On March 19, the Bank of Japan decided that it would focus more on money supply than on interest rates and that the new policy would be continued until it was confident that the consumer price index, which has been declining continuously for over two years, was rising.
I believe that the decision was correct for the following reasons.
First, it has at last been recognized by the authorities that the present complications of the Japanese economy are closely related to the unusual development that prices have been declining for a considerable period. There have may have been times in the past when the wholesale price alone declined for some years, reflecting, for example, successful restructuring of the distribution system. But there have been few, if any, cases of prices as a whole, including the consumer price, continuously declining over a long period.
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