It can be said that a moderate price decline has gradually undermined Japan’s economy. Therefore, what we should do to restore the vitality of Japan’s economy and let the economy grow in a sustainable manner is to achieve the 2 percent price stability target and overcome protracted deflation.
As I will describe later, to overcome deflation, the Bank of Japan introduced last April quantitative and qualitative monetary easing, dubbed QQE – an unprecedented bold monetary easing – and has been pursuing this policy. Today, so as to enhance your understanding of the Bank’s initiatives to overcome deflation, I will address three questions. First, why has Japan’s economy been unable to overcome deflation?