THE BANK OF JAPAN HAS FINALLY GOT ITS GAME BACK

The BOJ is finally bank on track as the World’s third largest economy, which has been in a deflationary spiral for almost twenty years, has finally nudged Inflation up a bit. Deflation causes an economy to stagnate. With interest rates at virtually zero, or even less, Citizens see no reason to invest their money, Consumer Spending drops, businesses don’t see any reason to expand and banks have no one to lend to. Our FED, for instance, has a Target Rate of Inflation of 2.0%. Kind of not too hot, and not too cool.

In November, the BOJ’s bond-buying program contributed to the Japanese Core Interest Rate (excluding volatile Food and Energy) rising to 0.6%. Although its still low, that was the largest gain in 15 years. The important point about this is that, for almost 20 years, the Japanese economy has been a drag on the Overall World Economy; however, as Japan seems to be coming back to life, that can only contribute to the continued International Recovery.

The linked column from the NY Times “Economix” Series, by Phillip Swagel goes into some detail in explaining this, http://economix.blogs.nytimes.com/2013/12/31/monetary-policy-in-japan-finally-on-track/?ref=economy&pagewanted=print. Dr. Swagel is a Professor at the University of Maryland’s School of Public Policy, and was a former assistant secretary for economic policy at the Treasury Department from 2006 to 2009.

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