Many OECD countries will be tempted to “Japanify” their economic policy

In many OECD countries, low inflation is allowing the central bank to keep interest rates very low, which allows the government to conduct an expansionary fiscal policy. This has been the case in Japan for 20 years, and is now the case in the United States, France, Italy and the OECD taken as a whole . For the time being a mong the large OECD countries, only Germany, the United Kingdom and Spain are resisting this “ Japanisation ” of economic policy. It is easy enough to understand the motives of : Central banks: inflation is lower than their inflation targets; Governments: they want to stimulate growth, reduce unemployment and offset the weak growth in household demand that results from the weak growth in wages. But this choice to “ Japanify ” economic policy gives rise to significant irreversibility: a rise in interest rates would be disastrous given the very high public debt ratios.