In deciding a specific inflation rate, the Bank considered that (1) there is considerable uncertainty surrounding the prospects for Japan’s economy because it is in a process of transition to a normal growth path following long-term stagnation, and therefore (2) deliberations should fully take into account the perception of price developments held by the general public, which is used to long periods of low inflation rates, including even the period of the financial bubble prior to the 1990s.
This means that, apart from debt service, all other expenditures are covered by current revenues. This is quite an achievement in an international context: Japan, for example, will have a 9% of GDP primary deficit this year, the U.S. 6% and U.K. more than 5%.