This chapter looks at three case studies of the Bank of Japan's (BOJ) monetary policy to illustrate how these policy ideas influenced BOJ decision making: the decision to implement and then lift the zero interest rate policy (ZIRP) (1998–2000); the first quantitative easing (QE) policy (2001–6); and the policies implemented in response to the global financial crisis and then Japan's “3–11” triple disaster—the massive earthquake, tsunami, and nuclear meltdown that occurred on March 11, 2011. During these fifteen years, the BOJ's worldview made it slow to tackle deflation head-on and cautious in its reflationary measures. The BOJ Policy Board at various times did concede to outside pressure to use unorthodox monetary measures such as forward guidance or QE. It did so reluctantly, however. When afforded room to maneuver, the Policy Board was ready to retreat quickly from monetary easing, in some cases even before the economy was fully out of deflation.
Effectiveness of the Zero Interest Rate Policy for Financial Markets in Japan: Principal Components Analysis
