This effect of monetary easing is called the “duration effect.” When the Bank, in March 2006, terminated its quantitative easing policy, which was accompanied by such a duration effect, it introduced a new framework for the conduct of monetary policy and decided to conduct monetary policy based on its “understanding” – that is, the level of inflation that each Policy Board member understands, when conducting monetary policy, as being consistent with price stability over the medium to long term – expressed in the form of a numerical value.
Moreover, in April 2007, the Bank presented in the Outlook Report its assessment of the outlook for price developments based on the “understanding,” and in December 2009 it provided further clarification with regard to the numerical value in the “understanding.”15 With regard to the current comprehensive monetary easing, the time horizon of the policy is clarified by making it explicit that the “understanding” is the basis for the judgment regarding the duration of the virtually zero interest rate policy.