The preparatory work undertaken by the EMI has reduced the possible alternatives to just two strategies, that is monetary targeting and inflation targeting. A monetary target emphasises the central bank’s responsibility for monetary conditions and demarcates its responsibility vis-à-vis other policy areas and exogenous shocks. Monetary targeting informs the public about the central bank’s fundamental orientation and can thus help to stabilise inflation expectations.
Confidence in JGBs could change in a non-linear fashion and government calculations suggest that the fiscal situation in Japan is likely to remain severe.