Upload
others
View
5
Download
0
Embed Size (px)
Citation preview
October 18, 2017Hiroshi Nakaso
Deputy Governor of the Bank of Japan
Evolving Monetary Policy:The Bank of Japan's Experience
Speech at the Central Banking Seminar Hosted by the Federal Reserve Bank of New York
Note: The figure for Japan is based on BOJ staff estimations (fiscal year based). Figures for the United States and the euro area are based on the OECD estimations. Sources: Bank of Japan; OECD.
Potential Growth RateChart 1
1
-2
-1
0
1
2
3
4
5
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Japan
United States
Euro area
%
CY
Financialsystemcrisis in Japan(1997)
Globalfinancial
crisis(Sep. 2008)
Plaza Accord(Sep. 1985)
Burst of the bubbleeconomy in Japan(first half ofthe 1990s)
Asiancurrency
crisis(Jul. 1997)
Burst of thedot-com bubble(2000)
BNP Paribasshock
(Aug. 2007)
European debt crisis(2010-)
Great East JapanEarthquake(Mar. 2011)
Policy Interest RatesChart 2
Note: For Japan, for the period when no target interest rate was adopted, figures for the policy rate are the interest rate applied on excess reserves.Sources: Bank of Japan; Federal Reserve; European Central Bank; Haver; Bloomberg. 2
-1
0
1
2
3
4
5
6
7
8
9
10
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Japan
United States
Euro area
%
CY
Zero Interest Rate Policy
Quantitative Easing Policy
ComprehensiveMonetary Easing Policy
Quantitative and QualitativeMonetary Easing (QQE)
QQE with Yield Curve Control
Notes: 1. Figures for the uncollateralized overnight call rate are monthly averages.2. The CPI figures are adjusted for changes in the consumption tax rate.
Sources: Bank of Japan; Ministry of Internal Affairs and Communications; Bloomberg.
Quantitative Easing Policy (2001-2006)Chart 3
3
0
5
10
15
20
25
30
35
40
45
-2
-1
0
1
2
3
4
00 01 02 03 04 05 06 07 08 09
trillion yen
Current account balances at theBank of Japan (right scale)
Uncollateralized overnight call rate(left scale)
CPI (all items less fresh food andenergy, left scale)
%
Quantitative Easing Policy
CY
Transition of BOJ's Monetary PolicyChart 4
4
Feb. 1999
Aug. 2000
Mar. 2001
Mar. 2006
Oct. 2010
Apr. 2013
Apr. 2013
Sep. 2016
QuantitativeEasing Policy
Current accountbalances at the
BOJ
Operating targetTarget of short-term
interest rates
(1)Affecting longer-term interest rates
(2)Affecting risk
premiums
(3)Applying a negativeinterest rate to thecurrent accounts
(4)Affecting inflation
expectations
Zero InterestRate Policy
Uncollateralized
O/N call rate
ComprehensiveMonetary Easing
Policy
Uncollateralized
O/N call rate
QQE with YieldCurve Control
Quantitative andQualitative
Monetary Easing(QQE)
Monetary base
Purchases of risk assets
(CP, corporate bonds,ETFs, J-REITs)
0 to 0.1%
(virtually 0%)
Negative territory
Policy durationeffect
(forward guidance)
Policy duration effect
(forward guidance)
Negative interest rate
(since Jan. 2016)
Purchases ofrisk assets
Large-scale JGB purchases
Yield curve control
(operating target:10-yr JGB yields)
Purchases ofrisk assets
Negative interest rate
"As low aspossible"
(virtually 0%)
Around 0%
Around 0%↓
Negative territory(since Jan. 2016)
Short- and long-term interest rates
・Short-term policy interest rate
・10-yr JGB yields
Policy duration effect
(forward guidance)
"Price stabilitytarget of 2%"(since Jan. 2013)
Inflation-overshooting commitment
JGB purchases /Fixed-rate funds-supplying operation
Strong and clear commitment
-2
-1
0
1
2
3
95 97 99 01 03 05 07 09 11 13 15 17
Natural rate of interest
Real interest rate
%
CY
Japan's Natural Rate of Interest and Real Interest RateChart 5
Note: Based on BOJ staff estimations using 10-year JGB yields, etc. For details of the estimation procedures of the natural rate of interest, see Imakubo et al. (2015), "The Natural Yield Curve: Its Concept and Measurement," Bank of Japan Working Paper Series, 15-E-5. The shaded area indicatesthe 95 percent confidence interval for the natural rate of interest.
Sources: Consensus Economics Inc., "Consensus Forecasts"; Bloomberg; Bank of Japan, etc. 5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
05 06 07 08 09 10 11 12 13 14 15 16 17
Unemployment rate
s.a., %
CY0
1
2
3
4
5
6
7
8
05 06 07 08 09 10 11 12 13 14 15 16 17
Ratio of current profits tosales (all industries andenterprises)
s.a., %
CY-5
-4
-3
-2
-1
0
1
2
-10
-8
-6
-4
-2
0
2
4
05 06 07 08 09 10 11 12 13 14 15 16 17
Output gap (left scale)
CPI (all items less fresh food andenergy, right scale)
y/y % chg.%
CY
Japan's EconomyChart 6
Notes: 1. The output gap is based on BOJ staff estimations. 2. The CPI figures are adjusted for changes in the consumption tax rate. The figure for 2017/Q3 is the July-August average.3. Figures for corporate profits are based on the Financial Statements Statistics of Corporations by Industry, Quarterly. Excluding "finance and insurance."
Sources: Bank of Japan; Ministry of Internal Affairs and Communications; Ministry of Finance. 6
Output Gap and Prices Corporate Profits Unemployment Rate
QQE with Yield Curve Control
Source: Bloomberg. 7
Yield Curve Control Inflation-overshooting CommitmentBOJ facilitates the formation of a yield curve that is considered most appropriate for maintaining the momentum toward achieving the price stability target of 2 percent, taking account of developments in economic activity and prices as well as financial conditions.
BOJ will continue expanding the monetary base until the year-on-year rate of increase in the observed CPI exceeds 2 percent and stays above that level in a stable manner.
Chart 7
Inflation rate
2%
Expansion of monetary base continues
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
0 1 2 3 4 5 6 7 8 9 10 15 20 30 40
%
year residual maturity
Target level of the long-term interest rate"around zero percent"
Short-term policy interest rate"minus 0.1 percent"
JGB yield curve
Interest RatesChart 8
Source: Bloomberg. 8
Japan's Yield Curve 10-year Government Bond Yields in Selected Advanced Economies
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
0 1 2 3 4 5 6 7 8 9 10 15 20 30 40
end-September 2017
end-March 2017
end-September 2016
July 27, 2016 (the bottom of 10-year JGB yields)
%
year residual maturity
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17
United States
Germany
Japan
%
Introduction of "QQE with a NegativeInterest Rate"
Introduction of "QQE with Yield CurveControl"
Evolution of the "Lender of Last Resort"Chart 9
Responding to the contraction of market activities resulting from concerns over counterparty risk among market participants
Liquidity Assistance to a Market
Responding to foreign currency liquidity shortages faced by globally active financial institutions
Liquidity Assistance of Foreign Currencies
9
Responding to the risk of the deterioration of business conditions at one financial institution tainting those at other financial institutions mainly through depositors' inferences
Conventional "Lender of Last Resort" Function
Responding to the risk of the deterioration of business conditions at one financial institution tainting those at other financial institutions mainly through depositors' inferences
Conventional "Lender of Last Resort" Function
Responding to the risk of the deterioration of business conditions at nonbanks destabilizing financial markets
Liquidity Assistance to Nonbanks
Network of Central Banks' Swap LinesChart 10
10
FRB
US$
BOJ
Yen
BOC
Canadian$
SNB
Swiss Franc
ECB
Euro
BOEPound
Sterling
"Designing frameworks for central bank liquidity assistance" (Excerpt)
Chart 11
Source: BIS, CGFS Papers No.58 "Designing frameworks for central bank liquidity assistance: addressing new challenges."
Growing importance of liquidity assistance for globally active financial institutions
Expansion of financial institutions' international activities, and strengthening of relationship among markets
Growing needs for transparency and accountability of liquidity assistance
Increasing difficulty in non-disclosure of the details of liquidity assistance since the global financial crisis
Rise in the weight of market-based forms of financial intermediation (funding through financial markets)
Growing importance of maintaining market function and market liquidity
Principle of Central Banks'Liquidity Assistance
Changes in the Environment Surrounding Central Banks
11
Bilateral liquidity assistance
◆ Principle of cooperation among central banks
Pirnciple 1: Allocation of responsibility
Principle 2: Information-sharing
◆ Principle of practical issue
Principle 3: Eligibility
Principle 4: Solvency
Principle 5: Collateral
Principle 6: Provision of foreign currency
Principle 7: Transparency
Liquidity assistance to a market
Better understanding of market-basedforms of financial intermediation
Information-sharing among central banksPrinciple 8:
Note: The CPI figures are adjusted for changes in the consumption tax rate.Sources: Ministry of Internal Affairs and Communications; Cabinet Office.
Japan's Economy and BOJ's Monetary PolicyReference Chart
12
-15
-12
-9
-6
-3
0
3
6
9
12
15
-4
-3
-2
-1
0
1
2
3
4
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
y/y % chg.
CY
y/y % chg.
CPI (all items less fresh food and energy, left scale)
Real GDP (right scale)
Financial system crisis
in Japan(1997)
Globalfinancial
crisis(Sep. 2008)
Plaza Accord(Sep. 1985)
Burst of the bubbleeconomy in Japan(first half of the 1990s)
Asian currency
crisis(Jul. 1997)
Burst of the dot-com bubble(2000)
BNP Paribasshock
(Aug. 2007)
European debt crisis(2010-)
Great East JapanEarthquake(Mar. 2011)
Zero Interest Rate Policy
Quantitative Easing Policy
Comprehensive Monetary
Easing Policy
Quantitative and QualitativeMonetary Easing (QQE)
QQE withYield Curve Control