The demographics have driven the zero-growth of the last years.
On the topic of inevitable destruction of Japan and hyperinflation --some of you guys forget: Deficit spending is just a wealth transfer from the government to the people. This is what has happened very slowly over the last few decades. The people of Japan are wealthy (relative to the US). Just as easily, the people can transfer their wealth back to the government to reduce debt burden (through taxes). And in Japan, they'll gladly do it (remember Kamikazes?)... after all, these are people who are now newly optimistic after recently losing 30% of their wealth through currency devaluation. The next 30% might be a little more painful, but are still doable.
The 'happy ending' for Japan is that the weaker currency brings back growth, rates rise in due time (due to the economy becoming healthier), and Japan raises taxes (which it has a ton of capacity to do) to bring the budget back into balance given the new cost of money. Given their forex reserves and ability to tax (which can't be underestimated), they have a decent probability of landing on their feet....although i wouldn't be surprised at 150 yen/d.
They do seem like buffoons trying to talk the rates down right now. They want their cake... What they need to do is literally hand out cash on the streets and get the yen to 120/d. Then it doesn't matter what rates do... (because lets face it, Japanese aren't going to start borrowing because money is cheap - that was already the case, and did nothing -- they'll only start borrowing if they GENUINELY think they can pay back those yen loans in cheaper future currency .. and as Krugman says, you have to appear reckless as a central bank to get that to happen).
So my only criticism is that they aren't reckless enough if they are really serious about 2% ... This fear of going over 1% is absurd given the circumstances.
On the topic of inevitable destruction of Japan and hyperinflation --some of you guys forget: Deficit spending is just a wealth transfer from the government to the people. This is what has happened very slowly over the last few decades. The people of Japan are wealthy (relative to the US). Just as easily, the people can transfer their wealth back to the government to reduce debt burden (through taxes). And in Japan, they'll gladly do it (remember Kamikazes?)... after all, these are people who are now newly optimistic after recently losing 30% of their wealth through currency devaluation. The next 30% might be a little more painful, but are still doable.
The 'happy ending' for Japan is that the weaker currency brings back growth, rates rise in due time (due to the economy becoming healthier), and Japan raises taxes (which it has a ton of capacity to do) to bring the budget back into balance given the new cost of money. Given their forex reserves and ability to tax (which can't be underestimated), they have a decent probability of landing on their feet....although i wouldn't be surprised at 150 yen/d.
They do seem like buffoons trying to talk the rates down right now. They want their cake... What they need to do is literally hand out cash on the streets and get the yen to 120/d. Then it doesn't matter what rates do... (because lets face it, Japanese aren't going to start borrowing because money is cheap - that was already the case, and did nothing -- they'll only start borrowing if they GENUINELY think they can pay back those yen loans in cheaper future currency .. and as Krugman says, you have to appear reckless as a central bank to get that to happen).
So my only criticism is that they aren't reckless enough if they are really serious about 2% ... This fear of going over 1% is absurd given the circumstances.
