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DEWJ - What Japan Would Have To Do To Achieve A 10% Inflation Target
iShares Adaptive Currency Hedged MSCI Japan ETF
I do not expect Japan to adopt a 10% inflation target, nor do I think it's a good idea. Nonetheless, it's a useful thought experiment which helps to illuminate some difficult-to-grasp ideas.
Let's think about what Japanese interest rates and base money demand would look like with a 10% inflation target, assuming no IOR. Here are some plausible guesses:
Japanese interest rates would be roughly 10%, plus or minus 2%.
The Japanese monetary base would be roughly 5% to 10% of GDP.
I base the first estimate on the fact that real interest rates in