Thus, even if aggregate demand only grows moderately for one to two years, the supply and demand balance should improve, which is indeed evidenced by economic developments since last year. Third, whether the output gap continues to narrow depends on prospects for economic recovery led by private demand.
If we become confident of such a recovery, moderate declines in some price indexes should not necessarily be interpreted as a supply and demand imbalance or manifestation of the risk of a deflationary spiral.