[MUSIC] We've seen that fiscal policy looks like it was attempting, it was stimulative, it was expansive, it was attempting to get Japan to grow faster. Let's look and see what monetary policy was doing in this period because you know that monetary policy is another tool that governments can use to try to influence the growth of their economy. If it's growing too fast, they can raise interest rates to slow it down, if it's growing too slowly, they can reduce interest rates to speed it up. So, let see what Japan's central bank has done. Well, actually, we find that in Japan interest rates have been near zero now for many years because when Japan's crisis began in the 1990s, the central bank brought interest rates down very low. And then once they were down that low, there was nowhere else to go, so they couldn't use interest rates to stimulate the economy. They wanted to get the economy to grow, so what could they do? Well, they invented something called quantitative easing. And quantitative easing is a non-conventional monetary policy tool, which involves central banks going out to banks, commercial banks, buying bonds from them in huge quantities. And paying those commercial banks with cash, actually reserves, that those banks hold and then can lend. The idea of the central bank is, let's get these banks to have reserves, which they can lend. Hopefully, they'll lend money, and the economy will get started again. So Japan invented quantitative easing to try to get out of its lost decade. It used it for a few years and then stopped. And when the global financial crisis began, a number of other countries started using quantitative easing. The United States, the UK, finally the EU, and then Japan came and used it again. Now, how can you tell if a country is using quantitative easing to try to stimulate its economy? Well, what we look at is the central bank balance sheet, okay, here's the idea. If the Central Bank is buying bonds and creating money to pay for them, the size of the balance sheet would grow. And in some cases it will grow almost exponentially, right, because we've got huge purchases of bonds trying to put money into the economy. On this chart you will see, if you look at the year 2009, you can see the United States and the UK suddenly starting to do quantitative easing. Their balance sheet total goes up quite a bit, and we see the Bank of Japan is flat because they weren't doing it at that moment. But then they start doing it, you can see there between 2013 and 2015, the amount of assets on their balance sheet begins to rise. And actually, by the end of the period, we see that Japan is so far above all the others that we actually have to create a different axis for their [LAUGH] numbers. So the Japanese central bank is expected to continue quantitative easing for some time until its assets are well over 100% of GDP, which is the number that the other countries in this chart never reached. In fact, you see that the United States is trying to get its balance sheet back down. You see how, for the federal reserve, that number goes down at the end of the period. So Japan is doing an unprecedented quantitative easing, creating what could potentially be money supply by buying bonds from commercial banks with no end in sight. With no sense, by any of us because we don't know, what the long-term effect of this massive amount of liquidity could be on the economy. Why are they doing it? To try to get the economy back to growth, to try to get inflation to be around that target of 2%, and stop being negative in deflationary periods. [MUSIC]