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This paper presents an analysis of the impact of the Bank of Japan’s low-interest rate policy on the banking sector in the wake of the 1998 Japanese financial crisis. We show how the low-cost liquidity provision as a means to stabilize banks has created a growing gap between deposits and loans in the financial system and how the low-interest rate policy has compressed interest margins as the traditional source of banks’ income. Efficiency scores are compiled to estimate the effect of the Bank of Japan’s monetary policy on banks’ technical efficiency. The estimation results provide evidence that the Japanese monetary policy has contributed to declining efficiency in the banking sector, despite – or possibly because of – the increasing concentration within this sector. [ABSTRACT FROM AUTHOR]

Inequality has been largely ignored in the literature and practice of monetary policy, but is gaining more attention recently. Here, we exclusively focus on the impact of unconventional monetary policy (UMP) on inequality. We look at how the recent UMP in Japan affected inequality, using household survey data. Our vector auto regression (VAR) results show that UMP widened income inequality after 2008Q3 as the Bank of Japan (BoJ) resumed its zero-interest rate policy and reinstated UMP. This is largely due to the portfolio channel. To the best of our knowledge, this is the first study to empirically analyse the distributional impact of UMP. Japan’s extensive experience with UMP may hold important policy implications for other countries. [ABSTRACT FROM PUBLISHER]

I investigate how monetary policy can avoid a deflationary slump when policy rates are near zero by studying interest rate policy during Japan's “Lost Decade.” Estimation results suggest that the Bank of Japan's interest rate policy fits a conventional reaction function with an inflation target near 1%. The disapointing economic performance thus seems primarily due to adverse economic shocks rather than extraordinary policy errors. Also, counterfactual policy simulations suggest that simply raising the inflation target would not have substantially improved performance. However, price-level targeting or combining a higher inflation target with an aggressive output response would have achieved superior stabilization results. [ABSTRACT FROM AUTHOR]

This article presents information on the economic crisis in Japan. It is informed that the era of consistently high rates of economic growth in Japan is long past. Although Japan entered the year 2000 with a dynamic economic expansion, the economy ran out of steam soon afterwards. In the third quarter a marked decline in economic activity was recorded. According to the revised figures, gross domestic product declined by 0.6 percent on the previous quarter and is equivalent to an annualized figure of 2.4 percent. Japan has been confronted with a deflationary trend for many years now. In 2000 the consumer price index was once again on a declining trend, despite the rise in oil prices and the renewed depreciation of the yen. Japan has relied primarily on an expansionary fiscal policy in order to overcome the crisis. It soon became apparent that a one-off fiscal impulse was not sufficient to enable the economy to move on definitively to a new growth trajectory. As a result, continual supplementary budgets were adopted. Yet because private economic agents did not respond to these impulses, each time the effect swiftly burnt out.