Quantitative Easing in Japan: A critical evaluation.

This article examines the Bank of Japan’s (BoJ) Quantitative Easing (QE) program initiated in 2013, focusing on why it has persisted despite largely negative empirical evidence regarding its effectiveness in achieving key macroeconomic goals like sustained inflation and GDP growth. It highlights that while traditional critiques emphasize transmission mechanism failures and structural challenges such as Japan’s “balance sheet recession,” the program has become institutionally entrenched, effectively positioning the BoJ as a market-maker of last resort that supports asset prices and liquidity in Japanese financial markets. Drawing on critical macro finance (CMF) theory, the article argues that QE has evolved into a de facto standing facility underpinning certain asset classes, complicating efforts to normalize monetary policy amid growing interest rate differentials with the U.S. Federal Reserve. This case illustrates the complexities central banks face in transitioning from bank-based to market-based financial systems and the structural implications of prolonged unconventional monetary policies.