Wednesday, May 23, 2007 How Japan fuels financial instability By THOMAS I. PALLEY NEW YORK — Over the past several years, much attention has focused on the role of China's trade surplus in creating today's global financial imbalances. But too little attention has been paid to the role of Japan's policy of near-zero interest rates in contributing to these imbalances. As global financial uncertainty rises, it is time for Japan to change course. Japan's ultralow interest-rate policy was initiated in the 1990s to put a floor under the economy following the bursting of its asset price bubble. However, over time...
