Moreover, some hold the view that, while monetary policy actions can influence asset price developments, the magnitude of the swings in policy rates that would be needed to curb boom and bust cycles in asset prices at times of “irrational exuberance” could be so large as to have adverse implications for macroeconomic stability in the short term.
The second reason is that, since Japan is a commodity importer, the economy has been under downward pressure from an outflow of income brought about by recent rises in international commodity prices (Chart 2).