We at the Bank of Japan stand on the front line of the war against deflation. However, we have used up the greatest weapon in a central bank’s arsenal, that is interest rates, which have all declined to virtually zero in our short-term markets.
Thus, in the spring of 2001 we stepped into new territory, where no central bank has ever ventured, namely “quantitative easing”. Here, there are two important points. The first is to set quantitative targets in the form of outstanding balance of current account deposit with the Bank and then to aggressively supply abundant liquidity into financial markets.