If Corporate Governance is the Answer, What is the Question? The Illusory Relation between Structural Solutions and Japanese Deflation

Policy by assertion is an all too common temptation amongst economic analysts. Plausible stories substitute for closely developed economic theory backed by convincing empirical evidence. In the case of Japan, an extended period of deflation attracted numerous proposed policy responses. Structural explanations, typified by those relating to corporate governance, appear to be uncontroversial. On closer examination however, the causative mechanisms and actual evidence turn out to be seriously lacking. Instead, a collection of individually desirable objectives are bundled together to present an appearance, rather than a reality, of cause and effect. The result is a set of obvious solutions, but the associated policies remain largely dependent on assertion for their authority.