A way to implement this would be to target an average inflation rate over the medium term.15 This type of framework depends on history; target misses are not treated as bygones, unlike under the current inflation-targeting regime. That means if inflation were to undershoot 2 per cent, the central bank would be committed to making up for it with higher inflation in later years.
To be sure, final demand overall is still weak, but exports—which have a relatively large impact on production—have recently stopped declining. Also, inventory adjustment is progressing further in many industries including electronic parts due to the continued production cutbacks to date. Reflecting these developments, the decline in industrial production is moderating further.