STUDIOUSLY AVOIDING THE MOST IMPORTANT LESSON:

Lessons From Japan's Experiment With Negative Rates (Mohamed A. El-Erian, 4/13/16, Forbes)

Japan's economic and financial malaise once was thought to have little relevance for other advanced economies. Respected Western economists and policy makers even argued that "Japan couldn't happen here." But developments in recent years have led to a more humble attitude that recognizes the importance of understanding Japan's experience, past and present.

Japan Is One Of The Best Performing Economies Of The Last Decade (Tim Worstall, 9/05/14, Forbes)

Here's FT's Alphaville on the point:

    Japan, meanwhile -- a country whose economic performance is often held up as a negative example to avoid, especially by US policymakers -- has consistently been one of the strongest performers in the sample, despite suffering the biggest downturn during the recession.

    Prime Minister Shinzo Abe's economic rejuvenation program may have helped sustain this track record since 2012 but Japan's impressive growth in living standards was occurring long before then.

There is, of course, no evidence that there's any downside to negative rates.  Rather, they appear to be the appropriate response to productivity driven deflation.  Indeed, the evidence suggests that the danger lies in responding to deflation with artificial positive rates.


Posted by Orrin Judd at April 13, 2016 4:40 AM

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