Monday, January 25, 2010

"Japan's Policy Trap" starts to bite

a little (more):

Japan's finance minister said on Monday it is necessary to consider what amount of currency reserves is appropriate as there are differing views on how big they should be.

Naoto Kan told parliament the government cannot easily dip into the reserves to fund its spending as that would involve selling foreign assets and could lead to a rise in the yen. Reuters

Japan's Policy Trap refers to the book of that title by R. Taggart Murphy and Akio Mikuni from 2002:

...Japan's dollar-denominated trade surplus has outstripped official reserves and currency in circulation. These huge accumulated surpluses have long exercised a growing and perverse influence on monetary policy, forcing Japan's authorities to support a build-up of deflationary dollars. " Book description from

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