If driving rates down to zero was, above all, a measure to combat deflation, the policy should be abandoned only when the threat of deflation is lifted.
The lesson from Japan is that, if there is the slightest risk of deflation, monetary policy needs to be looser than warranted by current economic conditions.
Most serious of all, deflation can make monetary policy ineffective: nominal interest rates cannot be negative, so real rates can get stuck too high.
The instrument is implemented in the UK and US, where the central banks consider that there are risks of deflation and where the policy rate is constrained by the zero lower bound.
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From 1929 to 1932 the main government in the firing line - America - operated a pro-cyclical policy of deflation: that is, making the downturn worse in the belief that it would "cleanse the system".
Once deflation sets in, monetary policy can do little to revive an economy.
Banishing Japan's persistent state of mild deflation has been a key policy pledge of prime minister Shinzo Abe, whose conservative Liberal Democratic Party returned to power last month after three years in opposition.
For once deflation has taken hold, monetary policy becomes a blunt tool.
The Bank of Japan allowed deflation to develop when it held policy too tight, partly because it was worried about another asset-price bubble.
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In contrast, once expectations begin to shift away from continuing yen appreciation and deflation, managing domestic Japanese monetary policy in the transition will be technically intricate.
Another gold member, James Dines, editor of the Dines Letter, says that the Fed's fear of deflation has prompted a highly stimulative monetary policy.
His powerful deputy governor, Yutaka Yamaguchi, favours the first: that the policy's prime target is deflation.
Expectations that Mr. Abe's Liberal Democratic Party, which came to power in December, would implement an aggressive monetary policy to end 15 years of deflation sent the currency tumbling.
The Fed is conducting monetary policy to counter high unemployment and possible deflation.
It welcomed recent policy changes by Japanese authorities aimed at tackling deflation and boosting growth.
Deflation has been one of the biggest bugbears for Japanese policy makers as it holds back consumer spending.
That is because much looser monetary policy is necessary to stave off recession and deflation in the euro zone.
The second and no doubt leading contributor to the gold bubble has been the world financial crisis of 2008-2009 and the subsequent worldwide central bank policy of monetary expansion to fight financial asset price deflation.
LDP's powerful committee on anti-deflation policies, and Taro Aso, the party's policy chief, they are putting the finishing touches to a bill that temporarily suspends mark-to-market accounting for banks, life insurers and 10, 000-odd listed companies.
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Japan's top economic policy makers are meeting to finalise moves to curb spiralling deflation and stablise the stock market.
But Japan must also act "to finally break free of the deflation trap" and it needed to "rely more on monetary policy to kick-start growth".
Our deflation began in the late 1990s, when the Fed inadvertently tightened monetary policy.
The first signs of deflation could lead to a harsh sell-off in gold, but policy makers, particularly in the United States, are keen to avoid such a scenario.
Japan's gold-selling boom could soon turn to gold-buying, analysts say, if policy makers succeed in their goal of ending 15 years of deflation and sparking a new round of inflation.
With Bernanke and Co. pledging to keep buying bonds until the end of June and also to maintain ZIRP (zero interest rate policy) for as long as there is any threat at all of deflation, traders knew exactly what to do.
"Such conduct of monetary policy will support the positive movements in economic activity and financial markets, contribute to a rise in inflation expectations, and lead Japan's economy to overcome deflation that has lasted for nearly 15 years, " the bank said in its policy statement.
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The yen's slump across a range of currencies has occurred as a new government has pledged to revive the deflation-dogged Japanese economy and has pressured the Bank of Japan to aggressively ease monetary policy.
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The new chief cabinet secretary, Yoshito Sengoku, the prime minister's gatekeeper on government policy, will want to deal seriously with both Japan's national debt and its deflation.
Deflation is not inherently bad, and that it is therefore far from being obvious that a wise monetary policy should seek to prevent it, or dampen its effects, at any price.
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