New Monetary policies in Japan

The article that I have chose to discuss is called “Win some lose some”.  It discusses the monetary policy in Japan.  Recently Japan has elected a new prime minister named Shinzo Abe.  He has attempted to reduce pull Japan out of deflation by curbing the independence of the Bank of Japan.  The belief is that minimizing the power within central banks will eventually reflate the economy.  Shinzo’s policies have earned him praise all over the world.  The policy seems to be working rather smoothly because the central banking system is aiming to achieve a 2% inflation target.  Shinzo’s policies however are not going over very well with the Bank of Japan.  They are doing everything within their power to refute the prime minister’s efforts.  The banks are pushing for the government to achieve the 2% goal of inflation through refining their monetary policies.  The government on the other hand would like to take power away from the banks and put it into their own hands in attempt to reach their 2% goal.  They have also reported that the new economic policies have “doused” the financial markets.  Their currency is down against the US dollar and the stock market has now suffered a three day losing streak.  I think that this policy will show benefits in the short term but in the long run will lead to further deflation.  A free market has proven to be effective over time.  The “invisible hand” of the economy will eventually pull itself out of deflation.  It is a natural for an economy to fluctuate up and down.  I think that strong arming the banking sector and the financial markets will eventually lead to increased deflation.

 http://www.economist.com/news/finance-and-economics/21570710-bank-japan-tests-limits-shinzo-abes-economic-power-win-some-lose