TOKYO (AFX-ASIA) - State Minister for Economic and Fiscal Policy Heizo Takenaka said he urged the Bank of Japan's policy board members today to study the real interest-rate theory, in contrast to nominal rates.
"I am not asking (the BoJ) to study real interest-rate theory from a policy viewpoint, but I am asking them to make this a subject of study," Takenaka told a briefing after the central bank decided today to maintain its existing stance.
He added that as inflation expectations are often influenced by the existing price trend, there is a possibility that Japan's real interest rate is not as low as is generally believed.
Takenaka called for flexible policy management at a delicate time. "Structural reforms may move forward just because there is a strong belief that monetary policy will move," he said.
He added that inflation targeting could be a solution to lower real interest rates but that it is questionable whether such an approach can be adopted.