This is because people's mindset and behavior based on the assumption that prices will not increase easily have been deeply entrenched under prolonged deflation and it has been taking time for such mindset and behavior to change. Also, firms' room to raise productivity and the high elasticity of labor supply have absorbed inflationary pressure. Under these circumstances, the COVID-19 shock occurred last spring.
Because of this additional impact, inflation expectations have weakened somewhat and the output gap has deteriorated significantly. Since downward pressure on economic activity and prices is  10  For a recent academic assessment on the policy, see Honda, Y. and Inoue, H., "The Effectiveness of the Negative Interest Rate Policy in Japan: An Early Assessment," Journal of the Japanese and International Economies, vol.