Reflated economy must be Japan’s priority, claims Moody’s

Hayami has argued that the bank has already deployed all available orthodox methods in its attempts to address falling prices. In so doing it has flooded the market with liquidity. Nevertheless, it is argued by some that the bank has used deflation in an attempt to coerce the government into adopting structural economic reforms. Hayami has doggedly ruled out setting an inflation target.

Moody’s said reflating the economy, while not a panacea, would reduce Japan’s problematic and growing debt burden.

The agency said it would lead to a rise in domestic gross national product that, supported by other policies, would "lead to deficit reduction as a percentage of GDP". Last year, the rating agency downgraded Japanese sovereign debt to A2.

While Moody’s added that failing to appoint a recognised inflation-fighter would not further harm the rating, the agency believes rigid adherence to present policies is not viable, and that breaking the cycle of deflation is critical. Figures released yesterday indicate that money supply growth in December had slowed to the lowest level in two years.

  • LinkedIn  
  • Save this article
  • Print this page  

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact [email protected] to find out more.

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: