This confidence in JGBs rests on the confidence that payments of interest and principal are backed by future government revenues and, moreover, that the government and the Bank have the will and ability to restore long-term fiscal health and maintain the value of the currency.
•  Financial innovations such as credit card networks and money market mutual funds allow households and firms to minimize their holdings of cash and central bank reserves, thus shrinking the base of the inflation tax. •  Increased circulation of banknotes in dollars or other hard currencies enable citizens to conduct transactions without holding inflationary currency.