Some interesting ideas about how Japan (and by extension the rest of us) can get out of the deflation trap in today’s Times. The article, "To fight deflation, abolish cash", proposes that getting rid of physical money will allow policy makers to do something not possible in a world where the population can hoard bundles of bank notes in sock drawers – namely to set an effective negative nominal interest rate. Many economists suggest that Japan needs interest rates of around -4% (and a similar number has been talked about for the Euro area). Abolishing yen notes and moving fully to electronic payment systems would allow policy makers to apply negative interest payments to "hoarded" money, and thus encourage spending rather than saving. Whether it would simply encourage spending on gold bullion and foreign banknotes is another question, but whether it’s spending on non yen financial assets or on domestic consumption, negative nominal rates should eventually generate inflation. Such a radical measure in an economy where the amount of cash circulating is over 6 times higher than in most developed economies is unlikely to be implemented, despite some political support, which in part explains why the Japanese government bond market continues to expect average deflation of -2% per year for the next decade.