ESRI Discussion Paper Series No.404 Monetary Policy Announcements and Household Expectations: Evidence from Two Identification Strategies

Takeshi Niizeki

Visiting Senior Researcher, Economic and Social Research Institute, Cabinet Office

Professor, Graduate School of Social Sciences, Chiba University

Abstract

This paper examines the impact of the Bank of Japan's monetary policy announcements from April 2023 to March 2025 on household expectations using two identification strategies: high-frequency identification and information provision experiments. The findings are as follows. First, we find no significant difference in household expectations in the two days immediately before and after all 16 announcements. In contrast, when information about changes in monetary policy is provided randomly, households do revise their expectations. These expectation revisions are consistent with the rational inattention model. Second, in response to the provision of information on monetary tightening, households generally lower their inflation expectations but raise their expectations for real GDP growth. Several possible mechanisms behind these responses are discussed.