Does Unconventional Monetary Policy Affect Inequality? Evidence from Japan

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Inequality has been largely ignored in the literature and practice of monetary policy, but is gaining more attention recently. Here, we exclusively focus on the impact of unconventional monetary policy (UMP) on inequality. We look at how the recent UMP in Japan affected inequality, using household survey data. Our vector auto regression results show that UMP widened income inequality after Q4 2008 as the Bank of Japan (BoJ) resumed its zero-interest rate policy and reinstated UMP. This is largely due to the portfolio channel. To the best of our knowledge, this is the first study to
empirically analyze the distributional impact of UMP. Japan’s extensive experience with UMP may hold important policy implications for other countries.