The ministry of higher education, science and innovation of the republic of uzbekistan

3.Analysis of monetary credit policy of the Central Bank of Japan
and comparing Japan's monetary system with other countries

The monetary credit policy of the Central Bank of Japan, also known as the Bank of Japan, is a crucial aspect of the Japanese economy. The Bank of Japan is responsible for implementing monetary policy in Japan, with the primary goal of achieving price stability and promoting economic growth. The Bank of Japan has implemented various policies over the years to achieve these goals, including the use of interest rates, quantitative easing, and other measures.

One of the most notable policies implemented by the Bank of Japan is the zero interest rate policy. This policy was introduced in the late 1990s in response to a prolonged period of deflation and economic stagnation. The policy involves setting the interest rate on overnight loans between financial institutions at zero percent, which has the effect of lowering interest rates throughout the economy. The zero interest rate policy has been controversial, with some economists arguing that it has led to excessive inflation and others arguing that it has been necessary to promote economic growth.

Another policy implemented by the Bank of Japan is quantitative easing. This policy involves increasing the money supply by purchasing government bonds and other securities. The Bank of Japan has implemented several rounds of quantitative easing in recent years in an effort to stimulate the economy and combat deflation. The effectiveness of quantitative easing in achieving the Bank of Japan's goals has been a topic of debate among economists.

The Bank of Japan also uses other measures to implement monetary policy, such as open market operations and reserve requirements. Open market operations involve buying and selling government securities to influence the money supply and interest rates. Reserve requirements involve setting the amount of reserves that financial institutions must hold, which can affect the amount of money available for lending.

The Bank of Japan's monetary credit policy has been influenced by various factors, including the global economic environment, domestic economic conditions, and political considerations. For example, the Bank of Japan has had to navigate the challenges posed by the global financial crisis and the COVID-19 pandemic. The Bank of Japan has also had to balance the need for economic growth with concerns about inflation and financial stability.

The effectiveness of the Bank of Japan's monetary credit policy in achieving its goals has been a topic of analysis and debate. Some economists argue that the Bank of Japan's policies have been too cautious and have not done enough to stimulate the economy. Others argue that the Bank of Japan's policies have been too aggressive and have led to excessive inflation and financial instability.

In conclusion, the monetary credit policy of the Central Bank of Japan is a crucial aspect of the Japanese economy. The Bank of Japan has implemented various policies over the years to achieve its goals of price stability and economic growth, including the use of interest rates, quantitative easing, and other measures. The effectiveness of these policies in achieving the Bank of Japan's goals has been a topic of analysis and debate among economists. The Bank of Japan will continue to face challenges in implementing monetary policy in the future, as it navigates the complex and ever-changing global economic environment.

Theoretical Background Model This appendix presents a two-country model describing the interdependence of monetary policy in the two countries. In the model, central banks choose the extent of monetary creation to achieve their inflation target taking into account spillover effects of the monetary policy of the other central bank.
The following notation is used: M and M*: the monetary base at home (Japan) and abroad (United States). Hereafter, the asterisk denotes variables referring to the United States.

e: exchange rate (an increase in e implies a depreciation of the yen), P: price level, p: inflation rate, π: inflation target, Y: real GDP, y: GDP growth, and m: excess monetary creation, which M-Y
Based on the money demand function and purchasing power parity, the long-run exchange rate can then be expressed as follows:

Thus, the exchange rate is expressed as a decreasing function of monetary expansion in the United States and an increasing function of monetary expansion in Japan.
The two countries try to achieve their inflation targets by adjusting their monetary bases. We assume that under price rigidities, there is a short-run negative spillover effect as a result of monetary policy interdependence, the so-called "beggar-thy-neighbor effect of monetary policy."
The optimization functions are:

where γ is a positive coefficient (of less than 1) representing the spillover effect.
In the postwar period after the Bretton Woods system of fixed dollar exchange parities fell apart (the so-called “Nixon Shock” of 1971), Japan was an early victim of currency warfare. From the mid-1970s to the mid-1990s, Japan’s relatively high rate of savings led to current account surpluses that were particularly obvious when compared with the bilateral trade deficits of the savings-deficient US (see the left-hand panel of Figure 7) Japan was accused of deliberately undervaluing the yen against the dollar to increase its exports. The result was American “Japan bashing,” with threats of tariffs and quotas on imports of goods from Japan, unless the yen appreciated.
This resulted in the famous Plaza Accord in 1985: a negotiated sharp appreciation of the yen, after which the yen continued to appreciate until April 1995. The political accusation that Japan had undervalued the yen is questionable. According to the Penn World Tables (Heston et al 2012), the yen was overvalued compared with its purchasing power parity (PPP) from 1985 through 2012 (Figure 8). Although PPP is only one factor affecting the exchange rate, the yen’s level well above its PPP was an important factor in Japan’s continued stagnation through 2012.
The dramatic balance sheet expansion by the BOJ is not out of line with similar expansions in the balance sheets of other major central banks since mid-2008. Figure 5 shows the balance sheet expansion of the BOJ compared with those of the Fed, the ECB and the Bank of England. Since 2013, the depreciation of the yen has reflected the recent more expansionary Japanese monetary policy. The renminbi/dollar rate remains remarkably stable, with very slow nominal appreciation. However, Japan’s recent aggressive quantitative easing has led to serious concern from other Asian countries, especially from the PRC and the Republic of Korea, about a depreciating yen. Unlike other major advanced economies, Japan is directly competing with other Asian exporters.
This strong inverse effect of the yen/dollar rate on the smaller East Asian economies (the PRC is no longer “small”) has two dimensions. First, when the yen appreciates against the dollar, it also appreciates against the won, baht, ringgit, rupiah, and so on, which tend to have more stable dollar exchange rates. So the smaller EA countries find it easier to export to Japan itself and to compete with Japanese exports to third markets.
Second, Japan is a creditor economy and has been a major source of direct investment to other East Asian economies. Indeed, large Japanese corporations such as Toyota, Nissan, Sony, Matsushita, and so on, have set up branch plant operations in other Asian countries. But this source of direct investment is cyclical with the yen/dollar exchange rate. When the yen is high and Japan has become a relatively expensive place to produce, Japanese firms disinvest from Japan and invest more in the smaller Asian economies (and in the US itself). Output is reallocated away from the parent firms in Japan to their East Asian subsidiaries whose exports increase, as per our first effect.
But when the yen becomes unusually weak against the dollar, these positive effects quickly unwind and the smaller East Asian economies tend to slump. Their exports, largely invoiced in dollars, fall along with inward direct investment from Japan. One of the most dramatic episodes was the fall in the yen in 1995–1996 just before the great Asian crisis of 1997. True, the crisis itself was mainly due to short-term overborrowing in dollars and yen by five countries: Indonesia, Republic of Korea, Malaysia, Philippines, and Thailand. But when the bubble burst in 1997, the negative economic impact on these countries was aggravated by the weaker value of the yen.
The Bank of Japan left its interest rates unchanged in newly appointed Governor Kazuo Ueda’s first policy meeting.
The decision was in line with economist expectations for no changes to the benchmark interest rate, which has been held at -0.1% since the central bank took rates below zero in 2016.
The central bank also kept the tolerance range for 10-year Japanese government bonds unchanged at 50 basis points above and below its target of 0%.
In December, the central bank shocked global bond markets by unexpectedly widening its tolerance range for 10-year Japanese government bonds from 25 basis points to 50 basis points above and below 0%.
The Japanese yen weakened roughly 0.8% to 134.75 against the U.S. dollar after the announcement. The yield on the 10-year JGB fell slightly to 0.425%.
While maintaining current policies, the Bank of Japan said it “decided to conduct a broad-perspective review” of its easing measures.
The central bank said the planned timeframe for the review is around one to 1½ years.
“Achieving price stability has been a challenge for a long period of 25 years,” the central bank said, adding that its monetary easing policies “have interacted with and influenced wide areas of Japan’s economic activity, prices, and financial sector.”
In a separate outlook, the central bank forecast inflation for all items excluding fresh food and energy to be around 2.5% for fiscal 2023, and between 1.5% and 2% for 2024 and 2025.
Ueda has previously emphasized inflation needs to be “quite strong and close to 2%” — the central bank’s target — before making any adjustments to the yield curve control policy.
Despite market expectations for the central bank to widen its yield curve control tolerance band further or to scrap the scheme entirely, the central bank stood by its current policies.
“The Bank will continue with QQE(Quantitative and Qualitative Monetary Easing) with Yield Curve Control, aiming to achieve the price stability target as long as it is necessary for maintaining that target in a stable manner,” it said in its outlook.
Asset management firm Pendal’s head of income strategiest Amy Xie Patrick predicts the central bank would abandon YCC rather than widen its tolerance range.
“I think the next move they make with regards to the YCC will be abandonment. But the path to there has to be about making the markets understand that it’s about their concern about markets function rather than their concern about inflation running away from them,” Xie Patrick told CNBC’s “Street Signs Asia.”
It added that the central bank will “not hesitate to take additional easing measures if necessary.”
Inflation in Japan’s capital city ticked higher in April, according to government data released Friday ahead of the BOJ decision.
The consumer price index in Japan’s capital city rose 3.5% in April, exceeding forecasts in a Reuters poll for a 3.2% increase. That figure is also slightly higher than the 3.2% reading in March.
Excluding fresh food and energy, Tokyo’s consumer price index rose 2.3% in April — slightly above the central bank’s inflation target of around 2%. Inflation in Tokyo is a leading indicator of the nationwide trend. Japan’s nationwide core CPI was at 3.1% in March.
Meanwhile, Japan’s unemployment rate rose to 2.8% in March from 2.6% in February, government data showed. That’s higher than Reuters’ forecast for 2.5% and marks the highest reading since January 2022.The nation’s jobs-to-applicant ratio was at 1.32, below Reuters’ estimate of 1.34.
“There remains some uncertainty in the Japanese real economy, but at the same time, inflationary pressures is becoming more imminent,” Hiromi Yamaoka, a former official at the Bank of Japan and the current head of Future Institute of Research told CNBC’s “Squawk Box Asia” on Friday ahead of the announcement.
“It’s a difficult situation but BOJ has to pay attention to price stability as the primary purpose of a central bank,” Yamaoka said, but added the central bank needs to focus more on increased inflation pressures, rather than the real economy.
In order to juggle both, Yamaoka said “they cannot continue the current extraordinary intervention in the JGB market.”
Japan's monetary system is unique in many ways, but it shares some similarities with other countries' monetary systems. In this article, we will compare Japan's monetary system with those of other countries, including the United States, the European Union, and China.

The United States' monetary system is based on the Federal Reserve System, which is the central bank of the United States. The Federal Reserve System is responsible for implementing monetary policy in the United States, with the primary goal of achieving price stability and promoting economic growth. The Federal Reserve System uses various tools to implement monetary policy, including open market operations, reserve requirements, and the discount rate.

One of the key differences between Japan's monetary system and the United States' monetary system is the use of negative interest rates. Japan has been experimenting with negative interest rates since 2016, while the United States has not yet implemented negative interest rates. Negative interest rates are controversial, with some economists arguing that they can stimulate economic growth by encouraging borrowing and spending, while others argue that they can lead to financial instability and discourage saving.
The European Union's monetary system is based on the European Central Bank (ECB), which is the central bank of the European Union. The ECB is responsible for implementing monetary policy in the European Union, with the primary goal of achieving price stability and promoting economic growth. The ECB uses various tools to implement monetary policy, including interest rates, open market operations, and reserve requirements.
One of the key differences between Japan's monetary system and the European Union's monetary system is the use of quantitative easing. Japan has implemented several rounds of quantitative easing in recent years, while the European Union has also used quantitative easing to stimulate economic growth. However, the European Union has been more cautious in its use of quantitative easing, with some economists arguing that it has not been aggressive enough to stimulate economic growth.
China's monetary system is based on the People's Bank of China, which is the central bank of China. The People's Bank of China is responsible for implementing monetary policy in China, with the primary goal of achieving price stability and promoting economic growth. China's monetary system is unique in many ways, with some economists arguing that it is more closely tied to the government than other countries' monetary systems.
One of the key differences between Japan's monetary system and China's monetary system is the use of capital controls. China has implemented strict capital controls to prevent capital flight and maintain financial stability, while Japan has not implemented capital controls to the same extent. Capital controls can have both positive and negative effects on the economy, with some economists arguing that they can prevent financial instability and others arguing that they can discourage foreign investment and hinder economic growth.
Sum up,Japan's monetary system shares some similarities with other countries' monetary systems, but it is also unique in many ways. Japan has implemented various policies over the years to achieve its goals of price stability and economic growth, including the use of interest rates, quantitative easing, and negative interest rates. Comparing Japan's monetary system with those of other countries can provide insights into the strengths and weaknesses of different approaches to monetary policy.