Fiscal cost to exit quantitative easing: the case of Japan

Hiroshi Fujiki, Hajime Tomura

    Research output: Contribution to journalArticle

    2 Citations (Scopus)

    Abstract

    This paper simulates the cash flows and balance sheet of the Bank of Japan (BoJ) before and after the end of Quantitative and Qualitative Monetary Easing (QQE) under various scenarios. The simulations show that the BoJ will record significant accounting losses after the end of QQE, because the yields on Japanese government bonds (JGBs) acquired during QQE will be lower than the interest rate on excess reserves after the end of QQE. These losses are fiscal costs for the consolidated Japanese government, as they correspond to increased interest expenses to the public. The extent of the BoJ's accounting losses depends crucially on the duration of QQE and the interest-rate elasticity of banknote demand.

    Original languageEnglish
    Pages (from-to)1-11
    Number of pages11
    JournalJapan and the World Economy
    Volume42
    DOIs
    Publication statusPublished - 2017 Jun 1

    Fingerprint

    interest rate
    bank
    Japan
    government bonds
    balance sheet
    costs
    scenario
    simulation
    demand
    Fiscal
    Quantitative easing
    Costs
    Exit
    Bank of Japan
    Interest rates

    Keywords

    • Central bank
    • Fiscal cost
    • Quantitative and Qualitative Monetary Easing
    • Quantitative easing
    • Solvency

    ASJC Scopus subject areas

    • Finance
    • Economics and Econometrics
    • Political Science and International Relations

    Cite this

    Fiscal cost to exit quantitative easing : the case of Japan. / Fujiki, Hiroshi; Tomura, Hajime.

    In: Japan and the World Economy, Vol. 42, 01.06.2017, p. 1-11.

    Research output: Contribution to journalArticle

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