>
> The trouble with Japan, in other words, is that while key policymakers now
> understand the nature of their problems, they still lack the intellectual
> courage to act on that understanding. What that means, I fear, is that
> things will have to get considerably worse before they get better. The good
> news is that this can probably be arranged, and sooner than you think.
>
I have run accross a fairly unorthodox prescription for Japan. It runs like this: the problem with Japan's ultralow interest rates is that it assumes that Japanese behave like Americans. In the US, when interest rates go down, Americans empty their bank accounts, party hard on the stock market and buy Lincoln Navigators on credit; in short, all the things that make neoliberal economists happy. The Japanese have a different attitude: as their bank accounts pay less and less interest, they feel compelled to save even more to make up the lost return. If you want Japan to break out of its recession, raise interest rates convincingly.
Any comments?
> The author is professor of economics at the Massachusetts Institute of
> Technology
-- Enrique Diaz-Alvarez Office # (607) 255 5034 Electrical Engineering Home # (607) 272 4808 112 Phillips Hall Fax # (607) 255 4565 Cornell University mailto:enrique at ee.cornell.edu Ithaca, NY 14853 http://peta.ee.cornell.edu/~enrique