Using Monetary Policy to End Stagnation
Advice for the DPJ Administration
Surely Japan will proceed down the road France took before World War II if the members of its political elite continue to buy the frivolous arguments of the monetary authorities. France found itself unable to overcome stagnation as a result of bungled monetary management, and it became a divided nation. The French people lost confidence in their own country’s elite, and they also lost the will to fight, as they were unable to forge a united front to repel an invader. The ramification of the country’s quick defeat rippled all the way into Asia, where it bolstered the position of Japan’s militaristic faction. If instead the warfare between France and Germany had bogged down in a stalemate, Japan might not have blundered off in the direction of reckless adventurism.
The people of Japan kicked the Liberal Democratic Party out of power last year because, as a result of the misguided monetary policy, the business slump just kept getting longer. Public discontent had mounted, and it became a major factor behind the victory of the Democratic Party of Japan in the August 2009 general election. I sincerely hope that the new administration will not be fooled by the strange measures the BOJ is devising, such as its new system for playing the role of the Development Bank of Japan. Recognizing that monetary policy does indeed have considerable power, the authorities must use it to extricate Japan from its quagmire.
Translated from an original article in Japanese written for Japan Echo Web. [August 2010]
Harada Yutaka
Graduated from the University of Tokyo, where he majored in economics. Joined the Economic Planning Agency and subsequently received his master’s degree in economics from the University of Hawaii. Has been an executive research fellow in the Cabinet Office’s Economic and Social Research Institute. Is now chief economist at Daiwa Institute of Research. Author of Nihon no ushinawareta jūnen (Japan’s Lost Decade) and other works.
