With this impact in mind and with a view to overcoming deflation, the Bank is determined to pursue the extremely easy monetary policy even as the economy continues to recover. The third element is the Bank’s efforts to improve the transmission mechanism of monetary easing.
Businesses are apparently continuing to discover unexploited areas of cost reduction that had accumulated during the boom years of 1995 to 2000 when the projected huge returns from market expansion dulled incentives for seemingly mundane cost savings. The ability of business managers to reduce costs, especially labor costs, through investment or restructuring is, of course, one reason that labor markets have been so weak.