Ma rch 8, 2021
Bank of Japan
Monetary Policy during and after
the COVID-19 Era
Speech at the Yomiuri Economic Forum in Tokyo
(via webcast)
AMAMIYA Masayoshi
Deputy Governor of the Bank of Japan
Introduction
It is my pleasure to have the opportunity to talk at the online seminar of the Yomiuri
Economic Forum today.
This week marks the 10th anniversary of the Great East Japan Earthquake. Recovery from
this disaster has made steady progress, including the restoration of social infrastructure such
as transportation networks and of the living environment. I would like to express my
heartfelt respect for all those involved in the reconstruction efforts. However, it is also true
that there are still many issues that need to be resolved, such as the harsh reality that more
than 40,000 people continue to live as evacuees. The Bank of Japan has been supporting the
restoration and reconstruction efforts from the financial side, mainly through the
Funds-Supplying Operation to Support Financial Institutions in Disaster Areas, which was
introduced in April 2011, a month after the disaster. In March last year, the Bank revised the
operation so that the necessary support can be continued; it decided to abolish the deadline
of the operation and extend the duration of loans from one year to two years. The Bank will
continue to contribute to the recovery of the affected areas.
It is almost a year since the onset of the novel coronavirus (COVID-19) pandemic. Positive
steps have been taken, such as the start of the vaccination rollout in Japan last month. That
said, COVID-19 has continued to have a significant impact on social and economic
activities, and economic activity and prices are projected to remain under downward
pressure for a prolonged period. In this situation, it is necessary for the Bank to support the
economy and thereby achieve the price stability target of 2 percent. To this end, it is
important to first respond to COVID-19 and, as monetary policy measures during the
COVID-19 era, the Bank has been conducting powerful monetary easing since March 2020.
From a somewhat long-term perspective, while also looking ahead to the post-COVID-19
era, the Bank's challenge is to conduct further effective and sustainable monetary easing
with a view to achieving the price stability target of 2 percent. The Bank is currently
conducting an assessment in this regard and plans to make public its findings at the
Monetary Policy Meeting (MPM) to be held next week. Today, I would like to first talk
about developments in economic activity and prices as well as the Bank's responses to
COVID-19. I will then explain in some detail the motivation and thinking behind the
assessment.
I. Developments in Economic Activity and Prices and the Bank's Responses to
COVID-19
Developments in Economic Activity and Prices
Let me start by looking at economic developments. Japan's economy has picked up as a
trend, although it has remained in a severe situation due to the impact of COVID-19 (Chart
1). The real GDP growth rate for the October-December quarter of 2020 was 3.0 percent on
a quarter-on-quarter basis, being positive for two consecutive quarters. Exports increased
clearly on the back of a recovery in external demand. In addition, with regard to private
demand, business fixed investment turned positive for the first time in three quarters and
private consumption, of services in particular, increased through around November, partly
due to demand stimulus measures such as the "Go To" campaign. Real GDP declined
significantly for the April-June quarter of 2020 to 10 percent lower than the pre-pandemic
level (the 2019 average) but recovered to just 2.4 percent lower for the October-December
quarter.
However, downward pressure stemming from the impact of a resurgence of COVID-19
since last autumn has remained strong to date, particularly in face-to-face services
consumption, such as eating and drinking as well as accommodations (Chart 2). Economic
activity in the face-to-face services industry already had decreased as of the end of last year,
and high-frequency data and anecdotal information suggest that it has declined further after
the turn of this year. In contrast, unlike last spring, when economic activity in a wide range
of industries was constrained, that in industries other than face-to-face services has been
maintained to a large degree. Looking at the breakdown of private consumption, although
services consumption declined further through January, it is still higher than the level seen
around last summer, and goods consumption has been firm on the back of stay-at-home
consumption. In addition, external demand has recovered and the world trade volume,
which had declined significantly, has already returned to the pre-pandemic level. With such
steadiness in goods demand at home and abroad, production has increased, and this has
continued to have positive effects on business fixed investment, mainly for machinery
investment.
Although uncertainties regarding the outlook are high, with the impact of COVID-19
waning gradually, Japan's economy is likely to follow an improving trend, albeit moderately,
supported by a recovery in external demand, accommodative financial conditions, and the
government's economic measures. As shown in our -- the Policy Board members' --
economic forecasts released in January, the real GDP growth rate is projected to register a
significant negative figure of minus 5.6 percent for fiscal 2020 but is expected to turn
clearly positive to 3.9 percent for fiscal 2021, rebounding from the contraction seen in fiscal
2020 and partly due to the effects of the government's additional economic measures.
Let me move on to price developments (Chart 3). The year-on-year rate of change in the
consumer price index (CPI) has been negative since the second half of 2020. However, this
is mainly attributable to the facts that the past decline in crude oil prices has pushed down
energy prices such as electricity charges with a time lag, and that subsidies on hotel charges
through the "Go To Travel" campaign have been recorded as price cuts in the statistical
calculation of the CPI. When excluding the effects of these temporary factors that push
down prices, the rate of change in the CPI has been slightly positive. Firms' price cuts that
aim at stimulating demand have not been observed widely, and price developments have
continued to be firm compared with the degree of deterioration in economic activity. As for
the outlook, the year-on-year rate of change in the CPI is likely to continue to be negative
for the time being, but thereafter is expected to increase with the effects of temporary
factors that push down prices dissipating and the economy improving.
This is the baseline scenario for the outlook for economic activity and prices, in which risks
remain skewed to the downside. Even with encouraging news on the vaccine front, the pace
of the rollout and the effects entail uncertainties. For the time being, attention should
continue to be paid to the consequences of COVID-19 and their impact.
The Bank's Responses to COVID-19
Under these circumstances, the Bank has conducted powerful monetary easing since March
2020 in response to COVID-19 through the following three measures (Chart 4). Specifically,
the first is the Special Program to Support Financing in Response to the Novel Coronavirus
(COVID-19) to provide support mainly for corporate financing. The second is an ample and
flexible provision of funds, mainly by purchasing Japanese government bonds (JGBs) and
conducting the U.S. dollar funds-supplying operations, to ensure stability in financial
markets. The third is active purchases of exchange-traded funds (ETFs) and Japan real
estate investment trusts (J-REITs) to lower risk premia in asset markets.
These responses have had positive effects. Global financial markets became highly volatile
last spring but have regained stability. Although firms' financial positions have been weak,
the environment for external funding has remained accommodative owing to the Bank's and
the government's responses as well as active efforts made by financial institutions (Chart 5).
Two points are noted as characteristics of financial conditions in Japan during the
COVID-19 shock. One is a characteristic observed when comparing the current situation
with that at the time of the Global Financial Crisis (GFC). In 2009, which was after the
GFC, banks' lending attitudes became significantly cautious and the amount outstanding of
CP and corporate bonds decreased due to the strengthening of investors' risk aversion.
These developments intensified downward pressure on the real economy from the financial
side. In contrast, during the COVID-19 pandemic, financial institutions' lending attitudes as
perceived by firms have remained accommodative, and the year-on-year rate of change in
the amount outstanding of bank lending and that in the aggregate amount outstanding of CP
and corporate bonds have continued to register high growth. The financial system has
maintained its stability on the whole and worked well in supporting economic activity. This
is a big difference from the GFC, when an adverse feedback loop between finance and the
real economy occurred. The other characteristic is seen when comparing Japan's financial
conditions with those of the United States and Europe. There is a clear contrast in financial
institutions' credit standards, in that, since the outbreak of COVID-19, they have tightened
in the United States and Europe while those in Japan have eased. This suggests that the
funding environment for borrowing money from financial institutions has been
accommodative in Japan compared with that in the United States and Europe.
The Bank decided at the December 2020 MPM to extend the duration of the Special
Program by six months until the end of this September, thereby continuing to provide
support mainly for corporate financing. It also will consider a further extension as necessary.
In addition, the Bank will closely monitor the impact of COVID-19 and will not hesitate to
take additional easing measures if necessary.
II. Motivation and Thinking behind the Assessment
Now, I will talk about the assessment for further effective and sustainable monetary easing.
The Bank has been conducting large-scale monetary easing since the introduction of
quantitative and qualitative monetary easing (QQE) in April 2013 with a view to achieving
the price stability target of 2 percent. In September 2016, the Bank conducted a
comprehensive assessment of developments in economic activity and prices since the
introduction of QQE as well as its policy effects. Based on the findings, a new policy
framework of QQE with Yield Curve Control was introduced. Owing to large-scale
monetary easing, developments in economic activity and prices have improved and the
economy is no longer in deflation. However, the price stability target of 2 percent has not
yet been achieved. It is expected to take time to accomplish this because economic activity
and prices are projected to remain under downward pressure for some period of time due to
the impact of COVID-19 since last spring. Under these circumstances, the Bank decided to
conduct an assessment for further effective and sustainable monetary easing, with a view to
achieving the price stability target of 2 percent.
Let me explain three points that underlie the assessment. First, with a view to achieving the
price stability target of 2 percent, it is appropriate for the Bank to maintain accommodative
financial conditions while continuing to pursue QQE with Yield Curve Control. Second, in
order to carry this out, the key is to enhance the sustainability of monetary easing by
minimizing the policy costs during normal times. Third, at the same time, it is important to
be prepared to make nimble and effective responses when needed to counter changes in
developments in economic activity and prices, as well as in financial conditions. I will
elaborate on each of these three points.
A. Continuation of Monetary Easing
Let me start by talking about the current framework of QQE with Yield Curve Control,
which aims at maintaining accommodative financial conditions. This framework consists
mainly of yield curve control and an inflation-overshooting commitment. Unlike the
conventional measure that targets short-term interest rates, yield curve control is a
framework for market operations that targets all interest rates at the short and long end,
which in other words is the yield curve. Given the expectation that monetary easing will be
prolonged, the Bank aims to control those rates to the appropriate levels while taking into
consideration both the positive and side effects of monetary easing. The
inflation-overshooting commitment is to continue expanding the monetary base until the
year-on-year rate of increase in the observed CPI exceeds 2 percent and stays above the
target in a stable manner. Through this commitment, the Bank aims to strengthen the
formation of inflation expectations. It implements the idea of a "makeup strategy," in which
central banks conduct monetary easing so that the inflation rate stays above the target for a
sustained period of time to compensate for the observed inflation rate that continued to fall
below the target. Last summer, the Federal Reserve adopted this makeup strategy, which has
been consistent with the Bank's thinking on monetary policy.
QQE with Yield Curve Control has had positive effects in line with the intended mechanism
(Chart 6). Under yield curve control, nominal interest rates in Japan have been kept at
extremely low levels, even amid a rise in interest rates abroad. While inflation expectations
have been higher than those prior to the introduction of QQE, real interest rates, which are
calculated by subtracting inflation expectations from nominal interest rates, have been in
negative territory. The low real interest rates have improved financial conditions, mainly
through low funding costs as well as favorable financial and capital markets (Chart 7).
Issuance rates for CP and corporate bonds have been at extremely low levels, and lending
rates have been at around historical low levels. In financial and capital markets, foreign
exchange rates have been stable on the whole and stock prices have been on an uptrend. As
a result, economic activity has improved (Chart 8). In 2017, the output gap turned clearly
positive, which represents excess demand, and expanded thereafter. Corporate profits have
increased and the employment situation has improved, as seen in the unemployment rate
declining to the range of 2.0-2.5 percent for the first time in about 30 years and the active
job openings-to-applicants ratio in all prefectures being above one. Under these
circumstances, wages have increased moderately, as seen in the fact that base pay, which
did not rise during the period of deflation, has increased for seven consecutive years, and
underlying inflation has taken hold in positive territory. In addition, as a result of acute
labor shortage, labor force participation of women and seniors has increased and firms have
improved their labor productivity. With economic developments continuing to be favorable,
positive moves toward addressing the medium- to long-term challenges facing Japan's
economy have been observed.
That said, the situation where the inflation rate does not rise easily has continued. The main
reason for this is that the formation of inflation expectations is largely adaptive in Japan. In
other words, such expectations are susceptible to the observed inflation rate. This implies
that it will take time for them to rise when the observed inflation rate is low. The adaptive
formation of expectations reflects not only actual prices at the time but also people's past
experiences, as well as norms that were cultivated through those experiences. Studies have
shown that the adaptive expectations formation therefore is relatively complex and sticky.
This means that changing people's mindset and behavior based on the assumption that
prices will not increase easily, which have become deeply entrenched under prolonged
deflation, will take time. In addition, elastic labor supply and an enhancement of firms'
labor productivity are positive for Japan's economy as a whole but have constrained
inflation (Chart 9). As I have mentioned, labor force participation, mainly of women and
seniors, has accelerated since the mid-2010s with labor shortage intensifying, and this is
desirable for Japan, which faces the problem of a declining population. Many new workers
have entered the labor market without a significant increase in wages, due partly to
improvement in their working environment. Moreover, firms have enhanced labor
productivity, mainly through labor-saving and efficiency-improving investments. While
these efforts are favorable in terms of raising productivity of the overall economy, they have
absorbed upward pressure on costs, and thus prices have not increased easily.
Although it may take time, the situation where the inflation rate does not rise easily is likely
to eventually head toward a resolution as economic activity improves. Since the labor
supply has a limitation, upward pressure on wages will increase if labor shortage continues.
In addition, the fact that the adaptive formation of inflation expectations is entrenched
implies the following: when people actually experience inflation, it likely will be
incorporated in the assumption on which their mindset is based, suggesting that inflation
expectations also are highly likely to rise.
In short, it is appropriate for the Bank to persistently maintain accommodative financial
conditions under the current framework of monetary policy, with a view to achieving the
price stability target of 2 percent.
B. Enhancement of the Sustainability
Next, let me talk about the second point that underlies the assessment, which is policy
conduct aimed at enhancing the sustainability of monetary easing, by taking yield curve
control as an example. Under yield curve control, even amid intensifying upward pressure
on JGB yields, mainly stemming from a rise in interest rates abroad and an increase in
issuance of JGBs, an appropriate shape of the yield curve that provides accommodative
financial conditions has been formed in a stable manner through flexible purchases of JGBs.
It has been possible for the Bank to control short- and long-term interest rates because it has
conducted meticulous purchases of JGBs. The Bank has made use as necessary of a
powerful tool called "fixed-rate purchase operations," through which it purchases an
unlimited amount of JGBs at a certain yield level.
Stabilizing short- and long-term interest rates at extremely low levels under yield curve
control inevitably brings about side effects on the functioning of JGB markets (Chart 10). In
fact, many indicators suggest that the functioning has decreased since the introduction of
yield curve control. In conducting yield curve control in a sustainable manner, it is
important to strike an appropriate balance between maintaining market functioning and
controlling interest rates. The Bank believes that it can find more ways to achieve this
balance because, although significant fluctuations in interest rates could lead to undesirable
consequences, fluctuations within a certain range could have positive effects on the
functioning of JGB markets without losing the effects of monetary easing.
To this end, the Bank made clear at the July 2018 MPM that interest rates might move
upward and downward to some extent, mainly depending on developments in economic
activity and prices. There is no change in this stance even though there have been times
when the range of actual fluctuations in interest rates has become narrow again. There also
is no change in the recognition that an excessive decline in super-long-term interest rates
could have an impact of lowering the rates of return on insurance and pension products, for
example. That said, with the economy hit by the impact of COVID-19, what is important
now is to maintain the stability in the bond market and stabilize the entire yield curve at a
low level, and it is necessary for the Bank to bear this in mind in conducting yield curve
control for the time being.
C. Nimble and Effective Responses
Lastly, I will talk about the third point, which is nimble and effective responses to counter
changes in the situation. In order to persistently continue with monetary easing, it is
important for the Bank not only to ensure the sustainability but also to be nimble in making
effective responses when needed, such as in the wake of a large shock to the real economy
and financial markets. Let me illustrate this by looking at two examples.
The first is a cut in short- and long-term interest rates. Cutting short- and long-term interest
rates is one of the essential options for additional easing measures. The Bank provides a
clear guideline for the levels of short- and long-term interest rates, in which it expects them
to "remain at their present or lower levels" as long as it is necessary to pay attention to the
impact of COVID-19. In other words, the Bank will cut short- and long-term interest rates
appropriately when necessary. However, a further decline in interest rates could affect the
functioning of financial intermediation. In addition, it is true that because of this possible
negative impact, one view in the market is that the Bank finds it difficult to further cut
short- and long-term interest rates. With these factors in mind, it is appropriate to ensure
that the Bank can cut them with consideration for the impact on the functioning of financial
intermediation. Sharing this recognition with market participants and various economic
entities will further enhance the effectiveness of a cut in short- and long-term interest rates
as an option for additional easing.
The second example is purchases of ETFs and J-REITs. Some lessons can be learned from
the Bank's responses to COVID-19 last spring (Chart 11). As financial markets became
significantly volatile at that time, the Bank decided to actively purchase ETFs and J-REITs
with upper limits of about 12 trillion yen and about 180 billion yen, respectively, on annual
paces of increase in their amounts outstanding. Such decisive purchases have had
significant positive effects in terms of easing market sentiment, which had deteriorated
considerably. The aim of purchasing ETFs and J-REITs is to lower risk premia, such as in
the stock market, in order to create positive effects on economic activity and prices by
preventing volatile developments in financial markets from leading to deterioration in firms'
and households' sentiment. A survey conducted by a private institute indicates that ETF
purchases by the Bank are assessed as having positive effects on the markets when they are
unstable, in that stock prices decline and volatility heightens. Based on lessons learned to
date, including from the case in last spring, it has become evident that large-scale purchases
at the time of volatile financial markets will have significant positive effects. The Bank will
further analyze the difference in the effects of purchases according to market conditions and
will examine whether it can create maximum positive effects by decisively conducting
active purchases when necessary. Conducting purchases flexibly in a prioritized manner
will lead to enhancing the sustainability of monetary easing.
Conclusion
I have outlined the motivation and thinking behind the assessment for further effective and
sustainable monetary easing. The keywords are "sustainable" and "nimble." That is, it is
important for the Bank to enhance the sustainability of monetary easing by minimizing the
policy costs during normal times and to be prepared to make nimble and effective responses
to counter changes in the situation. At the MPM next week, we would like to have a
discussion from this perspective and make public the findings of the assessment.
About eight years have passed since the introduction of QQE in 2013. Although this has
been a protracted effort, it is clear that the economy has improved significantly during this
period and is no longer in deflation. If the Bank continues to refine the framework and
persist with monetary easing, the price stability target of 2 percent can be achieved. In
addition, the thinking behind yield curve control introduced by the Bank and the "makeup
strategy," which is implemented through an inflation-overshooting commitment, are under
discussion at other central banks. As advanced economies have faced the common
challenges of low growth, low inflation, and low interest rates, many central banks,
including the Bank of Japan, have been pursuing ways to enhance the effectiveness and
credibility of their monetary policies. The Bank will continue to hold constructive
discussions to carry out its mandate of achieving price stability while taking advantage of
experiences of other central banks.
Thank you very much for your attention.
Monetary Policy during and after the COVID-19 Era
Speech at the Yomiuri Economic Forum in Tokyo
(via webcast)
March 8, 2021
AMAMIYA Masayoshi
Deputy Governor of the Bank of Japan
Introduction
I. Developments in Economic Activity and Prices
and the Bank's Responses to COVID-19
II. Motivation and Thinking behind the Assessment
Conclusion
Chart 1
I. Developments in Economic Activity and Prices and the Bank's Responses to COVID-19
Real GDP
Decomposition Pace of Economic Recovery
s.a., q/q % chg., contribution
s.a., CY 2019 average = 100
6
102
4
100
-2.4%
2
98
-5.3%
0 -10.0%
96
-2
94
-4
Net exports
92
Private demand
-6
Public demand
90
-8
Real GDP
88
-10
18/Q1 Q3 19/Q1 Q3 20/Q1 Q3 20/Q1 Q2 Q3 Q4
Source: Cabinet Office.
1
Chart 2
I. Developments in Economic Activity and Prices and the Bank's Responses to COVID-19
Impact of a Resurgence of COVID-19
Economic Activity by Sector Consumption Activity Index (Real)
s.a., CY 2019 = 100
s.a., CY 2019 = 100
120
110
Durable goods
Nondurable goods
100
110
Services
90
100
80
Manufacturing
90
70
Accommodations, eating
60
and drinking services
80
Services for amusement
50
and hobbies
Transport
70
40
Nonmanufacturing
30 60
Jan. Apr. Jul. Oct. Jan. Apr. Jul. Oct. Jan. Jan. Apr. Jul. July Oct. Jan. Apr. Jul. July Oct. Jan.
July July
Consumer Price Index (CPI)
y/y % chg.
4
Effects of the "Go To Travel" campaign
Effects of the consumption tax hikes and free education policies
3
Energy
Items other than energy
2
CPI (less fresh food)
1
0
-1
-2
CY 1 4 1 5 1 6 1 7 1 8 1 9 2 0 21
Note: Energy consists of petroleum products, electricity, and gas, manufactured & piped. Figures for the "effects of the consumption tax hikes and free education policies" from April 2020
onward are based on staff estimations and include the effects of measures such as free higher education introduced in April 2020.
Source: Ministry of Internal Affairs and Communications.
3
Chart 4
I. Developments in Economic Activity and Prices and the Bank's Responses to COVID-19
The Bank's Measures in Response to COVID-19
Supporting Corporate Financing
Special Program to Support Financing in Response to COVID-19
Purchases of CP and corporate bonds: amount outstanding of about 20 tril. yen at maximum (previous
amount outstanding of about 5 tril. yen)
Special Funds-Supplying Operations to Facilitate Financing in Response to COVID-19
Stabilizing Financial Markets
Ample and Flexible Provision of Yen and Foreign Currency Funds
Further active purchases of JGBs and T-Bills
Enhancement of the U.S. Dollar Funds-Supplying Operations
Lowering Risk Premia in Asset Markets
Active Purchases of ETFs and J-REITs
ETFs: annual pace of about 6 tril. yen
→ annual pace with the upper limit of about 12 tril. yen (for the time being)
J-REITs: annual pace of about 90 bil. yen
→ annual pace with the upper limit of about 180 bil. yen (for the time being)
Financial Conditions
Lending Attitudes of Financial Amounts Outstanding of Bank Financial Institutions' Credit
Institutions as Perceived by Firms Standards (Loan Survey)
Lending, CP, and Corporate Bonds
y/y % chg.
DI ("accomodative" - "severe"), % points
DI, % points
40 16
80
Lending by domestic
Japan
commercial banks
30 60 United States
CP and corporate bonds
12
Euro area
20 40
"Eased"
8 ↑
10 20
4
0 0
-10 -20
0
↓
Large firms
"Tightened"
-20 -40
-4
Small and
-30 -60
mediumsized firms
-40 -8 -80
CY CY 07 09 11 13 15 17 19 21 CY 07 09 11 13 15 17 19
07 09 11 13 15 17 19
Notes: 1. In the left-hand chart, figures are for all industries.
2. In the middle chart, figures for lending by domestic commercial banks are monthly averages. Figures for CP and corporate bonds are those at the end of the
period. Lending by domestic commercial banks includes loans to firms, individuals, and local governments.
3. In the right-hand chart, figures for Japan and the United States are small firms. Figures for the Euro area are small and medium-sized enterprises. The DI for Japan is
"eased" - "tightened" and that for the United States and the Euro area are "easing" - "tightening."
Sources: Bank of Japan; Japan Securities Depository Center; Japan Securities Dealers Association; I-N Information Systems; FRB; ECB.
5
Chart 6
II. Motivation and Thinking behind the Assessment
Economic and Financial Developments after
the Introduction of QQE with Yield Curve Control (1)
Nominal Interest Rates
Inflation Expectations Real Interest Rates
(10-year yields)
<I> <II> <III>
y/y % chg.
%
%
%
2.0 6.0
2.0 1.0
Real interest rate
Japan (left scale)
(Consensus Forecasts)
Synthetic indicator of
Real interest rate
United States firms', households', and
0.5
(QUICK)
1.5 4.5
(right scale)
economists' inflation
1.5
expectations
0.0
1.0 3.0
1.0 -0.5
0.5 1.5
-1.0
0.5
0.0 0.0
-1.5
-0.5 -1.5 0.0 -2.0
CY 07 09 11 13 15 17 19 CY 07 09 11 13 15 17 19 CY 07 09 11 13 15 17 19
Notes: 1. Shaded area <I> indicates the period after the introduction of QQE (2013/Q2-), <II> indicates the period after the introduction of yield curve control (2016/Q3-), and <III>
indicates the period after the outbreak of COVID-19 (2020/Q1-).
2. In the middle chart, inflation expectations of firms, households, and economists are represented by the the "Opinion Survey," and the "Consensus Forecasts," respectively.
Tankan,
3. In the right-hand chart, figures for the real interest rate are calculated as the 10-year JGB yield minus the respective long-term inflation forecast.
6
Sources: Bloomberg; Bank of Japan; Consensus Economics Inc., "Consensus Forecasts"; QUICK, "QUICK Monthly Market Survey (Bonds)."
Economic and Financial Developments after
the Introduction of QQE with Yield Curve Control (2)
Funding Costs Foreign Exchange Rate
and Stock Prices
yen/U.S. dollar thous. yen
%
2.0 150 30
Yen/U.S. dollar (left scale)
1.5
Nikkei 225 index (right scale)
130 25
1.0
110 20
0.5
90 15
0.0
Bank lending rate
70 10
-0.5 CP (3-month)
Corporate bonds (AA)
-1.0 50 5
CY 07 09 11 13 15 17 19 CY 07 09 11 13 15 17 19
Note: In the left-hand chart, figures for the bank lending rate are the long-term average contract interest rate on new loans and discounts by domestically licensed banks. Figures for issuance
yields for CP up to September 2009 are the averages for CP (3-month, rated a-1 or higher). Those from October 2009 onward are the averages for CP (3-month, rated a-1). Figures for
issuance yields for corporate bonds are the averages for domestically issued bonds launched on a particular date. Bonds issued by banks and securities companies, etc. are excluded.
Figures for issuance yields for corporate bonds show 6-month backward moving averages.
Sources: Bank of Japan; Japan Securities Depository Center; Capital Eye; I-N Information Systems; Bloomberg.
7
Chart 8
II. Motivation and Thinking behind the Assessment
Economic and Financial Developments after
the Introduction of QQE with Yield Curve Control (3)
Base Pay Increase and
Output Gap and Unemployment Rate
Scheduled Cash Earnings
y/y % chg.
% %
4 6 5
Base pay increase
4
2 5 Scheduled cash earnings
(full-time employees)
3
Hourly scheduled cash earnings
(part-time employees)
0 4
2
-2 3
1
-4 2
Output gap (left scale) 0
Unemployment rate (right scale)
-6 1 -1
CY 07 09 11 13 15 17 19 FY 07 09 11 13 15 17 19
Note: In the right-hand chart, figures for scheduled cash earnings from 2016/Q1 onward are based on continuing observations following the sample revisions of the "Monthly Labour Survey."
Sources: Bank of Japan; Ministry of Internal Affairs and Communications; Ministry of Health, Labour and Welfare; Japanese Trade Union Confederation (Rengo).
Elastic Labor Supply and Enhancement of Labor Pr