Reflating Japan: Time to Get Unconventional?

By Elif C Arbatli Saxegaard, Dennis P Botman, Kevin Clinton, Pietro Cova, Vitor Gaspar, Zoltan Jakab, Douglas Laxton, Constant A Lonkeng Ngouana, Joannes Mongardini, Hou Wang

August 2, 2016

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Elif C Arbatli Saxegaard, Dennis P Botman, Kevin Clinton, Pietro Cova, Vitor Gaspar, Zoltan Jakab, Douglas Laxton, Constant A Lonkeng Ngouana, Joannes Mongardini, and Hou Wang. Reflating Japan: Time to Get Unconventional?, (USA: International Monetary Fund, 2016) accessed December 24, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Deflation, Fiscal policy, Inflation, Inflation targeting, Labor, Labor markets, Monetary policy, Prices

Keywords: BoJ inflation target, BoJ's inflation target, Deflation, Dynamics amount, Fiscal policy, Global, Incomes policy, Inflation, Inflation expectation, Inflation guideline, Inflation target, Inflation targeting, Japan, Labor markets, Monetary policy, Output gap, Private sector, Structural reforms, Wage growth, Wage inflation guideline, Wage inflation target, Wage pressure, Wage-price dynamics, Wage-push inflation, WP

Publication Details

Pages:

46
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/157
Stock No:

WPIEA2016157
ISBN:

9781475523140
ISSN:

1018-5941

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