Japan: A premiere in the era of monetary and fiscal coordination – Goldman Sachs

FXStreet (Delhi) – Research Team at Goldman Sachs, suggests that one of the milestones in monetary policy has been the achievement of central bank independence in the 1990s, which has been widely recognized as a key factor in reining in inflation and stabilizing inflation expectations around the target adopted by major central banks (2%).

Key Quotes

“At the 2015 IMF Pollack conference that took place on November 10-11, a paper by Adair Turner entitled “The Case for Monetary Finance – An Essentially Political Issue” explored the topic of coordination between fiscal and monetary authority and the costs and benefits of ‘debt monetization’. It is interesting to note that this type of coordination could take place in Japan more clearly than elsewhere in the next few months.”

“Could it be the case that more open coordination between the fiscal and monetary authority and an open statement on debt monetization is needed to lift inflation and inflation expectations in Japan? Will investors price higher inflation into JGBs and yields rise despite the central bank purchasing a large share of sovereign debt? Can Japan become a ‘test economy’ and coordination between monetary and fiscal authority become more ‘mainstream’ economics?”

Research Team at Goldman Sachs, suggests that one of the milestones in monetary policy has been the achievement of central bank independence in the 1990s, which has been widely recognized as a key factor in reining in inflation and stabilizing inflation expectations around the target adopted by major central banks (2%).

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