Moreover, if interest rates were raised, this would lead to a decrease in the demand for loans, a decline in prices, an appreciation of the yen, an economic downturn, an increase in bankruptcies (raising banks' credit costs), and so forth. Therefore, raising interest rates would not solve the problem.
Considering that the current low interest rates are partly attributable to the deflationary monetary policies  1  pursued in the past, as I will describe later, the only way out is to maintain the current accommodative monetary policy in order to achieve sustained expansion of economic activity until we see increases in prices and interest rates. I.