Social and Behavioral Sciences Commons^™

Monetizing Public Debt In Japan: An Empirical Critique Of Modern Money Theory, Junji Tokunaga

PERI Working Papers

Is Japan really a ‘success’ case that supports the Modern Money Theory (MMT) framework? The Bank of Japan (BOJ), the country’s central bank, has conducted more aggressive monetary quantitative easing since April 2013, which could effectively allow the Japanese government to monetize its cheaper public borrowing. This paper argues that the economic and financial situations in Japan have provided little support for the MMT view, for these reasons: (i) The huge issuance of public debt by the government and the large-scale supply of monetary base by the BOJ did not create enough new money required to revive the economy as …