After years of unprecedentedly easy monetary policy in the world's advanced economies, many are warning that the stimulus potential is depleted, particularly in Japan, with its negative short-term interest rate. But this view fails to account for the exchange-rate mechanism by which monetary policy is transmitted to the real economy.
TOKYO – Since the 2008 global financial crisis, expansionary monetary policy has been the order of the day in most of the major advanced economies. This approach – comprising deep interest-rate cuts and large-scale asset purchases (quantitative easing, or QE) – has been credited with accelerating the recovery in the United States and the United Kingdom, and pulling the eurozone back from the brink of collapse. As for Japan – which introduced monetary easing in late 2012 as the first “arrow” of Abenomics, Prime Minister Shinzo Abe’s economic-reform program – the policy has contributed to the creation of about 2.5 million jobs.
TOKYO – Since the 2008 global financial crisis, expansionary monetary policy has been the order of the day in most of the major advanced economies. This approach – comprising deep interest-rate cuts and large-scale asset purchases (quantitative easing, or QE) – has been credited with accelerating the recovery in the United States and the United Kingdom, and pulling the eurozone back from the brink of collapse. As for Japan – which introduced monetary easing in late 2012 as the first “arrow” of Abenomics, Prime Minister Shinzo Abe’s economic-reform program – the policy has contributed to the creation of about 2.5 million jobs.