Japan Should Link Fiscal Policy to Inflation

Japan should delay raising the sales tax and commit to an expansionary fiscal policy until inflation meets the Bank of Japan’s 2 percent inflation target, Nobel laureate Christopher Sims said on Monday.

Linking fiscal policy to inflation, combined with continued BOJ debt purchases to keep yields low, would help overcome the limits posed by the zero lower bound on nominal interest rates, said Sims, a Princeton University economist.

Japan’s government should also delay returning to a primary budget surplus until after the inflation target is met, said Sims, who is in contact with Koichi Hamada, one of Prime Minister Shinzo Abe’s influential aides on economic policy.


Geopolitical and Trade Risks Dominate Market Moves

EUR/USD – Euro Steady at 1.07, Markets Brave for Soft German CPI

Oil Slips as US Rigs Continue to Rise

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.