Japan's Economy: Monthly Outlook
The Effects of Unconventional Monetary Policies in Japan, the US, and Europe(Jul 2015)

Japan’s economy is expected to pass through a temporary lull and move into a moderate growth phase

July 23, 2015

  • Mitsumaru Kumagai
  • Satoshi Osanai
  • Keisuke Okamoto
  • Shunsuke Kobayashi
  • Shotaro Kugo
  • Hiroyuki Nagai
  • Akira Yamaguchi


Main economic scenario for Japan: Japan’s economy is expected to enter a temporary lull. The real GDP growth rate for the Apr-Jun 2015 period on a year-to-year basis may very well fall temporarily into negative numbers. However, we believe that the economy will be able to avoid falling completely into a recession and move toward a moderate recovery due to (1) Continuation of the virtuous circle brought on by Abenomics, and (2) A gradual comeback for exports mainly to the US.

Four risk factors facing Japan’s economy: Risks factors for the Japanese economy are: (1) The Triple Weaknesses – a weak bond market, weak yen, and weak stock market due to loss of fiscal discipline, (2) The danger of China’s economic bubble collapsing, (3) tumult in the economies of emerging nations in response to the US exit strategy, and (4) a worldwide decline in stock values due to geopolitical risk.

The effects of unconventional monetary policies in Japan, the US, and Europe: In this report we compare the effects of unconventional monetary policies implemented by central banks in Japan, the US, and Europe. We provide a general overview of unconventional monetary policies, while considering what the implications for the future might be. The data indicates that the Fed’s LSAP series was especially effective in improving the real economy. LSAP in the US was followed by growth in stock prices, as well as a major asset effect due to the high shareholding ratio of households in comparison to other countries. This in turn led to major growth in personal consumption. Meanwhile, the BOJ’s QQE I had a major effect on CPI. The BOJ’s monetary policy has not had a great effect on the real economy, but the realization of a major depreciation in Japan’s currency has provided strong upward pressure on CPI.

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