Analysis On Japan’s Quantitative Easing Monetary Policy During2001to2006

Quantitative easing monetary policy is a kind of unconventional monetary policy,is in the interest rate as the core indicators of variables when the conventionalmonetary policy is invalid, the policy of central Banks to stimulate the nationaleconomy. Is different from the central bank’s open market operations and rediscountrate, legal deposit reserve rate of the three conventional monetary policy tools, theoperation of the quantitative easing monetary policy is the central bank by buyingfinancial assets commercial Banks and other private institutions, direct injection ofliquidity to the market, so as to realize money creation. Use quantitative easingmonetary policy is the premise of very low nominal interest rates, the central bank,the traditional policy tools have not make the market interest rates down further,making it impossible to increase the money supply, also can’t influence on the realeconomy. Because conventional monetary policy transmission mechanism blockedled to the failure, so the central bank can through quantitative easing theunconventional monetary policy tools to continue to implement monetary expansionto stimulate the economy. After Japan’s bubble economy burst in the early1990s, themacro economy are in a bad situation for a long time, financial markets continuedinstability. In such a case, the bank of Japan began implementing expansionarymonetary policy since1991, successive lower market interest rates, by early1999, thenominal interest rate has dropped to zero, the bank of Japan and then implements thezero interest rate policy. In spite of the macro economy showed signs of recovery,however, this does not prove that because of the low interest rate policy and the directresult of zero interest rate policy, out of the shadow of the financial crisis in1997Asiapromoted Japan’s exports are the main reason. In the autumn of2000, influenced bythe dotcom bubble burst, the global economic slowdown, Japan’s foreign exportsrising stem, followed by the recovery of the fire quickly extinguished, domesticfinancial institutions, large area, the phenomenon of the non-performing loan ratiorising, many large financial institutions collapse, deflation and worse. Due to themarket interest rate has dropped to zero, Japan has fallen into a "liquidity trap", monetary policy is invalid. In such a background, the bank of Japan in early2001tochange monetary policy intermediate targets, the operating target from overnightinterest rates adjusted for deposit financial institutions at the central bank’s currentaccount balance, direct injection of liquidity to the market. In2006the bank of Japanannounced his retirement from quantitative easing monetary policy, Japan’s economyhas been out of the haze of deflation.Quantitative easing monetary policy is one of the most obvious feature is thechanged structure and size of central bank balance sheets. The central bank’s balancesheet is a combination of its engaged in banking business accounting records, reflectsthe central bank as a financial management business characteristics, is an importantreference of central bank monetary policy operation. From Japanese bank’s balancesheet perspective, this paper of Japan’s quantitative easing policy in2001to2001were analyzed, and through the bank of Japan to the change of the balance sheet, tothe effect of quantitative easing monetary policy objective evaluation is given. In thispaper, the author thinks that policy does make Japan out of deflation, the problem ofnon-performing loans of financial institutions also resolved, however due to the lackof investment and financial institutions to lend phenomenon serious constraints, mostof the excess liquidity provided by quantitative easing (QE), left the financial systemdid not enlarge the scale of credit of the whole society, which failed to stimulate thereal economy recovery.