Transmission of monetary policy expectations on the money markets: Comparative analysis of nontraditional monetary policy regimes in Japan

摘要

When the Bank of Japan (BOJ) adopts interest rate targeting under a comprehensive easing policy, the term structure up to 12 months in the Japanese money market is driven by a single trend. It is caused by monetary policy expectations. The regime of interest rate targeting gives a sense of comfort to market participants that the regular transmission mechanism works in the term structure of the money market. Thus, monetary policy expectations are fully transmitted to the yield curve end. On the other hand, monetary policy expectations are not fully transmitted to the yield curve end under either the quantitative and qualitative easing policy or the negative easing policy. The quantitative and qualitative easing policy and the negative interest rate policy paralyze the market function in the short-term money market.