Government's inability to boost economy is cause of a vicious circle -- Akahata editorial, August 16, 2001 (excerpts)

In a move to step up the easing credit policy, a de facto inflation policy, the Bank of Japan has decided to further increase the nation's money supply.

Under the decision, targeted reserves held by the BOJ will be raised to about six trillion yen from the present five trillion yen, and its outright purchases of long-term government bonds will be raised to about 600 billion yen from the present 400 billion yen.
Paving the way for inflationary spiral

Policy of easing credit does not help boost the economy as is clear from recent economic activities. In announcing the latest measures, the BOJ governor admitted that he cannot tell to what extent the easing of monetary policy will be effective in rousing demand.

To begin with, the near-zero interest rate policy has contributed to raising the level of the overall money supply which exceeds the bubble economy level. The market has abundant money. In addition, the easing of credit policy since last March has held down the short-term interest rates to almost zero.

Notwithstanding all these measures, demand for funds does not increase simply because the real economy is not improving. If the central bank continues to boost the money supply without regard for the need for a strengthened real economy, the result will be an inflationary spiral.

The government policy is one of accelerating massive business bankruptcies and massive unemployment; the government is not at all concerned for an economic recovery policy that would raise demand.

The first thing the government must do to boost demand is increase personal consumption which is essential to economic recovery and improvement of the real economy. (end)