There is also the option of foreign exchange market intervention, which can be seen as introducing an extra policy instrument to deal with an extra target of policy. 9 Some countries, such as the United States, Chile, and Israel and more recently Japan – as well as the ECB – do not intervene in the exchange markets, or intervene very rarely.
Chronic Deflation and QQE A. Decline in the Natural Rate of Interest and Chronic Deflation Now, let me start with Japan's experience of deflation. In Japan, after the burst of a large-scale asset bubble in the early 1990s, the economy decelerated significantly and the inflation rate declined gradually.