Bank of Japan Monetary Policy

https://mainichi.jp/english/articles/20200121/p2g/00m/0bu/058000c


https://the-japan-news.com/news/article/0006302615

The Bank of Japan has decided not to change is easy money policy. The Bank of Japan has been for years attempting to increase inflation, which has been somewhat low for a very long time.

Inflation, the overall increase in prices, in a economy, can be seen as both a positive and a negative. In a positive way, it might indicate an increase in overall demand in an economy, meaning more money is moving through the economy. Economies need a certain flow of money, moving at a certain rate to be healthy. While on the negatives side, sometimes depending on the what part of the economy or society is affecting, a too much increase in prices could have a negatives effect.

The idea of the 10% sales tax in October could be seen as an artificial stimulus to get more money moving through the economy, not likely, or a negative stimulus, most likely, in the short term, until consumers get used to the higher prices from the tax increase, and could actually reduce the flow of money in the economy.

However someone looks at it inflation has been, on the surface, a challenge for the Japanese economy. Or is it really? Can it be just the new or ongoing new normal for an economy that becoming more aged every year, where age societies tend to spend less.

But recent research has show, the 20 to 65 age groups in Japan, on par, spend as much or more, with same ages groups as those in the OECD. But because the aged groups are increasing faster more than any other society, except maybe Korea,  having a more pronounced affect on the overall consumer spending behavior or the economy, and as such maybe having an affect on overall prices.

But because the low inflation has been a challenge or been around for a considerable time, maybe, if we throw out normal economic theory thinking, has/is not such problem if the economy continues to grow.

A 0.9% growth, while not what everyone wants is still economic growth. And if we look at the different regions, the major metropolitan regions are probably growing at a much faster rate. The challenge is of course those regions where the aged groups are, such as in the rural areas.

 2020 Tom Metts,  all rights reserved