

Publisher: Academic Press
ISSN: 0889-1583
Source: Journal of the Japanese and International Economies, Vol.14, Iss.4, 2000-12, pp. : 238-260
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Abstract
In this paper we review the role of monetary policy for a country facing deflationary pressure based on the recent experience of the Japanese economy. We discuss economic background of inflation policy in Japan and analyze the impacts of the policy. We made simple calculations regarding how much the debt of selected companies and government can be reduced by mild inflation. Noting that the Fisher effect does not work perfectly under liquidity traps, the effect of inflation on debt issue appears quite large. To maintain controllable stable inflation, inflation targeting is a good candidate for the policy rule.
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