Dec 19, 2012

Yale Professor Leads Discussion on Deflation Countermeasures

Koichi Hamada, the Tuntex Professor Emeritus of Economics at Yale University who played a key role when the Ivy League school joined the Sylff community in 1989, visited the Tokyo Foundation on December 14 to offer his thoughts on how Japan can beat deflation and overcome two decades of economic stagnation.

Hamada has been at the center of Japanese media attention recently for strongly endorsing Liberal Democratic Party President Shinzo Abe’s strategy for fighting deflation. The professor’s remarks and messages were widely quoted by the LDP leader during the campaign for the December 16 election for the House of Representatives, which the LDP won by a landslide.

Following the election victory, Abe indicated that he would appoint Hamada as a special advisor to the cabinet.

Hamada’s remarks are believed to have significantly boosted the LDP’s standing among the members of the public, many of whom are struggling to make ends meet. Hamada advocates a bold quantitative easing policy to halt deflation and ease the value of the high-flying yen.

On December 14 Hamada was joined by Tokyo Foundation Senior Fellows Shigeki Morinobu and Yutaka Harada—both experts on the economy—as well as other Foundation research fellows and program officers in a lively exchange of views.

While Hamada asserted it was high time to overturn the Bank of Japan’s cautious monetary policy, Morinobu countered that the yen was not “too high” from the viewpoint of purchasing power.

Harada, meanwhile, noted that the dramatic rise in the yen’s rate from around 120 yen to the dollar prior to the Lehman crisis to around 80 yen today was too heavy a burden on Japanese companies. The optimum exchange rate, he noted, was a level that does not adversely affect the domestic economy.

Regarding his recent media fame, Hamada noted he was grateful that “Finally, someone is listening to what I’ve been saying for years. It’s high time that bolder monetary measures are seriously and broadly discussed as an option in reviving the Japanese economy.”