Sayuri Shirai, 31 July 2017

Portfolio rebalancing through large-scale asset purchases is one of the major transmission channels under the zero lower bound. This column assesses whether the channel has been effective in Japan, focusing in turn on financial institutions, firms, and households. Japanese firms and households are notoriously risk averse, limiting the effectiveness of the portfolio rebalancing channel. These results suggest that more drastic structural reforms and growth strategies are needed.

Yosuke Takeda, Masayuki Keida, 18 June 2017

Communication strategies have become a policy instrument used by central banks to control expectations. This column uses a natural language processing method to explore the Bank of Japan’s communication strategy from July 2012 to November 2016, a period during which both Masaaki Shirakawa and Haruhiko Kuroda held office. The analysis suggests that since 2016, when the Bank introduced a negative interest rate policy, Kuroda's communication strategy has changed implicitly.

Takeshi Kimura, Teppei Nagano, 30 May 2017

While non-US entities pay dollar funding premiums in the FX swap market, the US earns profits on FX-hedged investments in non-US sovereign securities. This column argues that this new form of the ‘exorbitant privilege’ presents a modern version of the ‘Triffin dilemma’. If the distributional effect of US privilege becomes large enough to induce non-US entities to take excessive risk, the stability of the global financial system will come under threat. 

Sayuri Shirai, 16 March 2017

The Bank of Japan has been pursuing quantitative and qualitative monetary easing since 2013, but has failed to achieve its target of a stable 2% inflation rate. This column explores the Bank’s recent practices and performance, and identifies four structural factors that have contributed to the limited impact of unconventional monetary easing on aggregate demand and inflation. The Bank now needs to come up with more objective projections for the timing of achieving its price stability target. 

Richard Baldwin, 08 May 2010

This column, first posted 17 May 2008, reviews Willem Buiter's analysis of why the ECB is so hesitant to buy debt. Central banks can go broke – and some in developing countries have done so recently. The ECB is now lending against dubious collateral. An ECB recapitalisation seems unthinkable at the moment, but that’s why it is a good time to think the unthinkable. Willem Buiter considers the question at length in CEPR Policy Insight No. 24 and argues that Eurozone fiscal authorities should, ASAP, agree on a formula for fiscal burden-sharing should an ECB recapitalisation ever be necessary.

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