How has the Bank of Japan (BOJ) helped shape Japan's economic growth during the past two decades? This book comprehensively explores the relations between financial market liberalization and BOJ policies and examines the ways in which these policies promoted economic growth in the 1980s. The authors argue that the structure of Japan's financial markets, particularly restrictions on money market transactions and the key role of commercial banks in financing corporate investments, allowed the BOJ to influence Japan's economic success. The first two chapters critically evaluate the BOJ's daily operating procedures, the primary instruments of monetary policy, and the mechanisms by which the BOJ is believed to affect economic growth. The authors pay particular attention to the coincidence of the liberalization of financial markets and the evolution of monetary policy, as well as to the similarities and differences between policies in Japan and the United States. Chapter three explores the effects of the BOJ's window guidance policy on corporate investment and argues that such investment is affected differently depending on the relationship between the corporation and its principal banks and whether the corporation is a member of an industrial group (keiretsu). In the fourth chapter, the authors examine the effects of monetary policy on the term structure of interest rates. They document significant changes in the relations between long- and short-term interest rates, the liberalization of financial markets, and changes in monetary policy. The final two chapters examine the overall impact of monetary policy on real aggregate economic activity. Chapter five looks at the implications ofsmoothing interest rates for the endogeneity of the money stock, while chapter six explores the nature and importance of various economic shocks underlying Japanese business cycles. This volume will prove invaluable not only to economists interested in the technical operating procedures
Kenneth J. Singleton is C.O.G. Miller Distinguished Professor of Finance in the Graduate School of Business at Stanford University.
Introduction Kenneth J. Singleton 1 A Comparative Perspective on Japanese Monetary Policy: Short-Run Monetary Control and the Transmission Mechanism Kazuo Ueda 2 Market Operations in Japan: Theory and Practice Kunio Okina 3 Japanese Corporate Investment and Bank of Japan Guidance of Commercial Bank Lending Takeo Hoshi, David Scharfstein, and Kenneth J. Singleton 4 The Interest Rate Process and the Term Structure of Interest Rates in Japan John Y. Campbell and Yasushi Hamao 5 Monetary Policy and the Real Economy in Japan Hiroshi Yoshikawa 6 An Aggregate Demand-Aggregate Supply Analysis of Japanese Monetary Policy, 1973-1990 Kenneth D. West