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Reflating Japan: Time to Get Unconventional?
Author: Ms. Elif C Arbatli Saxegaard, Mr. Dennis P Botman, Kevin Clinton, Pietro Cova, Vitor Gaspar, Zoltan Jakab, Mr. Douglas Laxton, Mr. Constant A Lonkeng Ngouana, Mr. Joannes Mongardini, and Hou Wang
Series:
IMF Working Papers
Volume/Issue:
Volume 2016: Issue 157
Language:
English
Publication Date:
02 Aug 2016
DOI:
https://doi.org/10.5089/9781475523140.001
ISBN:
9781475523140
ISSN:
1018-5941
Pages:
46
Keywords:
WP; inflation target; private sector; inflation expectation; output gap; wage-price dynamics; Japan; monetary policy; fiscal policy; incomes policy; structural reforms; wage inflation guideline; wage-push inflation; dynamics amount; inflation guideline; wage growth; wage inflation target; wage pressure; BoJ inflation target; BoJ's inflation target; Inflation; Inflation targeting; Labor markets; Deflation; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Japan has ambitious economic goals: 3 percent nominal growth; 2 percent inflation; and a primary budget surplus. Abenomics has employed the three arrows of monetary, fiscal and structural policies, but the goals remain out of reach. We propose that countercyclical measures be embedded in long-run frameworks that anchor expectations for inflation and public debt. In addition, we argue for an incomes policy to assist reflation. Model simulations suggest that, combined, these proposals would make headway towards the goals, with, on balance, a better chance of success than the more unconventional policy alternatives proposed by Krugman, Svensson, and Turner from a risk-return perspective.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund