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Hanno Lustig argues that rather than being preoccupied with intervention in the Yen, the European Central Bank should instead focus on the key lesson from Japan’s experience: exiting a long period of financial repression is extremely challenging.
Lustig emphasizes that once central banks have maintained low interest rates for decades, it becomes nearly impossible to return to normal policy conditions.
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Lustig has previously questioned whether central bankers overestimate the impact of real interest rates on aggregate demand in current conditions, as noted in one of his earlier posts. He has also described Blackstone’s recent launch of new private-market funds with Vanguard as a head-scratcher in a separate commentary. These remarks reflect his ongoing focus on central bank policy and market developments.