"Engineering a successful transition out of deflation is one of the most challenging aspects of monetary policy, but the Bank of Japan just might be able to do it this time." – John Makin, AEI
Makin finds that:
- Japan has suffered two "lost decades" of stagnant growth, but new quantitative easing by the Bank of Japan may finally resuscitate the country’s economy.
- Though stimulating the economy by expanding the money supply is not an ideal course, if Japan allows deflation to persist, its massive debt burden will grow as its economy shrinks and its currency depreciates.
- Japan's experiment could provide lessons on the effects of quantitative easing for other nations and may offset weak outlooks in the United States and Europe.
John Makin is a former consultant to the US Treasury Department, the Congressional Budget Office, and the International Monetary Fund. He is available for interviews and can be reached at [email protected] or through his research assistant [email protected].
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