Tetsuya Inoue
Nomura Research Institute
12 June 2012
White Paper: Japanese and U.S. Monetary Policy: Convergent Frameworks, Divergent Motivation
The BOJ and Fed's monetary policy frameworks have converged as both central banks have adopted de facto inflation targets and committed to maintaining ultra-low interest rate policies. However, the Fed and BOJ had different motivations in adopting such a framework.
The former was motivated by criticism of its large-scale asset purchases; the latter, by pressure to adopt an inflation target to supply liquidity more aggressively. For markets and governments, differences in how the BOJ and Fed communicate regarding monetary policy have various implications in terms of policy effectiveness and risks.
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