Moreover, financial institutions become increasingly accustomed to deflation-oriented investment strategies, and shift their investments from risk assets (such as stocks, corporate bonds, mutual funds, loans, real estate, and foreign securities) to safer assets (such as Japanese government bonds [JGBs], deposits, and cash). Why was the 2 percent target adopted?
As I mentioned earlier, in January of this year the Bank established a target of 2 percent to achieve price stability. I would like to explain here why this course was decided on. In essence, Japan’s economy had been quite depressed and gradually eroding for some time.