Going forward, although such expansion is likely to pause, mainly due to the effects of the scheduled consumption tax hike, the output gap is expected to remain substantially positive. Second, medium- to long-term inflation expectations have been more or less unchanged recently.
As for the outlook, such expectations are likely to follow an increasing trend and gradually converge to around 2 percent on the back of the following: (1) in terms of the adaptive component, with the improvement in the output gap, firms’ stance is likely to gradually shift toward raising wages and prices, and (2) in terms of the forward-looking component, the Bank will pursue monetary easing through its strong commitment to achieving the price stability target.