Japan's Deflation Dogfight

After years of wandering in the policy wilderness, Japan's financial wizards think they have discovered what's really wrong with Japan's economy. It's deflation. In January, Prime Minister Junichiro Koizumi called falling prices Japan's "most urgent policy task" and declared he was taking all possible steps to curb its ravages. Such posturing drew praise from experts ranging from Japan's economics czar, Heizo Takenaka, to the chairman of the U.S. President's Council of Economic Advisers, R. Glenn Hubbard. Front and center in Koizumi's new war is the Bank of Japan (BOJ), where Governor Masaru Hayami ends his five-year term on March 19. In...

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