Undermined by deep-seated structural roadblocks, Japan's aggressive monetary easing since the early 2013 looks very much like Einstein's famous quip about "doing the same thing over and over again and expecting a different result."
Japan's central bankers are now farther than ever from their price inflation objective of 2 percent. Accelerating declines of consumer prices in the first seven months of this year culminated with 0.5 percent annual dips in June and July. In spite of that, they keep unfolding measures of credit expansion which, in their view, are supposed to lead them to their elusive inflation goal.
One wonders whether there is a need to remind people that accelerating increases in costs and prices are created by sustained excess demand in labor and product markets. In other words, a precondition for steadily accelerating price inflation is a growth of demand and output that is hitting the limits of the economy's production potential.
And here is what Japan's data are saying about that: Between the 2013 and the second quarter of this year, Japan's economy was growing at an average annual rate of 0.6 percent. That was also the period of no productivity growth despite a stagnating labor input.
Are robots the solution?
The above paragraph is a story to meditate by Japan's economic strategists; it is the key lesson showing the futility of an exclusive reliance on the long-running monetary experimentation.
I know personally some of these strategists, and I am aware that they have known all along that Japan needs root-and-branch reforms to unlock its economic growth potential through rising stocks of human and physical capital and reviving productivity advances.
Sadly, that message keeps falling on deaf ears.