In his campaign for the Dec. 16 Lower House election, Liberal Democratic Party chief Shinzo Abe has called on the Bank of Japan to set an inflation rate target of 2 to 3 percent, carry out unlimited monetary easing and buy construction bonds directly from the government.
Markets have responded favorably to Mr. Abe's proposals. Stock prices have risen and the yen has weakened. For the time being, Mr. Abe's proposals seem to have brought about desirable effects. But his proposals would cause side effects such as rises in long-term interest rates and inflation that is not accompanied by stimulated economic activities.
Mr. Abe appears to be obsessed with the idea that monetary policy will solve most of the major problems the Japanese economy is facing. But that will not be the case. He should realize the simple fact that appropriate government action combined with proper monetary policy by the central bank is needed to solve the economic problems Japan is facing.
With your current subscription plan you can comment on stories. However, before writing your first comment, please create a display name in the Profile section of your subscriber account page.