Date of Original Version



Working Paper

Rights Management

All Rights Reserved

Abstract or Description

The United States Treasury has been giving Japan bad advice for several years. Repeatedly, the message has been to reduce tax rates permanently and maintain the exchange rate for the yen in its recent range, about 125 to 135 yen per dollar. A permanent tax cut was supposed to do what previous fiscal efforts had failed to do -- generate sustained expansion of the Japanese economy.

No one should doubt that Japanese expansion is desirable for Japan, its neighbors, and the rest of the world. The Treasury is right about that. The Japanese government has watched the economy stagnate much too long. A policy change is long overdue