The Bank is well aware of the necessity of stopping the continuous price decline in view of the severe economic situation, and is taking strong monetary easing measures unprecedented in the history of central banking. Then, what are the problems with the current continuous price decline?
A loss of price stability, regardless of whether this is due to deflation or inflation, could cause the following problems. Firstly, when prices are not stable, the signaling function of prices does not work properly and efficient resource allocation is hampered; and secondly, uncertainty heightens which makes it difficult for economic agents to take decisions for the future.