Bernanke Says U.S. No Japan as 2% Inflation Avoids ‘Lost Decade’

Federal Reserve Chairman Ben S. Bernanke said the U.S. doesn’t face a “lost decade” like Japan’s because policy makers have helped the world’s largest economy avoid the deflation that has plagued the No. 3 nation.

“Very importantly, the Federal Reserve has kept inflation close to 2 percent and we have avoided deflation which was the major problem for the Japanese,” Bernanke said today in response to questions from members of the House Financial Services Committee in Washington.

He added that there are “important differences” between the nations. “Japan has even a more rapidly aging society than we do. Their workforce is actually declining. They’ve had more difficulties with their banking sector. We were more rapid at getting our banks up and running again.”

The Fed chairman, who offered Japan a prescription for ending deflation as a Fed board member a decade ago, also said the Bank of Japan wasn’t aggressive enough.

“They were too cautious,” Bernanke told lawmakers. “One of the most salient facts about Japan is they’ve had deflation, falling prices now for quite a few years. And that’s suggestive of a monetary policy which is not achieving price stability.”

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