Japan's new central bank chief said on Friday he expected the government to keep its end of the bargain in the bid to fix the country's flagging economy, after he unleashed a flood of easy money.
Bank of Japan governor Haruhiko Kuroda said the central bank and the government had agreed that they share responsibility for reinvigorating the country's torpid economy, which included fiscal restructuring.
"We strongly expect the government to move on that front," Kuroda told an economic symposium.
"It is vital for the government to clearly show the future course of fiscal consolidation and steadily make progress to reform fiscal structures," he said. At his first central bank policy meeting as governor last week, Kuroda unveiled plans to speed up the printing presses, doubling the amount of money in circulation over the next two years.
He said he would achieve this by boosting purchases of riskier assets such as exchange-traded funds (ETFs) and real-estate investment trusts, as well as vacuuming up longer-term government bonds.
The bank pledged to meet a two percent inflation target within two years, a key aim of a government that is intent on reversing the years of falling prices that have cast a 15-year shadow on Japan's faltering economy.
Almost immediately, the medicine kicked in, with yields on benchmark 10-year government bonds crashing, driving investors into equities on the hunt for a return on their money.
But in recent trading sessions long-term interest rates, which were reasonably stable, have been volatile, with Kuroda admitting the BoJ's bulk purchases had disturbed the market equilibrium.
"If such purchases by the Bank were regarded as monetising government debt, the JGB market might start to be destabilised, raising long-term interest rates in a manner inconsistent with the real economy," he said.
This made it even more important for the government to get itself into better fiscal shape, he said.
"This might not only offset the effects of monetary easing but also have negative effects on Japan's financial system and its economy as a whole," he said.
Years of ineffective pump-priming by successive governments have left Japan with a mountain of debt around twice the size of its economy.
Its ageing citizens are increasingly drawing down on their savings - much of which is tied up in government bonds - shrinking the pool of money the state can readily tap to fund the growing social security costs associated with that ageing.
Kuroda said he would not limit his easing programme to two years if the economy still needed a boost after that time and if the two percent inflation target had not been hit by then.
"It is not appropriate to say that the monetary easing will only last for two years," he said.
"Obviously, there will be both upside and downside risks to economic activity and prices going forward.
"The Bank will examine those risks carefully and will not hesitate to make adjustments as appropriate, should circumstances warrant," he said.