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June 18, 2025

Japan. Abenomics and the BoJ Run Out Of Options.

Japan. Abenomics and the BoJ Run Out Of Options.

by Burnham Banks / Tuesday, 05 May 2015 | 8:36 am / Published in Articles
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Japan is a cautionary tale of what happens when an export dependent economy has an inadequate domestic demand base.

The Bank of Japan appears to have run out of options. QQE on its own can exert pressure on interest rates and boost output but on the fiscal policy side, tax hikes have the ability to further depress interest rates but suppressing output. The result can be a serious liquidity trap where interest rates become irrelevant and output stagnates.

After chronic deflation and recession, inflation might finally finish off the Japanese economy.

 

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“Hello. I’m Burnham Banks and I studied economics in the late 80s and early 90s. I’m still studying economics today and am still no wiser. This blog is a journal, a record of my thoughts and experiences. If we are destined to repeat our mistakes, we should at least repeat them faithfully. If not, then perhaps the past is a mischievous guide and we should try something new.”

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