There are people called “experts” who possess incredibly deep knowledge in narrow fields. While their expertise can be reliable, misapplying it can lead to fundamentally flawed conclusions. In my view, when considering a nation’s economy, the absolute priority must be the optimization of growth and distribution. All other technical theories are secondary.
Today, I want to address the “experts” in monetary policy. I use quotation marks because they frequently say things that, frankly, make little sense. For instance, many obsess over the “exit strategy” from unconventional monetary policy and the “normalization of monetary policy.” From the beginning, I’ve struggled to understand why they place so much weight on these terms.
The “Exit Strategy” is a Non-Issue
First, let’s look at the “exit strategy.” It boils down to this: “Scale back unconventional measures and raise interest rates when the timing is right.” That’s it. There is no other way to do it, and indeed, the Bank of Japan (BOJ) is proceeding with this process quite matter-of-factly. While the minute procedural details might be vital for financial institutions and investors looking to profit from market fluctuations, they are irrelevant to the vast majority of people. Unsurprisingly, “exit strategy” is fast becoming a dead letter.
“Normalization” is Not an Absolute Virtue
As for “monetary policy normalization,” the essence of monetary policy is simply to identify what matters most for the macroeconomy and execute policies to achieve those goals. The impact on the macroeconomy is the only point that truly matters; whether the means used are “traditional” or “unconventional” is a trivial distinction.
I am well aware that unconventional policies have side effects, such as impairing the functionality of interbank markets and impacting the earnings of financial firms. However, even the BOJ’s own “Review of Monetary Policy from a Broad Perspective” concluded that the positive effects generally outweighed the negatives. While I don’t oppose scaling back unconventional measures while balancing macroeconomic trends against side effects, the idea that “scaling back and raising rates is ‘justice,’ regardless of macroeconomic conditions” is a blatant error.
The ETF and REIT “Problem”
The disposal of the massive amounts of ETFs and REITs held by the BOJ might be a larger logistical issue, but there is no need to rush. Who exactly is harmed if the BOJ continues to hold them? The dividends from these assets eventually flow back to the government as part of the BOJ’s remittances to the national treasury. For fiscal hawks who obsess over “finding funding,” this should be a welcome windfall—they could even earmark it for pension funds. Of course, for those of us in the MMT camp who know the government can create money at will, this entire debate is just a triviality.
Conclusion: Prioritizing People Over Markets
To reiterate: it is a grave mistake to treat “monetary policy normalization” as a supreme mandate and use it as a justification for tightening or hiking rates. While the discourse has improved slightly in 2025, the year 2024 was filled with these bizarre arguments. We must remember why monetary policy exists in the first place. The profits of financial institutions or overseas investors will never—and should never—take precedence over stable economic growth for the nation.
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