For example, over the past decade the average annual increase in the prices of non-tradables was 3¾ per cent, while the average increase in the prices of tradables (excluding food and fuel) was much lower, at just ¾ per cent. The primary reason for this difference is the faster rate of productivity growth in the production of goods than in services.
Furthermore, in order to fully ensure the effectiveness of monetary easing, it is important for the government to ensure market credibility of fiscal consolidation. Japan is facing serious fiscal imbalances, and if the credibility of its fiscal management were to decline, long-term interest rates would likely rise in a manner inconsistent with economic and price developments.