Working Papers

2021-24 | August 2022


Central Bank Credibility During COVID-19: Evidence from Japan


Japanese realized and expected inflation has been below the Bank of Japan’s two percent target for many years. We examine the impact of announcements of expansionary monetary and fiscal policy under COVID-19 on inflation expectations from an arbitrage-free term structure model of nominal and real yields. We find that both types of policies failed to lift inflation expectations, which instead declined notably over the pandemic period and are projected to only slowly revert back to Bank of Japan target levels. Our results therefore illustrate the challenges faced in raising well-anchored low inflation expectations.

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Article Citation

Christensen, Jens H. E, and Mark M. Spiegel. 2021. "Central Bank Credibility During COVID-19: Evidence from Japan," Federal Reserve Bank of San Francisco Working Paper 2021-24. Available at