Financial Crisis and Bank Management in Japan (1997 to 2016) by Mitsuhiko Nakano

Author:Mitsuhiko Nakano
Language: eng
Format: epub
Publisher: Palgrave Macmillan UK, London

Effects of Quantitative Monetary Policy

The BOJ repeatedly emphasized the policy duration effects of ZIRP and QE. One reason for adoption of QE was that Milton Friedman’s theory of ‘Inflation is always and everywhere a monetary phenomenon’ had been generally accepted by the public. It was frequently discussed among economists that the money stock would increase if the BOJ increased the base money supply.26, 27 Nevertheless, in reality, the money stock had already far exceeded the level of nominal GDP because of deflation, as presented in Fig. 3.4.

Fig. 3.4Trend of money stock (M2) and nominal GDP. Note: Through March 2003, money supply; after April 2003, money stock (Source: The Bank of Japan, The Cabinet Office)

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