Yet it seems difficult to accept temporary overshooting of the inflation rate and long-term interest rates in the transition path returning to the desired price level path from persistent deflation, in particular under the circumstances of the large-scale accumulation of government debt and the persistent budget deficit in Japan. However, we recognize the importance of "history dependence" in conducting monetary policy.
In this context, I would like to stress that maintaining the same reserve target level at the current stage implies an increased degree of monetary easing, since the excess supply of bank reserves is intensified and the maturity of short-term monetary operation instruments is lengthened, with the result of extension of zero interest rates in the market.