Abstract
This chapter is about how to adjust Japan’s monetary policy framework to meet the resumption of inflation. At the time of this writing (fall 2005), Japan’s monetary policy framework is tailored to ending deflation and maintaining financial stability. The Bank of Japan (BoJ) has committed to maintaining a highly accommodative stance under its “quantitative easing” policy at least until actual and expected deflation end. Operationally, it relies on a quantitative operating target, namely bank and nonbank reserves (or “current balances” held at the BoJ), supplying ample liquidity and thereby keeping the policy interest rate at virtually zero. This has the additional benefit of bolstering financial stability.
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Kramer, C., Stone, M. (2008). A Post-Deflation Monetary Framework. In: Citrin, D.A., Zanello, A. (eds) Japan’s Economic Revival. Procyclicality of Financial Systems in Asia. Palgrave Macmillan, London. https://doi.org/10.1057/9781137001603_7
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DOI: https://doi.org/10.1057/9781137001603_7
Publisher Name: Palgrave Macmillan, London
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