Abenomics’ First Arrow: The Effects of the Bank of Japan’s Quantitative and Qualitative Monetary Easing On Japan’s Economy

• Main Author: Ho, John B
• Format: Others
• Published: Scholarship @ Claremont 2015
• Subjects: Abenomics; deflation; quantitative easing; Japan; reform; Economic History; Economics; Finance; International Economics; International Relations; Macroeconomics; Political Economy; Regional Economics
• Online Access: http://scholarship.claremont.edu/cmc_theses/1080; http://scholarship.claremont.edu/cgi/viewcontent.cgi?article=2247&context=cmc_theses

In January 2013, the Japanese Government under Prime Minister Shinzo Abe and the Bank of Japan launched a package of monetary and fiscal stimulus along with promises of structural economic reform called Abenomics. This paper examines the preliminary effects of the Bank of Japan’s Quantitative and Qualitative Monetary Easing (QQE), which forms the monetary component of Abenomics. Given the weak economic response to QQE so far, the study predicts that QQE has failed to make a significant impact on its target macroeconomic variables of inflation and output. The results confirm this hypothesis as increases in the monetary base have an insignificant effect on the Consumer Price Index and have little effect in changing the trajectory of output. The results of QQE so far mirror those of the Federal Reserve’s quantitative easing programs, during which expansion of the monetary base in the aftermath of the 2008 financial crisis failed to significantly raise output given the size of the stimulus. Abenomics, however, continues to be implemented, making the results presented in this paper inconclusive.