Understanding the Impact of 公定歩合 on Monetary Policy and Economic Stability in Japan

Introduction

This paper explores the significance of 公定歩合 (kōtei buai), the official discount rate set by the Bank of Japan (BoJ), in shaping monetary policy and maintaining economic stability in Japan. The purpose of this report is to analyze how changes in the discount rate influence liquidity in the banking system, affect interest rates, and ultimately impact the broader economy. Given Japan’s unique economic landscape, particularly in the context of prolonged low growth and defl