Taming Japan’s deflation

Since the burst of its economic bubble, Japan has persistently dealt with bouts of deflation. The inability of Japan’s central bank, the Bank of Japan, to effectively address this challenge has long perplexed economists and policymakers. What had prevented the implementation of bolder economic policy to reflate the economy? Why did an activist monetary policy eventually emerge with Prime Minister Shinzo Abe’s return to office in 2013, the launch of Abenomics, and the appointment of new leadership at the Bank of Japan? In their new book “Taming Japan’s Deflation: The Debate over Unconventional Monetary Policy,” Gene Park, Saori N. Katada, Giacomo Chiozza, and Yoshiko Kojo address these questions, and analyze and explain the process behind the Bank of Japan’s policy- and decisionmaking in recent decades. They offer a combination of institutional analysis, quantitative empirical tests, in-depth case studies, and structured comparison of other countries to Japan to illustrate that the adoption of aggressive monetary policy depends on bankers’ established preceding policy ideas and policy network structure.

On December 6, the Center for East Asia Policy Studies hosted Gene Park, Saori N. Katada, and Yoshiko Kojo for a discussion of their recently published book. Joseph Gagnon of the Peterson Institute for International Economics and Steven Vogel of the University of California, Berkeley offered commentary. Following the discussion, panelists responded to questions from the audience.