As the FT reports this morning:
The Bank of Japan has ended an era of negative interest rates, raising borrowing costs for the first time since 2007 in a historic shift as the country puts decades of deflation behind it.
Kazuo Ueda, the BoJ governor, brought an end to more than a decade of ultra-loose monetary policy, abandoning a swath of easing measures that were put in place to stimulate Asia's most advanced economy.
That comment seems a little hasty to me. As the FT also noted in an email alert:
The central bank will continue with roughly the current amount of Japanese government bond purchases.
This is a very important point: around 54 per cent of Japanese government bonds are owned by the Bank of Japan—a level much higher than seen elsewhere. That level of quantitative easing is to continue, and that is still a very loose monetary policy.
So why has Japan done this? Because it has seen signs that there might, at last, be hints of inflation within the Japanese economy, which it has long sought but been unable to deliver.
To assume that all economies face the same problems is unwise, in other words.
But there is a point to be made nonetheless. Japan could not induce inflation through decades of loose monetary policy. It did not work. The Bank of England did not beat inflation with a tight monetary policy. It did not work.
Monetary policy is not a mechanism to control inflation is the obvious conclusion.
I hate to point out the obvious, but someone has to do it.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Worth making the point that Japan is a very different country, for example very few people are paid over the equivalent of over £1million
Richard Werner found ‘Examining the relationship between 3-month and 10-year benchmark rates and nominal GDP growth over half a century in four of the five largest economies we find that interest rates follow GDP growth and are consistently positively correlated with growth…Policy-makers had better focus on the quantity variables that cause growth.’
https://www.sciencedirect.com/science/article/pii/S0921800916307510
Looks like some are listening to you.
https://www.msn.com/en-gb/money/other/britons-being-unnecessarily-crushed-by-high-interest-rates-and-taxes-warns-former-bank-of-england-adviser/ar-BB1k6l3o?ocid=msedgntp&pc=HCTS&cvid=fc5b02df5b2542e7b7dd8b22540dd323&ei=29
Not sure Richard would agree taxes are too high and should be cut?
I don’t
But we need to change who pays
Do your claim is that the price of money has no influence upon the price of money? an interesting claim!!
So you claim is that the price of money has no influence upon the price of money? an interesting claim!!
I said look at the evidence.
The price of money has no serious power to control infaltion is what I said.
If you think infaltion is the price of money that’s weird. It relates to the price of goods and services.
Neoliberals and the conventional economic wisdom hates looking at Japan. They can’t explain Jspsn, so pretend it isn’t there ……