To overcome deflation, it is necessary to reverse this vicious cycle by responding appropriately to structural change, and raising firms’ and households’ medium- to long-term expectations for growth.
The price stability target of 2 percent is significantly high considering the long-term developments in Japan’s price situation, but if the general public’s expectations for growth of the economy heighten – causing the actual inflation rate to rise – the public’s expectations for inflation can also be expected to increase.