Therefore, it is natural to think that low inflation in Japan also is attributable to factors that are unique to Japan. The Background to Relatively Weak Price Developments and Their Outlook I will elaborate on the relationship between economic activity and prices in Japan.
Taking into account that firms' wage- and price-setting stance exerts a large impact on prices, weakness in price developments in Japan can be explained by the following two steps. The first is a moderate improvement in wages despite the tightness in labor market conditions.