This paper re‐examines empirical evidence on the potency of Japanese monetary policy in the 1990s by comparing the estimated impacts of various proxies for monetary policy shocks on the macroeconomy. My empirical results demonstrate that surprise target changes modeled as proxies for monetary policy shocks had impacts on real output and financial variables over the period 1990–2001. I also show that the estimated effects of identified monetary policy shocks depend on whether or not the shocks are expected: the monetary policy effects on the economy are underestimated when the empirical models fail to control for the market expectation for the monetary policy stance.