In recent years there have been a number of minor interest-rate reductions in response to capital inflows. The current interest rate spread to the euro is approximately 25-30 basis points, depending on which short-term interest rates are considered. There are many opinions on what a “normal spread” should be, but it cannot be pinpointed.
This development occurs against the background of a cyclical rebound in global demand for IT-related goods as well as the progress of structural adjustment, including the improvement of corporate profitability. Structural adjustment of Japan's economy is but halfway complete, and many issues remain to be resolved.