Japan government must remember commitment to fiscal side of BOJ pact

Masaaki Shirakawa is a distinguished guest professor at Aoyama Gakuin University in Tokyo and a former governor of the Bank of Japan.

The neutral (or natural) interest rate is a key concept in shaping monetary policy. Defined as the real (or inflation-adjusted) rate that balances aggregate demand with supply capacity, it neither accelerates nor decelerates inflation. It serves as a benchmark for assessing the restrictiveness of monetary policy.