IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2016-157.html
   My bibliography  Save this paper

Reflating Japan: Time to Get Unconventional?

Author

Listed:
  • Ms. Elif C Arbatli Saxegaard
  • Mr. Dennis P Botman
  • Kevin Clinton
  • Pietro Cova
  • Vitor Gaspar
  • Zoltan Jakab
  • Mr. Douglas Laxton
  • Mr. Constant A Lonkeng Ngouana
  • Mr. Joannes Mongardini
  • Hou Wang

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.

Suggested Citation

  • Ms. Elif C Arbatli Saxegaard & Mr. Dennis P Botman & Kevin Clinton & Pietro Cova & Vitor Gaspar & Zoltan Jakab & Mr. Douglas Laxton & Mr. Constant A Lonkeng Ngouana & Mr. Joannes Mongardini & Hou Wang, 2016. "Reflating Japan: Time to Get Unconventional?," IMF Working Papers 2016/157, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2016/157
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=44162
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. International Monetary Fund, 2015. "The Gambia: 2015 Article IV Consultation-Press release; Staff Report; and Statement by the Executive Director for the Gambia," IMF Staff Country Reports 2015/272, International Monetary Fund.
    2. Ali Alichi & Mr. Jaromir Benes & Mr. Joshua Felman & Irene Feng & Charles Freedman & Mr. Douglas Laxton & Mr. Evan C Tanner & David Vávra & Hou Wang, 2015. "Frontiers of Monetary Policymaking: Adding the Exchange Rate as a Tool to Combat Deflationary Risks in the Czech Republic," IMF Working Papers 2015/074, International Monetary Fund.
    3. Shibata Ippei, 2020. "Is Labor Market Mismatch a Big Deal in Japan?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 20(2), pages 1-28, June.
    4. Ms. Chie Aoyagi & Mr. Giovanni Ganelli, 2013. "The Path to Higher Growth: Does Revamping Japan’s Dual Labor Market Matter?," IMF Working Papers 2013/202, International Monetary Fund.
    5. Svensson, Lars-E-O, 2001. "The Zero Bound in an Open Economy: A Foolproof Way of Escaping from a Liquidity Trap," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 19(S1), pages 277-312, February.
    6. Buiter, Willem H., 2014. "The simple analytics of helicopter money: Why it works - always," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 8, pages 1-51.
    7. Hyeog Ug Kwon & Futoshi Narita & Machiko Narita, 2015. "Resource Reallocation and Zombie Lending in Japan in the 1990s," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 709-732, October.
    8. Romer, Christina D., 1999. "Why Did Prices Rise in the 1930s?," The Journal of Economic History, Cambridge University Press, vol. 59(1), pages 167-199, March.
    9. Michal Andrle & Patrick Blagrave & Pedro Espaillat & Ms. Keiko Honjo & Mr. Benjamin L Hunt & Mika Kortelainen & René Lalonde & Mr. Douglas Laxton & Eleonara Mavroeidi & Mr. Dirk V Muir & Susanna Mursu, 2015. "The Flexible System of Global Models – FSGM," IMF Working Papers 2015/064, International Monetary Fund.
    10. International Monetary Fund, 2015. "Angola: 2015 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Angola," IMF Staff Country Reports 2015/301, International Monetary Fund.
    11. Jérémie Cohen‐Setton & Joshua K. Hausman & Johannes F. Wieland, 2017. "Supply‐Side Policies in the Depression: Evidence from France," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(2-3), pages 273-317, March.
    12. Ricardo J. Caballero & Takeo Hoshi & Anil K. Kashyap, 2008. "Zombie Lending and Depressed Restructuring in Japan," American Economic Review, American Economic Association, vol. 98(5), pages 1943-1977, December.
    13. Kevin Clinton & Charles Freedman & Michel Juillard & Mr. Ondrej Kamenik & Mr. Douglas Laxton & Hou Wang, 2015. "Inflation-Forecast Targeting: Applying the Principle of Transparency," IMF Working Papers 2015/132, International Monetary Fund.
    14. International Monetary Fund, 2015. "Spain: Staff Report for the 2015 Article IV Consultation - Press Release; Staff Report; and Statement by the Executive Director for Spain," IMF Staff Country Reports 2015/232, International Monetary Fund.
    15. Ali Alichi & Kevin Clinton & Charles Freedman & Mr. Ondrej Kamenik & Michel Juillard & Mr. Douglas Laxton & Mr. Jarkko Turunen & Hou Wang, 2015. "Avoiding Dark Corners: A Robust Monetary Policy Framework for the United States," IMF Working Papers 2015/134, International Monetary Fund.
    16. International Monetary Fund, 2015. "Norway: 2015 Article IV Consultation - Press Release; Staff Report; Informational Annex; and Statement by the Executive Director for Norway," IMF Staff Country Reports 2015/249, International Monetary Fund.
    17. Mr. Giovanni Ganelli & Naoko Miake, 2015. "Foreign Help Wanted: Easing Japan’s Labor Shortages," IMF Working Papers 2015/181, International Monetary Fund.
    18. International Monetary Fund, 2015. "Cambodia: 2015 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Cambodia," IMF Staff Country Reports 2015/307, International Monetary Fund.
    19. Mr. Chad Steinberg & Mr. Masato Nakane, 2011. "To Fire or to Hoard? Explaining Japan’s Labor Market Response in the Great Recession," IMF Working Papers 2011/015, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mariana Colacelli & Emilio Fernández Corugedo, 2018. "Macroeconomic Effects of Japan’s Demographics: Can Structural Reforms Reverse Them?," IMF Working Papers 2018/248, International Monetary Fund.
    2. GOTO Yasuo & Scott WILBUR, 2017. "Efficiency among Japanese SMEs: In the context of the zombie firm hypothesis and firm size," Discussion papers 17123, Research Institute of Economy, Trade and Industry (RIETI).
    3. Goto, Yasuo & Wilbur, Scott, 2019. "Unfinished business: Zombie firms among SME in Japan’s lost decades," Japan and the World Economy, Elsevier, vol. 49(C), pages 105-112.
    4. Fructuoso Borrallo Egea & Pedro del Río López, 2021. "Monetary policy strategy and inflation in Japan," Occasional Papers 2116, Banco de España.
    5. Guido Ascari & Jacopo Bonchi, 2022. "(Dis)Solving the Zero Lower Bound Equilibrium through Income Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(2-3), pages 519-535, March.
    6. Fructuoso Borrallo Egea & Pedro del Río López, 2021. "Estrategia de política monetaria e inflación en Japón," Occasional Papers 2116, Banco de España.
    7. Vitor Gaspar & Maurice Obstfeld & Ratna Sahay & Douglas Laxton & Dennis P Botman & Kevin Clinton & Romain A Duval & Kotaro Ishi & Zoltan Jakab & Laura Jaramillo & Constant A Lonkeng Ngouana & Tommaso , 2016. "Macroeconomic Management When Policy Space is Constrained; A Comprehensive, Consistent and Coordinated Approach to Economic Policy," IMF Staff Discussion Notes 16/09, International Monetary Fund.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Haydeeliz Carrasco & Hamidou Jawara & Moritz Meyer, 2022. "The Effects Of Fiscal Policy On Inequality And Poverty In The Gambia," Commitment to Equity (CEQ) Working Paper Series 117, Tulane University, Department of Economics.
    2. Matti Ylönen, 2017. "Policy diffusion within international organizations: A bottom-up analysis of International Monetary Fund tax work in Panama, Seychelles, and the Netherlands," WIDER Working Paper Series 157, World Institute for Development Economic Research (UNU-WIDER).
    3. Matti Ylönen, 2017. "Policy diffusion within international organizations: A bottom-up analysis of International Monetary Fund tax work in Panama, Seychelles, and the Netherlands," WIDER Working Paper Series wp-2017-157, World Institute for Development Economic Research (UNU-WIDER).
    4. World Bank Group, 2015. "Malaysia Economic Monitor, December 2015," World Bank Publications - Reports 23565, The World Bank Group.
    5. International Monetary Fund, 2016. "Japan: Selected Issues," IMF Staff Country Reports 2016/268, International Monetary Fund.
    6. Grahame Johnson & Sharon Kozicki & Romanos Priftis & Lena Suchanek & Jonathan Witmer & Jing Yang, 2020. "Implementation and Effectiveness of Extended Monetary Policy Tools: Lessons from the Literature," Discussion Papers 2020-16, Bank of Canada.
    7. Mr. Maurice Obstfeld & Kevin Clinton & Mr. Ondrej Kamenik & Mr. Douglas Laxton & Ms. Yulia Ustyugova & Hou Wang, 2016. "How to Improve Inflation Targeting in Canada," IMF Working Papers 2016/192, International Monetary Fund.
    8. Shaozhen Han & Guoming Li & Michel Lubrano & Zhou Xun, 2020. "Lie of the Weak: Inconsistent Corporate Social Responsibility Activities of Chinese Zombie Firms," AMSE Working Papers 2001, Aix-Marseille School of Economics, France.
    9. Li, Jie & Guo, Xiaowei & Huang, Bihong & Zhou, Tianhang, 2024. "Political connections and zombie firms: The role of the 2008 stimulus plan in China," Journal of Financial Stability, Elsevier, vol. 72(C).
    10. Ali Alichi & Kevin Clinton & Charles Freedman & Mr. Ondrej Kamenik & Michel Juillard & Mr. Douglas Laxton & Mr. Jarkko Turunen & Hou Wang, 2015. "Avoiding Dark Corners: A Robust Monetary Policy Framework for the United States," IMF Working Papers 2015/134, International Monetary Fund.
    11. Morikawa, Masayuki, 2021. "Productivity of firms using relief policies during the COVID-19 crisis," Economics Letters, Elsevier, vol. 203(C).
    12. Selahattin Imrohoroglu, 2017. "Replacing Income Taxation with Consumption Taxation in Japan," CIGS Working Paper Series 17-008E, The Canon Institute for Global Studies.
    13. Kaehny, Maximilian & Herweg, Fabian, 2022. "Do Zombies Rise When Interest Rates Fall? A Relationship-Banking Model," VfS Annual Conference 2022 (Basel): Big Data in Economics 264126, Verein für Socialpolitik / German Economic Association.
    14. Daniel Appiah & Abdul-Gafaru Abdulai, 2017. "Competitive clientelism and the politics of core public sector reform in Ghana," Global Development Institute Working Paper Series esid-082-17, GDI, The University of Manchester.
    15. Carlos Carreira & Paulino Teixeira & Ernesto Nieto-Carrillo, 2022. "Recovery and exit of zombie firms in Portugal," Small Business Economics, Springer, vol. 59(2), pages 491-519, August.
    16. Dan Andrews & Filippos Petroulakis, 2017. "Breaking the Shackles: Zombie Firms, Weak Banks and Depressed Restructuring in Europe," OECD Economics Department Working Papers 1433, OECD Publishing.
    17. repec:hal:spmain:info:hdl:2441/j27962rn8r5qgvg0f7t0vk5q is not listed on IDEAS
    18. Caselli, Mauro & Schiavo, Stefano & Nesta, Lionel, 2018. "Markups and markdowns," Economics Letters, Elsevier, vol. 173(C), pages 104-107.
    19. Nieto-Carrillo, Ernesto & Carreira, Carlos & Teixeira, Paulino, 2022. "Giving zombie firms a second chance: An assessment of the reform of the Portuguese insolvency framework," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 156-181.
    20. Choudhary, M. Ali & Jain, Anil K., 2021. "Corporate stress and bank nonperforming loans: Evidence from Pakistan," Journal of Banking & Finance, Elsevier, vol. 133(C).
    21. Hansen, Gary & İmrohoroğlu, Selahattin, 2018. "Replacing income taxation with consumption taxation in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 48(C), pages 15-28.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2016/157. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.