In general, the slope of the Phillips curve steepens when firms find it easier to raise their sales prices or pass their input costs on to their sales prices given the level of the output gap. Also, an increase in the frequency of price adjustments will promote a steepening in the Phillips curve.
The current situation signals a possibility that the price-setting environment of firms may be improving. Meanwhile, severe competition among firms may discourage them from raising their sales prices, if their concerns increase over a possible loss of market share. Especially in fiscal 2014, the Phillips curve may remain largely unchanged owing to the high degree of uncertainty associated with the consumption tax hike.