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Changes in Perceptions about Monetary Policy:
Estimating the Policy Reaction Function Using Market Survey Data

日本語

March 25, 2026
Shunsuke Haba*1
Ryuichiro Hirano*2
Yuichiro Ito*3
Sohei Kaihatsu*4

Abstract

We estimate the policy reaction function of monetary policy as perceived by Japan's market participants, using market survey data. The key findings are as follows. First, consistent with previous research in other economies, the coefficient for inflation rate in the perceived policy reaction function in Japan is almost zero when the nominal interest rate is constrained by the effective lower bound. This coefficient tends to rise during subsequent interest rate hike periods, following changes in central bank policy, suggesting that market participants update their perceptions of monetary policy in response to actual policy changes. Second, although the coefficient for inflation rate generally increases, in the group with long-term inflation expectations deviating downward from the price stability target, it remains low even during recent interest rate hikes, suggesting that this subgroup of market participants may expect an extended period of low interest rates. Third, the market participants who assume a stronger monetary policy response to inflation tend to have more stable long-term inflation expectations around 2%. These results suggest that the perceptions of monetary policy among private agents are state-dependent, and that the macroeconomic stability and the effectiveness of monetary policy may vary over time.

JEL classification
C32, E43, E52, E58

Keywords
Monetary Policy Rule, Survey Forecasts, Policy Reaction Function

In writing this paper, we received valuable comments from Takuto Arao, Takahiro Minami, Jouchi Nakajima, Koji Nakamura and BOJ staff members. Any errors remaining in this paper are those of the authors themselves. Additionally, the views expressed herein are those of the authors and do not necessarily reflect the official views of the Bank of Japan.

  1. *1Monetary Affairs Department (currently Personnel and Corporate Affairs Department), Bank of Japan
    E-mail : shunsuke.haba@boj.or.jp
  2. *2Monetary Affairs Department, Bank of Japan
    E-mail : ryuuichirou.hirano@boj.or.jp
  3. *3Monetary Affairs Department, Bank of Japan
    E-mail : yuuichirou.itou@boj.or.jp
  4. *4Monetary Affairs Department, Bank of Japan
    E-mail : souhei.kaihatsu@boj.or.jp

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