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The 0.8 percent contraction in the second quarter gross domestic product, coupled with dive in Tokyo share prices, has increased pressure on the Bank of Japan to further ease its already loose monetary grip by setting inflation targets. Tuesday’s terrorist attacks in the United States and the ensuing plunge in world financial markets are expected to magnify that pressure.

Business circles, financial authorities and politicians are obviously making the demands in unison because they believe the economy would be easier to manage if nominal figures remain on the plus side. But if we scrutinize Japan’s economic conditions from a global perspective, it is easy to understand that such a policy option has little chance of succeeding, and I would like to make this point clear before the Diet reopens to discuss the issue.

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