Friday, April 15, 2011

Japan Will Return To Normal Growth, BoE's Posen Says

4/14/2011 1:41 AM ET 

(RTTNews) - Overcoming strongly from the current crisis, Japan will be a normal economy again, Bank of England policy maker Adam Posen said in a speech on Wednesday.

The human tragedy of the March 2011 earthquake and tsunami will not dislodge the Japanese economy from the long-term development path common to all advanced economies, he said in New York.

The outstanding public debt level in Japan is very high. At the same time, the national savings available to fund government borrowing remains far larger. According to Posen, re-building the devastated regions of the nation will cost up to 10 percent of gross domestic product spread over three to five years.

He suggested that the government could substitute the one time spending on reconstruction for ongoing wasteful public spending and transfer programs. Even if it is implemented partially, it would help to reduce the structural deficit in Japan.

"Underestimating the potential growth rate of Japan again, and returning to monetary or fiscal policy tightness too soon could become a self-fulfilling prophecy," he added.

by RTT Staff Writer

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