Bank of Japan Governor Haruhiko Kuroda recently said the country’s monetary policy and experience with quantitative and qualitative monetary easing programs may serve as a model for future economic study and policy.
“At present, there are not many economic papers that get a hit when doing an internet search with the keywords ‘quantitative and qualitative monetary easing,’” Kuroda said at the Global Public Policy Network Conference of the University of Tokyo’s Graduate School of Public Policy. “However, a few years from now, the experience of Japan and the Bank of Japan may have provided a new chapter for economics and public policy study. And I cannot help but expect that a theory worked out then will be one of the powerful weapons that central banks can use in the future to combat deflation.”
Kuroda discussed the central bank’s QE program that was implemented in 2001, which at the time did not garner much global attention. After the U.S. Federal Reserve and Bank of England introduced QE policies following the collapse of Lehman Brothers, however, studies on the policy have increased.
“Actual policies were in turn designed while learning from those theories,” Kuroda said. “In my view, such interaction between actual policies and theories is basic to economics, public policy studies and social science in general.”
Kuroda said the Bank of Japan’s QQE policies have “steadily produced the anticipated effects.”
“Favorable turns have been observed in the financial market, economic activity and prices, as well as in the public’s expectations,” Kuroda said. “The Bank will continue with the QQE, aiming to achieve the [two percent price stability] target, as long as it is necessary for maintaining it in a stable manner.”
Kuroda said that in economic policy, political and administrative feasibilities “should be properly recognized, as they limit the space of policies that can actually be pursued.”
“In recognizing this space, it is necessary to have an accurate understanding of people’s behavior and the values of stakeholders who are politically crucial, as well as the background to how the current administrative system and practices have been formed,” Kuroda said. “High-level judgment is required, as these factors are determined by each country’s history, culture and social systems, as well as the social and political situations of the times.”