Sources: Kunio Okina and Shigenori Shiratsuka, “Asset Price Bubbles, Price Stability, and Monetary Policy: Japan's Experience,” IMES Discussion Paper 2001-E-16, Institute for Monetary and Economic Studies, Bank of Japan, 2001, Chart 7. 8. Suppose a central bank adopts dramatic easing actions way beyond “standard” or rulebased monetary policy at an early stage.
The intention would be to create an accelerated inflation preemptively to avoid the future risk of a deflation when, as in the case of Japan, sharp falls in some but not all asset prices, still fairly robust economic growth, and mild inflation co-exist.