The latest information from Japan suggests that in December 2023, its inflation fell sharply for the second consecutive month and that one might conclude the inflation episode is coming to an end. The Bank of Japan made the assumption that this supply-side inflation was temporary and would subside fairly quickly once those constraints eased. And they were right. All the other central banks somehow convinced themselves that the inflation was demand-driven and have been needlessly pushing up interest rates. The experiment is nearly over and I think it is clear that the Japanese path was the sound one. At that point, the New Keynesian academics and officials should resign. After that, as it is Wednesday, we have some music to soothe our souls....William Mitchell — Modern Monetary Theory
Japan inflation now falling fast – monetary and fiscal policy settings have been vindicated
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
https://www.rateinflation.com/consumer-price-index/japan-cpi/
ReplyDeleteJapan CPI up 7% cumulatively in 5 years… they don’t have any “inflation”….
US cpi at end of 2018 was 251 now it’s 306… ie up 22%… well above stated 2% annual target…
Two completely different situations….
So Democrats have created a big political problem for themselves due to their fiscal policy which then they turn to the monetarists to solve for them..,
Hence the unprecedented policy rate increases of 2022 and the continuous reduction in system reserve balances.,,
Why would you choose a nation without “inflation” as an example to try to refute monetarism?
ReplyDeleteIf Japan cpi was up 22% instead of 7% they would be increasing rates like banshees….