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Inflation targeting discussions in Japan - unconventional monetary policy under deflation: How people have argued; Why the BOJ opposes adoption

Fujiki, Minako

Inflation targeting has been adopted by many central banks all over the world, and has brought about the successful result of reducing inflation rates and enhancing the central bank's independence, transparency and accountability. Could this regime also effectively work in Japan, whose economy has been suffering from deflation, by creating inflationary expectations? Krugman's suggestion in 1998 that Japan introduce an unconventional monetary measure to get out of a liquidity trap by fueling inflation triggered the debate about inflation targeting. A number of economists, policymakers, journalists and central bankers both inside and outside of Japan have hotly argued the policy and their opinions range from the mundane to the esoteric. This paper seeks to examine both sides of the inflation targeting argument and tries to sort through the confusing discussions.

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Academic Units
Center on Japanese Economy and Business
Publisher
Center on Japanese Economy and Business, Graduate School of Business, Columbia University
Series
Center on Japanese Economy and Business Working Papers, 219
Published Here
February 11, 2011
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