The transmission mechanism envisaged by the Bank is that these factors will lead to a reduction in real interest rates, thereby producing positive effects on Japan's economic activity and prices (Chart 2).
Under QQE, the underlying trend in the CPI (all items less fresh food and energy) turned positive and has been in such territory for more than two and a half years; this leads to the judgment that Japan's economy has reached a state of being no longer in deflation, which is commonly defined as a sustained decline in prices (Chart 3).