RIETI Report May 22, 2026

How is Policy Normalization by the Bank of Japan Affecting the Link between Monetary Policy and Stock Prices

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Dear Readers,

Welcome to RIETI Report. This bi-weekly newsletter will keep you updated with the recent columns, event information and research results by RIETI fellows and other leading economists in Japan and around the world.

In this edition, we are featuring topics related to the role of central banks. After years of ultra-loose monetary policy, the Bank of Japan is now back on track as it moves toward policy normalization. In his latest paper, RIETI Senior Fellow Dr. Willem Thorbecke shows how this shift is reshaping the link between monetary policy and stock prices, suggesting that in a positive interest rate environment, the impact of interest rates on stock prices can serve as a channel for transmitting policy shocks to the rest of the Japanese economy.

We hope you will enjoy it. If you have any feedback, we would love to hear from you (news-info@rieti.go.jp).
Editors of RIETI Report (Facebook: @en.RIETI / X: @RIETIenglish / URL: https://www.rieti.go.jp/en/)

FEATURED NON TECHNICAL SUMMARY

How is Policy Normalization by the Bank of Japan Affecting the Link between Monetary Policy and Stock Prices

Willem THORBECKE (Senior Fellow, RIETI)

The Bank of Japan (BoJ) implemented quantitative and qualitative easing (QQE) in 2013. It also set a two percent inflation target. The monetary base increased fourfold over the next ten years. The BoJ initiated yield curve control (YCC) in 2016. YCC involved fixing the uncollateralized overnight call rate at negative 0.1 percent and establishing a band of 25 basis points around zero for 10-year Japanese government bonds (JGBs).

>>>To download full text:
https://www.rieti.go.jp/en/publications/nts/26e038.html

Related Papers

How is Policy Normalization by the Bank of Japan Affecting the Link between Monetary Policy and Stock Prices
Willem THORBECKE (Senior Fellow, RIETI)
https://www.rieti.go.jp/en/publications/summary/26050001.html

The Impact of Monetary Policy on the U.S. Stock Market since the Pandemic
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How is Policy Normalization by the Bank of Japan Affecting the Link between Monetary Policy and Stock Prices
Willem THORBECKE (Senior Fellow, RIETI)
https://www.rieti.go.jp/en/publications/summary/26050001.html

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