Research InstituteDiscussion Paper Series№11
Title：The Impact of Financial Literacy and Layered
Communication on the Public’s Expectation Formation: A Questionnaire Survey among University Students

北野

友士

／

KITANO

Yuji

yukitano@andrew.ac.jp

2020 年 2 月

http://www.andrew.ac.jp/soken/

The Impact of Financial Literacy and Layered Communication on the Public’s
Expectation Formation: A Questionnaire Survey among University Students
KITANO Yuji*
Abstract
This paper examines the impact of financial literacy and layered communication on the
public’s expectation formation. Recently, almost all central banks in advanced economies haveintroduced forward guidance as an instrument of non-standard monetary policies. However,
the effects of such forward guidance could depend on the public’s understanding and trust of
the central bank. Moreover, financially illiterate people cannot understand the central bank’sview and policy. In this study, a questionnaire survey was conducted among 627 Japanese
university students. The survey comprised tests on basic financial literacy, and questions on
future economic outlook based on the Bank of Japan’s Outlook for Economic Activity andPrices. According to the survey, creating a visual summary like that produced by the Bank ofEngland could have positive effects on the economic outlook of financially illiterate students.
Additionally, improvement of financial literacy could help the respondents understand andtrust the BOJ’s economic and inflation outlook. In other words, financial education and layered
communication with regard to differences in public financial literacy could improve the BOJ’s
communication strategies and monetary policy.
Keywords: Monetary policy; Forward guidance; Inflation expectations; Financial literacy; Financial
education; Layering or layered communication;* Department of Economics, Momoyama Gakuin University, 1-1, Manabino, Izumi, Osaka 594-

1198, Japan. E-mail: yukitano@andrew.ac.jp
11. Introduction
In recent years, financial education has been encouraged in Japan. In other countries, however,various types of educational programs for financial literacy have been developed for some time. For
example, the Bank of England (BOE) has been making efforts to improve communication strategies
regarding public financial literacy. As described below, the Bank has been introducing layered
communication in its Inflation Report to enable financially illiterate people to understand and trust its
economic outlook. This means the BOE regards the public’s expectations on the economy and inflationin the near future as one of the most important factors in its monetary policy.
Incidentally, the Bank of Japan has also been making efforts to encourage the public to understandthe BOJ’s view of the future economy and inflation. However, only around 40% Japanese people
understand the BOJ’s economic outlook, due to the lack of knowledge about the central bank, as wellas financial illiteracy. Financial education and layered communication in Japan could help the BOJ’smonetary policy.
This article examines the impact of financial literacy and layered communication in Japan. The
author and co-researchers conducted a questionnaire among 627 students from five universities. The
survey comprised two parts. The first part was a survey on financial literacy, while the second partcomprised questions on expectations on the economy and inflation in the near future.
This study is organized as follows. Section 2 previews the relationship between monetary policy,
especially forward guidance and financial literacy, Section 3 provides an overviews of thequestionnaire and its results, Section 4 analyses the questionnaire statistically, and Section 5 provides
the conclusions.
2. Relationship between Forward Guidance and Financial Literacy
In this section, the relationship between forward guidance and financial literacy is reviewed. And
the purpose of this article is also provided.
2.1 Review of Forward Guidance
Forward guidance is one of the most influential channels in non-standard monetary policy. The
time axis effect of forward guidance could encourage the public to form inflation expectations. Cole(2018) examines the effectiveness of central bank forward guidance in terms of inflation and pricelevel-targeting monetary policies with under the New Keynesian model. Cole (2018) concludes thatthe beneficial effects of forward guidance increase if a central bank pursues price-level-targeting rather
than inflation-targeting monetary policy.
Honkapohja and Mitra (2016) also examine the global dynamics of learning under the New
Keynesian model, with price-level targeting that is subject to the Zero Lower Bound. Honkapohja and
Mitra (2016) describe that the economy as being hit by large expectation shocks, and assert that price2

level targeting with forward guidance is a more robust policy that out-performs inflation targeting interms of inflation, interest rate volatility and loss.
Winkelmann (2016) empirically investigates jump probabilities of Norwegian interest rates onannouncement days of Norges Bank before and after the introduction of quantitative guidance.
Winkelmann (2016) provides evidence in favor of quantitative guidance over qualitative guidance.
Smith and Becker (2015) shows that forward guidance, as practiced by the FOMC since 2008, has
had similar effects on the economy as past changes in the target federal funds rate. Smith and Becker(2015) suggests that changes in the FOMC’s forward guidance appear to have significant effects on
two macroeconomic aggregates closely related to the Federal Reserve’s dual mandate.
Gerko and Rey (2017) analyzes the transmission of monetary policy in the United States and theUnited Kingdom. According to Gerko and Rey (2017), monetary policy shocks in the United Statesencompass movements in the target rate and forward guidance, and their effects on financial
instruments reflect market expectations of the future policy rate. On the other hand, monetary policy
shocks in the United Kingdom distinguish between movements in the target rate and forward guidance.
The previous researches described above demonstrate the effects of forward guidance theoreticallyand empirically. However, Morgan and Sheehan (2015) indicate that Keynesian and post-Keynesianmodels have paid relatively little attention to the issue of trust. According to Morgan and Sheehan(2015), the BOE introduced forward guidance to create confidence amongst economic actors.
2.2 Purpose of this Article
As mentioned in previous researches, forward guidance is an effective instrument of central banks.
However, the impact of monetary policy can depend on whether or not the public trusts the central
bank’s announcement. As Morgan and Sheehan (2015) describe, the BOE introduced forward
guidance to rebuild trust among citizens1. Andrew G Haldane, a chief economist of the BOE, has given
a number of speeches on the Bank’s efforts to correct the public’s mistrust and misunderstanding(Haldane, 2017). Haldane (2017) describes that the Bank is seeking to make progress incommunication, conversation and education. The author focuses on layering in communication. In
November 2017, the Bank published the Inflation Report for the first time in three layers: Layer 3 was
the usual “50 page, 50 chart” version; Layer 2 was a “1- 2 page, 1- 2 chart” version; while Layer 1
was a “1 line, 1 chart” version (Haldane (2017), p. 9). Layering has enabled the MPC to reach a new,wider audience without cannibalizing its existing audience (Haldane (2017), p. 9).
Indeed, the BOE launched publishing “Visual summary” in its Inflation Report. Figure 1 showsthe “Visual summary” of the Inflation Report in February 2018. As you can see in Figure 1, the public
was able to understand the BOE’s view through simplified sentences and illustrated images. According1

Oxford Economics (2013) shows the detailed process that the BOE introduced forward guidance
for the first time.
3

to Haldane (2017), website hits for the November Inflation Report were double the average fromearlier quarters, and those extra hits were entirely accounted for by Layers 1 and 2, while Layer 3 hits
were essentially unchanged. Haldane (2018) calls this “Layered communication.”2
Figure 1: Image of “Visual summary” – Inflation Report February 2018

Source:Website

of

the

Bank

of

Englandreport/2018/february-2018/visual-summary）

2

Kitano (2018) examined this topic in detail.
4(https://www.bankofengland.co.uk/inflation-

Incidentally, the Bank of Japan has also been making efforts to encourage the public to understandthe BOJ’s view of the future economy and inflation. However, around 54% of Japanese publicanswered that it is difficult to understand the BOJ’s explanations. Three main reasons were revealed:lack of knowledge of the BOJ, difficulty to understand economics and finance, and difficulty tounderstand the BOJ’s explanations and words. On the other hand, there is little public distrust of theBOJ. These results suggest that improvement of financial education and layered communication could
correct the BOJ’s communication strategy. This paper therefore examines the impact of financial
literacy and layered communication on the public’s expectations.
3. Questionnaire Survey among Japanese Students
This section demonstrates the results of the questionnaire survey among Japanese university
students on financial literacy and layered communication.
3.1 Investigation Method
As previously mentioned, this paper examines the effects of financial literacy and layering on
people’s expectations. For this purpose, a questionnaire survey was conducted among Japanese
university students on their financial literacy and economic outlook. The survey consisted of two parts.
Part 1 comprised nine tests of basic financial literacy. Part 2 comprised 10 questions on expectations
regarding such topics as economic outlook, inflation, asset management, employment and real estate.
The respondents were 627 students studying at five different universities across Japan.
Part 2 must be given supplementary explanations. In this questionnaire, the author provided thetwo types of information. One was the normal summary of the BOJ’s Outlook for Economic Activity
and Prices in July 2018. The other was a visual summary of the BOJ’s Outlook which the author
created with reference to that produced by the Bank of England (BOE). The students were ramdomly
selected to response based on either the normal or the visual summary. Figure 2 shows the images of
the normal and visual summaries.
3.2 Results of Survey
Table 1 shows the results of the survey on financial literacy. Question No. 1 is about consultationin the event of financial trouble. No. 2 assesses the respondent’s knowledge regarding the three major
expenses in life: housing, education and retirement. No. 3 examines whether or not the respondent
understand the concept of inflation. No. 4 is a numerical calculation of compound interest. No. 5
investigates the respondent’s knowledge of the relationships between lifecycle, revenue and expenses.
No. 6 assesses the respondent’s ability to act prudently as a household. No. 7 concerns inappropriate
reasons for debt. No. 8 examines the respondent’s knowledge of the profitability of financial assets,
including stocks, government bonds, corporate bonds, and term deposits. No. 9 is a multiple choice5question, in which students have to choose a financial instrument on a fixed or an adjustable rate, inthe pretext or assumption that the interest rate will rise or fall.
As Table 1 shows, questions 2, 3, 5, 6, and 7 seem to be relatively easy. On the contrary, questions
8 and 9 are quite difficult. The average total score for financial literacy was 5.42, which isapproximately 60% for the nine questions.
Figure 2: Images of normal summary (left) and visual summary (right)

Table 2 shows the results of the students’ outlook or expectations of the future economy. Before
checking Table 2, the BOJ’s Outlook must be reviewed. According to the Bank of Japan (2018), themain points of the BOJ’s view were as follows: (1) The Japanese economy was expected to continue
on an expanding trend, partly supported by external demand. (2) The year-on-year rate of change in
the CPI had been positive, but had continued to show relatively weak developments compared to theeconomic expansion and the tightening labor market. (3) Companies would gradually shift toward astance of further raising wages and prices. (4) With regard to upside and downside risks, the BOJ
maintained QQE with Yield Curve Control.
Question No. 10 concerns understanding of the BOJ’s outlook for the economy. The appropriate
6

answer is “Agree,” because the BOJ expected to continue on an expanding trend. 51.9% of respondents
chose “Agree.”No. 11 concerns the respondents’ outlook for the economy. Though the BOJ’s economic outlook
was an expanding trend, 51.1% of respondents chose “Disagree,” indicating they did not think
Japanese economy was likely to continue its moderate expansion.

Items

No. 1 Financial trouble

No. 2 Three major expenses

No. 3 Inflation

No. 4 Compoound interest

No. 5 Lifecycle

No. 6 Household

No. 7 Debt

No. 8 Investment

No. 9 Fixed/adjustable rate

Total financial literacyNAnswer
1

N

169

60

303

95

627

％

27.0

9.6

48.3

15.2

100.0

N

535

17

40

35

627

％

85.3

2.7

6.4

5.6

100.0

N

41

165

402

19

627

％

6.5

26.3

64.1

3.0

100.0

N

68

224

259

76

627

％

10.8

35.7

41.3

12.1

100.0

N

125

431

38

33

627

％

19.9

68.7

6.1

5.3

100.0

N

24

63

523

17

627

％

3.8

10.0

83.4

2.7

100.0

N

20

562

28

17

627

％

3.2

89.6

4.5

2.7

100.0

N

94

186

226

121

627

％

15.0

29.7

36.0

19.3

100.0

N

97

158

267

105

627

％

15.5

25.2

42.6

16.7

100.0

N

M in.

M ax.

627

2

3

Total

%

0

9

4

Av.

S.D.

5.42

1.656

Table 1: Results of the survey for financial literacy
Note: Each question has a choice of three answer, with a fourth option of “Don’t know.” The shaded
answers are correct.

7

ItemsAnswerN
Agree％
No. 10 BOJ's economic outlook

No. 11 Respondents' economic outlook

No. 12 BOJ's inflation outlook

No. 13 Respondents' inflation outlook

No. 14 Deposit prior to stock

No. 15 Future policy rate

No. 16 Correction of unemployment

No. 17 Opportunity of capital investment

No. 18 House purchaseNo. 19 Overseas vs. domestic investment

DisagreeDon't know

Total

N

324

232

68

624

％

51.9

37.2

10.9

100.0

N

225

319

80

624

％

36.1

51.1

12.8

100.0

N

333

186

104

623

％

53.5

29.9

16.7

100.0

N

249

222

152

623

％

40.0

35.6

24.4

100.0

N

142

284

197

623

％

22.8

45.6

31.6

100.0

N

269

165

189

623

％

43.2

26.5

30.3

100.0

N

298

229

96

623

％

47.8

36.8

15.4

100.0

N

189

292

142

623

％

30.3

46.9

22.8

100.0

N

199

310

114

623

％

31.9

49.8

18.3

100.0

N

335

116

172

623

％

53.8

18.6

27.6

100.0

Table 2: Results of students’ outlook based on normal or visual summary
Note: The shaded answers indicate the most popular responses for each questions.
No. 12 concerned understanding of the BOJ’s inflation outlook. The appropriate answer is “Agree,”because the BOJ expected that the rate of inflation would be positive. 53.5% of respondents choose“Agree.”No. 13 concerned the respondent’s outlook on the inflation rate. 40% of respondents chose “Agree.”No. 14 examined the respondents’ capability of managing assets. Based on the Outlook, although
Japan’s economy would be on an expanding trend, the interest rate would be maintained. In thissituation, bank deposits would be less profitable than investment in stocks. So, the appropriate choice
was “Disagree.” 45.6% of the students chose “Disagree.”No.15 concerned understanding of the BOJ’s stance on the policy rate in the near future. The
Outlook describes the maintenance of QQE, and the respondents were supposed to expect and agree8with an unchanging policy rate. 43.2% of the students chose “Agree.”No. 16 investigated the student’s ability to predict the labor market based on the Outlook.
According to the Outlook, the labor market would tighten. This could result in a raise in wages andimprovement in the unemployment rate. 47.8% of respondents chose “Agree.”No. 17 examined the student’s competence as a corporate manager. According to the Outlook,
QQE with Yield Curve Control would be maintained, even though the BOJ’s outlook was forcontinued economic growth. If the respondent were a CEO of an enterprise, he or she might have an
opportunity to invest in. However, 46.9% of respondents chose “Disagree.”No. 18 assessed the respondent’s capability of financial planning. As already mentioned, the BOJ
expected a rising or positive inflation rate, and maintained a low interest rate. A person who wanted tobuy a house ought to invest in housing. However, 49.8% of the students chose “Disagree.”No. 19 examined the respondent’s capability of asset management in global terms. According to
the Outlook, the BOJ’s outlook for an expanding economy was supported by external demand or
foreign economies. For individual investors, overseas investment was expected to be more profitable
than domestic investment. 53.8% of the students chose “Agree.”To summarize the results of Part 2 of the survey, around 40 - 50% of the students could understandthe BOJ’s view based on the results of the questions 10, 11 and 15. However, it depended on thequestions whether the respondents trusted the BOJ’s outlook or not. In addition, the level of thestudents’ financial literacy or capability could affect their understanding of the BOJ’s view and ability
to make an appropriate choice. On the other hand, the results of Table 2 requires attention, because therespondents answered the questions based on different randomized information namely, the normal or
the visual summary.
4. Statistical Analysis of Questionnaire Survey
This section analyzes the impact of financial literacy and layered communication statistically.
4.1 Statistical Analysis
First, an overview of the respondents was made concerning differences in financial literacy
according to the type of summary viewed. Table 3 compares the average scores of the students’financial literacy for the normal and visual summaries. As Table 3 shows, the financial literacy of thetwo groups of respondents was almost the same. In fact, the difference in the students’ financial literacy
between the normal and the visual summary was not statistically significant by the t-test. On the other
hand, the author layered the students according to three levels of financial literacy based on thequestions in part 1. Low literacy (LL) students’ scores were < 4. Mideum literacy (ML) students’scores were 5 or 6. High literacy (HL) students’ scores were >7. As indicated in Table 4, 167 students(26.6% of the all respondents) were LL, 287 students (45.8%) were ML, and 173 students (27.6%)
9

were HL.

Frequency

Av.

S.D.

Normal

306

5.40

1.653

Visual

321

5.44

1.661

Table 3: Comparison of respondents’ financial literacy between the normal and visual summaries

Frequency

Av.

S.D.

M in.

M ax.

Low Literacy (LL)

167

3.26

1.013

0

4

M edium Literacy (M L)

287

5.52

0.501

5

6

High Literacy (HL)

173

7.35

0.556

7

9

627

5.42

1.656

0

9

Total

Table 4: Classification and comparison of students by financial literacy
The effect of layered communication or creating a visual summary is analyzed in Table 5. As Table
5 shows, the proportion of the appropriate answers among those viewing the visual summary was
higher than among those viewing the normal summary for six out of the 10 questions. This means thatlayered communication like creating a visual summary, could promote the students’ -or the public’sunderstanding of or trust in the BOJ. However, only the “BOJ’s inflation” outlook was statisticallysignificant at the p = 0.001 level by the chi-square test.

NormalVisual

Total

BOJ's
economicRespondents'
economic

BOJ's
inflation***

Respondents'
inflation

Dep osit vsstock

Policyrate

Unemployment

Capitalinvestment

Housepurchase

Overseas vsdomestic

agree

agree

agree

agree

disagree

agree

agree

agree

disagree

agree

N

168

111

138

112

136

135

144

87

152

160

％

55.4%

36.6%

45.7%

37.1%

45.0%

44.7%

47.7%

28.8%

50.3%

53.0%

N

156

114

195

137

148

134

154

102

158

175

％

48.6%

35.5%

60.7%

42.7%

46.1%

41.7%

48.0%

31.8%

49.2%

54.5%

N

324

225

333

249

284

269

298

189

310

335

％

51.9%

36.1%

53.5%

40.0%

45.6%

43.2%

47.8%

30.3%

49.8%

53.8%

Table 5: Effect of creating a visual summary
Note 1: The percentages of appropriate answers for each question are displayed. Shaded figuresindicate the highest percentages.
Note 2: ***:p<0.001, **:p<0.01, *:p<0.05, ☨:p<0.1 (by chi-square test, the followings are the same)

10

LL

ML

HL

Total

BOJ's
economic***Respondents'
economic

BOJ's
inflation*

Respondents'
inflation*

Deposit vs
stock
**

Policyrate*

Unemployment*

Capitalinvestment

Housepurchase☨

Overseas vsdomestic
*

agree

agree

agree

agree

disagree

agree

agree

agree

disagree

agree

N

70

56

77

53

56

54

70

48

68

74

％

42.4%

33.9%

46.7%

32.1%

33.9%

32.7%

42.4%

29.1%

41.2%

44.8%

N

142

107

150

118

135

130

141

90

152

153

％

49.5%

37.3%

52.3%

41.1%

47.0%

45.3%

49.1%

31.4%

53.0%

53.3%

N

112

62

106

78

93

85

87

51

90

108

％

65.1%

36.0%

62.0%

45.6%

54.4%

49.7%

50.9%

29.8%

52.6%

63.2%

N

324

225

333

249

284

269

298

189

310

335

％

51.9%

36.1%

53.5%

40.0%

45.6%

43.2%

47.8%

30.3%

49.8%

53.8%

Table 6: Effect of financial literasy
Note 1: The percentages of appropriate answers for each question are displayed. Shaded figuresindicate the highest percentages.
The impact of financial literacy is examined. As indicated in Table 6, HL and ML students’
percentages of appropriate answers were higher than those of LL students for all of the questions. In
other words, acquisition of financial literacy could improve the BOJ’s communication. In addition,eight of the 10 items are statistically significant by the chi-square test.
Comparing the effect of creating a visual summary and financial education, financial education is
likely to be more important than a visual summary. However, the purpose of layered communication
is to provide different types of economic outlook to financially literate or illiterate members of the
public. In short, this paper analyzes the impact of creating a visual summary while considering students’financial literacy.

Financial literacy
LL

ML

HL
Total

SummayFrequency

Av.

S.D.

M in.

M ax.

Normal

88

3.36

0.961

0

4

Visual

79

3.15

1.063

0

4

Normal

133

5.5

0.502

5

6

Visual

154

5.53

0.501

5

6

Normal

85

7.36

0.553

7

9

Visual

88

7.33

0.562

7

9

627

5.42

1.656

0

9

Table 7: Results of differences in summary type and financial literacy
Table 7 shows an overview of the results of differences in summary type and financial literacy. As
Table 7 shows, the average financial literacy of each layer was not influenced by the difference insummary type.

11

BOJ's economic outlook **AgreeDisagreeDon't know

Total

N

38

35

13

86

％

44.2%

40.7%

15.1%

100.0%

N

70

50

13

133

％

52.6%

37.6%

9.8%

100.0%

N

60

20

4

84

％

71.4%

23.8%

4.8%

100.0%

N

32

32

15

79

％

40.5%

40.5%

19.0%

100.0%

N

72

68

14

154

％

46.8%

44.2%

9.1%

100.0%

N

52

27

9

88

％

59.1%

30.7%

10.2%

100.0%

N

324

232

68

624

％

51.9%

37.2%

10.9%

100.0%LL

NormalML

HL

LL

Visual

ML

HL

Total

Table 8: Impact of layered communication on understanding of BOJ’s economic outlook
The impact of visual summaries and financial literacy on the BOJ’s economic outlook is examinedin Table 8. As Table 8 indicates, increasing the respondents’ financial literacy resulted in understandingof the BOJ’s economic outlook irrespective of the difference in summary type. However, thepercentage of respondents viewing the normal summary who selected “Agree” was higher than that ofthose who viewed the visual summary, for all layers of financial literary. This means that simplified
information did not always encourage the public to understand the BOJ’s view. In addition, the impactof layered communication on understanding of the BOJ’s economic outlook is statistically significant
at the p = 0.01 level.

12Respondents' economic outook
LL

NormalML

HL

LL

Visual

ML

HL

Total

Agree

DisagreeDon't know

Total

N

31

43

12

86

％

36.0%

50.0%

14.0%

100.0%

N

52

64

17

133

％

39.1%

48.1%

12.8%

100.0%

N

28

46

10

84

％

33.3%

54.8%

11.9%

100.0%

N

25

40

14

79

％

31.6%

50.6%

17.7%

100.0%

N

55

82

17

154

％

35.7%

53.2%

11.0%

100.0%

N

34

44

10

88

％

38.6%

50.0%

11.4%

100.0%

N

225

319

80

624

％

36.1%

51.1%

12.8%

100.0%

Table 9: Impact of layered communication on respondents’ economic outlook
The effects of a visual summary and financial literacy on the respondents’ economic outlook isanalyzed in Table 9. As Table 9 shows, the differences in summary type or level of financial literacy
did not affect the respondents’ economic outlook, although Table 7 indicates that over half of the
respondents understood the BOJ’s economic outlook. In other words, the students are likely to derive
their economic outlook from other information, such as experience, mindset, rumors, and so on.
The impact of layered communication on understanding of the BOJ’s inflation outlook is shownin Table 10. As Table 10 describes, increasing the respondents’ financial literacy resulted inunderstanding of the BOJ’s inflation outlook regardless with the difference in summary type. In
addition, the rate of “Agree” responses among respondents viewing the visual summary was higher
than for the normal summary. In the case of the inflation outlook, simplified and illustrated information
could help the public to understand the BOJ’s outlook. The effect of layered communication on the
BOJ’s inflation outlook is statistically significant at the p = 0.001 level.

13

BOJ's inflation outlook ***LL

NormalML

HL

LL

Visual

ML

HL

Total

Agree

DisagreeDon't know

Total

N

36

27

23

86

％

41.9%

31.4%

26.7%

100.0%

N

60

48

25

133

％

45.1%

36.1%

18.8%

100.0%

N

42

33

8

83

％

50.6%

39.8%

9.6%

100.0%

N

41

24

14

79

％

51.9%

30.4%

17.7%

100.0%

N

90

39

25

154

％

58.4%

25.3%

16.2%

100.0%

N

64

15

9

88

％

72.7%

17.0%

10.2%

100.0%

N

333

186

104

623

％

53.5%

29.9%

16.7%

100.0%

Table 10: Impact of layered communication on understanding of BOJ’s inflation outlook
Table 11 shows the results of the analyses of respondents’ inflation outlook as affected by visualsummary and financial literacy. According to Table 11, increasing the level of financial literacy could
help the respondents form an inflation expectation. However, it is noted that the respondents viewing
the normal summary answered “Disagree” more often than “Agree.” This might be due to details in
the normal summary which provided the BOJ’s inflation expectation together with upside anddownside risks. On the contrary, the visual summary simply describes the willingness to raise theinflation rate caused by the expanding economy and increasing wages. These results lead to thequestion. Which is more important detailed information or simplified words? In the context of thispaper, both are important, highlighting the benefit of layered communication. The impact of layered
communication on respondents’ inflation outlook is statistically significant at the p = 0.05 level.

14

Respondents' inflation outlook *LL

NormalML

HL

LL

Visual

ML

HL

Total

Agree

DisagreeDon't know

Total

N

27

29

30

86

％

31.4%

33.7%

34.9%

100.0%

N

51

52

30

133

％

38.3%

39.1%

22.6%

100.0%

N

34

37

12

83

％

41.0%

44.6%

14.5%

100.0%

N

26

29

24

79

％

32.9%

36.7%

30.4%

100.0%

N

67

48

39

154

％

43.5%

31.2%

25.3%

100.0%

N

44

27

17

88

％

50.0%

30.7%

19.3%

100.0%

N

249

222

152

623

％

40.0%

35.6%

24.4%

100.0%

Table 11: Impact of layered communication on respondents’ inflation outlook

Agree

Deposit prior to stocks ***LL

NormalML

HL

LL

Visual

ML

HL

Total

DisagreeDon't know

Total

N

17

35

34

86

％

19.8%

40.7%

39.5%

100.0%

N

38

58

37

133

％

28.6%

43.6%

27.8%

100.0%

N

23

43

17

83

％

27.7%

51.8%

20.5%

100.0%

N

24

21

34

79

％

30.4%

26.6%

43.0%

100.0%

N

25

77

52

154

％

16.2%

50.0%

33.8%

100.0%

N

15

50

23

88

％

17.0%

56.8%

26.1%

100.0%

N

142

284

197

623

％

22.8%

45.6%

31.6%

100.0%

Table 12: Impact of layered communication on respondents’ asset management
15

Table 12 shows the results of the analyses of layered communication on respondents’ asset
management. In the light of asset management, Table 12 indicates that the more financial literate
students could understand the advantage of stocks over bank deposits in a given situation. However,among only LL students, respondents viewing the normal summary chose a higher rate of “Disagree”
than the respondents viewing the visual summary. This means that simplified information was not
sufficient to enable financially illiterate people to make a decision. The effect of layered
communication on the respondents’ asset management is statistically significant at the p = 0.001 level.
Future policy rate *LL

NormalML

HL

LL

Visual

ML

HL

Total

Agree

DisagreeDon't know

Total

N

26

28

32

86

％

30.2%

32.6%

37.2%

100.0%

N

61

29

43

133

％

45.9%

21.8%

32.3%

100.0%

N

48

20

15

83

％

57.8%

24.1%

18.1%

100.0%

N

28

22

29

79

％

35.4%

27.8%

36.7%

100.0%

N

69

43

42

154

％

44.8%

27.9%

27.3%

100.0%

N

37

23

28

88

％

42.0%

26.1%

31.8%

100.0%

N

269

165

189

623

％

43.2%

26.5%

30.3%

100.0%

Table 13: Relationship between layered communication and future policy rate
Table 13 indicates the relationship between layered communication and respondents’ expectations
for the future policy rate. As Table 13 shows, improvement in financial literacy could encourage therespondents to understand the BOJ’s future monetary policy. However, the trend was more noticeable
among those viewing the normal summary than among those viewing the visual summary. Though thenormal summary described the detailed economic and inflation outlook with regard to risk balance,
the visual summary just illustrated the future policy rate with three main simplified points. Therefore,
the respondents viewing visual summary, especially HL students might not be able to form an
expectation of the BOJ’s future monetary policy with insufficient information. The impact of layered
communication on the students’ outlook on the future policy rate is statistically significant at the p =16

0.05 level.

Agree

Correction of unemployment ☨LL

NormalML

HL

LL

Visual

ML

HL

Total

DisagreeDon't know

Total

N

37

33

16

86

％

43.0%

38.4%

18.6%

100.0%

N

69

53

11

133

％

51.9%

39.8%

8.3%

100.0%

N

38

34

11

83

％

45.8%

41.0%

13.3%

100.0%

N

33

25

21

79

％

41.8%

31.6%

26.6%

100.0%

N

72

59

23

154

％

46.8%

38.3%

14.9%

100.0%

N

49

25

14

88

％

55.7%

28.4%

15.9%

100.0%

N

298

229

96

623

％

47.8%

36.8%

15.4%

100.0%

Table 14: Respondents’ outlook for unemployment with layered communication
The respondents’ outlook for correction of the unemployment rate with layered communication is
examined in Table 14. As Table 14 indicates, improvement in financial literacy with a visual summary
could stimulate the students’ expectation for a correction in the rate of unemployment. On the contrary,
the respondents viewing the normal summary would not show any clear trend. However, except among
HL students, the rate of “Agree” responses among respondents viewing the normal summary was
higher than that among respondents viewing the visual summary. In the terms of the unemployment
outlook, both creating a visual summary and financial education might be important. The impact oflayered communication on the outlook for unemployment is statistically significant at the p = 0.1 level.
Table 15 shows the results of respondents’ outlook for firms’ capital investment with layered
communication. As Table 14 indicates, although improvement in financial literacy was likely to makethe students choose “Disagree,” the differences in summary type or in the layers of financial literacy
had little effect on the respondents’ expectations. The author supposed that financial education could
also raise the students’ ability to manage business. However, this hypnosis is not demonstrated in thissurvey. In the following research, the financial literacy for the management of enterprises must be
examined.
17

Opportunity of capital investment

Agree

DisagreeDon't know

Total

N

24

36

26

86

％

27.9%

41.9%

30.2%

100.0%

N

41

62

30

133

％

30.8%

46.6%

22.6%

100.0%

N

22

44

17

83

％

26.5%

53.0%

20.5%

100.0%

N

24

35

20

79

％

30.4%

44.3%

25.3%

100.0%

N

49

72

33

154

％

31.8%

46.8%

21.4%

100.0%

N

29

43

16

88

％

33.0%

48.9%

18.2%

100.0%

N

189

292

142

623

％

30.3%

46.9%

22.8%

100.0%LL

ML

NormalHL

LL

ML

VisualHL

Total

Table 15: Respondents’ outlook for capital investment with layered communication
House purchase
LL

ML

NormalHL

LL

ML

Visual

HL

Total

Agree

DisagreeDon't know

Total

N

28

37

21

86

％

32.6%

43.0%

24.4%

100.0%

N

39

72

22

133

％

29.3%

54.1%

16.5%

100.0%

N

30

43

10

83

％

36.1%

51.8%

12.0%

100.0%

N

32

31

16

79

％

40.5%

39.2%

20.3%

100.0%

N

44

80

30

154

％

28.6%

51.9%

19.5%

100.0%

N

26

47

15

88

％

29.5%

53.4%

17.0%

100.0%

N

199

310

114

623

％

31.9%

49.8%

18.3%

100.0%

Table 16: Respondents’ outlook for housing investment with layered communication

18

The impact of layered communication on the respondents’ outlook for housing investment isanalyzed in Table 16. As Table 16 shows, improvement to ML or HL would encourage students tounderstand opportunities for housing investment irrespective of difference in summary type. However,
the effect of layered communication on the “House purchase” is not statistically significant.

Agree

Oveasess vs. domestic investment *LL

NormalML

HL

LL

Visual

ML

HL

Total

DisagreeDon't know

Total

N

36

16

34

86

％

41.9%

18.6%

39.5%

100.0%

N

67

30

36

133

％

50.4%

22.6%

27.1%

100.0%

N

57

13

13

83

％

68.7%

15.7%

15.7%

100.0%

N

38

18

23

79

％

48.1%

22.8%

29.1%

100.0%

N

86

25

43

154

％

55.8%

16.2%

27.9%

100.0%

N

51

14

23

88

％

58.0%

15.9%

26.1%

100.0%

N

335

116

172

623

％

53.8%

18.6%

27.6%

100.0%

Table 17: Respondents’ ability to manage globally assets with layered communication
Table 17 indicates the results of the respondents’ capability of managing global assets with layered
communication. According to Table 17, improvement in financial literacy could help students tomanage their financial assets in globalization regardless the difference in summary type. However, it
was interesting that only among HL students was the rate of “Agree” among those viewing the normal
summary higher than that among those viewing the visual summary. Overly simplified informationinterrupts financially literate people. The impact of layered communication on global asset
management is statistically significant at the p = 0.05 level.
As all of the results were reviewed above, the information from the BOJ was not always trusted
by the respondents, due to lack of understanding or financial literacy. The author then additionallyanalyzed trust in the BOJ’s economic and inflation outlook among the public, because the Bank’s
views of the future economy and inflation are regarded as the most important factors in the light offorward guidance.
19Trust in BOJ's economic outlook
LL

NormalML

HL

LL

Visual

ML

HL

Total

Trust

Distrust

Total

N

44

22

66

％

66.7%

33.3%

100.0%

N

79

29

108

％

73.1%

26.9%

100.0%

N

44

26

70

％

62.9%

37.1%

100.0%

N

45

11

56

％

80.4%

19.6%

100.0%

N

91

39

130

％

70.0%

30.0%

100.0%

N

46

25

71

％

64.8%

35.2%

100.0%

N

349

152

501

％

69.7%

30.3%

100.0%

Table 18: Trust in the BOJ’s economic outlook with layered communication
Note: “Trust” means at match of answers in economic outlook between the BOJ and respondent. The“Distrust” means at mismatch of answers. Respondents who answered “Don’t know” were removed
from this table.
Table 18 shows the results of trust in the BOJ’s economic outlook among the respondents. As Table
18 indicates, the results were divided by summary type. For those viewing the normal summary, ML
students constituted the highest proportion of “Trust.” On the other hand, for those viewing visualsummary, LL students constituted the highest proportion of “Trust.” It is most interesting that HL
students constituted the highest proportion of “Distrust” in the case of both summaries. In short,
improvement of financial literacy could discourage students from trusting the BOJ’s economic outlook.
Reasons might be given, such as their circumstances, experiences, news, and so on. In addition, somefinancially literate respondents posed the author the interesting question of why the BOJ would notraise the policy rate despite expectations of an expanding Japanese economy. This could indicateinconsistency between the BOJ’s view and actual policy. Of course, this inconsistency was attributable
to uncertainty of the Japanese economy, but it was very difficult for financial literate public tounderstand the BOJ’s outlook and policy. However, the rate of trust for the BOJ in this survey was
greater than in the Bank’s survey previewed above, albeit with different research methods. The BOJ
may have to begin to make efforts to encourage the public to read the Outlook for Economic Activity
and Prices. The effect of layered communication on trust in the BOJ’s economic outlook is not20

statistically significant.
Trust in BOJ's inflation outlook *LL

NormalML

HL

LL

Visual

ML

HL

Total

Trust

Distrust

Total

N

29

19

48

％

60.4%

39.6%

100.0%

N

68

24

92

％

73.9%

26.1%

100.0%

N

54

12

66

％

81.8%

18.2%

100.0%

N

43

6

49

％

87.8%

12.2%

100.0%

N

84

25

109

％

77.1%

22.9%

100.0%

N

50

17

67

％

74.6%

25.4%

100.0%

N

328

103

431

％

76.1%

23.9%

100.0%

Table 19: Trust in the BOJ’s inflation outlook with layered communication
Note: “Trust” means at match of answers in inflation outlook between the BOJ and the respondent.
“Distrust” means at mismatch of answers. Respondents who answered “Don’t know” were removed
from this table.
Table 19 indicates the result of trust in the BOJ’s inflation outlook in layered communication. As
Table 19 shows, the improvement in respondents’ financial literacy increased the rate of “Trust” among
those viewing the normal summary. On the other hand, the enhancement of students’ financial literacy
decreased the rate of “Trust” among those viewing the visual summary. These results are muchinteresting. In short, creating a visual summary could encourage LL or ML students to understand andtrust the BOJ’s inflation outlook, and describing the normal summary could facilitate HL students’
understanding and trust in the BOJ’s expectation of inflation. In fact, the impact of layered
communication on the respondents’ trust in the BOJ’s inflation outlook is statistically significant at
the p = 0.05 level.
4.2 Discussion
As mentioned previously, creating a visual summary had positive effects on the respondents’
understanding of the BOJ’s inflation outlook, asset management, and expectation of correction of the21unemployment rate. The improvement in the students’ financial literacy positively affected all of these
items. However, overly simplified information was not valid for some items, for example, financiallyliterate students needed sufficient information like a normal summary. On the other hand, simplified
and illustrated information helped financially illiterate students understand the economic outlook. In
short, both financial education and creating a visual summary are effective instruments for the BOJ.
5. Conclusion
This paper points to the following four key themes from the questionnaire survey among Japanese
university students on financial literary and the outlook for the future economy.
(1) Layered communication like a creating visual summary encourages the public, especiallyfinancially illiterate people to understand and trust the central banks’ view and policy.
(2) Education to enhance financial literacy enables people to understand economic situations andmake financial decisions based on the central banks’ information.
(3) For financially literate people, normal summary of the Inflation Report or Outlook for Economic
Activity and Inflation is likely to provide better information than a visual summary.
(4) In the light of forward guidance, both creating a visual summary and improving financial literacy
have positive effects on the public’s inflation expectations with regard to differences in people’s
financial literacy.
From these points, this paper concludes that financial education and layered communication could
improve the BOJ’s communication strategies or monetary policy.
Incidentally, some questions remain in this paper. The survey respondents were limited to 627
students from five universities. A survey among the broader public will have to be conducted. The
adequacy of visual summaries created by the author must be re-examined. It remains unclear whatkind of financial literacy can affect the public’s outlook to any strong degree. These problems will
require future attention.
References
Bank

of

Japan,(2018),

Outlookfor

Economic

Activity

andPrices,

July

2018

(http://www.boj.or.jp/en/mopo/outlook/gor1807b.pdf).
Cole, S. J., (2018), “The effectiveness of central bank forward guidance under inflation and price-leveltargeting,” Journal of Macroeconomics, No. 55, pp. 14-161.
Gerko, E. and H. Rey, (2017), “Monetary policy in the capitals of capital,” Journal of the European
Economic Association, Vol .15, No. 4, pp. 721-745.
Honkapohja, S. and Mitra, K. , (2015), “Comparing inflation and price-level targeting: The role of22forward guidance and transparency,” Bank of Finland Research Discussion Paper, 9/2015,(https://pdfs.semanticscholar.org/1c7c/6a1cb4053b79c0a39d0ee394c438e5f6bf20.pdf).
Haldane,A.

G.,(2017),“Everyday

Economics–

speechby

Andy

Haldane,”(https://www.bankofengland.co.uk/speech/2017/andy-haldane-speech-during-regional-visit).
― ― ― , (2018), “Climbing the Public Engagement Ladder, speech by Andy Haldane,”(https://www.bankofengland.co.uk/speech/2018/andy-haldane-royal-society).
Kitano, Y., (2018), “Current Status of and Issues Concerning the Communication Strategy of the Bankof England: Focusing on Forward Guidance,” St. Andrew’s University Economic and Business
Review, Vo. 60 No. 1, pp. 47-63.
Morgan, J. and Sheehan, B. , (2015), “The concept of trust and the political economy of John Maynard
Keynes, illustrated using central bank forward guidance and the democratic dilemma in Europe,”
Review of Social Economy, Vol. 73, No. 1, pp. 113-137.
Oxford Economics, (2013), “Forward guidance – what does it mean and will it work,” Economic
Outlook, Vol. 37, No. 4, pp. 14-21.
Smith, A. L. and Becker, T. , (2015), “Has forward guidance been effective?” Federal Reserve Bankof Kansas City Economic Review, Vol. 100, No. 3, pp. 57-78.
Winkelmann, L., (2016), “Forward guidance and the predictability of monetary policy: a waveletbased jump detection approach,” Journal of Royal Statistical Society Applied Statistics Series C,
Vol. 65, part 2, pp. 299-314.
Acknowledgement
This work was supported by JSPS KAKENHI Grant Number JP17K03822 and JP18K02690.

23