Bank of Japan officials must sometimes feel like a boy subject to a schoolyard prank: a "pile on." Classmates fall on top of him, one after another, as he lies on the ground. It gets awful heavy.
For a long time, piles of officials and economists at home and abroad have been urging the central bank to pour out more yen to revive Japan's economy from a 10-year pause.
Since Japan is the world's second-biggest economy, it's slump has become everyone's concern. Asia's financially troubled nations hope a more vibrant Japan will buy more of their imports. American businesses could expect to ship more goods to Japan, shrinking a huge trade deficit with the island nation.
A pledge to do what?
Meeting in Washington on Sept. 25, the finance ministers and central bankers of the Group of Seven major industrial countries talked about the issue.
Masaru Hayami, the governor of the Bank of Japan, provided this convoluted bit of encouragement: "We are exploring how we could improve money-market operations so as to assure the further permeation of liquidity in the context of a zero-interest-rate policy."
After a bit of head-scratching, that sentence was first interpreted as, "Yes, we'll print more money." As last week went on, though, it was reinterpreted as, "Well, maybe."
Japan, many assumed, would intervene in the foreign-exchange markets, buying US dollars with yen to strengthen the dollar and weaken the yen.
The G-7 even hinted they might join in such an intervention, which would expand the amount of yen in the system.
No such steps have been taken. The yen has now risen by more than 15 percent against the dollar since early July. Toward the end of last week, a dollar still bought about 105 yen - little changed for the week.
And, says Richard Katz, a journalist who follows Japanese-US financial relations closely, the US didn't promise to intervene with Japan to support the dollar.
Japan's Ministry of Finance would like the Bank of Japan to ease monetary policy. But bank policymakers apparently believe they have already done all they can to revive the economy.
Right now, Japanese short-term interest rates are about zero. Long-term loans are cheap at 1.3 percent. The money supply in Japan has been growing faster.
Bank officials see further additions of money as a pointless exercise. It would add to bank reserves. But banks already have oodles of reserves and are not using them to make the additional business loans that might pep up economic activity
To economist Allan Meltzer, the Bank of Japan is mistaken. "That is exactly what the Federal Reserve [in the US] said in the Great Depression," he says.
Dr. Meltzer, an economist at Carnegie-Mellon University in Pittsburgh, is an official adviser to the Japanese central bank. In e-mail, faxes, and visits, he's been long urging the bank to print even more money.
As it is, Japan is suffering from deflation. Japanese wages and prices are falling.
Hand out enough money until the banks and others don't want to hold it anymore, Meltzer advises. Then they will spend it - on goods, services, company shares.
Bank of Japan officials, says Meltzer, take him seriously. But they haven't taken his advice.
More intervention required
Mr. Katz, author of "Japan: The System That Soured" (M.E. Sharpe), is more sympathetic with the bank's view that the nation is in a "liquidity trap" - a phrase coined by famous British economist John Maynard Keynes to describe the problem in the Depression.
Keynes advocated fiscal action - new government spending and tax cuts - to get people spending some of their excess savings.
Japan has done that.
The economy revived this year a little with another massive program of government spending, loan subsidies, and tax cuts. But the fear is that growth will peter out.
So keep pumping out new money, suggests Meltzer - as do piles of other bank critics.
(c) Copyright 1999. The Christian Science Publishing Society