Over the past year and a half, the world's major central banks have enacted ultra-loose monetary policies to counter the post-pandemic, Ukraine-related spike in inflation. Japan's central bank, however, has instead chosen to maintain a negative interest rate policy, making it an anomaly. The reason behind this is that Japanese authorities are more worried about a return to deflation rather than what they view as a temporary rise in consumer prices. Nevertheless, over the past year, the Bank of Japan (BoJ) has begun to adjust its policy framework to give it more flexibility to respond to inflation should it turn out to be persistent. Some economists and political analysts are worried that monetary tightening and higher interest rates may make Japan's massive debt unsustainable and even constrain the BoJ's willingness and ability to raise interest rates. However, the risks are manageable, and high government debt is very unlikely to make...
