The debate about the effectiveness of unconventional monetary policy measures such as quantitative easing remains perennially inconclusive. Yet the experience of Japan suggests there is one clear negative outcome from ultra loose monetary policy: it does structural damage to the economy.

The problem starts with an excessively low cost of capital. Average interest rates on new corporate loans, both short and long term, are down to an unprecedented level in Japan of almost 1 per cent, while the average interest rate paid on overall corporate lending is just below 1.5 per cent. At these levels too many inefficient businesses are being kept alive, says Jesper Koll, head of equity research at JPMorgan in Tokyo.

This is at a time when competition in all product markets has never been stronger and Japan is coping with a currency that has strengthened since the disappearance of the carry trades that flourished when the yen was seen as a cheap funding vehicle. The depreciation of the South Korean won after the Lehman Brothers collapse has been particularly painful, leaving the giants of Japanese electronics in such disarray at the hands of the South Korean chaebols as to dent Japanese national pride.