Economic Discourses of Monetary Policy – The Case of the Bank of Japan

Since the global financial crisis in 2008, central banks worldwide have engaged in unconventional monetary policies such as asset purchases, the provision of unprecedented extraordinary liquidity and ultralow or even negative interest rates. In this context, many central banks are recently challenged by various types of risks. The US Federal Reserve and the European Central Bank (ECB) are confronted with risks related to higher interest rates. The ECB faces the additional problem regarding the risk of default by periphery countries in the Eurozone. In Japan, the risk of fiscal policy dominating monetary policy has become real, as the Bank of Japan has been purchasing large amounts of public debt.

Monetary policy of central banks is high on the political agenda and has been a highly controversial topic of discussion, at least regarding the issues of monetary policy goals (e.g. inflation targets), tools of monetary policy (unconventional measures) and the effectiveness of monetary policy. Given Japan’s prolonged struggle with deflation and low inflation, the Bank of Japan is a promising case study for these research fields. This research project covers following three research questions:

1. Monetary Policy Target: How is inflation, deflation and the implementation of an inflation target discussed in the Bank of Japan, the public, academia and the media?
2. Monetary Policy Implementation and Communication: How is (unconventional) monetary policy (including balance sheet policies, negative interest rates) discussed in the Bank of Japan, the public, academia and the media?
3. Monetary Policy Achievement: How is it received (by the public, academia, media and the government) that the Bank of Japan has repeatedly been missing its price stability target of 2% inflation?