Study On Japan’s Zero Interest Rate Policy And Quantitative Easing Monetary Policy

Since the break out of financial crisis in2008, in order to cope with the declining global economy, three economic entities which include America, Japan and European Union began to down-regulate the interest rate in succession, meanwhile provided market with much mobility, thus entered into Zero Interest Rates Age and Quantitative Easing Age. Though four years have passed by since this financial crisis, the influence that it has brought to world economy has not yet been eliminated. Even so, ZIRP and QEMP which were taken by the main global developed economies had ever played a certain role in stabilizing economy, while Japan, as the birthland of ZIRP and QEMP, certainly has some experience for reference.After the Bubble Economy collapsed, Japan’s economy fell into the long-term stagnancy. Though it experienced several transient economic resurgences during this period, they were all very feeble. Economic growth was extremely slow, it is still in the state of stagnation in the long run. Japanese nationals are perplexed with economic pessimistic phenomenon all the time such as the slump of stock market and the price of land, the sharp increase of bank non-performing loan, the constant decline of prices which become the long-lingering shadow. In order to get over the economic stagnation, Bank of Japan began to carry out ZIRP and QEMP at the end of1990s in succession since the traditional financial policy couldn’t act, creating a precedent in world financial history. Besides, the duration is also rare in developed world. Though there are many disputes about the implementation effect of ZIRP and QEMP on Japanese economy at present, it deserves our further research.Though Japan’s economy was passed by China’s, as one of the three biggest economic entities, its monetary policy can not only have effect on domestic economy, but also profoundly affect the world economy. This article will take the relevant theories about the interest rate and monetary policy as a support, the time as a sequence, thoroughly analyze the background, reasons, content and effect on Japan’s economy of non-traditional financial policy that Japan has taken in order to stimulate the economy to recover since the Bubble Economy collapsed. Based on the summary of its experience, it comes up with suggestions that deserve our reference. Besides, this paper will adopt the qualitative analysis method of study, relying on a large quantity of data, deeply analyze the effect of Japan’s ZIRP and QEMP on its consumption, investment and economic growth. The conclusion is, though ZIRP and QEMP have played an active role in stabilizing financial system, stimulating consumption and investment, as well as promoting economic growth, they were far from the predefined goals and limited in stimulating economy; If they can not exit timely when economy recovers, they would lay the basis for a new round of inflation.As the second world biggest economic entity, People’s Bank of China has ever taken the interest rate policy and monetary policy to regulate and control macro-economy for a long time, while Japan’s ZIRP and QEMP has provided us with beneficial reference. During this recent financial crisis, our country has ever taken the method of down-regulating interest rate and increasing money supply more than once, though this helped us get over crisis to a certain extent, it was a passive choice that was made in a specific economic situation which can never became a long-term policy for promoting economy. Japan’s financial practice indicates that, while the non-traditional financial policy brought positive effect to Japan’s economy, its adverse impact should not be neglected. Therefore, we should learn the lesson from Japan, interact with money, finance and exchange rate policy, thus complement each other’s advantages, and then promote the national economy to sound and fast development. Besides, the independence of People’s Bank of China should be strengthened. From Japan’s experience, the properly suspend of non-traditional financial policy has well explained Bank of Japan’s independence of Japanese government, carrying out financial policy or not and how to implement it is little disturbed by external factors which deserve our reference in our future financial reform. Finally, anything can not be accomplished in an action, when we implement financial policy, we should ensure it’s enough elasticity without overhastiness, regulate and control step by step, and try our best to avoid the adverse impact to economy in the process of regulation.