Now that the Bank of Japan has fired a monetary bazooka at deflation, people are asking “what’s next” for Abenomics, our drive to revive Japan’s economy. The challenges are serious. Ours is the only country in the post-war era to suffer from deflationary stagnation. Since the bubble economy burst in the early 1990s, we have struggled through two “lost decades”. Deflationary expectations are entrenched, discouraging investment in the future and eating away at the economy. Wages, consumption and investment are sluggish.

The key insight of Abenomics is that deflation cannot be destroyed by one bazooka. That is why we are firing three: bold monetary policy, flexible fiscal policy and a growth strategy to overcome stagnation. The inspiration is Franklin Roosevelt’s leadership during the Great Depression and, before him, Korekiyo Takahashi, a Japanese finance minister in the 1920s and 30s whose stimulus policies are said to have been a model for Roosevelt’s.

Markets have felt the blast of the first bazooka. Haruhiko Kuroda, the new governor of the Bank of Japan, has already announced “Quantitative and Qualitative Monetary Easing”. The Bank will double Japan’s already expanded monetary base, taking all imaginable measures to achieve 2 per cent inflation in about two years. The policy pushed long term interest rates to record lows.