The revival of the joint statement in the Basic Policy could constrain monetary policy flexibility. Should the “Bank of Japan accord” be brought to an end?

A controversy arose over the wording on fiscal consolidation in the draft Basic Policy 2026, which was adopted by the Cabinet on 21 July. The focus this time is the description on the second page concerning the Bank of Japan, with the provision on the Bank of Japan–government accord identified as an issue.

The second of the accord’s 4 provisions stated that the Bank of Japan would set a 2% price stability target and pursue powerful monetary easing, while the third stated that the government would pursue fiscal consolidation and a growth strategy. However, some have pointed out that the Bank of Japan adhered faithfully to the accord, while the government’s progress remained on hold.

Drawing on the author’s experience as a private-sector member of the Council on Economic and Fiscal Policy, the article recalls discussions over whether to revise or bring the Bank of Japan–government accord to an end. In 2024, the idea arose of declaring an end to deflation and deciding whether to bring the accord to an end or allow it to fade out.

The article also explains that, following consideration with the cooperation of relevant parties, including through a survey, there was a certain level of support for declaring an end to deflation. The article is marked as available only to paid members.