First, there was originally very little room for interest rates to decline further. As a consequence of the Bank’s large-scale monetary easing since the bursting of the bubble, the overnight call rate was already below 0.5 percent in 1995, and long-term interest rates were already at around 1.5 percent at the time of the introduction of the quantitative easing framework.
In this situation, the effects of various additional easing measures have remained marginal, especially when the economy has been under substantial adjustment pressures. The concern of many central banks about the risks of a price decline is based on a reflection of such uncertainty and limitation of the effectiveness of monetary easing under the “zero lower bound” of short-term interest rates.