Conclusion: Thus, the Reflationist Theory Has Collapsed

Ten years of the Bank of Japan (BOJ) under Governor Kuroda proves the fallacy of the reflationist theoryReflationist theory. Reflationists argued that the BOJ could end deflation by raising expected inflation. However, the BOJ has failed to raise expected inflation or achieve its inflation target. Conversely, the surge in import prices since 2022 has pushed the consumer price (CPI) inflation rate up. This again showed that costs, not monetary policy, are driving up the CPI in Japan. However, imported inflationImported inflation has reduced consumption in real terms. There is no basis for the strategy of reflationists that overcoming deflation will revive the Japanese economy. The reflationists’ tools for raising inflation expectations were a Japanese-style inflation targetJapanese-style inflation target and a massive supply of monetary base. The BOJ under Kuroda abandoned both of them only three years after its start, and its monetary policy ended in a historic fiasco. The BOJ then tried to save its own positionPositions and reputations and reputation by pretending to continue policies advocated by reflationists.