In many cases of past rebalancing, an undervalued exchange rate also led to excessive growth in money supply, making it harder to tame inflation.

ECONOMIST: Economics focus

Authorities have been using monetary policy instruments to cool inflation rather than adjust an exchange rate which many consider to be undervalued.

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Mr Svensson argues that the yen needs to be pushed to an undervalued level, from which the public would then expect an appreciation of the real exchange rate.

ECONOMIST: The yen