The authors note that hystereris can be sizeable, but depending on the evolution of the (unobservable) underlying growth trend, the consequences are conflicting for monetary policy: in the presence of hysteresis, output deviation from its optimal level can be long lasting and call for a strong monetary response; but the response may prove too strong if we understand too late that the underlying trend has in fact changed.
I have high hopes that foreign financial institutions will continue to play the significant role they have played in Japan’s economy in the past 30 years and will contribute to the robust growth of Japan’s economy in the future. With such hopes, let me conclude my speech today. Thank you. 4  BIS central bankers’ speeches