Window guidance

Window guidance (Japanese: 窓口指導) or informal guidance, is an informal policy instrument used to regulate the supply of credit in an industry or sector. Window guidance typically involves the use of benevolent compulsion in order to regulate the supply of credit as a way to achieve policy targets such as sustainability.[1] Window guidance involves the use of monetary policy instruments including lending quotas as an informal way to subsidize or regulate the volume of credit in an industry or financial sector.[2] Window guidance is often associated with the Bank of Japan's policies during the Japanese economic miracle,[3] although similar policies have been widely used in the post WWII era in other Asian countries, as well as Western European countries (France, UK, Belgium, Germany) and Canada.[4]

Window guidance is often criticized for causing inefficient capital allocation as well as being a form of central planning.[5]

  1. ^ Volz, Ulrich; Dikau, Simon. "Out of the window? Green monetary policy in China: window guidance and the promotion of sustainable lending and investment". Grantham Research Institute on climate change and the environment. Retrieved 2022-04-18.
  2. ^ "From Window Guidance to Interbank Rates: Tracing the Transition of Monetary Policy in Japan and China" (PDF). National Graduate Institute for Policy Studies: 285, 287. June 2020.
  3. ^ Rhodes, James R.; Yoshino, Naoyuki (1999-04-01). "Window guidance by the Bank of Japan: was lending controlled". Contemporary Economic Policy. 17 (2): 166–167. doi:10.1111/j.1465-7287.1999.tb00672.x.
  4. ^ Bezemer, D., Ryan-Collins, J., van Lerven, F. and Zhang, L. (2018). Credit where it’s due: A historical, theoretical and empirical review of credit guidance policies in the 20th century. UCL Institute for Innovation and Public Purpose Working Paper Series (IIPP WP 2018-11).
  5. ^ Pham, Peter. "How Do Asian Central Banks Distort And Destroy?". Forbes. Retrieved 2022-04-18.