From the Wall Street Journal – criticisms Ben Bernanke made of Japan’s central bank a decade ago—saying it was too timid in stimulating Japan’s economy to prevent deflation—give hints of what the Fed’s next steps might be. As a Princeton professor in the 1990s, Ben Bernanke lectured Japanese officials for mishandling their economy. In a 1999 paper, Mr. Bernanke lashed out at Japanese officials, saying their country’s woes were the result of their own “self-induced” paralysis. Japan’s responses to deflation, he charged in atypically blunt terms, were confused, inconsistent and too cautious.Today, Tokyo’s economic problems are more than academic for the Federal Reserve chairman. They are a window into his own situation as he stares at what could be a long period of slow growth, high unemployment and declining inflation in the U.S. There are two lessons from the Japan experience:
1. be aggressive about providing stimulus to the economy in the early stages of a downturn and
2. avoid canceling it too soon.
Click here for the article in the Wall Street Journal. Also an informative interview with columnist Jon Hilsenrath