JAPAN DOES MMT?

Let's first look at Italy which is in the crosshairs of the EU.

Italy’s renewed flirtation with economic recession while stuck in its euro straitjacket raises an unenviable policy dilemma for its policymakers. It also raises serious questions about the very heavy economic costs of Italy’s continued euro membership. These considerations do not bode well for either the Italian or the global economies.

Italy’s basic policy dilemma boils down to a choice between two unattractive options.

Should Italy try to stimulate its economy through an expansionary fiscal policy even though that might give fuel to the country’s bond vigilantes who are already concerned about Italy’s budget deficit and its very high public debt-to-GDP ratio? ...

Inspired by President Trump’s 2017 tax cut, Salvini is advocating the introduction of a 15-percent flat income tax. He is doing so even though such a policy initiative is expected to cost €30 billion or around 1.5 percent of GDP. ...

All this because it is in the straitjacket of the Euro with no option to devalue its currency. Italy's debt is a little over 130% of GDP. Inflation in the EU hovers at a tad above 1%.

Cross over to Japan with a sovereign currency and a whopper of debt. Japan's debt is above 250% of GDP and bond vigilantes play no role. To the contrary, its bonds are being gobbled up in no time. Inflation is around 1%. Now as MMT gains in popularity, it is even featured in German papers, the question is

JAPAN DOES MMT?

L. Randall Wray explains.

In recent days the international policy-making elite has tried to distance itself from MMT, often going to hysterical extremes to dismiss the approach as crazy. No one does this better than the Japanese.

As MMT began to gather momentum, its developers began to receive a flood of calls from reporters around the world enquiring whether Japan serves as the premier example of a country that follows MMT policy recommendations.

My answer is always the same: No. Japan is the perfect case to demonstrate that all of mainstream theory and policy is wrong. And that it is the best example of a country that always chooses the anti-MMT policy response to every ill that ails the country.

Reporters find that shocking. Biggest government fiscal deficits in the developed country world? Check. Highest government debt ratios in the developed country world? Check.

Isn’t that what MMT advises? No.

Nay, it is the perfect demonstration that all the mainstream bogeymen are false: big deficits cause inflation? No. Japan’s inflation runs just above zero. 
...
full post here.