What I have presented is generally consistent with the path toward achieving the 2 percent price stability target, which I described in a speech in April 2013 at a meeting with business leaders in Gifu.1 In that speech, I presented a path consisting of the following five stages: (1) recovery in the world economy; (2) accommodative financial conditions, reflected in asset prices and foreign exchange rates; (3) a gradual rise in the potential growth rate of Japan’s economy accompanied by an increase in business fixed investment and structural reforms; (4) an improvement in the output gap amid firm household spending; and (5) a gradual heightening in inflation expectations.
Some analysts say, the Fed would be hard-pressed to hike rates by any significant measure (as in June this year) if oil prices continue to drop because inflation in the US will be soft. In addition, low oil prices increase the risk of deflation in the EU and Japan, raising the likelihood that more easing measures would be put in place.