How has the Bank of Japan (BOJ) helped shape Japan's economic growth
during the past two decades? This book comprehensively explores the
relations between financial market liberalization and BOJ policies and
examines the ways in which these policies promoted economic growth in
the 1980s. The authors argue that the structure of Japan's financial
markets, particularly restrictions on money market transactions and the
key role of commercial banks in financing corporate investments, allowed
the BOJ to influence Japan's economic success. The first two chapters
critically evaluate the BOJ's daily operating procedures, the primary
instruments of monetary policy, and the mechanisms by which the BOJ is
believed to affect economic growth. The authors pay particular attention
to the coincidence of the liberalization of financial markets and the
evolution of monetary policy, as well as to the similarities and
differences between policies in Japan and the United States. Chapter
three explores the effects of the BOJ's window guidance policy on
corporate investment and argues that such investment is affected
differently depending on the relationship between the corporation and
its principal banks and whether the corporation is a member of an
industrial group (keiretsu). In the fourth chapter, the authors examine
the effects of monetary policy on the term structure of interest rates.
They document significant changes in the relations between long- and
short-term interest rates, the liberalization of financial markets, and
changes in monetary policy. The final two chapters examine the overall
impact of monetary policy on real aggregate economic activity. Chapter
five looks at the implications ofsmoothing interest rates for the
endogeneity of the money stock, while chapter six explores the nature
and importance of various economic shocks underlying Japanese business
cycles. This volume will prove invaluable not only to economists
interested in the technical operating procedures
