In Japan, an entire lost decade has been caught in the liquidity trap: Mythili Bhusnurmath

Mythili Bhusnurmath, Consulting Editor, ET Now, explains why she is not enthusiastic about the latest move by BoJ to shore up people's spending power
ET Now: A quick comment on what the BOJ has done, I mean the easing is on expected lines but BOJ is now trying to follow what ECB has done in the hope that it will bring back some bit of the necessary inflation.

Mythili Bhusnurmath: Yes I am afraid I am a bit of a sceptic about all this because Japan has tried virtually every trick in the trade. We heard earlier about the Abenomics and the three quivers. But that did not work. So now we have the BOJ trying. In fact, the BOJ was the first to talk about it but never did. The Scandinavian countries – Denmark, Sweden as well as ECB, have tried that route. The idea is to get banks to lend to force people to spend and get inflation up. But given what we have seen in Japan, virtually an entire lost decade, it has been caught in the liquidity trap. I am not really so enthused about the move because we really do not know how Japan is going to get out of that low level equilibrium where they find themselves caught and there have been numerous analysis of what really lies behind Japan’s problem. I am not sure that the kind of reaction that we are seeing now will be sustained and that really is worrisome because every time we have a policy action, trying to spur growth and trying to do something to the economy, there is a temporary kick and then again it goes back to normal. So I am a bit of a sceptic about all this. More so, because of what we have seen coming out of Japan in the past one decade. Nothing really seems to have worked. They also have the problems of an aging population. So there are a whole host of issues which is why I am not so enthused by what the BOJ has done.