Reflating Japan: Time to Get Unconventional?

Elif Arbatli Saxegaard, Dennis Botman, Kevin Clinton, Pietro Cova, Vitor Gaspar, Zoltán Jakab, Douglas Laxton, Constant Lonkeng Ngouana (), Joannes Mongardini and Hou Wang

No 2016/157, IMF Working Papers from International Monetary Fund

Abstract: Japan has ambitious economic goals: 3 percent nominal growth; 2 percent inflation; and a primary budget surplus. Abenomics has employed the three arrows of monetary, fiscal and structural policies, but the goals remain out of reach. We propose that countercyclical measures be embedded in long-run frameworks that anchor expectations for inflation and public debt. In addition, we argue for an incomes policy to assist reflation. Model simulations suggest that, combined, these proposals would make headway towards the goals, with, on balance, a better chance of success than the more unconventional policy alternatives proposed by Krugman, Svensson, and Turner from a risk-return perspective.

Keywords: WP; inflation target; private sector; inflation expectation; output gap; wage-price dynamics; Japan; monetary policy; fiscal policy; incomes policy; structural reforms; wage inflation guideline; wage-push inflation; dynamics amount; inflation guideline; wage growth; wage inflation target; wage pressure; BoJ inflation target; BoJ's inflation target; Inflation; Inflation targeting; Labor markets; Deflation; Global (search for similar items in EconPapers)
Pages: 46
Date: 2016-08-02
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Citations: View citations in EconPapers (7)

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