Bank of Japan: Pioneer of “Unconventional Monetary Policy” – and Still Trailblazing

​Since the Global Finance Crisis and Great Recession, developed-world central banks have adopted all kinds of “unconventional monetary policies” (UMP), some of which have since become conventional: ZIRP (zero interest rate policy), NIRP (negative interest rate policy), QE (quantitative easing), “credit easing,” “forward guidance,” macroprudential policy, and, most recently, “yield curve control.” Many central banks are still actively employing unconventional monetary policies and there is much soul-searching in policy circles about what monetary and other policy tools might be able to be mobilized in future economic downturns, particularly if central banks start from deep in unconventional monetary policy territory (helicopter money, anybody?).

The Bank of Japan (BOJ) was the pioneer of almost all of these unconventional monetary policies (the exception being NIRP – the Europeans got there first). This Study Group will examine the BOJ’s experience since the late 1990s in developing the unconventional monetary policies that later went global, and compare and contrast them with the unconventional monetary policies of other central banks such as the Federal Reserve, the European Central Bank and the Bank of England. The Study Group will draw on Paul Sheard’s more than thirty years of experience as a BOJ-watcher. 

Background readingBank of Japan, 2019: “Statement on Monetary Policy,” Sep 19, 5pp, https://www.boj.or.jp/en/announcements/release_2019/k190919a.pdf


Paul Sheard, 2016: “Negative Interest Rates: Why Central Banks Can Defy ‘Time Preference,’” S&P Global Ratings RatingsDirect, Feb 3, 15pp
https://www.hks.harvard.edu/sites/default/files/centers/mrcbg/programs/senior.fellows/2019-20%20fellows/NegativeRatesFeb2016%20.pdf



Paul Sheard, 2016: “The Bank of Japan Breaks New Ground – And It May Work This Time,” S&P Global Ratings RatingsDirect, Oct 7, 12pp
https://www.hks.harvard.edu/sites/default/files/centers/mrcbg/programs/senior.fellows/2019-20%20fellows/BOJYieldCurveControlOct2016%20.pdf