Experience, judgement and the acknowledgement of uncertainty are key parts of that environment, and key parts of the policy maker’s outlook. To help assess economic developments and to facilitate policy discussion, though, central banks use a variety of macroeconomic models and econometric tools. Despite the sophisticated tools and analysis at our disposal, the uncertainty underlining the policy environment is pervasive.
However, the gap narrowed significantly during the Izanagi boom, when small and medium-sized manufacturing firms actively invested in facilities and equipment. In this way, not only did prices rise, but firms' efforts to raise productivity also drastically intensified. As a result, real wages increased notably, thereby substantially boosting households' purchasing power.