Japan is used to the position in which it currently finds itself: apart from the rest of the rich world. Elsewhere, as inflation exceeded central-bank targets, rate-setters tightened monetary policy in rough proportion to the size of their overshoot. If the Bank of Japan had behaved in a similar manner to its G10 peers, notes Tim Baker of Deutsche Bank, the country’s interest rates would have increased by two percentage points over the past few years. Instead, they barely crept up, rising from -0.1% to 0.25%, despite nearly three years of price growth above the BoJ’s target of 2%.
