Many have cheered the new BOJ and their movement to increase inflation. The yen is down and the Nikkei is up. How can we question the wisdom of current policy. However, Japan still has to define the role of the central bank. Monetary policy is not the solution for structural flows. How are those going to be solved?
BOJ head Kuroda is now being thought of as the Paul Volcker of Japan. Paul Volcker stopped inflation through high rates and slower money growth. Kuroda will be the opposite of a an inflation fighter, the deflation slayer. Yet, like Volcker he is going to have to warn of the limits of monetary policy.
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