The Art of Central Bank Communication: A Topic Analysis on Words used by the Bank of Japan's Governors

This paper addresses the art of central bank communication, in a semantic analysis which applies a topic model to the regular press conference documents of the Bank of Japan (BOJ)'s Gov. Masaaki Shirakawa and Gov. Haruhiko Kuroda. Based on the standard method of latent Dirichlet allocation (LDA) in the statistical natural language processing literature, our research on the communication strategies that the BOJ pursued under two governorships using over 70 press conference documents indicates significant differences between the Shirakawa and Kuroda governorships in terms of topic distribution. In early 2016, when the negative interest rate policy was introduced during the era of Kuroda's governorship, the ratio of "policy goal" topics decreased dramatically, despite being an essential feature of Gov. Kuroda's vocabulary relative to Gov. Shirakawa to that point in time. Since the ambiguity in the words of the governors is contained in "discretionary" topics, which include to strengthen, to confront, to recognize, to plan and so forth, the communication strategy in the Shirakawa governorship was considered "Delphic" in that the semantic ambiguity may reveal bad fundamental conditions concerning the Japanese economy.