No one in their right mind would choose to remain malnourished simply because they are afraid that eating might one day lead to an upset stomach. Since a bit of overindulgence rarely leads to a terminal illness, you should worry about indigestion only after you’re actually full. Conversely, no one stuffs themselves to the point of nausea today just because they fear a famine tomorrow. There is a limit to how much the body can store; binge-eating like a maniac only ruins your health for nothing. To prepare for future shortages, you find other means—you don’t just overeat.
Similarly, no one tells a burn victim, “Don’t cool that wound, you might get frostbite,” or a frostbite victim, “Don’t warm up, you might get burned.” This is common sense.
The Paradox of the “Experts”
Yet, in the world of economic discourse, there are an astonishing number of people saying things that defy this very logic. What makes it troublesome is that these individuals carry grand titles—University Professors, Chief Economists, BoJ Policy Board members, or executives at international organizations—titles far beyond the reach of an ordinary person like myself.
Despite Japan suffering through decades of deflation, and even now with no clear prospect of achieving a sustainable 2% CPI growth, these “experts” continue to preach the dangers of proactive fiscal policy, citing the fear of inflation. It is a case of monetary policy déjà vu. We saw this before when critics claimed that non-traditional measures like Quantitative Easing (QE) would trigger hyperinflation. While I don’t deny that such policies paralyzed market functions, their actual effect on stimulating inflation was negligible.
Perhaps the reason Japan’s wages haven’t budged in 30 years is precisely because these highly-titled “experts” are utterly indifferent to the dangers of low inflation, while obsessing over the risks of high inflation. The average voter naturally assumes that people this “important” couldn’t possibly be wrong.
The Myth of Hyperinflation
Furthermore, Japan has multiple layers of defense that make a descent into hyperinflation virtually impossible. If inflation ever did become too high, the Bank of Japan could simply implement cooling measures. Governor Ueda, for instance, is so hawkish on inflation that I would say there is zero risk of him letting it run wild. (Note: I initially had high hopes for Governor Ueda as a balanced thinker, but my view has shifted; I now see him as someone whose caution regarding inflation is becoming excessive. I will expand on this another time.)
In fact, every BoJ Governor in recent memory has made statements that I find impossible to defend. While I generally support former Governor Kuroda for his efforts to stimulate the economy, I cannot overlook his remarks claiming that “establishing a sustainable fiscal structure is a prerequisite for long-term growth.” If he placed an excessive burden on monetary policy just because he was worried about “fiscal consolidation,” then that was a massive failure. I intend to revisit this issue as well.
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