Bill Mitchell (2024): Japonia eta inflazioa
@tobararbulu # mmt@tobararbulu:
“Japan provides an example… when the government and its central bank runs policy settings that are beyond what most economists would think reasonable.” Japan inflation now falling fast – monetary and fiscal policy settings have been vindicated https://billmitchell.org/blog/?p=61510
Japan inflation now falling fast – monetary and fiscal policy settings have been vindicated
(https://billmitchell.org/blog/?p=61510)
The latest information from Japan suggests that in December 2023, its inflation fell sharply for the second consecutive month and that one might conclude the inflation episode is coming to an end. The Bank of Japan made the assumption that this supply-side inflation was temporary and would subside fairly quickly once those constraints eased. And they were right. All the other central banks somehow convinced themselves that the inflation was demand-driven and have been needlessly pushing up interest rates. The experiment is nearly over and I think it is clear that the Japanese path was the sound one. At that point, the New Keynesian academics and officials should resign.
(…)
The point is that once again Japan provides an example, even if the policy makers are in denial about what they are doing, of how mainstream macroeconomics is off the mark.
I have read comments on earlier posts that I have written saying that the Bank of Japan operates using Monetarist logic – that inflation is the result of an excessive monetary base.
It is true that their official discussions talk about how they watch the monetary base.
But if they were truly Monetarist then they would not have defied the rest of the world in the last few years and held rates constant.
That decision separates them from the rest of the central banks who have behaved in a thoroughly orthodox fashion over the last few years – inflation rise, push up rates.
The point I make is that what Japan provides us with is a tested example of what happens when the government and its central bank runs policy settings that are beyond what most economists would think reasonable.
The differences between Japanese fiscal and monetary policy settings and those in place elsewhere over the thirty or so years are not just trifling variations.
Japan has pushed large fiscal deficits relative to other nations and a mainstream economist would say their monetary policy settings are extreme.
So we have been able to see over an extended period what happens when those ‘extreme’ settings are in place.
And what we see is that the mainstream predictions fail badly across all the major aggregates.
That is why Japan is important to study and understand.
