You are the governor of the Bank of Japan. You have been tasked with accomplishing (or at least providing broader guidance on) two key goals: First, you are tasked with stabilizing real GDP. Real GDP is under significant pressures due to the pandemic and you must work to get the real economy as close to potential as possible. Secondly, you have been tasked with trying to move the economy away from prolonged periods of deflation to one where inflation is stable but positive. You understand that there is demographic issues (discussed in class) that have put downward pressures on both potential GDP and growth in inflation over many years. With this information as a backdrop, provide me a blueprint for monetary policy. Assume the tools of monetary policy are the same across countries. What can you, as the Governor of the Bank of Japan, do to help achieve these goal presented above in presence of the many economic and social challenges facing Japan? In your answer, please explain what tools you will employ. Also advise of the limitations monetary policy may have given the unique situation Japan finds itself in. In your answer, explain how expectations about inflation impacts the effectiveness of monetary policy when attempting to achieve the goals stated above. What are some non-monetary policies you can you recommend that may assist us in achieving our tasks outlined above. Would monetary policy of the Bank of Japan differ if it faced stronger inflationary expectations and a growing GDP potential? Would Japan be in as much debt as it current in the presence of stronger demand? Why or why not?

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The Japanese economy is showing signs of recovery after the slump caused by the COVID19 pandemic The government lifted the state of emergency at the e... View the full answer