Moreover, attention should be paid to the effects of the appreciation of the yen since early autumn and the uncertainty in financial and economic developments abroad. To lead Japan’s economy into a steady recovery, it is important to prepare an environment where firms and households can regain confidence in Japan’s economic future by, for instance, promptly restoring the stability of the financial system.
It is argued that central banks must improve the underlying analytical framework of their monetary policy taking due cognisance of asset price movements, monetary and credit developments and the build-up of financial imbalances in order to identify potential risks and ensure more informed decision making.