Spot the Liquidity Trap

by Dirk Ehnts, Econoblog101 The NY Times reported last week on the new strategy of the Bank of Japan: The Japanese central bank on Tuesday set an ambitious target to defeat the nation’s crippling deflation and pledged to extend indefinitely its program to pump money into the economy, following intense pressure from the country’s audacious new prime minister, Shinzo Abe. In a joint statement with the government, the Bank of Japan said it was doubling its inflation target to 2 percent and said it would “pursue monetary easing and aim to achieve this target at the earliest possible time.” The bank also said it intended to remove any time limit from its program of purchasing government bonds and other assets. The bank’s board voted to keep its benchmark interest rate at a range of zero to 0.1 percent. Read more »