The Bank of Japan is running an unprecedented historic experiment by doubling its already record high monetary base to more than 50 % of GDP over the next 2 years. The aim is to escape from deflation and achieve 2 % inflation. This chapter questions the main assumptions underlying the new monetary policy: (1) There is little evidence that deflation is a major obstacle to Japan’s prosperity. (2) Japan does not seem to be suffering from insufficient demand. (3) It is not clear how the BoJ can control inflation expectations. (4) Even if it succeeds, it will face the challenge of controlling the negative side effects of rising nominal interest rates, an accelerating velocity of money, lower real wages and a devaluation of the yen that may spur a currency war.
CITATION STYLE
Waldenberger, F. (2014). Japan’s New Monetary Policy: Some Critical Questions (pp. 43–55). https://doi.org/10.1007/978-3-319-03062-3_3
Mendeley helps you to discover research relevant for your work.