There Is No Monetary Policy Working on Inflation Expectations

Reflationists, including Kikuo[aut]Iwata, Kikuo Iwata, who was the Deputy Governor of the Bank of Japan (BOJ), have argued that monetary policy achieved success by working on inflation expectations. The theoretical problem with the monetary policy proposed by reflationists, which works on inflation expectations, is that no one can explain why inflation expectations and the actual inflation rate rise when the BOJ defines an inflation target with a deadline and declares commitment to achieving it, and rapidly expands the monetary base. The reflationist price theoryReflationist theory has no theoretical basis. Next, reflationists argue that the monetary policy advocated is the standard of mainstream American economics. This is also false. On the contrary, mainstream economists in the United States, including Bernanke[aut]Bernanke, Ben S. and Gertler,[aut]Gertler, Mark have seen the failure of the BOJ and insist that the BOJ is not capable of overcoming deflation. Instead, Iwata submitted what he called evidence. Ironically, we show that the BOJ under Kuroda[aut]Kuroda, Haruhiko and Iwata proved their own evidence false. It was inevitable that policies based on theories with no theoretical basis or evidence would fail.