Adam Posen: Japan Needs Loose Money, Not Fiscal Stimulus

A blog about business and economics.
Jan. 16 2013 2:03 PM

Adam Posen: Japan Needs Loose Money, Not Fiscal Stimulus

Adam Posen, formerly of the Bank of England and currently of the Peterson Institute, says Shinzo Abe's planned fiscal stimulus is a bad idea and Japan hasn't needed loose fiscal policy for about 10 years. On the other hand, he heartily endorses Abe's plans for loose money and more aggressive inflation targeting from the Bank of Japan.

Posen's argument is reasonably clear, but I wish he'd taken less time laying out the basic sketch of the argument and more time explaining how and why he distinguishes this case from the situation in the United Kingdom. Relative to where Posen is, I'd say that we should be a bit less certain in both cases and rely on a mix of fiscal (which for Japan should probably mean tax cuts rather than new pork projects) and monetary measures. But he seems quite certain that the United Kingdom needs fiscal stimulus and equally certain that Japan only needs monetary stimulus, and I don't really see the situations as all that different.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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