A monetary revolution is also needed elsewhere

Ambrose Evans-Pritchard has a good take on Japan:

“Abenomics is working,” says Klaus Baader, from Societe Generale. The economy has roared back to life with growth of 4pc over the past two quarters – the best in the G7 bloc this year. The Bank of Japan’s business index is the highest since 2007. Equities have jumped 70pc since November, an electric wealth shock.

“Escaping 15 years of deflation is no easy matter,” said Mr Abe this week, after winning control over both houses of parliament, yet it may at last be happening.

Prices have been rising for three months, and for six months in Tokyo. Department store sales rose 7.2pc in June from a year earlier, the strongest in 20 years.

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My view is that Japan is less sclerotic and pre-Thatcherite than often claimed. The Western narrative that Japan kept zombie firms alive and put off reform after the Nikkei bubble burst in 1990 is only half true. The greater failing was monetary policy.

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Yet the real crisis is demographic, and harder to solve.

This will be Mr Abe’s real test. But without a monetary revolution, he could never even have started.

3 thoughts on “A monetary revolution is also needed elsewhere

  1. Here is a good question for market monetarists:

    Which Fed policy is more damaging and should be eliminated first: the fact that the Fed uses the Fed funds rate (an instrument that becomes “mute” at the zero bound) or the fact that the Fed focuses on the rate of inflation rather than NGDP?

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