Has Zero Interest Rate Policy of the Bank of Japan Influenced Financial Markets?

This article empirically examines the effect of zero interest rate policy of the Bank of Japan on financial markets. Zero interest rate policy was first introduced in Japan and has been adopted to combat deflation and to promote the economy. This policy was later implemented by other developed countries, including the United States and United Kingdom. Empirical results show that this policy has effectively influenced the expectation of markets, namely, over one-year future interest rates. The zero interest rate policy has been effective in lowering and stabilizing interest rates to boost the economy in Japan