December 23, 2021
Bank of Japan
Monetary Policy and Firms' Behavior:
Transmission Channels of Monetary Policy and
Japanese Firms' Structural Changes
Speech at the Meeting of Councillors of Nippon Keidanren
(Japan Business Federation) in Tokyo
KURODA Haruhiko
Governor of the Bank of Japan
Introduction
It is a great honor to have this opportunity to address such a distinguished gathering of
business leaders in Japan today.
It is almost two years since the outbreak of the novel coronavirus (COVID-19). Looking
back at developments in Japan's economy since then, a wide range of economic activities
was constrained at first, and the annualized quarter-on-quarter growth rate of real GDP was
minus 28.5 percent for the April-June quarter of 2020, registering larger negative growth
than immediately after the Global Financial Crisis (GFC) (Chart 1). Thereafter, however,
economic activity has been picking up, led by the corporate sector, where profits have
recovered to the pre-pandemic level at an early stage and business sentiment has improved
steadily. Economic recovery has been relatively fast because accommodative financial
conditions have played an important role, not to mention firms' flexible adaptation to the
pandemic. That is, despite the significant shock of COVID-19, firms' funding environment
has remained accommodative on the whole, and thus large-scale fixed capital and
employment adjustments have been avoided in the current phase. In fact, the Bank of
Tankan
Japan's December 2021 (Short-Term Economic Survey of Enterprises in Japan)
released last week shows that excess production capacity has been resolved already and
firms' labor shortage has become evidently acute. In this situation, Japanese firms have been
addressing the impact of COVID-19 and have started to take actions with an eye on the
post-pandemic era. Specifically, firms have accelerated their efforts toward digitalization
and decarbonization, and they also have started to restructure the global supply chain in
light of the recent experience of supply-side constraints.
Today, I will talk about medium- to long-term changes in firms' behavior while also
touching on its relationship with monetary policy.
I. Transmission Channels of Monetary Policy
Let me first provide an overview of the transmission channels through which monetary
policy affects the real economy via changes in financing, mainly of firms, and in their
spending behavior (Chart 2). In the case of monetary easing, for example, its effects
transmit through various channels. The four major ones are (1) a channel through which the
availability of funds for firms improves -- that is, firms are able to procure a necessary
amount of funds when needed; (2) a channel through which firms' funding costs decrease
due to a decline in interest rates; (3) a channel through which the yen depreciates due
mainly to an expansion in yield differentials between Japan and other economies; and (4) a
channel through which factors, including a decline in interest rates and a lowering in risk
premia, lead to a rise in prices of assets such as stocks. Since a decline in interest rates is the
starting point of the third channel, concerning foreign exchange rates, and the fourth
channel, regarding stock prices, these two channels can be regarded as one type of the
interest rate channels. Here, I would like to only focus on the three channels of availability,
interest rates, and foreign exchange rates, all of which have a relatively strong relationship
with Japanese firms' structural changes.
Availability Channel
The first is the availability channel. Through this channel, changes in the amount of external
funds that firms can procure in loan markets as well as capital markets, such as for CP and
corporate bonds, are expected to affect firms' spending behavior. The less internal funds
firms have and the higher their dependence on external funds, the larger the effects of
monetary easing transmitted through the channel. Long-term developments in the balance
sheets of Japanese firms, including small and medium-sized ones, show that cash and
deposits have increased significantly since the 2000s and the capital adequacy ratio also has
been on an uptrend through the accumulation of internal reserves (Chart 3). Therefore, at
least in normal times, the share of firms subject to liquidity constraints decreases, and the
availability channel seems to have become less important than before.
That said, in the event of a large shock, such as the GFC or the current COVID-19, the
availability of funds is reduced and firms' spending is significantly constrained, mainly
against the background of heightening precautionary demand for liquidity due to a rise in
uncertainty and of deterioration in the functioning of the CP and corporate bond markets. In
such a situation, it is critically important for central banks to provide ample liquidity and
help firms to sustain their business. In light of the pandemic, the Bank introduced the
Special Program to Support Financing in Response to the Novel Coronavirus (COVID-19)
in order to support financing of firms and other entities that have been affected by
COVID-19. Specifically, the Bank, through its Special Funds-Supplying Operations to
Facilitate Financing in Response to the Novel Coronavirus (COVID-19), has provided
funds on favorable terms to financial institutions that make loans in response to COVID-19.
It also has significantly increased the purchases of CP and corporate bonds. Owing to the
Bank's responses, together with the government's measures and financial institutions' efforts,
the environment for external funding of firms has remained accommodative on the whole
Tankan
compared with past economic downturns. Looking at the surveys, developments in
the indices for lending attitudes of financial institutions and conditions for CP issuance have
been steady and have not worsened in tandem with business sentiment (Chart 4). Therefore,
although corporate financing deteriorated temporarily in spring last year, which was
immediately after the outbreak of COVID-19, it has improved relatively quickly, mainly for
large firms. The number of bankruptcies has been at a historically low level. That said,
weakness in financial positions has remained for some small and medium-sized firms, such
as those in the face-to-face services industry.
Given these developments in corporate financing, the Bank decided at the Monetary Policy
Meeting held last week to extend the Special Program, set to expire at the end of March
2022, by another six months, until the end of September 2022, for the part of the program
that supports financing, mainly of small and medium-sized firms (Chart 5). Since there
remains high uncertainty over the course of COVID-19, mainly due to the recent emergence
of a new variant, the Bank will continue to do its utmost to support these firms' financing.
Interest Rate Channel
Next, let me move on to the transmission channel concerning interest rates. Through this
channel, monetary policy influences nominal interest rates and inflation expectations,
leading to changes in real interest rates, and this directly affects firms' and households'
funding costs. A typical example of this channel is changes in policy interest rates resulting
in changes in lending rates or issuance rates for CP and corporate bonds. In addition,
changes in interest rates can indirectly affect the real economy through changes in financial
and capital markets, such as in stock prices and foreign exchange rates.
In this regard, in its "Assessment for Further Effective and Sustainable Monetary Easing"
conducted in March 2021, the Bank carried out an empirical analysis on the transmission
channels of the effects of a decline in interest rates on economic activity and prices (Chart
6). Specifically, the Bank made a quantitative comparison of the channels via funding costs,
stock prices, and foreign exchange rates in terms of how the decline in interest rates
improves the economy. The results show that the transmission channel via funding costs
accounts for more than 30 percent of the overall effects on the economy, while that via
financial and capital markets accounts for more than 50 percent. This suggests that a decline
in interest rates not only has a direct impact on economic activity via funding costs but also
a relatively large indirect impact via financial and capital markets. Taking this fact into
account, the interest rate channel is crucial, in that it is the main transmission channel of
monetary policy.
I would like to focus on the transmission channel via funding costs here, and then elaborate
on the channel via financial and capital markets, specifically via foreign exchange rates,
later. The change in funding costs affects various types of domestic private demand, such as
consumption of durable goods, housing investment, business fixed investment, and
inventory investment. Of these types, John Maynard Keynes, the founder of modern
The General Theory of Employment, Interest and
macroeconomics, says in his famous book
Money
that the channel in which long-term interest rates affect business fixed investment is
the most important. Under the current monetary policy framework of yield curve control,
the Bank has been keeping long-term interest rates -- in addition to the conventional
short-term interest rates -- stable at low levels in order to support private demand,
particularly business fixed investment.1
Looking at the breakdown of fixed capital formation by Japanese firms, while the share of
machinery and construction investments has remained high, the so-called investment in
intangible fixed assets, such as research and development (R&D) investment and software
investment, has been on an uptrend from a somewhat long-term perspective (Chart 7).
Firms make R&D investment to conduct research and develop technologies that lay the
groundwork for creating new products and services, or new production processes. Many of
those investment projects therefore have a longer payback period, and this could have
resulted in an uptrend of firms' demand for longer-term funding. In recent years, issuance of
corporate bonds by Japanese firms has been increasing evidently for long- and
super-long-term bonds with a maturity of over 5 years. Long-term yields have been at
extremely low levels under the Bank's yield curve control, and this has been contributing to
firmly supporting R&D investment and other long-term investment.
In terms of firms' long-term investment, efforts to address climate change also have become
increasingly important. Climate change not only could have a broad socioeconomic impact
in the medium to long run but also is a pressing challenge for individual firms, in that their
presence in the global market might depend on how they address this issue. In this situation,
the Japanese government has been pushing forward with its Green Growth Strategy with a
view to achieving carbon neutrality by 2050. In order to contribute to addressing climate
change as a central bank, the Bank introduced the Climate Response Financing Operations,
and the first operation was announced today. Through the operations, the Bank provides
1
Keynes refers to the possibility of yield curve control as a monetary policy framework in The
General Theory of Employment, Interest and Money (1936): "Perhaps a complex offer by the central
bank to buy and sell at stated prices gilt-edged bonds of all maturities, in place of the single bank
rate for short-term bills, is the most important practical improvement which can be made in the
technique of monetary management."
For details on the history of yield curve control, including Keynes' idea of monetary policy
during the Great Depression, see Amamiya, M., "History and Theories of Yield Curve Control," a
keynote speech at the Financial Markets Panel Conference to Commemorate the 40th Meeting,
January 2017.
funds on favorable terms with the interest rate of 0 percent to financial institutions against
their climate change-related investment or loans, enabling them to receive long-term
financing from the Bank -- namely, until the end of fiscal 2030. This monetary policy
framework is distinctive from other central banks, because the Bank supports the private
sector's various efforts to address climate change while respecting the decisions of
individual financial institutions on what investment or loans to make. The Bank hopes that
the Climate Response Financing Operations will encourage firms to make investments in
fixed capital and R&D related to climate change.
Foreign Exchange Rate Channel
The third transmission channel concerns foreign exchange rates. Monetary policy does not
directly target exchange rates, but indirectly affects them through, for example, changes in
yield differentials between countries. That said, at which maturity of differentials will affect
foreign exchange rates depends largely on market developments at any given time. In
addition, there is a shared recognition among economists that it is extremely difficult to
establish theoretical and empirical models that can explain and predict developments in
foreign exchange rates.
Fluctuations in foreign exchange rates bring about changes in relative prices of goods and
services across trading partners, and thereby have a significant impact on various corporate
decisions. Therefore, exchange rates should move in a stable manner that reflects economic
and financial fundamentals. In this regard, Jean-Claude Trichet, former President of the
European Central Bank (ECB), pointed out that foreign exchange rates have been stable in
the medium run probably because all of the central banks in Japan, the United States, and
the euro area have been conducting monetary policy with the aim of achieving the common
target of 2 percent inflation.2 In fact, Japanese firms often suffered from excessive volatility
in foreign exchange rates, but once the Bank adopted the price stability target of 2 percent
in 2013 and started conducting large-scale monetary easing, the volatility has declined
(Chart 8). Stability in foreign exchange rates must have played an important role in
lowering uncertainties over the business environment surrounding firms.
Foreign exchange rates affect economic activity and prices mainly in three ways. First, the
yen's depreciation enhances price competitiveness of goods and services produced within
Japan, and thereby leads to an increase in export volume. Second, the depreciation brings
about rises in nominal value of exports and profits of overseas business in yen terms. Third,
in contrast, the yen's depreciation pushes down households' real income and profits of
domestic demand-oriented firms through a rise in import costs. As such, foreign exchange
rates affect economic activity and prices in various ways. However, the degree of their
effects has changed in the medium to long run due to globalization of Japanese firms, and I
would like to elaborate on this point.
Let me start with the effects of foreign exchange rates on export volume. Before the GFC, it
was clearly observed that, as the yen depreciates, export volume increases with some time
lag. However, the degree of the increases in response to the yen's depreciation -- in other
words, the sensitivity of exports to exchange rates -- has declined significantly since the
GFC and thus the yen's depreciation recently has become less likely to lead to an increase in
export volume (Chart 9).3 The background to this is that, reflecting the rapid appreciation
of the yen immediately after the GFC, Japanese firms have been shifting production sites to
overseas of items that are less profitable while within Japan they have mainly produced
high value-added goods that are less likely to get involved in price competition. The shift in
production sites has also created a significant change in firms' price-setting behavior.
Specifically, in the face of a depreciating yen, firms attempted to increase export volume by
lowering export prices in terms of local currencies; a typical example of this is automobiles.
However, such developments are less often the case in recent years, reflecting the rising
value-added of export goods. Instead, firms increasingly tend to maintain their export prices
in terms of local currencies, despite the yen's depreciation.
The second respect concerns the effects of foreign exchange rates on corporate profits. The
effects of the yen's depreciation to improve export profitability lead to an increase in profits
of exporting firms in Japan (Chart 10). The effects on export profitability seem to be
heightening in recent years on the back of rising value-added of domestically-produced
export goods. In addition, the yen's depreciation has been pushing up profits of global firms
in yen terms gained from their overseas business. Since the 1990s, Japanese firms have had
a tendency to expand production abroad to benefit from strong overseas demand, and they
further increased the share of overseas production after the GFC, reflecting the rapid
appreciation of the yen. As a result, the yen's depreciation has a larger impact of pushing up
the profits of overseas business in yen terms. In fact, current profits, including dividend
receipts from overseas subsidiaries, have been increasing at a pace well above the increase
in operating profits, which are earnings from firms' core business operations in Japan. This
Balance of Payments
is reflected in the Statistics, in that direct investment income, which is
one component of primary income, has increased (Chart 11). Thus, when examining the
effects of the yen's depreciation on corporate profits, it is necessary to take due
consideration of the fact that Japan is now a country that gains profits not only from trade
surplus, which was a traditional source of income, but also from a surplus on the income
balance.
Lastly, I would like to touch on the effects of the yen's depreciation on a rise in import costs.
Japan's import penetration ratio, which shows the ratio of imported goods to goods
consumed domestically, has been on an uptrend (Chart 12). By goods, this trend is evident
for durable goods. With the rise in the import penetration ratio, the effects of foreign
exchange rates on goods prices seem to have become larger. In fact, a quantitative analysis
by the Bank's staff shows that the effects of the yen's depreciation in terms of pushing up
prices of durable goods have increased in recent years.4 Accordingly, the yen's depreciation
might have an increasing negative impact on household income through price rises.
In sum, the impact of fluctuations in foreign exchange rates on Japan's economy has gone
through structural changes. Nevertheless, the situation is basically unchanged in the sense
that the yen's depreciation generally pushes up Japan's economic activity and prices. Taking
into account that Japan's CPI inflation has been below the price stability target of 2 percent
and that capital flight is not a concern for Japan in light of its economic fundamentals, the
yen's depreciation basically has a net positive impact on Japan's economy. That said, the
depreciation has both positive and negative effects, and due attention should be paid to the
fact that its effects will materialize in various ways depending on economic entities'
business activities and their breakdown of spending.
II. Toward Strengthening Japan's Economic Growth Potential and Achieving the Price
Stability Target
Taking into account the relationship between monetary policy and firms' behavior that I
have explained, I would next like to talk about the challenges of strengthening Japan's
economic growth potential in the post-pandemic era.
From 2013 to 2019 -- that is, from when the Bank introduced quantitative and qualitative
monetary easing (QQE) to immediately before the outbreak of COVID-19 -- Japan's
economy grew at an annual pace of 0.9 percent on average. Meanwhile, partly supported by
the government's measures, Japanese firms made efforts toward improving the working
environment, mainly through working-style reforms, and powerfully encouraged women
and seniors to participate in the labor force (Chart 13). As a result, the number of employees
increased significantly by more than 4 million, despite a headwind of the declining
population. That said, the labor force participation rate for women is already at a high level
exceeding that of the United States, and the baby boomers in Japan are almost in their
mid-70s. Therefore, it is difficult to assume that women and seniors will continue to serve
as a driving force to further raise the labor force participation rate. In order to maintain and
enhance Japan's economic growth potential under these circumstances, it is necessary to
accumulate capital stock or improve productivity.
In this regard, investments in fixed capital and R&D are the key. Through these investments,
a new production process will be adopted and new goods and services will be created,
thereby leading to an expansion in demand in the future. In addition, when new capital
equipment that employs innovative technology is introduced to production processes,
productivity will be enhanced in turn. Moreover, if firms across the entire supply chain
make efforts toward digitalization and decarbonization, the virtuous cycle in which an
investment induces another investment can be generated (Chart 14).
In the wake of the COVID-19 shock, the trend toward digitalization and decarbonization
has accelerated worldwide. Against this background, Japanese firms need to make efforts in
both fields so that they can maintain and enhance their competitiveness. In this regard, it is
encouraging to note that the ratio of Japanese private firms' R&D investment to GDP has
remained somewhat higher than that of other major advanced economies (Chart 15).
However, taking a look by industry shows that three alone -- the transportation machinery
industry, which is pushing ahead with the electrification of automobiles, the chemical
industry, which includes pharmaceuticals, and the electrical machinery industry -- account
for nearly 70 percent of the total, suggesting that there is much room for R&D investment to
be conducted more widely. Since Japan as a whole needs to move forward with
digitalization and decarbonization, a wide range of industries urgently needs to engage in
R&D investment. In doing so, it is also important from the medium- to long-term
perspective to promote basic research, mainly through support for research at Japanese
universities with a strong intellectual foundation.
In order to improve productivity, it is also necessary for firms to foster and secure human
resources that have high skills, such as regarding artificial intelligence (AI), by expanding
investment in human capital, including in vocational education and training. Academic
research has revealed that investment in vocational education and training by firms clearly
improves their productivity, particularly in the services industry.5 Moreover, firms for
which labor productivity has improved because of such investment tend to raise their
employees' wages. This means that, while firms bear the cost of investment in vocational
education and training, workers will benefit from wage increases. If such investment starts a
virtuous cycle from improvement in productivity to a rise in wages, it is likely that
households' purchasing power will strengthen for new products and services innovated
through R&D.
As I have explained in detail today, through the availability and interest rate channels of
monetary policy, the Bank's large-scale monetary easing has provided an environment
conducive to business activities and investment. In addition, stable developments in
exchange rates have led to a reduction in uncertainty surrounding business activities. Unlike
in Europe and the United States, the inflation rate, on which monetary policy decisions are
based, has remained below the price stability target in Japan.6 Therefore, the Bank's basic
policy stance is to persistently continue with the current powerful monetary easing through
QQE with Yield Curve Control. Currently, the macroeconomic environment is favorable for
Japanese firms, in that they can increase their investment toward digitalization and
decarbonization while taking advantage of the low interest rate environment and effectively
utilizing accumulated internal reserves. If firms become more active in spending and the
growth potential of Japan's economy increases accordingly, this will further amplify the
effects of monetary easing and bring achievement of the price stability target of 2 percent
closer.
Conclusion
Lastly, I would like to conclude my speech today with a few words on the outlook for
Japan's economy in the coming year and expectations for Japanese firms.
Japan's economic recovery is expected to become evident next year, since downward
pressure stemming from the impact of COVID-19 and supply-side constraints are likely to
wane and the government's new economic measures are expected to have positive effects.
From a macroeconomic perspective, the coming year provides an opportunity to take large
strides toward the post-pandemic era.
In doing so, it is extremely important to boldly shift resources such as human capital,
physical capital, and financial capital to business areas that are expected to be more
profitable, without being locked into the business models that have been built up since
before the pandemic. On this point, there were large-scale job cuts and layoffs during the
pandemic in the United States. This seems to have resulted in acute labor shortage,
supply-side constraints, and a surge in the inflation rate, all of which have been seen since
the turn of this year when economic activity resumed rapidly. That said, it is expected from
a somewhat long-term perspective that production factors will be dynamically reallocated
through the labor market in view of a post-pandemic society. In contrast, Japanese firms
have prioritized long-term employment and essentially hoarded labor, even amid the severe
conditions of the pandemic.7 This kind of behavior by firms has ensured stability in
employment and enabled them to rapidly respond to the reopening of the economy. In order
for Japanese firms to adapt to the possible structural changes in the economy during the
post-pandemic era, it is essential for them to boldly shift their business resources within the
firm to areas that are expected to be more profitable. I sincerely hope that the coming year
will be one of new leaps forward for individual firms and for Japan's economy as a whole.
Thank you for your attention.
Monetary Policy and Firms' Behavior:
Transmission Channels of Monetary Policy and
Japanese Firms' Structural Changes
Speech at the Meeting of Councillors of Nippon Keidanren
(Japan Business Federation) in Tokyo
December 23, 2021
KURODA Haruhiko
Governor of the Bank of Japan
Introduction
I. Transmission Channels of Monetary Policy
II. Toward Strengthening Japan's Economic
Growth Potential and Achieving the Price
Stability Target
Conclusion
Chart 1
Introduction
Economic Developments since the Outbreak of COVID-19
Business Conditions, Production Capacity,
Real GDP and Corporate Profits
and Employment Conditions (Tankan)
s.a., ann., tril. yen s.a., tril. yen
DI ("favorable" - "unfavorable," "insufficient" - "excessive"), % points
570 25
40
560
30
20
550
20
540
10
15
530
0
Business conditions
10
520
Real GDP (left scale) -10
Production capacity
510 Current profits
-20
Employment
(right scale) 5
conditions
500
19/Q4→ -30 19/Q4→
490 0
-40
17 18 19 20 21
CY 17 18 19 20 21
CY
Note: In the left-hand chart, figures for current profits are based on the and exclude "finance and insurance" and pure
Financial Statements Statistics of Corporations by Industry, Quarterly
holding companies.
Sources: Cabinet Office; Ministry of Finance; Bank of Japan.
1
Chart 2
I. Transmission Channels of Monetary Policy
Main Transmission Channels of Monetary Policy
Availability
(business
Inflation
fixed
expectations
Real interest rates
Domestic
investment,
Monetary
Nominal
Real
private
interest
exports
rates private
Foreign exchange
policy
rates
demand
Corporate
profits
consumption,
Stock prices
etc.)
Financial Positions of Firms
Total Amount Outstanding of
Capital Adequacy Ratio
Cash and Deposits
amount outstanding, tril. yen
%
%
300 15 45
Cash and deposits (left scale)
40
14
250
Ratio to total assets (right scale)
13 35
200
12 30
150
11 25
100
10 20
50
9 15
0 8 10
FY-end
FY-end 95 97 99 01 03 05 07 09 11 13 15 17 19 95 97 99 01 03 05 07 09 11 13 15 17 19
Note: Figures are based on the and exclude "finance and insurance."
Financial Statements Statistics of Corporations by Industry, Annually
Source: Ministry of Finance.
3
Chart 4
I. Transmission Channels of Monetary Policy: (1) Availability Channel
Financial Conditions
Lending Attitudes of Financial Institutions
Financial Positions (Tankan)
and Business Conditions (Tankan)
DI ("accommodative" - "severe," "favorable"
"unfavorable"), % points
DI ("easy" - "tight"), % points
30
30
20
20
10
10
0
0
-10
-20
-10
-30
-20
-40
Lending attitudes
Large enterprises in all industries
-30
-50
Small enterprises in all industries
Business conditions
Small enterprises in face-to-face services industry
-60 -40
CY 97 99 01 03 05 07 09 11 13 15 17 19 21
CY 97 99 01 03 05 07 09 11 13 15 17 19 21
Extension of Financing Support for SMEs
Japan's Financial Conditions: Improved on the Whole
Large firms: Issuance conditions for CP and corporate bonds have been favorable. Precautionary demand for
liquidity has subsided in the loan market.
SMEs: Financial positions have been on an improving trend on the whole, but weakness has remained in
some segments, such as the face-to-face services industry.
Partial Extension of the Special Program to Support Financing in Response to COVID-19
(until end-March 2022 → until end-September 2022)
Special Funds-Supplying Operations to Facilitate Financing in Response to COVID-19
Purchases of CP and
Against private debt Against Against
corporate bonds
pledged as collateral governmentsupported loans non-governmentsupported loans
Extend by six months the
Additional
fund-provisioning to financial Extend by six months
institutions against their loans
purchases
 Under the current terms and conditions
to be completed
 Under the revised terms and conditions • Applied interest rate: 0.2% (Category I)
To be completed
• Applied interest rate: 0% (Category III) • Amount added to the Macro Add-on
Continue purchasing the
• Amount added to the Macro Add-on Balances: twice as much as the amount
same amount as prior to
Balances: the amount outstanding of outstanding of funds provided
the COVID-19 pandemic
funds provided
Mainly for large firms and housing loans Mainly for SMEs
For the time being, the Bank will closely monitor the impact of COVID-19
and will not hesitate to take additional easing measures if necessary.
5
Chart 6
I. Transmission Channels of Monetary Policy: (2) Interest Rate Channel
Transmission Channel of a Decline in Interest Rates
Economic Improvement through a Decline
Yield Curve Control (YCC)
in Interest Rates by Channel
Taking into account developments in economic activity
and prices as well as financial conditions, the Bank
encourages the formation of the yield curve that is
considered most appropriate for achieving the price
Other
11%
stability target of 2 percent.
%
1.0
0.8
Yield curve
Funding costs
Foreign
33%
exchange rates
0.6
20%
Short-term policy
0.4
interest rate:
minus 0.1 percent
0.2
Stock prices
0.0
36%
-0.2
Target level of the
long-term interest rate:
-0.4
around zero percent
-0.6
Channel via financial and capital markets
Chart 7
I. Transmission Channels of Monetary Policy: (2) Interest Rate Channel
Fixed Capital Formation and
Increased Issuance of Corporate Bonds with Longer Maturity
Fixed Capital Formation (SNA) Issuance of Corporate Bonds by Maturity
tril. yen, monthly avg.
tril. yen
1.8
120
Machinery, etc.
Short-term (3 years or less)
1.6
Construction
Medium-term (3-5 years)
100 Software
1.4
R&D
Long- and super-long-term
(over 5 years)
80 1.2
1.0
60
0.8
40 0.6
0.4
20
0.2
0
0.0
CY 80 84 88 92 96 00 04 08 12 16 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21
CY
Notes: 1. In the left-hand chart, figures are for fixed capital formation other than that of dwellings in the private sector in the Cabinet Office's "Gross Fixed Capital Formation of Assets
Classified by Institutional Sectors and Economic Activities" in current prices.
2. In the right-hand chart, figures are for publicly offered bonds issued by Japanese firms in domestic markets. The figures are on an i