The Impact of Japan's “Yield Curve Control” (YCC) on Inflation of Japan

Research Article
Open access

The Impact of Japan's “Yield Curve Control” (YCC) on Inflation of Japan

Jiayi Hu 1*
  • 1 Guangdong University of Education    
  • *corresponding author jammy@tzc.edu.cn
Published on 10 November 2023 | https://doi.org/10.54254/2754-1169/39/20231931
AEMPS Vol.39
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-83558-099-8
ISBN (Online): 978-1-83558-100-1

Abstract

After the bursting of the bubble crisis in Japan, the government adopted a series of quantitative easing policies to improve the weak economic environment and promote economic growth. in September 2016, the Japanese government began to implement the yield curve control policy to improve the economic environment by controlling the yield on government bonds. the YCC policy, in theory, could promote economic growth and achieve the inflation target in Japan, but the actual effect was lacking. This paper analyses the main reason for the unsatisfactory implementation of the yield curve policy in Japan is the special social environment in Japan. Although the YCC policy has led to an increase in the money circulating in the market, after firms have received the money, they do not expand their investment production at home due to Japan's own lack of domestic demand, but choose to invest the money in stocks, government bonds or other overseas markets for profit. After the money flowed around the market, it went back to the capital market without making the liquidity in the market increase. This paper uses Granger causality tests to analyze the causal relationship between the ageing population, personal savings, average wage and the inflation rate in Japan, and finds through the tests that the inflation rate conversely affects the above factors. The interaction between these two factors has trapped the Japanese economy in a cycle of economic malaise, which is difficult to break with YCC policy.

Keywords:

Japan, YCC, deflation, inflation

Hu,J. (2023). The Impact of Japan's “Yield Curve Control” (YCC) on Inflation of Japan. Advances in Economics, Management and Political Sciences,39,39-46.
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References

[1]. Liu, Q. L., Ye, A. Z.: The effect of quantitative easing monetary policy in Japan Empirical analysis based on SVAR model. Contemporary economy 22, 15-16 (2018).

[2]. Liu, R.: A New Framework for Quantitative and Qualitative Easing in Japan: Yield curve control policy analysis. North East Asia Journal 6,3 2-37 (2017).

[3]. Zhang, X. C., Li, H. J.: The Bank of Japan's yield curve control policy is in trouble. Financial Review 129, 82-87 (2023).

[4]. Chen, J. Y.: Japanese bond liquidity continues to deteriorate Bank of Japan's YCC policy is in question. Shanghai Securities News 03, 1-2 (2022).

[5]. Wen, B.: Analysis of Japan's monetary policy and the outlook of the future trend of the yen. Tsinghua Financial 209, 32-24 (2022).

[6]. Jarrow, R., Lamichhane, S.: The effects of yield control monetary policy: A helicopter money drop to financial institutions. The Quarterly Journal of Finance 10, 1 (2020).

[7]. Zhong, L., Luo Q. M.: Key characteristics of JGB yield curve changes, influence and revelation. Global perspective 03, 86-90 (2023).

[8]. Li, S. Q.: Analysis of foreign investor behavior in the process of bond market opening The Japanese Experience and Enlightenment. International Finance 93, 104-106 (2021).

[9]. Zeng, Y.: Analysis of the causes of abnormal fluctuations in the Japanese government bond futures market-- The perspective of the yield curve control policy. Financial Development Research 9, 86-89 (2016).

[10]. Xiang, M. X.: December monetary policy meeting flies out of the "black swan" The Bank of Japan's adjustment of its yield curve control plan has triggered financial market volatility. Financial 8, 1-2 (2022).

[11]. Xiang, M. X.: The Bank of Japan's adjustment of its yield curve control plan has triggered financial market volatility. Global Financial Times 08, 1-2 (2022).

Cite this article

Hu,J. (2023). The Impact of Japan's “Yield Curve Control” (YCC) on Inflation of Japan. Advances in Economics, Management and Political Sciences,39,39-46.

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About volume

Volume title: Proceedings of the 7th International Conference on Economic Management and Green Development

ISBN：978-1-83558-099-8(Print) / 978-1-83558-100-1(Online)
Editor：Canh Thien Dang
Conference website: https://www.icemgd.org/
Conference date: 6 August 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.39
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Liu, Q. L., Ye, A. Z.: The effect of quantitative easing monetary policy in Japan Empirical analysis based on SVAR model. Contemporary economy 22, 15-16 (2018).

[2]. Liu, R.: A New Framework for Quantitative and Qualitative Easing in Japan: Yield curve control policy analysis. North East Asia Journal 6,3 2-37 (2017).

[3]. Zhang, X. C., Li, H. J.: The Bank of Japan's yield curve control policy is in trouble. Financial Review 129, 82-87 (2023).

[4]. Chen, J. Y.: Japanese bond liquidity continues to deteriorate Bank of Japan's YCC policy is in question. Shanghai Securities News 03, 1-2 (2022).

[5]. Wen, B.: Analysis of Japan's monetary policy and the outlook of the future trend of the yen. Tsinghua Financial 209, 32-24 (2022).

[6]. Jarrow, R., Lamichhane, S.: The effects of yield control monetary policy: A helicopter money drop to financial institutions. The Quarterly Journal of Finance 10, 1 (2020).

[7]. Zhong, L., Luo Q. M.: Key characteristics of JGB yield curve changes, influence and revelation. Global perspective 03, 86-90 (2023).

[8]. Li, S. Q.: Analysis of foreign investor behavior in the process of bond market opening The Japanese Experience and Enlightenment. International Finance 93, 104-106 (2021).

[9]. Zeng, Y.: Analysis of the causes of abnormal fluctuations in the Japanese government bond futures market-- The perspective of the yield curve control policy. Financial Development Research 9, 86-89 (2016).

[10]. Xiang, M. X.: December monetary policy meeting flies out of the "black swan" The Bank of Japan's adjustment of its yield curve control plan has triggered financial market volatility. Financial 8, 1-2 (2022).

[11]. Xiang, M. X.: The Bank of Japan's adjustment of its yield curve control plan has triggered financial market volatility. Global Financial Times 08, 1-2 (2022).

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