Reflating Japan: Time to Get Unconventional?


Elif C Arbatli Saxegaard ; Dennis P Botman ; Kevin Clinton ; Pietro Cova ; Vitor Gaspar ; Zoltan Jakab ; Douglas Laxton ; Constant A Lonkeng Ngouana ; Joannes Mongardini ; Hou Wang

Publication Date:

August 2, 2016

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate


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.


Working Paper No. 2016/157



Publication Date:

August 2, 2016



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