Here’s an (audio) interview with economist Richard Werner, who remarks on the problems high land prices have posed for the Japanese economy in recent decades, and the relevance for the U S and other nations. Dropping interest rates supports higher land prices, as well as facilitating financial engineering, but does little for actual investment in the real economy. Small businesses, who actually provide useful goods or services, still have trouble borrowing because big banks don’t want to deal with them. The number of small “community” banks, more likely to actually meet the needs of small businesses, in the U S has been declining. He suggests that having more local banks, especially co-operative banks, would be an effective way to make loans available. This seems plausible, as ILSR says that “In 2018, community-based financial institutions made 52 percent of all small business loans, even though they controlled only 16 percent of banking assets.” Yet it seems there’s no shortage of local banks, as least in medium and larger cities.
In this interview he never mentions the possibility of a substantial land value tax as a way to curb land speculation. As Keizo Takagi wrote in 1989, Japan’s land value tax “has been so low that [it] has not functioned properly as a holding cost,” [p. 129] thus failing to control speculative prices.
Perhaps deliberately or perhaps ignorantly, the Bloomberg interviewers didn’t bother to bring this up in the interview. Werner’s conclusion seems to be that, rather than ZIRP, interest rates should be allowed to rise to a level where local banks could more easily find loans profitable. I suppose that might be better than nothing.