Fully recognizing that this is the conundrum facing Japan’s economy, I want to stress here that, when pursuing ‘structural reforms,’ it should clearly be recognized that such reforms could cut both ways as I have explained. In the end, the public determines the desirable sequencing of policy change.
A decision to realize the efficient reallocation of resources all at once will be associated with significant pain but, at the same time, it could pave a way for faster recovery later. To the contrary, a decision to realize reallocation in a gradual manner could avoid a sharp downturn but it could delay a sustainable recovery.