Before around 1980, Japan consistently had higher inflation than the United States, and it was Japan that suffered a surge in inflation at the time of the first oil shock, having the highest rate among advanced economies, at over 20 percent.
It is well known that the bitter experiences of the two oil shocks and stagflation have led to the rapid development of theories on inflation expectations within academia, and that these theories have had a significant impact on the monetary policy conduct of central banks, including the Bank of Japan.2 Monetary policy conduct that takes the importance of inflation expectations into account has led to the low and stable inflation rates in Japan and the United States since the 1980s, and it could be said that this is the result of close interactions between academia and policymakers.