Impact of the Kuroda Bazooka on Japanese households’ borrowing intentions

Abstract

This study examines the impact of a monetary policy by the Bank of Japan on households’ willingness to borrow, that was announced on October 31, 2014. This policy, known as Kuroda Bazooka, was not anticipated by the private sector; therefore, it could be regarded as an exogenous shock. To estimate the effects of the Kuroda Bazooka, this study used interrupted time series analysis, a technique often used in medicine, but not yet widely used in economics. The analysis of the data before and after the shock shows that the Kuroda Bazooka increased household borrowing intentions by approximately 10 %. This result suggests that although there was not much change in households’ aggregate borrowing, there was a change in their intention to borrow. Therefore, a monetary policy that merely changes expectations may not be effective.