Fmr. Fed Top Economist: Japan Needs Dramatic Shift

The Bank of Japan has a credibility problem. Speaking to CNBC's Fast Money yesterday, Pimco CEO Mohamed El-Erian says the markets aren't so sure and neither is he:

"I think the market is rightly questioning the effectiveness of the Bank of Japan. Not the willingness but the effectiveness. And doing so for a number of reasons. First, we have yet to hear of the structural reforms. Remember central bank liquidity is a bridge, you need a destination. That's about structural reform and growth. Second, Japan is trying to do a lot and can only do that through capturing demand from other countries. And finally the initial conditions are the worst possible. "

On the fiscal side, Japanese Prime Minister Shinzo Abe also has to shore up his credibility. Abe meets the other G8 leaders this weekend to convince them his planned economic reforms will help the Japanese economy. But will that work?

Talking Numbers asked former Chief Economist and Director of Research and Statistics at the Federal Reserve Bank, David J. Stockton. He's now senior fellow at the Peterson Institute for International Economics, and is also senior adviser at Macroeconomics Advisers LLC.

Japan has seen several recessions over the last two decades. "This is the reason why there's need for a dramatic shift in both monetary and fiscal policy," says Stockton. "There's certainly a hope with Prime Minister Abe's election that we'd get that kind of a dramatic shift."

To hear Stockton on whether Abe can pull it off and save Japan, watch the video above.

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