Tags: Stiglitz | QE | success | Japan

Stiglitz: QE Has Better Chance in Japan Than in US

Sunday, 07 Apr 2013 10:50 AM

By Dan Weil

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The ambitious new quantitative easing program announced by the Bank of Japan Thursday is more likely to succeed than the Federal Reserve’s easing effort, says Nobel laureate economist Joseph Stiglitz.

The Japan's central bank pledged to double the monetary base in two years and push inflation up to 2 percent quickly.

Japan benefits from the government’s pledge to pursue structural reforms, its fiscal stimulus and its success in cleaning up the banking system, Stiglitz, an economist at Columbia University, tells CNBC. "What is interesting about BOJ Gov. Haruhiko Kuroda's move is it is part of a broader agenda,” he says.

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

“They are not going alone. They are using monetary policy, in addition to fiscal policy, and what the prime minister calls the growth strategy — and some of us call a structural policy. It is those three together that are likely to be effective."

Prime Minister Shinzo Abe has promised 10.3 trillion yen ($106 billion) in government spending to lift GDP by 2 percentage points.

The U.S., by contrast “is basically in a contractionary [fiscal] mode,” Stiglitz notes.

As for banking, “They [the Japanese] have gone a bit further along in repairing their financial system” than the United States, he says.

The Wall Street Journal isn’t so enthusiastic about Japan’s easing.

“The question is whether it will work to drive economic growth,” according to an editorial in
the paper. It cites comments of Sumitomo Mitsui Asset Management economist Hiroaki Muto to answer the question.

“It is as if we've gone back to the quantitative easing of the 2000s,” Muto told

"Targeting the monetary base will lead to a huge increase in current-account balances that commercial banks keep at the BOJ, but I'm still not sure if this money will move through the economy."

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

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