The "zero bound" problem in monetary economics is this: The central bank can't cut nominal interest rates to lower than zero, because no one would buy a government bond with a negative interest rate, because they could hold cash instead. Cash has a zero nominal interest rate.
So here's the latest bright idea out of Japan: get rid of the "zero bound" problem by getting rid of cash. The idea is to force people to use rapidly depreciating government bonds as their only means of exchange; the money will then be "burning a hole in their pockets," and they'll go out and spend spend spend.
It wouldn't work, of course. Even if you got rid of cash, people could still hold zero-nominal-interest checking accounts. If you outlawed checking accounts, it would wreck your economy spectacularly, but it also wouldn't work; people would start using foreign cash (as they do in countries with high inflation rates).
Nice try, Japan.
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