Macroscope | As the Federal Reserve and ECB follow in the Bank of Japan’s footsteps, they skirt some inconvenient truths
- Japan’s central bank pioneered the policy of zero interest rates and easy money, now seen as a panacea for the world’s economic ills. However, the side effects of this model are not fully known, nor how long it can continue without posing system risks

Stock, bond, real-estate investors and businesspeople everywhere were eager to see whether Kuroda would endorse the new monetary orthodoxy that has allowed them to make a financial killing since the United States Federal Reserve, the European Central Bank and others followed in the BOJ’s footsteps.
This must have been music to the ears of US President Donald Trump, who neither knows nor cares much about economics so long as the US economy “goes up like a rocket” on his watch. Kuroda’s words were no doubt soothing too, to those ordinary mortals who, to use his own words, “do not always pay close attention to monetary policy”.
Many central banks, he observed “face a common challenge of how to raise inflation”, the assumption being that, without the expectation of inflation, and far more so if there is disinflation or deflation present, consumers will have little incentive to consume and investors to invest because it will be cheaper to do so tomorrow.
