However, prices in Japan have barely increased over the past 30 years. Thus, even if firms could not raise wages, employees did not typically leave to take another job, as I will elaborate later (Chart 8). Meanwhile, there is now less room to increase the labor force participation of the elderly and women, and labor shortages have become more severe (Chart 9).
In this effort, monetary policy has two specific objectives: (i) to prevent the spillover of supply-side pressures into a more broad-based inflationary process and (ii) to moderate demand to levels consistent with the capacity of the economy to meet it without provoking price increases.