By the same token, the main reason why the differential between long-term real interest rates in Japan and those in the United States was far narrower than the differential between long-term nominal interest rates for the two is because inflation expectations in Japan remained lower than those in the United States (Chart 13).
In Japan, where inflation expectations are low and tend to decline further in a recession period especially, real interest rates cannot be lowered sufficiently to provide appropriate monetary accommodation, even with nominal interest rates of 0 percent.