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Re: the first point, it actually is surprising, at least to some, because under Keynesian doctrine, Japan was supposedly in a "liquidity trap" slash "zero lower
by jvm 13y ago
Re: the first point, it actually is surprising, at least to some, because under Keynesian doctrine, Japan was supposedly in a "liquidity trap" slash "zero lower bound" where monetary policy is supposedly ineffective, but obviously it was thoroughly effective.
Re: the second point, it looks like RGDP rose 3.5% annualized in the 1st quarter, that means that real incomes in Japan rose in aggregate, even taking inflation into account. If true, it means that incomes rose faster than prices.
source: http://www.reuters.com/article/2013/05/16/japan-economy-gdp-idUSL3N0DX04U20130516 http://www.reuters.com/article/2013/05/16/japan-economy-gdp-...
- cromwellian 13y agoBy "monetary policy ineffective" they mean slashing interest rates. Keynesians have been saying for a long time that the only effective monetary policy in a liquidity trap is to cause people to credibly believe you are raising the inflation rate. It's not really surprising at all, Ben Bernanke and Paul Krugman have basically been calling for this (in Japan) for over a decade.
- bdcs 13y agoTo expand further, lowering interest rates at the ZLB doesn't do anything because people will hold money rather than deposit it at a nominal interest rate at or below zero. Hence, central banks must buy assets: treasuries in the case of the Fed and JGB/ETFs in the case of BoJ. Buying assets is effective at the ZLB, according to Keynesians anyhow.