Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/115321
Authors: 
Yoshino, Naoyuki
Taghizadeh-Hesary, Farhad
Year of Publication: 
2014
Series/Report no.: 
ADBI Working Paper Series 503
Abstract: 
Japan has reached the limits of conventional macroeconomic policy. In order to overcome deflation and achieve sustainable economic growth, the Bank of Japan (BOJ) recently set an inflation target of 2% and implemented an aggressive monetary policy so this target could be achieved as soon as possible. Although prices started to rise after the BOJ implemented monetary easing, this may have been for other reasons, such as higher oil prices. Oil became expensive as a result of the depreciated Japanese yen and this was one of the main causes of the rise in inflation. This paper shows that quantitative easing may not have stimulated the Japanese economy either. Aggregate demand, which includes private investment, did not increase significantly in Japan with lower interest rates. Private investment displays this unconventional behavior because of uncertainty about the future and because Japan's population is aging. We believe that the remedy for Japan's economic policy is not to be found in monetary policy. The government needs to implement serious structural changes and growth strategies.
Subjects: 
monetary policy
energy
oil prices
japanese economy
JEL: 
E47
E52
Q41
Q43
Document Type: 
Working Paper

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