Monday, April 30, 2007

This is a Problem?

The WSJ has an article about a conundrum facing the Bank of Japan. The Japanese economy is expanding but deflation remains persistent (prices are falling again). Apparently this is viewed as a problem:

Still, such weakness in prices would make it difficult for the Bank of Japan to raise interest rates. Raising interest rates too quickly could discourage consumers and businesses from spending, depressing demand and putting more downward pressure on prices.

Oh my goodness, the economy is expanding, prices are falling and the central bank may have to keep interest rates low, whatever will we do? Can the government please rescue the Japanese citizen from these terrible conditions?

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