02.18.2013 18:19

Giving Abe's Policy a Chance

New PM wants to solve Japan's economic problems with an expansionary fiscal approach, and FDR's experience would seem to support his argument
By Barry Eichengreen
 
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The new Japanese government of Shinzo Abe appears to be serious about addressing the country's economic woes. That's been said of Japanese politicians before, of course. This time, however, Japan's leaders have been quite specific about the steps they plan to take. Abe proposes doubling the Bank of Japan's (BOJ) inflation target and appointing a central bank governor who will make it a priority to end deflation. The BOJ will then seek to hit its new target with an expanded program of asset purchases. The government will meanwhile back a new monetary policy with a fiscal stimulus of 2 per cent of GDP.

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