However, such monetary easing alone will not be sufficient to achieve the government’s target of “real economic growth of about 2 percent on average for 10 years” and can only provide a supplementary boost to Japan’s growth potential. To achieve the government’s target, it is necessary to raise Japan’s growth potential by pushing ahead with drastic structural reforms through a growth strategy.
Mainstream macroeconomic doctrine had long built on a finance-less construct in which short-term rates matter only to the extent that they determine long-term rates, as risk-adjusted expectations of future short-term rates. The crisis has suggested that finance is not a veil.