Noah Smith — Will lack of tax hikes crash the Japanese economy?

Hyperinflation seems to be in the air.

So what [Adam] Posen is saying is essentially that debt monetization will lead international investors to fear hyperinflation - which really does kill stocks. I'm very, very suspicious of this, because I think it's just a fact that no one really knows why or when hyperinflation happens. It's always possible that investors could get scared of hyperinflation and bolt.

But suppose Japan's debt were half of what it is. Wouldn't it still be the case that investors could get scared of monetization-induced hyperinflation and bolt at any moment? What level of debt and monetization is reassuring to investors, and what level is scary? Posen has no evidence to support his contention that Japan is near a tipping point. But does anyone have evidence? Can anyone?

Noahpinion
Will lack of tax hikes crash the Japanese economy?
Noah Smith | Assistant Professor of Finance, Stony Brook University

I posted a link to Brian's post over at Noah's place.