Japan Picks New Strategy to End Two-Decade Stagnation

[Frodo]

Does anyone think this will work?

With 2 percent inflation target, Japan signals new strategy to end deflation

By Chico Harlan, Tuesday, January 22, 5:20 AM

SEOUL — Japan’s central bank on Tuesday doubled its inflation target to 2 percent, a main pillar in the country’s drastic new strategy to break away from a two-decade economic stagnation.

The Bank of Japan’s new commitment, coupled with the government’s splurge of spending on public works projects, represents a controversial rethink about the way developed countries should repair their crisis-battered economies.

Under Prime Minister Shinzo Abe, elected last month, Japan has turned away from the well-worn practices followed by economies under duress — conventions that call for austerity and debt reduction. Japan, instead, is trying to spend its way out of a recession, rather than cutting back.

The goal is to shake the world’s third-largest economy from two of its most unrelenting problems, chronic deflation and a strong currency, which hurts Japan’s exporters by making their products more expensive overseas. But the strategy represents a particular gamble for a nation already with the highest debt burden in the developed world, at 220 percent of the gross domestic product.

[opebo]

The key is printing in a way that isn't just 'pushing on a string'.  The BOJ needs to create truly enormous amounts of fresh Yen, and get it out there in a way that is truly inflationary.  I suppose it is a good opportunity to disappear, say, half of japan's outstanding debt, but that won't effect the economy one way or the other.

The best way for this to go down would be for the BOJ to simply buy dollars in whatever amount is required to get the Yen down to about 150 yen per dollar.  One nice effect this could have for us is allowing the Fed to also print more.

[Beet]

This is a step in the right direction, my only regret is that it is being done by a right-wing government. There are two other things Japan needs, one is to raise the birth rate. This is well-known but never really acted upon. The other thing, not to sound trite, but "just do it". Japanese just have to give up their comfortable position as aspiring salarymen and go take risks, as Akio Morita did in the 1940s and 50s.

[opebo]

This is a step in the right direction, my only regret is that it is being done by a right-wing government. There are two other things Japan needs, one is to raise the birth rate. This is well-known but never really acted upon. The other thing, not to sound trite, but "just do it". Japanese just have to give up their comfortable position as aspiring salarymen and go take risks, as Akio Morita did in the 1940s and 50s.

So, applying one solution to the three problems:

1) print money
2) use the money to pay women a huge bonus for their second child, an even bigger one for their third, etc, and escalating monthly support checks the more children they have.
3) give large, interest free loans to any individual who wants to start a small business.

[Kitteh]

Or, as an alternative to questionably effective pro-natalist policies, allow immigration.

[opebo]

Or, as an alternative to questionably effective pro-natalist policies, allow immigration.

From the Philippines would seem harmless enough. 

[LastVoter]

Or, as an alternative to questionably effective pro-natalist policies, allow immigration.

And pay setup transfer payments for them too.

This is a step in the right direction, my only regret is that it is being done by a right-wing government. There are two other things Japan needs, one is to raise the birth rate. This is well-known but never really acted upon. The other thing, not to sound trite, but "just do it". Japanese just have to give up their comfortable position as aspiring salarymen and go take risks, as Akio Morita did in the 1940s and 50s.

So, applying one solution to the three problems:

1) print money
2) use the money to pay women a huge bonus for their second child, an even bigger one for their third, etc, and escalating monthly support checks the more children they have.
3) give large, interest free loans to any individual who wants to start a small business.

Also you need a nationalized daycare system.

[Indy Texas]

Or, as an alternative to questionably effective pro-natalist policies, allow immigration.

And pay setup transfer payments for them too.

This is a step in the right direction, my only regret is that it is being done by a right-wing government. There are two other things Japan needs, one is to raise the birth rate. This is well-known but never really acted upon. The other thing, not to sound trite, but "just do it". Japanese just have to give up their comfortable position as aspiring salarymen and go take risks, as Akio Morita did in the 1940s and 50s.

So, applying one solution to the three problems:

1) print money
2) use the money to pay women a huge bonus for their second child, an even bigger one for their third, etc, and escalating monthly support checks the more children they have.
3) give large, interest free loans to any individual who wants to start a small business.

Also you need a nationalized daycare system.

Most Japanese women stay at home when they have children. Encouraging them to work outside the home isn't going to alleviate their chronically high unemployment.

Affordable housing is a big obstacle to young people getting married and starting families. So are rigid labor laws that make it virtually impossible for young people to get jobs until one "opens up" (via a wizened old salaryman finally departing to the land of ancestors).

Japan is never going to embrace immigration for a variety of cultural reasons. In that regard, they're like China, but without the people, the land or the natural resources.

[opebo]

Also you need a nationalized daycare system.

Most Japanese women stay at home when they have children. Encouraging them to work outside the home isn't going to alleviate their chronically high unemployment.

Japan has very low unemployment.

[DC Al Fine]

Also you need a nationalized daycare system.

Most Japanese women stay at home when they have children. Encouraging them to work outside the home isn't going to alleviate their chronically high unemployment.

Japan has very low unemployment.

Indeed. And getting their women into the workforce is counter productive in solving their birth rate problem.

[Benj]

Also you need a nationalized daycare system.

Most Japanese women stay at home when they have children. Encouraging them to work outside the home isn't going to alleviate their chronically high unemployment.

Japan has very low unemployment.

Indeed. And getting their women into the workforce is counter productive in solving their birth rate problem.

No it isn't. Generally speaking, developed countries with higher female workforce participation also have higher birth rates. It's a little counterintuitive, but the statistical significance is quite strong. Japan, Italy, Spain etc. have much lower birthrates and much lower female workforce participation while the US, Germany, Britain etc have much higher birthrates and much higher female workforce participation.

Anyway, the easiest and most correct solution to all of Japan's economic problems is a dramatic shift to open immigration. Subsidies for families are well-established to be wasteful and ineffective, not only in Japan but also in Southern Europe, and stimulating the economy through government spending and inflating their way out of debt, while also wise at this point, isn't going to solve the demographic problem.

[a83192]

My question is whether PM Abe wants to raise the birthrate.

[Politico]

Inject hard currency into the economy by covertly buying up all of the drugs the Yakuza is selling. Turn around and export the drugs to interested buyers overseas who are willing to fork over foreign currency. Stick the foreign currency in a vault, print more Yen and repeat process.

[Kitteh]

Inject hard currency into the economy by covertly buying up all of the drugs the Yakuza is selling. Turn around and export the drugs to interested buyers overseas who are willing to fork over foreign currency. Stick the foreign currency in a vault, print more Yen and repeat process.

[Nhoj]

Also you need a nationalized daycare system.

Most Japanese women stay at home when they have children. Encouraging them to work outside the home isn't going to alleviate their chronically high unemployment.

Japan has very low unemployment.

Indeed. And getting their women into the workforce is counter productive in solving their birth rate problem.

No it isn't. Generally speaking, developed countries with higher female workforce participation also have higher birth rates. It's a little counterintuitive, but the statistical significance is quite strong. Japan, Italy, Spain etc. have much lower birthrates and much lower female workforce participation while the US, Germany, Britain etc have much higher birthrates and much higher female workforce participation.

Anyway, the easiest and most correct solution to all of Japan's economic problems is a dramatic shift to open immigration. Subsidies for families are well-established to be wasteful and ineffective, not only in Japan but also in Southern Europe, and stimulating the economy through government spending and inflating their way out of debt, while also wise at this point, isn't going to solve the demographic problem.

Uh no, Germany has had one of the worst birth rates for some time. its very slightly improved in recent years.

[King]

Inject hard currency into the economy by covertly buying up all of the drugs the Yakuza is selling. Turn around and export the drugs to interested buyers overseas who are willing to fork over foreign currency. Stick the foreign currency in a vault, print more Yen and repeat process.

Politico thinks the world economy plays by Stallone movie rules.

[Ban my account ffs!]

Also you need a nationalized daycare system.

Most Japanese women stay at home when they have children. Encouraging them to work outside the home isn't going to alleviate their chronically high unemployment.

Japan has very low unemployment.

Indeed. And getting their women into the workforce is counter productive in solving their birth rate problem.

No it isn't. Generally speaking, developed countries with higher female workforce participation also have higher birth rates. It's a little counterintuitive, but the statistical significance is quite strong. Japan, Italy, Spain etc. have much lower birthrates and much lower female workforce participation while the US, Germany, Britain etc have much higher birthrates and much higher female workforce participation.

Anyway, the easiest and most correct solution to all of Japan's economic problems is a dramatic shift to open immigration. Subsidies for families are well-established to be wasteful and ineffective, not only in Japan but also in Southern Europe, and stimulating the economy through government spending and inflating their way out of debt, while also wise at this point, isn't going to solve the demographic problem.

The developed nations that have higher fertility rates do so because while women often work and start families, they are given significant financial incentives to have children (via transfer payments in Scandinavia/the UK/France) or through tax incentives (the U.S.).

More importantly, these societies have seen liberalization of gender roles.  These countries generally don't frown upon women balancing a career with family as much as more conservative cultures like Japan, Germany, or southern Europe.  There it is seen as either/or rather than a balancing act.  If you want children, the mother should stay home and care for them, in other words.

[Darth Maul]

This will fail. As I have said before.

[Simfan34]

Inject hard currency into the economy by covertly buying up all of the drugs the Yakuza is selling. Turn around and export the drugs to interested buyers overseas who are willing to fork over foreign currency. Stick the foreign currency in a vault, print more Yen and repeat process.

Bizarrely enough, this is economically sound, but what's the point of deflationary forex buying if one is to counteract that with money printing? I suppose the ratios would have to be carefully managed. And is this enough money to really change things?

Also, this is highly illegal. But I suppose it could be a sting operation- arrest buyers and seize assets, which is actually something I would support. Every time I hear something like "$60 million dollars of cocaine seized" I always think about what a waste it is. Sell the stuff, arrest the buyers, pocket the money and drugs, repeat ad nauseam. I would think this would inject enough uncertainty and distrust in the international drug market to cause it to gradually dry up.

You might actually be on to something here.

[Beet]

This will fail. As I have said before.

Why?

[Politico]

Inject hard currency into the economy by covertly buying up all of the drugs the Yakuza is selling. Turn around and export the drugs to interested buyers overseas who are willing to fork over foreign currency. Stick the foreign currency in a vault, print more Yen and repeat process.

Bizarrely enough, this is economically sound, but what's the point of deflationary forex buying if one is to counteract that with money printing? I suppose the ratios would have to be carefully managed. And is this enough money to really change things?

Also, this is highly illegal. But I suppose it could be a sting operation- arrest buyers and seize assets, which is actually something I would support. Every time I hear something like "$60 million dollars of cocaine seized" I always think about what a waste it is. Sell the stuff, arrest the buyers, pocket the money and drugs, repeat ad nauseam. I would think this would inject enough uncertainty and distrust in the international drug market to cause it to gradually dry up.

You might actually be on to something here.

It was a quick tongue-in-cheek comment, but when you've been battling deflation for this long perhaps it is time to start thinking outside-of-the-box? You're best off simply printing Yen, using the funds to purchase drugs at a premium, turn around and re-sell the drugs to somebody else at a discount, and then repeat the process. No point in exporting the drugs in exchange for foreign pieces of paper. The whole point would be to expand the money supply and create inflation rather than continuing to struggle with deflation. It is hard to predict to what degree this would have an impact on the money supply, let alone what the unintended consequences would be. Japan is probably not the best place to run such an experiment since I suspect demand for drugs is much lower there relative to most other developed countries.

While this is all tongue-in-cheek, it is worth noting that Miami had a much higher velocity of money in the late 1970s/early 1980s relative to everywhere else in the country. Nowhere else came close. Just saying...