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Japanese Monetary Policy

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Japan’s economy has contracted, and the price level there has fallen for much of the last decade. Prospects for a quick turnaround seem dim. Some economists believe that near-zero short-term interest rates and falling aggregate price levels have stymied monetary policy. They call on the Bank of Japan (BOJ) to announce an inflation target a few percentage points above zero and to pursue it aggressively, perhaps by financing a further fiscal expansion. The expectation of higher future inflation, these observers contend, would spur consumption and investment today.

Suggested citation: "Japanese Monetary Policy," Federal Reserve Bank of Cleveland, Economic Trends, no. 01-12, pp. 09, 12.01.2001.

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