A Reassessment of the Problems with Interest Targeting: What Have We Learned from Japanese Monetary Policy?

Interest rate targeting is widely used by central banks to pursue price stability; however, the variation in inflation policy outcomes between central banks such as the Federal Reserve and the Bank of Japan despite a common policy instrument framework suggests interest- targeting has limitations. Despite the variation in policy outcomes, the role of targeting was enhanced with the advent of Taylor rules in the 1990s and interest rate targeting dominates central bank attitudes to the exclusion of any other policy instrument framework. The recent Japanese experience confronts us with the need to reassess the relative merits of interest targeting. This paper frames the discussion of the various problems of the interest-targeting framework within a model that encompasses a number of important previous results and stresses that interest rate targeting may leave the price level indeterminate in various plausible circumstances. In a low, or even zero interest rate environment, such as the one that characterized Japan, Taylor-type rules may offer no solution to the indeterminacy problem. The paper then discusses various aspects of the BoJ’s decision to adhere to interest rate targeting despite its limitations.Interest-targeting, Monetary Policy, Deflation, Japan

A ‘Second-Best’ Rationale to Deflationary Monetary Policy in Japan

The Bank of Japan permitted a ten-year period of deflation (1995-2005) which appears to have ended in 2006. The deflation, as well as the preceding disinflation, adversely affected the financial and real sectors of the economy that in turn, made it difficult to recover from the collapse of asset prices in 1990 and 1991. Various ad hoc explanations have been offered to account for the deflation period. This paper offers a second-best explanation based on a two-player policy game between the Bank of Japan and the banking system in which the banking system relies on an accommodative policy of forgiveness and forbearance by the Ministry of Finance to deal with weak balance sheets. The paper does not explicitly model the Ministry of Finance preference function but incorporates the Bank of Japan’s perceived willingness of the Ministry to accommodate the banking system in the Bank’s reaction function. The model suggests that in the context of established deflationary expectations and large amounts of debt, the Bank of Japan explicitly regarded the level of debt as exceeding the socially optimal level, that Ministry of Finance forgiveness and forbearance contributed to this excess, and lacking an instrument to reverse deflationary expectations, the Bank of Japan employed deflation as a disciplining instrument to limit real debt.Monetary Policy, Deflation, Japan

Implications of the 2019–2020 megafires for the biogeography and conservation of Australian vegetation

Australia's 2019–2020 'Black Summer' bushfires burnt more than 8 million hectares of vegetation across the south-east of the continent, an event unprecedented in the last 200 years. Here we report the impacts of these fires on vascular plant species and communities. Using a map of the fires generated from remotely sensed hotspot data we show that, across 11 Australian bioregions, 17 major native vegetation groups were severely burnt, and up to 67–83% of globally significant rainforests and eucalypt forests and woodlands. Based on geocoded species occurrence data we estimate that >50% of known populations or ranges of 816 native vascular plant species were burnt during the fires, including more than 100 species with geographic ranges more than 500 km across. Habitat and fire response data show that most affected species are resilient to fire. However, the massive biogeographic, demographic and taxonomic breadth of impacts of the 2019–2020 fires may leave some ecosystems, particularly relictual Gondwanan rainforests, susceptible to regeneration failure and landscape-scale decline

A Large-Scale Rheumatoid Arthritis Genetic Study Identifies Association at Chromosome 9q33.2

Rheumatoid arthritis (RA) is a chronic, systemic autoimmune disease affecting both joints and extra-articular tissues. Although some genetic risk factors for RA are well-established, most notably HLA-DRB1 and PTPN22, these markers do not fully account for the observed heritability. To identify additional susceptibility loci, we carried out a multi-tiered, case-control association study, genotyping 25,966 putative functional SNPs in 475 white North American RA patients and 475 matched controls. Significant markers were genotyped in two additional, independent, white case-control sample sets (661 cases/1322 controls from North America and 596 cases/705 controls from The Netherlands) identifying a SNP, rs1953126, on chromosome 9q33.2 that was significantly associated with RA (ORcommon = 1.28, trend Pcomb = 1.45E-06). Through a comprehensive fine-scale-mapping SNP-selection procedure, 137 additional SNPs in a 668 kb region from MEGF9 to STOM on 9q33.2 were chosen for follow-up genotyping in a staged-approach. Significant single marker results (Pcomb<0.01) spanned a large 525 kb region from FBXW2 to GSN. However, a variety of analyses identified SNPs in a 70 kb region extending from the third intron of PHF19 across TRAF1 into the TRAF1-C5 intergenic region, but excluding the C5 coding region, as the most interesting (trend Pcomb: 1.45E-06 → 5.41E-09). The observed association patterns for these SNPs had heightened statistical significance and a higher degree of consistency across sample sets. In addition, the allele frequencies for these SNPs displayed reduced variability between control groups when compared to other SNPs. Lastly, in combination with the other two known genetic risk factors, HLA-DRB1 and PTPN22, the variants reported here generate more than a 45-fold RA-risk differential

Yemen and the Horn of Africa

Ginny Hill; Tom Cargil