The notion that the BOJ has some magic wand to create inflation is a myth perpetuated by monetarist economist against all evidence. The BOJ has printed money like mad. But once interest rates hit zero, we're in a new ballpark.

Says Richard Katz.

Like mad is a bitt of an exaggeration, bur BoJ has certainly been prnting money. But what has it done with it? Given it to banks and insurance companies in exchange for JGBs, thus keeping up the price of the latter and giving banks more cash for which they cannot find worthy borrowers and so stash away in their deposits with BoJ.. Meanwhile large amounts of JGBs are newly minted to cover a big fiscal deficit, while, trying to narrow the deficit by increasing taxes and thus plunging the economy ever deeper into gloom, causing animal spirits to evaporate in thin air. If it printed money and simply gave it to the Government to cover the deficit and the government firmly told bond-holders that they were going to go on doing that until inflation got to 5% (they'd probably have to change the BoJ law first) That would REALLY be printing money. And the sell-off of JGBs by the scared markets would soon take care of Katz's zero interest problem.

It's not a matter of the intellectual mistakes of monetarist economists.
It's a matter of political power being exercised in favour of the holders of financial assets who don't want to see the value pf their property fall, rather than in favour of all those people out of work because of the output gap.

Ronald Dore