The Bank of Japan Act stipulates that the principle of monetary policy conduct should “be aimed at achieving price stability, thereby contributing to the sound development of the national economy.” Overcoming the longstanding challenge of deflation and achieving sustainable growth with price stability conform with the principle. Japan’s economy has started picking up, and now is a great opportunity to overcome the challenge.
This brings me back to my initial remarks on monetary policy. Unsound public finances, various forms of financial instability and the hazardous interplay between them can eventually jeopardize the smooth transmission of the monetary policy stance.