Thus, if we take the interest rate level as given, for the outstanding balance of government securities in real terms to decline, the price level needs to rise. However, although such a rise in the price level would spell the end of deflation in Japan, it would give rise to concerns that the government was planning to accumulate debt and then inflate it away.
Therefore, no matter how strongly the central bank is committed to ensuring price stability, it will find it difficult to maintain credibility. Ultimately, such a path will destabilize the economy and prices. Lessons learned from the past are that credibility, once lost, is hard to be restored.