After that, commercial banks came into existence, the planned economy was replaced by market economy, and the interest rate determined by market supply and demand came among. At this point, an important question is, “What is the appropriate level of the interest rate?” We can see that central banks in various countries all concentrate on the adjustment and control of the interest rate.
Modifying the inflation differentials with trading partners will lead to an adjustment in excessive appreciation of the yen. Moreover, narrowing the differentials of inflation expectations with other economies will contribute to the stability of foreign exchange rates. In this way, corporate profits will start to improve and employee income will increase.