How Can the Public Monitor Monetary Policy

Abstract

On August 11, 2000, the Bank of Japan made one of the most controversial decisions in the history of monetary policy when it ended its zero-interest-rate policy and increased the overnight rate to 0.25%. This paper aims to examine whether or not this decision to terminate the zero-interest-rate policy was premature. In this study, I argue that this decision by the Bank of Japan to tighten monetary policy in 2000 was unreasonable as there still remained a great deal of slack in the economy and inflation was not far from its target. On reading the minutes of the Monetary Policy Meeting of August 11, 2000, I observe that some arguments for tightening monetary policy seem to confuse rates of change and levels.