Unconventional Politics: Ideas, Policy Networks and Japan’s Monetary Policymaking under Deflation

Unconventional Politics: Ideas, Policy Networks and Japan’s Monetary Policymaking under Deflation

Saori Katada - Associate Professor, School of International Relations, University of Southern California

Friday, April 20, 2018 - 12:00pm to 1:30pm
Room 202, Henry R. Luce Hall See map
34 Hillhouse Avenue
New Haven, CT 06511

Since the global financial crisis, many countries have experienced worryingly low inflation or deflation. Some central banks have taken aggressive unorthodox measures such as large scale quantitative easing, while others have taken a more cautious approach.  What determines the extent to which central banks have tackled the problem of low inflation?  Particularly interesting is the case of the Bank of Japan (BOJ), which for 15 years since its de jure independence of 1998 resisted adaptation of such unorthodox measures.  Examining the case of Japan, this project makes the case that the policy ideas of central bankers are critical to understanding nature of the monetary response to economic downturn and low inflation.  We use text analysis to quantify the level of concern bankers had of inflation, and an autoregressive model analyzes the impact of these policy ideas on monetary policy.  The results show that: 1) central banker concerns about inflation explain the BOJ’s delayed embrace of aggressive reflationary monetary policy, 2) these subjective concerns are a better predictor of policy than objective economic conditions, and 3) there is little support that the political business cycle, political partisanship, or leadership of the BOJ influenced its policy choices. 

(Based on the forthcoming co-authored book under the same title, Cornell University Press, November 2018 - Co-authors: Gene Park (Loyola Marymount University), Saori N. Katada (University of Southern California), Giacomo Chiozza (Victoria University of Wellington) and Yoshiko Kojo (University of Tokyo))

Saori N. Katada is Associate Professor at School of International Relations at University of Southern California. She is a co-author of a book The BRICS and Collective Financial Statecraft (Oxford University Press, 2017), and a forthcoming book Unconventional Politics: Ideas, Policy Networks and Japan’s Monetary Policymaking under Deflation (tentative title, Cornell University Press).  Her single-authored book Banking on Stability: Japan and the Cross-Pacific Dynamics of International Financial Crisis Management (University of Michigan Press, 2001) received Masayoshi Ohira Memorial Book Award.  She has also published six edited and co-edited books and numerous articles on the subjects of trade, financial and monetary cooperation in East Asia as well as Japanese foreign aid.  She is currently working on a book manuscript on Japan’s foreign economic policy and East Asian regionalism.  For her research on regionalism, she was recently awarded Asia Studies Fellow at the East-West Center in Washington, Japan Foundation Research Grant and National Endowment for the Humanities Fellowship.  She has her Ph.D. from the University of North Carolina at Chapel Hill (Political Science) in 1994, and B.A. from Hitotsubashi University (Tokyo).  Before joining USC, she served as a researcher at the World Bank in Washington D.C., and as International Program officer at the UNDP in Mexico City.

Sponsored by The Japan Foundation Center for Global Partnership