As a result, the downturn in growth during this period caused a decline in prices, further reducing growth through the rise in real interest rates, so that weak economic growth and deflation reinforced each other over a long period. Then, in 2008, the global financial crisis led to another sharp contraction in Japan's economy (Chart 6).
The income elasticity of demand for broad money which has been proven to be reasonably stable and is in the range of 1.5 to 1.6 in India should be taken into account.