Krugman Advises Japan to Raise Inflation Target and Stimulus Boost

Japan should raise its inflation target to 4 percent and embark on a large but temporary fiscal stimulus to boost prices in the economy, Nobel laureate Paul Krugman said.

Speaking at a conference on Thursday in Singapore, Krugman called for “a big burst of government spending and maybe also cash donations,” though authorities don’t necessarily need to adopt a strategy that involves “helicopter” money, he said.

“Japan needs to get that inflation rate convincingly high,” Krugman said, adding that worrying about the “longer-term budget outlook needs to be put on hold.” The Bank of Japan’s current target is 2 percent and consumer prices excluding fresh food, a key benchmark for the BOJ, have fallen for three straight months.

Krugman’s comments add to an intensifying policy debate in Japan as the nation struggles to spur inflation and deliver consistent economic growth. With the central bank set to meet later this month to consider its monetary program and Prime Minister Shinzo Abe’s government planning a fiscal stimulus package, experts at home and abroad have been offering their views.

via Bloomberg

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, he established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza