Perhaps Japan will take a note out of Israel’s book. There is an ongoing war of words between Japan’s finance ministry and its central bank, in which the government asks the bank to tackle deflation, and the bank asks the government to fix the fiscal deficit. As Robin has pointed out, the ‘pressure’ being applied to the bank is more of a nudge than an ultimatum. But if the government wanted to step up the pressure, it could use the minimum wage to affect monetary dynamics. This is a charge levelled today by Bank of Israel governor Stanley Fischer against the Israeli finance ministry, who told parliament the tactic has been used at least once (Israeli speech from Bloomberg).
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