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Thursday, May 25, 2006

Putting The Lost Decade Behind Them?

Well, I certainly hope the IMF won't live to eat their words here:

"Japan has escaped from “the lost decade of deflation” and should now take more aggressive action to repair its fiscal situation, the worst among advanced economies, the International Monetary Fund said on Wednesday.

In its most positive assessment of the economy in years, the IMF foresaw brisk demand-led growth of 2.75 and 2.0 per cent for this year and next respectively. The normalisation of monetary policy in March, with the abandonment of unorthodox quantitative easing, signalled that the post-bubble deflationary era was over, it said
"

Personally I am simply not convinced, and thing we need to give this a little time yet awhile. Of course they are right that Japan needs to address its fiscal problems. Here's the link to the IMF Mission Concluding Statement.

2 comments:

Scott said...

Given that the IMF considers Japan's fiscal situation to be "the worst among advanced economies", why would there be an expectation that the yen should increase in value relative to other currencies, particularly the US dollar?

Edward Hugh said...

"why would there be an expectation that the yen should increase in value relative to other currencies, particularly the US dollar?"

Exactly, you tell me. Obviously for some people it is much worse to have a current account deficit than it is to have a fiscal one, although, of course, having both *is* a problem. More problems than available solutions it seems.