2006, which is
different from the positive response of stock prices during 2001-2006 (Fig.10-1, 10-2).
The impulse response of stock prices to monetary base and BOJ current account also has become
insignificant since 2006 until today, which is not shown in Fig.10- and 10-2 (see Ohta 2013).
11 The circle indicated in each graph shows statistically significant response to the shock of each variable.
10
10
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
Fig.10-1: BOJ Current Account, REER, Lend, Nikkei, Prod
2001-2006
2006-2008
2008-2011
2011-2014
J
J
BOJAC
.04
.04
.02
6
8
8
0
2
0
-1
6
8
2
10
LEND
.4
.3
.2
.1
.0
-.1
-.2
4
6
8
10
6
8
.03
.02
.02
NIKKEI
.03
.00
-.01
-.02
2
4
6
8
4
6
8
-.01
-.01
-.02
-.02
-.01
-.02
2
10
4
6
8
10
0.0
-0.5
-1
-0.5
-1.0
0
-1.0
2
4
6
8
4
6
8
6
8
10
2
4
6
8
10
2
4
6
8
10
2
4
6
8
10
-.2
4
6
8
10
.02
.02
.00
-.02
-.04
2
4
6
8
.00
-.02
-.02
-.04
-.04
10
2
3
1
2
0
-1
1
0
-3
10
4
.0
-2
2
10
2
-.1
.04
PROD
PROD
0.5
10
.04
1
1.0
8
.0
2
.00
1.5
6
-.2
.01
10
-2
4
.2
10
8
0
.1
2
6
-1
.2
.0
4
1
.4
.2
2
2
.6
10
.01
10
.4
NIKKEI
4
8
.6
-.2
2
6
3
2
LEND
4
4
4
3
2
1
0
-1
-2
-2
2
-.04 -.04
-.04
10
REER
REER
REER
1
LEND
6
1
-1
NIKKEI
4
2
2
PROD
-.08
2
10
-.02 -.02
LEND
4
.00
-.02
REER
-.08
-.02
2
-.04
NIKKEI
-.02
.02
.00
-.04
.00
.04
PROD
BOJAC
.02
.00
.06
BOJAC
.08
.04
BOJAC
.06
Ja
BOJAC
BOJAC
BOJAC
BOJAC
-1
2
4
6
8
10
Fig.10-2: Monetary Base, REER, Lend, Nikkei, Production
2001-2006
2006-2008
2008-2011
2011-2014
.010
.010
.010
8
10
-.005
.000
-.010
-.005
2
4
6
8
6
8
10
1
0
-1
-2
10
2
4
6
8
4
6
8
.2
.0
-.2
10
LEND
.4
2
4
3
2
1
0
-1
-2
10
.6
LEND
.4
.3
.2
.1
.0
-.1
-.2
4
REER
0
6
8
10
.00
-.01
4
6
8
10
1.5
2
1.0
1
0.5
0.0
-0.5
-1.0
4
6
8
10
6
8
2
4
6
8
-1
2
4
6
8
4
6
8
10
11
4
6
8
10
2
4
6
8
10
2
4
6
8
10
2
4
6
8
10
.0
-.1
-.2
10
.04
.02
.00
-.02
-.04
2
4
6
8
10
2
1
2
0
-1
-2
2
2
0
3
-3
10
-2
10
-.02
10
0
-2
2
4
8
-1
.00
-.04
2
PROD
-.02
2
NIKKEI
.02
.01
6
1
.1
-.4
4
4
2
-.2
2
2
3
.0
.02
-.02
-.01
10
.2
.03
-.01
8
.4
.02
.00
6
.2
.03
.01
4
.6
.04
NIKKEI
LEND
NIKKEI
REER
1
-1
2
2
PROD
REER
2
.00
2
REER
6
LEND
4
.01
.005
NIKKEI
2
.000
PROD
.000
.005
MB
.005
MB
.02
MB
.015
-.005
PROD
MB
MB
.015
MB
MB
MB
.015
1
0
-1
2
4
6
8
10
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
Fig.10-3: Call Rate, REER, Lend, CPI, Yield, Production
2006-2008
2008-2011
Call Rate
.010
.10
.10
.05
.05
.000
-.005
2
4
6
8
.00
.00
-.05
-.05
-.10
10
8
10
.000
-.004
2
4
6
8
10
3
2
2
2
.2
LEND
.1
.0
-.1
-.2
2
4
6
8
4
6
8
.6
.2
.4
.0
-.2
-.4
10
2
4
6
8
.03
.03
.02
.02
.01
.01
.00
.00
NIKKEI
.00
-.02
-.01
2
4
6
8
-.01
-.02
10
1.0
PROD
0.5
0.0
-0.5
-1.0
2
4
6
8
6
8
-1
4
6
8
6
8
10
2
4
6
8
10
2
4
6
8
10
2
4
6
8
10
10
.02
.00
-.02
-.04
4
6
8
10
3
2
0
1
0
-1
-1
-2
-2
10
8
.04
2
-2
6
.0
-.2
4
-.04
1
4
-.1
.00
2
2
.1
.0
1
10
.2
.2
2
2
10
-.02
10
0
10
8
.02
PROD
1.5
4
6
.04
-.02
2
8
.3
2
.02
-.01
4
-.2
10
.03
.01
-2
2
.4
6
0
-2
10
4
-1
-1
-2
10
2
1
LEND
8
0
NIKKEI
6
1
PROD
4
-1
LEND
2
0
REER
3
1
REER
2
.3
PROD
6
.004
1
0
LEND
4
.008
2
-1
NIKKEI
-.10
2
NIKKEI
REER
-.010
Call Rate
.012
.04
.03
.02
.01
.00
-.01
-.02
Call Rate
.15
Call Rate
.15
.005
2011-2014
Call Rate
.015
REER
Call Rate
Call Rate
Call Rate
2001-2006
2
4
6
8
10
Fig.11-1: BOJAC, M2, CPI, Yield, All Industrial Activity Indices
2001-2006
2006-2008
2008-2011
2011-2014
BOJAC
BOJAC
4
6
8
10
8
10
CPI
.4
.2
.0
2
4
6
8
.4
.3
.2
.1
.0
-.1
-.2
10
.12
YIELD
.08
.04
.00
4
6
8
2
4
6
8
10
-.0010
6
8
.1
.08
.0
-.1
10
2
4
6
8
0.0
-0.5
.4
.0
-.4
-.8
2
4
6
8
10
BOJAC
6
8
10
2
4
6
8
10
12
8
10
-.0010
2
4
6
8
10
2
4
6
8
10
2
4
6
8
10
2
4
6
8
10
.0000
-.0005
.4
.2
.0
2
4
6
8
-.2
10
.12
.00
2
4
6
8
.08
.04
.00
-.04
10
1.5
1.0
1.0
0.5
0.5
0.0
-0.5
6
.6
.04
-.08
10
INDEX
INDEX
0.5
4
-.04
.8
1.0
2
.0
.12
4
.0005
-.0005
.2
-.4
10
2
.0010
-.2
4
.00
-.02
.0015
.4
2
.02
-.04
10
.6
.2
-.2
2
8
-.0005
CPI
6
6
.0000
YIELD
4
4
.0005
.0000
-.0010
2
2
.0010
M2
M2
M2
10
.0005
.6
-1.0
8
-.0005
.0000
-.04
6
.0010
.0005
-.2
4
-.04
.0015
.0010
-.0005
2
-.02
M2
2
.04
.00
CPI
-.05
.0015
CPI
.00
-.02
-.04
YIELD
.02
.05
YIELD
.00
.06
INDEX
.02
BOJAC
.04
BOJAC
BOJAC
BOJAC
.04
INDEX
BOJAC
.10
.06
2
4
6
8
10
0.0
-0.5
-1.0
-.0005
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
Fig11-2: Monetary Base,M2, CPI, Yield, All Industrial Activity Indices
2001-2006
2006-2008
2008-2011
2011-2014
MB
MB
MB
.015
8
10
M2
.0000
-.0005
6
8
10
2
.6
CPI
.4
.2
.0
-.2
2
4
6
8
4
.1
YIELD
.08
.00
2
4
6
8
.0010
.0000
8
10
-.0010
4
6
8
-.1
4
6
8
-0.4
.0
-.4
-0.8
2
4
6
8
6
8
2
10
4
6
8
4
6
8
10
2
4
6
8
10
2
4
6
8
10
2
4
6
8
10
.2
.12
.08
-.08
2
4
6
8
.04
.00
-.04
10
1.5
1.2
1.0
0.8
0.5
0.0
-0.5
10
2
-.2
10
.00
-.8
10
.0
4
.04
.4
8
.4
2
10
6
.6
-.4
INDEX
INDEX
0.0
-.0005
10
.0
.8
0.4
8
-.04
10
0.8
6
.08
2
1.2
4
.12
.0
4
.0000
2
.2
10
2
.0005
-.2
-.2
-.04
.0005
.4
2
.2
10
.6
10
.04
6
.4
.3
.2
.1
.0
-.1
-.2
.12
8
-.0005
-.0010
-.0005
6
.0015
CPI
4
4
-.01
.0010
YIELD
2
MB
2
.0005
M2
M2
-.010
10
.0010
.0005
CPI
8
.0015
.0000
YIELD
6
M2
6
4
CPI
4
2
.0010
INDEX
MB
MB
MB
-.010
2
.00
-.005
-.005
.0015
.01
.000
.000
-.01
-.0005
.005
.005
.00
.02
YIELD
.01
MB
.010
.010
INDEX
.02
2
4
6
8
0.4
0.0
-0.4
-0.8
10
Fig.11-3: Call Rate,M2, CPI, Yield, All Industry Activity Indices
2001-2006
2006-2008
2008-2011
2011-2014
Call Rate
Call Rate
.04
.03
.02
.01
.00
-.01
-.02
.00
-.05
-.10
-.010
4
6
8
2
10
4
6
8
10
.0015
.0010
.0010
2
4
6
8
-.0010
-.0010
2
CPI
YIELD
.00
10
4
6
8
INDEX
0.8
0.4
0.0
-0.4
6
8
-0.8
.2
.10
.1
.05
.0
-.1
4
6
8
-.4
4
6
8
4
6
8
10
13
6
8
10
2
4
6
8
10
2
4
6
8
10
2
4
6
8
10
.2
-.2
10
.12
.08
2
4
6
8
.04
.00
-.04
10
1.2
0.8
0.5
0.0
-0.5
-1.0
10
4
.0
2
1.0
.0
2
-.0005
1.5
.4
10
.4
-.05
10
8
.6
.00
-.10
2
8
10
.0
10
-.8
6
8
10
1.2
4
6
.2
-.4
4
.8
2
4
6
.0000
-.2
2
2
2
4
.0005
.4
-.2
-.04
INDEX
8
INDEX
CPI
YIELD
.04
6
2
.0010
.6
2
.12
4
.4
.3
.2
.1
.0
-.1
-.2
10
.08
.0005
-.0010
-.2
8
.0005
-.0005
.0
6
.0010
.0000
.4
4
-.010
10
-.0005
.6
2
8
-.0005
.0000
10
.2
6
.0010
CPI
-.0005
4
.0000
YIELD
.0000
.0005
M2
M2
M2
.0005
2
INDEX
2
.000
-.005
CPI
-.005
YIELD
Call Rate
.05
.000
.005
Call Rate
Casll Rate
.10
.005
Call Rate
.010
Call Rate
.15
M2
Call Rate
.010
2
4
6
8
10
0.4
0.0
-0.4
-0.8
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
On the other hand, the reponse function of industrial prodiction to call rate is generally
significant during 2008-2014, and it is in line with the theoretical assumptions(Fig.10-3).
This result implies that interest rate policy could be more effective than that of quantitative
monetary easing even under the ‘zero interest’ policy in Japan.
The impulse response functions of money stocks (M2) and Government Bond Yileds
to monetary easing (BOJ Current Account and Monetary Base) indicate no significant
effects during the whole period of 2001-2014 (Fig.11-1, 11-2). The response of CPI to
BOJAC and MB also had no significant effect on the price levels.
Likewise, the monetary expansion of the BOJAC and MB has no significant effect
upon the all industry activity index during the overed period(2001-2014), as seen in the
case of industrial production.
As shown in Table 2, the results of inpulse response functions indicate that the
quantitative montreary easing generally has not influenced on the real economy, nor
financial markets significantly, while interest rate (Call Rate) had put some effective impact
upon the real economy in accordance with theoretical assumptions.
Table2: Effects of Monetary Policy
(a)Shock (b)Variables Original 2001-06 2006-08 2008-11 2011-14
BOJAC M2
+
－
－
－
－
▲
MB
+
－
－
－
Call Rate
－
－
－
▲
－
BOJAC Yield
－
－
－
－
▲
MB
－
－
－
－
▲
Call Rate
+
－
－
－
－
BOJAC Lend
+
－
－
－
－
MB
+
－
－
－
－
▲
Call Rate
－
－
▲
▲
▲
BOJAC REER
－
－
－
▲
MB
－
－
－
－
▲
Call Rate
+
－
－
+
－
BOJAC CPI
+
－
－
－
－
MB
+
－
－
－
－
Call Rate
－
－
－
▲
▲
▲
BOJAC Stock
+
+
－
▲
▲
MB
(Nikkei)
+
－
－
▲
Call Rate
－
－
▲
▲
▲
BOJAC Prod
+
－
－
－
－
MB
+
－
－
－
－
▲
Call Rate
－
▲
▲
▲
BOJAC Index
+
－
－
－
▲
MB
+
－
－
－
－
▲
Call Rate
－
－
－
▲
Notes 1 'Original' denotes originally expected effects.
2 ＋denotes increase or appreciation；▲ denotes minus effects or
decrease； - denotes insignificance in the impulse responses.
6. Association and integration of monetary markets between the USA and Japan
The analysis conducted in the previous sections suggest that BOJ’s monetary easing
policy instruments have not given positive effect on the real economy, and had very limited
impact upon the domestic market during the whole period (2001-2014). It could be caused
mainly by capital flows that affect the money stocks and monetary base in Japan and the
USA, especially after the Global Financial Crisis. Therefore, this section will discuss on
increasing integration of the markets between the US and Japan in terms of money flows
that have significantly influenced on the both markets in recent years.
14
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
6.1 BOJ Current Account and ForeignBanks’ reserves
The BOJ’s monetary policy has been associated with the global markets, especially the US
market, as shown in Fig.12-1. It indicates that excess reserves of BOJ Current Account are
possibly utilized for financial investment globally, including the US market12. The BOJ
Current Account put substantial impact upon the US market since 2008.
On the other hand, foreign banks have not increased lending substantially in Japan,
which could indicate that foreign banks’ reserves have not been utilized for productive
activities in Japan (Fig.13). Thus, the foreign banks’s execess reserves might have utilized
for financial investment in the the US and global market. These aspects are analyased by
Granger Causality and Impulse Response Functions in 6.2 , 6.3 and 6.4.
12000
（%, y/y）
10
6000
Current Account (A)
4000
nikkei (RHA)
2000
Jan-14
Jan-13
0
Jan-05
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
0
Jan-08
50
Jan-07
0
Jan-06
100000
Jan-05
70
8000
Excess reserve(A-B)
200000
20000
Sources: Bank of Japan, IFS database (IMF)
10000
300000
Jan-12
90
40000
400000
Jan-11
60000
14000
Jan-10
110
16000
500000
Jan-07
80000
18000
600000
Jan-09
130
20000
Jan-06
100000
Fig.12-2: : BOJ Account (Commecial Banks
in Japan)
（¥）
（¥100 mn )
700000
Jan-08
Fig.12-1:BOJ Current Account (Foreign
Banks) & US Share Prices （2010=100）
170
Excess reserve(A-B, LHA)
Current Account (A, LHA)
120000
150
USShare (RHA)
（¥100 mn ）
140000
Sources: Bank of Japan, Nikkei Profile
Fig.13: Lending by Category of Banks (Japan）
Commerical
Regional2
Regional
Credit Union
Regional1
Foreign（RHA)
（%, y/y）
150
100
5
50
0
0
-5
-50
-10
-100
01
02
03
Source: Bank of Japan
04
05
06
07
08
12Fukuda(2011)
09
10
11
12
13
14
suggests that foreign banks in Japan may utilize the excess reserve of the BOJ Current
Acount and call market for short-term investment in the monetary/ financial market, not in lending to
manufacturing industry. Kikuchi (2013) suggested that under the excessive monetary easing, liquidity
could be used for ‘speculative’ investment. He also maintained that monetary easing in fact has provided
‘Hedge Funds’ with imporatant resources for financial investment. Foreign banks may mobilize the
resources delivered in the Japanese market, and they transfer the money to the Headquarters to be lend
to ‘Hedge Funds’ that trade stocks in the Tokyo market, which accelerated the exchange of yen to dollars.
Depreciation of yen would cause the stock prices higher in recent years, since it would enlarge the yen
denominated corporate profit. Kikuchi(2014) claims that tapering of the QE3 would require further
continuation of BOJ’s QQE policy.
15
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
6.2 Causality between the US and Japanese Markets.
BOJ Current Account (BOJAC) and Foreign Banks’ excess reserves (heareafter
FEXRESV) have significant causality with the US share prices as shown in Table3. Also,
causality from the US monetary base and M2 to FEXRESV has become significant,
especially after the Global Financial Crisis in 200813. The foreign banks’ excess reserve
influenced on the US market, and it has causality to the US share prices during 2011-2014.
The causality from the US monetary base and money stocks(M2) to BOJAC and
FEXRESV is clearly indicated during the post-Global Financial Crisis period (2008-2011),
while the direction of causality from the US monetary base and M2 to money stock(M2) in
Japan has become significant since 2011. This could be accounted by the fact that the US
monetary easing has been strengthend with the introduction of QE2, and as a result,
liquidity though private banks have increased for financial investment in the maket in
Japan14. Therefore, the results are consistent with the general trend described above (6.1).
Table 3: Japan/ US：Granger Causality (2001-2014)
2001-2008
BOJAC FExRes.
MB
BOJAC
1.415
1.536
BOJFExRes.
0.248
0.167
JPNMB
2.963 * 1.564
JPNM2
3.360 * 4.045 ** 1.399
JGBYield
0.755
1.485
1.296
JPN　Nikkei
1.315
0.463
1.046
US MB
1.487
1.672
1.458
USM2
0.657
0.133
0.697
US Share(2005=100) 0.389
2.165
1.127
USProd
1.509
2.015
1.034
2008-2011
BOJAC FExRes.
MB
BOJAC
1.384
0.781
BOJFExRes.
2.421
0.845
JPNMB
1.017
1.157
JPNM2
1.011
0.321
1.692
JGBYield
0.788
1.567
0.317
JPNNikkei
2.727 * 3.299 * 2.313
US MB
2.457 * 3.761 ** 1.360
USM2
3.359 * 4.451 ** 1.465
US Share
1.248
4.036 ** 0.804
USProd
2.280
3.350 * 0.690
2011-2014
BOJAC FExRes.
MB
BOJAC
3.412 * 0.713
BOJFExRes.
0.364
0.413
JPNMB
0.636
2.314
JPNM2
2.424
2.217
2.427
JGBYield
0.538
0.047
0.813
JPN Nikkei
0.802
1.828
0.726
US MB
1.201
1.455
0.785
USM2
0.420
1.650
1.721
US Share
0.057
8.753*** 0.033
USProd
2.355
1.393
3.644 **
USM2 US Share
M2
JGBYield JPNNikkei US MB
2.236
0.530
2.814 * 1.032
0.550
1.434
1.573
0.639
3.115 * 0.803
0.182
1.472
3.431 *
0.412
1.173
0.933
0.268
0.631
0.505
1.132
0.581
0.226
1.210
0.907
1.657
0.479
2.496
0.887
1.327
1.894
0.240
5.436 ** 2.954 *
1.106
0.510
0.413
2.277
0.795
1.978
2.708 *
1.304
1.141
1.429
1.666
1.654
0.129
1.699
0.320
1.498
0.199
1.237
1.347
1.347
1.338
USM2 US Share
M2
JGBYield JPNNikkei US MB
1.057
1.310
5.604 *** 0.354
0.921
4.674 **
0.894
1.923
6.197 *** 6.197 *** 1.321
5.807 ***
1.346
0.570
3.614 ** 0.195
1.262
2.030
0.249
1.722
1.425
0.418
2.453 *
0.746
1.507
0.405
0.489
1.330
1.581
0.939
2.415
2.230
3.703 **
0.796
0.865
0.531
4.823 ** 4.224 **
0.583
0.565
0.641
1.556
2.370
0.953
0.916
0.422
2.634 * 1.774
0.517
1.256
1.710
1.976
2.441
3.254 *
USM2 US Share
M2
JGBYield JPNNikkei US MB
1.086
1.069
0.602
1.763
1.186
1.937
1.787
0.447
1.549
0.552
4.512 ** 5.712 ***
0.655
1.185
0.638
1.894
1.383
1.578
0.287
1.150
1.233
1.274
1.371
2.000
2.106
0.600
0.435
0.175
2.258
1.685
1.314
0.869
3.289 *
3.783 *
0.120
3.496 **
1.223
2.628 *
3.787 *
0.275
0.336
1.275
4.575 **
1.314
0.229
0.075
0.832
1.622
***
5.520
1.139
0.108
0.916
0.604
0.715
US Prod
1.062
0.641
0.919
1.048
0.543
2.563 *
0.276
1.622
1.622
US Prod
0.579
1.861
0.673
0.594
0.494
2.787 *
5.435 **
2.176
4.914 **
US Prod
0.756
1.169
1.104
2.125
1.030
0.230
0.752
0.224
0.423
Notes: 1 The periods are from April 2001 to Aug.2008, Sept 2008 to Feb. 201, and March 2011 to June 2014.
2. BOJFExRes: Foreign Banks' excess reserve of BOJ current account The covered period is from Jan 2005 to June 2014.
3. Calculation based on the average of 1st to 4th lags of the variables
4. Figures are F-value. ***, **, * denote significance at 1%, 5%, and 10%.
Sources: Author's calculation based on IFS database (IMF), Bank of Japan, Federal Reserve
13The
period is basically devided before and after the Global Financial Crisis, triggered by the Lehman
Shock (Sept.2008). The period is also devided before the Comprehensive Monetary Easing (CME) in Japan
and QE2 in the USA. The period from March 2011 to June 2014 is most recent one, and it starts from
March 2011, since the monetary base had not increased substantially until February 2011 in both Japan
and the US, even the BOJ’s CME and FRB’s QE2 had been introduced by that time.
14 The money flows from the US monetary base should change in the process of ‘tapering’ of the Federal
Reserve(clearly stated in the FOMC in Septemebr 2014). The causality from the Japanese market could be
more apparent in such a situation.
16
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
6.3 Impulse Response Functions of the Monetary Base (from Japan to the US)
This section will examine the relationship between the Japanese and the US markets
through the impulse response function of VAR model(Granger Causality and Impulse
Response Functions). As mentioned above, the US and Japanese markets are closely
associated and integrated, depending upon the monetary policy in both countries, especially
after the Global Financial Crisis. The effects of BOJ’s monetary base on several variables,
including the monetary base, excess reserves of Foreign Banks’ BOJ Current Account, M2
as well as stock prices in Japan and the US markets are examined (Model 3)
The overall impact of monetary expansion of the BOJ current account on the US
market has become very large in terms of the response of US monetary base recently
(Fig.14-1). The shock of increase in the BOJ current account has positive influence on the
US monetary base during 2011-2014,while foreign banks’ excess reserves of BOJ Cureent
Account (heareafter FEXRESV) also put positive effect on the response of US Money
stocks (M2) during 2011-2014 (Fig.14-2). It could imply that through the channels of
private banks account, several financial investment activities are undertaken, originally
from the BOJ current account under massive expansion of QQE in Japan. It is therefore
likely that money shift from the reserve at the BOJ current account to the US market by the
US banks increased significantly during the period of pre-QE2.
It should be noted here that the shock of FEXRESV has negative impact upon the US
share prices during 2008-2011, while that became insignificant during the period 20112014. This may be related to the fact that FRB’s monetary easing under QE2 had not been
initiated before 2010, so that the impact on the US stock market was mainly from the
monetary expansion in Japan, rather than the FRB.
On the other hand, the BOJ current account has positive impact upon the US monetary
base during 2011-2014. This shows that monetary base between the US and Japan has
become closely related,and that are significantly influenced by the monetary easing policy
in Japan and the USA.
6.4 Impulse Response Functions of the US Monetary Base ( the US & Japan)
Now we examine the effects of US monetary policy in the domestic (US) and Japanese
markets. As shown in Fig.15-1, the US monetary base has not given significant effect on
the US domestic market over the period 2008-2014. Moreover, the industrial production
shows negative response under monetary easing during 2008-2014. In fact, the US
monetary base has not given any significant impact upon the US market and the real
economy during 2011-2014. On the other hand, interest rate as a policy tool could be more
effective than that of monetary easing policy15, since the response functions of REER and
yield of TB (2y), as well as share prices to FF rate during 2008-2014 are in line with the
theoretical outcome of the financial market (Fig.15-2).
The US monetary base has significant effect on the impulse response of M2 during
2008-2011 and 2011-2014, as well as monetary base in Japan during 2008-2011(Fig.16).
The Federal reserve is expected to continue the current low interest policy, irrespective of the decision of
tapering of the current QE3, which may be in line with this paper’s analysis.
15
17
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
Fig.14-1: Impulse Response to BOJ's Monetary Easing in the US Market/Economy
2001-2008
2008-2014
2008-2011
2011-2014
.00
4
6
8
8
6
8
-.02
10
.000
TB10Y
.0
.000
-.001
2
2
4
6
8
10
4
6
8
10
-.002
2
4
6
8
10
2
4
6
8
10
2
4
6
8
10
2
4
6
8
10
2
4
6
8
10
.001
.000
-.001
.3
.4
.3
.2
.2
.2
.1
.0
-.1
2
4
6
8
.0
-.2
-.4
10
2
4
6
8
.1
.0
-.1
-.2
10
6
USSHARE
2
0
-2
2
4
6
8
4
4
2
0
-2
-4
10
2
4
6
8
2
0
-2
-4
10
.8
.4
.0
-.4
8
10
.000
-.004
10
.002
USPROD
.4
6
8
10
.8
4
8
.001
.8
2
6
.002
.001
-4
8
4
.002
USSHARE
0
6
2
.003
4
2
4
6
10
4
2
USMB
USMB
4
.003
-.2
8
4
.004
.003
.0
6
2
.008
.00
2
4
6
8
.6
.4
PROD
USM2
TB10Y
.1
4
10
10
.2
2
8
.01
TB10Y
6
6
10
USM2
4
4
-.01
2
-.001
2
2
.02
.00
.3
USSHARE
10
USM2
2
.000
PROD
8
.03
-.01
.001
-.4
6
.01
USMB
USMB
.000
-2
4
.02
.001
-.1
2
10
USM2
8
.00
-.04
TB10Y
6
-.02
.02
-.02
USSHARE
4
.002
-.001
.00
.00
USPROD
2
.04
.04
.02
.02
-.02
.003
-.001
.04
.06
BOJAC
BOJAC
BOJAC
.02
BOJAC
.06
BOJAC
.06
.04
-.02
BOJAC
BOJAC
BOJAC
.06
.0
-.4
-.8
10
.4
.2
.0
-.2
2
4
6
8
-.4
10
10
Fig.14-2: Impulse Response to Foreign Banks' Ex. Reserve in the US Market/Economy
2005-2008
2008-2014
2008-2011
2011-2014
Japan & U
FEXRESV
2
4
6
8
-.1
10
.000
8
.1
-.2
10
.00
.0
-.04
-.1
-.08
2
4
6
8
.00
.02
.01
.00
-.01
10
USM2
USM2
.000
4
6
8
4
6
8
-.02
10
.003
.003
.002
.002
.001
.000
-.001
2
2
10
4
6
8
.1
.0
.1
.0
-.1
-.2
2
4
6
8
2
4
6
8
10
8
-2
-4
-2
2
4
6
8
2
4
6
8
10
2
4
6
8
10
2
4
6
8
10
2
4
6
8
10
2
4
6
8
10
.000
-.001
2
4
6
8
10
.2
.0
-.2
.1
.0
-.1
-.2
2
4
6
8
10
4
2
0
-2
-4
10
10
.001
USSHARE
0
0
8
.002
4
2
USSHARE
USSHARE
USSHARE
2
6
.003
4
4
4
10
.2
-.4
10
2
.000
.4
.2
TB10Y
TB10Y
.2
6
.000
.3
.3
4
.001
-.002
10
10
.004
-.008
2
-.001
2
8
USM2
8
6
-.004
TB10Y
6
USM2
4
4
.008
.03
.01
2
10
-.01
2
.001
TB10Y
6
USMB
.001
-.1
4
.02
.002
USMB
USMB
.003
2
FEXRESV
.0
.04
USMB
.0
-.001
FEXRESV
.1
FEXRESV
FEXRESV
.1
-.001
.08
.2
-.1
-.2
FEXRESV
FEXRESV
FEXRESV
.2
2
0
-2
-4
2
4
6
8
10
.8
.0
-.4
.0
-.4
2
4
6
8
.6
.8
.4
2
4
6
8
10
.4
.0
-.4
-.8
10
USPROD
.4
USPROD
USPROD
PROD
.8
.2
.0
-.2
-.4
2
4
6
8
10
Note: The figures of Foreing Banks' BOJ current account are only available since 2005.
18
.4
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
Fig15-1: Impulse Response to the US Monetary Base (USA )
2001-2008
2008-2014
USMB
2008-2011
USMB
.01
USMB
.000
-.002
2
4
6
8
USMB
USMB
.001
-.001
.00
.03
.012
.02
.008
.01
.00
-.01
-.01
10
2
4
6
8
0
2
4
6
8
0
-1
10
2
4
6
8
1
0
-1
2
4
6
8
4
6
8
4
6
8
TB10Y
-.1
2
4
6
8
4
6
8
USSHARE
-2
2
4
6
8
4
6
8
2
4
6
8
10
2
4
6
8
10
2
4
6
8
10
.1
.0
4
6
8
10
2
0
-2
2
0
-2
-4
-4
10
4
6
8
10
.6
.8
.4
PROD
.4
.0
.0
2
4
6
8
.4
.2
.0
-.2
-.4
-.4
10
10
-.1
USPROD
USPROD
USPROD
2
8
-.2
4
-4
-.4
6
4
.8
.0
4
.2
2
.4
2
10
-.4
0
.8
8
-.2
10
2
10
10
.000
USSHARE
USSHARE
USSHARE
2
8
.3
2
-2
6
.0
4
0
4
.2
-.2
2
6
-.002
.4
.0
4
4
-.001
-.002
10
.1
10
2
0
TB10Y
TB10Y
TB10Y
2
10
.001
-.001
2
-.1
8
.002
.000
.2
.0
6
.003
2
.1
4
1
10
.001
.3
.2
8
USM2
USM2
.000
.3
6
.002
.001
-.001
10
4
.003
.002
USM2
USM2
-.001
2
-1
2
.000
.000
10
-2
10
.003
.001
8
2
1
-1
6
3
REER
REER
1
4
USREER
USREER
2
.004
-.004
-.02
10
2
2
USMB
USMB
.02
.002
USMB
.003
2011-2014
-.4
-.8
10
2
4
6
8
10
Fig15-2: Impulse Response to theUS Federal Fund Rate(USA )
2001-2008
2008-2014
FF
.16
.12
.08
.04
.00
-.04
-.08
2011-2014
FF
FF
.02
.06
.04
.01
FF
FF
8
10
2
2
4
6
8
2
10
REER
REER
0
4
6
8
1
0
4
6
8
10
2
4
6
8
1
0
6
8
10
2
4
6
8
10
2
4
6
8
10
2
4
6
8
10
2
4
6
8
10
2
4
6
8
10
0
-1
2
10
4
1
2
-1
2
2
10
3
2
1
-.01
-.04
-.02
6
.00
.00
-.02
REER
FF
.02
.00
4
FF
.04
.02
2
REER
2008-2011
FF
4
6
8
10
.003
.003
.003
.000
-.001
.000
4
6
8
10
USM2
.001
.001
.000
-.001
-.002
2
4
6
8
.000
-.002
-.002
2
10
.001
-.001
-.001
-.001
2
.002
.002
.002
USM2
.001
USM2
USM2
.002
4
6
8
10
.05
.1
.0
.2
.00
-.05
2
4
6
8
10
.1
.0
.04
.00
-.04
-.08
-.1
-.10
-.1
TB2Y
.10
.2
TB2Y
.3
TB2Y
TB2Y
.08
2
4
6
8
2
10
4
6
8
10
4
0
2
1
0
-1
2
4
6
8
2
10
0
-2
2
0
-2
-4
-4
-2
-2
USSHARE
2
USSHARE
USSHARE
USSHARE
2
3
4
4
6
8
2
10
4
6
8
10
.6
.2
.0
.0
2
4
6
8
10
.4
.0
-.4
2
4
6
8
2
10
19
.2
.0
-.2
-.4
-.8
-.4
-.2
.4
PROD
.4
.4
PROD
PROD
.6
PROD
.8
.8
.8
4
6
8
10
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
Fig.16: Impulse Response to the US Monetary Base (Japan)
2005-2008
2008-2014
USMB
.000
-.004
4
6
8
.00
2
2
4
6
8
4
6
8
10
.08
.04
.00
-.04
4
6
8
4
6
8
.001
.000
-.001
10
2
4
6
8
JGBYIELD
.0
2
4
6
8
10
.08
.04
.00
4
6
8
-.04
2
4
6
8
2
4
6
8
.002
.001
.001
-.01
2
4
6
8
10
.01
.00
2
4
6
8
-.002
10
-.02
2
4
6
8
8
10
2
4
6
8
10
2
4
6
8
10
2
4
6
8
10
2
4
6
8
10
.12
.1
.0
2
4
6
8
.08
.04
.00
-.04
10
.03
.00
-.02
-.04
6
.000
.02
-.01
4
-.001
10
.02
2
.00
-.04
.02
NIKKEI
NIKKEI
.00
10
.04
10
.000
.03
.01
8
.08
.04
.02
6
.00
-.01
10
.002
-.1
4
.01
10
.12
.1
2
-.1
-.001
2
.02
.0
10
JPNM2
JPNM2
2
.000
-.005
10
.1
-.2
2
JGBYIELD
JPNM2
.0000
8
.000
.002
.0004
6
.2
-.08
10
4
.005
FEXRESV
FEXRESV
FEXRESV
-.1
2
.010
.12
.0
JGBYIELD
10
.015
10
.0008
NIKKEI
8
-.005
2
.1
-.02
6
.01
.2
-.1
4
JPNMB
JPNMB
JPNMB
.004
-.0004
2
.02
.008
-.2
-.02
-.01
10
JPNMB
8
.005
.00
FEXRESV
6
.02
JPNM2
4
.010
JGBYIELD
2
.012
-.008
USMB
.00
.000
NIKKEI
USMB
.01
.001
USMB
.04
USMB
.02
.002
2011-2014
USMB
USMB
USMB
.003
-.001
2008-2011
2
4
6
8
.01
.00
-.01
-.02
10
10
Fig.17: Impulse Response to the US Federal Fund Rate (Japan)
2001-2008
2008-2014
U
6
8
10
0
8
6
8
0
JGBYIELD
.00
6
8
.00
4
6
8
4
6
8
.00
10
.005
.02
.00
-.02
4
6
8
-.02
8
10
2
4
6
8
10
20
6
8
10
2
4
6
8
10
2
4
6
8
10
2
4
6
8
10
.000
-.005
-.010
.04
.00
-.04
4
6
8
10
.02
.01
.00
-.02
-.04
-.04
4
.08
2
NIKKEI
.00
2
-.005
10
-.04
.02
6
8
.00
.04
4
6
.04
.02
2
4
.08
10
10
-.010
2
.04
.00
10
.04
.02
-.01
8
-.08
2
8
0
.06
.03
.01
6
.12
.05
6
1
.010
10
4
-2
4
-.04
2
2
-1
2
10
.01
-.05
2
0
-2
4
.10
.05
1
-1
2
10
.10
10
2
-.01
4
8
2
1
.02
2
6
3
.03
.00
4
2
10
.01
FF
2
10
Call Rate
6
NIKKEI
JGBYIELD
8
-2
4
.15
NIKKEI
6
3
.02
-.05
4
3
.03
-.01
2
-1
2
-.01
-.04
JGBYIELD
-1
Call Rate
REER
1
Call Rate
REERJPN
2
.00
-.02
REER
4
.00
Call Rate
2
.01
.02
JGBYIELD
.00
-.05
.04
REER
.05
.02
NIKKEI
.10
FF
.06
FF
FF
.15
2011-2014
FF
FF
.04
.03
.02
.01
.00
-.01
-.02
.20
US
2008-2011
USA
FF
FF
.00
-.01
-.02
-.03
2
4
6
8
10
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
It should be noted that Nikkei has some positive respone to the US monetary base
recently(2011-2014). The federal fund(FF) rate, as a policy based interest rate, also has
significant impact upon the Japanese market(Fig.17).
The FF rate has negatively affected on the Japanese government bond yield during
2011-2014, which indicates that if interest rate in the US market rises, then the dollars
exchange rate appreciate (as shown as REERin Fig.15-2). It means that JGB(Japanese
Government Bond) could be positively bought by the investors, which would resul in fall in
JGB yield. During 2008-2011, on the other hand, FF rate has negative effect on the stock
prices (Nikkei) in Japan, and this would indicate that if FF rate were to fall, as a result of the
monetary policy to be eased by FRB, the exchange rate of Yen should depreciate, and
Nikkei price would rise accourdingly. During 2011-2014, the effect of FF rate upon the call
rate became insignificant, possibly due to the substantial fall in FF rate during the period.
The result of impulse response functions of Japanese market to the US monetary base
suggests that the US monetary easing policy (QE2 and 3) has played an important role in
carry trade of international money flows into the Japanese market.
6.5 The Monetary Policy and its Impact on the Markets in the US and Japan
As shown in the Granger Causality and impulse response functions given above, BOJ’s
monetary base has significantly influenced on the US capital and financial market. The US
monetary easing also influenced on the Japanese monetary and financial market
significantly in recent years , as summerised in Table 4.
Table 4: Effects of Monetary Policy (Japan & USA)
(a) Shock (b) variables 2001-06 2001-08 2005-08 2008-11 2011-14 2008-14
JPNMB
USMMB
－
－
－
－
+
－
FEXRESV
－
－
+
－
－
JPNMB
USM2
－
－
－
－
－
－
FEXRESV
－
－
－
+
－
JPNMB
USTB10Y
－
－
－
－
－
－
FEXRESV
－
－
－
－
+
JPNMB
USShare
+
－
－
－
+
－
▲
FEXRESV
－
－
－
+
JPNMB
USPROD
－
－
－
－
－
－
+
FEXRESV
－
+
－
▲
▲
USMB
USREER
+
－
－
－
+
+
+
JPNMB
－
－
－
+
FEXRESV
+
－
+
+
+
▲
USM2
－
－
+
－
▲
JPNM2
－
－
+
+
+
▲
+
▲
USTB10Y
－
－
▲
JGBYield
－
－
－
－
－
－
▲
USShare
－
－
－
－
▲
+
Nikkei
－
－
－
－
▲
▲
+
▲
USPROD
+
－
－
FF
USREER
－
+
+
+
+
+
JPNREER
－
－
USM2
－
－
－
－
JPN Call Rate
－
+
－
－
▲
USTB2Y
－
－
－
▲
JGBYield
－
－
－
▲
▲
USShare
－
－
+
▲
Nikkei
+
－
USPROD
－
－
－
+
Notes 1 ＋denotes increase or appreciation；▲ denotes minus effects or
decrease； - denotes insignificance in the impulse responses.
2 The data on foreign banks' excess reserve of BOJ Current Account (FEXRESV)
is only from Jan. 2005 to date.
21
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
Therefore, it is likely that the reserves held by foreingbanks at the BOJ’s current account
have been spent for capital and financial investment. This could be one of the reasons why
the monetary policy has become ineffective in stimulating the real economy in Japan.
Fig.1: Monetary Policy and the Market(2008-2014)
Bank Lending
(Japan)
×
×
Japan CPI
×
Production
Expansion
×
Stock Market
（JPN)
×
×
Real Effective
Exchange Rate
×
BOJ's Monetary
Base
(2011-14)
BOJAC Excess.
Reｓv.(Foreign
Banks)
(2008-14)
US Money
Stocks
(2008-2014)
Stock　Market
（US)
FRB Monetary
Base
Money Stock
(Japan)
Note: The direction of arrow indicates causality and association. ’×’denotes that no significance in causality and impulse response.
7. Concluding Remarks
This paper analyses the effects of monetary policy on the markets and the real
economies in Japan and the USA, based on the VAR models between 2001 and 2014,
covering the period of the Quantitative Monetary Easing Policy (2001-2006),
Comprehensive Monetary Easing (2010-2011), as well as the Qualitative and Quantitative
Monetary Easing (QQE) Policy (2013- to date) in Japan and QE2 and QE3 in the USA.
The results of analyses indicate that the abundant liquidity provided by BOJ has not
been utilized for productive investment even under the extremely easy monetary policy in
Japan, which is also shared by the US market. As the analysis of Granger Causality and the
impulse response functions demonstrates, it has become more difficult for BOJ to have
substantial impact on the market by quantitative monetary policy under increasing
international capital flows. The monetary and financial markets in the US and Japan have
become more associated and integrated each other recently. In the case of Japan, the excess
reserve of the BOJ current account might have been utilized for financial investment
through carry trade, which is supposed to have accelerated under the BOJ’s monetary
easing policy. The massive liquidity expanded under the QE2 and QE3 in the US market
also have put significant impact upon the market in Japan.
Therefore, tapering of the FRB’s QE3 should put some pressure on the BOJ’s
continuation of the current QQE policy, as a ‘safety net’ of global money supply. However,
the original purpose of reviving the domestic real economy in Japan would not be realized
under the current completely free capital account regime, since the abundant liquidity under
BOJ’s QQE policy should only increase financial investment. If the monetary authority
were to attain the original purposes to recover the real economy effectively, there should be
some alternative way. In this regard, some policy on capital account and financial
management may be considered to attain independence on the domestic monetary (incl.
interest rate) policy in the medium to long term perspective16.
Please see Ohta(2012) on the importance of management and controls of capital account to attain
stability of the market and achieve stable growth of the economy.
16
22
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
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Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
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24
Hideaki Ohta
Professor
College of International Relations, Ritsumeikan University
著作権や内容・意見は執筆者に属し、国際関係学会の示すものではない。尚、無断転載を禁ずる。
25