On the other hand, the output gap widened after turning positive in the October-December quarter of 2016, and reached a high level that exceeded 2 percent at the end of 2018. In theory, the widening output gap should place upward pressure on prices, but there are no signs of inflation at the moment.
4  I consider the reason for inflation being constrained to be structural changes in Japan's inflation mechanism. As moderate economic growth has continued, since around 2017, changes in the supply capacity of the economy -- specifically, for labor and capital -- have begun to constrain inflation.