Ryutaro Kono says, “If fiscal sustainability is compromised, we will fall from the ranks of developed countries.”
The Kishida administration is taking more fiscal expansion measures than the Abe administration (Photo: Representative Photography/Reuters/Afro)
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A wave of inflation has hit the world in the wake of the coronavirus pandemic. Japan, which had been pointed to as a long-term stagnation of “low growth, zero inflation, and zero interest rates” before the coronavirus, faced a sharp, ultra-weak yen and high inflation. How have the world and Japanese economies changed? 『The depths of global inflationWe spoke to Ryutaro Kono, chief economist at BNP Paribas Securities, which published the book “ (Keio University Press). (Interviewer: Akiko Osaki, journalist)
Experts are wrong that “inflation is temporary”
–In response to the rapid inflation that occurred after the coronavirus pandemic, central banks, the Federal Reserve (FRB) and the ECB (European Central Bank), were both slow to change their monetary policies and were forced to sharply raise interest rates. Ta. In “The Deep Depths of Global Inflation,” it is written that “the experts are the ones who get it wrong.”
Mr. Ryutaro Kono (hereinafter referred to as Kono):There have been three times in the past that the inflation situation changed significantly. The “Great Inflation Era” that began in the late 1960s, the “Great Moderation” when inflation subsided from the mid-1980s, and the “Global Inflation” that began in the wake of the current pandemic. is.
Professor Ricardo Reis of the London School of Economists (LSE) points out in his paper that in all three cases, it was the experts who misjudged the price outlook. When high inflation rates began to be observed in 2021, both Fed Chair Jerome Powell and ECB President Lagarde repeatedly said that “inflation is temporary.” So did many private economists.
On the other hand, contrary to experts, survey results showed that from an early stage, the percentage of households expecting high inflation to continue has increased. This is the same in Japan, as the Bank of Japan’s “Survey on Lifestyle Attitudes” found that the percentage of people concerned about rising prices has increased since the second half of 2021.
According to Professor Rice, there are two reasons why central banks have ignored accelerating inflation.
One is that it is seen as an adjustment process in which prices that fell in 2020 during the pandemic catch up to normal levels, and second, the inflation rate was 2% from 2014 to 2019 before the coronavirus pandemic. They were concerned that inflation had fallen below 2%, and argued that inflation above 2% should be welcomed.
Another reason why many experts attributed inflation to supply constraints such as a decrease in labor supply, supply chain problems, and the war in Ukraine was one reason why they misjudged inflation as “temporary”.
Regarding this point, I personally believe that the current inflation is more influenced by the expansion in demand caused by the large-scale measures taken by the governments of developed countries to counter the coronavirus pandemic, namely large-scale fiscal expansion and delays in monetary tightening. However, Professor Rice similarly points out that demand shocks are the main cause.
2023-12-23 21:00:00
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