On the one hand, nominal interest rates, including long-term government bond yields, have been stable, while, on the other hand, economic entities’ inflation expectations have been rising on the whole, as I will explain in a moment. Therefore, expected real interest rates – that is, nominal interest rates minus the expected rate of inflation – have been declining.
This, in turn, has boosted private demand, such as consumption and investment, raising aggregate demand in the economy as a whole. Economic growth in fiscal 2013 jumped to 2.3 percent following slow growth between only 0 and 1 percent in the two preceding years.