The key to boosting Japan's sluggish economy isn't more monetary policy, it's focusing on making households feel more secure, Sayuri Shirai, a former Bank of Japan board member, told CNBC on Tuesday.
"Just by doing monetary easing, I don't think we can increase the aggregate demand," Shirai, whose five-year term at the BOJ ended on March 31, 2016, told CNBC's "Squawk Box" on Tuesday.
Shirai was also sceptical of the government expanding fiscal policy, another frequently mentioned possibility for boosting Japan's anaemic economic growth.
"If you talk to the households, they all say they are worried about their futures because they don't know how many years they are going to live and then their pensions are not enough," said Shirai, who is currently a professor at Keio University. "So the most important thing is Abe really has to touch on Social Security expansion reform and try to make this pension, health insurance system more sustainable and that is the only way in order to reduce the anxiety and concerns that are prevailing among the households."
Japan's pension and health-care systems have been strained by an aging and declining population, with fewer workers supporting a growing number of retired people. Prime Minister Shinzo Abe's administration has been seeking reforms that would limit pension-benefit payment growth.
In the fourth quarter, Japan's gross domestic product (GDP) grew just 1.0 percent annualized, weighed by sluggish consumer demand.
Household spending in December fell 0.3 percent on-year, while retail sales rose 0.6 percent on-year in December, below expectations from a Reuters poll for a 1.3 percent rise.
Shirai said monetary policy and the resultant weaker yen can't spur more consumption.
"Households are very sensitive to the prices, the general prices and especially food prices," she said. "So this past most recent quarter, you saw the consumption growth was very sluggish. It's because food prices went up. Whenever food prices go up, the consumers feel their disposable income is going down. So they'd rather reduce the consumption."