Junko Koeda and Bin Wei
Working Paper 2024-8
September 2024
Abstract:
This study evaluates the effectiveness of Japan's unconventional monetary policies over the past quarter century within a unified term structure framework. It specifically examines the impact of the Bank of Japan's (BOJ) outcome-based forward guidance and yield curve control (YCC) and incorporates other policy types into the framework. The findings show that the BOJ’s forward guidance and YCC have both had a significant impact on the shadow rate. Forward guidance accounted for most of the policy impact in the early stages of unconventional monetary policies and remained influential throughout. YCC, since its introduction in 2016 until March 2022, contributed to more than a third of the policy impact. Furthermore, these policies have been effective in raising output and inflation.
JEL classification: E43, E44, E52, E58
Key words: forward guidance, effective lower bound (ELB), liftoff, term structure, shadow rate, macro finance, unspanned macro factors, yield curve control, Japan
https://doi.org/10.29338/wp2024-08
The views expressed here are those of the author and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the author's responsibility.
Please address questions regarding content to Junko Koeda, Graduate School of Economics, Waseda University; or Bin Wei, Research Department, Federal Reserve Bank of Atlanta.
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