The Bank of Japan’s Monetary Policy Lacks a Strong Driving Force for Building Inflation Expectations

The Bank of Japan has been failing to create the 2% inflation expectations. This article presents the author’s views about why the Bank of Japan’s monetary easing measures have not led to achievement of the inflation target of 2%, as well as on measures required to achieve the 2% inflation (and base wage increases of over 3% which is the flip side of a 2% inflation). The major points of this article are outlined below.

First, while many Japanese economists pay little attention to importance of mild inflation, the achievement of mild inflation of 2% is vital in ensuring a stable macroeconomic environment. Its achievement would enable lowering of real interest rates (i.e., reducing the real interest rate to minus 2% as against the 0% nominal interest rate) in the situation where the nominal interest rates are drifting at the lower limit against a backdrop of various economic shocks. It would also facilitate reduction in real wages against the downwardly rigid nominal wages, thereby helping companies revive their businesses, and also facilitating adjustments in the overall economy.

Second, the reasons why the current Bank of Japan’s monetary easing measures have been unsuccessful in attaining the inflation target of 2% are as follows: 1) most of the Japanese do not understand the importance of mild inflation and so the specific content of the inflation target (achieving 2% inflation and base wage increases of over 3%) is not clearly shared; 2) on top of the fact that deflation/zero inflation has become rooted in Japan’s economy over the past two decades, Japan has never adopted a monetary policy that would anchor a mild inflation expectation of 2% (until 1990, the Bank of Japan’s primary task was to be mindful of curbing the accelerating cost-push inflation associated with wage growth); and 3) the current Bank of Japan’s monetary policy lacks a strong driving force for building inflation expectations to induce a change in people’s behavior.

Third, in order to build mild inflation expectations of 2% under such circumstances, it is important that the parties concerned with employer’s associations and labor unions become fully aware of this target so that the 2% inflation and base wage increases of over 3% becomes a code of conduct. On that basis, the government and Bank of Japan need to clearly demand substantial base wage increases with concrete numerical targets combined with the achievement of mild inflation towards the goal of building inflation expectations.

Fourth, I propose as the first step that, along with the economic measures recently taken, the government and the central bank either mediate or participate in a specific attempt to build a consensus between the employer’s associations and labor unions on achieving, in a neutral manner, inflation of 2% and base wage increases of (at least) 2%. The aim is to establish an inflation of 2% and base wage increases of over 3% as a new code of conduct shared by employer’s associations and labor unions through continued labor-management agreement.

It is desirable that mild inflation is attained gradually by stimulating aggregate demand continuously, if time and cost permit and if the international environment tolerates weak yen. However, the current economic environment would not allow it and the leeway to ease monetary policy has also been limited. It is also difficult to continue to boost aggregate demand through fiscal policy in a sustained manner against a backdrop of a low birthrate and aging population. Although successful achievement of mild inflation is not a panacea for all economic problems, unless we first achieve mild inflation and restore the function of monetary policy, we will not be able to implement the subsequent structural reforms of the labor markets, etc. or fiscal consolidation, which are both painful. And thus, the long-term economic outlook of Japan is dismal. The author strongly hopes that the Abe Cabinet and Bank of Japan under the leadership of Governor Kuroda implements a drastic regime change similar to the one launched by the Roosevelt administration, overcome deflation and achieve mild inflation, restore the function of monetary policy at the earliest possible time, and get on the path to a true revitalization of the Japanese economy.     

Macro-determinants of the Lithuanian housing market: a test for Granger causality

This research examines the macro-determinants of the Lithuanian housing market. The study employs the Granger causality test to assess the interdependence of a number of macro-variables and the national housing price index. Regardless of the limitations involved with this methodology, the empirical findings suggest that the Lithuanian housing market relates to growth in building activity, interest rates, inflation, and employment. Considering all of these results, the research highlights useful policy implications for property market participants. Investors and developers can employ this information to guide their investment decisions. Likewise, the government and central bank could use this updated knowledge to drive a successful macroeconomic program.     

俄罗斯卢布汇率安排的经济效应分析

俄罗斯转型时期的宏观经济波动与汇率制度安排之间存在着密切的关系.本文在评述新兴市场经济国家汇率制度选择困境和概述俄罗斯汇率制度演变的基础上,从汇率与通货膨胀、汇率与对外贸易、汇率与资本流入、汇率与外债规模结构变动等方面分析了汇率制度安排及汇率变动的宏观经济效应,并简要总结了俄罗斯的实践对中国的启示.     

Hard Bargains: The Impact of Multinational Corporations on Economic Reform in Latin America

This article promotes the idea that multinational corporations have independent agency in the process of economic reform in Latin American host countries. Through a number of pooled cross-sectional time series analyses, it shows that accumulated foreign direct investment can affect policy reform in ways unanticipated by earlier theories predicated on the obsolescence of firms' influence after initial investment. The influence of firms varies across different reform areas, and competitive pressures lead firms to press alternately for liberal and illiberal reform measures. The study also considers sectoral issues, and argues that a preponderance of natural resource–oriented FDI can alter the impact of multinational investment on policy reform. Indexes of economic reform are measured against stocks of FDI and a number of political and economic control variables. Evidence shows that the dramatic increase in FDI in the region in recent years has bolstered firms' bargaining power and concomitant policy leverage.     

What Macroeconomic Measures Are Needed for Free Trade to Flourish in the Western Hemisphere?

Recent experience has made clear the importance of macroeconomic stability, and exchange rate stability in particular, in generating support for regional integration. The tensions created by exchange-rate and financial volatility are clearly evident in the recent history of Mercosur and may also hinder the development of a Free Trade Area of the Americas. This essay argues that ambitious schemes for a single regional currency are not a practical response to this problem. Nor would a system of currency pegs or bands be sufficiently durable to provide a lasting solution. Instead, countries must solve this problem at home. In practice, this means adopting sound and stable monetary policies backed by a clear and coherent operating strategy, such as inflation targeting. With such policies in place, exchange rate volatility can be reduced to levels compatible with regional integration.     

Problems and profitability of direct foreign investiment in China: An analysis of the survey data

By analyzing a survey in the Tianjin area, this article investigates the problems and profitability of joint ventures in China, and draws some policy implications. The authors find that there are a number of systemic constraints on the profitability of joint ventures, such as input and foreign exchange shortages, rigid labor policies, conflicts between business partners, and uneasy relations with state authorities. The article concludes that unless the investment environment is improved, China will not succeed in the competition with other developing countries in attracting the foreign capital needed for its modernization. Chung H. Lee is a professor of economics at the University of Hawaii at Manoa and research associate at the Institute for Economic Development and Policy of the East-West Center. He is also author ofThe Economic Development in Japan and Korea (Praeger 1990) andTrade and Investment in Services (Westview 1988).     

关于俄罗斯是否患上“荷兰病”的实证分析

俄罗斯是否患上"荷兰病"的问题一直是个学术界近年来争论的焦点.本文根据 "荷兰病"的理论模型,分别从国际油价上涨是否导致汇率上升、制造业部门是否表现出"去工业化"现象和工资上涨的效应是否存在这三方面,运用协整检验等实证分析方法,讨论了俄罗斯是否患上"荷兰病"的问题,并综合三方面的实证分析结果,得出了俄罗斯存在一定程度的"荷兰病"现象的结论.     

Trade and investment in Southeast Asian development

Expansion of foreign trade and investment has been a vital factor underlaying the high economic growth of the Southeast Asian economies over the last ten years. As East and Southeast Asian economies continue to deregulate and prosper, trade and investment flows are becoming increasingly interconnected within the region. The character of this regional economic integration, however, has shifted recently. The role of the Japanese has declined while that of China and the overseas Chinese has boomed. Whereas China has absorbed huge amounts of foreign investment, investment to the Southeast Asian economies appears to be weakening significantly. This weakening of investment is occurring just as many Southeast Asian countries struggle to uppgrade the technical levels of their production of goods and services to accommodate the rising wages and income levels that are fundamental to sustained and broad-based increases in standards of living throughout the region.     

China and Cambodia: In the Mirror of History

In recent years, China has been paying greater attention to Southeast Asia and to Cambodia in particular, says Nayan Chanda, director of publications at the Yale Center for the Study of Globalization. This interest is not new however, but reflects a partial return to the foreign policy followed by the leaders of China since the days of the Ming dynasty. Historically, China had not been interested in active involvement in Indochina, preferring to limit its role to policies that kept its southern neighbors in check and the region free of influence from another challenging power. This tradition of noninterference was broken in the 1970s, amidst increasing tension between the Soviet Union and China, and the beginning of the Sino-American détente in 1971, which changed the international context of China's foreign policy. Chanda points out that since the collapse of the Soviet Union, there has been a surge in Chinese aid, private investment, dispatch of labor and support for the growing local ethnic Chinese community in Cambodia.     

日元汇率波动对日本对外投资影响的实证分析——基于日本19个行业1971—2007年的面板数据

以日本的制造业和非制造业中的19个行业为例,实证分析了1971—2007年间日元汇率波动对这些行业的影响情况。分析结果表明,总体上日元汇率的波动与日本对外直接投资存在显著的正相关关系。分行业来说,这些行业的结果可以分为三类。最后对这些结果进行了原因分析。     

Rethinking the Political Economy of Import Substitution Industrialization in Brazil: A Clientelist Model of Development Policymaking

Import substitution industrialization was the postwar development policy of choice in Latin America, and the diagnosis of its weaknesses heavily influenced subsequent policy recommendations. Yet few attempts have been made to test the predominant sectorally based explanation of ISI's failings against alternatives. This article develops a model of direct (clientelistic) linkages between politicians and their supporters and tests it against the standard sectoral model based on indirect linkages. Examining three features of process (economic sector influence, legislative voting, and exchange rate policy) and analyzing the distributional implications of the overall policy in Brazil, this article demonstrates that a clientelist model provides a more complete and coherent account of the empirical record. By demonstrating that variation in linkage type alters the political constraints on policy choice, the analysis also provides new insight into enduring puzzles, including the better performance in East Asia.     

日本研究开发投资现状与存在问题及启示

本文研究发现，在“科技立国”政策背景下，日本研发投资居发达国家首位，但全要素生产率增长率有所下降。其根本的原因是日本研发投资成果没有得到有效利用，最终造成研发投资成果质量水平较低、专利市场的占有率有下降趋势、高科技产业附加价值收益、国际市场份额及贸易收支比下降等问题。应采取强化基础研究、充实对服务业的研究开发、发挥大学和政府的作用、推进企业、大学及政府协作、强化国际合作、确立和保护知识产权和强化知识管理等措施才有可能改变其被动局面。     

Equality and Regional Finance in the Americas

This article explores competing definitions of equality embedded in contending visions for regional finance in the Americas. The U.S. free market–oriented project envisions extension of a NAFTA‐like regulatory framework hemispherewide, promising Latin Americans better financial services, credit, and investment in exchange for strong financial property protections and (implicitly) dramatically reduced financial policy autonomy for their governments. Venezuela's vision of “Bolivarian” finance, exported to the Caribbean and the upper Andes, promotes assertive state management of both foreign and domestic investors, populist redistribution, and increasing reliance on nonmarket financial transactions. Brazil's regional financial project would unite South America through continentwide physical infrastructure and capitalist financial markets while retaining a role for public sector banks responsive to central government priorities. Brazil's approach shares with Venezuela's an emphasis on governments' need for financial policy authority and with the U.S. approach a concern for regulatory predictability and financial deepening.     

Understanding Presidential Failure in South America

This article examines the issue of presidential failure in South America by evaluating the multiple factors that create risk of resignation, removal, or impeachment of presidents. The study draws on various economic variables that have not been thoroughly investigated in the past and uses survival analysis to identify what factors are influential. In performing this testing, the importance of variables such as civil protest, executive wrongdoing, and specific measures of economic hardship—inflation and prolonged recession—becomes clear. Majority legislative support also remains significant, supporting early arguments about the influence of presidential institutions. This investigation provides a unique perspective on presidential survival while evaluating the importance of previously excluded variables in a comprehensive manner.     

Good Inflation, Bad Inflation: The Housing Boom, Economic Growth and the Disaggregation of Inflationary Preferences in the UK and Ireland

This article presents a comparative analysis of the determinants, sustenance and broader macroeconomic consequences of the ultimately unsustainable housing boom in Ireland and the UK in recent years. It examines, in particular, the role played by ostensibly depoliticised monetary policy in both contexts in the development of a house price bubble that has served to fuel consumer-led growth. It assesses the viability, sustainability and reproducibility of the private debt-financed consumer boom that house price inflation has generated. In the process it draws attention to the increasingly differentiated character of both government inflationary preferences and counter-inflationary performance—with the shift to official measures of inflation that exclude mortgage interest repayments and, in the UK at least, to the covert re-politicisation of monetary policy. It concludes by suggesting that governments may well not have time-inconsistent inflationary preferences so much as sectorally specific inflationary preferences. This might be summarised in terms of the aphorism: 'retail price inflation bad, house price inflation good'.     

Labour migration and rural transformation in post-colonial Swaziland

This article describes the effects of labor migration in rural southern Swaziland. It is argued that wages from rural migration to mining areas were invested in agricultural implements such as tractors, in education of children, and in cattle. These effects are improvements in rural quality of life and involve women in agricultural production. Male labor migration in southern Swaziland contributed to progress and rural development for rich and poor families at the individual level. Community level changes from labor migration were not evident. The author does not suggest that all changes were due to labor migration or unique. Negative effects are recognized, such as life style changes or changes in social customs. It is stated that southern Swaziland benefited little post-independence from national development. The Lowveld benefitted from sugar and citrus plantations. The central region experienced development of industry and commerce. The northern region had sugar plantations and mining development. The western region established commercial forests. The south only had export labor, which was attracted to higher wages in South Africa. Data and arguments in this article pertain only to male labor migration to mining areas. The literature on development tends to associate male labor migration with underdevelopment. Women are left to plough the fields in traditional agricultural production. Evidence is presented for southern Swaziland, which showed periods of low agricultural production and poor health conditions. During the 1940s this was the case and male absence was very high. Although women had limitations, it is argued that the most important factor was unavailability of new technology. By the 1970s, women were able to hire private or government tractors for tilling the soil.     

日本经济政策不确定性与企业研发投资--基于日本上市企业微观数据的实证检验

在梳理日本经济政策不确定性波动情况的基础上,利用2010年-2018年日本上市企业微观数据,通过构建实证模型探讨了日本经济政策不确定性对企业研发的影响,主要结论有:(1)日本经济政策不确定性的提高对企业研发活动产生负面影响;(2)日本经济政策不确定性对企业研发的影响具有行业差异;(3)不同经济政策的不确定性对日本企业研发活动的影响方向不同。贸易政策、金融政策不确定性指数的增加负面冲击企业研发活动,而财政政策、汇率政策不确定性的提高却激励企业研发投资。相较于日本,中国企业研发管理经验较少,风险承担能力较弱,政府更应重视在运用政策手段平滑景气波动的同时,避免政策施行的大起大落,警惕经济政策不确定性的过快、过度提高,尽可能营造、引导产生良好的市场预期,并采取有效措施切实支持企业创新活动。     

Gorbachev's Economic Strategy: A Preliminary Assessment

Gorbachev's economic strategy for the remainder of this decade is analyzed using the information contained in the Twelfth Five-Year Plan covering the years 1986-1990. The plan calls for an acceleration in the rate of economic growth achieved through a modernization of industry, a restructuring of investment, and increased labor effort on the part of the entire labor force. The economic reforms which accompany the plan are fairly modest. Analysis of the plan shows that it is very ambitious, and probably unachievable, although some improvement in economic performance is not excluded. Journal of Economic Literature, Classification Numbers: 052, 113, 124.     

Limits to Hegemonic Influence in the Organization of American States

Although powerful states have the ability to dominate the international system to achieve their policy preferences, such dominance has limits in the Organization of American States. Even though the United States, its most powerful member state, has considerable influence over OAS actions, institutional factors also affect decisionmaking and produce more varied outcomes than one might anticipate. Adapting three different perspectives from organizational sociology, this study constructs an analytical framework to explore the impact of structural, normative, internal relational, and environmental factors on the level of U.S. influence in the OAS. Four hypotheses are tested on 30 cases of regional conflict management from 1948 to 2002. The organizational variables also reveal incentives for the United States to act multilaterally rather than unilaterally in most instances in the post-Cold War era.