Monetary Policy and the Transformation of Japan's Economic Structure

The great popularity of the Koizumi administration indicates that the slogan ‘no recovery without structural reform’ now reflects a national consensus in Japan. However, there is little evidence that Japan’s current recession was due to Japan’s economic structure. Instead, there is strong evidence that the recession was caused by the monetary policy of Japan’s central bank. This finding stands in sharp contrast to the long standing image of Japan’s central bank as a proponent of deep and far-reaching structural changes and suggests a closer look at the bank’s activities and its approach to structural change. The presentation addresses the origins of the bubble economy, the subsequent recession, and the key individuals involved. In the process, some of the issues currently debated among Tokyo-based economists are addressed. Such issues include the necessary conditions for a recovery, the effectiveness of monetary and fiscal policies, the proposal of an inflation target, and the role and mandate of a central bank in a democracy.

Richard A. Werner is assistant professor at Sophia University, Tokyo, teaching monetary economics, international economics and development economics. He has been conducting research on the Japanese economy for the past ten years at various research institutions, including the Japan Development Bank, the Nomura Research Institute, the Ministry of Finance, and the Bank of Japan. Moreover, he has worked as consultant for the Asian Development Bank, as chief economist for Jardine Fleming Securities (Asia) and, currently, Managing Director and Chief Economist of the Profit Research Center Ltd., Tokyo. He has published widely in the Japanese financial press. His talk will be based on his recent book ‘Princes of the Yen’, which was published in Japanese in May and became a No. 1 Bestseller.