Title: Japan's Lowflation Problem
Headings: Japan's Lowflation Problem
May 30, 2021,05:30pm EDT
Brazil’s Hit Bottom. But Maybe Not Bolsonaro.
Japan's Lowflation Problem

Content: It appeared that the Bank of Japan had defeated the lowflation enemy. Markets joyfully anticipated the end of QE and the prospect of higher interest rates. After twenty years in the wilderness, the prodigal was coming home. Though they did wonder how it would live in the future, since the “Three Arrows” program seems to have cost its entire inheritance. How on earth would the Bank of Japan unwind all those asset purchases? And how will the Japanese government pay off all that debt? But their joy – and their concern - was premature. Since April, inflation has tailed off again, along with any possibility of monetary policy “normalization,” as central bank watchers like to call it. Though since Japan’s interest rates have effectively been zero since 1995, we have to wonder what “normalization” would even mean. Surely, after this length of time, zero interest rates are "normal"?