Contingency Plans for a Potential Financial Crisis
This research program will develop contingency plans for a possible financial crisis in Japan. By preparing the plans beforehand, it aims to minimize the damage to the national economy that such a crisis may cause.
The contingency plans address two crisis levels: (1) the precursory stage and (2) the initial stage. Each stage is defined by the level of long-term interest rates. Our proposals will include emergency fiscal measures, market-taming measures, and emergency expenditure reductions for each stage.
We will mainly use quantitative simulations and institutional analyses to develop our plans. One focus will be the Bank of Japan, which now possesses more than 50% of Japanese government bonds. We will simulate the BOJ’s financial standing under different economic conditions and investigate how it can maintain the market’s confidence during a crisis.