There is evidence, however, that the scope for orderly adjustment through the exchange rate channel is limited: the responses of current account balances to exchange rate changes has been subdued in recent years, possibly because of structural changes. One reason for this is that the sensitivity of imports to exports has increased as a consequence of the structural international integration of production.
In my view, this is basically because the natural rate of interest declined rapidly, due to the stagnant potential growth rate, the bubble burst, and the subsequent financial crisis (Chart 2).1 The Bank had been searching for measures to strengthen monetary easing from an early stage.