Based on this understanding, the Bank’s JGB purchases are expected to generate downward pressure primarily on the risk premia and then on the expected path of short-term interest rates. Moreover, the Bank’s commitment to achieve the 2 percent target stably is likely to enhance the downward pressure.
Meanwhile, an improvement in the economic outlook, a gradual rise in medium- to long-term inflation expectations, and a rise in overseas long-term interest rates may lead to an increase in the expected path of short-term interest rates. Developments in long-term interest rates since the introduction of QQE reflect such downward pressure as well as upward pressure (Chart 3).