The Eurosystem’s stability-oriented monetary policy strategy rests on two “pillars”, which are both important when the Governing Council discusses monetary, financial and economic developments at its bi-weekly meetings. The first pillar, which is a prominent role for money, takes into account the essentially monetary origins of inflation over the medium to long term.
From the medium-term perspective, Japan needs to carry out the structural overhaul of its public sector, too. For instance, the legacy of an activist fiscal policy throughout the 1990s is still with us, as shown by the huge public debt nearing 160% of our GDP. This leads us to conclude that fiscal consolidation should be examined in a well thought-out manner.