The price stability target of 2 percent is significantly high considering the long-term developments in Japan’s price situation, but if the general public’s expectations for growth of the economy heighten – causing the actual inflation rate to rise – the public’s expectations for inflation can also be expected to increase.
If the economy is likely to be operating close to, or above, its capacity to produce, it is reasonable to expect that this will put upward pressure on inflation in the future (Chart 1).