In Japan, All That Matters is… erm, “Structural Reform”?
A gem from the MPC’s June meeting minutes – yes, I’m a month behind still:
9. Japanese output had grown by 0.9% in the first quarter. It was probably too soon for that to have reflected the impact of recent announcements on fiscal and monetary policy. A durable improvement in nominal demand growth would depend in part on the third aspect of the Japanese policy package – structural reform – but there was as yet little detail on the form that that would take.
That’s a bit scary to read.
1) They believe so much in those “long and variable lags” that they are inclined to dismiss contrary evidence even when it is staring them in the face. And it sure is a good thing our policy-makers carefully studied the Great Depression and what happened to US industrial production in the months after FDR devalued, otherwise we’d really be in trouble. Oh, wait.
2) The path of Japanese nominal GDP depends “in part” on… supply-side policy? Erm, really? What can that mean? That the Bank of Japan does not determine the level of Yen-denominated values even in the long run? Is it a statement of policy – that the BoJ could raise NGDP but it would not be “durable” (“only inflationary”?) unless the government also does supply-side reform? Or is it an endorsement of “creditism”, the BoJ is “impotent” unless mumble mumble banks mumble financial system mumble mumble deleveraging mumble?
Any better ideas? Somebody send nine copies of Bernanke (1999) to Threadneedle St., pronto.