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In a policy shift, the Bank of Japan has decided to give more weight to commercial banks’ reserves in adjusting its monetary policy than to interest rates.

At its March 19 policy-setting meeting, the BOJ decided to bring overnight interest rates effectively back to zero by setting a higher target for the reserves in its current accounts. In effect, the BOJ is aiming to provide interbank lending markets with nearly interest-free money.

Apparently with an eye to growing calls for steps to keep prices from falling further, the BOJ said the new policy measures will remain in place until the consumer price index registers a stable zero percent or a year-on-year increase.

The central bank has thus signaled to the marketplace that it intends to keep the economy from sliding into a deflationary spiral and clear the way for sustainable economic growth. The BOJ is apparently worried about threatened increases in the effective value of debts owned by corporations and government offices.

Now that the BOJ has done all it can to help ease the impact of policy measures to halt deflation and is left with little room to introduce new stimulative policies, the ball is in the government’s court.

The question now is whether the government can live up to the BOJ’s expectations by introducing more aggressive structural reform.

With July’s Upper House election drawing near, however, some economists remain skeptical about the government’s intent to take effective measures promptly.

Since the early 1990s, the government has repeatedly tried to spend its way out of the economic predicament.

Despite pump-priming measures worth more than 100 trillion yen, however, signs of a strong economic recovery are still nowhere in sight.

It has become evident that follow-throughs of former stimulative measures will not work to get the economy back on a path toward self-sustaining growth.

It’s time to re-evaluate the nation’s pension and social insurance schemes and other economic systems to bring them more in line with changing needs. Japan must devise new systems to meet its needs without being bothered by global standards and other popular themes.

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