Chart 12  QQE with Yield Curve Control (2) (c) Transmission Mechanism  QQE with Yield Curve Control Inflation-overshooting commitment  Yield curve control  Strengthening forward-looking expectations formation  Stabilizing interest rates at low levels  Nominal interest rates  Inflation expectations  －  ＝  Real interest rates  Adaptive expectations formation  Observed inflation rates  Boosting economic activity through improvement in financial conditions  Inflation expectations  ＝  ＋  Improvement in the output gap  Chart 13  Japan's Economy under the Large-Scale Monetary Easing Unemployment Rate and Labor Force Participation Rate  Inflation Rate and Output Gap 8  %  y/y % chg.  4  7  s.a., %  Output gap (left scale) 6 4  3 CPI (less fresh food and energy, right scale)  2  2  1  0  0  -2  -1  -4  -2  -6  -3  -8 CY07  -4 09  11  13  15  17  19  21  6  s.a., %  Unemployment rate (left scale) Labor force participation rate (right scale)  63  62  5  61  4  60  3  59  2 CY07  58 09  11  13  15  17  19  21  Note: In the left-hand chart, CPI figures are Bank staff estimates and exclude mobile phone charges and the effects of the consumption tax hikes, policies concerning the provision of free education, and travel subsidy programs.
Figures for the output gap are Bank staff estimates. Sources: Ministry of Internal Affairs and Communications; Bank of Japan.