Japan's monetary policy transition, 1955-2004

This paper surveys the postwar evolution of Bank of Japan (BOJ) monetary policy. Using both qualitative and quantitative data, we describe the changes in the money supply process in response to changing institutional constraints. We focus on the transition from quantitative to qualitative control mechanisms, illuminating, in particular, the important role of the BOJ’s lending guidance (window guidance) in the early periods and financial liberalization in subsequent periods. Monetary policy reaction functions are estimated and used to verify major changes in policy instruments, targets, and indicators