July 22, 2010 / 8:21 AM / 9 years ago

Lindsey: U.S. entering deflation trap, to ease more

TOKYO (Reuters) - Former Federal Reserve board member Lawrence Lindsey said on Thursday it will be “obvious” by the end of this year that the U.S. economy has entered a “deflationary trap.”

“We know from (Fed) Chairman (Ben) Bernanke’s recent comments that it is now at least a concern ... By the end of this year I think it will be quite clear,” Lindsey said in an economic forum in Tokyo.

“I would expect by December we will see further quantitative easing” by the Fed, he said.

Former Bank of Japan Governor Toshihiko Fukui said in the same forum that Japan will need a “considerable time” to overcome deflation as growth expectations remain subdued.

“Deflation is a difficult issue. It is not something that can be wiped out in one stroke,” he said.

Fukui said the Japanese public has low growth expectations not only because of the declining population but also bulging public debt, which will need to be repaid in the future.

“Japan will need to make persistent efforts to improve productivity and rebuild public finances for a considerable period of time to achieve its target (of beating deflation),” he said.

Reporting by Rie Ishiguro; Editing by Michael Watson

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