"If anyone is an expert on the unintended effects of quantitative easing, it’s the Bank of Japan.
In fact, one might say, what the Fed, ECB, BoE are facing today, the BoJ has already faced. What’s more, what the BoJ is facing today, the Fed, ECB, BoE will face too.
Which is why — in the context of the BoJ’s Valentine QE extension and Mervyn King’s semi existential crisis on Wednesday, in which he continuously pointed out that there are limits to monetary policy — it’s worth rehashing some quick BoJ QE background.
First off, BoJ governor Masaaki Shirakawa has long stressed that fundamental realities, like an ageing population, can’t help but impede the effectiveness of Japanese monetary policy. More so, that breaking the economic malaise lies just as much in fundamental adjustments to the real economy as it does in central bank action. In other words, there is only so much a central bank can do. Eventually real adjustments have to be made.
If not, at some point balance sheet expansion might actually begin to achieve diminishing returns. (Though Mervyn himself doesn’t think we’re quite there yet in the UK.)
Nevertheless, if there was to be an unintended impact anywhere, then — based on the Japanese experience at least — it was always most likely to manifest in money markets and/or savings rates. An unintended consequence which, incidentally, first became fully realised from about 2005 onwards..."
at http://ftalphaville.ft.com/blog/2012/02/15/882671/the-japanese-liquidity-trap-revisited/
In fact, one might say, what the Fed, ECB, BoE are facing today, the BoJ has already faced. What’s more, what the BoJ is facing today, the Fed, ECB, BoE will face too.
Which is why — in the context of the BoJ’s Valentine QE extension and Mervyn King’s semi existential crisis on Wednesday, in which he continuously pointed out that there are limits to monetary policy — it’s worth rehashing some quick BoJ QE background.
First off, BoJ governor Masaaki Shirakawa has long stressed that fundamental realities, like an ageing population, can’t help but impede the effectiveness of Japanese monetary policy. More so, that breaking the economic malaise lies just as much in fundamental adjustments to the real economy as it does in central bank action. In other words, there is only so much a central bank can do. Eventually real adjustments have to be made.
If not, at some point balance sheet expansion might actually begin to achieve diminishing returns. (Though Mervyn himself doesn’t think we’re quite there yet in the UK.)
Nevertheless, if there was to be an unintended impact anywhere, then — based on the Japanese experience at least — it was always most likely to manifest in money markets and/or savings rates. An unintended consequence which, incidentally, first became fully realised from about 2005 onwards..."
at http://ftalphaville.ft.com/blog/2012/02/15/882671/the-japanese-liquidity-trap-revisited/
