As seen in the wage negotiations this spring, the increase in inflation has been taken into account in the wage negotiations between management and labor. In addition, a shift in firms’ price-setting strategies from strategies focusing on low prices to strategies seeking to raise sales prices while increasing value added can be observed.
Given that the Bank continues to steadily pursue QQE and that inflation continues to be above 1 percent, medium- to long-term inflation expectations will likely follow an increasing trend, which will further reinforce inflationary pressure. Upward drift of the Phillips curve Although somewhat technical, let me summarize this price rise mechanism by using the concept of the Phillips curve (Chart 9).