Japan, the U.S., and Supply

Greg Ip has a great op-ed in the WSJ today. Here is a sample:

Much of the U.S. policy response to the crisis has been driven by a determination to learn from Japan: the Troubled Asset Relief Program and bank stress tests were designed to keep credit flowing. The Federal Reserve’s near-zero interest rates and bond purchases, and both the Bush and Obama administrations’ fiscal stimulus plans, were meant to sustain demand while the private sector pays down debt.

These have been the right actions. Yet they too narrowly focus on the role of inadequate demand in Japan’s reversal of fortune. Japan has just as important a lesson about supply.

Read the whole thing.

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