No. of Recommendations: 7
More importantly, Japan’s experience actually reinforces the modern point:
Even there, policymakers spent decades trying to create inflation through aggressive monetary and fiscal policy.
And yet nearly all of the tools prescribed by our current wonderful knowledge were tried there, unsuccessfully:
Japan combated decades of deflation (approx. 1990s–2020s) primarily through massive monetary easing, including zero/negative interest rates and quantitative easing (QE), alongside fiscal stimulus and structural reforms known as "Abenomics" (launched 2013). These measures aimed to boost domestic demand, encourage borrowing, and raise inflation to a
2% target.
Yes, Japan has some structural differences. How are we to know that there won’t be an equal, but different set of differences that impact our ability to deal with a deflation, given that we haven’t had one in 100 years?
This is a bit too facile, and I think Jim had it right. You aim for 2% because if you’re low, you’re still not in “danger Will Robinson” territory. If you aim for zero% and miss, you are.
