Fed’s Yellen Says Japan’s Easing Appropriate to End Deflation

Federal Reserve Vice Chairman Janet Yellen said the Bank of Japan’s plan to double its monetary base is appropriate to end the country’s deflation.

“What Japan is doing is something that is in their own best interest,” Yellen said today in response to audience questions after a speech in Washington. “It’s something that, if successful, will be good for stimulating growth in the global economy and will be good for us too.”

The BOJ will double the monetary base by the end of 2014 through buying government bonds, in Japan’s biggest round of quantitative easing, the central bank said in Tokyo. At stake is the credibility of Prime Minister Shinzo Abe’s economic program -- dubbed Abenomics -- and the chances of ending two decades of stagnation and meeting a 2 percent inflation goal.

“Taking an aggressive approach to try to end deflation is something I certainly understand,” Yellen said.

“Nominal income, nominal GDP in Japan is slightly lower than it was 20 years ago,” she said. “That’s really remarkable and it’s resulted in all kinds of problems for Japan.”

Joshua Zumbrun in Washington at jzumbrun@bloomberg.net

Jeanna Smialek in Washington at jsmialek1@bloomberg.net

Before it's here, it's on the Bloomberg Terminal.