Takehiro Sato: Lessons of Japan - focusing on issues regarding long-term inflation expectations

Speech by Mr Takehiro Sato, Member of the Policy Board of the Bank of Japan, at Yale University, New Haven, USA, 28 March 2017.

Introduction

First of all, I thank Senior Fellow Stephen Roach for giving me the opportunity to talk to this esteemed audience at Yale. I understand that he teaches macroeconomic policy issues, focusing on the lessons Japan learned from deflation. The Bank of Japan is the frontrunner in combating deflation. As one of its board members, I hope that my remarks today will help stimulate academic discussion. 

Deflation has prevailed for almost a quarter century in Japan. To overcome deflation, theory and practice were introduced and tested, and the policy effects were examined. As a result, a range of knowledge and wisdom has been acquired. The Bank, on its part, conducted a comprehensive assessment of quantitative and qualitative monetary easing - or QQE for short - in September last year, and learned some important lessons. Among these, I will today focus on the issues regarding long-term inflation expectations. This is because they are the key factor in overcoming deflation. I admit that conceiving such expectations is a somewhat elusive task, but it is worth discussing.