Piketty: Europe should learn lesson from Japan on deflation

By Daniel Leussink

(Bloomberg) — Thomas Piketty, the French economist whose 2013 book on wealth inequality became an international best-seller, said Europe should learn from Japan that monetary policy alone can’t prevent the economy entering deflation.

“Maybe one lesson is that it’s not enough to print money,” he said during a brief interview on Saturday in Tokyo. “If you print money, you can create bubbles on the stock market, on real estate prices. But that’s not necessarily increasing consumer price inflation and increasing growth.”

The 43-year-old author commented after speaking at a forum in Tokyo where he compared Europe’s economy with Japan’s.

Euro-area consumer prices fell 0.6 percent in January from a year earlier, according to data published by Eurostat Jan. 30. A week earlier, European Central Bank President Mario Draghi announced a bond-buying program valued at about 1.1 trillion euros ($1.2 trillion).

“In Europe right now, the economic growth is very bad. I think because there was too much austerity,” Piketty said in a speech at the Japan National Press Club. “We tried to reduce the public deficit too fast. So we’ve killed growth. And now we have a little bit the same problem as Japan with deflation.”

The Bank of Japan expanded already-unprecedented monetary stimulus in October, giving it room to purchase every new bond issued by the finance ministry. The yen has declined 21 percent against the dollar since Governor Haruhiko Kuroda introduced the easing program in April 2013, helping to boost profits of some exporters and spurring a 39 percent gain in the Topix index of shares.

The BOJ’s easing and a sales-tax increase in April last year have driven up the cost of living faster than incomes, weighing on Japan’s economic recovery. Kuroda said in January he owns a copy of Piketty’s “Capital in the Twenty-First Century” and planned to read it thoroughly.

Global Tax

The French author met with the leaders of the Democratic Party of Japan, the largest opposition party, Jiji Press reported. Prime Minister Shinzo Abe had no publicly scheduled meetings with Piketty, according to the prime minister’s office.

Abe said Jan. 28 in Japan’s parliament that Piketty’s proposal for a global wealth tax would be hard to implement. Piketty said Saturday that Japan could implement the tax first.

“We should not use the lack of global cooperation as an excuse for not doing this in Japan,” Piketty said. “I think in Japan it’s important to rebalance the tax system in favor of the young generation, who have a very difficult time to access property right now in Japan. I think increasing the value-added tax, which is what Abe did, is not a very good way to reduce inequality in Japan.”

Piketty said on Jan. 29 in Tokyo that he sees gender inequality as an impediment to Japan’s economy.